Minister confirms that the public pay for railway profiteering

Minister confirms that the public pay for railway profiteering

5 October 2020

RMT Press Office:

Minister confirms you are paying for profiteering on the railways as train owning company pours £80 million into speculators’ pockets.

RAIL UNION RMT has renewed the call to end the great rail rip-off after it revealed that the government has confirmed that the taxpayer will continue to ‘pick up the tab’ for profiteering on the ownership of trains on Britain’s railways.

In the same week that one of the three companies who own 87% of Britain’s trains announced that it had paid £80 million to its shareholders overseas – enough to pay for more than 400 new vehicles - the Rail Minister Chris Heaton Harris confirmed that the UK taxpayer will be footing the bill in full as he made clear that the government will carry on paying the rising costs of leasing trains through PFI-style contracts.

RMT General Secretary Mick Cash said;

“This shows it’s one rule for the government’s big business mates and one rule for keyworkers and the taxpaying public.

“These new agreements are rigged to keep the profits flowing at the expense of taxpayers, even as companies all over the network start to attack jobs, pay and conditions for workers.

“The government should put a stop to this fat cat feeding frenzy now and nationalise our railways.”

ENDS.

 

Notes for editors:
 
On 23rd September, Labour MP Grahame Morris asked the Department for Transport whether it planned to continue to cover the cost of rolling stock company contracts under the new Emergency Recovery Management Agreements.
On 1st October, Rail Minister Chris Heaton Harris confirmed that the government’s agreements meant the taxpayer paying the rolling stock companies for leasing their trains:

“The Emergency Recovery Measures Agreement (ERMA) arrangements cover the operators’ costs including the costs of rolling stock contracts for the duration of the ERMAs.”

The cost of leasing rolling stock from the ROSCOs has been rising in absolute terms and as a proportion of what Train Operating Companies spend. Last year it rose to a record high of 17% of train operating company costs, the fastest rising cost on the railways.
 
(See RMT’s report ‘Picking up the tab for trains: how the public is funding profiteering in railway rolling stock’ (RMT, July 2020). 
 
Table 2: Rolling stock charges as a percentage of spending
Rolling stock charges as a percentage of expenditure (£m)
2013/14
2014/15
2015/16
2016/17
2017/18
2018/19
TOC expenditure
10143
10237
12105
12574
12857
14448
Rolling stock charges
1269
1329
1419
1816
1990
2450
Rolling stock as a % of spending
13%
13%
12%
14%
15%
17%
 
The leases work in a similar way to PFI’s. The government sets the requirement to build new trains, the ROSCOs raise money to buy them from train manufacturers and then the operating companies lease them back. RMT argued that under the old franchising system, the rising costs of these leases accounted for the growth in subsidies paid to Train Operating Companies. Now, under the ERMAs, the cost of these trains is being directly covered by the taxpayer. 
 
Academic research has shown that the ROSCOs are able to keep their lease costs high because the three companies effectively monopolise the market. Between them, they own 87% of the vehicles on the railways. Because of this, the public is likely to be paying the ROSCOs for years after the real cost of the trains has been paid off. 
 
For more details see RMT’s report ‘Picking up the tab for trains: how the public is funding profiteering in railway rolling stock’ (RMT, July 2020).
 
In the same week, one of the ROSCOs, Porterbrook, filed its annual accounts showing that made a profit of £81 million in 2019 and paid its shareholders £80 million in dividends. That’s enough to pay for more than 400 new vehicles on our railways. (Capital costs for vehicles have been calculated using the figures in the Long-Term Passenger Rolling Stock Strategy, which state that the 7187 new vehicles being introduced in CPs 5 and 6 will have a capital cost of £13.8 billion. 
(See p. 28. Long-Term Passenger Rolling Stock Strategy for the Rail Industry, Sixth Edition, March 2018, p. 28.)

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Tagged with: ROSCO, Rail Nationalisation, Profiteering, PFI