New figures show the reality of the Great British Rail Rip Off

Ahead of the government announcing rail reforms this week rail union RMT says that new figures show the reality of the Great British Rail Rip Off as a train owning company pays out a £46.5 million dividend funded by Government COVID–19 support.

Eversholt, one of the three Rolling Stock leasing companies who own more than 85% of trains running on Britain’s railways, paid their shareholders a dividend of £46.5 million for the year covering March 2020, to March 2021.

The government has guaranteed to pay all Eversholt’s lease charges under the bailout packages agreed with the industry and has done nothing to stop the Rolling Stock Leasing companies paying dividends during the pandemic.

Indeed, according to Eversholt’s most recent accounts, its Directors ‘do not believe that COVID-19 presents any material risks to the Group’ and say that ‘the key critical judgement in reaching this conclusion to be the UK Government’s continued support to the rail industry.’

Eversholt also crowed that problems with public financing and new fleets represented opportunities for even bigger profits, saying ‘pressure on public sector finances may play to our asset management strengths and existing fleet optimisation” and “Delays in competitor new build programmes has created lease opportunities for some of our existing fleets”.

RMT General Secretary Mick Lynch said:

“In the week when the government is set to announce the creation of Great British Railways its full steam ahead for the Great British rail rip off.

“Even as Ministers have been finalising their plans for rail reform, they have funded obscene pandemic profiteering by a company that owns a quarter of the country’s trains.

“While rail workers have risked and, in some cases, lost their lives keeping the country moving the Government have been keeping the gravy train moving for the rail fat cats.

“Profits up, fares up, services, jobs and pay cut – we can expect more of the same this week.”

1. Eversholt owns around 25% of the UK’s trains. Its accounts show that Eversholt enjoyed its pandemic year, noting that because of the government support, ‘the Directors do not believe that COVID-19 presents any material risks to the Group’, and the Directors duly paid the shareholders a dividend of £46.5 million, higher than the previous year’s £41 million payout. The group has paid out £171 million in dividends since 2017.[1]

2. In a recent Investors report, Eversholt also crowed that problems with public financing and new fleets represented opportunities for even bigger profits, saying ‘pressure on public sector finances may play to our asset management strengths and existing fleet optimisation” and “Delays in competitor new build programmes has created lease opportunities for some of our existing fleets”.

3. Questions in Parliament have revealed that the government’s bailouts of the Train Operating Companies – the Emergency Measures Agreements (EMAs) and Emergency Recovery Management Agreements (ERMAs) – included guarantees that the costs of rolling stock operating leases would be covered by the taxpayer.[2] 

4. The rolling stock companies appear to be revelling in their favoured position with government. An investors’ presentation by Eversholt lists all the supportive comments made by Rail Minister Chris Heaton Harris, including reassurance that the DfT will not be seeking to restrict dividend payments (figure 1). The same presentation also notes that the company stand to gain materially from the pressure on public finances as the government will be reluctant to step in to finance new trains, being forced instead to lease existing ones from the Roscos: “Pressure on public sector finances may play to our asset management strengths and existing fleet optimisation” (Slide 13)

5. While the government has said that it expects Train Operating Companies and Network Rail to implement a pay freeze for staff and cut costs from their operations, as well as seeking cuts from Network Rail, the rolling stock companies have been shielded from scrutiny. As industry magazine Modern Railways recently agreed, ‘it is worth noting that the rolling stock companies have not been approached by the Department for Transport to see if they could be more flexible about the terms of their ‘hell or high water’ lease contracts at a time of national crisis.’

6. The cost of these PFI-style leases has risen dramatically in the last 10 years from £1.4 billion in 2010/11 to £2.9 billion in 2019/20. Train companies used to devote around 13% of their spending to these leases but that figure is now 23%, almost a quarter. This is the fastest rising cost on the railway. 

7. As the ORR explained, these rising costs are the consequence of the operating leases charged on the new trains entering service in the last few years. In 2009 the Rolling Stock companies were investigated by the Competition Commission because of concerns at their monopolistic position and their ability to charge high lease costs. The ORR recently commented that nothing had materially changed in this market position since that time and the National Audit Office noted that rolling stock leases represent 'a significant fixed cost for operators'.

8. The rolling stock companies are still under measures supposedly designed to tackle their monopolistic position, as the ORR recently found that there had been no significant change since they were investigated by the Competition and Markets Authority in 2009. The cost of rolling stock leases has risen by 77% in the last 10 years to £2.9 billion in 2019/20, representing the fastest rising cost on the railways.