Could we start to see the DfT purchase rolling stock outright?

[RailWonderer]

With the DfT taking central control over TOC spending and the rail and road in general and a move to a GBR system, could we see existing and new rolling stock being purchased outright by the DfT, and then allocating it to a TOC of their choice? BR did this and the DfT did it recently with the 365s.

The existance of ROSCOs that lease the stock, to me, is a relic of the franchising era from 1996 to the pandemic, and although the Tories like to pay lip service to the benefits of privitisation and a competitive market, the use of ROSCOs is looking defunct. In theory, they are meant to compete with each other to lease stock to TOCs at the best price - in theory - we know they overcharged for Pacers and Sprinters *ahem Porterbrook* but if the TOCs are being told by the DfT what they can and can't lease or order, why do ROSCOs need to exist in the first place to order and lease rolling stock when the ROSCOs getting any return is dependant on the DfT allocating funds to TOCs? ROSCOs have always been to an extent dependant on the magic money tree of central govt that subsidised TOCs and allowed them to order new stock but in the current climate surely the business case for ROSCOs and the private equity funds that look to go into that business is looking slimmer by the day.

Then you have the view that the govt sees rolling stock as more of a liability than an asset, then in that case they don't mind a private company taking on the risk while govt just controls the finances without the responsibility of having to store, maintain and deploy stock as well as all the associated training costs. What do you think? But will ROSCOs continue to exist, lease and profit, or do they see it as less appealing, in which case more rolling stock goes into the ROSCO of last resort, the DfT.

Also if I am factually wrong on any points here feel free to correct me, my knowledge of the business is not industry level.

 

[Bletchleyite]

I suspect they won't, as leasing contracts aren't debt, and there's pressure to keep Government debt low.

What could be considered would be something like a lease-to-own scheme, a bit like an Islamic mortgage, but that depends if it'd count as debt or not.

 

[Tetchytyke]

No, because if they borrow money it is debt but if the ROSCOs borrow money it is a leasing cost.

Just another idiotic way in which national debt is always seen as bad, regardless of what it gets spent on. Unlike a company balance sheet where, so long as the debt and the asset values match it doesn’t matter, the government seem to perceive debt as like a credit card.

 

[skyhigh]

With the DfT taking central control over TOC spending and the rail and road in general and a move to a GBR system, could we see existing and new rolling stock being purchased outright by the DfT, and then allocating it to a TOC of their choice? BR did this and the DfT did it recently with the 365s.

DfT did it because it was in the original contract that if the class went off lease it would pass to the government after a set period of time of no use. They obviously didn't want them as they passed them back to the previous ROSCO who then scrapped them. I think if it wasn't contractual they wouldn't have bothered gaining ownership of the units.

 

[Irascible]

No, because if they borrow money it is debt but if the ROSCOs borrow money it is a leasing cost.

Just another idiotic way in which national debt is always seen as bad, regardless of what it gets spent on. Unlike a company balance sheet where, so long as the debt and the asset values match it doesn’t matter, the government seem to perceive debt as like a credit card.

Even more stupid given it's being repaid from the same place in this case, and the cost of borrowing for governments. Who're they trying to appeal to anyway...

I wonder how many ways a state owned ROSCO could bleed money into pockets, it must surely tick a lot of boxes.

 

[bramling]

DfT did it because it was in the original contract that if the class went off lease it would pass to the government after a set period of time of no use. They obviously didn't want them as they passed them back to the previous ROSCO who then scrapped them. I think if it wasn't contractual they wouldn't have bothered gaining ownership of the units.

Yes it does seem that the 365 debacle ultimately went back to obscure contractual terms which dated back to the early 90s, which probably no one thought at the time of the circumstances arriving.

It would be interesting to know how much effort DFT did make in trying to find alternative work for the 365s, especially the ones made redundant back in 2018. It was suggested on here that they might have been used as something of a stick to beat the ROSCOs with, but there doesn’t seem to be much evidence that ever happened. Evidently DFT were quite happy for GTR to ditch theirs, which probably resolved a headache for them as it enabled them to simply offload the whole class back to the ROSCO.

I might be misremembering, but I do remember reading somewhere that the terms of DFT taking the units back on were time limited, but I’m not sure of the authenticity of that. Clearly the ROSCO weren’t interested in them once they got them back, especially with a number having been in essentially cold store for over 3 years, so were happy to get rid. The whole saga is not one of the rail industry’s finer achievements to be honest, and certainly can be filed in the same box as the 442 and 769 debacles.

 

[Hadders]

Some info in this thread from 2019 about the ownership of the class 365s.

Government takes ownership of Class 365 fleet

From RAIL: “ The Class 365 fleet is now the property of the Department for Transport. Currently 21 are leased to Govia Thameslink Railway, with 19 stored at Crewe South Yard. The ‘365s’ were procured in 1994 under a unique financing model that was put in place by British Rail shortly before...

www.railforums.co.uk

 

[bramling]

Some info in this thread from 2019 about the ownership of the class 365s.

Government takes ownership of Class 365 fleet

From RAIL: “ The Class 365 fleet is now the property of the Department for Transport. Currently 21 are leased to Govia Thameslink Railway, with 19 stored at Crewe South Yard. The ‘365s’ were procured in 1994 under a unique financing model that was put in place by British Rail shortly before...

www.railforums.co.uk

Many thanks for well and truly depressing my evening!

 

[AM9]

Some info in this thread from 2019 about the ownership of the class 365s.

Government takes ownership of Class 365 fleet

From RAIL: “ The Class 365 fleet is now the property of the Department for Transport. Currently 21 are leased to Govia Thameslink Railway, with 19 stored at Crewe South Yard. The ‘365s’ were procured in 1994 under a unique financing model that was put in place by British Rail shortly before...

www.railforums.co.uk

The biggest problem with RoSCos is that they tend to generate microfleets by pandering to every TOC's exact requirements. There's no reason why the designs of fleets couldn't be harmonised to allow cheaper aquisition, common training and more effective cascading over their lives.

 

[Mikey C]

The biggest problem with RoSCos is that they tend to generate microfleets by pandering to every TOC's exact requirements. There's no reason why the designs of fleets couldn't be harmonised to allow cheaper aquisition, common training and more effective cascading over their lives.

I imagine they regret that now, as they will have realised that it's not in their interest to be left with unwanted rolling stock, that nobody else can use.

And to be fair, many of the unwanted trains aren't because they are microfleets, it's because of political or lease cost reasons. The 379s and 350/2s are perfectly normal trains.

 

[bramling]

The biggest problem with RoSCos is that they tend to generate microfleets by pandering to every TOC's exact requirements. There's no reason why the designs of fleets couldn't be harmonised to allow cheaper aquisition, common training and more effective cascading over their lives.

Ironically, even where there have been common fleets, this soon gets eroded up with TOC-inspired modifications. Look at the differences between the West Coast and XC Voyagers for an example of this. Then you have something like Southern with their anything-but-common Electrostar fleet, even the earlier ones have variations.

Even the Connex 365s had to undergo alterations when they transferred to WAGN to harmonise the two fleets. I’m not sure if the former Connex units retained any differences under the skin, however they for many years did retain a slightly different seating layout where the pay phone used to be.

I do tend to agree with your point though.

 

[Thirteen]

Out of interest, do TfL own or lease their various rolling stocks?

 

[bramling]

Out of interest, do TfL own or lease their various rolling stocks?

The LU stocks are presumably owned outright, with the exception of the 95 stock which are owned and maintained by Alstom.

In their case that seems to have been the only way they were able to progress the Northern Line fleet replacement in the 90s, otherwise the Northern would have been in the situation the Bakerloo now is, albeit their existing trains weren’t as old.

There we go, 59 stock until 2010ish. Wouldn’t that have been nice!

 

[MattRat]

But then who would the government scape goat when something goes wrong? And yes, you can call me cynical if you want.

 

[Meerkat]

we know they overcharged for Pacers and Sprinters

Did they? They were assigned a value at the privatisation of the ROSCOs - if the ROSCO made more than expected out of them then either the government didnt fund replacements as soon as they predicted or the ROSCOs were sold too cheap (wasn't that mainly due to Labour saying they would renationalise then not doing it?)

Even more stupid given it's being repaid from the same place in this case,

Is it really the same? If the government buy then they have to find the cash up front and then get some/all of it back via fares. If they lease it then they only ever have to find the cash for the subsidy if the fares don't cover the leasing cost. If the train is profitable then the government never have to fund it.

 

[AM9]

Is it really the same? If the government buy then they have to find the cash up front and then get some/all of it back via fares. If they lease it then they only ever have to find the cash for the subsidy if the fares don't cover the leasing cost. If the train is profitable then the government never have to fund it.

But there would be as many misinformation statements about government debts as there are about re-deploying 'money' spent on HS2 available for diverting to the NHS.

 

[HamworthyGoods]

Last time DfT procured rolling stock we ended to with very expensive class 800s!

 

[JamesT]

Out of interest, do TfL own or lease their various rolling stocks?

https://tfl.gov.uk/info-for/media/p...th-line-trains-to-345-rail-leasing-consortium suggests they lease Overground and Elizabeth Line stock, but own the Underground stock.

Similar leasing deals have previously enabled TfL to introduce new trains onto London Overground since it began running services in November 2007.

Due to their unique nature, leasing options are currently not suitable for the procurement of new rolling stock on the London Underground network. This is why TfL has pursued the sale and leaseback with the Elizabeth line train fleet.

 

[Ken H]

Shedloads of government stuff is leased. Ambulances, fire engines for instance. And many other large capital items. Other stuff is hired in. things like CT and MRI scanners.

 

[Thirteen]

https://tfl.gov.uk/info-for/media/p...th-line-trains-to-345-rail-leasing-consortium suggests they lease Overground and Elizabeth Line stock, but own the Underground stock.

Interesting that only the heavy rail rolling stock is leased but everything else is owned outright.

 

[RailWonderer]

Shedloads of government stuff is leased. Ambulances, fire engines for instance. And many other large capital items. Other stuff is hired in. things like CT and MRI scanners.

Trains have a much longer service life than road vehicles which last 15-20 years.

 

[Wolfie]

With the DfT taking central control over TOC spending and the rail and road in general and a move to a GBR system, could we see existing and new rolling stock being purchased outright by the DfT, and then allocating it to a TOC of their choice? BR did this and the DfT did it recently with the 365s.

The existance of ROSCOs that lease the stock, to me, is a relic of the franchising era from 1996 to the pandemic, and although the Tories like to pay lip service to the benefits of privitisation and a competitive market, the use of ROSCOs is looking defunct. In theory, they are meant to compete with each other to lease stock to TOCs at the best price - in theory - we know they overcharged for Pacers and Sprinters *ahem Porterbrook* but if the TOCs are being told by the DfT what they can and can't lease or order, why do ROSCOs need to exist in the first place to order and lease rolling stock when the ROSCOs getting any return is dependant on the DfT allocating funds to TOCs? ROSCOs have always been to an extent dependant on the magic money tree of central govt that subsidised TOCs and allowed them to order new stock but in the current climate surely the business case for ROSCOs and the private equity funds that look to go into that business is looking slimmer by the day.

Then you have the view that the govt sees rolling stock as more of a liability than an asset, then in that case they don't mind a private company taking on the risk while govt just controls the finances without the responsibility of having to store, maintain and deploy stock as well as all the associated training costs. What do you think? But will ROSCOs continue to exist, lease and profit, or do they see it as less appealing, in which case more rolling stock goes into the ROSCO of last resort, the DfT.

Also if I am factually wrong on any points here feel free to correct me, my knowledge of the business is not industry level.

I would have thought that HMT would be opposed as it would add to the public borrowing figures and, at life expiry, leave a worthless asset.

 

[Halifaxlad]

I wonder what the implications would be for open access operators

 

[zwk500]

Interesting that only the heavy rail rolling stock is leased but everything else is owned outright.

A historic thing, mostly.

The primary reason the DfT won't want to own any more rolling stock than is practically possible is that it wants to keep assets offthe government books for accounting reasons. It's a similar reason why NR was required to sell of the railway arches. Leaving financing to the ROSCOs allows the financial companies to manage the financing (in theory to the overall better value for public spending) and the DfT has a lease that it can, within reason, end if the ROSCO is not providing a good enough deal. This is very attractive to short-term thinking politicians.

I wonder what the implications would be for open access operators

Either they would continue to lease as before but from DfT (Train Owning Company) ltd not a ROSCO, or they'd be forced to purchase their own stock outright.

 

[Meerkat]

Either they would continue to lease as before but from DfT (Train Owning Company) ltd not a ROSCO, or they'd be forced to purchase their own stock outright.

Why would the DfT stop them using a ROSCO?
There would be some bad effects from ending leasing. Train procurement would be when the Treasury decided it had capital spending available rather than the most suitable time for the railway. As we have seen the cheapest long term answer doesn't happen if the Treasury refuses capital spending.

 

[zwk500]

Why would the DfT stop them using a ROSCO?

I thought the premise of the thread was that the DfT would own all stock and ROSCOs wouldn't be there. Of course if ROSCOs survived then they could easily lease from them.

 

[43096]

I thought the premise of the thread was that the DfT would own all stock and ROSCOs wouldn't be there. Of course if ROSCOs survived then they could easily lease from them.

You aren’t getting rid of ROSCOs. Even if DfT owned the stock of the TOCs it controlled, you’d still have freight operators leasing stock. And that’s before you get to the leasing businesses active in the European rail market (Akiem, Alpha, Beacon, ELL, Railpool etc), who, it should be noted, are increasingly leasing to state-owned operators.

 

[Meerkat]

I thought the premise of the thread was that the DfT would own all stock and ROSCOs wouldn't be there. Of course if ROSCOs survived then they could easily lease from them.

Why would the DfT own OAO stock? I assume they would roll forward on TOC procurement, rather than buy the ROSCOs.

 

[Ken H]

We must remember ROSCOs do more than finance stock. Especially mid life upgrades. They did a lot of work financing disabled people mods to rail vehicles.
Do the DfT have that expertise?

 

[zwk500]

We must remember ROSCOs do more than finance stock. Especially mid life upgrades. They did a lot of work financing disabled people mods to rail vehicles.
Do the DfT have that expertise?

The DfT would effectively just be the holding company of a ROSCO, the actual staff would largely stay the same except the shareholders would be replaced by the Minister. Similar to when an OLR takes over actually very few staff change.