Rail firms rake in £2.7bn subsidies while raising fares

Transport campaigners in Britain's union movement voiced outrage today at a "fundamentally flawed" culture of corporate coddling after revealing the multibillion-pound payouts.

Official figures from the Department for Transport showed train operating companies paid the government a combined £1.17bn in premiums for 2011 - but benefited from a whopping £3.88bn in public subsidies.

Many companies received direct subsidies through "revenue support" when passenger numbers were down.

But companies also benefited from artificially low access charges for the upkeep of Britain's rail network - paid for instead by departmental grants to Network Rail.

For West Coast operator Virgin, its £211 million in franchise payments left it £133m ahead, boosting pre-tax profits to nearly £40m before siphoning off £29m to shareholders earlier this year.

By comparison the state-run East Coast Main Line received just £12m in net public subsidy, although the company reported a tidy operating profit of £7.1m last month and directors have said that they plan to reinvest the funds back into the service.

Action for Rail chair and TUC general secretary Frances O'Grady said that the figures showed the true nature of Britain's rail industry - "a system of corporate welfare where train operators make a play of bidding for contracts knowing that their future revenue is underwritten by the taxpayer."

The recent abortive handover of Virgin's West Coast franchise was just the latest lesson, she said.

"The franchising process is fundamentally flawed and unsustainable.

"Instead of allowing public subsidies to end up in the pockets of shareholders the government should be using this money to invest in services that puts passengers first," she said.