Impact on costs

The impact on cost is primarily driven by the estimated impact of changes in demand generating additional revenue to offset that lost by the reduction in fares. Then the additional costs incurred by ScotRail are added to this estimate.

The current estimated additional costs are £2.5 million over the initial trial period (to end June) or £3.3 million per year but this includes the Trainline costs (for changing fares etc) which arguably should not be included as a permanent estimate giving an annual cost £2.7 million. A figure of £3 million has been used in subsequent analysis for the additional annual cost.

In terms of the impact on revenue, the econometric approach suggests a net loss in revenue of £12.7 million over 9 months, which annualised would be £17 million, giving an annualised total of £20 million (including additional ScotRail costs).

The TMfS approach suggests an annualised total of £17 million (M2 or main scenario) or £37 million (M4, the low impact scenario)) (including the additional SR costs) which illustrates how sensitive the results are to the demand assumptions made. ScotRail estimate the cost to be between £20 million and £27 million on an annual basis including the additional costs.

A prudent view of annual costs would be in the range of £25 million to £30 million with a (less likely) downside scenario of up to £40 million.