asked Her Majesty's Government:
Further to the Written Statement by Lord Davies of Oldham on 13 December (WS 191-92) on Virgin Rail Group franchises, what changes have been made to the terms of the franchise for the West Coast Mainline services from 1997 to 2012 in respect of (a) payments to or from Government, and (b) profit sharing of guarantees against losses. [HL886]
Detailed below are the payments envisaged in the original franchise agreement, the actual sums paid (including those of the substituted “letter agreement”) and the subsidies expected to be paid under the reinstated franchise agreement.
In 2002 a “letter agreement” was put in place to reflect Railtrack's failure to deliver the agreed terms of the west coast modernisation programme. The recently announced agreement puts the Virgin West Coast franchise back on a secure contractual footing and enables the department to secure additional public value by incentivising the operator to reduce costs. Bracketed figures are premia planned to be received by the department.
It is to be noted that the sums paid include actual incentive payments and receipts. The sums paid also include the impact of the ORR regulatory review of track access charges, as do those planned for the reinstated franchise agreement.
The reinstated franchise agreement, unlike the original, includes a revenue share/support arrangement in the eventuality that a target revenue is exceeded/fails to be achieved. This is in accordance with other recent franchises. The Department for Transport will receive 50 per cent of revenues achieved between 102 per cent and 106 per cent of an agreed target revenue and 80 per cent of revenues greater than 106 per cent of target revenue.
Revenue support arrangements are a mirror image of these; that is, should the franchisee fail to achieve between 98 per cent and 100 per cent of target revenues the franchisee will receive no support. Should 94 per cent to 98 per cent of target revenue not be achieved the department pays 50 per cent of that revenue not achieved; it pays 80 per cent should revenues received be less than 94 per cent.
Franchise Year Original Franchise Agreement Plan(£m) Actual Payments(£m) Reinstated Franchise Agreement 1996-97 92.5 5.8 1997-98 77.8 76.6 1998-99 68.4 70.2 1999-2000 56.1 59.1 2000-01 53.7 57.7 2001-02 52.3 190.9 2002-03 (3.9) 188.8 2003-04 (52.7) 328.6 2004-05 (55.8) 113.0 2005-06 (72.0) 68.2 2006-07 (126.6) 193 (estimate) 72.9 2007-08 (151.6) 282.9 2008-09 (167.6) 312.4 2009-10 (184.5) 265.3 2010-11 (202.2) 230.1 2011-12 (220.3) 198.8 (Figures in brackets denote planned premium)