One rail firm in four 'technically insolvent'

Half of Britain's train operators are being bailed out by massive and unforeseen handouts by taxpayers, according to new analysis on the state of the rail industry.

Nearly one-quarter of the companies are technically insolvent while a similar number receive extra government subsidies worth hundreds of millions of pounds to maintain the level of service.

Six of the 24 operators cannot balance their books and are paid a set margin above their costs by the government's Strategic Rail Authority (SRA), while a further six have been given extra Treasury subventions, according to the report in Rail magazine.

Ten years after rail privatisation, critics believe the parlous state of the network has been caused partly by the aftermath of the Hatfield disaster and partly by ministers' insistence on persevering with a deeply flawed sell-off.

Train operators now running on a "cost-plus'' basis – given enough taxpayers' money for a surplus above the cost they incur – are Arriva Trains Northern, Arriva Trains Merseyside, First North Western, Wales & Borders, Wessex Trains and Great Northern routes of West Anglia Great Northern. But massive unplanned extra backing is also being paid to Virgin West Coast, Virgin CrossCountry, ScotRail, Central Trains, Connex South Eastern and Anglia Railways.

Some industry insiders believe the network is privatised in name only. The infrastructure assets of Railtrack have been taken over by the publicly backed Network Rail and the SRA took charge of major improvements to the system last year.

Don Foster, Liberal Democrat Transport spokesman, said the "botched-up privatisation'' was continuing to fail. "The Government really ought to come clean and say whether we are returning to a state-run railway," he said. "The SRA itself seems to be running out of control, spending increasing amounts of taxpayers' money.''

Howard Johnston, author of the analysis, said: "The sell-off was forced on the network by a Conservative government going out of office which wanted to rush it through. But what seemed to work on paper had not been matched by reality.'' He pointed out that next year train franchises were up for grabs and there was a chance of a new beginning.

One reason for extra payments from the Government is that subsidies to services being operated in the public interest were falling too sharply for train operators to keep up, Mr Johnston said.

Extra payments from the SRA have also lead to increased intervention in the management of train operators by the authority.

The main drivers' union, Aslef, is threatening a national strike to protest the SRA's decision to keep wages down at train companies but refuse to negotiate directly with the union.

A spokesman for the SRA said the organisation intended to replace the franchises in question with longer-term contracts negotiated through competitive processes. "We are going to have much more precise specification of the franchise proposition.''

* The impact of strikes by train guards planned for this Friday, the following Monday and 17 April will vary widely between operators, according to the Association of Train Operating Companies.