THE German government agreed on May 12 to provide an additional €1bn to the country’s 16 federal states to fund local and regional transport in 2021.

The funding, which is subject to approval by the German parliament, is in addition to €2.5bn of extra funds made available in 2020 and in both cases is additional to the so-called “regionalisation funds” that the federal government pays the states annually to finance local and regional transport.

These regionalisation funds amounted to €8.85bn in 2020 and increased to €9.26bn in 2021. They primarily fund rail, metro and tram services although they also fund bus and other public transport provision such as cycle hire schemes.

The federal government and the 16 states agreed in 2020 to equally share the cost of supporting local and regional transport during the pandemic with the states matching the 2020 figure of €2.5bn using funds drawn from their budgets, which are in part funded by local or regional taxes. It is proposed the same agreement applies in 2021 with the states collectively funding €1bn, bringing the total pandemic support for local and regional transport to €7bn.

Covid-19-related lockdowns have been in place in Germany for most of 2021 with all but essential travel discouraged and, in some cases, prohibited. The lockdown is only now beginning to gradually ease.

Most German rail, metro and light rail contracts are awarded on the basis of cost per kilometre operated, plus quality criteria - so called ‘gross contracts’ - with the states retaining fare revenue. This model has worked well for some operators during the pandemic, which have been paid to operate whether passengers use services or not. But for the transport authorities paying the operators there have been substantial revenue losses, leading to the need for the €7bn of additional funds in 2020-21 to replace missing fares revenue.

German long-distance rail services are largely operated on a commercial basis, mainly by German Rail (DB) Long Distance. The German government, which owns DB, has provided several sources of additional finance including increased borrowing, dividend cancellation and rebates on track access fees.