Date lodged: 15 December 2016
To ask the Scottish Government, further to its draft budget statement on 15 December 2016, whether it will provide a breakdown of its estimate that a freeze on regulated rail fares will cost £58 million.
Answered by: Humza Yousaf 10 January 2017
The cost impact of any franchise contract variation must be assessed through the financial modelling suite associated with the franchise contract. This takes into account a range of factors including forecast levels of revenue and inflation. A one-year freeze would create a gap in franchise revenue that would be maintained and compounded each year thereafter, even after returning to the current fares policy for future years. Cost estimates in accordance with the financial model for a one-year freeze on all fares, which were validated by the independent financial advisers Ernst and Young LLP, predicted a gap in revenue until the first break point in the contract of up to £58 million. This revenue gap would need to be met by the Scottish Government. Of course this gap in ScotRail revenues would continue to grow beyond the end the franchise contract, whoever operates the ScotRail services.