Ailing Connex is given £58m handout by state

Rail chiefs gave one of Britain's biggest train operators a £58m handout yesterday from taxpayers, but cut its franchise by five years.

The move to bail out Connex, which runs commuter services in the South-east, will be seen as a further step in the "creeping re-nationalisation" of the network.

Connex South Eastern, whose franchise will now finish at the end of 2006, will add £11m of its own equity to the government subsidy, which will come via the Strategic Rail Authority (SRA). The news follows revelations in The Independent that Connex, along with five other operators in the South-east, are to raise peak-time fares by 2.5 per cent.

An SRA spokesman said Connex had been losing money and was expected to continue to do so. "We wanted to have a degree of stability and that's why we have announced the extra subsidy," he said.

In the wake of yesterday's announcement, critics will argue that the idea of a privatised rail system is increasingly counterfeit. The infrastructure has been been taken over by the state-backed Network Rail and all major new projects are being organised by the SRA.

Nick Newton, the SRA's chief operating officer, said the package had short and long-term benefits for passengers. "It secures the continuation of Connex's efforts to improve punctuality, ensures delivery of the programme to replace slam-door trains and opens the way for an expanded Kent franchise from 2007 incorporating proposed high-speed services," he said.

It is expected that the Kent franchise will incorporate the domestic services that will run on the Channel Tunnel high-speed rail link when it opens in 2007. A Connex spokeswoman said the firm looked forward to bidding for the enlarged licence.

The Liberal Democrat transport spokesman, Don Foster, said it was "deeply disturbing" that taxpayers' money had to be used to prop up an "ailing and failing" company. He said Connex should be placed into a "management contract" under the SRA which would give taxpayers greater control over their investment, "rather than seeing cash disappear into a black hole".

He added: "It is vital that the new franchise is sorted out as quickly as possible."

Mike Hewitson, secretary of the southern England sector of the Rail Passengers Council, said: "We have been calling for more investment in Kent train services, although this was not quite the way we thought we would get it. If this leads to improved services, then it's a good thing."