MINISTERS have come under fire over the “scandal” of giving a £1.5m-a-month management and performance fees to ScotRail chiefs on top of massive subsidies and Covid payments which union leaders have condemned as “profiting from the pandemic”.
ScotRail, which is at the centre of multiple industrial disputes over a refusal to give a pay rise, received £6.654m as a management fee over six months between March and September, 2020, it has emerged.
That is on top of the £475.1m paid to the company run by Dutch state-owned transport firm Abellio over the same half-year period in terms of the normal franchise subsidy and extra emergency Covid payments.
Some £215.3m of that was through the introduction of pandemic Emergency Measures Agreements (EMAs) introduced to cover operating costs due to cut revenues due to Covid-19 restrictions and to protect staff and rail services.
ScotRail also received a further £2.2m for its performance during the pandemic – when trains were at a virtual standstill. That included £739,425 for operational performance, £739,425 for customer experience and £739,425 for acting as a good and efficient operator.
The payments were made in January, three months before the Scottish Government decided to boot Abellio from the franchise early, and run operations themselves through an ‘arms-length’ company.
Net zero, climate and transport secretary Michael Matheson then described Abellio’s time in charge of ScotRail as “a difficult period” which had confirmed the franchise system was “broken and not working in the taxpayers’ interest”.
Government officials had in the past refused to divulge the management fees paid to the railway companies.
The Herald has been told that the management fees have now been scrapped by ministers.
The Transport Salaried Staffs’ Association has said that the money could have been used to improve services or cut fares.
They say that the management and performance fees amounting to £9.3m is effectively profit as the pandemic support payments paid for operating company’s costs.
Last month, unions expressed anger that ScotRail under state ownership planned to make cuts to services in a new timetable.
The train operator plans to cut 300 services a day from its pre-pandemic levels to save £40m a year.
Video promo: How ScotRail presents the changes
The changes from next May mean some 2,100 weekday trains running compared to 2,400 before the Covid crisis.
TSSA general secretary Manuel Cortes said heads should roll over the payments which should be handed back.
“When the Scottish government handed over management fees to Abellio for running ScotRail these were nothing more than profits, funded by the taxpayer. No-one begrudges the government paying Abellio for the costs of running the railway during the pandemic,” he said.
And that should, of course, include the wages of the back-office staff whose work is also essential in any company. But the management fees were nothing more than profit, funded not by careful stewardship of resources, or savvy business practices, but by the taxpayer.
“It’s sickening to think that whilst many Scottish taxpayers were risking their lives as key-workers, or facing reduced wages on a furlough scheme Abellio were using the pandemic as a profit-making opportunity. And not only that, but a profit paid for out of Scottish workers’ taxes.
“Abellio should apologise now and hand the money back. And the Scottish ministers responsible for this outrage should do the decent thing and resign.”
The rail union RMT said that it had long-standing concerns that the Scottish Government was trying to evade scrutiny over the management fee issue by unnecessarily transparency over them for months.
RMT general secretary Mick Lynch said: “It is nothing short of a scandal that Transport Scotland and the SNP are happy to pay management fees to Scotrail Abellio, a company that has declared war on its loyal and hard working staff.
“It’s about time the political elite in Scotland took responsibility for the seven month dispute over pay equality on Scotrail and forced their contractors back to the table to negotiate a fair settlement. ”
It comes as the cost of Scotland’s railways to the taxpayer is set to soar by over £1 billion over two years due to the Covid-19 emergency funding.
In 2020/21, the railways will have cost the public purse £1.4 billion – £568m more than in the previous year.
It has been confirmed that a further £450m in emergency funding was expected to be given to rail operators until March, next year on top of the usual subsidies, after which Dutch state-owned transport firm Abellio relinquishes control of ScotRail.
A confirmed EMA has been put in place for £173m till September, 2021.
Some 97% of the emergency payouts go to Abellio-controlled ScotRail with the remainder going to Caledonian Sleeper, which is run by Serco.
In 2019/20, before the Covid-19 crisis, Scotland’s railways cost the taxpayer £832.6m which is made up solely of subsidies of £476.9m to Abellio ScotRail, £13m to Serco Caledonian Sleeper as well as £355.7m paid directly to publicly owned Network Rail for the keep of the infrastructure, which includes the track and signals.
On Wednesday the joint trade unions of TSSA, RMT, ASLEF and Unite are launching a ‘Save Scotland’s Railway’ campaign at Bute House, the official residence of the First Minister to coincide with World Car Free Day.
The unions will be calling on Nicola Sturgeon to reject the proposed cuts to service levels and to stop Abellio, transport minister Graeme Dey and Michael Matheson from what they describe as “taking a wrecking ball our railways”.
They will also be calling on the First Minister to intervene and to resolve the ongoing disputes within Scotrail which is currently suffering from what they describe as the “worst industrial relations in living memory”.
Today (Sunday) ScotRail conductors will be continuing a long-running strike over withdrawn payments for working on days off which will bring most trains to a standstill.
But the unrest does not end there.
Formal notice has been served that industrial action will begin in 11 days time for crucial engineering staff to take rolling industrial action in a dispute that threatens to bring Scotland’s railways to a grinding halt when the world’s eyes are on the nation during the United Nations Climate Change Conference (COP 26) in Glasgow in November.
Railway bosses have been warned that the action by 250 engineers alone, who provide maintenance, overhaul and repair services for the railway rolling stock would bring the nation’s railways to a standstill. Unite Scotland, who represent the engineers, say that if their safety critical work is not carried out, then the nation’s railway network will not be able to effectively operate.
After months of impasse with unions, ScotRail have begun discussions last week with those representing the engineering staff to end the dispute – which could have ramifications for a series of parallel staff grievances.
But on the eve of the talks starting, ScotRail insisted is position remained the same as it had been for several months: “There is no extra money.”
Abellio ScotRail posted a pre-tax loss of £64.5m in the 12 months to March 31, 2020, a period which covered the first eight days of the first Covid lockdown.
In the previous 15-month accounting period, its losses were just over £11m.
Abellio’s turnover for 2020 at £917m was down from the previous accounting period, principally due to passenger income falling from £445.3m in 2019 to £360.4m.
Transport Scotland said the the EMAs were originally required because of a “very significant shortfall in revenue due to an around 90% drop in passengers”.
It said the extra money for the 2021/22 financial year is the result of “projections of expected revenue shortfalls” till September, 2021.
In March, Mr Matheson said that ScotRail would come under public ownership run through an arm’s-length company controlled by the Scottish Government, declaring that the current system of rail franchising was “no longer fit for purpose”.
The move will come through “operator of last resort arrangements” after he decided it was not the right time to seek a franchise procurement competition to run Scotland’s railways after Abellio ends it control in March, 2022.
It came a year after ministers announced it had stripped Abellio of the franchise three years early in the wake of continuing outcry over service failings and rising costs to the taxpayer.
It came after a 2018 winter timetable with the introduction of high-speed trains and new class 385 electric trains ushered in months of cancellations and disruption to services with much of it put down to staff shortages partly due to training to deal with the new trains.
ScotRail was forced to submit a plan by February, 2019, to address falling performance levels which, if unsuccessful, could result in a breach of contract and lead to Abellio losing the franchise early.
Mr Matheson explained that he had considered sticking with Abellio after March, 2022, but decided it was not in the country’s best interest.
A Transport Scotland source said: “The management fees covered a period when significant management of urgent new issues was required, such as emergency timetable changes, introduction of extra cleaning and PPE. The performance fees were calculated based on an assessment of the criteria specified in the EMAs which covered operational performance, customer experience and being a good and efficient operator.
“Franchises have experienced significant revenue shortfalls during the ongoing pandemic which remain far larger in scale than any possible management or performance payments.
“At the first opportunity available we removed the management fee element from future EMAs and based any payments on performance related criteria.
“As the pandemic has progressed we no longer saw a need for this payment, unlike others who continue to pay management fees, and have focussed instead on performance which we know passengers value strongly.”
ScotRail said that there was no profit being made and that for unions to suggest that is “wholly inaccurate”.
The train operator said it has only survived the pandemic due to the emergency taxpayer support amid what it called “the most serious financial crisis in our history”.
A spokesman said: “For the avoidance of doubt, the scale of the financial situation ScotRail is facing is stark. Passenger numbers and revenue remain down at only 50 per cent of pre-pandemic levels and we all need to be working together, not engaging in divisive and potentially destructive disputes.
“Through the Emergency Measures Agreement, we have been held to account by Transport Scotland. We have been measured on a range of fronts and have delivered on all these as identified by Transport Scotland’s independent evaluators.
“While attention is drawn to the management and performance management fees paid under the period of the Emergency Measures Agreement, these will not reverse the significant financial losses that Abellio has reported in relation to the ScotRail franchise.
“To build a more sustainable and greener railway for the future and reduce the burden on the taxpayer, we need to change. All of us in the railway – management, staff, trade unions, suppliers, and government – need to work together to modernise the railway so that it is fit for the future.”