RMT research reveals extent of Scottish rail companies Covid profiteering

RMT research reveals extent of Scottish rail companies Covid profiteering

10 November 2020

RMT Press Office:

New research from RMT reveals that the private rail companies in Scotland set to make over £28 million in profit under Covid-19 Emergency Agreements, equivalent to up to a 7.4% fares cut.

RAIL UNION RMT has released new research that shows private Train Operating Companies and Rolling Stock Companies in Scotland are set to be handed in the region of £28 million in profit, under the ongoing Emergency Measures Agreements, which is equivalent to up to a 7.4% annual fares cut.

The figures have been revealed at the same time as Abellio Scotrail is denying dedicated rail workers a pay rise and the Serco Caledonian Sleeper is refusing to take action on staff fatigue.

Since March 2020, due to the massive fall in passenger numbers and revenue as result of Covid-19, both Abellio Scotrail and Serco Caledonian Sleeper have been operating via Emergency Measures Agreements (EMAs), under which the Scottish Government takes on all revenue risk and covers the costs of the franchise.

The Scottish Government has confirmed that the terms of the EMAs include the payment of a ‘management fee’ and that it is covering the costs of lease payments to Rolling Stock Companies who supply trains to Scotrail and the Caledonian Sleeper.

RMT’s analysis shows that by the time the current EMA period expires in January 2021, the private Train Operating Companies could stand to have made a profit of nearly £13 million, and the Rolling Stock Companies may have made more than £15 million. The union is calling for Scottish rail services to be taken into public ownership in January 2021 when these agreements expire.

The Scottish Government has not yet announced what will happen when the current EMA’s expire in January 2021. RMT has today written to the Scottish Government to call on it to follow the Welsh Government by taking its rail services into public ownership, something it is fully able to do under its existing powers. This would stop millions in public money being handed to the private profiteers and instead enable all money to be reinvested in Scotland’s railway.

In a letter to Transport Secretary Michael Matheson MSP, RMT General Secretary Mick Cash will say:

“With just two months to go until the current EMAs expire, I urge you to do the right thing for Scotland’s passengers and to commit to taking Scotland’s rail passenger services into public ownership in January 2021 and create an affordable, accessible, reliable and sustainable railway network for the whole of Scotland.”

Mick Cash said:

“We welcome the vital funding that has been forthcoming from the Scottish Government to keep Scotland’s railways going during Covid-19 but unbelievably part of this deal has meant that while passengers and rail workers have made huge sacrifices its business as usual for Scotland’s privatised rail companies who stand to make millions in profits. Instead the right course of action would be public ownership where every penny of emergency government funding should be invested in the railway.

“Our calculations show that public ownership could mean a fairer deal for passengers who could benefit from up to a 7.4 % fare cut. Ending the profiteering could also mean a fairer deal for rail workers who are currently being denied a pay rise despite their heroic efforts during Covid-19.

“As the Welsh Government has shown, it is well within the Scottish Government’s powers to take its rail services into public ownership. There can be no more excuses, in January 2021, when these agreements expire the Scottish Government must take Scotland’s passenger railway into public ownership.”

ENDS

Notes for editors
 
·          The Cabinet Secretary, Michael Matheson MSP, confirmed to the Rural Economy and Connectivity Committee on 2 September 2020, that the management fee for the initial six month EMA period was ‘capped at 2 per cent across the board’.
·          In response to parliamentary question S5W-31978, Michael Matheson confirmed the management fee for the period September 2020 to January 2021 is ‘capped at a maximum of 1.5%’. 
·          The latest Office of Rail and Road data, for 2018-19, states that the total cost base (total staff costs, fuel costs, rolling stock charges, corporation tax and other costs (including Network rail charges)) for the Scotrail franchise was £826 million and the Caledonian Sleeper franchise was £61 million. Neither franchise made any payments to the Scottish Government during this period. 
·          The table below shows estimated management fee for both operators, based upon them receiving the maximum management fee for each period: 
TOC Annual cost base 2018-19 (ORR*) 2% management fee 6 months 1.5% management fee 16 weeks  Total
Abellio Scotrail 
£826,000,000
£8,260,000
£3,812,000
£12,072,000
Serco Caledonian Sleeper
£61,000,000
£610,000
£281,500
£891,500
         
     
Total both franchises
£12,963,500

*ORR – UK rail industry financial information 2018-19
·          In response to parliamentary question S5W-32136, Michael Matheson MSP confirmed that:  ‘The global figure for all rolling stock costs during the EMA period until 20 September 2020 is £84.8m.’Based upon these rolling stock costs for six months, the annual rolling stock charges have been estimated as double this figure at £169.6m. 
·          Part of Scotrail’s fleet (Hitachi EMUs) are leased from Caledonian Rail Leasing Ltd, a special purpose vehicle owned by SMBC Leasing (UK) Ltd. The latest accounts for Caledonian Rail Leasing Ltd (Year to March 2020) show that it received income from lease payments of £16.7m and made a profit before tax of £1.9m. The remaining fleet are leased from the three ROSCOs (Porterbrook, Angel Trains and Eversholt). 
·          Serco Caledonian Sleeper’s carriages are leased from Caledonian Sleepers Rail Leasing Ltd, which is owned by Lombard North Central PLC. The latest accounts for Caledonian Sleepers Rail Leasing Ltd (year to September 2019) show that it received income from lease payments of £15.4m and made a profit before tax of £3.5m. 
·          In 2019, the UK’s three ROSCOS made a profit of £245m and the latest ORR data shows that rolling stock charges across Britain totalled £2.45 billion.  
 
ROSCO Year  Profit before tax Dividend
Porterbrook* Year ending December 2019
99,897,000
£80,000,000
Angel Trains** Year ending December 2019
£114,300,000
£105,000,000
Eversholt*** Year ending December 2019
£31,726,000
£41,550,000
  Total
£245,923,000
£226,550,000
       
* Porterbrook Holdings 1 Ltd, Annual Report and Financial Statements, year ended 31 December 2019
** Angel Trains Ltd, Annual Report and Financial Statements, year ended 31 December 2019
*** Eversholt UK Rails (Holding) Ltd (Security Group), Annual Report and Financial Statements, Year Ended December 2019
 
·          After accounting for leases paid to Caledonian Rail Leasing Ltd and Caledonian Sleepers Rail Leasing Ltd it can be estimated that rolling stock charges from Scotland account for 5.69% of Britain’s total rolling stock charges. Based upon this calculation, RMT has estimated that the same proportion (5.69%) of the ROSCO’s profits are generated from operations in Scotland. 
·          On this basis, for the EMA period from March 2020 – January 2021, RMT estimates that the rolling stock companies (including Caledonian Rail Leasing Ltd and Caledonian Sleepers Rail Leasing Ltd) stand to make £15.6m in profit from Scottish operations, funded from public money. 
·          Based on RMT’s calculations, the private rail operators and rolling stock companies stand to make £28.5m in profit between them during the EMA period until January 2021.
·          The latest ORR data [1] shows that passenger income from the Scotrail and Caledonian Sleeper franchises in 2018-19 was £383m. If the £28.5m in profits were instead passed onto passengers in the form of an across the board fares cut, this equates to a 7.4% annual fares cut.

[1] ORR – UK rail industry financial information 2018-19

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