Transport secretary Grant Shapps has announced that normal rail franchise agreements will be suspended for six months due to the coronavirus pandemic.
During the suspension all revenue and cost risk will be transferred to the Government under Emergency Measures Agreements.
The Department for Transport (DfT) confirmed that railways have already seen up to a 70% drop in passenger numbers, with rail fares revenue reducing as people increasingly work from home and adopt social distancing, and total ticket sales down by two-thirds from the equivalent date in 2019.
Shapps said: “In these uncertain times, the railway has a vital role to play in ensuring Britain’s key workers can travel and vital supplies are kept moving.
“My absolute focus is on making sure services continue so that journeys that are vital in tackling this crisis can continue to take place.
“...These agreements will suspend the normal financial mechanisms of franchise agreements, transferring all revenue and cost risk to the government.”
Shapps confirmed that rail operators will continue to run day-to-day services for a small, pre-determined management fee.
Companies entering into these agreements will see a temporary suspension of their existing franchise agreement’s financial mechanisms for an initial period of six months, with options for further extension or earlier cancellation as agreed.
Shapps said: “These measures will provide greater flexibility to the train operators and the government and make sure the railway can continue to react quickly to changing circumstances and play its part in serving the national interest.
“It will ensure vital services continue to operate for key workers who are keeping the nation running and that we are able to reinstate a normal service quickly when the situation improves.”
Fees will be set at a maximum of 2% of the cost base of the franchise before the COVID-19 pandemic began, intended to incentivise operators to meet reliability, punctuality and other targets.
The maximum fee attainable will be "far less than recent profits earned by train operators". In the event that an operator does not wish to accept an Emergency Measures Agreement, the Government’s Operator of Last Resort will step in.
Passengers will be able to get refunds for advance tickets they aren’t able to use while the Government advises against non-essential travel.
Those holding a season ticket that they no longer wish to use will also be eligible for a partial refund, determined by the amount of time remaining on the ticket.
Shapps said: “We are operating in extraordinary times, but today’s announcement will make sure key workers who depend on our railways are able to travel and carry on their vital roles, that hardworking commuters - who have radically altered their lives to combat the spread of coronavirus, are not left out of pocket, and it will provide certainty to the industry’s staff who are still working hard every day to make sure the railway plays its part in tackling this crisis.”