Why does this current U.K. Government hate rail so much.

[Energy]

Not so sure about that - Remember which party cancelled the Channel Tunnel in 1974, after construction had started? It was not the Tories!

Labour have committed to HS2 in full (and have referenced the original Y). Also NPR but no one knows what "in full" means for that.

They may not fufill that promise but I'd be suprised if they cancelled HS2.

 

[bramling]

The Welfare spending is almost entirely on the elderly as pensions, housing benefit and the like. The alleged workshy are a rounding error - total unemployment benefits account for a low single digit percentage.

The problem is that so much expenditure is on things the vast majority think sacrosanct: health, education and pensions, that any savings have to come out of the rest of the budget which includes railways. There were warnings thirty years ago about the effect of an ageing population and we did nothing about it. We are where we are now because of that collective failure. We need to accept higher taxes, or far worse services

Don’t forget in-work benefits as well, these represent quite a significant outlay. Clearly pensions are always going to be protected, and rightly so, albeit I’m less convinced that pensioners should have been quite as insulated as they’ve been recently.

 

[43066]

Don’t forget in-work benefits as well, these represent quite a significant outlay. Clearly pensions are always going to be protected, and rightly so, albeit I’m less convinced that pensioners should have been quite as insulated as they’ve been recently.

Indeed. And of course these benefits, along with local authority housing, often subsidise lifestyles that would be unaffordable to those who make more responsible choices and don’t qualify for them. This issue is particularly acute in London and the Home Counties.

But it needs to be remembered who has been in power for the last decade and a half: the Tory government should never have allowed the welfare bill to grow as it has - yet another failure to chalk up!

 

[Tetchytyke]

Are you seriously saying the govt should own rolling stock outright? They would have to borrow way more to spend on purchasing. Leasing is more convenient, same principle why vehicle PCP accounts for 86% of new car purchases.

What’s the difference between buying a train and depreciating it over 30 years, and paying rental charges for 30 years?

Other than the latter being a lot more expensive, naturally.

PCP on new cars is popular because you only borrow the depreciation and not the full cost of the vehicle, so monthly payments are cheaper. But then if you want to keep it at the end of the term there’s a huge balloon payment. It works where there’s a relatively buoyant second-hand car market so PCP lenders know they’ll get a good price when they sell ex-PCP cars, and it works because it encourages those on PCPs to buy a new car every three years.

Where’s the buoyant second-hand market for UK-spec trains that ISN’T in the UK rail industry?

 

[zwk500]

Labour have committed to HS2 in full (and have referenced the original Y). Also NPR but no one knows what "in full" means for that.

Correction, Labour have said they're committed to HS2 in full. Labour also said a large amount of things in 1996/97 that ended up not happening or being watered down.

 

[yorksrob]

I’m glad there’s some objectivity here and not the simple ‘Labour and BR were all good, Tories and Railtrack all bad’ line.

Are you seriously saying the govt should own rolling stock outright? They would have to borrow way more to spend on purchasing. Leasing is more convenient, same principle why vehicle PCP accounts for 86% of new car purchases.


No government has been very pro car either - more road building has always been rejected on the fact it would increase congestion rather than ease it. They take the opposite view for railways - HS2 = more capacity. I think they are neither pro rail or pro car. Plus a lot of car policy is down to local councils anyway regarding road maintenance not the government in power.

If leasing trains is such a panacea, how come railway companies largely avoided it in the 150+ year run up to Privatisation ?

And then an asset that's a massive liability we couldn't shift sitting in sidings the public railway would be paying to maintain (directly or indirectly) as we had to get rid of it.

Don't get me wrong, there's pros and cons to both sides, but let's not kid ourselves that Leasing the trains is rinsing us dry.

If purchasing big equipment outright by credit was so much better, why do pretty much all large companies lease so much of their kit from printers to vehicle fleets to their offices?

See my above post. Surely railways owning their own stock has been the preferred method of operation for the majority of their history.

 

[Energy]

Correction, Labour have said they're committed to HS2 in full. Labour also said a large amount of things in 1996/97 that ended up not happening or being watered down.

Of course, though it makes it unlikely that they'll cancel the remaining bits.

The reaction to the Leeds cancellation from the media seems to be more disappointment rather than the dislike of HS2 which is in the Chilterns and Warwickshire area.

 

[RailWonderer]

If leasing trains is such a panacea, how come railway companies largely avoided it in the 150+ year run up to Privatisation ?

I would say that no government had the ingenuity to create the market, so it didn’t exist

 

[yorksrob]

Correction, Labour have said they're committed to HS2 in full. Labour also said a large amount of things in 1996/97 that ended up not happening or being watered down.

To be honest, if they committed to ending the chaos we've had to endure over the past year, and committed to running a service more like pre-covid (with some tweaks around genuine passenger requirements, rather than just an excuse for cuts) that would be a vote winner for me.

I would say that no government had the ingenuity to create the market, so it didn’t exist

That's one way to look at it I suppose !

 

[bramling]

Indeed. And of course these benefits, along with local authority housing, often subsidise lifestyles that would be unaffordable to those who make more responsible choices and don’t qualify for them. This issue is particularly acute in London and the Home Counties.

But it needs to be remembered who has been in power for the last decade and a half: the Tory government should never have allowed the welfare bill to grow as it has - yet another failure to chalk up!

This is of course the problem with having built up a fairly low-paying economy. Both political parties are equally responsible for this. With budgets now squeezed unsustainably, it’s a case of what’s easier to cut. As you say, start cutting in-work benefits and it will affect lifestyles people have become accustomed to which are beyond their self-sustaining means. Same with the way it’s now regarded as “bad” to raise interest rates. The railway is simply way down the queue compared to all this. Add in that the current crop of senior Conservative politicians seem to despise and look down upon the population, and here we are.

 

[zwk500]

If leasing trains is such a panacea, how come railway companies largely avoided it in the 150+ year run up to Privatisation ?

Because the economics of constructing your own trains and doing the whole thing in-house changed dramatically from the 1980s with Globalisation, the rise of East Asian manufacturing, and the rise of computing as a necessity.

 

[JonathanH]

What’s the difference between buying a train and depreciating it over 30 years, and paying rental charges for 30 years?

Having to provide the money up front is the big difference. The country can't now afford to do that within its fiscal scope.

Correction, Labour have said they're committed to HS2 in full. Labour also said a large amount of things in 1996/97 that ended up not happening or being watered down.

Yes, and there is a lot less money around this time. 1997 was an air for positivity. 2024 will just be a switch of caretakers.

 

[yorksrob]

Because the economics of constructing your own trains and doing the whole thing in-house changed dramatically from the 1980s with Globalisation, the rise of East Asian manufacturing, and the rise of computing as a necessity.

Except that most trains aren't built in East Asia anyway.

 

[zwk500]

Except that most trains aren't built in East Asia anyway.

The design and engineering skills that have grown in the region have fundamentally changed the economics. Hitachi built plenty of A-Trains for its own domestic market before pitching it to the UK.

 

[Bletchleyite]

The design and engineering skills that have grown in the region have fundamentally changed the economics. Hitachi built plenty of A-Trains for its own domestic market before pitching it to the UK.

Hitachi manufacture in Japan, which while it's in the east is economically more like the west.

If China got a significant inroad into European railway vehicles then that would be that effect.

 

[yorksrob]

The design and engineering skills that have grown in the region have fundamentally changed the economics. Hitachi built plenty of A-Trains for its own domestic market before pitching it to the UK.

Hitachi manufacture in Japan, which while it's in the east is economically more like the west.

If China got a significant inroad into European railway vehicles then that would be that effect.

I can't see even more dependance on Communist China being desirable at the moment.

 

[zwk500]

Hitachi manufacture in Japan, which while it's in the east is economically more like the west.

If China got a significant inroad into European railway vehicles then that would be that effect.

Hitachi are just one example - look at the shipping industry for how East Asia completely turned that market on it's head. Japan may be 'more like' the West but it does have important differences - not least the multi-industry conglomoreates. South Korea is a similar story although Samsung haven't yet got big in the rail market.

I can't see even more dependance on Communist China being desirable at the moment.

It won't be, but equally the cost savings will still be attractive. But China is much more interested in getting a dominant foothold in African markets for the moment.

 

[Tetchytyke]

Because the economics of constructing your own trains and doing the whole thing in-house changed dramatically from the 1980s with Globalisation, the rise of East Asian manufacturing, and the rise of computing as a necessity.

Really? I didn’t have CAF, Bomardier (the successor company to BREL) and Siemens down as East Asian.

But even buying from a specialist manufacturer, there’s no reason not to buy outright rather than tie yourself down into a 30-year lease agreement like we have done with Hitachi.

Having to provide the money up front is the big difference. The country can't now afford to do that within its fiscal scope.

Borrow it. Government borrowing is always cheaper than commercial borrowing. And from a balance sheet perspective nothing has changed- you’ve borrowed £100m for a train and you’ve got a £100m train on your asset inventory. No different to a mortgage in that respect.

If the country can afford to pay leasing costs, it can afford to pay borrowing costs. And borrowing costs will always end up cheaper than leasing costs- the government is paying cheaper interest rates and isn’t paying the ROSCO’s profit margin and risk margin.

In a similar sector with similar high-value long-life assets, there is a reason why Ryanair purchase their planes outright rather than leasing them. And there’s a reason why Ryanair are performing better than airlines who lease their fleet.

Labour, with PFI, proved long-term build-lease-and-maintain contracts always end up in disaster. So what do the Tories do for the railways?

 

[JonathanH]

Borrow it. Government borrowing is always cheaper than commercial borrowing. And from a balance sheet perspective nothing has changed- you’ve borrowed £100m for a train and you’ve got a £100m train on your asset inventory. No different to a mortgage in that respect.

That depends on the amount of government borrowing. The events of September 2022 proved that the government doesn't have an infinite borrowing threshold, and 'proper' borrowing goes on the balance sheet.

Mortgages are limited by the prospect of repayments being made.

If the country can afford to pay leasing costs, it can afford to pay borrowing costs. And borrowing costs will always end up cheaper than leasing costs- the government is paying cheaper interest rates and isn’t paying the ROSCO’s profit margin and risk margin.

Up to a point. The government can also terminate a lease, which is what the ROSCO is charging more for. It could be argued that it is prepared to pay the premium for leasing in order to avoid its borrowing rate going up on other debt. Arguably, the government is borrowing on its lower rate of interest to pay the ongoing cost of leasing, rather than actually bringing in the required revenues.

 

[hkstudent]

Really? I didn’t have CAF, Bomardier (the successor company to BREL) and Siemens down as East Asian.

But even buying from a specialist manufacturer, there’s no reason not to buy outright rather than tie yourself down into a 30-year lease agreement like we have done with Hitachi.



Borrow it. Government borrowing is always cheaper than commercial borrowing. And from a balance sheet perspective nothing has changed- you’ve borrowed £100m for a train and you’ve got a £100m train on your asset inventory. No different to a mortgage in that respect.

If the country can afford to pay leasing costs, it can afford to pay borrowing costs. And borrowing costs will always end up cheaper than leasing costs- the government is paying cheaper interest rates and isn’t paying the ROSCO’s profit margin and risk margin.

In a similar sector with similar high-value long-life assets, there is a reason why Ryanair purchase their planes outright rather than leasing them. And there’s a reason why Ryanair are performing better than airlines who lease their fleet.

Labour, with PFI, proved long-term build-lease-and-maintain contracts always end up in disaster. So what do the Tories do for the railways?

Despite it’s cheaper to borrow, but the problem is national governments do have ceiling for loan, especially loan to GDP ratio, which making getting loan being more difficult than leasing

 

[mike57]

Labour also said a large amount of things in 1996/97 that ended up not happening or being watered down.

And going back to 1965 the Labour Government of the day continued with the Beeching cuts even although they made an election promise to halt them. To be fair all parties have failed to deliver on promises over the years, and then politicians wonder why the public are cynical. It brings to mind the old joke, "How do you know when a politician is lying, easy his mouth is moving"

 

[Tetchytyke]

That depends on the amount of government borrowing. The events of September 2022 proved that the government doesn't have an infinite borrowing threshold, and 'proper' borrowing goes on the balance sheet.

September 2022 proved that you don’t borrow to fund tax cuts. Borrowing to invest is quite different.

Borrowing does indeed go on the balance sheet- but so does the asset you’ve bought with the loan.

Depreciation and interest costs go on the profit and loss- and these will be lower than leasing costs.

Arguably, the government is borrowing on its lower rate of interest to pay the ongoing cost of leasing, rather than actually bringing in the required revenues.

There’s truth in that, which makes the whole thing even more idiotic.

the problem is national governments do have ceiling for loan, especially loan to GDP ratio, which making getting loan being more difficult than leasing

In the context of the national debt, the additional borrowing is minuscule.

In the context of a loss-making railway industry, the cost savings would be significant.

This is a government who are demanding the removal of free WiFi from trains “to save money”, despite such equipment being a) of minuscule cost and b) probably required for operation of the train anyway.

 

[Clarence Yard]

Borrow it. Government borrowing is always cheaper than commercial borrowing.

That’s actually not true. It was a common complaint amongst the former nationalised industries (BR included) that, at times, it would have been cheaper to go to the market rather than pay the Treasury rate.

The Treasury route for finance was, of course, mandatory for nationalised industries like BR.

 

[zwk500]

Depreciation and interest costs go on the profit and loss- and these will be lower than leasing costs.

This point is prescient - the current government are ideologically opposed to the government holding large amounts of assets. Therefore buying trains outright goes straight against their principles. Similar to when they forced NR to sell off the railway arches.

 

[Tetchytyke]

It was a common complaint amongst the former nationalised industries (BR included) that, at times, it would have been cheaper to go to the market rather than pay the Treasury rate.

True. Gilts are nearly always the cheapest form of borrowing because of the low risk, but that doesn’t always mean Treasury passes that low interest rate on.

 

[JamieL]

This point is prescient - the current government are ideologically opposed to the government holding large amounts of assets. Therefore buying trains outright goes straight against their principles. Similar to when they forced NR to sell off the railway arches.

I think there is more nepotism than ideology in the current team - if they can sell it to a potential donor, and the donor is interested, then it will be so.

 

[Tetchytyke]

the current government are ideologically opposed to the government holding large amounts of assets. Therefore buying trains outright goes straight against their principles. Similar to when they forced NR to sell off the railway arches.

The highlighted bit was equally imbecilic, and has made Network Rail’s financial position significantly worse.

This government, for all their talk, behave more like an asset-stripper than anything else. As did the Tories in the late 90s too. Yet they describe themselves as the “party of business”.

I think you’re being charitable calling it an ideology, unless kleptomania is an ideology.

 

[zwk500]

The highlighted bit was equally imbecilic, and has made Network Rail’s financial position significantly worse.

Indeed. It was as silly as it will be profitable for a select group of individuals.

This government, for all their talk, behave more like an asset-stripper than anything else. As did the Tories in the late 90s too. Yet they describe themselves as the “party of business”.

Well, it's good business for them and the people they care about.

I think you’re being charitable calling it an ideology, unless kleptomania is an ideology.

They're not taking it for themselves though - they're flogging it to their mates. Perhaps 'schedule of returns on investment in donations to the tory party' might be a better title of their next manifesto

 

[urbophile]

But we were always assured that HS2 came out of a separate budget from the mainline railway !



Yes, there's an ideological element as well.

This government is even more ideological than Thatcher's. Brexit is a prime example of letting theory triumph over reality. It applies across the board.

 

[GoneSouth]

Roads are more accessible to people than the railways, in more ways than one. Plus the roads are way more intensely used.

Not ALL people