British taxpayers lost out on £700m of dividends and preference shares when the Tory government sold its Eurostar stake in 2015, according to reckonings by the National Audit Office. Now the high-speed rail link, shuttling just 300 or so tenacious passengers a day to and from the continent, wants UK bailout funds.
The response should be a resounding non. Eurostar is majority-owned by France’s SNCF, which itself belongs to the state. It would be eccentric for British taxpayers to bolster the equity that French counterparts hold in Eurostar via France’s national railway company. The UK government is already pouring billions into domestic rail franchises to backstop losses racked up during the pandemic.
Eurostar’s situation is dire. Travel on its services has dropped almost 99 per cent. The business has warned it could run out of cash this summer.
But the operating company is eminently replaceable: successors would step into its place post-pandemic if they felt the business was a viable one. As infrastructure goes, the Channel Tunnel on which services rely is the most fixed of all assets. It belongs to Getlink, a Paris-quoted company whose shares are doing tolerably.
If the UK government believes some journeys have important economic or social value, ministers should subsidise the relevant routes, not bail out operators directly. They declined to do either in the case of regional airline Flybe, which collapsed into administration.
Shareholders and lobbyists are trying to push on similar emotive buttons to those hammered by Flybe and its supporters. They point to trains’ greener credentials over planes and the symbolism of cutting physical links between France and the UK in the wake of Brexit. French students studying in the UK are depicted as potential victims of a Eurostar collapse by London First, a business body.
But the 50km tunnel linking Britain and France is a poster child for why states should cede such projects to the private sector whenever possible. Once self-servingly dubbed a wonder of the world, Eurotunnel was quickly engulfed with debt resulting from vast cost over-runs and heroic assumptions on passenger numbers.
UK prime minister Margaret Thatcher and French president François Mitterrand were both adamant the state would steer well clear of the tunnel project. There is even less reason for Boris Johnson to bail out Eurostar.
The Lex team is interested in hearing more from readers. Should the UK government help the train operator? Please tell us what you think in the comments section below