Things are very rosy in franchise land. For the franchisees and their owners that is. Certainly not the passenger or taxpayer. Since franchising began, only 9% of TOC▸ profit has been reinvested in the industry or returned to government. 91% of TOC profits have gone to shareholders, if the TOC is part of a PLC, or to the state. But not the UK▸ state you understand. Nope. To Germany, France and the Netherlands, who have realised that the UK's bonkers franchising system is an ideal source of income to subsidise their own railways.
I don't entirely understand why bignosemac is complaining about the apparently low amounts of money the TOCs are re-investing in the railway industry. I would suggest that the model of the industry that he is using does not reflect the actual, or even the desired, situation.
As a result of increasing passenger numbers and fare increases exceeding the rate of inflation over the last few years the operating costs of the railway are nearly completely covered by income from passenger fares and freight carried. Taking financial figures published last year by the
ORR» for the year 2011-12 passenger income amounted to ^7.4 billion and 'other' income (freight, car parking, etc.) amounted to ^1.3 billion - a total of ^8.7 billion.
Network Rail's operating expenditure (including renewals) amounted to ^2.6 billion and the TOCs' outgoings amounted to ^6.1 billion. So the total costs for running the railway came to ^8.7 billion - essentially the same as the income.
What of course is missing in this last figure is the capital expenditure being made by Network Rail on the infrastructure - all those developments such as the Reading rebuild, electrification, the flyovers at Hitchin and Doncaster, the new chord at Nuneaton, the new platform at Gatwick and the junctions at Bicester and so on. These are covered by
NR» borrowing money, about ^2 billion in the year mentioned, and grants from the Government - the railway does not generate enough money (yet) to fund its own enhancements. And of course interest has to be paid on the total of the sums borrowed over the years which amounted to ^1.5 billion in 2011-12.
The TOCs make a profit of a few per cent on turnover - but to suggest they don't contribute their fair share to the railway is wide of the mark. Their investment in the system is made indirectly - via their track access and other payments to NR and via the rolling stock leasing payments to the
ROSCOs» .
A better model by which to judge the TOCs is the consider them in the same light as a retail outlet in a shopping mall. Its rent covers its proportion of the costs of maintaining and enhancing the mall - but these activities are carried out by the mall owner, in our case NR. The shop's investment is limited to the fixtures and fittings in the shop and in the capital tied up in stock - it does not cover the fabric of the building. The shop pays directly for its own staff, cleaning and power and it makes a profit, it is to be hoped, on its sales.
My point is you cannot criticise the TOCs for not spending money, or even of not spending enough money, on renewals or investment in the system because they do, it's just one step removed. The question of ownership of the TOCs, or even where their dividends are paid, is irrelevant. There has been foreign ownership of UK companies, and UK ownership of foreign companies since time immemorial - did you know that the
HSTs▸ are Rolls-Royce powered?
