Railways: Coronavirus

Department for Transport written question – answered on 8th July 2020.

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Photo of Dan Carden Dan Carden Shadow Financial Secretary (Treasury)

To ask the Secretary of State for Transport, with reference to the COVID Emergency Management Arrangements (EMA) with Train Operating Companies (TOC), what provisions are included in the EMA to ensure that TOCs are not in a financially advantageous position under the EMA than their financial performance under their franchise agreements in the months before the covid-19 lockdown.

Photo of Chris Heaton-Harris Chris Heaton-Harris Minister of State (Department for Transport)

The Emergency Measures Agreements (EMAs) temporarily suspend the normal financial mechanisms of franchise agreements, transferring all revenue and cost risk to the government. Operators are required to continue to fulfil their obligations under the EMAs for a small, pre-determined management fee. Fees are set at a maximum of 2 per cent of the cost base of the franchise before the Covid-19 pandemic began, intended to incentivise operators to meet reliability, punctuality and other targets. The maximum fee attainable was set on the basis that it will be lower than the returns attainable in operator’s existing franchise agreements where they bore revenue risk.

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