TSSA report on publicly owned ScotRail

[JohnR]

Here is the report they have published today. I'm not sure they've made the case for it myself.

A public future for Scotland’s Railways (PDF format)

...The presence of a publicly-run ScotRail would rectify
some of the significant flaws in the current system,
and could stand at the centre of a new collective
approach to our railways which would enable us to take
full advantage of the array of benefits rail travel will
have to offer in the years to come. Public investment
could be put wholly to use improving rail infrastructure
and improving service, rather than being lost in the
profit margins of ROSCOs and TOCs or wasted due to
the inefficiencies of the franchise system. Managers
of the railway could take a long-term approach to
decision-making and problem-solving, rather than
having to work in a necessarily short-term manner due
to the arbitrary temporality created by ritual rounds
of competitive bidding and funding cycles that are too
short for serious long term investment planning. A
publicly-run Scotrail could provide greater democratic
accountability to the various groups of people it
serves, and could restructure fare prices in such a
way that no longer seems to arbitrarily penalise some
groups of passengers....

http://allofusfirst.org/tasks/render/file/?fileID=F5DF30F9-EE5B-E2D3-26287052E021C23F

 

[PaxVobiscum]

On page 9, Executive Summary, par. 3 begins:

Operators of the Scotrail franchise have made consistent annual operating profts of £10-20 million.

Unfortunately that is not actually true, which doesn’t add weight to their arguments.

 

[Randomer]

Just skimmed it so far but this made me laugh:

if Scotland were to embark on a programme of electrification bringing our railways into line with other European countries such as the Netherlands – where over 70% of track is electrified – the environmental efficiency of the railways would be improved further.

Magical money tree required here.

Otherwise the bit indirectly saying Brexit might be better for public ownership of railways was an interesting point as well (which would also apply nationally not just in Scotland):

the current likelihood is that as of March 2019, Scotland will not be a full EU member state. Unless continuous Single Market membership is obtained, the only legislative obstacles to ending competitive tendering in this scenario would be the UK Government Railway Acts.

 

[Carntyne]

TSSA seem hellbent on damaging the case for it with nonsense like this.

 

[DarloRich]

what a surprise that such a report didn't go down well here.................

 

[PaxVobiscum]

what a surprise that such a report didn't go down well here.................

I’m not sure understand that comment. Are you meaning that the majority of the posts above are against the idea of taking ScotRail out of private hands? Surely the criticism has been about the persuasiveness/accuracy/competence of the report itself rather than being negative about the principle of ScotRail being taken under Scottish Government control?
Perhaps I have misunderstood you.

 

[8H]

I’m not sure understand that comment. Are you meaning that the majority of the posts above are against the idea of taking ScotRail out of private hands? Surely the criticism has been about the persuasiveness/accuracy/competence of the report itself rather than being negative about the principle of ScotRail being taken under Scottish Government control?
Perhaps U have misunderstood you.

To be fair there is a oft expressed position on the forums that there is the current structure of the railway and its funding and there is GRIP, and that is all ye need to know! Whilst we do have to deal with reality as we find it, it doesn’t mean that things will never change or that other models for the industry simply don’t work. I think maybe Darlorich may have meant that, but I’m sure he can stick up for himself I will now retreat and wait for someone to accuse me of owning a box of Lakeland crayons

 

[Randomer]

Personally I don't think the idea of taking the ownership of the TOC in Scotland back into public hands is a bad idea.

My problem is that instead of focusing sharply on an achievable (goal such as legislating to have a public ownership TOC which could then as time goes on gradually purchase its own rolling stock as leases expire or can be modified) the report has lumped all aspects such as infrastructure and trains etc into one system of ownership.

A duel ownership system (infrastructure and operators as separate companies both publicly owned) is what exists in Finland, so often mentioned in the report, yet here seems not to be recommended.

Edited to say, my issue here seems to be that the report has set a goal (ownership of Railways in Scottish government hands) then tried to justify it rather than setting out an actual alternative. As people here are perhaps apt to be critics when other members make similar proposals.

 

[LNW-GW Joint]

The TSSA must know that EU legislation does not require privatisation, just separation of infrastructure and operations, with the operations competed for, public or private.
In Germany there are numerous publicly owned TOCs (mainly regional/municipal operators), but they compete will each other as contracts come up for renewal.
They also quote the private UK railway as being 40% less efficient than public continentals, but I think this relates to ORR's view of NR's (public) costs, not the TOCs.
If you look at the operating subsidy level across Europe, most are significantly more than the UK, up to x4 (per head) in the case of Germany and France.
SNCF is in particularly bad shape with huge subsidies and declining traffic - Macron is determined to change its structure.
http://www.railwaygazette.com/analy...t-share-falling-in-france-says-regulator.html

Any Scottish solution will have to allow cross-border TOCs, privately-operated freight and open access services.
That means a rail regulator, an access charge regime and a level playing field between TOCs.
Much like now, really. The same is true in England and Wales, of course.

 

[route:oxford]

Isn't the Scottish Government preparing to privatise the only state owned & operated railway station in Britain?

 

[380101]

Isn't the Scottish Government preparing to privatise the only state owned & operated railway station in Britain?

are you referring to Prestwick International Airport station? it's state owned by default I suppose given the airport is run by an at arms length company wholly owned by the Scottish government.

 

[Dr Hoo]

Isn't the Scottish Government preparing to privatise the only state owned & operated railway station in Britain?

Aren't Network Rail major stations state owned and operated then?

 

[WatcherZero]

The document keeps referring to 'Bowman et al' as an independent source.

Bowman wrote "THE GREAT TRAIN ROBBERY: Rail Privatisation and After" the last hatchet job independent report with a grant from the TUC political lobbying fund, the Campaign Fund.

Its basic argument in favour of British Rail competence was this:

 

[matt_world2004]

Aren't Network Rail major stations state owned and operated then?

And london underground.

 

[JohnR]

On page 9, Executive Summary, par. 3 begins:



Unfortunately that is not actually true, which doesn’t add weight to their arguments.

From reading the report, it seems they looked at the profits that First made from the franchise during their tenure. Which is fine, but its not the current situation - either at the start of the Abellio franchise or now. Even if you took the "£1million a month" figure that was widely quoted in 2016, that equates to only a 1.8% margin. If true that in 2017 there have been times where the franchise has made a loss, then that figure for 2017/18 will be even lower. Its simply not enough to reduce fares by as much as the report suggests.

As for the other points, hardly any of them actually require nationalisation, or would be better done by a nationalised operator - and I say that say someone who believes that the vast majority of such things (new lines, increased investment, more freight etc) should be happening.

25 years ago I fought hard against privatisation, and nothing I've seen since has convinced me it was anything other than a mistake - at least in the form it took. I would welcome a return to a unified single state owned operator - rail transport is a social good in my opinion. But this report simply makes overblown claims for what nationalisation will achieve.

 

[daikilo]

The report at least has the merit of clearly identifying how much money is going into private hands and where i.e. 15-20 million in operating profits and an ammount for the margin on train lease costs from the ROSCOs. What I have not found is how much First or Abelio money was/is actually tied up in the TOC i.e. what was/is the above return on capital employed.

I consider that bid costs cannot be considered "wasred" entirely as budgeting and ausiting will be required anyway, but would be vastly reduced if done as part of normal financial management.

Finally, what value do the TOC owners and the ROSCOs actually bring to the rail operation and to the government? At the time of privatiation some was monetary (private rather than publis debt) but some was "perception" such as labour management and theoretical "government hands-off". I am pretty sure that neither of the first is actually valid today and the latter is about discipline.

 

[route:oxford]

From reading the report, it seems they looked at the profits that First made from the franchise during their tenure. Which is fine, but its not the current situation.

Surely the profits would have been much higher in the state sector? Salary increments would have been limited to the 1% for the last 8 years or so and no bonuses would have been paid.

 

[WatcherZero]

We do have a modern example for comparison, under DOR East Coast investment and planned new services were cut back heavily with an emphasis on returning money to the treasury, which harkens back to the problems of under investment and profit taking in BR and Royal Mail underpublic ownership, rolling stock maintenance was also cut back with a large backlog of work accumulating.

 

[Kite159]

We do have a modern example for comparison, under DOR East Coast investment and planned new services were cut back heavily with an emphasis on returning money to the treasury, which harkens back to the problems of under investment and profit taking in BR and Royal Mail underpublic ownership, rolling stock maintenance was also cut back with a large backlog of work accumulating.

Agreed, something which gets overlooked with the soundbites of "East Coast returned £X Million to the treasury" as a prime example of why the railways should be back in public hands. The largest profits are made by the companies who own the rolling stock, and they won't be giving up their stock on the cheap.

 

[47271]

Agreed, something which gets overlooked with the soundbites of "East Coast returned £X Million to the treasury" as a prime example of why the railways should be back in public hands. The largest profits are made by the companies who own the rolling stock, and they won't be giving up their stock on the cheap.

Well, exactly.

Do any of the current proposals for renationalisation, in Scotland or elsewhere, make any reference to the ROSCOs, or is the issue consistently swept under the carpet?

I never hear anything about it from the TSSA or anyone else.

 

[JohnR]

Well, exactly.

Do any of the current proposals for renationalisation, in Scotland or elsewhere, make any reference to the ROSCOs, or is the issue consistently swept under the carpet?

I never hear anything about it from the TSSA or anyone else.

This report does talk about. Says that it would be cheaper for the state to purchase the vehicles. No figures as to why, but I guess that because the state can borrow at ~3% while the commercial sector is at about ~7%, there would be a lower cost. However, if you compare the cost of an IEP vehicle (~£2.5m) to that of a pendolino (~£1.3m) [figures from Roger Ford], it suggests that DfT cannot order stock efficiently, even if the cost of finance was cheaper.

 

[47271]

This report does talk about. Says that it would be cheaper for the state to purchase the vehicles. No figures as to why, but I guess that because the state can borrow at ~3% while the commercial sector is at about ~7%, there would be a lower cost. However, if you compare the cost of an IEP vehicle (~£2.5m) to that of a pendolino (~£1.3m) [figures from Roger Ford], it suggests that DfT cannot order stock efficiently, even if the cost of finance was cheaper.

Okay, fair enough, thanks for clarifying.

So taking that a stage further, and aside from new vehicles ordered efficiently or otherwise, in the case of Scotrail we'd be looking for the public company to borrow money to buy out the entire fleet from their commercial leases? And then go on to buy everything else from new as it's specified and procured.

That seems like it would be a massive debt, but maybe not in the overall scheme of public borrowing.

 

[WatcherZero]

Well taking for example Angel trains, during 2016/17 they signed leases for 1685 vehicles, 39% of their portfolio and during the next three years 3,731 or 86.4% of leases expire, 34% of their portfolio is covered by section 31 undertakings (government guarentees a home for new stock for the first decade or so) they will retire 761 vehicles and have 935 new ones delivered. 2.1% of their portfolio currently has no home.

During the last year they spent £101m, approx 60% on loan repayment and 40% on refurbs/modifications and they have £1.4bn of spending commitments, £180m on refurbs and the rest on new stock. They have £1.95bn of debt from a £2.5bn credit line and are paying an average interest rate of 6.5%. They had leasing revenue of £475m generating £375m ebitda and a a pre tax profit of £45m. They list Equipment assets of £1.45bn.

Multiply that by 4 and you have the approx UK rolling stock market.

Edit: interim 2017 their assets have expanded to £2.2bn and there has been a direct injection of £600m from the owners.

 

[47271]

Well taking for example Angel trains, during 2016/17 they signed leases for 1685 vehicles, 39% of their portfolio and during the next three years 3,731 or 86.4% of leases expire, 34% of their portfolio is covered by section 31 undertakings (government guarentees a home for new stock for the first decade or so) they will retire 761 vehicles and have 935 new ones delivered. 2.1% of their portfolio currently has no home.

During the last year they spent £101m, approx 60% on loan repayment and 40% on refurbs/modifications and they have £1.4bn of spending commitments, £180m on refurbs and the rest on new stock. They have £1.95bn of debt from a £2.5bn credit line and are paying an average interest rate of 6.5%. They had leasing revenue of £475m generating £375m ebitda and a a pre tax profit of £45m. They list Equipment assets of £1.45bn.

Multiply that by 4 and you have the approx UK rolling stock market.

Edit: interim 2017 their assets have expanded to £2.2bn and there has been a direct injection of £600m from the owners.

So £8bn debt across all UK leasing.

Very roughly let's assume that Scotrail could be 10% of that, although I suspect that's a bit on the high side.

They'd need to borrow £800m to buy the fleet out of its present leases? Not completely unmanageable.

 

[JohnR]

So £8bn debt across all UK leasing.

Very roughly let's assume that Scotrail could be 10% of that, although I suspect that's a bit on the high side.

They'd need to borrow £800m to buy the fleet out of its present leases? Not completely unmanageable.

No, its not. But what else could you do with that £800m that might be more beneficial? Perhaps reopen Tweedbank-Carlisle, Levenmouth, Dyce-Ellon, Leuchars- St. Andrews? Fund some infrastructure improvements to reduce journey times?

 

[infobleep]

Just skimmed it so far but this made me laugh:



Magical money tree required here.

Otherwise the bit indirectly saying Brexit might be better for public ownership of railways was an interesting point as well (which would also apply nationally not just in Scotland):

Do the Netherlands have a magic money tree?

 

[HH]

Do the Netherlands have a magic money tree?

Is Scotland similar to Netherlands geographically?

 

[HH]

No, its not. But what else could you do with that £800m that might be more beneficial? Perhaps reopen Tweedbank-Carlisle, Levenmouth, Dyce-Ellon, Leuchars- St. Andrews? Fund some infrastructure improvements to reduce journey times?

More to the point, the new electric fleet has not been financed via a ROSCO. It is a much better deal, with the Scottish Government owning the trains at the end of the lease. This was achievable because they were prepared to guarantee payments across the lease term.

DfT appear to have some remit to help the ROSCOs, so this solution is not available south of the border.

 

[380101]

More to the point, the new electric fleet has not been financed via a ROSCO. It is a much better deal, with the Scottish Government owning the trains at the end of the lease. This was achievable because they were prepared to guarantee payments across the lease term.

DfT appear to have some remit to help the ROSCOs, so this solution is not available south of the border.

The 380s will also be sold to the ScotGov for "£1" at the end of the 25 year lease deal. This ensures that the 380s stay in Scotland.