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Under the management of the Department for Transport, the process for awarding passenger Rail Franchises in England and Wales has delivered better value for money, with subsidies expected to fall. But some fares will rise above inflation and crowding for many commuters will increase in the short term until investment delivers more carrying capacity.

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Today’s report from the National Audit Office found that the Department – which took over the franchising process from the Strategic Rail Authority in 2005 – has provided service specifications for Train Operating Companies that reflect Government aims of improving railway performance while controlling industry costs.

At the time the eight franchises we examined were let, a continued rise in the number of passengers and length of passenger journeys was projected to result in a turnaround from a subsidy from the taxpayer of £811 million in 2006-7 to a payment of £326 million in 2011-12. The turnaround relates to payments to train operators to run passenger services and does not include other subsidies paid through Network Rail. Achieving this reduction in subsidy will depend on a number of factors including the effect of any slowdown in the economy.

The Department’s contract terms should improve the security, reliability, accessibility and quality of passenger rail services on the eight franchises it has let, but there is a risk that overcrowding and fare increases may offset any improvements to passenger satisfaction.

Most regulated fares (such as saver and season tickets) have risen by RPI plus one per cent. Increases in non-regulated fares have been substantially higher – often six to seven per cent. Some one-off increases have been as high as 20 per cent in 2007, although incentives for passengers travelling outside peak hours have included special low fare offers.

The Department plans to increase capacity on the rail network, mainly from an additional 1,300 carriages. In the eight franchises we examined this would lead to increased capacity of 22 per cent. Many passengers – particularly on routes serving London – will, however, face increased crowding at peak periods until the planned improvements can be carried out.

"Taxpayers and passengers should benefit from changes made to the franchising process for passenger rail services. The Department for Transport has contracted to save the taxpayer money while improving service quality, but it will need to see that capacity increases are well-managed and timely if passengers are to expect less crowded and more reliable journeys."

Tim Burr, head of the National Audit Office


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