Renationalisation of the TOCs is at the heart of the government’s strategy for rail – but what about the far more lucrative ROSCOs?
One mystery of the new Labour government’s rail policy is why it seems so uninterested in rolling stock issues.
Public control has been the driving force of their approach. They are determined that the private sector operators of passenger services need to be removed, at the very least when their contract periods expire or even earlier, if the government can find an excuse to do so.
According to Baroness Blake of Leeds, the Labour peer who is steering the Passenger Railway Services (Public Ownership) Bill through the House of Lords, “public ownership will allow us to end the failed franchising system which has inflicted misery on passengers through delays, overcrowding and poor service”.
This is despite a more sensible model being available – having the state determine the service levels, fares, and even the colour of the trains but having the private sector run the operation on a day-to-day basis. This model, after all, has been proven to work on London Overground, where the trains are run by Arriva, and on London’s buses.
But that battle has been lost, and I note that Rail Partners, the trade body for the TOCs, is being wound up. This is not a great result.
The determined elimination of the TOCs (other than from open access) smacks of dogma, to be honest, and a bone thrown to the rail unions. So why so little clamour even from them to renationalise the rolling stock leasing companies (ROSCOs)?
Baroness Blake again: “This bill will ensure that trains are run for the benefit of the British public, not for the profits of shareholders around the world.” Unless of course they are rolling stock companies.
The uncomfortable fact that Labour is desperate not to notice is that the amount of money disappearing into profits and dividends at the ROSCOs dwarfs what the TOCs have been making
The uncomfortable fact that Labour is desperate not to notice is that the amount of money disappearing into profits and dividends at the ROSCOs dwarfs what the TOCs have been making, and about which the unions loudly complain. In 2022/23, ROSCO profits tripled from £122.3m to £409.7m, and their net profit margins increased from 14.3% to 41.6%. Over the last decade, they have paid out around £2bn in dividends, with an average annual payment of around £260m. Their directors are paid roughly twice as much as the handsomely rewarded chief executive of Network Rail, over £1m a year in at least one case. £3.1bn was spent by the TOCs on leasing trains in 2023, 26% of their overall expenditure.
Three big companies own 87% of the country’s rolling stock – Angel Trains, Eversholt, and Porterbrook. And while fares rise inexorably for passengers, and trains run all too often with short formations, billions have disappeared into the Canadian pension funds behind the ROSCOs. Still, when you pay over the odds for your next train ticket, you can take some comfort from knowing that you are helping Canadian pensioners.
I strongly suspect the main reason the ROSCOs are being left untouched is a financial one. While the TOCs can disappear one by one as their contracts expire, and so on paper free of cost to the government, there would be a huge bill to buy out the ROSCOs, and that wouldn’t get past first base at the Treasury.
Yet if the government is serious, as I believe it is, about delivering a coherent railway network with some sensible joined up central planning, it cannot simply leave the ROSCOs on one side. Naturally, they will take decisions in the interests of their shareholders rather the great British public, and there is no guarantee that what is good for one is good for the other.
The clear compromise is to create a rolling stock strategy that sets out in detail what the government wants and over what timescale
The clear compromise is to create a rolling stock strategy that sets out in detail what the government wants and over what timescale, and gets the ROSCOs to deliver the necessary vehicles.
It is astonishing, frankly, that we do not have such a strategy, though the lumbering giant that is GBRTT seems to have working on one for years since its inception without very much to show for it.
But how can the government sensibly decide, for example, on electrification schemes without tying this closely in to the provision of appropriate rolling stock?
This shockingly obvious failure leads to some crazy and unwelcome consequences. One is that electric rolling stock is not simply sitting in sidings with nowhere to go – it is – but in some cases is actively being cut up to eliminate storage costs. So the perfectly serviceable Heathrow Connect trains have all been cut up, though barely 20 years old. This is criminal. Meanwhile, clapped-out 40-year-old diesel trains trundle across the network each day, polluting as they go. Climate change, anyone?
Trains can and do remain useable for 40 years, which means any new trains introduced today could still be in use in 2065, long after the government’s net zero target of 2050. It is hardly surprising therefore that no ROSCO is ordering any new diesel trains, though presumably there may be a requirement for some on East-West rail given the previous government’s stupid decision not to electrify this from the start.
But with the electrification programme scaled right back by the chancellor and battery technology not yet there, the existing 40-year-old diesels might still be with us well into the next decade and beyond.
What is the government’s plan to get a grip on all this? Judging by parliamentary answers, they don’t have one. Last week Baroness Randerson asked the rail minister, Peter Hendy, “how many electric trains are being held by rolling stock companies and have not been released to train operators; and how many electric trains have been scrapped in the last five years”. He replied: “The Department does not track how many electric trains are with rolling stock operators but not leased to train operators… It is a matter for rolling stock owners to determine the future use of any fleets returned by passenger train operators”.
It seems the Department doesn’t even know the position, let alone direct it. Why don’t they find out? Or perhaps they don’t want to be told about the number of electric vehicles being scrapped. It is just too embarrassing.
At the moment, in the absence of a proper rolling stock strategy, the ROSCOs have to second guess what will be needed so inevitably will err on the side of caution
At the moment, in the absence of a proper rolling stock strategy, the ROSCOs have to second guess what will be needed so inevitably will err on the side of caution. After all, the network needs the requisite number of carriages and will have to take what is available, like it or not. And if there is a shortage of rolling stock, well that can help push the leasing price up.
And by the by, there also needs to be much greater consideration to what passengers want in terms of the interior of the trains, by the Department for Transport, the ROSCOs, and GBR eventually. Louise Haigh, as the passenger-in-chief, will know that passengers want reasonably comfortable seats, especially on other than short journeys, and seats with windows rather than walls next to them.
As I write this, I am recovering from travelling on a Thameslink train from the south coast to Cambridge, having been bolt upright against an ironing board for the two plus hours of the journey. Who on earth thought these ghastly seats were a good idea?
ABOUT THE AUTHOR: Norman Baker served as transport minister from May 2010 until October 2013. He was Lib Dem MP for Lewes between 1997 and 2015.
This story appears inside the latest issue of Passenger Transport.
ROSCOs are rolling in it – so why not act?
by Passenger Transport on Nov 29, 2024 • 2:53 pm No CommentsRenationalisation of the TOCs is at the heart of the government’s strategy for rail – but what about the far more lucrative ROSCOs?
One mystery of the new Labour government’s rail policy is why it seems so uninterested in rolling stock issues.
Public control has been the driving force of their approach. They are determined that the private sector operators of passenger services need to be removed, at the very least when their contract periods expire or even earlier, if the government can find an excuse to do so.
According to Baroness Blake of Leeds, the Labour peer who is steering the Passenger Railway Services (Public Ownership) Bill through the House of Lords, “public ownership will allow us to end the failed franchising system which has inflicted misery on passengers through delays, overcrowding and poor service”.
This is despite a more sensible model being available – having the state determine the service levels, fares, and even the colour of the trains but having the private sector run the operation on a day-to-day basis. This model, after all, has been proven to work on London Overground, where the trains are run by Arriva, and on London’s buses.
But that battle has been lost, and I note that Rail Partners, the trade body for the TOCs, is being wound up. This is not a great result.
The determined elimination of the TOCs (other than from open access) smacks of dogma, to be honest, and a bone thrown to the rail unions. So why so little clamour even from them to renationalise the rolling stock leasing companies (ROSCOs)?
Baroness Blake again: “This bill will ensure that trains are run for the benefit of the British public, not for the profits of shareholders around the world.” Unless of course they are rolling stock companies.
The uncomfortable fact that Labour is desperate not to notice is that the amount of money disappearing into profits and dividends at the ROSCOs dwarfs what the TOCs have been making, and about which the unions loudly complain. In 2022/23, ROSCO profits tripled from £122.3m to £409.7m, and their net profit margins increased from 14.3% to 41.6%. Over the last decade, they have paid out around £2bn in dividends, with an average annual payment of around £260m. Their directors are paid roughly twice as much as the handsomely rewarded chief executive of Network Rail, over £1m a year in at least one case. £3.1bn was spent by the TOCs on leasing trains in 2023, 26% of their overall expenditure.
Three big companies own 87% of the country’s rolling stock – Angel Trains, Eversholt, and Porterbrook. And while fares rise inexorably for passengers, and trains run all too often with short formations, billions have disappeared into the Canadian pension funds behind the ROSCOs. Still, when you pay over the odds for your next train ticket, you can take some comfort from knowing that you are helping Canadian pensioners.
I strongly suspect the main reason the ROSCOs are being left untouched is a financial one. While the TOCs can disappear one by one as their contracts expire, and so on paper free of cost to the government, there would be a huge bill to buy out the ROSCOs, and that wouldn’t get past first base at the Treasury.
Yet if the government is serious, as I believe it is, about delivering a coherent railway network with some sensible joined up central planning, it cannot simply leave the ROSCOs on one side. Naturally, they will take decisions in the interests of their shareholders rather the great British public, and there is no guarantee that what is good for one is good for the other.
The clear compromise is to create a rolling stock strategy that sets out in detail what the government wants and over what timescale, and gets the ROSCOs to deliver the necessary vehicles.
It is astonishing, frankly, that we do not have such a strategy, though the lumbering giant that is GBRTT seems to have working on one for years since its inception without very much to show for it.
But how can the government sensibly decide, for example, on electrification schemes without tying this closely in to the provision of appropriate rolling stock?
This shockingly obvious failure leads to some crazy and unwelcome consequences. One is that electric rolling stock is not simply sitting in sidings with nowhere to go – it is – but in some cases is actively being cut up to eliminate storage costs. So the perfectly serviceable Heathrow Connect trains have all been cut up, though barely 20 years old. This is criminal. Meanwhile, clapped-out 40-year-old diesel trains trundle across the network each day, polluting as they go. Climate change, anyone?
Trains can and do remain useable for 40 years, which means any new trains introduced today could still be in use in 2065, long after the government’s net zero target of 2050. It is hardly surprising therefore that no ROSCO is ordering any new diesel trains, though presumably there may be a requirement for some on East-West rail given the previous government’s stupid decision not to electrify this from the start.
But with the electrification programme scaled right back by the chancellor and battery technology not yet there, the existing 40-year-old diesels might still be with us well into the next decade and beyond.
What is the government’s plan to get a grip on all this? Judging by parliamentary answers, they don’t have one. Last week Baroness Randerson asked the rail minister, Peter Hendy, “how many electric trains are being held by rolling stock companies and have not been released to train operators; and how many electric trains have been scrapped in the last five years”. He replied: “The Department does not track how many electric trains are with rolling stock operators but not leased to train operators… It is a matter for rolling stock owners to determine the future use of any fleets returned by passenger train operators”.
It seems the Department doesn’t even know the position, let alone direct it. Why don’t they find out? Or perhaps they don’t want to be told about the number of electric vehicles being scrapped. It is just too embarrassing.
At the moment, in the absence of a proper rolling stock strategy, the ROSCOs have to second guess what will be needed so inevitably will err on the side of caution. After all, the network needs the requisite number of carriages and will have to take what is available, like it or not. And if there is a shortage of rolling stock, well that can help push the leasing price up.
And by the by, there also needs to be much greater consideration to what passengers want in terms of the interior of the trains, by the Department for Transport, the ROSCOs, and GBR eventually. Louise Haigh, as the passenger-in-chief, will know that passengers want reasonably comfortable seats, especially on other than short journeys, and seats with windows rather than walls next to them.
As I write this, I am recovering from travelling on a Thameslink train from the south coast to Cambridge, having been bolt upright against an ironing board for the two plus hours of the journey. Who on earth thought these ghastly seats were a good idea?
ABOUT THE AUTHOR: Norman Baker served as transport minister from May 2010 until October 2013. He was Lib Dem MP for Lewes between 1997 and 2015.
This story appears inside the latest issue of Passenger Transport.
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