Rail privatisation: legalised larceny Train operators invest little cash but take massive profits. This wasnt what was promised. As they flog our public assets, government ministers always promise one thing: that they will be better cared for by the new private owners. Sure, they may look like hedge funds out for a fast buck, but we must consider them investors, who will plough in their own millions to burnish the family silver. Thatcher said it in the 80s; and now, during this second coming of popular capitalism, her grandchildren are saying it too. Take this reliably bouffant pledge from Transport minister at the time of privatisation Steven Norris: There is not the slightest shadow of doubt that, freed from the constraints of public sector financing, train operators … will generate substantially greater investment in the railways because of the privatisation of British Rail. Was he right? I asked academics at the Centre for Research on Socio-Cultural Change (Cresc) to calculate how much companies such as Virgin and First Group are investing in their services. They looked at their return on capital employed, which is to say the amount train operators made on the money tied up in their business. A low ratio would indicate an industry doing as Norris and his colleagues foretold: ploughing cash into delivering a better service. A really high ratio would indicate the opposite: barely any cash going in. The figures are astonishing. In the financial year ending in March 2012, the train companies gained an average return of 147% on every pound they put into their business. Forget about high: that is stratospheric. It suggests that – despite all the promises made by the freshly rehabilitated John Major – the train operators are investing barely anything, but making bumper returns. If youre a pensioner, imagine a savings account that promised to give you next year a 147% return on your cash, rather than the 1% youll typically get now. If youre a first-time buyer, imagine selling up next year at a 147% markup – impossible even in central London. theguardian/commentisfree/2013/nov/04/rail-privatisation-train-operators-profit
Posted on: Tue, 24 Jun 2014 05:37:40 +0000