Eurostar Privatisation

[SS4]

It doesn't suit the government for Eurostar to be in the public sector.
Its competitors (BA, EasyJet, even Air France) are in the private sector.
It took a long time to make it profitable - it was a basket case for the first decade.

It doesn't suit this government to ensure the poorest have food on the table this winter.

Why privatise something that's improving? I'd understand if you sold it in the first decade it'd make more sense.

Perhaps the Coalition are emulating Thatcher by trying to ensure a potential Labour government has no means of raising money beyond raising tax (unpopular) or cutting spending ("told you so"). Discrediting your opponent certainly seems more popular than actually solving problems

 

[ainsworth74]

I notice someone has gone back and expanded "LCR" to London and Continental Railways in the thread title, but as it said in the BBC article, they are no longer involved in Eurostar.

That would be me

I've fixed it now.

 

[NSEFAN]

Why privatise something that's improving? I'd understand if you sold it in the first decade it'd make more sense.

Perhaps the Coalition are emulating Thatcher by trying to ensure a potential Labour government has no means of raising money beyond raising tax (unpopular) or cutting spending ("told you so"). Discrediting your opponent certainly seems more popular than actually solving problems

That is believeable. "Cutting off your nose to spite your face" seems to be a recurring theme in British politics.

 

[Olaf]

Just a few points:

• This is just part of a 20 Billion GBP sell-off of assets,
• It is probably a good time to get it off of the Government books with the prospects of competition from other operators eroding future profits,
• At some point euroStar will need to raise funds to replace it's existing fleet - there has already been some discussion of this, so again another good reason for disposal of the holding,
• There is no real benefit in the assets being held by the Government - it is not the job of The Treasury to run a rail service.

 

[WatcherZero]

Its now done, final bidders were Canadian pension fund and Lancashire public sector pension fund, went to the Canadians for £585.1m, better than the £325m public books valuation a year ago. However the Government has also sold back its golden share to Eurostar for a further £172m which wasn't part of the initial plan.

 

[JaJaWa]

Its now done, final bidders were Canadian pension fund and Lancashire public sector pension fund, went to the Canadians for £585.1m, better than the £325m public books valuation a year ago. However the Government has also sold back its golden share to Eurostar for a further £172m which wasn't part of the initial plan.

I wonder if it was always planned for this week to stop the government continuing to run East Coast if Eurostar had won.

 

[Tetchytyke]

Its now done, final bidders were Canadian pension fund and Lancashire public sector pension fund, went to the Canadians for £585.1m, better than the £325m public books valuation a year ago

I'm always skeptical about the valuations- look at Royal Mail- especially where the amount it gets sold for is way in excess of the valuation.

But I don't really have a problem with the UK Government selling the stake in Eurostar, I don't see that train service as any different to an airline.

 

[WelshBluebird]

It is all great selling off stuff like this now to make some money when the public finances need it. But of course, what happens when we are in the same situation again in 5/10/20 years time but then with nothing to be able to sell off.

 

[dstrat]

To me, its quite simple.

This is a great idea for now if we are planning to close the country in a few years time.

But if we are planning to keep the country running into foreseeable time, it's instead short-sighted thinking that only costs the country in the long run, given that this current venture makes money for the country.

But it is doctrine for the incumbent powers that the state should be minimised in its ability to make money if it means that their chummos in the financial world can make a mint out of whatever is in question.

 

[Lampshade]

Another ideological move, just like with Royal Mail - the 'cutting the national debt' argument doesn't wash, we give away more in foreign aid every year than the government received from the one off sale of RM.

 

[dgl]

It seems to me that they want to boast about how much money they are bringing into the country by being able to say at they end of the current government that they have bolstered the books, the problem with that is now they won't have this revenue coming in every year.
It's like selling a business and stopping working and claiming that you now have all this money. You will end up running out of this money when if you have kept working you would not have had so much instant cash but you would be constantly receiving cash year on year which would probably amount to a fair bit more money.

 

[NSEFAN]

It seems to me that they want to boast about how much money they are bringing into the country by being able to say at they end of the current government that they have bolstered the books, the problem with that is now they won't have this revenue coming in every year.

But by the time anyone notices they will have slunk off into the background and someone else can take the blame. Welcome to politics!

 

[ScotGG]

I have no idea if it's a good thing but a one off saving of £700m off a £92 billion annual deficit doesn't seem like it'll achieve much. The timing is suspicious though with it happening now - it seems planned to ensure borrowing undershoots last years total by April, just before the election. Electionering and politics above sound economics? Wouldn't be the first time, and possibly why we are in this mess to begin with.

As for whether the French or Belgians will sell and if not why not? They have less need to - for all the sneering at the French their deficit has been lower for many years.

UK deficit to GDP - 5.8%
France - 4.1%
Belgium - 2.6%

Source: http://www.tradingeconomics.com/

That link really shows up how badly the UK deficit still is compared to other developed nations despite all this 'long term economic plan' PR stuff.

 

[CdBrux]

Some thoughts.
As I understand it, happy to be corrected:

Eurostar operating profit last year £56million. From this £7.4million in dividend to UK government. (I am guessing the profit not paid in dividends is being used in part to finance the new trains etc...)
Interest on £750million government debt if at 2% interest rate: £15million

So from this simple view (I am sure it is more complicated) then the government is better off by £7.6million if the dividend is forecast to remain at the same level - I have no idea if it is or not, would be informative if we knew. In any case this is even before you consider anything like payback.

Really this international train service is more akin to an airline than a normal internal UK service.

Added to this should future investments to add new rolling stock for new services result in needing some cash input from shareholders then UK government - if it had a choice as a minority shareholder - would need to prioritise that vs debt or other expenditure.

 

[Xenophon PCDGS]

It doesn't suit this government to ensure the poorest have food on the table this winter.

I never thought that I would see a posting on this website that draws a comparison between the Coalition government in 2015 with that of the Stalin government in the early 1930's....hock:

 

[Olaf]

I tend to think that surely the best course of action is driving profitability (for example new routes to compete against air). Soon there will be nothing left to sell off and therefore fewer sources of long term income.

Well, there is the NR network and the new high-quality HS2 asset in prospect, so there is still a way to go.
--- old post above --- --- new post below ---

To me, its quite simple.

This is a great idea for now if we are planning to close the country in a few years time.

But if we are planning to keep the country running into foreseeable time, it's instead short-sighted thinking that only costs the country in the long run, given that this current venture makes money for the country.

But it is doctrine for the incumbent powers that the state should be minimised in its ability to make money if it means that their chummos in the financial world can make a mint out of whatever is in question.

What is your reasoning? Food supplies for example are handled by the private sector, as are telecoms, air travel, manufacturing, insurance etc, etc.
--- old post above --- --- new post below ---

Another ideological move, just like with Royal Mail - the 'cutting the national debt' argument doesn't wash, we give away more in foreign aid every year than the government received from the one off sale of RM.

The ideology/dogma is with the concept that basic services and property should be held under state control, not the other way around.
--- old post above --- --- new post below ---

I have no idea if it's a good thing but a one off saving of £700m off a £92 billion annual deficit doesn't seem like it'll achieve much. The timing is suspicious though with it happening now - it seems planned to ensure borrowing undershoots last years total by April, just before the election. Electionering and politics above sound economics? Wouldn't be the first time, and possibly why we are in this mess to begin with.

As for whether the French or Belgians will sell and if not why not? They have less need to - for all the sneering at the French their deficit has been lower for many years.

UK deficit to GDP - 5.8%
France - 4.1%
Belgium - 2.6%

Source: http://www.tradingeconomics.com/

That link really shows up how badly the UK deficit still is compared to other developed nations despite all this 'long term economic plan' PR stuff.

The French economy is busted, and has been busted for nearly ten years. It's Government will not get expenditure under control and as was demonstrated earlier this week, has relied on the rest of the Eurozone to prop it up, to avoid biting the bullet. French industry has been devistated by the Left's policies, and it is only the drop in the value of the Euro, not Government policy, that will prevent it from collapsing.

 

[DT611]

Well, there is the NR network and the new high-quality HS2 asset in prospect, so there is still a way to go.

tried, and look what happened. lets not go there again. only a fool who hasn't learned from what happened last time would resell off the NR network again, and would sell the HS2 network.

What is your reasoning? Food supplies for example are handled by the private sector, as are telecoms, air travel, manufacturing, insurance etc, etc.

because those industries won't have a monopoly. where a monopoly has to be, better a state one then a private one.

The ideology/dogma is with the concept that basic services and property should be held under state control, not the other way around.

and its the right dogma and ideology. the state has to keep some things for the greater good. the private sector can not be left to take up everything, and in some cases, can't be trusted as has been proven.

 

[muddythefish]

Well, there is the NR network and the new high-quality HS2 asset in prospect, so there is still a way to go.
--- old post above --- --- new post below ---
.

I've another idea. Let's sell off the roads instead; private motorists paying for the use of private roads

What is your reasoning? Food supplies for example are handled by the private sector, as are telecoms, air travel, manufacturing, insurance etc, etc.
--- old post above --- --- new post below ---
.

They should be in private sector. Public transport however ......

The ideology/dogma is with the concept that basic services and property should be held under state control, not the other way around.
--- old post above --- --- new post below ---
.

Correct. Basic services and infrastructure should be publicly owned.

The French economy is busted, and has been busted for nearly ten years. It's Government will not get expenditure under control and as was demonstrated earlier this week, has relied on the rest of the Eurozone to prop it up, to avoid biting the bullet. French industry has been devistated by the Left's policies, and it is only the drop in the value of the Euro, not Government policy, that will prevent it from collapsing.

Hollande has been in power for what, 2 or 3 years ? Look to your mate Sarkozy if you want a culprit.

 

[jimbo99]

Having just done a London/Paris return in Business Premier, I think it should be sold off. As noted earlier, competitors (eg Easyjet, BA) are in the private sector.

£490 for the return fare (and no taxes on that, unlike air travel). Poor food. Poor "cabin service". Poor lounge (compared with airport lounges), disgusting toilets. Tired carriages.

That's not to say things would be better in the private sector.

(I used to use Eurostar alot about 10 years ago. I'm sure the food was better then?? I remember even having pheasant on one New Year's Eve trip.)

 

[ainsworth74]

I believe they've cut back on catering over the last four or five years. Standard Premier, for example, was significantly cut back to cold food only.

 

[DT611]

Having just done a London/Paris return in Business Premier, I think it should be sold off. As noted earlier, competitors (eg Easyjet, BA) are in the private sector.

thats hardly a good reason to sell it off in fairness.

That's not to say things would be better in the private sector.

oh absolutely. there are no guarantees what so ever unfortunately.


i do think though if its making long term money for the government, to sell it off for a payment that will run out eventually is in my view bad business sense.

 

[6Gman]

thats hardly a good reason to sell it off in fairness.



oh absolutely. there are no guarantees what so ever unfortunately.


i do think though if its making long term money for the government, to sell it off for a payment that will run out eventually is in my view bad business sense.

The "business sense" depends on the annual return against capital sale value compared to the interest costs of the deficit. Anyone got the figures?

 

[CdBrux]

The "business sense" depends on the annual return against capital sale value compared to the interest costs of the deficit. Anyone got the figures?

As I understand it then roughly:
UK Government dividend last year: £7.4M
Interest on £750M debt at 2% would be £15M
So net opportunity loss = £7.6M


Of course its going to be a bit more complicated than that.

Of course dividends may improve, interest rates may reduce or they may both go in the opposite direction.

To me, as a user of Eurostar, then my decision to use the train vs plane or even driving / ferry or tunnel is based on costs, where I want to go and how much time I have. It's more akin to an airline service than even an intercity train.

 

[6Gman]

As I understand it then roughly:
UK Government dividend last year: £7.4M
Interest on £750M debt at 2% would be £15M
So net opportunity loss = £7.6M


Of course its going to be a bit more complicated than that.

Of course dividends may improve, interest rates may reduce or they may both go in the opposite direction.

To me, as a user of Eurostar, then my decision to use the train vs plane or even driving / ferry or tunnel is based on costs, where I want to go and how much time I have. It's more akin to an airline service than even an intercity train.

If those figures are correct - and I've no reason to doubt CdBrux - then it's a no-brainer! By giving up £7.4M in income the govt can avoid £15M in debt charges.

 

[ScotGG]

The govt is lending a large sum to itself through QE and the Bank of England (independent, yeah right...) who aren't charging interest on a large sum.

Olaf - The UK manufacturing sector is no better than the French is it? As for them not being able to reduce their spending - their deficit has been below ours for nigh on a decade which says they've done a better job than us of keeping spending in check. The UK's annual deficit is dropping at a glacial pace too - almost no movement in three years despite 2.6% growth the past year. Still £90 billion. French have around £60b this year. We will overtake total GDP to debt levels from the French very soon (currently 91% to 92%) according to EU accounting which is the best comparable measure, as our deficit is continuously higher than theirs and improved GDP is not translating to much improved deficit levels.

We do have the benefit of the BoE not charging interest on some debt though.