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?