SCOTTISH transport giant FirstGroup has welcomed a big-money extension to its cross-border rail contract.

The UK Government has scrapped rail franchising and will continue to use public cash to support train firms through the pandemic.

The 18-month move benefits Aberdeen-based First and a number of other companies, but has been slammed by unions.

At least £3.5 billion has been spent since the UK Department for Transport (DfT) took on the revenue and cost risks of franchise holders in March.

It has now switched current operators to "transitional contracts" and promises to develop a "simpler and more effective structure" in the coming months.

Howevever, "significant taxpayer support will still be needed" under the new Emergency Recovery Management Agreements (ERMAs), the department said.

It went on: "Ministers today ended rail franchising after 24 years as the first step in bringing Britain's fragmented network back together."

Rail firms will continue to be paid a management fee for running services, but under the ERMAs it will be a maximum of up to 1.5% of the franchise cost base, rather than 2% under the Emergency Measures Agreements introduced in March.

Transport Secretary Grant Shapps said: "The model of privatisation adopted 25 years ago has seen significant rises in passenger numbers, but this pandemic has proven that it is no longer working.

"Our new deal for rail demands more for passengers. It will simplify people's journeys, ending the uncertainty and confusion about whether you are using the right ticket or the right train company.

"It will keep the best elements of the private sector, including competition and investment, that have helped to drive growth - but deliver strategic direction, leadership and accountability.

"Passengers will have reliable, safe services on a network totally built around them. It is time to get Britain back on track."

First owns four affected UK rail franchises — South Western Railway, the TransPennine Express and the West Coast Partnership, which comprises the cross-border Avanti West Coast and HS2 shadow operations.

It says passenger number remain at 70% below pre-pandemic levels.

Its chief executive Matthew Gregory said the ERMAs could lead to "a more appropriate balance of risk and reward for all parties".

He added: "We have long advocated for a more sustainable long-term approach to the railway, with passengers at its centre, and we look forward to working constructively with the DfT to make this a reality."

However, Mick Cash of the Rail, Maritime and Transport union claimed "private rail companies are a waste of time and a waste of money".

He insisted that "public ownership is the only model that works".

And Harish Patel, Unite's national officer for rail, said: "Instead of the proposed new model which will allow privateers a renewed opportunity to feed off the taxpayer and passengers, the government should be permanently re-nationalising rail services to increase services, improve punctuality and reduce tickets prices."