ScotRail nationalisation to cost taxpayers more than £4m

It comes as Transport Scotland's director of rail, Bill Reeve has admitted he is not confident over what the net costs of operating the new state-owned ScotRail will be as passenger numbers continued to slump against pre-pandemic levels as Covid restrictions ease.

The Scottish Government announced last year that ScotRail will come under direct state control April 1, this year.

The Scottish Government will run ScotRail through an arms-length company after it declared that the current system of franchising "is no longer fit for purpose".

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Net zero, energy and transport secretary Michael Matheson said the move will come through “operator of last resort arrangements” after he decided it was not the right time to seek a franchise procurement competition to run Scotland’s railways after Dutch state owned railway company Abellio ends its control.

Mr Reeve said that the final costs of the transfer of operation will be under £5m, but said that the last franchising competition exercise which Abellio was more than double that.

"Having run the previous franchise competition which cost us, I'm forever shocked at the cost of such processes, but the last franchising cost around £10m from memory. Though I still remain struck at the scale of what's involved in a in a large, complex contractual set of transfers like this, it [the cost of nationalisation] is nonetheless substantially cheaper than that alternative option."

But he said that he was not confident of what the net cost of operating ScotRail would be as he pointed out that weekday passenger numbers are at between 55% and 60% of pre-pandemic levels.

Some £719.5m has allocated for the first year of the nationalised rail services, of which £312m goes to the rail infrastructure owners Network Rail as a contribution to its costs.

Mr Reeve said: "What is not certain yet is what the revenue of ScotRail will be over this next year. We have learned in the last two years how demand has gone up and down at different stages.

"We were as low as under 10% of revenue at one point. At the minute we're on Saturdays up to pre pandemic levels at the weekend, but we're bumping along the sort of 55% to 60% of revenue on a weekday at the minute.

"And I think we can all look over the next year a range of very plausible scenarios that would take us to very different passenger demand and therefore revenue figures.

"So could I look you in the eye and say I'm confident what the net cost of operating ScotRail over the next 12 months will be? No. Bluntly, that's not an issue of ownership that's just an issue of the market conditions. "

When asked by Liam Kerr, the shadow cabinet secretary for net zero, energy and transport what is going to bet better through nationalisation, transport minister Jenny Gilruth said "accountability to ministers".

Mr Kerr told the Scottish Parliament transport committee: "Post April 1, we have the same people, we have the same rolling stock, we have the same leasing arrangements in the short term, we have the same network at a cost of 3.6 million, with potentially fewer ticket offices, fewer services.. So the question begs is what can a nationalised rail company do that the previous operator couldn't?."

Ms Gilruth said: "The franchise is now accountable directly to ministers and ministers are accountable to Parliament and are accountable to this committee."

At the end of 2019, ministers announced it had stripped Abellio of the franchise three years early in the wake of continuing outcry over service failings and rising costs to the taxpayer.

It came after a 2018 winter timetable with the introduction of high-speed trains and new class 385 electric trains ushered in months of cancellations and disruption to services with much of it put down to staff shortages partly due to training to deal with the new trains and timetable.

ScotRail was forced to submit a plan by February, 2019, to address falling performance levels which, if unsuccessful, could result in a breach of contract and lead to Abellio losing the franchise early.

Ms Gilruth added: "Now, I know as a Fife MSP of some of the challenges we faced with the Abellio contract in the years leading up to where we are now. Some of the very real challenges have been about not having enough seats on trains, for example, trains been cancelled and delayed. I am very live to all of that.

"Do you think all that's going to go away under public ownership? I hope some of it will be released. But at least there will be accountability to parliament and at least there will be ministerial oversight in the process. And I think that's hugely important.

"And, yes, some of the people will be the same. But these people are experts in their fields. We would want these people to be in charge of running ScotRail trains for example. "There is greater democracy, I think, in the way in which we hope to run Scotland's trains in the future that we don't currently have under the franchising network system that we currently use under Abellio."

A Transport Scotland spokesman said: "Bringing ScotRail services under Scottish Government control on 1 April 2022 provides us with an opportunity to shape our vision for rail services going forward; services which are efficient, passenger focussed and provide public value.

“Tne process has entailed more work than originally anticipated, but this has identified opportunities for material savings that are substantially larger than the mobilisation costs. £3.6m remains significantly lower than the typical costs of £10m or more required by the public sector to run a franchise procurement competition, not to mention the bid costs that each bidder must incur.”