18 April 2023
RMT Press Office:
Rail union RMT today revealed that the Transport Secretary Mark Harper has allowed two private rail companies to be paid £82 million in dividends in 2022.
This is the despite the fact both companies are part of a major industrial dispute where hundreds of millions of pounds has been used to indemnify them against lost revenue from strike action.
FirstRail Holdings Ltd, the holding company for five FirstGroup franchises, and Govia Thameslink Railways, which runs the biggest franchise in Britain, have recently reported dividend payments of £65 million and £16.9 million respectively in their annual accounts for 2022.
Two of First Rail Holdings Ltd’s franchises, Avanti West Coast and Transpennine Express, have been the subject of public and political controversy after cancelling hundreds of services. In spite of this, the government has renewed or extended contracts for Avanti West Coast and may shortly do the same for Transpennine Express.
Govia won a contract to carry on running the Thameslink, Southern and Great Northern franchise from the government in October 2022 despite its sister company LSER being stripped of the Southeastern franchise for concealing public money.
The DfT allowed Go-Ahead Group to conduct its own internal inquiry into the failings at LSER and renewed Govia’s contract for the Thameslink franchise in spite of the fact that the two companies shared many of the same management personnel.
All these franchises have benefited from indemnification worth hundreds of millions of pounds in taxpayers’ money by the DfT to cover the costs of lost passenger revenue during the ongoing dispute.
RMT General Secretary Mick Lynch said: “The DfT is now little more than a representative of big business, geared to turning tax revenue into shareholder dividends.
"If you’re a private train operator, it doesn’t matter whether your problem is unpredictable passenger revenue, costly train leases or industrial action, the Secretary of State is there to help, opening the public purse and emptying it into shareholder’s pockets.
"This system is not operating in the interests of passengers, railway workers or the taxpayer.
"It is clear that only full public ownership of train operation in this country can save our railways from being looted by this gang of unaccountable spivs.”
Notes:
First Rail Holdings Ltd
· Last year, First Rail Holdings Ltd paid out a dividend of £65 million to FirstGroup plc, paid in two instalments: a £20 million payment before March 2022 and £45 million after the financial year end, while it was in dispute with the RMT and while its Avanti West Coast and Transpennine Express franchises were busy cancelling hundreds of services.
· First Rail is the holding company for First Group on South Western, Great Western and the basket-case franchises Avanti West Coast and Transpennine Express and it received £51.4 million in dividends from these operations in the year to March 2022.
· All these dividend payments to FirstRail have to be authorised by the Secretary of State for Transport. In March 2021, the annual accounts of First Greater Western show that it was awaiting the ‘approval’ of the DfT for a payment of a £33 million dividend to First Rail. The 2022 accounts show that this payment was authorised.
· Accounts filed for FirstGroup’s companies for the last three years show dividend payments of £129 million over the last three years, with 2022 being the highest yet at £59 million. £51.4 million of this was attributable to FirstRail Holdings (Table 1).
· In October 2022, Secretary of State Mark Harper gave Avanti West Coast a contract extension in spite of its disastrous service failures. In March 2023, he again extended Avanti’s contract in spite of the fact that it was still cancelling 17% of trains under its new timetable.
Table 1: FirstGroup franchise dividend payments
|
|
2020 |
2021 |
2022 |
TOTAL |
|
First Greater Western |
£40,000,000 |
£19,000,000 |
£33,000,000 |
£92,000,000 |
|
First Hull Trains Ltd |
£0 |
£0 |
£0 |
£0 |
|
First South Western Railways |
£0 |
£0 |
£12,900,000 |
£12,900,000 |
|
First Transpennine Express |
£0 |
£0 |
£0 |
£0 |
|
First Trenitalia Avanti West Coast |
£0 |
£11,500,000 |
£13,500,000 |
£25,000,000 |
|
TOTAL |
£40,000,000 |
£30,500,000 |
£59,400,000 |
£129,900,000 |
Source: Annual reports in Companies House, 2020-22
Govia Thameslink Railways Ltd
· Govia Thameslink Railways paid out a dividend of £16.9 million in October 2022, ‘following permission given by the Department for Transport’.
· Govia were given a National Rail Contract by then Secretary of State, Grant Shapps, in spite of the fact that the same owning group had recently been fined £50 million and LSER stripped of the Southeastern franchise for concealing multiple millions in public money over years to ramp up their dividend payments.
· Incredibly, Mr Shapps and the DfT allowed Go-Ahead to conduct their own internal inquiry into LSER’s ‘breaches of good faith’ in financial matters, in the full knowledge that the results of the investigation would be used to determine whether Govia would be allowed to keep the Thameslink franchise. Go-Ahead had every incentive to find their wider group innocent, which they duly did, in spite of the fact that LSER and Govia shared many senior directors.
· The £16.9 million payout, authorised by the Department for Transport, was made during an industrial dispute in which the companies have had all their costs covered by the same Department for Transport. As Govia’s annual report states ‘Under the management contract… the direct cost and revenue risk of industrial action remains with the DfT’.
· In October the same year, just as the dividend payment was being made, Go Ahead was acquired by a company set up by Australian bus operator Kinetic and Spanish transport investment fund Globalvia.
The role of the DfT
The DfT has refused to disclose details of applications and approvals for dividend payments. On 20th December last year, rail minister Huw Merriman said “The Department does not publish a list of approved dividend payments or applications under consideration as it considers that publication of this information would prejudice commercial interests.” Written questions and answers - Written questions, answers and statements - UK Parliament
The DfT claims that payments are authorised following ‘independent evaluation’ but revealed under questioning that this involved yet more contracts to private companies, including consultancy firms Arup and Atkins. Written questions and answers - Written questions, answers and statements - UK Parliament
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