Rail renationalisation- do you support it?

[matt_world2004]

Ha ha, they haven't been bailed out? What has happened then?

They are handing back the franchise early but then will run the next franchise while paying significantly less premiums

 

[fowler9]

They are handing back the franchise early but then will run the next franchise while paying significantly less premiums

So they are paying the government less to run the franchise? How does that work?

 

[Domh245]

The east coast partnership is being run bythe same parent companies as vtec and paying lower premiums. This franchise has been awarded without competition so yes it is a bailout and claiming it isnt is just spin.

I must have missed the bit where Grayling announced that he'd bypassed the franchising system and awarded it back to VTEC. Perhaps you could find a quote from a reputable news source confirming that has occurred? Here's the BBC article to give you a start.

Ha ha, they haven't been bailed out? What has happened then?

Early termination of contract agreed to by both parties. Not a bail out in the conventional, financial, sense of the word...

 

[Agent_Squash]

Ha ha, they haven't been bailed out? What has happened then?

I refer you to the definition of bailout: "an act of giving financial assistance to a failing business or economy to save it from collapse"

VTEC is not going to collapse. And as far as I'm aware the government isn't actually giving any financial assistance to the current franchise, but in effect renegotiating terms?

Reducing premiums is hardly financial assistance.

 

[fowler9]

I refer you to the definition of bailout: "an act of giving financial assistance to a failing business or economy to save it from collapse"

VTEC is not going to collapse. And as far as I'm aware the government isn't actually giving any financial assistance to the current franchise, but in effect renegotiating terms?

Reducing premiums is hardly financial assistance.

Yeah I would disagree with you there unless the share holders are no longer making any money.

 

[Agent_Squash]

Yeah I would disagree with you there unless the share holders are no longer making any money.

It's perfectly reasonable to negotiate terms if a side has failed its commitments. By failing the Power Supply Upgrade (North), NR have placed the government in breach of the franchise agreement and as a result Stagecoach are more than in their rights to renegotiate.

If this happened between two private sector firms, I can't see anyone complaining.

 

[fowler9]

It's perfectly reasonable to negotiate terms if a side has failed its commitments. By failing the Power Supply Upgrade (North), NR have placed the government in breach of the franchise agreement and as a result Stagecoach are more than in their rights to renegotiate.

If this happened between two private sector firms, I can't see anyone complaining.

Yeah I am sure it is legal, I'm not sure I find it acceptable.

 

[F Great Eastern]

Yeah I am sure it is legal, I'm not sure I find it acceptable.

You believe if one party violates a contract that the other party should just deal with it? A contract works both ways.

Would you say the same if your employer violated yours?

 

[coppercapped]

Ha ha, they haven't been bailed out? What has happened then?

The details have been well published in papers like the Financial Times.

Essentially there are two parts to the issue.

Firstly receipts have been lower than anticipated when the bid was prepared towards the end of 2013 and awarded in November 2014 to a joint venture of Stagecoach (90%) and Virgin (10%). The two partners are putting money into the franchise to meet the premium profile which one could argue was, with the benefit of hindsight, over-ambitious. Far from ‘handing in the keys’, Stagecoach is intending to stay in the franchise at a cost of £84.1 million over the next two years (2017-18 and 2018-19). In addition it is drawing down £57 million from the Parent Company support loan commitment in the franchise agreement.

The second part of the problem is that the increased premiums due to be paid from 2019 were predicated on infrastructure enhancements to allow more trains to be run. In 2013 NR was supposed to increase the ECML capacity to 6 trains per hour throughout from Kings Cross to Newcastle - part of this was widening the three track section near Huntingdon to four tracks and modifying the station throat at Kings Cross by laying an addition track through the disused bore of Gasworks tunnel. In addition the capacity of the power supply to the overhead north of York was to be increased to permit more than the current number of electric service to run per hour. These enhancements would have allowed , Stagecoach/Virgin to run an hourly 4h London-Edinburgh service which is one of the contracted improvements. Without the power increase the Inverness and Aberdeen trains would either had to have been the Hitachi trains running on diesel power or the HSTs would have had to continue.

The infrastructure enhancements were supposed to be completed by 2019 and Stagecoach's contract with the DfT included these dates.

Then the Hendy Review in November 2015 pushed all these dates to the right. In addition the DfT's procurement of the IET/Azuma/Hitachi trains for the East Coast is now running some months late.

So the situation is not as simple as the Branson-Bashers, the Souter-haters, the nationalisation proponents, left wing politicians like Lord Adonis and these forum's own childish conspiracy theorists would like to believe.

Even had things been going well until now, VTEC would have had difficulties starting in May 2019 when the upgraded ECML on which to run the more frequent and faster trains was not available. Without the services to attract more traffic and generate more fares income to pay the rising premiums, the franchise would have had to have been renegotiated from April 2019 anyway.

It might be necessary to emphasise the next bit for those who have difficulty in understanding: the DfT is responsible for both the IEP contract and nationalised Network Rail. As a result Government is on the hook as much as, if not more than, Stagecoach hence the face-saving announcement that East Coast Main Line will become ‘the first of the new generation of long-term regional partnerships which will be introduced from 2020’.

So the wibble about a government bail-out letting VTEC off paying growing premiums in the last three years of the franchise is mere ill-informed cant.

And, for the life of me, I can't see how any nebulous 'nationalisation' would make any of this better.

 

[fowler9]

Can I just clarify again that I understand the law, I understand how business works. I just do not accept how the railways have been privatised. Me saying I do not find it acceptable does not mean I am thick or can't understand how it works. Coppercapped I am not sure how long you wasted typing that essay on stuff I understand because you do not understand the word acceptable.

 

[Railsigns]

And, for the life of me, I can't see how any nebulous 'nationalisation' would make any of this better.

Some people only see what they want to see.

 

[Harbornite]

Yeah I am sure it is legal, I'm not sure I find it acceptable.

Why is a contract re-negotiation/ termination unacceptable, in your opinion?

 

[fowler9]

Why is a contract re-negotiation/ termination unacceptable, in your opinion?

I just disagree with the whole way it was done in the first place. Do you disagree with me being able to disagree with you? If so what is it you believe in?

 

[Harbornite]

I just disagree with the whole way it was done in the first place. Do you disagree with me being able to disagree with you? If so what is it you believe in?

No. I'm just not opposed to contract renegotiations, it's not exactly as bad as the government's attempts at funding British Leyland in the 1970s.

By the way, why do you disagree with the "whole way it was done"? Do you think their bid was overambitious or is there another reason?

 

[fowler9]

No. I'm just not opposed to contract renegotiations, it's not exactly as bad as the government's attempts at funding British Leyland in the 1970s.

By the way, why do you disagree with the "whole way it was done"? Do you think their bid was overambitious or is there another reason?

I personally found it a ridiculous privatisation of a natural monopoly. There is pretty much no way anyway other companies can run a naturally competing service. Like trying to privatise gas, water and electricity. Privatising the planet just seems wrong to me, who has the right to claim ownership of it.

 

[squizzler]

Have proposals for nationalisation got as far as dealing with open access operators? I could stomach nationalisation if open access not only remained was allowed to expand. It would be very important to keep the national operator on its toes.

It is currently part of EU regulation that new rail players can access national networks. However I understand there are moves afoot to devolve the the UK out of the EU, so will this legislation be retained?

 

[matt_world2004]

Have proposals for nationalisation got as far as dealing with open access operators? I could stomach nationalisation if open access not only remained was allowed to expand. It would be very important to keep the national operator on its toes.

It is currently part of EU regulation that new rail players can access national networks. However I understand there are moves afoot to devolve the the UK out of the EU, so will this legislation be retained?

As franchises expire was the manifesto committment seems to imply open access wouldnt be touched and providing there is the capacity there would be no reason to touch open access

 

[LNW-GW Joint]

Yeah I would disagree with you there unless the share holders are no longer making any money.

The VTEC shareholders (Stagecoach and Virgin) are putting £85m into the operation for the next 2 years, prior to any new contract, to maintain premiums to DfT.
That wipes out all the profit from their other franchises (VTWC and EMT).
"Bail outs" do not come for free.

 

[squizzler]

As franchises expire was the manifesto committment seems to imply open access wouldnt be touched and providing there is the capacity there would be no reason to touch open access

That’s good. Using my own logic the east coast franchise which benefits (suffers?) from open access competitors should revert to directly operated railways.

An open access operator wants to contest the route to Southampton so let’s hope that can be in place before that franchise gets into difficulty due to falling commuter numbers!

 

[matt_world2004]

That’s good. Using my own logic the east coast franchise which benefits (suffers?) from open access competitors should revert to directly operated railways.

An open access operator wants to contest the route to Southampton so let’s hope that can be in place before that franchise gets into difficulty due to falling commuter numbers!

We dont know the old franchises could be returned to one monolithic operator. But more likely imo is that increasingly commuter services will be devolved to large regions and intercity services either run by a monolithic operator or run by the most sucessful/dominant region

 

[coppercapped]

Can I just clarify again that I understand the law, I understand how business works. I just do not accept how the railways have been privatised. Me saying I do not find it acceptable does not mean I am thick or can't understand how it works. Coppercapped I am not sure how long you wasted typing that essay on stuff I understand because you do not understand the word acceptable.

As far as I am aware I did not try to explain either the law or how business works in my post, so I do not understand the reasoning behind your first sentence.

Anyway, I was trying to be helpful. I was responding to your question in post 780 where you wrote:

Ha ha, they haven't been bailed out? What has happened then?

If I you had been clear that that was not the question you wanted answered, then I could have saved my time.

 

[LNW-GW Joint]

There's a long feature article in today's Rail giving a platform to the architect of the Labour nationalisation proposals, Ian Taylor.
He's rail policy advisor to Andy McDonald, Shadow SoS.
I perceive he was also behind this union-sponsored report from 2012: http://transportforqualityoflife.com/u/files/120630_Rebuilding_Rail_Final_Report_print_version.pdf

In the article he lists a lot of the things he thinks are wrong with the current rail setup, but just at the point where he should describe his solution, he just lapses into the Labour mantra of (a) a single guiding mind for rail, and (b) taking passenger franchises in-house as they expire, "for free".
More detail on the proposed structure is promised in a future article.

That's no solution at all, as several commentators point out, including Michael Holden (a BR man who ran DOR), and Dick Fearn (a BR man who ran GB franchises and then publicly-owned IE, now back with Network Rail).
Mick Cash's contribution includes the words "racket" and "fleeced", so nothing new there.
The main objection is that a whole different set of problems would arrive with a nationalised structure, and many of the supposed problems are inevitable anyway, due to the fragmented and devolved nature of public services in the country.
For instance, TfL will always be a separate rail operator independent of "BR", and now we also have regional/national bodies rowing in different directions to DfT, while the Marsham St-controlled network continues to shrink.

It's worth a read to appreciate who is behind Labour's restructuring plans.

 

[ChiefPlanner]

There's a long feature article in today's Rail giving a platform to the architect of the Labour nationalisation proposals, Ian Taylor.
He's rail policy advisor to Andy McDonald, Shadow SoS.
I perceive he was also behind this union-sponsored report from 2012: http://transportforqualityoflife.com/u/files/120630_Rebuilding_Rail_Final_Report_print_version.pdf

In the article he lists a lot of the things he thinks are wrong with the current rail setup, but just at the point where he should describe his solution, he just lapses into the Labour mantra of (a) a single guiding mind for rail, and (b) taking passenger franchises in-house as they expire, "for free".
More detail on the proposed structure is promised in a future article.

That's no solution at all, as several commentators point out, including Michael Holden (a BR man who ran DOR), and Dick Fearn (a BR man who ran GB franchises and then publicly-owned IE, now back with Network Rail).
Mick Cash's contribution includes the words "racket" and "fleeced", so nothing new there.
The main objection is that a whole different set of problems would arrive with a nationalised structure, and many of the supposed problems are inevitable anyway, due to the fragmented and devolved nature of public services in the country.
For instance, TfL will always be a separate rail operator independent of "BR", and now we also have regional/national bodies rowing in different directions to DfT, while the Marsham St-controlled network continues to shrink.

It's worth a read to appreciate who is behind Labour's restructuring plans.

With perhaps the exception of GB Rail's Mr Smith rather sneering and very out of date comment at the end of his piece "BR sandwich anyone" - lifted no doubt from the Daily Fail ........
-

 

[bbrez]

Rather than people dismissing the failure of yet another East Coast franchise as a contract renegotiation, surely the focus should be on the state of the franchise agreement which once again allows the majority of payments to be made at the end of the contract, meaning that if the companies running the franchise wish to pull out, the treasury and the tax payer is once again left short.

That's without forgetting that the only reason East Coast was once again franchised was solely for ideological purposes by the current government. The 'nationalised' entity that ran for six years had the highest customer satisfaction of any rail franchise and returned over £1bn to the treasury.

Overall, the VTEC franchise has been a failure and Grayling's willingness to renegotiate has set a dangerous precedent for future franchises.

 

[F Great Eastern]

Rather than people dismissing the failure of yet another East Coast franchise as a contract renegotiation, surely the focus should be on the state of the franchise agreement which once again allows the majority of payments to be made at the end of the contract, meaning that if the companies running the franchise wish to pull out, the treasury and the tax payer is once again left short.

Do you understand that the government made commitments in the franchise agreement that they are not keeping to which impacts the operators ability to make the payments later on because the calculations for such payment were on the basis of the government providing the infrastructure that they said they would?

Are you saying the operator should ignore the fact that the other party has breached the agreement and just carry on regardless? If so what's the point of having contracts if one party can breach them at will without any penalty but the other party must still follow them to the letter?

 

[Domh245]

surely the focus should be on the state of the franchise agreement which once again allows the majority of payments to be made at the end of the contract, meaning that if the companies running the franchise wish to pull out, the treasury and the tax payer is once again left short.

I think it is quite reasonable that the premiums being paid at the start are little different to those paid by the existing TOC, and that the higher payments (as a result of increased passenger numbers) only occur once all of the upgrades have been done and the passenger numbers can be grown. It'd be daft do to it any other way, so I'd be interested to see why you think it's a such a bad way of doing things...

 

[bbrez]

Do you understand that the government made commitments in the franchise agreement that they are not keeping to which impacts the operators ability to make the payments later on because the calculations for such payment were on the basis of the government providing the infrastructure that they said they would?

Are you saying the operator should ignore the fact that the other party has breached the agreement and just carry on regardless? If so what's the point of having contracts if one party can breach them at will without any penalty but the other party must still follow them to the letter?

Is there really any need for the patronising tone?

I fully understand what's happened. My point remains, the repayment process that is fully loaded towards the end of a contract does not benefit the taxpayer or the treasury in these situations - I understand why this is done - but do not agree with the weighting of it. I also disagree with agreeing contracts based on forecasts.

 

[Agent_Squash]

Is there really any need for the patronising tone?

I fully understand what's happened. My point remains, the repayment process that is fully loaded towards the end of a contract does not benefit the taxpayer or the treasury in these situations - I understand why this is done - but do not agree with the weighting of it. I also disagree with agreeing contracts based on forecasts.

Then why is the government's franchising policy favouring bids with back-end payments? Another problem with VTEC is the premium profile is front-end loaded as well, which means that there's little room for failure on either side.

 

[6Z09]

No.
Simply because of the power that it would give to the Unions. Regardless of which Political Party was in power the Unions or more specifially the Union Leadership and their cronies (with their own agenda) would run the railway and arguably the County.

Given the "Race to the bottom" on staff conditions over the past two or three years the unions do need more power!
Part time ,Zero hour contracts,redundancies followed by rehiring on reduced terms are taking place across the industry. Conditions for staff with some FOCs are shocking. Unions are there to protect their members! Something that is getting harder to do all the time given anti union legislation favoured by the current government.

 

[Bookd]

The VTEC shareholders (Stagecoach and Virgin) are putting £85m into the operation for the next 2 years, prior to any new contract, to maintain premiums to DfT.
That wipes out all the profit from their other franchises (VTWC and EMT).
"Bail outs" do not come for free.

This would mean that effectively VTWC and EMT make nothing for their shareholders for the next year or two; even if it had worked as planned they would have made more by leaving their money in the bank.
Despite the rhetoric from RMT railway franchises are not a goldmine, hence the reduction of numbers of bidders, and nationalisation would just be another burden on taxpayers.