Railways: Franchises

Department for Transport written question – answered at on 3 May 2018.

Alert me about debates like this

Photo of Andy McDonald Andy McDonald Shadow Secretary of State for Transport

To ask the Secretary of State for Transport, what specific provisions within the Forecast Revenue Mechanism which his Department introduced into rail franchises are planned to protect those franchises from future risk and balance the appropriate level between risk and reward.

Photo of Jo Johnson Jo Johnson Minister of State (Department for Education) (Universities and Science) (Joint with the Department for Business, Energy and Industrial Strategy), Minister of State (Department for Transport), Minister of State (London)

The Forecast Revenue Mechanism (FRM) provides a risk sharing mechanism by which the risk of actual revenue diverging significantly from the original franchise bid forecast is shared between the Department and the Train Operating Company (TOC). It is designed to respond to the difficulty of accurately forecasting revenue over the long term. It ensures that the TOC shares revenue with the Department when actual revenue outperforms this bid forecast, outside of a specified range and protects the TOC when revenue falls below the specified range. FRM is designed to provide protection against passenger-related revenue risk. The TOC remains on risk for other revenue streams. There are also requirements to align the TOC’s incentives with those of taxpayers and passengers and to protect the quality of passenger services.

Does this answer the above question?

Yes0 people think so

No0 people think not

Would you like to ask a question like this yourself? Use our Freedom of Information site.