Recommendation 17

The Department updated us on the Emergency Recovery Measures Agreements (ERMAs), which it put in place as an overlay to franchising agreements in response to the dramatic loss in passenger revenue caused by the COVID-19 pandemic. The ERMAs transferred all cost risk and revenue risk from operators to the Department and were put in place to ensure the continued operation of rail passenger services during the pandemic, now funded by the taxpayer. The Department told us that the cost of its emergency measures to the taxpayer to date was £8.5 billion. The Department acknowledged that this level of investment is unsustainable and that it will be transitioning all operators from ERMAs to new interim National Rail contracts to reduce financial burden on the government and taxpayer.41 However, cost and revenue risk will remain with government as, under these new contracts, operators will be paid a fixed fee for operating services rather than themselves being exposed to changes in operational costs and passenger revenues.42 The Department considered that, given the current economic uncertainty, contracting in any other way would be untenable.43