Are you implying here that Angel Trains (and by implication Porterbrook and Eversholt) can offer better value for the taxpayer, and make a better profit for itself, than a new entrant to the market?
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Article - Train leasing companies’ profits investigated by regulator. But should the government “buy out” the ROSCO’s?
- Thread starter crablab
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I am implying that, if you already lease rolling stock from company A, switching to company B, even if their ongoing costs are lower, may not be cost-effective as there is a capital cost involved in switching ROSCOs and switching to a whole new fleet. It's not something you can do overnight, and given the big three's position in the market, having such a dominant market share, that merely introducing new ROSCOs to the market won't address their market dominance any time soon.
Trainbike46
Established Member
There is not necessarily a need to buy existing rolling stock from the ROSCOs, even if the decision is taken to move away from leasing all or most rolling stock in the long-term. It is entirely possible to only buy new stock outright when new stock is acquired, and phase out the ROSCOs as existing stock becomes surplus or end-of-life.
While I agree regarding the way the government is talking, I think it is important to acknowledge that these are political choices, whether we agree with the choices being made or not.
I think a hybrid approach is more likely than buying everything outright. TfL for example sold and leasebacked the Class 345s to pay for new Piccadilly line trains although they bought 10 new Class 345s as well so they have a situation where they own and lease the same trains.
Keep in mind there are contracts for trains which are currently being built like the Class 897 and it's likely too expensive to buy out the ROSCO in that situation.
Keep in mind there are contracts for trains which are currently being built like the Class 897 and it's likely too expensive to buy out the ROSCO in that situation.
Nobody's going to be confiscating any privately owned assets. And indeed nobody would ever even need to. It's just nonsense.
There are far, far easier ways for Parliament to retaliate against specific businesses which are pretty much above the law (or rather, which precede the law, as writing the law is... well their role) if they wish to do so, for example an overnight windfall tax. This is still not at all likely and not necessary.
There's still a lot of rolling stock being leased to the TfL operators, Transport for Wales, Hull Trains, Eurostar, ScotRail & Cal Sleeper and so on and so forth.
Irish Rail and NIR could also hypothetically lease British rolling stock with quite minimal conversion. All of these are pretty small but there's a lot of stock that won't immediately fall under DfT Operator.
There are far, far easier ways for Parliament to retaliate against specific businesses which are pretty much above the law (or rather, which precede the law, as writing the law is... well their role) if they wish to do so, for example an overnight windfall tax. This is still not at all likely and not necessary.
It's a large buyer dominating the market, yes, but it's not quite a monopsonist.
There's still a lot of rolling stock being leased to the TfL operators, Transport for Wales, Hull Trains, Eurostar, ScotRail & Cal Sleeper and so on and so forth.
Irish Rail and NIR could also hypothetically lease British rolling stock with quite minimal conversion. All of these are pretty small but there's a lot of stock that won't immediately fall under DfT Operator.
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43096
On Moderation
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I don't think you understand the definition of "monopoly" if you are talking about a 3-way monopoly. Perhaps you think it is a cartel?
In any case there are more than three companies involved now - Rock Rail has taken a significant slice in recent years for starters.
Assuming Rachel finds the magic money tree, would she please the electorate most by:
a) Buying out water companies,
b) Nationalising energy supplies
c) Restoring funding to everything the Tories bled out such as:
- The NHS/dentistry/pharacists
- The police
- Local authorities
- Education
d) Paying billions to banks to buy the UK’s trains.
Yep. Ain’t happening.
a) Buying out water companies,
b) Nationalising energy supplies
c) Restoring funding to everything the Tories bled out such as:
- The NHS/dentistry/pharacists
- The police
- Local authorities
- Education
d) Paying billions to banks to buy the UK’s trains.
Yep. Ain’t happening.
The UK public finances are unsustainable. It already has outstanding debt at 100% of GDP. Interest costs on existing debt are already consuming a significant portion of tax revenue.
This means that the UK government is at the mercy of the international financial markets where UK government debt is traded. The ability to carry on borrowing is not infinite.
Some of you have very short memories: cast your minds back to autumn 2022.
In the current financial circumstances buying out the ROSCOs is not going to be any nearer to the front than row Z.
Trainbike46
Established Member
I mostly agree with you here, and completely agree that the ability for the government to borrow isn't infinite.
However, I do think it is important to consider what is being borrowed for; for example, for a future new fleet of trains that has not yet been ordered, the government could:
a) lease in a similar way as has been done in the privatised railway until now.
b) buy outright, issuing government debt to pay for the upfront cost, and paying it off over the life of the train.
In most situations, b will be cheaper over the lifespan of the train, though most of the cost is front-loaded, overall it would lead to lower government expenditure, and therefore a lower government deficit.
This has come up before, but massive indefinitely ongoing expenditure with zero explanation of how it will be paid for, which is what Liz Truss did, is not the same as one-off expenditure, or as ongoing expenditure of which the impact is estimated using modelling for that matter.
Liz Truss's behaviour appears to have been designed to maximise the chances of scaring the money markets - nothing proposed in this thread is like it.
twpsaesneg
Member
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- 480
Remember though that the 2nd Generation DMU stock at that time was only funded by the government on a 2 for 3 basis - i.e. three vehicles had to be withdrawn for every two funded. The railway was seen as being in decline.
I agree with that for future new build, but the question here relates to the existing fleet.
The difficulty with this is the precarious state of the UK public finances mean that the immediate is far more important than 30-40 years time.
Nicholas Lewis
Established Member
The pseudo DfT contracts for IEPs and the Thameslink fleet are far more lucrative than the ROSCOs and have decades to run. Most of the rosco leases are now co terminus with the end of the operating contract so going to be interesting to see what DfT does with those as they move the under GBR umbrella.
11 years left on the Class 700s.
We’ve got lots of trains that are relatively new (within last 10 years). I don’t disagree in principle but you’d need to found a new government body with expertise while the ROSCOs continue to manage their existing stock for 25+ years.
Nationalising a business isn't the same as (say) paying pensions.
If the UK were to buy out the water companies (which have large debts which they are paying commercial interest rates on) then arguably the cost to the consumer would be less (as government debt has lower rates of interest) and the cost of the government debt would be covered by the customers without needing any further taxes.
On top of this water companies are paying money to share holders, that could also stop, the government then had a choice as to what to do with that money. They could lower bills, they could invest in the infrastructure (reduce flood risks, reduce pollution spills, etc.) or they could use the money to lower overall debt.
A lot of this concern about debt levels is down to an economics paper which when a student tries to analyse/recreate they found they couldn't, they approached their professor who also got the same result as them, when they dug into it, it was found that the weighting on the data was interesting, for example one year of data from New Zealand having a bigger impact than several (around a decade and a half if I recall) of data from the UK.
However, debt to own something which has a value/creates income is very different to debt which is on outgoings.
Comparing to personal circumstances is always a dodgy thing to do as government spending is very different. However as an individual it is generally accepted that having a mortgage on your home is a good thing, whilst borrowing (even a tiny fraction of cost of your home) to buy petrol is generally not recommended without a way of being able to pay it off quickly (i.e. otherwise your petrol debt will just keep increasing as you'll need more petrol next month but haven't paid off what you've already borrowed).
Buying trains, building railways, nationalising industries and the like are generally more like having a mortgage (in that like a house they have a value and can generate an income if so desired) unlike paying pensions which are more like buying petrol (as those costs are ongoing and there's less scope for return - even if there's plenty of good reasons to do so).
How long the ROSCO's continue is up to them.
If I had the resources, I recon that I could make them all go out of business fairly quickly.
To take an example, if I wanted to take out the owners of the Voyagers, all I'd need to do is offer more capacity (let's say a 7 coach 80x) to XC for the same money as XC are being charged for their current fleet.
The DfT wouldn't have an issue as XC aren't spending more money (and may actually spend less due to being able to use electric traction).
Politically, there wouldn't be few objections (as the public would love the extra capacity and even if people complained about the new trains having worse seats many users of XC would point out that any seat is better than not having a seat due to overcrowding!).
There's been many discussions about where Voyagers could be used, and few make sense.
Other rolling stock would be harder to replicate the above for. However, not impossible. Although picking off the easy to do rolling stock will set the direction of travel.
As the supply of rolling stock increases prices fall, those ROSCO's which have the most debts would exit the market first. With the other ROSCO's potentially seeing the direction of travel they are unlikely to buy trains from others, as such the only market for the trains is likely to be scrap or the government. Either way a lot of trains could enter public ownership much quicker than 25+ years.
Of course, if ROSCO's do continue to exist, what does that matter?
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True, but that was a political choice of the government of the day. There's nothing to say that a later government will have the same policy, particularly if a political goal of retaining more domestic train building becomes more prominent.
Which is all the more reason why Governments need to start looking at the balance of payments deficit and where all the wealth is going. Gradually winding down ROSCO's and reducing the revenue being siphoned off to banking interests based who knows where, would be a way to retain wealth in the British economy.
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Please no! Not the government.
An awful lot of hugely experienced rolling stock experts should land in GBR. Use the folks who know how to do this and do it well.
Ultimately the whole premise of this thread is that we are looking to the government to pay for rolling stock. It stands to reason that they would need to manage that investment.
It doesn't have to be that way. The BRB managed that investment under previous arrangements, not the Government directly.
I'm here now
Member
I believe the directive is to cut the Quangos at the moment, sadly.
There is plenty of central government spending that gets managed in varying degrees of arms-length arrangements. Network Rail is one of those.
Oversee it, yes. Manage it? No.
This is the Reinhart/Rogoff paper which is quite old, and, as you say, now discredited. But it isn't influencing current thinking.
The concern now is best illustrated by the Office for Budget Responsibility Fiscal Sustainability Report published last year. I gave a brief summary of it here:
OBR fiscal risks and sustainability report
Various recent discussions have touched upon the state of the UK public finances, in relation to matters such as pensioners' winter fuel allowance, public sector pay, and public funds available for investment in transport infrastructure. Today the Office for Budget Responsibility has published...
www.railforums.co.uk
This is about the lack of economic growth, and the population getting older and sicker. Basically, expenditure on welfare and the NHS is rising much more quickly than tax revenue.
If anything, the situation has worsened since the Fiscal Sustainability Report was published, because interest rates are coming down more slowly and there is a new perceived need for more expenditure on defence.
In the UK the deficits on the balance of payments and the public finances are two sides of the same coin.
But attempts to try to manage the balance of payments directly is what leads to mercantilism and tariffs. Tackling them both indirectly by getting back to economic growth is a better approach.
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Economic growth is important, but the resultant wealth needs to percolate through the UK. It's of less value if it ends up in off shore private equity, oil backed sovereign wealth funds or authoritarian state backed enterprises.
Tariffs on goods and services (whilst sometimes justified when used carefully) are less important than the ownership of the means of production of those goods and services, and the ability to manipulate where the wealth generated by those goods and services ends up.
One only has to look at Trump demanding that America's dreadful corporations be exempted from VAT, to see the folly of having an economy owned "off shore".
The closest term is probably oligopsony. But even then it doesn't quite fit.
Topological
Established Member
The UK needs borrowing for investment, the country is in a big mess because of the unwillingness of the previous administration to fund big projects with sufficient strength of will.
IF borrowing is to be increased then the stock should be a long way down the list of things to pay for. Yes you save the difference between lease payments and the interest on borrowing, but that is not a huge number. The old trains are already produced so there is no scope for the train to generate growth that it would not generate whilst on lease. The only chance is that a new train can create more connectivity benefits over the smaller train it replaces. However, that is somewhat clutching at straws for an argument for "investing" in new trains. It also follows that the longer train could be leased without the capital investment. (I leave off the benefits accrued in construction since they apply whoever orders the train)
Governments can borrow, so balanced books are not essential. However, it is essential that the borrowing can be justified in terms of the growth it will produce.
IF borrowing is to be increased then the stock should be a long way down the list of things to pay for. Yes you save the difference between lease payments and the interest on borrowing, but that is not a huge number. The old trains are already produced so there is no scope for the train to generate growth that it would not generate whilst on lease. The only chance is that a new train can create more connectivity benefits over the smaller train it replaces. However, that is somewhat clutching at straws for an argument for "investing" in new trains. It also follows that the longer train could be leased without the capital investment. (I leave off the benefits accrued in construction since they apply whoever orders the train)
Governments can borrow, so balanced books are not essential. However, it is essential that the borrowing can be justified in terms of the growth it will produce.
I think the correct term here is "oligopoly".
oligopoly noun econ: a situation in which there are few sellers of a particular product or service, and a small number of competitive firms control the market.
LNW-GW Joint
Veteran Member
You forgot the new bottomless pit called increased defence spending - doubling it over a decade seems likely, with negative impacts on all other budgets.
BR didn't manage the investment.
They put in proposals for new rolling stock (and other capital spend) and the DfT/Treasury eventually approved a proportion of those on a year-by-year basis - usually with reduced scope.
BR then had to live with whatever Whitehall gave them, cutting other budgets if necessary (eg resignalling, maintenance, and service frequency).
Helvellyn
Established Member
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Exhibit 1 - HST batches
- 27 WR sets wanted; 27 approved
- 42 ER sets wanted: 32 approved
- 16 WR sets wanted; 14 approved
- 36 XC sets wanted; 18 approved
- 7 ER top-up sets wanted; 4 approved
Then BR started shuffling resources (from WR/XC) to get extra ER sets and provide for the Midland Mainline in the mid-1980s.
And the Government also had to sign off pacer and HST replacement for example.
BR specified the rolling stock, accepted the rolling stock, decided when and where to move the rolling stock, when to refurbish the rolling stock and when to scrap it. This seems to be a greater element of control over the lifetime of the investment, than having to beg another few years lease of a depreciated asset at considerable cost.
Dr Hoo
Established Member
Is it sensible to claim that the various ROSCOs “control the market” when it appears that it is the DfT (or equivalent devolved service sponsor) who seem to micromanage and microspecify virtually everything? This has included ordering significant fleets without the usual involvement of ROSCOs when it has suited them.