ROSCO’S POUR £80 MILLION INTO SPECULATORS’ POCKETS

RMT helpline 0800 376 3706 :: october 2020 :: RMTnews 10 25 years after the selling off of the rolling stock leasing companies (ROSCOs) in 1995 RMT renewed the call to end the great rail rip-off after it revealed that the government has confirmed that the taxpayer will continue to pick up the tab for profiteering on the ownership of trains on Britain’s railways. Created in 1994 as part of the privatisation of British Railways, rolling stock leasing companies own and maintain railway engines and carriages which are leased to train operating companies. These so-called ROSCOs were then sold off by BR in November 1995 and have been raking in enormous profits ever since at the taxpayers expense. Just last month one of the three companies who own 87 per cent of Britain’s trains announced that it had paid £80 million to its shareholders overseas – enough to pay for more than 400 new vehicles. Rail Minister Chris Heaton Harris also confirmed that the UK taxpayer will be footing the bill in full as he made clear that the government will carry on paying the rising costs of leasing trains through PFI-style contracts. RMT general secretary Mick Cash said that it revealed that its one rule for the government’s big business mates and one rule for keyworkers and the taxpaying public. “These new agreements are rigged to keep the profits flowing at the expense of taxpayers, even as companies all over the network start to attack jobs, pay and conditions for workers. “The government should put a stop to this fat cat feeding frenzy now and nationalise our railways.” Last month Labour MP Grahame Morris asked the Department for Transport whether it planned to continue to cover the cost of rolling stock company contracts under the new Emergency Recovery Management Agreements. On October 1, Rail Minister Chris Heaton Harris confirmed that the government’s agreements meant the taxpayer paying the rolling stock companies for leasing their trains: “The Emergency Recovery Measures Agreement (ERMA) arrangements cover the operators’ costs including the costs of rolling stock contracts for the duration of the ERMAs,” he said. The cost of leasing rolling stock from the ROSCOs has been rising in absolute terms and as a proportion of what Train Operating Companies spend. Last year it rose to a record high of 17 per cent of train operating company costs, the fastest rising cost on the railways. (See RMT’s report ‘Picking up the tab for trains: how the public is funding profiteering in railway rolling stock’ (RMT, July 2020). The leases work in a similar way to PFI’s. The government sets the requirement to build new trains, the ROSCOs raise money to buy them from train manufacturers and then the operating companies lease them back. RMT has argued that under the old franchising system, the rising costs of these leases accounted for the growth in subsidies paid to Train Operating Companies. Now, under the ERMAs, the cost of these trains is being directly covered by the taxpayer. Academic research has shown that the ROSCOs are able to keep their lease costs high because the three companies effectively monopolise the market. Between them, they own 87 per cent of the vehicles on the railways. Because of this, the public is likely to be paying the ROSCOs for years after the real cost of the trains has been paid off. One of the ROSCOs, Porterbrook, also filed its annual accounts last month showing that made a profit of £81 million in 2019 and paid its shareholders £80 million in dividends. That’s enough to pay for more than 400 new vehicles on our railways. These capital costs for vehicles have been calculated using the figures in the Long- Term Passenger Rolling Stock Strategy, which state that the 7,187 new vehicles being introduced in CPs 5 and 6 will have a capital cost of £13.8 billion. ROLLING STOCK CHARGES AS A PERCENTAGE OF SPENDING Rolling stock charges as a percentage of expenditure (£m) 2013/1 - 4 2014/1 - 5 2015/1 - 6 2016/1 - 7 2017/1 - 8 2018/1 - 9 TOC expenditure 10143 10237 12105 12574 12857 14448 Rolling stock charges 1269 1329 1419 1816 1990 2450 Rolling stock as a % of spending 13% 13% 12% 14% 15% 17% (Source: https://orr.gov.uk/rail/publications/economic-regulation-publications/uk-rail-industry-financial-information/uk-rail-industry-financial-information-2018-19. Calculations by RMT) ROSCO’S POUR £80 MILLION INTO SPECULATORS’ POCKETS Union marks quarter of a century of the rail rolling stock leasing company rip-off by calling for a halt to the scandal