None of that applies in the railways though. Partly because there's no incentive to be innovative and partly because the checks and balances in the franchise agreements mean there's no opportunity to be innovative.
Yes. And I think there you've hit on the real problem. The franchise system itself prevents many of the benefits of having competition and private enterprise. Of course, that doesn't by itself mean the solution is nationalisation. Maybe it is, but it's equally possible that it would be more beneficial to keep private companies while replacing the franchise system with something else.
There isn't any innovation and there is precious little evidence of any investment either. £1.2bn last year, after nearly ten years of an annual investment of £500m or less. And that includes investment from the ROSCOs, who really do put their own cash down upfront and could take a hit if they get it wrong, as the 707s show.
I think you're being a bit too restrictive of your definition of investment. For the purposes of justifying a reasonable profit, investment is anything the companies put in. That would include, for example, all the work that goes into planning the timetable, any upfront payments made to the DfT, the cost of preparing a franchise bid etc.
It's all well and good glibly stating that it's "only" 3% of passenger revenue going in profits (also note that it isn't- that 3% is profit to the TOCs, it doesn't include profits to the ROSCOs), but if those profits are going to people who do nowt and contribute nowt, then what's the point?
But as I've pointed out, these companies are not doing 'nowt'. They are running trains, and - in the case of ROSCOs - getting them designed and commissioned. You could argue that that is work that the Government could have done itself, had the Government so chosen, but you can't reasonably argue that work is 'nowt'.
Besides, where do you draw the line when it comes to protesting about profits? Even if you didn't have ROSCOs, you'd still have the companies that build the trains making a profit. All the outside contractors who come in to do any work on the railways make a profit. The companies that rail replacement buses get hired from in times of disruption make a profit. The companies that supply the card that tickets are printed on must presumably make a profit, as will the companies that supply all the computers the rail network uses. I would imagine that even whatever company built the piano that is sitting for people to play in my local station made a profit from selling it. For all of those, you could say, 'well, it'd be cheaper if the Government did it and then noone needs to make a profit'. So why don't you? What is it about the rail companies and the ROSCOs that is makes it so uniquely objectionable in your mind when they make a profit, when you don't appear to object to most other companies making profits?
Cap-and-collar made the risk a fallacy. And although cap-and-collar has gone- of a fashion- there still simply isn't the risk. Those that have lost money have done so through their own hubris, no other reason, no matter how much they try and blame tomorrow's infrastructure delays for today's losses.
I agree the risk is much reduced under more recent franchise agreements.
But I would disagree your using "Those that have lost money have done so through their own hubris" as an argument. Private companies make profits partly in reward for accepting risk.
All risk - including any risk that is the fault of their own overconfidence or any miscalculations they make about the market. You don't get to just arbitrarily eliminate some sources of risk, and claim that that risk shouldn't count because of whose fault it is.
