The need for continued taxpayer funding of rail provision

2.12 The projected fall in direct subsidy over the period does not mean that passenger fares will cover the full costs of the rail service available. Every five years, the Office of Rail Regulation undertakes a review of charges that train operators should pay for using the rail network (the track access charges). Since the June 2003 Access Charge Review, train operators no longer pay Network Rail the full amount needed to renew and maintain the network. The Department has elected to pay part of the subsidy, related to capital spending, directly to Network Rail. The change enables network renewal and enhancement spending to be shown as investment. This removes a previous distortion from the Department's accounts because under the previous arrangements no part of subsidies to train operating companies could be categorised as investment. Figure 10 overleaf illustrates what franchise subsidies would have been in 2006-07 if train operators had been required to pay Network Rail in full.

2.13 Figure 10 shows that taxpayer support for train services in the eight franchise areas was around £2 billion in 2006-07 once £1.25 billion of grants to Network Rail are included. The Department's support for Network Rail for 2011-12 has not yet been determined and so a figure for total taxpayer support for the eight franchises in 2011-12 is not available. For the purposes of calculation, we have assumed that the Department's support for Network Rail remains constant at £1.25 billion. This would imply government support of £926 million for train services in these eight franchise areas - an overall reduction of about 55 per cent from the previous £2 billion.