The Northern Rail subsidy myth

[LNW-GW Joint]

Are you *absolutely sure* LM does not receive a PTE subsidy from Centro?
Neil

Well, as you can see from the two reports, there is no figure for Centro or LM.
Does Centro "pay extra" for any services above the franchise agreement?

 

[Bletchleyite]

Well, as you can see from the two reports, there is no figure for Centro or LM.
Does Centro "pay extra" for any services above the franchise agreement?

I don't know, but I suspect all the PTEs work the same way. They appear to have simply ignored LM/Centro; this might well be because you're right and it weakens their argument, but not necessarily.

Neil

 

[Greybeard33]

These are the two sets of stats (ORR and DfT) for 2013/14.
In the DfT stats the net Northern figure is 12.5 p/mile, which equates to the ORR figure of 7.79 p/km.
http://orr.gov.uk/__data/assets/pdf_file/0007/14497/rail-finance-statistical-release-2013-14.pdf
https://www.gov.uk/government/publications/rail-subsidy-per-passenger-mile

On a pence per mile basis (in the DfT document), the Northern PTE grant is 13.3, and the network grant is 25.7.
That's how you get to 51.5 pence per passenger mile.
So the PTEs pay Northern more than DfT does in subsidy, and the network grant doubles both those figures.

What's more these figures are going up by about 10% a year, so the Northern problem is getting worse.

It is interesting to delve further into these figures. The total subsidy of 51.5p PPM was actually a fall of 3% from the previous year, due to a 12% reduction in the Network Grant PPM apportioned to Northern. So that part of the "Northern problem" is not getting worse. The direct DfT subsidy PPM to Northern, net of revenue share, increased by 9% year on year, from 11.5p to 12.5p, while the PTE subsidy PPM increased by 7%, from 12.4p to 13.3p.

The PTE grant, like the others, is divided by Northern's total annual route miles to get the PPM figure, whereas this grant is really just for the route miles within the PTE areas. I do not know what proportion of Northern's route mileage is in the PTE areas, but these figures suggest that the "Northern problem" may be mainly a problem of the suburban services, rather than, as some have suggested, the far-flung rural services. If so, the high subsidy levels might be due more to low revenue yield (low fares and ticketless travel) than to high operating costs.

Greater Manchester alone absorbed 39% of the PTE grant. Yet Manchester Metrolink, operating on similar routes to Northern's Manchester suburban services, achieved an operating surplus. This seems to me to indicate that investment in improved infrastructure and rolling stock is the way to turn things around.

 

[Clarence Yard]

The change in subsidy to or premium paid by an operator year on year is partly dependent on the change in the FTAC for that year. As it is a balancing subsidy to NR to satisfy its budget requirement, it varies year on year and, of course, Network Grant isn't a constant figure either.

FTAC and Network Grant are two sides to the same coin by which NR receives income from Government. One is direct funding and, as I said before, one is laundered through the TOCs. Both are "allocated" by the DfT to TOCs in a fairly arbitrary way and it is well understood within the industry that this apportionment bears but a passing resemblance to the actual costs involved in renewing or maintaining that TOCs part or proportion of the network.

The industry (at RDG level) is actually trying to work towards a better system of recording and allocating costs which, in turn, should lead to a simpler & more transparent charging system and much better information for decision makers.

Personally I wish the DfT would quietly shelve that set of subsidy figures and acknowledge that there is more work to do in this area.

 

[yorksrob]

Personally I wish the DfT would quietly shelve that set of subsidy figures and acknowledge that there is more work to do in this area.

Alas, it won't do because the figures suit their agenda to make Northern rail travellers the whipping boys in terms of fare increases and potentially cuts.

 

[northwichcat]

Greater Manchester alone absorbed 39% of the PTE grant. Yet Manchester Metrolink, operating on similar routes to Northern's Manchester suburban services, achieved an operating surplus. This seems to me to indicate that investment in improved infrastructure and rolling stock is the way to turn things around.

Metrolink has received many grants for the initial set-up of lines and if the grants had instead been loans then Metrolink would not be profitable.

However, the same sort of situation applies for NR. The £800 million for St Pancras redevelopment wasn't billed to FCC and EMT.

 

[The Ham]

It is interesting to delve further into these figures. The total subsidy of 51.5p PPM was actually a fall of 3% from the previous year, due to a 12% reduction in the Network Grant PPM apportioned to Northern. So that part of the "Northern problem" is not getting worse. The direct DfT subsidy PPM to Northern, net of revenue share, increased by 9% year on year, from 11.5p to 12.5p, while the PTE subsidy PPM increased by 7%, from 12.4p to 13.3p.

A fall in subsidy of 3% due to a 12% fall in network grant apportioned to Northern (where the network grant cost makes up a significant proportion of the over all cost) would appear to me that the "Northern Problem" overall is getting worse.

As if the running the trains (i.e. ignoring the network grant) was as "profitable" as it was the previous year then the overall reduction should have been closer to 6% (as the network grant element is about 1/2 of the overall subsidy).

 

[kieron]

Well, as you can see from the two reports, there is no figure for Centro or LM.
Does Centro "pay extra" for any services above the franchise agreement?

They pay extra for services to run, and these are included in the franchise agreement because of this. As an example, Centro fund half of the Birmingham-Rugeley trains, with the DfT funding the other half. In other parts of the country, other local authorities fund services. For example, Devon County Council funding the Okehampton FGW trains.

It would be interesting to know why none of these are included in the figures.

 

[Bletchleyite]

It would be interesting to know why none of these are included in the figures.

I'd imagine simple omission, given that they are interested in Northern and not really LM.

Neil

 

[kieron]

I'd imagine simple omission, given that they are interested in Northern and not really LM.

Shouldn't the DfT be more impartial than than?

 

[Bletchleyite]

Shouldn't the DfT be more impartial than than?

Aha, I meant the PDF which was not by the DfT.

If you view the DfT's figures they show PTE grant to LM as zero, which must be wrong.

Neil

 

[LNW-GW Joint]

They pay extra for services to run, and these are included in the franchise agreement because of this. As an example, Centro fund half of the Birmingham-Rugeley trains, with the DfT funding the other half. In other parts of the country, other local authorities fund services. For example, Devon County Council funding the Okehampton FGW trains.

It would be interesting to know why none of these are included in the figures.

My understanding of the situation in the south west is that the various local authority deals applying to FGW additional services were all wrapped up into the new direct award.
Hence a reduction in the net premium expected from FGW.

I've not seen anything similar about Centro and LM.

 

[kieron]

My understanding of the situation in the south west is that the various local authority deals applying to FGW additional services were all wrapped up into the new direct award.
Hence a reduction in the net premium expected from FGW.

Three of the "priced options" in the October 2013 contract are only listed as "not used", so I suppose those are the ones which were taken over by the DfT then. There are still another 6 left in Schedule 3 Part 2, although I haven't looked to see if they're all in operation.

 

[AM9]

However, the same sort of situation applies for NR. The £800 million for St Pancras redevelopment wasn't billed to FCC and EMT.

The remodelling of St Pancras was all about Eurostar and HS1 for domestic services. The changes didn't do much for EMT or FCC so why should they be billed for it. In fact the MML TOC arguably has less operating space compared with the old St Pancras station. All FCC got out of it was the 12-car platforms instead of the old 8-car station. They didn't have enough stock to run all the peak services as 8-car, let alone sidings full of 12-car trains ready to run.
The programme to make most Thameslink stations 12-car long was separate.

 

[northwichcat]

The remodelling of St Pancras was all about Eurostar and HS1 for domestic services. The changes didn't do much for EMT or FCC so why should they be billed for it. In fact the MML TOC arguably has less operating space compared with the old St Pancras station. All FCC got out of it was the 12-car platforms instead of the old 8-car station. They didn't have enough stock to run all the peak services as 8-car, let alone sidings full of 12-car trains ready to run.
The programme to make most Thameslink stations 12-car long was separate.

If the changes didn't do much for EMT or FCC then perhaps we need this standard of interior at all mainline stations across the country:
http://www.nationalrail.co.uk/SME/html/NRE_STP/images/photos/800/o3114-0211435.jpg
http://www.nationalrail.co.uk/SME/html/NRE_STP/images/photos/800/o3114-0211628.jpg
http://www.nationalrail.co.uk/SME/html/NRE_STP/images/photos/800/o3114-0211465.jpg
http://www.nationalrail.co.uk/SME/html/NRE_STP/images/photos/800/o3114-0213714.jpg

It obviously wouldn't cost much would it? :roll:

Anyway the point I was making was claiming Metrolink is profitable doesn't allow for all the infrastructure work being paid for and the same situation applies for National Rail TOCs.

 

[Xenophon PCDGS]

My understanding of the situation in the south west is that the various local authority deals applying to FGW additional services were all wrapped up into the new direct award. Hence a reduction in the net premium expected from FGW.

I've not seen anything similar about Centro and LM.

It is at times in a posting debate like this that I dearly wish that some of our more thoughtful forum members could be asked to address any Transport Select Enquiry with explanations....or better still, to actually be on the panel and able to subject senior figures of certain reticent bodies to detailed questioning.