THE ROSCOS’ RECORD OF FAILURE

RMT helpline 0800 376 3706 :: october 2020 :: RMTnews 11 N early 90 per cent of the rolling stock on Britain’s railways is owned by three companies, known as the ROSCOs (Rolling Stock Companies). When British Rail was privatised in 1993 under EU Directive 91/440, these three companies were formed by the Conservative government and handed British Rail’s stock of 11,250 vehicles, assets which had been funded by public investment. The ROSCOs then leased their vehicles to the train operating companies (TOCs) who controlled the franchises. The fundamentally flawed theory was that they would generate competition and mobilise private sector expertise and capital to drive innovation. This did not happen due to the high costs of rolling stock investment, the absence of surplus vehicles on privatisation and the fact that vehicles are rarely easily interchangeable between different parts of the railway. This has meant that the three ROSCOs gained and maintained a largely unassailable monopoly position, carving up the market in leasing to the TOCs between them. In addition, the leasing model that the ROSCOs were handed at privatisation effectively deters them from investing in new rolling stock in a sustained way. Following privatisation, the ROSCOs were set up to offer operating leases rather than finance leases. This meant that the ROSCOs continued to own the asset at the end of the lease and remained responsible for ensuring that the asset was capable of being re-leased. The ROSCOs’ assets have a life of around 30 years, while the franchises which lease them are generally between five and 10 years in length. Therefore they have an interest in maintaining the life of their asset for as long as possible rather than invest and innovate. The TOCs invest little capital and with the length of their franchises give them little incentive to commission new rolling stock. Consequently, as the as the Office for Road and Rail (ORR) acknowledged, the ROSCOs ‘rarely engage in genuinely speculative new build’. The consequence of this model of rolling stock provision is that three companies operate an effective monopoly of leasing to the Train Operating Companies while neither party has much incentive to invest in new rolling stock. For the ROSCOs, the nightmare scenario is being left with surplus stock off- lease, especially if these are assets which have plenty of operating years left. As Mary Grant, CEO of Porterbrook said in 2018, investment in new trains “will create a form of surplus in the short term... The model is not sustainable if there is a continuous cycle of a new train comes in and seven years later it might be displaced”. For rail passengers this has meant that the average age of rolling stock has risen since privatisation, while high leasing costs are passed onto the taxpayer through the subsidies demanded by TOCs as compensation and onto passengers through higher fares. SCANDAL: Last year RMT shone the spotlight on the shadowy rolling stock companies continuing to make a financial killing out of the Pacer train scandal on Northern. Northern Rail’s 40- year old 158 Class 142 Pacer trains are owned by Angel Trains while their 56 Class 144 pacers are owned by Porterbrook. The longer they continue in service, the more Angel and Porterbrook get from the extension to their leases. THE ROSCOS’ RECORD OF FAILURE