Question to the Department for Transport:

To ask the Secretary of State for Transport, what criteria his Department uses to allocate subsidies and premiums to train companies for the operation of rail franchise agreements.

The Secretary of State allocates subsidies and premiums for each franchise using the following criteria at the bidding stage. This determines if a franchise will either pay a premium to the department or receive a subsidy.

For a premium paying TOC

The total income bid exceeds the sum of total bid costs and bid margin

For a subsidy paying TOC

The sum of total bid costs and bid margin exceed total bid income.

The Premiums receivable and Subsidies payable are set at the point of contract award based on bid forecast. There are some factors that may make actual payments differ from Bid. They include Revenue (share)/support, profit share, regulatory changes, inflation indices etc.