National Express extracts £115m subsidy for loss-making franchises

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The Strategic Rail Authority yesterday agreed to give National Express an extra £115m in subsidy for its ScotRail and Central Trains franchises after the group threatened to cut services to the bare minimum on the two loss-making businesses.

An SRA spokesman defended the additional support on the grounds that the two franchises had suffered badly from the network speed restrictions imposed after the Hatfield accident and had no prospect of returning to profitability before they expire in 2004.

In return for the extra £115m in subsidy, National Express has agreed to make a cash payment of £59m to the SRA, cutting the net contribution from the taxpayer to £56m. Its Central Trains franchise is also being extended by two years to March, 2006.

As part of a wider agreement with the SRA, National Express has also been allowed to cut back on the investment it promised to make in its rail business when it was given approval to take over Prism, the operator of the West Anglia Great Northern, Wales and Borders and c2c franchises.

Investment in the c2c line, which runs from London to Southend, will be cut from £20.5m to £8m while National Express is stopping £13.3m of investment in its other franchises in return for making a £3.5m cash payment to the SRA.

Richard Bowker, the chairman of the SRA, described the agreement as "a great step forward for passengers". Officials defended the decision to allow National Express to cut back on its investment pledges on the grounds that the franchises did not have very much longer to run and the SRA did not want to have the liability for honouring the investment if National Express did not renew them.

Phil White, the chief executive of National Express, said he was delighted with the settlement which would enable the company and the SRA to plan for the future with greater certainty.