Yes thats correct the up front capital costs are on Rock Rail but the leasing charges are on the taxpayer and it wont take many years for the taxpayer to have paid out that 895m. The state could have provided the finance much cheaper but then nobody else makes any margin.
A couple of points to this position:
1. The leasing payments are not covered entirely by government subsidies. Pre-Covid some three quarters of the passenger TOC’s total costs were covered by fare income. In the meantime this proportion has fallen to about half which means that essentially government subsidies now cover about half the leasing costs.
The Class 701 trains will have an operating life of thirty years or more. Any predictions of future income are therefore fraught with uncertainty but it is a reasonable assumption that the proportion of the total TOC costs made up by fares income will increase as passengers return and under the changed circumstances the railways get better at improving the yield. In turn this implies that the government’s share of the leasing costs will continue to fall.
At no point will the government pay, as you suggest, all the leasing costs.
2. Under the financial constraints on the governments of the recent past - regardless of their political inclination - it is extremely unlikely that the Treasury would fork out £865 million to buy trains when there are other expenditures to be considered which are much more important to voters generally than a section of the railways.
In addition as you say, a government may well be able to borrow money at a lower rate of interest than a commercial company but it certainly does not have to pass on this lower rate of interest to the organisations to which it, in turn, lends the money. One of the perennial gripes of BR was that the rate of return charged by the Treasury for loans was higher than it could have obtained on the commercial market. But being a nationalised industry it could only borrow through the Treasury.
