Train firm First Great Western to get £120 million in subsidies

Train operator First Great Western will receive £120 million in Government subsidies this year because it is not making enough money – despite rising fares.

The company is being given the money by the Government under the terms of its contract to run trains from Bristol to London, Gloucester, Devon and Cornwall, as well as services to Keynsham, Bath and Weston-super-Mare.

Each franchise contract guarantees the rail operator Government cash handouts if its passenger takings fall below a certain level, which is decided at the start of their franchise but not revealed to the public.

FGW's parent company FirstGroup confirmed it was receiving the maximum possible Government payout for this year – more than its entire profits for the last financial year – because takings had plunged, blaming the recession.

Unions have criticised the handout, branding it a "massive taxpayer bail-out".

First won the Great Western franchise in April 2006 and its deal lasts until 2013. If it meets punctuality and reliability targets set by the Government, the contract will then be extended to 2016.

The company charges passengers £59 for an average off-peak fare from Bristol Temple Meads to London Paddington, while the same rush-hour fare is £153. Average first-class fares cost £154 off-peak, or £254 in the rush-hour.

First Group also confirmed that its First Capital Connect (FCC) service, which operates in and around London, will get £30 million of taxpayer subsidy this year.

The National Union of Rail, Maritime and Transport Workers (RMT) said the scale of the payments exposed serious flaws in the rail franchise system. RMT general secretary Bob Crow said: "This is a massive taxpayer bail-out, which makes a mockery of the rail franchising system.

"These figures show that companies are being propped up by taxpayers' money and it reinforces the RMT's argument that the whole system has been an expensive disaster."

News of the Government cash handouts came as FirstGroup unveiled a 44 per cent drop in profits to £30.3 million in the six months to September, compared to £54 million for the same period a year ago. Yearly profits for First group a year ago were £107 million, compared to £69 million in 2009.

An increase of £74 million in fuel costs in the current financial year also hurt FirstGroup, although it expects this to reverse in 2010/11.

FirstGroup, which employs more than 130,000 people, has cut 4,400 jobs in the year to date, including 1,130 posts in UK bus and 610 in UK rail to save £200 million.