Ministers are seeking to thwart Sir Richard Branson’s attempt to launch private train services that would compete with Labour’s state-run railway.
In a letter published on Friday, the Department for Transport said it was opposed to Virgin Trains running services between London and Glasgow because it would siphon ticket revenues away from government-run trains.
It has also opposed seven other “open access” proposals put forward by private providers, including five put forward by London-listed FirstGroup, one by Arriva and another by Alliance Rail Limited.
“We have significant concerns over abstraction of revenue from contracted operators and the unreasonable burden that this in turn places upon taxpayers,” the letter to the Office of Rail and Road (ORR) stated.
“These concerns are particularly acute with regards to the applications from Virgin and FirstGroup, with Alliance Rail’s proposed Edinburgh-Cardiff services also posing significant risk.
“We expect that ORR will fully investigate and take into account the material impact to the Secretary of State’s funds and to taxpayers of each open access application and will pay close regard to this in its decision making.”
The objections, first reported by the Financial Times, come as Labour is seeking to bring the railways back into public ownership under the auspices of a new body, Great British Railways. Rather than revoking existing private operating contracts, ministers will allow deals to expire without renewal.
However, companies including Sir Richard’s Virgin Trains are attempting to maintain a presence through so-called open access rules. These allow private operators to offer services alongside the main operator of a rail line, so long as the route is under-served and there is sufficient capacity for more trains.
Examples of such services today include Lumo, which operates on the East Coast Mainline between London and Edinburgh, as well as the Heathrow Express on the Great Western Mainline and Hull Trains, in Yorkshire.
However, the Department for Transport warned that the various services would damage the performance of existing services and drain away fare revenue, rather than adding extra demand.
Virgin’s proposals to run trains between London, Preston, Liverpool Lime Street, Birmingham New Street and Glasgow Central would lead to £110.5m of revenues being “abstracted” from government services while generating £19.7m of new revenues, it claimed.
Virgin Trains have proposed to run private services between London, Preston, Liverpool Lime Street and other locations
This represented “a very high level of absolute abstraction and the Department is of the belief that this represents an unacceptable level of impact to taxpayers”, the Government warned the Office of Rail and Road.
“Further, given the greatly constrained overall position of rail finances, the loss of revenue on such a significant scale would materially impact the funds available to the Secretary of State to support and improve the railway,” the letter added.
Phil Whittingham, head of Virgin’s train business, insisted the company still planned to push ahead with its bid, telling the Financial Times the private service would probably cause ministers “a bit of a headache” but that competition would ultimately benefit both sides.
FirstGroup insisted its proposals “enjoy widespread stakeholder support” and would “coexist with other operators and create demand on these routes”.
On Friday, a government spokesman said: “Our number one priority for the railways is to provide passengers with the reliable, accessible and better quality services they deserve.
“We’re supportive of open access services which can encourage growth, improve connectivity and provide more choice for passengers but these benefits must outweigh the costs to the taxpayer and impacts to network performance.”
A final decision will be made by the regulator, the spokesman added.
www.orr.gov.uk
