Taxpayers are facing a rail fare of at least £5bn as industry bosses warn ministers that emergency measures to support the network must be extended for up to 18 months.
Train companies have delivered an ultimatum to Government that they must extend the current subsidy package or be forced into full nationalisation and the effective return of British Rail.
Senior industry figures have opened “formative and exploratory” talks with Whitehall officials amid fears that a slew of train operators would collapse within weeks if normal contractual terms come back into force in September, when the current arrangements expire.
So-called “emergency measures agreements” (EMAs) between train companies and the Government were rushed through by the Department for Transport in late March to guarantee a basic service keeps running during the lockdown.
They effectively nationalised the rail network for six months by introducing a “cost-plus” financial model, meaning operators are guaranteed to make a profit despite passenger numbers collapsing 95pc.
The regime is costing the taxpayer an estimated £900m per month but if ministers fail to extend it, operators face ruin, train leaders said.
The combination of dramatically lower fare collections and a return to normal franchise costs would quickly rack up big losses. Operators would have little choice but to hand franchises back to the Government, said senior industry insiders, who have been instructed by ministers not to speak publicly about the crisis in the rail industry.
One senior executive said: “In September, the only alternative to an extension is full nationalisation,”
While politically unpalatable to many Conservatives, full nationalisation of the railways remains a popular notion among the British public. Surveys show a majority of commuters believing public ownership could solve a lot of the railways’ woes.
Companies House filings reveal that the Operator of Last Resort – the Government organisation that manages failed rail franchises such as LNER and Northern – has created six shell companies in recent weeks. This has sparked industry speculation that ministers are laying the foundations for drastic action such as bringing the whole network fully under state ownership.
With Boris Johnson expected to announce a gradual easing of coronavirus measures this evening, the rail industry has been locked in talks over the last week over how to safely ramp up services from May 18.
An app has been created to allow commuters to book slots at railway stations to prevent overcrowding and ensure social distancing is observed.
Industry sources said that train companies are expecting to carry roughly 20pc of pre-crisis passenger numbers. This means that without an extension of the emergency measures, operators would quickly rack up crippling losses.
For this reason, there is broad consensus among train firms that a cliff-edge return to the pre-crisis franchise model must be averted.
“Just going back to something pre-March is not going to be an option,” said another senior rail executive.
Industry bosses differ in their opinion on the finer details of what needs to be implemented in September.
One figure said their train company would be calling for a simple six-month extension of the current EMAs – meaning taxpayers would need to fork out an estimated £5bn between September and March 2021.
Another raised the prospect of a hybrid model that would reintroduce “commercial tension” into the rail system but leave overall control with the state for up to 18 months.
The Government declined to comment.