Sir, Currently, in real terms, the £5 billion total cost to the State of funding the railways is more than three times greater than that of the former nationalised British Rail (report, Nov 22). This financial commitment is unsustainable and passenger fares must continue to increase. Already, the Government has shifted a considerable burden of funding to the rail traveller. Within the next six years passengers who currently contribute 50 per cent of the cost of operating the railways will see their contribution increase to more than 67 per cent.
Many train operators, especially in the South East, obtained their franchises based on highly optimistic levels of predicted growth in passenger numbers. Most of these train companies have high fixed costs and are unable to reduce their main costs either quickly or meaningfully in an economic downturn. In a recession, the loss of a relatively small volume of commuter and leisure traffic will result in significant trading losses for train operating companies.
The recession in the early 1990s provided evidence of how relatively small declines in passenger numbers can rapidly hit the bottom line. If the present economic turmoil becomes deeper than previous recessions then it is likely that it will be the rail passenger — and not the Government — that will foot a financial rescue package for the train operators.
John Stittle
Essex Business School
The Times
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