Huffington Post Article:Britain's Privatised Rail Network Makes Millions For Foreign

[DarloRich]

I came across an article on the Huffington Post website entitled "Britain's Privatised Rail Network Makes Millions For Foreign State-Owned Train Companies" which makes some interesting reading and i thought i would share it here

http://www.huffingtonpost.co.uk/201...n-companies-revenue_n_8003970.html?1439910687

Huffington Post

Labour leadership contender Jeremy Corbyn has pledged to make Britain’s railways entirely state-owned and run by a citizens' corporation - dubbed the "People's Railway".

Yet many of Britain’s rail franchises are already owned and operated by state-owned companies – from Germany, the Netherlands and France.

Through a complex web of international subsidiaries, both state-owned and majority state-owned railway companies are operating millions of rail journeys across Britain.

And the profits are flowing back to their countries, funding public transport and spending across Europe.

Here are the top-performing foreign state-owned franchises on Britain’s rail network…

ETC

 

[jopsuk]

not really anything that's not been endlessly discussed on here before. No new information, just lots of bluster.

 

[CosherB]

I came across an article on the Huffington Post website entitled "Britain's Privatised Rail Network Makes Millions For Foreign State-Owned Train Companies" which makes some interesting reading and i thought i would share it here

http://www.huffingtonpost.co.uk/201...n-companies-revenue_n_8003970.html?1439910687

And how much does the Corbyn charter actually cost?

 

[ChiefPlanner]

One of the good revenue streams for NS is the profits made from operations in the UK - a fact , which no doubt keeps ticket prices down in the Netherlands.

However the reverse applies with NX running some German operations - but the profit is retained for shareholders.

 

[Andrewlong]

And some of our franchises are run by UK companies with interests in foreign countries eg their bus services which brings in revenue.

And of course those state owned railways employ people who might travel to the UK or buy British goods.

We live in a global economy though some have not yet sussed this!

 

[yorksrob]

And some of our franchises are run by UK companies with interests in foreign countries eg their bus services which brings in revenue.

And of course those state owned railways employ people who might travel to the UK or buy British goods.

We live in a global economy though some have not yet sussed this!

Such as those of our global competitors, who are rather more selective about what they allow to be flogged off to foreigners!

 

[Greenback]

I think people have sussed that we live in a global economy. The question is whether state railways running trains and making a profit int he UK, which is then used to subsidise services at home, is a good thing.

If things were reversed, and we still had a BR, which was running services in Europe and thus helping to runt he railways here at a lower cost to the user and taxpayer, i think we'd be delighted. I certainly would. I'm not sure that the residents of those other countries would be so pleased.

 

[Simon11]

Or how about the thought that some TOC's are actually losing money and thus other rail travelers in Europe are subsiding our service.....

 

[Greenback]

Or how about the thought that some TOC's are actually losing money and thus other rail travelers in Europe are subsiding our service.....

Which of the franchises are losing money?

 

[Simon11]

Well Cross-country and chiltern haven't been doing very well

 

[DarloRich]

Well Cross-country and chiltern haven't been doing very well

Are you sure? I don't believe for one moment any TOC is struggling or failing to make money

Huffington Post

Arriva CrossCountry - £12.9m profit

 

[HowardGWR]

NR is nationalised and I know of no law that disallows it from doing business abroad. Indeed it has set up a subsidiary to do so. I rather thought it had enough on its plate at the moment though!

 

[LNW-GW Joint]

Are you sure? I don't believe for one moment any TOC is struggling or failing to make money

Chiltern and Cross Country have had spells of losing money.
EMT also lost money for a while.
Arriva and Stagecoach bailed them out until they made money again.
They do take risks on the revenue and premium profiles.

 

[nuneatonmark]

Under the franchise system, our government actually has more control over the railways than when it was nationalised. Due to it's current fragmented nature it passes a lot of the risk to the private franchisees, when it gets it right, which isn't always the case of course. It can then effectively 'sack' poor performing companies and get others to bid. That's fine as long as there are enough bidders to make it truly competitive, which doesn't always happen. Under the nationalised system, the unions had much greater power and the civil service that run it for us often did not have a lot of drive or creativity to change much so the railway was a lot more 'constant', some would say 'reliable'. There isn't a huge amount of difference for me. The franchised system is probably a bit more dynamic and more customer focused but almost certainly costs more overall and risks inconsistency in delivery.

I am sure numerous people will say this has been done to death on here, but here's my tuppenth anyway.

 

[Pinza-C55]

I think people have sussed that we live in a global economy. The question is whether state railways running trains and making a profit int he UK, which is then used to subsidise services at home, is a good thing.

If things were reversed, and we still had a BR, which was running services in Europe and thus helping to runt he railways here at a lower cost to the user and taxpayer, i think we'd be delighted. I certainly would. I'm not sure that the residents of those other countries would be so pleased.

It doesn't matter what you or I think about the railways. The British people are cattle and capitalists have found a reliable way to relieve of us of our money and make themselves even wealthier. If 90% of the British people wanted the railways nationalised they would still remain privately run for profit.

 

[ChiefPlanner]

Which of the franchises are losing money?

Because a significant amount of money is paid direct to Network Rail (aka the Network Grant) , the economics of the TOC's are skewed a bit.

If this sum of around £2 Bn per annum was levied directly through access charges to the operators (freight included) , with no Government subsidy - the network would be in very dire financial straits.

"Best" performers in the current state are SWT and Thameslink - greatest income / fares gap are Wales, Scotland , Isle of Wight and Merseyrail.

 

[Don King]

It is nice to know the Germans are subsidising their network with the sufferance payments we may to travel on voyagers.

 

[DarloRich]

Chiltern and Cross Country have had spells of losing money.
EMT also lost money for a while.
Arriva and Stagecoach bailed them out until they made money again.
They do take risks on the revenue and premium profiles.

little risk - hence the competition to win franchises!

Being parts of such massive companies has all manner of accounting possibilities.

 

[Greenback]

Because a significant amount of money is paid direct to Network Rail (aka the Network Grant) , the economics of the TOC's are skewed a bit.

Indeed. As far as I can see, while some franchises have, at some point, been in a position whereby they cna claim not to have made a profit, it's much more difficult to know whether this is in fact the case, and not due tot he skill of the accountants in turning a profit into a paper loss, for whatever reason they want to.

If this sum of around £2 Bn per annum was levied directly through access charges to the operators (freight included) , with no Government subsidy - the network would be in very dire financial straits.

The whole way that the railways are funded seems to me to be set up to ensure that franchisees make money. Not a lot in the grand scheme of things, and it must be this way,. otherwise there will be little interest in bidding for and running one.

"Best" performers in the current state are SWT and Thameslink - greatest income / fares gap are Wales, Scotland , Isle of Wight and Merseyrail.

I'm not convinced that those behind the franchises don't do well enough out of it to keep them keen!

 

[glbotu]

So, while I can see the benefit of a government run body bidding for franchises (a la Deutsche Bahn/Nederlandse Spoorwegen), I really would struggle with the idea of putting the railways into the hands of the civil service.

As someone who frequently works with the civil service (security clearance prevents me saying more), it is a pain to get anything done. The problem being that everything needs 19 levels of approval, namely from the treasury. This is a horribly inefficient way of working, especially for something like the railways, which have constantly changing demands. There is also a sense of short-termism for creating savings: "We could do it a way which will save us £1 million now, or £10 million over 3 years, let's go with the first one as we might not get re-elected", which can be incredibly frustrating. While one can claim the government does take long term views with infrastructure planning, that's great, but also over a much bigger scale than making incremental changes that are visible for passengers.

I'm not saying the private sector is all sunshine and roses, but I can see why there could be efficiency savings there. The crux of it is we don't know. Could we be in a situation where a government run railway IS more expensive? Could the losses to shareholders be offset by losses in efficiency? This unknown is so important in this discussion, because that is the gamble that's being taken by both parties, those championing private railways and those championing public railways.

I'd be VERY hesitant to champion ANY of British Rail's successes, or look to its failings for that matter, because it was created and operated during a very different time in Britain's history. The 1980s were a long time ago, the 1950s even more so. The 80s were an era of "the 26 year old man who gets the bus to work has failed at life". We live in an era of "the 26 year old man who gets the bus to work is environmentally responsible".

The advantage of government run franchises is fairly clear and I can see some good things coming from it (if nothing else to benchmark and compete abroad). It would be important to review the franchise process in this case though. I feel at the moment, too much is based on return to the treasury and not enough on passenger service. In a situation where the government would be possibly running the franchise, return to the treasury would be somewhat pointless in all but accounting terms.

The cost of the rolling stock would be insurmountable though and I think will be the nail in the coffin for all renationalisation attempts. We just can't afford to buy back all the stock from the ROSCOs. There ARE other countries that would lease the stock if we "hardballed" them (sure, poorer ones, but if they offer more than we do, then we wouldn't get the stock which we would need).

 

[WelshBluebird]

Even ignoring the question of if they should be run as franchises like they are or not, surely it is a bit odd that foreign state owned companies can bid for franchises but any potential British state owned company can't.

I have no issues with the system being run as franchises specifically, though there are quite a few issues that really need to be fixed (they really should have been fixed 20 years ago but there you go) and these have been discussed at length before (delay attribution between TOC's wasting time and money, the "not our problem see x TOC" issue etc).

As someone who frequently works with the civil service (security clearance prevents me saying more), it is a pain to get anything done. The problem being that everything needs 19 levels of approval, namely from the treasury. This is a horribly inefficient way of working, especially for something like the railways, which have constantly changing demands.

To be fair, I have also worked with quite a few private companies (as clients of the company I work for) and that sounds very familiar even for them!

 

[ScotTrains]

Isn't it good news our railways have been turned around and are now making money? Whether the money goes to a private company or state organisation does it really matter? The fact is the franchises are now profitable. If a state organisation wins a franchise then their bid must have been better than the other bidders.

 

[Bantamzen]

So, while I can see the benefit of a government run body bidding for franchises (a la Deutsche Bahn/Nederlandse Spoorwegen), I really would struggle with the idea of putting the railways into the hands of the civil service.

As someone who frequently works with the civil service (security clearance prevents me saying more), it is a pain to get anything done. The problem being that everything needs 19 levels of approval, namely from the treasury. This is a horribly inefficient way of working, especially for something like the railways, which have constantly changing demands. There is also a sense of short-termism for creating savings: "We could do it a way which will save us £1 million now, or £10 million over 3 years, let's go with the first one as we might not get re-elected", which can be incredibly frustrating. While one can claim the government does take long term views with infrastructure planning, that's great, but also over a much bigger scale than making incremental changes that are visible for passengers.

I'm not saying the private sector is all sunshine and roses, but I can see why there could be efficiency savings there. The crux of it is we don't know. Could we be in a situation where a government run railway IS more expensive? Could the losses to shareholders be offset by losses in efficiency? This unknown is so important in this discussion, because that is the gamble that's being taken by both parties, those championing private railways and those championing public railways.

I'd be VERY hesitant to champion ANY of British Rail's successes, or look to its failings for that matter, because it was created and operated during a very different time in Britain's history. The 1980s were a long time ago, the 1950s even more so. The 80s were an era of "the 26 year old man who gets the bus to work has failed at life". We live in an era of "the 26 year old man who gets the bus to work is environmentally responsible".

The advantage of government run franchises is fairly clear and I can see some good things coming from it (if nothing else to benchmark and compete abroad). It would be important to review the franchise process in this case though. I feel at the moment, too much is based on return to the treasury and not enough on passenger service. In a situation where the government would be possibly running the franchise, return to the treasury would be somewhat pointless in all but accounting terms.

The cost of the rolling stock would be insurmountable though and I think will be the nail in the coffin for all renationalisation attempts. We just can't afford to buy back all the stock from the ROSCOs. There ARE other countries that would lease the stock if we "hardballed" them (sure, poorer ones, but if they offer more than we do, then we wouldn't get the stock which we would need).

Well speaking as one from inside the public sector, one might argue that dealing with the private sector can be an equal nightmare, especially when it gets to the bottom line, cost.

But speaking purely as a commuter my fares have been rising way above inflation (and far beyond my pay rises) year on year whilst the improvements to my service at best remain largely static. Lots of lovely promises of electrification of the Trans-Pennine (now on hold), more and/or new stock under the new franchises (how much these relied on the previous who knows?), but in the meantime trains are getting ever busier, and reliability is starting to slip as stock gets older. Personally I'd say the service is getting worse for a hell of a lot more money, a theme that sadly seems to becoming increasingly common of the private sector.

 

[LNW-GW Joint]

Even ignoring the question of if they should be run as franchises like they are or not, surely it is a bit odd that foreign state owned companies can bid for franchises but any potential British state owned company can't.

Once the government decided to franchise the passenger railway to the private sector, it was inevitable that the public sector was excluded.
Private firms would not be keen to bid if there was a public outfit with bottomless pockets in competition to them.

On top of that, once all the BR TOCs were in private hands, there was no-one left in the public sector with the skills and resources to run trains.
That is pretty much still the case.
Also, what UK state bodies are prepared to risk their taxpayers' money to operate trains? They have other jobs to do.

Foreign state railways are also restructuring and are having to allow external competition.
So you have Trenitalia running domestic services in Germany, or Italo (SNCF) running domestic trains in Italy.
Competition works both ways.

 

[meridian2]

Even if it is just 'bluster' it's hardly an uncommon setup, since the vast majority of us purchase and use goods that go into foreign coffers. There is very little 'made in Britain' left.

 

[NSEFAN]

Isn't it good news our railways have been turned around and are now making money? Whether the money goes to a private company or state organisation does it really matter? The fact is the franchises are now profitable. If a state organisation wins a franchise then their bid must have been better than the other bidders.

The problem is that, under current UK legislation, the UK government is specifically not permitted to bid for franchises. It can take over when things fall apart under the guise of Directly Operated Railways, but that's it. If the franchises are indeed so lucrative then why can't DOR be set up to bid as well? As others have mentioned the true cost of running the service is skewed by the subsidy paid to NR, which effectively means that train operators can be undercharged for the infrastructure costs in running trains.

 

[HH]

Are you sure? I don't believe for one moment any TOC is struggling or failing to make money

Belief is a strange thing.

Chiltern has undoubtedly lost money. Greater Anglia was barely breaking even before the Direct Award and certainly lost money if you factor in the cost of bidding. EMT was losing money before Revenue Share and is probably still in the red overall. We all know about the problems on East Coast. Great Western was losing money in the last three years before it pulled the plug and North Western, both before and after First took it over, was losing money. I'm damn sure there are more. Franchises aren't a license to print money, whatever the ignorant think.

--- old post above --- --- new post below ---

As others have mentioned the true cost of running the service is skewed by the subsidy paid to NR, which effectively means that train operators can be undercharged for the infrastructure costs in running trains.

The first bit is true; the second tosh. As I have had to point out previously, bidders are told, at the time of bidding, what NR charges will be for the length of the franchise, and therefore base their bids on that amount. Changing the NR subsidy (which happens at least every 5 years anyway) merely results in a slightly different money-go-round.

--- old post above --- --- new post below ---

Even ignoring the question of if they should be run as franchises like they are or not, surely it is a bit odd that foreign state owned companies can bid for franchises but any potential British state owned company can't.

That's a British Government decision. But the Telegraph article rightly points to the associated problems. Problems, it should be said, that are reflected in what happens in other European countries.

--- old post above --- --- new post below ---

Indeed. As far as I can see, while some franchises have, at some point, been in a position whereby they cna claim not to have made a profit, it's much more difficult to know whether this is in fact the case, and not due tot he skill of the accountants in turning a profit into a paper loss, for whatever reason they want to.

The only way that this would work is for the group to levy huge fees onto the TOC, which they are expressly disallowed from doing by the franchise agreement.

Anything else and they'd just never get any money out of the TOC (there are rules on that too).

I don't know why people imagine that they're the only ones able to think of some simple scam and that nothing would have been done to prevent it.

 

[w0033944]

I came across an article on the Huffington Post website entitled "Britain's Privatised Rail Network Makes Millions For Foreign State-Owned Train Companies" which makes some interesting reading and i thought i would share it here

http://www.huffingtonpost.co.uk/201...n-companies-revenue_n_8003970.html?1439910687

What amuses me in that article (among many others) is that the link encoded within the phrase "Since privatisation a new zeal of innovation has occurred on the railways..." takes you to an article which simply states the same ideological arguments against renationalisation as the original article, suggesting to me that the Telegraph thinks that none of its readers has the nous or ability to click the link and compare the advertised content ("...zeal of innovation...") to the reality.

 

[NSEFAN]

The first bit is true; the second tosh. As I have had to point out previously, bidders are told, at the time of bidding, what NR charges will be for the length of the franchise, and therefore base their bids on that amount. Changing the NR subsidy (which happens at least every 5 years anyway) merely results in a slightly different money-go-round.

My point was that if it ultimately takes more money to run the service than it receives via the fare box then it should not be considered profitable. If NR is receiving additional money via the government then it cannot be charging every operator the correct amount for the wear and tear done to the infrastructure by their trains. Surely the honest way to go about this would be to subsidise each operator as required, as that would show more clearly which routes are paying for themselves and which aren't?

 

[61653 HTAFC]

A read of the relevant chapters of Naomi Klein's "The Shock Doctrine- The Rise of Disaster Capitalism" covers the fire-sale of national infrastructure under the Thatcher regime in the 1980s. Thatcher however stopped short of selling off the railways and that was left to the Major administration which followed. EU legislation under the Maastricht Treaty enforced liberalisation of the railway industry in all member states, though as far as I am aware no other member states followed the model applied here. Had BR still existed, it could theoretically be running services in other EU member states in the same way as NS, DB, etc., are doing here... But then we're getting into the realms of "what if..." which is rather futile.