The UK government plans to end emergency funding for the railways after pouring in billions to keep services running during the pandemic.
Taxpayers are spending about £20m a day on the network, a situation which the government believes is unsustainable, according to an industry recovery group that includes Network Rail, train operating companies and unions.
“Taxpayer support for rail services has increased significantly while the industry’s operating costs have broadly stayed at pre-pandemic levels. The government’s position is that the current financial commitment is not unlimited or sustainable,” the recovery group said on Tuesday.
The government has spent more than £12bn on the railways after in effect nationalising the industry at the start of the pandemic as passenger numbers collapsed.
But with ticket revenue hugely depressed and ridership still running at half of normal levels, the fall in funding is expected to have to be made up elsewhere, either through greater efficiencies, higher prices or service cuts.
“It is planned that train service levels will be curtailed, reduced or flexed in the future to align service levels and capacity to predicted variable passenger demand with the flexibility to expand as passenger growth returns,” the recovery group said.
“The government is forcing cuts on the UK railway industry in the wake of the Covid-19 pandemic,” said Mick Whelan, general secretary of train drivers’ union Aslef.
The Department for Transport said it was “committed to creating a modern railway that works for its passengers and provides value for money to taxpayers”.
“[The government] will support the industry as they drive forward the transition to a secure future for our industry and those who work within it,” it added.
Tuesday’s announcement did not give any details of when the support might end, but DfT officials expect it to taper rather than be cut overnight.
There were also no details of how much the government is still willing to spend to subsidise services.
Unions, railway operating companies and Network Rail, which owns and manages the infrastructure, will meet to try to agree “a transition to a more secure, sustainable future”, the recovery group said.
Train operating companies have been put on new contracts that shift the risk from rising and falling revenues on to the government, and in the longer term ministers have unveiled an overhaul of the railways that will centralise control under a new public body called Great British Railways.
Under the new system, private companies will be paid to run services to a pre-determined timetable and fare system.
Network Rail is already in the middle of a big cost-cutting exercise, prompting threats of strike action from the RMT union, which has warned about the safety implications of cuts to maintenance work. Grant Shapps, transport secretary, announced last month that he would expect another £1.5bn of annual savings from Great British Railways within five years.
Executives at several train operating companies have told the Financial Times that they think “difficult decisions” will have to be made on service levels if passengers do not return in the same numbers after the pandemic because of the rise in flexible working.
While leisure travel has bounced back strongly, overall ridership has only recently touched 50 per cent of pre-pandemic levels.
David Brown, chief executive of Go-Ahead Group, which runs the commuter-heavy Govia Thameslink Railway and Southeastern franchises, said last week he expected commuting “will never be the same again”.
“You will end up having to cut costs, some of that will be difficult decisions along the line,” he said. But he added that the remaining passengers would still expect a good service, and that “wholesale changes” were unlikely.