On 6 October 2020, Baroness Randerson (Liberal Democrat) is due to ask the Government “what additional support they plan to give to the transport industry to enable that industry to address the impact of the COVID-19 pandemic”.
In June 2020, the Secretary of State for Transport, Grant Shapps, informed Parliament that his department had drawn £7 billion from the Government’s contingency fund to finance Covid-related support for the railways, bus services and local networks such as Transport for London.
This article summarises statistics on transport use since the start of the coronavirus lockdown in mid-March 2020, and the economic support provided by the Government to the transport sector.
Since the lockdown was imposed in mid-March, the number of passengers on the rail, bus and London Underground networks declined significantly and has not returned to its pre-lockdown level. Motor vehicle journeys also declined significantly but have since returned to broadly pre-lockdown levels. Graph 1 shows the number of daily journeys by motor vehicle, bus (excluding London), national rail, and London Underground as a percentage of the equivalent day/week in 2019.
The graph shows that in the initial lockdown period in March, motor vehicle journeys declined to around 40% of their normal levels. However, they have since increased to 90 to 100% of their normal level. Train and Tube travel declined to 5 to 10% of normal levels between late-March and May 2020. Since then, the number of journeys has increased, but only to around 40% of its pre-lockdown level. A similar trend occurred on buses, increasing to around 60% of its pre-lockdown level by September 2020.
Graph 1: Transport use by mode, Great Britain, March–September 2020
Government intervention in the transport sector
In response to the pandemic, the Government has issued a range of guidance and imposed legal duties on passengers and transport firms, including:
- the wearing of face coverings for all travel on or in public transport, aircraft and private hire vehicles;
- observance of social distancing guidelines;
- travel restrictions for flights to and from certain countries; and
- mandatory 14-day quarantine for people entering the UK from certain countries.
The following sections summarise the Government support provided in each transport sector to date.
By June 2020, the Government had spent £3.5 billion on Covid-related support for the rail network. The wider impact of coronavirus has been to effectively end the rail franchise model.
Prior to the pandemic, the majority of rail services were provided by train operating companies (TOCs) which had a franchise agreement with the Government to provide services on a particular part of the network. On 23 March 2020, the same day that the national lockdown was imposed, Grant Shapps announced that TOCs would be able to temporarily transition their franchises to an emergency measures agreement (EMA). This was in response to “a 70% drop in passenger numbers” and the related decline in fare revenue.
EMAs suspended the financial mechanisms of franchise agreements and transferred “all revenue and cost risk to the government”. The TOCs continue to run day-to-day rail services in return for a pre-determined management fee “set at a maximum of 2 percent of the cost base of the franchise before the Covid-19 pandemic began”. EMAs were initially introduced for a period of six months. All TOCs have subsequently transferred onto an EMA (except for those rail services which were already run by the public sector as ‘operator of last resort’).
On 21 September 2020, Grant Shapps told Parliament that the Government intended to “bring the rail franchising system to an end”. He announced that EMAs had been replaced by emergency recovery measures agreements (ERMAs). ERMAs are “more demanding” agreements with “tougher performance targets, and lower management fees” of 1.5% of the former cost base. They will be in force for 18 months.
Grant Shapps said that ERMAs were the “first step” in creating a new rail structure that will “take shape over the coming months”. He also said that the new contracts would allow the Government to “make an early start on key reforms”, including requiring operators to co-ordinate better with each other and “driving down the railways’ excessive capital costs”. He said that the Government would publish a white paper on the future rail system, which would incorporate the findings from the Rail Review currently being undertaken by Keith Williams.
Transport for London
The reduction in passengers on London Underground and other transport modes in the capital (such as buses and trams) had a significant impact on the revenue of Transport for London (TfL). By mid-May 2020, the Mayor of London, Sadiq Khan, warned that TfL would have to reduce services and may have to declare itself bankrupt unless it received financial support from the Government.
On 14 May 2020, it was announced that TfL had reached an agreement with the Government for £1.6 billion in emergency funding to keep services running until October 2020. The deal comprised a £1.095 billion grant and a loan of £505 million. The agreement also included conditions, such as a commitment from TfL to increase fares and the London congestion charge. Sadiq Khan said it was “not the deal” he wanted, but “it was the only deal the Government put on the table and I had no choice but to accept it to keep the Tubes and buses running”. He continued:
The Government is, in effect, making ordinary Londoners pay the cost for doing the right thing on Covid-19. They want fares to go up next January—ending the four years fares freeze I delivered after the last election […] The Government has also insisted that, unlike the deals done elsewhere in the country, TfL takes on £505 million of additional debt. This will undo the hard work we’ve put in to fix TfL’s finances over the last four years.
The Mayor also said that a new funding arrangement would need to be agreed with the Government in the future:
The old model for funding public transport in London simply does not work in this new reality—fares income will not cover the cost of running services while so few people can safely use public transport. Over the next few months we will have to negotiate a new funding model with Government—which will involve either permanent funding from Government or giving London more control over key taxes so we can pay for it ourselves—or a combination of both.
On 28 September 2020, the Mayor of London released a statement which said that TfL would need an additional £4.9 billion of Government support by the end of the 2021/22 financial year:
After TfL’s finances were decimated by the pandemic, £2bn will be required for the second half of 2020/21 on expiry of the existing Government funding agreement, and it is anticipated that a further £2.9bn will be required during 2021/22 to stabilise the network’s financial position.
The statement said that additional government funding would also be required to complete the Elizabeth Line (Crossrail). The Mayor’s official submission to the Government’s Comprehensive Spending Review stated that TfL would require temporary funding of “at least £5.65 billion over the remainder of 2020/21 and 2021/22”.
TfL’s current deal for temporary funding expires on 17 October 2020, and negotiations “are now underway” with the Government to agree a future funding settlement.
Buses and trams
In April 2020, the Government announced £167 million of new funding for bus services, to “maintain necessary services at a level which is sufficient to meet much reduced demand”, but also to allow for social distancing on board. The Government also said the £200 million of existing funding, allocated through the Bus Service Operators Grant, would continue to be paid despite reduced services.
In August 2020, the Government announced an additional £256 million for bus and tram services, to meet “expected increases in public transport use in September”. For bus services, the funding comprised “up to £218.4 million of support over the next eight weeks”, with rolling funding of up to £27.3 million per week thereafter. For tram services, the funding comprised “up to £37.4 million over 12 weeks”, with a review at the end of the period.
The UK aviation sector has not received any specific financial support from the Government because of the pandemic. However, the Government has established a Restart, Recovery and Engagement unit to liaise with the sector. The Government has also said that airlines and other aviation firms are able to access its general coronavirus support schemes, such as the job retention (or ‘furlough’) scheme and a range of business loans and tax deferrals.
For more information on the background, see the House of Lords Library article, ‘Coronavirus: Airlines’ (23 June 2020).
- Jim Pickard, ‘Sadiq Khan sets out £5.7bn TfL rescue plan for London’, Financial Times (£), 30 September 2020
- House of Commons Library, The future of rail, 29 September 2020
- BBC News, ‘Rail franchises axed as help for train firms extended’, 21 September 2020
- Railway Gazette, ‘UK government announces the end of rail franchising’, 21 September 2020
Image by Shutterbug75 on Pixabay.