Transparency data

Details of operational support payments to franchised passenger rail operators under emergency agreements and National Rail contracts

Updated 27 April 2023

Many rail industry processes, including payments under franchise contracts, occur once each ‘rail period’. There are 13 such periods per financial year (each ending at 1:59 am on the day after the final date given).

This table of payments to franchised passenger rail operators under emergency agreements and National Rail Contracts (ODS, 15KB) shows payments made over the first 31 periods since these arrangements have been in place, namely:

• financial year 2019 to 2020, period 13: 1 March 2020 to 31 March 2020
• financial year 2020 to 2021, periods 1 to 13: 1 April 2020 to 31 March 2021
• financial year 2021 to 2022, periods 1 to 13: 1 April 2021 to 31 March 2022
• financial year 2022 to 2023, periods 1 to 9: 1 April 2022 to 11 December 2022

How operational support payments are calculated and made

A similar budgeting process continues to apply under the more recent National Rail Contracts (NRCs) and emergency recovery measures agreements (ERMAs) as under the emergency measures agreements (EMAs). Specifically, the Department for Transport (DfT) agrees a budget for each period with each train operating company (TOC).

This budget is reviewed by the DfT and contains:

• forecasts of costs
• capital expenditure
• revenue

Operational support payments are generally made from the DfT to the TOCs on the first weekday of each period. Each periodic franchise payment initially comprises a ‘forward-looking’ forecast for costs and capital expenditure for that period, less a ‘backwards-looking’ estimate for revenue received for the previous period.

The forecasts of costs and capital expenditure are taken from the TOC’s periodic budget. The revenue estimate may come from either the TOC’s budget or the DfT’s own estimates based on the most recently available industry data on ticket sales.

Each periodic franchise payment also includes an adjustment based on the difference between these initial values (for costs, capital expenditure and revenues) and the actual values, as reported in the management accounts submitted by the TOCs to the DfT.

While the initial payment is made on the first weekday of a period, the management accounts are submitted within 10 weekdays following the end of the period. Under the EMAs, there was therefore a 2-period interval between the initial payment and the adjustment. This adjustment interval has now been extended to 3 periods under the ERMAs and NRCs to allow more time for adjustments to be calculated and reviewed. The Period 6 payment in financial year 2020 to 2021 (the final period of the EMAs) was the first to be affected by this change.

This adjustment process can lead to either upward or downward movement in the operational support payments as actual values for costs, capital expenditure and revenues can be higher or lower than the initial values.

For any given period, the total franchise payment is therefore made in 2 stages:

• the first is made on the first weekday of the period, based on forecast costs and estimated revenues
• the second is made 2 periods later (extended to 3 periods following the introduction of ERMAs and NRCs) and ensures the total net payment reflects actual costs and revenues as reported in TOC management accounts

Scope of the periodic payment data

The operational payments to TOCs under emergency agreements and NRCs data (ODS, 12KB) includes both stages of the operational support payment, as described above, for all periods shown; however, it does not include any allowance for the effect of future payments, and future adjustments that may partly relate to these periods, unless explicitly stated. These future payments and adjustments may include longer-term retrospective adjustments to reconcile payments to full audited TOC accounts.

Management and performance fees (ODS, 15KB) due to the TOCs are also excluded from this operational support data.

Exceptions to standard arrangements

During the period covered by this data, 2 franchises were in public ownership throughout – East Coast and Northern. These 2 franchises were not operating under emergency agreements as the DfT already had full responsibility for their costs and revenues. Their payment data is shown here for completeness and comparability. Payments to these franchises continued to be made in accordance with their existing services agreements. No management or performance fees were payable to these 2 TOCs.

Two franchises – Great Western and South Eastern – were previously operating under franchise agreements that expired on 31 March 2020. During the period covered by this data, they were operating under new franchise agreements, beginning on 1 April 2020, that were signed alongside their EMAs in late March 2020. Both franchises had different EMA term lengths, and other smaller differences to standard EMA arrangements. South Eastern transferred to public ownership on 17 October 2021, from when similar arrangements to the other franchises also in public ownership came into place, and Great Western transferred onto a National Rail Contract on 26 June 2022.

One franchise – Cross Country – had an EMA that was one rail period longer than the standard term to coincide with the end date of its previous franchise agreement in October 2020. A directly-awarded franchise agreement, of 3 years’ duration with an extension option of up to 1 year, came into effect when this ended on 18 October 2020.

This agreement includes various bespoke requirements specific to this franchise, but the core commercial arrangements – whereby DfT receives revenue collected and pays most costs incurred through a regular franchise payment – are consistent with those used in the EMAs and ERMAs.