EMT bailout

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David

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East Midlands Trains has been given £46m of taxpayers' money to make the company profitable again.

Last year the train operator made a loss of £25m in six months and under the terms of it franchise agreement with the government was eligible for a revenue support grant.

The RMT Union said the pay-out was "corporate welfare".

The bail-out was revealed by the Department for Transport in a Freedom of Information request by the BBC.

'It's ridiculous'

East Midlands Trains, which has been running local and London services in the region for five years, reported lower than expected passenger revenues and received £46,443,000 between last November and June.

The government provides subsidies to the rail industry to protect rail companies from the worst of their losses.

RMT regional organiser Ken Usher said: "We hear on a daily basis of various cuts due to austerity measures and quite clearly it's a case that this does not apply to big business. It's ridiculous."

The company said it and its sister operator South West Trains made a net contribution to UK taxpayers of more than £280m during last financial year.

An East Midlands Trains spokesperson said: "Rail franchises were let by the Department for Transport on the basis that the government accepted it would get high premium payments when the environment for rail was strong, but it agreed to provide contractual revenue support when tough conditions meant revenue growth was lower than expected.

"We have had several tough years during the economic downturn and East Midlands Trains was loss-making in 2010/11 and during the first six months of the last financial year.

"Despite this, we have continued to meet all of our franchise commitments to government and we continue to invest millions of pounds to improve our trains and stations to encourage more people to travel on our network."

'Justify' bail out

East Midlands Trains parent company Stagecoach said in its 2012 annual report that taxpayer payments have returned the business to profitability.

Lilian Greenwood, Labour MP for Nottingham South and a shadow transport minister, said: "Train operating companies across the country need to justify their receipt of taxpayers money at a time when too many services are overcrowded and the government is allowing fares to rise by up to 11%.

"The onus is now on the company to make sure that the money is spent on improving services for passengers, instead of bolstering shareholders' profits."

In its response to the BBC's Freedom of Information Act request, the Department for Transport said: "Under the terms of its franchise agreement with the Department for Transport, East Midlands Trains became eligible for revenue support on 11 November 2011.

"The amount of revenue support paid to East Midlands Trains up to 18 June 2012 is £46,443,000."

It said the figure was calculated and paid to East Midlands Trains based on information received about its revenue.

http://www.bbc.co.uk/news/uk-england-18893265

I don't want to turn this into a union bashing thread, as I've stated before I am in favour of them, but ....

Is the RMT mentioned in the report the same union that ballots EMT staff for strike action if there is a pay offer of less than 5%? Is it not the same union that balloted staff at EMT (successfully) for strike action as EMT wanted to reduce pension contributions as the fund was performing well enough?

The RMT have helped cause the loss at EMT by calling their members out on strike, thus losing EMT revenue, then they call the revenue support package ridiculous. Hypocritical much?
 
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GadgetMan

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I'm not into the politics of it all but should mention it was drivers at EMT who walked out over pension contributions and they are mostly represented by Aslef.
 

Masboroughlad

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I just wish that somebody in a position of power would see sense.

If a franchisee needs to be bailed out by taxpayers to make a profit for shareholders, something is VERY wrong.

We need one company running our railway system - BR?! No shareholder profits, just a public owned company that is run commercially, business focussed managers, efficient systems.
 

Class377/5

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But if the DfT signs an agreement it should stick to its commitments it makes. That's what happened. EMT isn't making as much money as expect so the DfT is complying with its part of the franchise contract.

However when the franchise was let things were roser and the DfT couldn't have know how bad things were going to get. That's the problem with forecasting the future, it normally turns out different.
 

38Cto15E

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Hopefully Robert Peston will be giving us all the info so I can understand it better, seems as though something is fundamentaly wrong when the UK government gives a company money to satisfy the companies shareholders.
Vince Cable was at Leicester station on Monday with a rucksak on his back, probably £46 mill in it for EMT.
 

David

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I'm not into the politics of it all but should mention it was drivers at EMT who walked out over pension contributions and they are mostly represented by Aslef.

The RMT was involved as well, and I'll quote what Bob Crow said in the press release ....

While RMT members will receive a small financially gain from a reduction in contributions it is clear that the biggest winner will be the employer. The RMT believe that the employer’s savings will be in the region of £750,000 per annum.

Despite the RMT objections management have gone ahead regardless of these concerns for the future funding of the EMT Pension Scheme. It is our opinion that managements refusal to withdraw this proposal is irresponsible and only suits to line the pockets of shareholders.

Management are trying to con our members in the interests of a windfall profit for the shareholders.

http://www.rmt.org.uk/Templates/Internal.asp?NodeID=159371&int1stParentNodeID=89732

I can't fault Bob Crow for his actions, as he is sticking up for his members, for which he is paid to do. However, I've said it before, and I'll keep on saying it. He is too aggressive in his speech and actions. While glancing through the RMT news archive looking for the above press release, 2 words stood out a lot as they were in most of the press releases. "Strike action".

I'm sorry Bob, but this isn't the 1970s anymore. You do not need to call your members out on strike for everything. In doing so, you alienate the public, the government, the TOCs, basically everyone.

What the RMT need is a new general secratary. 1 who will continue to stick up for their members and try and get the best they can for them, but a leader who will not make scathing remarks about everything, just to get mentioned in every story about the railway. Criticism when it's due is fair enough, but anything else beyond that just ****es people off ....
 

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What the RMT need is a new general secratary. 1 who will continue to stick up for their members and try and get the best they can for them, but a leader who will not make scathing remarks about everything, just to get mentioned in every story about the railway. Criticism when it's due is fair enough, but anything else beyond that just ****es people off ....

Well the membership who ARE the RMT dont appear to agree with you and probably dont care either because he does what he does best,for them.

Rightly or wrongly in the eyes of the public and other rail staff his members vote him in. Thats how it works.
 

BestWestern

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Well the membership who ARE the RMT dont appear to agree with you and probably dont care either because he does what he does best,for them.

Rightly or wrongly in the eyes of the public and other rail staff his members vote him in. Thats how it works.

To be fair though, in my experience at least, there are many members who find themselves increasingly frustrated by Iron Bob and his constant rantings, and moreso by the worrying eagerness to go out on strike at the drop of a hat. It does enormous damage to the public image of railway workers, which won't help to bolster public supprt if McNulty's axe does begin chopping.

Having said all of that, the whole concept of 'revenue support' and the way that TOCs openly abuse it with complete impunity, is utterly outrageous. I wish that somebody in the media would cotton on to it and do some stirring. Operators in receipt of Government subsidy are easily identifiable by the immediate removal of revenue protection staff, a sudden unexplained epidemic of ticket barriers remaining open at busy times when they would previously have been manned without fail, and a general complete lack of any effort whatsoever to collect any revenue. Whilst many of us may feel that this is tantamount to fraud, the Government appears quite content to sit idly by and hand over huge amounts of taxpayer's cash to companies who quite clearly feel it is perfectly acceptable to deliberately send revenue through the floor :roll:
 

WatcherZero

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This isnt a bailout apart from in the RMT's crazy world. Revenue sharing deal with Government, the number of passengers declined so the Government subsidy went up by £46m, however its still making £280m in franchise payments to Government!
 

BestWestern

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This isnt a bailout apart from in the RMT's crazy world. Revenue sharing deal with Government, the number of passengers declined so the Government subsidy went up by £46m, however its still making £280m in franchise payments to Government!


...which demonstrates that it clearly isn't just the RMT's world which is crazy! :roll:
 

Clip

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To be fair though, in my experience at least, there are many members who find themselves increasingly frustrated by Iron Bob and his constant rantings, and moreso by the worrying eagerness to go out on strike at the drop of a hat. It does enormous damage to the public image of railway workers, which won't help to bolster public supprt if McNulty's axe does begin chopping.

No you are quite right BestWestern and I know an awful lot are very annoyed with his big fat mouth spouting off any old cack at the drop of the hat. But yet he still doesnt get voted out because those who are frustrated at him dont bother voting anyway so its the hardcore group of people within the union who always vote always keep him in. If the silent majority stay silent, nowt will change.

After all, power to the people means all the people, not just the gob****es.
 

blacknight

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BBC news now reporting that EMT drivers are planning another 3 days strike action on 6-8 August. Guessing they are still in dispute over pensions drivers want to keep at same rate whilst EMT are looking for pension holiday by reducing rate of contributions from drivers & the TOC.
 
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Oswyntail

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Sadly, in the franchised world, the railways need private companies. If the shareholders of private companies do not get a return on their investment (that is better than other investment opportunities), the companies will walk away from the industry. The question should not be about shareholders getting returns, but whether there is the right balance between shareholder returns and investment in the use of profits.
 

Pen Mill

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However when the franchise was let things were roser and the DfT couldn't have know how bad things were going to get. That's the problem with forecasting the future, it normally turns out different.

Indeed it does but it turns out different for all commercial concerns not just wet-nursed TOCs.

I will guarantee my sharedholders that we'll never lose money because the Dft will stump up the difference.. weyhey let's party !:lol:
 

WatcherZero

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Indeed it does but it turns out different for all commercial concerns not just wet-nursed TOCs.

I will guarantee my sharedholders that we'll never lose money because the Dft will stump up the difference.. weyhey let's party !:lol:

Except the shareholder can and do lose money.

EMT, East Coast (twice) and FGW if the franchise continued to name but a few.
 

bb21

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But if the DfT signs an agreement it should stick to its commitments it makes. That's what happened. EMT isn't making as much money as expect so the DfT is complying with its part of the franchise contract.

However when the franchise was let things were roser and the DfT couldn't have know how bad things were going to get. That's the problem with forecasting the future, it normally turns out different.

I totally agree.

I don't like the company much, however if the franchise was let on specific terms then surely the government and the company should both stick to them.

Non-story really.
 

whhistle

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To be fair though, in my experience at least, there are many members who find themselves increasingly frustrated by Iron Bob and his constant rantings, and moreso by the worrying eagerness to go out on strike at the drop of a hat. It does enormous damage to the public image of railway workers, which won't help to bolster public supprt if McNulty's axe does begin chopping.
This man has brains.

That is the whole problem with the RMT. Yes, Mr Crow may get results but remember, he earns way more than a lot of nurses and fire fighters (I believe it's around £145,000 pa), yet claims benefits from the government.

Using Mr Crows iron hand to blackmail companies will do nothing but create bad atmosphere and yet another hit for public railways. Yet I see Union members who still support that union, even though they despise the leader - I don't think I'll ever understand people who do this.

Bob Crow doesn't care about the public image. He cares enough to get his family a nice life, then retire, that is all. If any RMT union member or Mr Crow himself would like to challenge me on that point, please feel free.
 

Pen Mill

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Except the shareholder can and do lose money.

EMT, East Coast (twice) and FGW if the franchise continued to name but a few.

but frankly how this can happen in an "open book" contract is completely beyond me.
They know exactly what they're getting , routes , timetable , passenger no.s etc and I'm sure it's doubly & trebly audited pre-contract.

If subsidy is agreed up front for sustainability reasons, I'm comfortable with that but in any other business contract anything that happens from then on in is commercial risk , they have to manage that .
 

Skimble19

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This man has brains.

That is the whole problem with the RMT. Yes, Mr Crow may get results but remember, he earns way more than a lot of nurses and fire fighters (I believe it's around £145,000 pa), yet claims benefits from the government.

Using Mr Crows iron hand to blackmail companies will do nothing but create bad atmosphere and yet another hit for public railways. Yet I see Union members who still support that union, even though they despise the leader - I don't think I'll ever understand people who do this.

Bob Crow doesn't care about the public image. He cares enough to get his family a nice life, then retire, that is all. If any RMT union member or Mr Crow himself would like to challenge me on that point, please feel free.
The amount of damage that man alone does to the image of the industry is ridiculous.. I'd go on but I doubt there's any point.
 

David

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Except the shareholder can and do lose money.

EMT, East Coast (twice) and FGW if the franchise continued to name but a few.

Regarding Natex on the East Coast, following the failure of GNER because they couldn't afford the premiums, they then put in a bid that was even sillier! (Something like an extra £100 million compared to GNER over a shorter timespan.)

It's also unfair to lump FGW into the same boat, as the circumstances are different. The media are saying the FGW are "handing the keys back early", which is a blatent lie. The only thing First Group have done is refused to take up the option of a 3 year extension to the franchise, as it did not make commercial sense.
 

Wolfie

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This man has brains.

That is the whole problem with the RMT. Yes, Mr Crow may get results but remember, he earns way more than a lot of nurses and fire fighters (I believe it's around £145,000 pa), yet claims benefits from the government.

Using Mr Crows iron hand to blackmail companies will do nothing but create bad atmosphere and yet another hit for public railways. Yet I see Union members who still support that union, even though they despise the leader - I don't think I'll ever understand people who do this.

Bob Crow doesn't care about the public image. He cares enough to get his family a nice life, then retire, that is all. If any RMT union member or Mr Crow himself would like to challenge me on that point, please feel free.

I am neither an RMT member nor Bob Crow but I will happily challenge you.

Even the most knuckle-dragging member of the Daily Mail fraternity would not regard living in a council house as being "on benefits" so I regard your original post as being from the Goebbels school of accuracy.

Had Bob Crow taken advantage of the opportunity available to him to buy the council house he lives in at a large discount he would doubtless have been criticised for making a killing at the taxpayers expense. He could of course have bought a largeish house on the private market and then been subjected to the Daily Mail doing a shock-horror story about that (see for example Arthur Scargill). Instead he has clearly said that he believes in social housing as a concept and is happy to continue living where he not only has family memories but also likely friends.

To be clear, council tenancies currently are neither time nor income restricted. There is an arguement, which I would on balance support, that this should change BUT Bob Crow, so long as he has paid the rent on time, has stuck to the terms of his tenancy.
 

142094

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Regarding Natex on the East Coast, following the failure of GNER because they couldn't afford the premiums, they then put in a bid that was even sillier! (Something like an extra £100 million compared to GNER over a shorter timespan.)

Not sure if you can lump in GNER with NXEC - although GNER did bid a very high amount, it might have been a different story if Sea Containers had been in better shape.
 

HH

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I don't think most (any?) of you understand the basis on which Franchises are let. The Government wishes to get the biggest headline payment it can. In the last round no doubt their economists forecast only upside so the mechanisms put into place allowed for both revenue share and support (plus profit share, but no profit support). The presence of revenue support allowed for bigger premiums - bidders have to balance risk & reward.

What DfT got wrong, was to fail to understand that once you reached the full level of revenue support it became very hard to justify spending money to generate revenue (however the DfT could get around this to some extent by using the change mechanism, but they haven't made as much use of it as they could). The current round of franchises have addressed that issue.

Note that in most cases the TOC receiving revenue support is still paying the goverment a very healthy amount - more than it would get if they took it back and re-let it.
 

WatcherZero

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but frankly how this can happen in an "open book" contract is completely beyond me.
They know exactly what they're getting , routes , timetable , passenger no.s etc and I'm sure it's doubly & trebly audited pre-contract.

If subsidy is agreed up front for sustainability reasons, I'm comfortable with that but in any other business contract anything that happens from then on in is commercial risk , they have to manage that .

I have already explained, there is a great deal of commercial risk beyond simply running trains. I could start a new bus company and operate all the services for a pound, I would make enough money to cover the cost of operating the services (bus, driver, fuel) known as an operating profit, but not make enough to cover the other costs of running a company and so make a loss.
 

LNW-GW Joint

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It's called Cap and Collar, and it is a risk-sharing agreement between DfT and the TOCs.
The TOCs only get a proportion of revenue losses back, it's not a risk-free deal.
Equally, when the times are good, the TOC has to fork out more to DfT.
That nice Mr Crow is only looking at the downside (fancy that!).
 

HSTEd

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Is the RMT mentioned in the report the same union that ballots EMT staff for strike action if there is a pay offer of less than 5%? Is it not the same union that balloted staff at EMT (successfully) for strike action as EMT wanted to reduce pension contributions as the fund was performing well enough?

This is the 80s and 90s again as far as they are concerned ("Pension Payment Holidays"), when the fund ends up in trouble as a result of the reduction in contributions they will declare that the only way to fix the fund is to reduce the benefits.

It is just a way to reduce pension benefits in the opinion of the union members.
 

Pen Mill

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I have already explained, there is a great deal of commercial risk beyond simply running trains. I could start a new bus company and operate all the services for a pound, I would make enough money to cover the cost of operating the services (bus, driver, fuel) known as an operating profit, but not make enough to cover the other costs of running a company and so make a loss.
And you would put in such a bid ? streuth... we are talking about multi-million/billion pound companies employing brigades of commercial accountants formulating these bids.
I can assure you that they've considered all potential risks before placing their chips.They won't always get their assessments all right all of the time but that is the commercial risk to which I refer.
 
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