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Post by q8 on Dec 13, 2005 8:40:39 GMT
I see on the news that First group have won the GW and Thameslink franchises. But it also says that they will pay the Governement £1.9 bn over the lifetime of said franchises.
Now I don't understand this system at all. If the Government is subsiding the TOC's then all the TOC's are doing is paying the subsidy back and someone somewhere along the line is pocketing a fortune. Seems like the economics of the madhouse to me
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Post by compsci on Dec 13, 2005 9:59:02 GMT
I believe the system works along the lines of operators running less profitable routes being given a subsidy, while those with profitable franchises paying the government for the privilege. The bids that are submitted include the amount that the operator is willing to pay or be given in subsidy.
As for this new franchise, the result will be that most of the trains passing through Cambridge will look like something you'd expect to find in Barbie's train set.
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Post by doubletrigger on Dec 13, 2005 11:04:59 GMT
I see on the news that First group have won the GW and Thameslink franchises. But it also says that they will pay the Governement £1.9 bn over the lifetime of said franchises. Now I don't understand this system at all. If the Government is subsiding the TOC's then all the TOC's are doing is paying the subsidy back and someone somewhere along the line is pocketing a fortune. Seems like the economics of the madhouse to me Not a madhouse economy, though some of the ammounts of money paid is! Since privatisation the government will decide who to tender the franchise to and at the TOC will offer money for said franchise on the grounds they will make a profit. Routes that don't make a profit but the government want to keep open will receive subsidy in order to keep them running, as a result ticket prices are cheap to encourage people to use them, say the Wick/Thurso line for example. Meanwhile lines paying a premium will have higher fares in order for the company to make a profit and pay said premium. Take the East Coast and the hefty Premium GNER are paying. In theory the premium made by the government then gets invested back in transport, or so the theory goes. Seems to work to me... things would be a lot better if Network Rail could actually profit and invest more... this seems to be impossible though. |
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Post by q8 on Dec 13, 2005 20:07:24 GMT
I have been thinking [do sometimes although it hurts] If the franchisees make money on the good routes and pay the govenment a percentage which the government pays back as subsidy for the unprofitable routes would it not be more efficient for the TOC'S to keep the profits and use them as the subsidies. After the balance has been achieved the excess can then go in the shareholders pockets. Or am I being dumb?
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Post by doubletrigger on Dec 13, 2005 20:14:33 GMT
I have been thinking [do sometimes although it hurts] If the franchisees make money on the good routes and pay the govenment a percentage which the government pays back as subsidy for the unprofitable routes would it not be more efficient for the TOC'S to keep the profits and use them as the subsidies. After the balance has been achieved the excess can then go in the shareholders pockets. Or am I being dumb? Where there is no profit the TOC will not feel obliged to continue running. No one bids for the franchise and the government are in a tricky situation of having to maintain an operating which does not profit. Where there is no potential profit at all people will simply not bid, especially if subsidies on low use lines were withdrawn. It's not perfect but it's the only way it'd work given the current method of operation. If there was no support you'd be back to Beeching cuts, decided by private companies. I know this can't happen as it stands, it's not a private companies decision to stop running over a line, but if the government did not intervene with subsidies Beeching would happen again. |
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Post by Tomcakes on Dec 13, 2005 20:16:50 GMT
Cross-subsidisation (fancy word for what Q8 was saying) was fine under BR, but then they decided to make each individual service make a profit on its own - which put an end to that.
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Post by doubletrigger on Dec 13, 2005 20:23:10 GMT
Correct, but it's not BR anymore. Wouldn't work in a privatised state in my opinion.
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