Sweeping reforms to bring the railway’s track and trains together under a new Great British Railways will be set out this week – but reforms of fares will be limited, with the industry braced to have its budget slashed.
The Treasury is understood to be demanding cost cuts of between 10% and 20% after expanding its subsidy to the rail industry by £10bn during the Covid-19 pandemic as fare revenue dropped away. Unions have warned they will fight cuts to maintenance budgets and workforce terms and conditions.
The long-delayed – and heavily re-edited – review of the industry, initially led by Keith Williams, is expected to be published as a white paper on Thursday. Control of both the infrastructure and the contracting of train operations will be given to the arms-length public-sector body, with private firms bidding to run concessions.
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Ministers hope the changes, the biggest shake-up since privatisation in the early 1990s, will resolve the fragmentation of the industry which has been blamed for adding cost as well as leading to the chaos seen in the 2018 rail timetable crisis and franchise failures that prompted the review.
Despite three years having elapsed, the white paper will still leave much of the detail to be decided. The head of Network Rail, Andrew Haines, and its chairman, Sir Peter Hendy, will be tasked with drawing up the processes and structures of the new GBR, which will eventually subsume Network Rail.
New types of fares aimed at making train travel more attractive to part-time commuters will also be unveiled by ministers – largely in the form of carnet-style tickets for multiple journeys with limited savings, which may disappoint passenger groups.
While the industry has long urged fares reform – and organisations have appealed for cheaper fares to tempt passengers back after Covid – the Treasury is understood to have blocked more radical changes and deeper discounts until the post-pandemic pattern of passenger behaviour and working from home becomes clear.
Franchises, which allowed operators to increase profits by growing revenue, were abolished in March 2020 for emergency contracts when passengers were told to avoid travel due to coronavirus. The future concessions will be modelled on the kind of system seen in London, where operators are paid a management fee with performance incentives or penalties based on aspects such as punctuality and cleanliness.
While some parts of government have been resistant to loosening direct control from the Department for Transport – and others to endorsing a publicly run railway – Downing Street and the Treasury have eventually backed a version of Williams’ review heavily influenced by the transport secretary, Grant Shapps. “What got [Boris] Johnson over the line was the promise of a TfL-style institution, not just for London but the whole of Britain,” said a rail insider. “There is consensus on the short document, but the detail will bring problems.”
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Another rail source said: “The cost of the industry has got to be reduced – how those cuts are made is up for vigorous debate. Rail is basically in financial crisis, structural reform was needed – once this is published at last we can get on with it.”
Unions warned of a “national fight” if the outcome of the white paper were to target cost-cutting on the workforce while still paying guaranteed sums to private firms.
The RMT general secretary, Mick Lynch, said: “We know full well that the industry is preparing for a tsunami of cuts.
“All the signals are that the Shapps/Williams review will be stuck in the past and wedded to the failure of privatisation. It’s the same meat with different gravy served up by the Tories and their rail fat cat friends.”
