Labour ‘must explain rail nationalisation blunder that cost taxpayers £250m'
The Government must explain a rail nationalisation blunder that is costing taxpayers £250 million, MPs have demanded.
A group of 24 Liberal Democrat MPs has written to Heidi Alexander, the Transport Secretary, asking for an explanation on the deal with South Western Railway (SWR).
Last week, The Telegraph revealed that civil servants had negotiated a £250 million increase in costs for leasing SWR's train carriages. It raises fears that passengers will have to pay increased fares to cover those extra fees.
Rolling stock rental negotiations normally take between 18 months and two and a half years, according to both Government and industry sources.
Yet talks on the SWR deal only began in December – just six months before the Government takes it over on May 25 – and are still ongoing, The Telegraph understands.
Insiders said the cost of leasing the carriages under the new Government-controlled operation is set to soar by £50 million a year, increasing the company's train rental bill by a third.
The Lib Dem MPs, most of whose constituencies are served by SWR, are demanding answers from Ms Alexander - and assurances that similar blunders will not happen with the other nine train companies the Government intends to nationalise over the coming three years.
The Transport Secretary is being urged to explain exactly when the Department for Transport (DfT) realised it had to negotiate new contracts for SWR's rolling stock, as well as confirmation of how much the new leasing deal is costing the taxpayer.
'The Government has frequently justified nationalisation on the grounds it will deliver better value for money for British taxpayers. We are consequently concerned by recent media reports indicating missteps in the run-up to SWR's nationalisation which have negatively impacted the public purse,' said the letter, signed by Sir Ed Davey, the Lib Dem leader, and Paul Kohler, the party's transport spokesman.
'Assurances were given to the House on the March 27 that the Department was 'across the detail' and the issues delaying the rollout would be resolved by the time of nationalisation on May 25,' the letter pointed out.
MPs have asked how the DfT 'will avoid any increase in leasing costs being borne by passengers in the form of increased fares or decreased investment'.
Taxpayers are already propping up SWR, with the operator receiving net subsidies of £154.7 million during the 2024 financial year, according to Office of Rail and Road figures.
The letter also asks 'whether negotiations with Roscos (the companies that lease train carriages to operators) have begun' in respect of the next train companies to be nationalised – c2c and Greater Anglia – 'or any other operators'.
Roscos are typically owned by pension funds and similar investment businesses. They have the cash to pay for new trains up front, recovering those multi-million pound investments by charging leasing fees to train operators.
The creation of Roscos was one of the key parts of John Major's rail privatisation of the 1990s, with the idea being that the companies would fund a wave of new investment to replace tired old British Rail trains.
Labour's nationalisation plans do not include taking these businesses into state ownership, as it would cost billions to buy out the tens of thousands of carriages that they own.
SWR spent £92.5 million on the 'hire of rolling stock' in the 12 months to March last year, down from £104 million in the previous year, according to accounts filed at Companies House.
It operates a mixed fleet of more than 2,000 carriages, comprising everything from ex-British Rail diesel trains to a new £1 billion fleet of air-conditioned, electrically powered units.
c2c, whose trains run between London, Southend and Shoeburyness in south Essex, will be nationalised in July, while Greater Anglia, serving the rest of eastern England, falls under Government ownership in autumn this year. Both are similarly dependent on Rosco contracts for their trains.
An official said: 'This Government is taking the railways back into public ownership at the lowest reasonable cost to the taxpayer, so we can get on with making the long-overdue improvements needed to make day-to-day journeys easier.
'The only alternative available to this Government would have been to buy the current operator out of the contract, a few months before it lapsed anyway – but this would have incurred the same rolling stock renewal costs next month, in addition to millions of pounds worth of compensation paid to the outgoing operator.'
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