Err, Willy?

And this is unrelieved by any attempt to look for tax revenue to mitigate the impact, as every other country does and is advised to do. Instead, more asset disposals are proposed. The east coast mainline, generating £209m of surplus on £700m turnover, will be sold despite its fabulous returns to the taxpayer. The same will take place with EuroStar. To give up such great financial returns along with the benefits of ownership is daft. The new owners will demand even higher returns on their investment, with only enfeebled regulators left to protect “hard-working” people from being skinned. Ownership matters.

Err, you privatise the asset for the value of those future profits. You’re not giving anything up.

20 thoughts on “Err, Willy?”

  1. A £209m surplus on £700m turnover.

    Makes those “rip off” and “profiteering” energy companies look like charities.

  2. As David Moore notes, you really have to be suspicious of Willy and the like:

    For alongside the proposal to create a 1948-scale state is another highly toxic proposal, at least for any Lib Dem worth their salt: to introduce a cap of just over £100bn on welfare spending, excluding pensions and the jobseeker’s allowance.

    That must sound horrendous to the average guy on the Clapham Omnibus or Guardian reader, so I followed the link to find this:

    A welfare cap was first mooted in the summer Spending Review, but today Chancellor George Osborne revealed that the cap would be set by the chancellor of the day at the beginning of each Parliament.

    ‘If the cap is breached, they will have to explain why and hold a vote in this House,’ he said.

    ‘The principle is clear: the government has a responsibility to taxpayers to control their spending on welfare, and Parliament has a responsibility to the country to hold the government to account for it.’

    According to the Autumn Statement document, the cap will be set in nominal terms for each year over the five-year forecast horizon, but will not apply for the first year of the forecast, in order to allow the government time to implement policy changes to bring down spending if necessary.

    So he’s making Chancellor responsible for sticking to a commitment, note that the new Government makes its own commitment and has time to implement policies, and if they don’t they explain themselves to Parliament aka us, and Willy turns it in to something akin to doing away with the welfare state.

    I think the polite term is sophistry.

  3. Tim is spot on re “not giving up” the present value of expected future profits – although some people don’t believe in time discounting (‘what happens in the future is worth just as much as what happens now, not less!”) so wouldn’t accept the point. They would see such an asset as a cash cow, a veritable “family jewel”, never to be sold off. (Mind you I also have seen the formerly nationalised coal, steel and car industries as “family jewels”, though that comes from spending too much time on CIF.)

    Shinsei has it right too. There is an irregular verb in here somewhere:

    I generate fabulous returns for my investors.
    You keep the shareholders happy.
    They are profiteers.

  4. I am sure they will sell the Eurostar share, presumably the partners have a right to first refusal.
    Not sure about the East Coast line- is that not a lease operation or franchise as they call them and do not those franchises contribute revenue to government or have I got the whole rail privatisation wrong ?

  5. pilsden,

    I’m sure the resident rail expert, Thornavis, will be along soon to give us chapter and verse but IIRC there was a problem with ECL and it was taken back in to public control.

  6. Rub the ( signal ) lamp and I appear.

    I’m not an expert on franchising or much else really, I suspect john b knows more about it than me but yes there was a problem with the East Coast franchise, namely that it all fell apart and was given up early, the government took over and created a management contract to see it through to re franchising.

    As with anything to do with railway finances those figures that Hutton quotes are open to dispute but its true that ECR has been run pretty well since the last franchise ended. Beyond that I can’t really see what his point is, the railways are still in state hands and the real extra costs have been incurred in infrastructure and rolling stock rather than franchising, flawed though it is.

  7. A lot of the costs of rolling stock investment are because of the franchises. In order to make privatization look like it was yielding obvious results, there were a series of (mainly badly thought out) requirements placed on most of the franchisees to buy new rolling stock, even when rational industry analysis suggested that there was no needed for said new rolling stock.

    Thus for instance there was the daft insistence that all mk1 rolling stock must be replaced by 2000 (iirc). Some of the mk1 stock was knackered (anyone remember the North Wales Coast route’s motley collection of class 101 units), but a lot of it wasn’t – in London’s commuter belt, the replacement 3rd rail electric units have never equaled the miles per failure stats of the mk1 3rd rail fleet, even the figures from right at the bitter end when they had basically stopped maintaining them. Hundreds of units went for scrap that probably had 10-20 years of useful working life left in them.

    Now, we all got shiney new trains – all paid for by loans against future income. Why are we surprised that rail fares have rocketed up, compared to BR days when every bit of rolling stock was run (in less and less important roles) till it was properly worn out beyond economical repair. (See also the North Wales class 101 fleet – one of the last examples of that actually happening)

  8. the Prole

    All very true but part of the reason for the disappearance of Mk 1 stock was safety concerns. Not that those concerns were very real but there was an obsession with slam doors and the supposed risk of people falling or getting out onto the track. Much of that was due to stupidity but these days its apparently the duty of us all to prevent the stupid from harming themselves. Slam door stock also loads and empties more quickly than sliding door stock.

    Franchising in itself shouldn’t have meant increased costs of this kind. In BR days it was often said that we had an engineering led railway, the needs of the passenger being subordinate to the desire of railway professionals to run things their way. There was some justification for this view but we now live with the consequences of the politically led railway that replaced it. Politicians and civil servants mandate standards and the old railway operating and construction skills have been compromised or even lost altogether.

  9. @ Tjornavis
    The East Coast Main Line has NOT been run well since it was taken back under state management – it has generated over one-quarter of all passenger complaints for the whole network. Under National Express it had allegedly improved from one of the worst to one of the best.

  10. The issue wasn’t with franchises as a concept – that could have worked fine. The issue was/is political interference with the franchise process (e.g. by creating a ridiculous witch hunt over slam door stock), which IMHO was largely about giving an impression of “improvement”, by making everything shiney and new, rather than getting value for money.

    What was needed was to get some sensible businesses practice into the railway system, as well as professional rail engineering. What we actually achieved was to hand control to a dubious mixture of bus bandits and politicians, while losing most of the engineering nous that kept BR going.

  11. john77

    The East Coast Main Line was a failed franchise, it’s not much good being popular with your customers if you don’t have a viable business. Now it is more or less back on its feet and ready to be re franchised so if that is the right way to go we will soon know.
    Those complaints will have included ones from problems with the infrastructure, the East Coast Main Line has its fair share, perhaps more, of those, one of them being that the overhead electrification was constructed to a somewhat lower standard than usual at the time in order to get it done to schedule and to budget. Network Rail has also let standards of OHL maintenance slip, something that caused a bad accident on the Kings Lynn line – see my and the Prole’s comments about losing a grip on operations and construction.

  12. So Much for Subtlety

    One of the advantages of handing the railway network back to the private sector is that we do not have these sort of discussions. By taking it over, the government has made the state of cleanliness on the trains a matter of national interest.

    Bring back the old Four Railway companies. Apologise for stealing their property and mismanaging it for so long. Let them do what they like. Everyone has so many alternatives to rail these days that the market will force them into good behaviour.

    And we can get back to the important national issues. Like why Rod Little is a bastard for calling Mandela a nice old Black man.

  13. SMFS

    I take it you know the Big Four pre nationalisation companies only came about as a result of government diktat ? They were something of a dog’s breakfast, apart from the Southern which was perhaps the most successful of the four, the LNER may well have been trading whilst insolvent at one point.

  14. @ Thornavis
    The “failure” produced significant improvements in performance and passenger satisfaction despite Network Rail: are you claiming that state-owned Network Rail has selectively worsened its performance on the East Coast line while it was state-managed while improving its overall performance? Actually train frequency, speed and delays which are dependent upon Network Rail are three of the few areas where East Coast gets better satisfaction ratings than long distance as a whole. despite satisfaction ratings being lower overall for commuting, which is a minority of East coast’s passenger volume, East Coast managed to generate more than *six* times as many complaints as the average for the other 18 rail franchises.
    In the light of which shows that on punctuality/reliability which was the strongest single factor for customer satisfaction/dissatisfaction, it contributed more to satisfaction with East Coast than any other franchise (and less to dissatisfaction than Virgin), your attempt to suggest that the nationalised EC line is not really that bad because it is the fault of the nationalised Network Rail is stretching credulity past breaking point.

  15. You’re doing your favourite trick of taking something another commenter said, reading your own interpretation into it and then going off on one.

    ” are you claiming that state-owned Network Rail has selectively worsened its performance on the East Coast line while it was state-managed while improving its overall performance? ”

    I said no such thing I just pointed out that some complaints will have their origins in infrastructure faults and that OHL maintenance had not been up to scratch. If you don’t believe me take a look at the RAIB report on the Littleport accident.

    “your attempt to suggest that the nationalised EC line is not really that bad because it is the fault of the nationalised Network Rail is stretching credulity past breaking point.”

    Again I said no such thing, you are just making stuff up.

    I’m afraid you can’t get round the fact that the East Coast franchise failed and it was necessary to take it back under direct operation, a similar thing happened to South East Trains, this was always recognised as something that might happen. I don’t doubt that there are good reasons for complaint about ECR as it stands but that’s not too surprising in the circumstances. As I said now it will be re franchised and we will see what the new franchise holder can do with it.

  16. If John77, or anyone else, is still reading here’s another example of NR failure on the ECML.

    I have a friend who works in one of the signalling centres on that route, he tells me that the planning processes for engineering work are in chaos. Signallers are having to rearrange engineering possession details as they are often completely wrong, something that is potentially dangerous as well as inefficient. They are not really supposed to do this as any request for a work arrangement that does not correspond with the pre planned published details should be refused. So in order to get jobs done and keep the railway working they are having to bend the rules, something that can get you into severe trouble these days if anything goes wrong. I know from my own experience before retirement that NR planning was inadequate it seems to have got worse.

    Some of this is having an effect on train performance on the East Coast and resulting in more complaints from the public. Which is not to say that it is the only or probably the major cause of complaint, just another factor and something which is true of the railway as a whole not just the directly operated bit. Neither Hutton and the other re nationalisers or the partisans for privatisation want to accept the reality of this sort of disfunction, which is why we are where we are.

  17. @: Thornavis
    I have no trouble accepting that National Express’s management got their bid for East Coast horribly wrong and duly got sacked after costing NE more than £100m.
    What I cannot accept are blatant lies by Hutton et al that the renationalised franchisee is a success.
    If you do not want to be grouped alongside Hutton don’t post comments from which any unbriefed reader would assume that it is all or mostly Network Rail’s fault. Try reading what you said: ” ECR has been run pretty well since the last franchise ended”. When I refuted that your next post only mentioned external problems caused by Network Rail – none about its appalling service standards. I am *not* making that up.
    “It is not too surprising under the circumstances” – only if you expect performance to slump from best of class to worst of class. If you are not suggesting that Network Rail has been discriminating against its nationalised franchisee why do you not find it surprising?
    East Coast’s worst score is on toilets – nothing to do with Network Rail.

  18. john77

    I don’t think there’s any point in continuing this. In effect you are accusing me of lying based on your refusal to read what I have written and then claiming your own wildly inaccurate interpretation of it is the truth. You’ve done this before and I just gets pointless trying to correct you.

  19. @ Thornavis
    I am not accusing you of lying – I am accusing you of being thoughtless or negligent in making statements that the average reader must be expected to interpret in a fashion that you as “the resident rail expert” should know to be wrong.

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