Breakdown of TOC subsidies/premiums?

[mrmartin]

Anyone have a breakdown of the various TOCs and their current subsidies or premiums from the DfT, and for bonus points upcoming ToCs and their future payments?

 

[wibble]

Anyone have a breakdown of the various TOCs and their current subsidies or premiums from the DfT, and for bonus points upcoming ToCs and their future payments?

From the ORR website: Government subsidy per passenger kilometre by train operating company - Table 1.7

 

[Gareth Marston]

Meaningless in many ways as they do not include the cost of infrastructure and also where you do get an allocation for NR costs the methodology used allocates the entire enhancement and renewals budget across the network on a per train KM basis resulting in work in SE England being loaded onto regional lines supposed subsidy.

 

[gimmea50anyday]

Rubbish. Total rubbish!

Those figures are being heavily massaged. Why else would so many foreign and government owned rail companies be taking more interest in our railways.

3% of the turnover of the franchise is operating profit. So how much money over 25 franchises does that amount to? Think there is more to it than that....

 

[coppercapped]

Rubbish. Total rubbish!

Those figures are being heavily massaged. Why else would so many foreign and government owned rail companies be taking more interest in our railways.

3% of the turnover of the franchise is operating profit. So how much money over 25 franchises does that amount to? Think there is more to it than that....

You are right, there is more to it than that.

Because of the fall in the value of the pound sterling compared to a basket of other currencies over the last few years - which has been especially noticeable since the Brexit referendum - buying things in the UK has been cheap for foreign based organisations.

It may have escaped you that the number of foreign tourists has been increasing recently for the same reason.

 

[Moonshot]

Rubbish. Total rubbish!

Those figures are being heavily massaged. Why else would so many foreign and government owned rail companies be taking more interest in our railways.

3% of the turnover of the franchise is operating profit. So how much money over 25 franchises does that amount to? Think there is more to it than that....

How much of Network Rails spend on contractors turns out to be profit?

 

[LNW-GW Joint]

How much of Network Rails spend on contractors turns out to be profit?

You will never get a figure for that.
While individual projects will include a whack of profit margin, the contractors will tell you that overall NR is a bad customer, particularly for resignalling projects.
It is always respeccing, downsizing, phasing and cancelling major projects.
The electrification guys stand to lose a packet, having trained up large numbers of staff just in time for NR to defer/cancel the expected "gravy train" downstream.
Balfour Beatty walked off the North West electrification project as they couldn't make money from it.
Feast and famine is the order of the day on the railway, and it doesn't work well for contractors (or NR).

 

[Elecman]

It isn't NR that has cancelled Electrification schemes but the Government

 

[Moonshot]

It isn't NR that has cancelled Electrification schemes but the Government

Correct.

I wonder how the picture would be if Network Rail was in the private sector...

 

[Gareth Marston]

You will never get a figure for that.
While individual projects will include a whack of profit margin, the contractors will tell you that overall NR is a bad customer, particularly for resignalling projects.
It is always respeccing, downsizing, phasing and cancelling major projects.
The electrification guys stand to lose a packet, having trained up large numbers of staff just in time for NR to defer/cancel the expected "gravy train" downstream.
Balfour Beatty walked off the North West electrification project as they couldn't make money from it.
Feast and famine is the order of the day on the railway, and it doesn't work well for contractors (or NR).

The electrification projects that have spent actual£ have been a small percentage of what NR has given contractor land in their 15 year existence.

 

[3141]

Those figures are being heavily massaged. Why else would so many foreign and government owned rail companies be taking more interest in our railways.

Rather, it may be that British companies are taking less interest. NatEx has pulled out, but is winning railway operations abroad. Stagecoach withdrew from the Greater Anglia bidding, and I don’t think it tried for West Midlands. Arriva didn’t try for South Western this time round, even though it’s now German-owned. Serco appears to have given up.

Meanwhile, looking at foreign bidders, the new ones are Trenitalia and Japan East Railways. Keolis has been associated with Go-Ahead in Govia for 15 years or so. Danish State Railways bid for East Coast in 2005 (if I remember correctly), and may have been interested in South Eastern. Abellio, then known as NedRail, won Merseyrail and Northern in conjunction with Serco in 2004/2005, so they’ve been in the British rail market for a considerable time, and the main change is that in recent years they’ve won more. MTR have been trying since at least 2006, when they were in partnership with Sea Containers in bidding for South Western.

I don’t think this provides evidence for the theory you've put forward.

 

[ChiefPlanner]

The Dutch (NS) made a small loss this year - (partly due to a massive fine for infrastructure led and performance failures) , and due to less return on "overseas operations" due to the £ and Euro imbalance on UK operations.

Quoted in DutchnewsNL"

 

[Chrisgr31]

Meaningless in many ways as they do not include the cost of infrastructure and also where you do get an allocation for NR costs the methodology used allocates the entire enhancement and renewals budget across the network on a per train KM basis resulting in work in SE England being loaded onto regional lines supposed subsidy.

Are there more train km in the south east in the first place? This would mean there should be more work in SE England, and it would be paying a fair proportion

 

[Bald Rick]

The Dutch (NS) made a small loss this year - (partly due to a massive fine for infrastructure led and performance failures) , and due to less return on "overseas operations" due to the £ and Euro imbalance on UK operations.

Quoted in DutchnewsNL"

Indeed, it is quite likely that the Dutch taxpayer is subsidising our railway!

 

[LNW-GW Joint]

It isn't NR that has cancelled Electrification schemes but the Government

Correct.
I wonder how the picture would be if Network Rail was in the private sector...

You don't think NR is the author of its own misfortune then?
If it had delivered against its own estimates the projects would not have been cancelled.

 

[Gareth Marston]

Are there more train km in the south east in the first place? This would mean there should be more work in SE England, and it would be paying a fair proportion

No- the methodology spreads the total enhancement and renewals budget costs across the NR regions before they are divided by train KM. Therefore a proportion of the cost of the Reading remodel works is in the NR Scotland budget for example and this increases the nominal train KM cost for ScotRail.

 

[coppercapped]

No- the methodology spreads the total enhancement and renewals budget costs across the NR regions before they are divided by train KM. Therefore a proportion of the cost of the Reading remodel works is in the NR Scotland budget for example and this increases the nominal train KM cost for ScotRail.

That is an interesting conclusion. How do you arrive at it?

 

[Gareth Marston]

That is an interesting conclusion. How do you arrive at it?

It was pTEG report now Urban Transport Group that identified it. I'm trying there website to see if the report is still there but it was in something else and all their reports/publications have similar sounding titles.

 

[coppercapped]

It was pTEG report now Urban Transport Group that identified it. I'm trying there website to see if the report is still there but it was in something else and all their reports/publications have similar sounding titles.

Thank you for the reference. I’ve looked at the Urban Transport Group’s website and the section on Rail Industry Finances. The data which are shown there are referenced as coming from the ORR.

The ORR published in February 2017 a document entitled UK Rail Industry Financial Information 2015-16. Examination shows this to be UTG’s source document.

In this document the section on enhancements and renewals does not, to my reading, exactly match your suggestion. Figure 2.11, on page 18 of the document, shows Network Rail’s capital expenditure by route in 2015-16; the footnote to this Figure states that the numbers have been extracted from Network Rail’s audited 2015-16 regulatory financial statements. The routes are Anglia, East Midlands, Kent, North East, North West, Sussex, Wales, Wessex, Western and Scotland. There are summary figures for both England and Wales together and the GB total. The Capex is shown for renewals and enhancements separately.

Section 4 of the report gives the underlying assumptions for the way the analysis has been done. The application sections are:

Allocation of Network Rail costs to routes
This allocation has already been done by Network Rail in its regulatory financial statements.
Scotland and Wales are routes in their own right. The 8 other regulatory routes are added together for the England totals. Network Rail uses the following set of principles to attribute income and expenditure to routes:

• directly attributed – route managed. Income and expenditure in this category is currently managed at route level. As there is alignment between management responsibility and route, such items can be directly attributed to an individual regulatory route, e.g. signallers and maintenance;
• centrally managed – directly influenced. For these items, income and expenditure is the responsibility of the centre but decisions and actions taken by individual routes can affect the company wide costs, e.g. capital expenditure delivered by Network Rail’s project delivery team;
• centrally managed – route identifiable. For these items, income and expenditure is the responsibility of the centre, and individual routes have little direct influence over costs. However, the geographic location of business activity allows activity to be allocated to specific routes, e.g. train charges per train km, enhancements, property income; and
• centrally managed – allocated by cost driver. Income and expenditure in this category is incurred for the whole network, e.g. central HR costs. Network Rail has allocated network-wide income and expenditure to regulatory routes based on an appropriate cost driver. For example, for HR it is based on headcount in a particular route.

The document goes on to say:

...capital expenditure can be “lumpy”, i.e. it can vary significantly from year to year. However, if we used actual annual expenditure, the amounts used in our analysis could vary significantly from year to year. In our PR13 determination and for Network Rail’s regulatory accounts, we instead use the “amortisation” of the regulatory asset base. This is based on a forecast of the long-run annual average renewals expenditure that is required to maintain the network in a steady state over a 35-year-period...

...Enhancement expenditure is not separately amortised but the future renewals of that enhancement are included in the long-run renewals calculation.

Amortisation is directly allocated to routes based on the renewals work required in each route for each asset type. We have presented the actual costs in figure 2.11.

My emphasis.

It then discusses the allocation of costs to the franchise area:

Franchise area analysis
The franchise area analysis shows the finances of individual franchise operators in a franchise area, as well as allocating Network Rail’s income and expenditure to each franchise area. Due to the overlapping geographies of franchises and operating routes there are many different approaches to the allocation of Network Rail’s income and expenditure and the allocation of government funding to franchised areas. It is important that it is recognised that there is no definitive view on how this should be done and therefore care is required in understanding and interpreting our analysis.

On page 50 it is stated:

Network Rail’s expenditure allocated to franchises
... 


• depreciation/amortisation and other costs have been allocated in proportion to train distance travelled by each franchise in each regulatory route. We have adopted this simple approach because physical presence on the network is arguably a more meaningful way to allocate largely fixed costs which relate to long-life assets than measures which relate to short-term (variable) wear and tear; and 

• network grant has been allocated at route level in proportion to the residual Network Rail income less expenditure that we have calculated in each franchise’s route-level “account”. In 2014-15 this calculation was done at GB level. In 2015-16 we have used the route-level grant figure, as published in Network Rail’s regulatory financial statements.

In all this I find no suggestion that part of the costs of the Reading re-build have been carried by the Scotland budget. It seems absolutely clear that costs incurred in one route area are identified and carried by that route. In any case 'smearing' costs over the whole system helps nobody. Why would it be useful, helpful or sensible to get Wales to carry part of the cost of rebuilding London Bridge station?

 

[Shaw S Hunter]

Correct.

I wonder how the picture would be if Network Rail was in the private sector...

It's been tried... it didn't go well...