Claw back ?12m ‘failing’ rail firm paid out in dividends, Labour urges

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Labour has called on ministers to claw back ?12m in dividends paid by Avanti West Coast to its shareholders last year, when it was subsidised by ?343m by the taxpayer.

Figures released by the rail watchdog on Tuesday showed that Avanti paid out ?12m in 2021-22 from management and performance fees.

The dividends were paid to the owners groups First Group and Trenitalia before the depths of the current crisis. However, in that financial year Avanti recorded the worst performance for punctuality among train operators, cut back the number of train services it scheduled and still cancelled almost 3,600 trains, according to figures from Office of Rail and Road (ORR).

Under the emergency contracts, the Avanti West Coast operation received a ?343m net subsidy from the taxpayer in the year, covering the difference between revenue and costs with ?10m to spare.

The company also received more than 35,000 complaints in 2021-22, the most of any operator, according to ORR. The figures cover the period before this summer, when Avanti’s problems grew so bad that it slashed its timetables to concentrate on running fewer trains more reliably.

Businesses and commuters in northern cities that rely most on Avanti’s intercity services have spoken of problems and despair due to unreliable trains – exacerbated now by cancellations and staff shortages at TransPennine Express (TPE) in particular, as well as Northern.

The shadow transport secretary, Louise Haigh, said ministers were “rewarding abject failure with taxpayers’ hard-earned money”.

She added: “It is scandalous that despite the abysmal service, the government has allowed public money to flow into the pockets of shareholders.

“It’s time the government did their job and hold this failing operator to account.

Ministers sign off on dividend payments – they must claw back taxpayers’ cash being used to reward failure.”

The transport secretary, Mark Harper, will meet northern metro mayors on Wednesday to discuss problems with services across the region, with the unreliability of TPE trains now rapidly matching Avanti for concern.

Both operators are to add more services in a planned 11 December timetable change, but regional leaders fear that issues around rest day working agreements on TPE may mean even more cancellations owing to lack of staff. Henri Murison, chief executive of Northern Powerhouse Partnership, said: “We need a resolution by the end of this week or we will get absolute chaos following the timetable change.”

Haigh is due to meet business leaders privately in the north on Thursday to discuss Labour’s plans for rail.

The Department for Transport last month renewed Avanti’s contract to run West Coast services for another six months, with a warning that services must improve. Avanti has promised to restore three trains an hour between London and Manchester as part of its recovery plan.

Data recently revealed by the Guardian showed that Avanti cancelled proportionately more trains than any other operator, in a year of record cancellations by British rail firms.

The biggest dividends of any operator last year, ?33m, were paid out by another First Group-owned company, Great Western. First also netted the biggest share of the ?13m paid out by its South Western Railway joint venture.

FirstGroup said that the dividends were “not shareholder dividends” but how the fees were remitted from the train operators to the owning group. It added: “Since 2020, train operators have been paid a nominal fixed annual management fee as well as a performance-based fee against specific targets set by the government to run rail services.

“The information released by ORR today refers to financial data for operations in the year to March 2022, during which we saw passenger numbers begin to recover after the impact of the pandemic and prior to industrial action across the network.”

TheDfT said: “This report reflects funding to the rail industry up to March this year and pre-dates disruption seen on Avanti West Coast services this summer.

“We are meeting with Avanti West Coast regularly to discuss its performance and they have been given six months to roll out a recovery plan and deliver long-overdue reliability for passengers.”