How a new, re-nationalized railway could be created and how existing TOCs could be integrated.

[YorkRailFan]

Following the announcement of hundreds of millions of £ in dividends for ROSCOs, an interesting discussing point could be how to nationalise ROSCOs and the assets they own?

 

[Mike Machin]

It could be done, independent financial and industry analysts would have to undertake a thorough survey to assess the market value of each of the businesses and arrange for a way for the shares to be compulsorily purchased. There would likely be strong resistance from some shareholders as they have the interests of their investors to consider, in many cases involving money tied-up in pensions etc., so there could likely be a significant impact on the day-to-day finances of hundreds of thousands of ordinary investors in a way not encountered when the railways were nationalised in 1948.

The knock-on effect to the reputation of the financial security of investing in the UK would de-stabilise the markets and would cause irreparable long-term damage to the UK financial markets globally.

The financial costs alone would be staggeringly eye watering. Nationalisation in the modern world is something that can only be considered for failing essential services. Profitable ROSCOS do not fit that criteria. With government investment money needed for more pressing social needs, if the rolling stock was brought into public ownership, there simply wouldn’t be any government money available to fund the acquisition of any new stock in the future.

It’s all now a very different world where investment is managed globally and it simply wouldn’t be worth nearly bankrupting the country just to get rolling stock into public hands.

Everything is leased nowadays, aircraft, cruise ships, office developments, buses - even many private cars. Nationalisation of rolling stock assets really is a bridge too far.

 

[Bletchleyite]

Following the announcement of hundreds of millions of £ in dividends for ROSCOs, an interesting discussing point could be how to nationalise ROSCOs and the assets they own?

I'm not sure if that actually makes sense or if it'd just make more sense to purchase any new stock directly.

 

[507020]

I'm not sure if that actually makes sense or if it'd just make more sense to purchase any new stock directly.

State ownership of rolling stock by a single operator is likely the most pertinent aspect of a future nationalisation, largely because leasing is the single biggest method for the current industry to haemorrhage taxpayers money.

100% of this £410 million lost in dividends could have been invested back into the industry this year alone, for example to solve industrial relations, increase the service on some lines, fund accessibility improvements to some stations and progress the reopening of new lines or stations.

The issue is that a lot of new stock has just been purchased which has potentially a 40 year life and the industry cannot afford to continue to haemorrhage what will soon be billions to the ROSCOs every year for that length of time. Only through significant growth of a state owned operator with direct rolling stock purchases could the market share of leasing be reduced by dilution, but this does nothing to recover the money lost to taxpayer subsidised profits.

It could be done, independent financial and industry analysts would have to undertake a thorough survey to assess the market value of each of the businesses and arrange for a way for the shares to be compulsorily purchased. There would likely be strong resistance from some shareholders as they have the interests of their investors to consider, in many cases involving money tied-up in pensions etc.

That’s one way of doing it, but would you want to nationalise the entire businesses, or merely the assets? You could enforce a ban on leased rolling stock from operating on the network, with a strict deadline, similar to Beeching’s steam ban, forcing the ROSCOs to forfeit their owned rolling stock to the new state railway. For much of it there would be no other route for disposal of no longer profitable, but very much usable assets available to the ROSCOs and of course their businesses and share prices would be destroyed, perhaps along with some questionable foreign pension schemes, but that wouldn’t be the railway’s problem.

ordinary investors

I’m afraid this is an oxymoron. On average only the top 25% of the population are wealthy enough to be able to own shares in privatised entities. If this is the case, then the 75% of the population who are not able to hold shares outnumber them 3:1 and are much more likely to be able to be described as “ordinary people” than shareholders or investors, but this figure might well be lower for the ROSCOs, due to a lack of awareness in them by the public when compared to the headline privatisations of British Gas, BT etc, the fact that the ROSCOs were originally established by consortiums of banks, who have since sold shares to corporate groups including foreign pension schemes, who simply have no right to be taking such vast sums of British taxpayer subsidy for their profits under the guise of rolling stock leasing and even upon the privatisation of BR, the main public facing campaign offering the purchase of railway shares was in Railtrack, not the ROSCOs.

 

[A0wen]

I’m afraid this is an oxymoron. On average only the top 25% of the population are wealthy enough to be able to own shares in privatised entities. If this is the case, then the 75% of the population who are not able to hold shares outnumber them 3:1 and are much more likely to be able to be described as “ordinary people” than shareholders or investors, but this figure might well be lower for the ROSCOs, due to a lack of awareness in them by the public when compared to the headline privatisations of British Gas, BT etc, the fact that the ROSCOs were originally established by consortiums of banks, who have since sold shares to corporate groups including foreign pension schemes, who simply have no right to be taking such vast sums of British taxpayer subsidy for their profits under the guise of rolling stock leasing and even upon the privatisation of BR, the main public facing campaign offering the purchase of railway shares was in Railtrack, not the ROSCOs.

Directly owning shares perhaps, but for anyone who works outside the state sector and has a "company pension" that pension scheme will own shares and therefore the value of both shares and pensions is inextricably linked.

Workplace pension participation rate is, according to the ONS, running at 79% - that's more than the "top 25%" of the population by a long way.

 

[RT4038]

100% of this £410 million lost in dividends could have been invested back into the industry this year alone, for example to solve industrial relations, increase the service on some lines, fund accessibility improvements to some stations and progress the reopening of new lines or stations.

It wouldn't be 100%, because a proportion of this dividend is the equivalent of interest payments on the capital used to purchase the rolling stock in the first place.

That’s one way of doing it, but would you want to nationalise the entire businesses, or merely the assets? You could enforce a ban on leased rolling stock from operating on the network, with a strict deadline, similar to Beeching’s steam ban, forcing the ROSCOs to forfeit their owned rolling stock to the new state railway. For much of it there would be no other route for disposal of no longer profitable, but very much usable assets available to the ROSCOs and of course their businesses and share prices would be destroyed, perhaps along with some questionable foreign pension schemes, but that wouldn’t be the railway’s problem.

Countries trying this sort of stunt soon find out that the International business community want nothing to do with them, and that raising finance becomes a lot more expensive. Not sure why you would think foreign pension schemes are questionable (aside from that they are foreign) and I'm not sure you would want other countries to think the same about British pension schemes spreading their risks by investing a proportion of their funds abroad.

 

[renegademaster]

single biggest method for the current industry to haemorrhage taxpayers money.

Its far from the biggest

 

[A0wen]

Countries trying this sort of stunt soon find out that the International business community want nothing to do with them, and that raising finance becomes a lot more expensive. Not sure why you would think foreign pension schemes are questionable (aside from that they are foreign) and I'm not sure you would want other countries to think the same about British pension schemes spreading their risks by investing a proportion of their funds abroad.

Good post @RT4038

There does seem to be a tendency - either deliberate or through lack of understanding - from many, seemingly on the left, to conflate 'private' with 'rich' - so if you own a 'private' house, you are 'rich', if you have a 'private' pension, you are 'rich', when the reality is such things are held by many people who aren't "rich". There is a similar insinuiation that 'overseas' or 'foreign' particularly with regard to financial things also means 'rich'.

and even upon the privatisation of BR, the main public facing campaign offering the purchase of railway shares was in Railtrack, not the ROSCOs.

There is a precedent for that - the National Bus Company subsidiaries weren't listed with a public facing campaign either, many of those went to Management Buy Outs led by their existing management.

To do a sale in the way British Gas, BP or even Railtrack was done, you need a large, national entity - whereas to create a competitive market in the case of the ROSCOs it was split into smaller units so there wasn't a single 'all dominant' player - had they been sold as a single entity, it would have been very difficult if not impossible for a new entrant to enter the market, whereas you now have 5 key players, 3 are the former BR units - Angel, Eversholt and Porterbrook and 2 new entrants in Rock and Beacon.

It's also unclear whether the public would have been "interested" in owning a company which owned some trains - the key with the BT, BPs et al, is they were all organisations people knew, understood and used.

 

[Mike Machin]

It wouldn't be 100%, because a proportion of this dividend is the equivalent of interest payments on the capital used to purchase the rolling stock in the first place.


Countries trying this sort of stunt soon find out that the International business community want nothing to do with them, and that raising finance becomes a lot more expensive. Not sure why you would think foreign pension schemes are questionable (aside from that they are foreign) and I'm not sure you would want other countries to think the same about British pension schemes spreading their risks by investing a proportion of their funds abroad.

You are absolutely right. What the railways need is real change, I would like to see all Inter-City type services entirely privatised and being operated on a totally 'open access' arrangement. A few rural services could be directly funded by central government if subsidies are needed, and regional public/private 'Transport Executive' organisations could be created to look after commuter services.

Railways should be run by the private railway industry and government intervention should only be necessary as a last resort. The market will always decide which services survive, imagine what a shambles it would be if there was a British Food Corporation or Network Food instead of Tesco, Sainsbury's, Waitrose, Aldi etc!

 

[Sad Sprinter]

What would be the rough Market Value of the "Big Four" if they were recreated today?