East Coast Main Line now under public ownership

[teuchter]

A "performance bond" of £32M is mentioned in the article - do I understand it right that that is essentially what NX have to pay in order to get out of the contract?

It doesn't seem a very large amount of money, compared to the £1.4bn that they had signed up to pay over the length of the contract (about £200M per year I guess).

It doesn't seem that there is a huge amount of incentive in the way the franchises are set up, for operators not to give up as soon as things get a bit tricky.

I mean, if I sign up for a twelve month phone contract, and then want out after two months, it's not like they are going to let me do that in exchange for paying them 15% of one month's line rental as a penalty. They are going to want ten month's line rental.

 

[agricola]

A "performance bond" of £32M is mentioned in the article - do I understand it right that that is essentially what NX have to pay in order to get out of the contract?

It doesn't seem a very large amount of money, compared to the £1.4bn that they had signed up to pay over the length of the contract (about £200M per year I guess).

It doesn't seem that there is a huge amount of incentive in the way the franchises are set up, for operators not to give up as soon as things get a bit tricky.

I mean, if I sign up for a twelve month phone contract, and then want out after two months, it's not like they are going to let me do that in exchange for paying them 15% of one month's line rental as a penalty. They are going to want ten month's line rental.

IMHO the small level of the bond (the BBC reckon its £72 million in total) is probably justifiable - it seems to be not unlike the deposit paid on a commercial rental property lost when the tenant firm cant pay its rent.

The bulk of NX's costs seem to have been the £1.4 bn that they were contracted to pay the DoT - given that the Government refused to negotiate this (which is somewhat questionable, yes it would perhaps have set a precedent but they have already bent over backwards for Virgin on the WCML) - the ECML service in itself was always run at a profit (edit: as you of course point out).

What they should perhaps have done (and indeed could still do) is fold the ECML, c2c and EA into Network Rail - who could then have run the profitable service and reinvested those profits back into the rail network / paying off its debts, as well as realise the considerable savings involved in eliminating the franchise system. This would probably also intimidate the Bearded One into surrendering his own, subsidized, franchises.

 

[Mr T]

john prescott has posted a smug video on his website saying how happy he is with this - the man was secretary of state for transport for four years ffs

 

[Roadkill]

as long as such renationalisation includes a reversal of the beeching amputations.

Can we drop all this talk of NXEC being 'renationalised'? It hasn't been. All that's happening is that NX is about to hand back its franchise.

The significance of it doesn't lie in the railways being in any real sense being renationalised, but in how the industry as a whole is weathering the recession. AFAIK, NX is going to have to hand back all of its franchises. Many franchisees are struggling with contracts made before the onset of recession, whose terms were predicated on traffic growth that's not happening atm. It'll be interesting to see if any of the other big players topple, and what happens thereafter...

<e2a> Bowker is going from NXEC. Fall guy, fool or ... well, what? davesgcr - I'd love to hear your opinion!

 

[Chz]

It's almost exactly like the SouthEastern problem, with the exception that Connex were too stubborn to throw in the towel so they had to be turfed out. (IIRC, they got a subsidy rather than paying in so that's the likely reason) The government ran the SE franchise competantly, but didn't invest anything in it (note that it still ran a lot better than when Connex was at the helm!) - leaving that for Govia when they picked it up.

 

[teuchter]

I never really liked the NX livery anyway.

I'm going to write a letter to Gordon Brown demanding that the trains be painted back into BR red stripe intercity livery.

 

[PacificOcean]

I still think First will get it in some form.

According to BBC Breakfast, First made a takeover bid for NEX but were rebuffed. Now NEX is a rudderless ship, First can have another crack at a takeover.

The Government might let NEX carry on with First at the helm or just let them rebrand it to First?

 

[cybertect]

I'm going to write a letter to Gordon Brown demanding that the trains be painted back into BR red stripe intercity livery.

He may find that hard to swallow

 

[davesgcr]

Its all about cash flow and parent company strength.


The GNER franchise being owned by Sea Containers couldent be saved as the parent company couldent drip feed enough cash in to keep it going after the collapse of the London optional market after 7/7 - so it was bailed out on a contract and re-let.

NX has widely known issues with a £400m corporate cash call as a result of other issues and the traffic on long haul has become tricky due to credit crunch , down trading of full fare to cheaper tickets and a general fall in volume. NX did not bid the most optimistic offer for the franchise but one that was seen to be "moderate risk" - Bowker is clearly no fool and knew the issues around the markets etc. Open access competition and revenue split from Hull and GC trains has obviously made some impact.

I am sure the route will bounce back - but the message is that commuter Toc's and the more heavily subsidised regional ones are better and safer options for taking a punt - lower profit sure (say around 3-4%) , but a more guaranteed revenue / subsidy flow. As the French say "one doit manger" -in railways terms "on doit fair le commute"

Leaves a hole in the DfT forward transactions for sure - but there is a footnote here that Network Rail gets guaranteed funding over a 5 year period whilst the the Toc's - wherever they are - have to earn the hard pence every day of the operating year.

 

[starfish2000]

Theres no point in First getting it. They can barely run FGW to timetable, so thats ridiculous....but then I remember that Muir Lockheed is a scotsman and personal friend of Gordon Browns.....Hmmmm.

But the idea of the private sector saving the railways is bollocks. Most private sector directors and executives of TOCs were there in the BR days as managers anyway Most of NX's board worked at BR pre privatisation, so privatisation has been meaningless.

Theres been rolling stock expansion funded by the banks (government) and passenger growth, but thats down to socio-economic trends. In the 90's the amount of people going to university increased, the technology sector got a greater foothold into the wider economy. People travelled more....simple as.

BR was run at a third of the budget and still made the government a handsome profit.

Whats shocking is how none of the political parties will challenge the idea of privatisation, like its a foregon conclusion.

 

[Chz]

BR was run at a third of the budget and still made the government a handsome profit.

BR's profit was never, ever greater than its subsidy. (meaning it was clever accounting and nothing else) Admittedly less of a subsidy than the TOCs get now...

 

[davesgcr]

BR's remit was "to run a public service , and to break even - taking one year to another" - simple really.

The profits made is some sections - such as Inter city , bulk freight , cross- subsidised the other sections (like commuter lines) - also any surplus was ploughed back into improvements like track relaying , stations etc.

Sounds fabulously simple doesnt it - and it was - but there was never really enough money to recapitilise and invest in the heavy end of the business , so there was always a grant from the skinflint Treasury when something like new 125 trains , new trains for commuterland etc were needed.

BR - claimed to be deeply inefficient by an ex PM (failed bus conductor) wasnt perfect but it knew how to re-use things - so that track off main lines and no longer suitable for very high speed trains was recycled to lines with say a 60mph speed limit - but doing this often allowed the 60mph line to be upgraded to 80mph. Plus you could do things very quickly in a command and control integrated railway.

I have said this before - but in the mid to late 80's , BR was costing UK PLC about £100k a day in "subsidy" and was the Worlds most cash and service efficient railway .....in terms of giving a good , basic service.

Now its about £5bn - most of it through Network Rail - not the operators.

 

[teuchter]

*posting from ECML*

The title of this thread is wrong. The East Coast Mainline has been under public ownership for some time now. It should say "East Coast franchise now under public ownership".

 

[starfish2000]

BR's profit was never, ever greater than its subsidy. (meaning it was clever accounting and nothing else) Admittedly less of a subsidy than the TOCs get now...

As mentioned by someone here, Intercity was profitable

Also organisation as the guy above me mentioned

For example under nationalisation, trains could be coupled together, there were some standards, things like that.

A few years ago One TOC was offered anothers excess DEMU fleet (how do you over order trains exactly?), but could not actually lease the trains/carraiges as despite being a slightly later variant of the same train, pretty much all of the electrics/software and coupling systems were incompatible with each other. Imagine how much that stupid mistake has cost the TOC's/Banks and ultimately the farepayer??? If it had been nationalised then all that rolling stock could have been spec'd and ordered at the same time or at least made to be backwards compatible?

Wheelchair ramps - Again no standard, so station staff have to fuck around with different types according to the type of rolling stock, not exactly efficient is it?

There are something like 256 ticket types since privatisation

Walk up fairs are now prohibitive to ordinary people, so if you want a cheap ticket your tied to the type of train

I haven't even mentioned the fact that all the salary structures are different so depending on which company you work for you could be on £18K or 30K for doing the same job!

Also things like catering on Intercity, as a big concern could buy in bulk and give greater discount. 5 smaller concerns can't buy provisions at the same price, so yer Mars Bar on a train is what these days 90p? All train stations food outlets are run by a company called Select Service partner so thats a monopoly anyway isn't it?

The privatised railway is a panacea, an illusion, its private companies utilising state infrastructure to their own profit. But it doesnt always make it better. The fact that the debate about Nationalisation has been closed down by the media/BBC just shows what little of a democracy we have now. As mentioned before there was no massive input of private ideas when it was taken over. 99% of senior people in these so called private companies are ex-BR and have no experience of any other job or industry. So why exactly are they better when supporting a shareholder rather than society as a whole?

 

[Dan U]

http://www.guardian.co.uk/politics/2009/nov/06/national-express-east-coast-nationalised

so from next Saturday it will be called 'East Coast' and under Govt control for 18 months or so.

does anyone think that if it was a success - for the public and they made money - or at least broke even, they'd keep it under control or would the privatise privatise privatise agenda just over rule common sense?

although i note they are still planning beefy fare increases.

 

[teuchter]

http://www.guardian.co.uk/business/2009/nov/04/firstgroup-taxpayer-subsidy

Bailout for FGW too.