Privatised rail firms get extra pounds 6m hand-out

Subsidy row: Anger at 'giveaway of taxpayers' cash'

The first two privatised rail franchisees have been given pounds 6m in extra subsidy each in an unannounced move by the franchising director, Roger Salmon.

Great Western Trains, which went to a management buy-out team, and South West Trains, taken over by Stagecoach, Britain's biggest bus company, have both received the additional subsidy as a result of changes to the financial system governing the railways.

GWT will receive pounds 59.8m during the current year, compared with the pounds 53.2m previously announced, and SWT will get pounds 60.1m instead of pounds 54.7m. Both final figures aresimilar to the net amounts paid to British Rail during 1995/6.

The belated allocation of grant shows the fluidity of the new privatised rail finance system and suggests that the Government would find ways of baling out any franchisee which fell into financial difficulties.

Clare Short, Labour's transport spokeswoman, said: "The franchising director is giving extra hand-outs of taxpayers' money as it were confetti. This is a thoroughly bizarre and questionable behaviour which illustrates how the taxpayer is being fiddled by the whole sordid process of privatisation."

In a unpublicised decision, about pounds 115m was made available by Mr Salmon to the 25 train operating companies as a result of two changes - the transfer of pounds 32m of level crossing grant previously paid to British Rail to the train operating companies, and the allocation of an extra pounds 84m to compensate train operating companies for the risk they face from new performance regimes.

The level crossing grant, part of which comes from the European Union, is supposed to be used to pay for the transformation of staffed crossings into automatic ones. It can no longer be paid direct to Railtrack under EU rules and therefore has been allocated through the subsidy for track access charges paid to the train operating companies.

Under the performance regime, all companies are liable to pay compensation to passengers if their trains are late. Equally, if Railtrack exceeds its performance targets, the train operating companies have to pay bonuses to the soon-to-be privatised company.

In order to soften the impact of these payments, the Government agreed to allocated the extra pounds 84m in subsidy to the train operating companies and some of this has been paid retrospectively to the two companies privatised before 1 April.

Ms Short said: "It is unacceptable to claim that there have been oversights in the allocation of subsidies. Operators bid for franchises with the full knowledge of the criteria attached to them and this decision sets a dangerous precedent."