Great Western franchise to be broken up?

[whole diary]

[Bmblbzzz]

Now we have a railway system in which many of the operating companies are part owned by the state rail companies from Germany, France and the Netherlands .  So we've exported the asset value.  How will Brexit impact on that I wonder?

All anyone knows about that is that nobody knows anything for certain. 

[ChrisB]

Now we have a railway system in which many of the operating companies are part owned by the state rail companies from Germany, France and the Netherlands .  So we've exported the asset value.  How will Brexit impact on that I wonder?

It won't - what would change? A contract is a contract.

How much of the European rail system does Network Rail own? Er...

None - but no European State-Owned company owns any British infrastructure either!!! So many pax get this wrong - all they have is the contract to run trains for a period of time. That's it, no ownership of any infrastructure, nor rolling stock, unless they physically purchase it themselves.

[Tim]

This is true of all privatisations - every one of the industries has to have a regulator to control the activities of the companies. 

I would argue that if you had a properly functioning market with competition you would not need a complicated regulatory system to make the thing work.  The necessity of a complicated regulatory system therefore suggests that perhaps privatisation of that industry or certainly privatisation of the form pursued wasn't a good idea. 

[ChrisB]

Now we have a railway system in which many of the operating companies are part owned by the state rail companies from Germany, France and the Netherlands .  So we've exported the asset value.  How will Brexit impact on that I wonder?

All anyone knows about that is that nobody knows anything for certain. 

And the asset value of a fixed term contract is precisely zero at the end of such a contract, so no asset value is exported. The profit margin maybe, but no assets.

[Bmblbzzz]

I'd interpreted welshman's question as relating to the future: When these contracts come up for renewal, how will Brexit affect the negotiation and bidding? It might become politically unacceptable to award big contracts to foreign-owned companies. Currency instability might make them unattractive to EU^» (European Union - about)-based firms, as might a post-Brexit crash. We might even impose rules on repatriation of profits. On the other hand, if we become "tax haven Britain" we might find those firms transferring their bases over here while their operations remain across the Channel. Etc etc.

[ChrisB]

With the UK^▸ (United Kingdom) needing trade deals, it is very unlikely that we'll put any kind of profit-retaining in the deals! We will want Big Deals ourselves, so awarding big deals to others will be a necessity....

[didcotdean]

None - but no European State-Owned company owns any British infrastructure either!!! So many pax get this wrong - all they have is the contract to run trains for a period of time. That's it, no ownership of any infrastructure, nor rolling stock, unless they physically purchase it themselves.

This is one of the reasons why it is debateable how much of the passenger side of the is railway actually is really privatised these days, beyond ownership of the rolling stock. As things have developed with the operating companies they are running a schedule as originally dictated by the DfT^» (Department for Transport - about). In theory they can do more, but this is a marginal activity now, not least constrained by the contracted schedule taking up pretty much all the infrastructure capacity in many key areas. As such franchises are much more like a public service contracted out (along the lines of those from councils to empty dustbins) rather than truly private.

It has suited successive governments to portray it differently, not least so they can say it is up to the operating companies when the service is less than a section of the public desires - as they used to do with BR^▸ (British Rail(ways)).

[ellendune]

This is true of all privatisations - every one of the industries has to have a regulator to control the activities of the companies. 

I would argue that if you had a properly functioning market with competition you would not need a complicated regulatory system to make the thing work.  The necessity of a complicated regulatory system therefore suggests that perhaps privatisation of that industry or certainly privatisation of the form pursued wasn't a good idea. 

But for a properly functioning market to work it must be economic for companies to increase capacity to meet all the expected demand.  Without that there never can be a properly functioning market.

[4064ReadingAbbey]

Now we have a railway system in which many of the operating companies are part owned by the state rail companies from Germany, France and the Netherlands .  So we've exported the asset value.  How will Brexit impact on that I wonder?

How much of the European rail system does Network Rail own? Er...

For want of a better word - tosh! No 'asset value' has been exported at all. The infrastructure assets remain in UK^▸ (United Kingdom) Government ownership - Network Rail is a limited company which is effectively nationalised.

The rolling stock is owned by six or seven (I can't be bothered to count) ROSCOs^» (Rolling Stock Owning Company - about). Some of these are whole or partially owned by overseas interests.[1]

The foreign state railway companies, or rather their subsidiaries, have bought into the right to operate trains - that's all - under terms and conditions set by the DfT^» (Department for Transport - about).

[1] That foreign interests own a proportion of British assets is simply the consequence of this country having run a balance of payments deficit for many years. The exported sterling then needs to find a home - it's pretty useless if it is simply locked away in the vaults of China or the Gulf States.

[ChrisB]

Unfortunately, there are a lot of pax who honestly believe this tosh....I'm not sure how they could be correctly educated.

[4064ReadingAbbey]

This is true of all privatisations - every one of the industries has to have a regulator to control the activities of the companies. 

I would argue that if you had a properly functioning market with competition you would not need a complicated regulatory system to make the thing work.  The necessity of a complicated regulatory system therefore suggests that perhaps privatisation of that industry or certainly privatisation of the form pursued wasn't a good idea. 

Not quite. The idea of the regulatory systems for the de-nationalised industries was to act as a form of artificial competition by limiting monopolistic behaviour.

With time the regulation was intended to fade away as market forces gained in strength. However once an organisation, any organisation, has been set up its first priority is to ensure its continued existence. So the Regulators became 'essential', especially with a change in the political make-up of the Government the Regulators were seen to be an ideal channel to implement Government policy.

The form and structure of the regulating bodies is now very different indeed to that existing when they were set up.

[Tim]

Not quite. The idea of the regulatory systems for the de-nationalised industries was to act as a form of artificial competition by limiting monopolistic behaviour.

That is my beef.  It is neither capitalism nor socialism.  It is phoney-capitalism which IMHO^▸ (in my humble opinion) often incorporates the worst aspects of both of the other systems bringing in both private sector greed and short termism and public sector incompetency and inefficiencies. 

[4064ReadingAbbey]

Not quite. The idea of the regulatory systems for the de-nationalised industries was to act as a form of artificial competition by limiting monopolistic behaviour.

That is my beef.  It is neither capitalism nor socialism.  It is phoney-capitalism which IMHO^▸ (in my humble opinion) often incorporates the worst aspects of both of the other systems bringing in both private sector greed and short termism and public sector incompetency and inefficiencies. 

I presume that you are being ironic with your stereotypes? I hope so - as neither is strictly true!

I could refute both descriptions - but that is really an argument for other places. Suffice it to say that anyone who believes either of these descriptions are always true is fated to be either a pundit or a politician.

[JayMac]

I believe the description. Which one am I?

You seem very pro- the current franchise model, 4064ReadingAbbey, and pro privatisation generally. Are there interests in the status quo that inform your opinion - shareholdings for example? Or is it just a belief that 1980s/1990s Conservative ideology is the one true path?

Are you pundit or politician? 

[ellendune]

The problem with privatisation is that was invented because politicians were so bad at running anything.  So instead of resigning or getting some training they tried to get private sector people in to manage it, put in an 'independent' regulator to oversee it and then could not resist trying to meddle.