THE latest accounts from the three train firms running the South Western Trains, Avanti West Coast, Thameslink, Great Northern, Southern and Gatwick Express rail franchises show these companies paid their owners a combined £69.5 million of dividends in 2022-23, despite depending on hundreds of millions in government subsidy.

The subsidy that kept these firms going was both much bigger than their profits and their dividends, so really they paid out this money to their shareholders directly from government aid.

When Covid slashed passenger numbers in 2020, the government tore up all the existing rail contracts and moved to huge subsidies to keep rail moving: the rail companies kept their privately run, publicly granted transport monopolies, but the Department for Transport pumped in extra cash to keep the trains running.

Under the deals, the Department for Transport would take all the ticket money, add a huge public subsidy and hand it over to the rail firms. As the pandemic has ended and passenger numbers began to improve, the subsidies have reduced, though they are still very big.

These agreements were first called Emergency Measures Agreements, then Emergency Recovery Measures Agreements and now National Rail Contracts, but their basic structure — and reliance on public subsidy — is the same.

Govia Thameslink Railway runs the Thameslink, Great Northern, Southern and Gatwick Express rail lines. It’s a big set of franchises, carrying passengers on about 18 per cent of British rail journeys.

Its latest annual report, covering the year to March 2023, says it relied on a subsidy of £284m that year from the taxpayer — that’s less than the previous year, but still a huge sum. The subsidy is 17 per cent of its turnover.

The firm claimed to have made a profit of £14m, but given the much greater taxpayer support it got, this “profit” is artificial. This isn’t the “free market,” it’s just a big firm getting a big public handout.

But it is still acting like investors have done something special and deserve a reward. Govia Thameslink Railway’s annual report says it paid £16.9m dividend to its owners in October 2022, and an extra £62.3m dividend in July 2023.

Govia’s owners are Kinetic Group (an Australian bus company) Globalvia (a Spanish transport infrastructure company) and Keolis (a subsidiary of the French state-owned rail provider SNCF).

The annual accounts tell us: “In March 2022 the Department for Transport awarded a National Rail Contract (NRC)” to the firm to continue running all the franchises.

The report says: “The new contract commenced on April 1 2022 and will run at least until April 1 2024 and will continue thereafter to March 2028 at the Secretary of State’s discretion.” The contract will continue after the Tories probably lose the next election: the government has signed a number of these contracts to try to force the next Labour government to stick with the private rail firms, at least for a while.

Govia Thameslink Railways’ annual report is also pretty honest about the lack of any risk to them in this cosy arrangement. It tells us: “The contract has limited revenue and contract risk” and “is not exposed to changes in passenger demand.”

Govia Thameslink is not alone. The company First MTR South Western, which is 70 per cent owned by Britain’s First Group with a 30 per cent stake from Hong Kong’s public rail firm MTR, runs South Western. First Trenitalia West Coast, is also 70 per cent owned by First Group with a 30 per cent stake from Italian national rail operator Trenitalia.

The latest accounts for First MTR South Western, published in December but covering the year to March 2023 shows it got a £144.9m government subsidy. That’s less than the previous year but still represents about 14 per cent of its total turnover.

The firm then paid a £9.3m dividend to its two owners: arguably it simply took this dividend out of its taxpayers’ subsidy. First Trenitalia West Coast’s 2023 annual report, also published in December, shows it got a £92.4m public subsidy, worth 9.5 per cent of its turnover. It paid its owners an £11m dividend: another slice of publicly subsidised cash was diverted to its two private owners.

Travellers on South Western and Avanti West Coast are used to cancellations and delays. The same is true of Govia’s rail franchises, where nearly a third of its trains failed to run on time in the most recent quarter and 4 per cent were cancelled, according to figures from the Office for Rail and Road (ORR)… but the government happily throws cash at these rail companies.

Under their contracts, rail firms must seek Department for Transport approval to pay dividends, so these payments have ministerial backing.

Just like Govia, the First MTR South Western annual report also shows the firm takes few risks to get these easy rewards. It says that, thanks to the National Rail Contract, the firm “holds no revenue risk and very limited cost risk that is proportional to the reward available to the operator.” The Department for Transport also extended its contract for two more years until May 2025.

Many media commentators are expressing surprise that Fujitsu still gets government contracts after its firm helped cause terrible miscarriages of justice when subpostmasters were imprisoned due to failure in its accounts computer system.

More are shocked that Fujitsu also still gets government contracts after the firm sued the NHS for £700m for cancelling its failing NHS IT system. But the truth is the state now has a sort of masochistic relationship with big firms: corporations can cheat, lie and fail, but the state will just come back for more, and hand over greater contracts and subsidies.

Giving rail firms huge subsidies so they can pay their owners multimillion-pound dividends is another example of this “punish me, please” approach. The role of the state, as defined by New Labour and Tory governments, is to make the people fit the corporate needs, not the other way around.

Follow Solomon Hughes on Twitter at @SolHughesWriter.