TfL rolling stock crisis

[Recliner]

Anyone know if Cex buy second hand trains for cash?
https://mobile.twitter.com/Cogbat/status/948552206986379264
So TfL are so hard up that they are having to "sale and lease back" an
unspecified train fleet to generate £875m to pay for the new Picc Line
trains. What a shambles - no capital monies.
(from today's Assembly budget review mtg)

That link doesn't work anymore.

Yes, the tweet that Chris was quoting has apparently been deleted — I
wonder why? It was from Paul Corfield, so perhaps he could enlighten us?

For those who don't know, Paul was previously a senior executive in LU, and
he still follows developments closely and knows how decisions are taken.
Unlike the rest of us who tend to rely on hearsay and supposition, Paul
actually monitors the original source documents.

[Paul Corfield]

Post by Recliner

Anyone know if Cex buy second hand trains for cash?
https://mobile.twitter.com/Cogbat/status/948552206986379264
So TfL are so hard up that they are having to "sale and lease back" an
unspecified train fleet to generate £875m to pay for the new Picc Line
trains. What a shambles - no capital monies.
(from today's Assembly budget review mtg)

That link doesn't work anymore.

Yes, the tweet that Chris was quoting has apparently been deleted — I
wonder why? It was from Paul Corfield, so perhaps he could enlighten us?
For those who don't know, Paul was previously a senior executive in LU, and
he still follows developments closely and knows how decisions are taken.
Unlike the rest of us who tend to rely on hearsay and supposition, Paul
actually monitors the original source documents.

It doesn't work because I deleted it.

I was a senior manager - I think "executive" is over-egging things. To be accurate I would not claim to be up to date with current decision making as the internal structure of TfL has changed considerably as have many of the people in key positions. I also think the "influence" of City Hall has changed somewhat in the current Mayoralty but that's more a "feeling" that knowledge.

I simply quoted what was said at a London Assembly meeting last week where the Budget and performance Cttee were reviewing the budget for TfL. Either Caroline Pidgeon or Sian Berry queried a capital receipt of £875m in the budget. I think it was Simon Kilonback of TfL who confirmed this was a "Sale and lease back" of an unspecified train fleet. The deal is not yet concluded so there were few other details. Both Mike Brown and Val Shawcross said "this is all standard commercial practice" - which it may well be in some industries. However it is pretty exceptional for TfL where normally a mix of internally generated surplus and govt investment grant pays for new train fleets. I can't recall a train fleet being "flogged off" to pay for a new one. It was Caroline Pidgeon who remarked that the proposal was "crazy" (or some similar term).

There is a webcast of the meeting available on line if anyone wants to sit through it. TfL's bit starts about 110 minutes in from the start. Plenty of other interesting remarks about how the budget has been cut and the impact on passengers and challenges from Assembly Members - especially on buses.

[b***@cylonHQ.com]

On Sat, 6 Jan 2018 07:06:02 -0800 (PST)

mix of internally generated surplus and govt investment grant pays for new =
train fleets. I can't recall a train fleet being "flogged off" to pay for a=
new one. It was Caroline Pidgeon who remarked that the proposal was "craz=
y" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys the
trains won't be doing it for the good of mankind, they'll want a long term
profit. As ever short termism rules in british government.

[Recliner]

Post by b***@cylonHQ.com
On Sat, 6 Jan 2018 07:06:02 -0800 (PST)

mix of internally generated surplus and govt investment grant pays for new =
train fleets. I can't recall a train fleet being "flogged off" to pay for a=
new one. It was Caroline Pidgeon who remarked that the proposal was "craz=
y" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys the
trains won't be doing it for the good of mankind, they'll want a long term
profit. As ever short termism rules in british government.

Yes, it's just a way of borrowing money at a significantly higher interest
rate than TfL would pay if it could offer its own bonds, or if the Treasury
funded the trains.

It's not as if the banks doing the lease-back will be bringing in any
private sector efficiencies like a main line ROSCO might. These trains are
completely specific to LU, so there are no potential benefits from their
being leased rather than owned.

[b***@cylonHQ.com]

On Mon, 8 Jan 2018 10:08:07 -0000 (UTC)

Post by Recliner

Post by b***@cylonHQ.com
On Sat, 6 Jan 2018 07:06:02 -0800 (PST)

mix of internally generated surplus and govt investment grant pays for new =
train fleets. I can't recall a train fleet being "flogged off" to pay for a=
new one. It was Caroline Pidgeon who remarked that the proposal was "craz=
y" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys the
trains won't be doing it for the good of mankind, they'll want a long term
profit. As ever short termism rules in british government.

Yes, it's just a way of borrowing money at a significantly higher interest
rate than TfL would pay if it could offer its own bonds, or if the Treasury
funded the trains.
It's not as if the banks doing the lease-back will be bringing in any
private sector efficiencies like a main line ROSCO might. These trains are
completely specific to LU, so there are no potential benefits from their
being leased rather than owned.

Unless Island Line make an offer ;)

[Roland Perry]

Post by b***@cylonHQ.com

mix of internally generated surplus and govt investment grant pays for new =
train fleets. I can't recall a train fleet being "flogged off" to pay for a=
new one. It was Caroline Pidgeon who remarked that the proposal was "craz=
y" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys the
trains won't be doing it for the good of mankind, they'll want a long term
profit. As ever short termism rules in british government.

What government wants is stability (whichever political party in power
we are talking about).

Thus, raising taxes to fund those trains could result in voters making a
change at the top, which tends to cause all sorts of costly consequences
reversing earlier policy decisions.

A long term lease (which is the opposite of short-term-ism actually)
does at least make things predictable.

[b***@cylonHQ.com]

On Mon, 8 Jan 2018 10:13:16 +0000

Post by Roland Perry

Post by b***@cylonHQ.com

mix of internally generated surplus and govt investment grant pays for new =
train fleets. I can't recall a train fleet being "flogged off" to pay for a=
new one. It was Caroline Pidgeon who remarked that the proposal was "craz=
y" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys the
trains won't be doing it for the good of mankind, they'll want a long term
profit. As ever short termism rules in british government.

What government wants is stability (whichever political party in power
we are talking about).
Thus, raising taxes to fund those trains could result in voters making a
change at the top, which tends to cause all sorts of costly consequences
reversing earlier policy decisions.
A long term lease (which is the opposite of short-term-ism actually)
does at least make things predictable.

Oh please. It'll cost a damn site more long term, its just kicking the actual
costs down the road for the next government/administration to have to explain
to the public. Its exactly the sort of moronic short term thinking that got
us the NHS PFI debarcle simply because the treasury have some pathological
aversion to any sort of direct public investment unless absolutely necessary
regardless if it'll actually be cheaper in the long run than the
keep-it-off-the-books route.

[Roland Perry]

Post by b***@cylonHQ.com

Post by Roland Perry

Post by b***@cylonHQ.com

mix of internally generated surplus and govt investment grant pays for new =
train fleets. I can't recall a train fleet being "flogged off" to pay for a=
new one. It was Caroline Pidgeon who remarked that the proposal was "craz=
y" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys the
trains won't be doing it for the good of mankind, they'll want a long term
profit. As ever short termism rules in british government.

What government wants is stability (whichever political party in power
we are talking about).
Thus, raising taxes to fund those trains could result in voters making a
change at the top, which tends to cause all sorts of costly consequences
reversing earlier policy decisions.
A long term lease (which is the opposite of short-term-ism actually)
does at least make things predictable.

Oh please. It'll cost a damn site more long term,

How do you know what the cost of political upheaval after raising taxes
is likely to be?

Post by b***@cylonHQ.com
its just kicking the actual costs down the road for the next
government/administration to have to explain to the public.

The thing is, they don't ever have to explain it [again]. It's nailed
into the long term (that's good isn't it) operational costs, just like
the rent for the new HQ building they are leasing rather than buying.

I don't know what the ratios are for TfL (maybe PaulC can help) but on
National Rail leasing the rolling stock represents only 11% of the fares
basket.

[Recliner]

Post by Roland Perry

Post by b***@cylonHQ.com

Post by Roland Perry

Post by b***@cylonHQ.com

mix of internally generated surplus and govt investment grant pays for new =
train fleets. I can't recall a train fleet being "flogged off" to pay for a=
new one. It was Caroline Pidgeon who remarked that the proposal was "craz=
y" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys the
trains won't be doing it for the good of mankind, they'll want a long term
profit. As ever short termism rules in british government.

What government wants is stability (whichever political party in power
we are talking about).
Thus, raising taxes to fund those trains could result in voters making a
change at the top, which tends to cause all sorts of costly consequences
reversing earlier policy decisions.
A long term lease (which is the opposite of short-term-ism actually)
does at least make things predictable.

Oh please. It'll cost a damn site more long term,

How do you know what the cost of political upheaval after raising taxes
is likely to be?

But they wouldn't raise taxes. They'd just borrow the money more cheaply,
thus ultimately reducing future taxes.

Post by Roland Perry

Post by b***@cylonHQ.com
its just kicking the actual costs down the road for the next
government/administration to have to explain to the public.

The thing is, they don't ever have to explain it [again]. It's nailed
into the long term (that's good isn't it) operational costs, just like
the rent for the new HQ building they are leasing rather than buying.

Yes, but higher costs than if the government borrowed the money directly.

The whole point of this sort of obtuse deal is just to keep the borrowing
off the Treasury balance sheet.

Post by Roland Perry
I don't know what the ratios are for TfL (maybe PaulC can help) but on
National Rail leasing the rolling stock represents only 11% of the fares
basket.

I don't know either, but would speculate that the figure is a bit higher
for TfL as it runs many more trains per mile of track than National Rail.

[Robin]

On 08/01/2018 11:17, Recliner wrote:
<snip>

Post by Recliner
The whole point of this sort of obtuse deal is just to keep the borrowing
off the Treasury balance sheet.

Finance leases are on the balance sheet in the Whole of Government Accounts.

[Roland Perry]

In message
<584016189.537102741.585815.recliner.ng-***@news.eternal-septe
mber.org>, at 11:17:32 on Mon, 8 Jan 2018, Recliner

Post by Recliner

Post by Roland Perry
How do you know what the cost of political upheaval after raising taxes
is likely to be?

But they wouldn't raise taxes. They'd just borrow the money more cheaply,
thus ultimately reducing future taxes.

What makes you think they have the power to borrow the money required?

[Recliner]

Post by Roland Perry
In message
mber.org>, at 11:17:32 on Mon, 8 Jan 2018, Recliner

Post by Recliner

Post by Roland Perry
How do you know what the cost of political upheaval after raising taxes
is likely to be?

But they wouldn't raise taxes. They'd just borrow the money more cheaply,
thus ultimately reducing future taxes.

What makes you think they have the power to borrow the money required?

Are you joking? Of course the Treasury can borrow more. It does so
all the time.

[r***@cix.compulink.co.uk]

Post by Recliner

Post by Roland Perry
In message
eptember.org>, at 11:17:32 on Mon, 8 Jan 2018, Recliner

Post by Recliner

Post by Roland Perry
How do you know what the cost of political upheaval after raising
taxes is likely to be?

But they wouldn't raise taxes. They'd just borrow the money more
cheaply, thus ultimately reducing future taxes.

What makes you think they have the power to borrow the money required?

Are you joking? Of course the Treasury can borrow more. It does so
all the time.

But the Treasury has to give TfL permission to borrow through them. And they
aren't.

[Recliner]

Post by r***@cix.compulink.co.uk

Post by Recliner

Post by Roland Perry
In message
eptember.org>, at 11:17:32 on Mon, 8 Jan 2018, Recliner

Post by Recliner

Post by Roland Perry
How do you know what the cost of political upheaval after raising
taxes is likely to be?

But they wouldn't raise taxes. They'd just borrow the money more
cheaply, thus ultimately reducing future taxes.

What makes you think they have the power to borrow the money required?

Are you joking? Of course the Treasury can borrow more. It does so
all the time.

But the Treasury has to give TfL permission to borrow through them. And they
aren't.

I agree, but as I'm saying that's increasing the costs. Or TfL could
be allowed to issue its own bonds, which wouldn't be quite as cheap as
doing it through the Treasury, but would be a fraction of the cost of
a sale and leaseback of an old Tube fleet.

[unknown]

Post by Recliner

Post by r***@cix.compulink.co.uk

Post by Recliner

Post by Roland Perry
In message
eptember.org>, at 11:17:32 on Mon, 8 Jan 2018, Recliner

Post by Recliner

Post by Roland Perry
How do you know what the cost of political upheaval after raising
taxes is likely to be?

But they wouldn't raise taxes. They'd just borrow the money more
cheaply, thus ultimately reducing future taxes.

What makes you think they have the power to borrow the money required?

Are you joking? Of course the Treasury can borrow more. It does so
all the time.

But the Treasury has to give TfL permission to borrow through them. And they
aren't.

I agree, but as I'm saying that's increasing the costs. Or TfL could
be allowed to issue its own bonds, which wouldn't be quite as cheap as
doing it through the Treasury, but would be a fraction of the cost of
a sale and leaseback of an old Tube fleet.

The issue is that would be seen as government backed as well, Increasing
government debt affwcts the interest payable on it thuis raidung
government spending. ALso there are many people complaining about
increasing debt. See the history of BR for underinvestment due to this.

What fraction of the cost of a sale and leaseback of an old Tube fleet
be? .001? or 99%?

[r***@cix.compulink.co.uk]

Post by Recliner

Post by r***@cix.compulink.co.uk

Post by Recliner

Post by Roland Perry
In message
eptember.org>, at 11:17:32 on Mon, 8 Jan 2018, Recliner

Post by Recliner

Post by Roland Perry
How do you know what the cost of political upheaval after raising
taxes is likely to be?

But they wouldn't raise taxes. They'd just borrow the money more
cheaply, thus ultimately reducing future taxes.

What makes you think they have the power to borrow the money required?

Are you joking? Of course the Treasury can borrow more. It does so
all the time.

But the Treasury has to give TfL permission to borrow through them. And
they aren't.

I agree, but as I'm saying that's increasing the costs. Or TfL could
be allowed to issue its own bonds, which wouldn't be quite as cheap as
doing it through the Treasury, but would be a fraction of the cost of
a sale and leaseback of an old Tube fleet.

The Government don't care. They want to punish Labour for the fares freeze.

[Recliner]

Post by r***@cix.compulink.co.uk

Post by Recliner

Post by r***@cix.compulink.co.uk

Post by Recliner

Post by Roland Perry
In message
eptember.org>, at 11:17:32 on Mon, 8 Jan 2018, Recliner

Post by Recliner

Post by Roland Perry
How do you know what the cost of political upheaval after raising
taxes is likely to be?

But they wouldn't raise taxes. They'd just borrow the money more
cheaply, thus ultimately reducing future taxes.

What makes you think they have the power to borrow the money required?

Are you joking? Of course the Treasury can borrow more. It does so
all the time.

But the Treasury has to give TfL permission to borrow through them. And
they aren't.

I agree, but as I'm saying that's increasing the costs. Or TfL could
be allowed to issue its own bonds, which wouldn't be quite as cheap as
doing it through the Treasury, but would be a fraction of the cost of
a sale and leaseback of an old Tube fleet.

The Government don't care. They want to punish Labour for the fares freeze.

Yes, that's a very good point.

[tim...]

Post by r***@cix.compulink.co.uk

Post by Recliner

Post by r***@cix.compulink.co.uk

Post by Recliner

Post by Roland Perry
In message
eptember.org>, at 11:17:32 on Mon, 8 Jan 2018, Recliner

Post by Recliner

Post by Roland Perry
How do you know what the cost of political upheaval after raising
taxes is likely to be?

But they wouldn't raise taxes. They'd just borrow the money more
cheaply, thus ultimately reducing future taxes.

What makes you think they have the power to borrow the money required?

Are you joking? Of course the Treasury can borrow more. It does so
all the time.

But the Treasury has to give TfL permission to borrow through them. And
they aren't.

I agree, but as I'm saying that's increasing the costs. Or TfL could
be allowed to issue its own bonds, which wouldn't be quite as cheap as
doing it through the Treasury, but would be a fraction of the cost of
a sale and leaseback of an old Tube fleet.

The Government don't care. They want to punish Labour for the fares freeze.

Hm

I wonder what their plan is to win back the mayoralty in 2020 - only a 50%
fare increase?

tim

[Paul Corfield]

Post by tim...
Hm
I wonder what their plan is to win back the mayoralty in 2020 - only a 50%
fare increase?
tim

Obviously no one knows what the politicians are planning post 2020 but TfL are assuming fares will rise by RPI after the fares freeze. I got this from them when I recently FOI-ed a load of extra data from the new Business Plan.

[Recliner]

On Tue, 9 Jan 2018 04:40:49 -0800 (PST), Paul Corfield

Post by Paul Corfield

Post by tim...
Hm
I wonder what their plan is to win back the mayoralty in 2020 - only a 50%
fare increase?
tim

Obviously no one knows what the politicians are planning post 2020 but TfL are assuming fares will rise by RPI after the fares freeze. I got this from them when I recently FOI-ed a load of extra data from the new Business Plan.

I suppose TfL has to assume that business reverts to normal at the end
of any particular political pledge. Of course, by then, rail fares
probably won't be linked to RPI anyway, but TfL can't assume any
change in national fare strategy.

[Steve F.]

On Mon, 08 Jan 2018 13:45:24 +0000, Recliner

Post by Recliner
I agree, but as I'm saying that's increasing the costs. Or TfL could
be allowed to issue its own bonds, which wouldn't be quite as cheap as
doing it through the Treasury, but would be a fraction of the cost of
a sale and leaseback of an old Tube fleet.

Who has said they're selling and leasing back old trains?

They have a lot of much newer trains with a higher capital value.

[Recliner]

Post by Steve F.
On Mon, 08 Jan 2018 13:45:24 +0000, Recliner

Post by Recliner
I agree, but as I'm saying that's increasing the costs. Or TfL could
be allowed to issue its own bonds, which wouldn't be quite as cheap as
doing it through the Treasury, but would be a fraction of the cost of
a sale and leaseback of an old Tube fleet.

Who has said they're selling and leasing back old trains?
They have a lot of much newer trains with a higher capital value.

That doesn't change anything. They're still trains that have no value
to anyone but TfL, so the lease costs will reflect that lack of
flexibility. It's quite different to a ROSCO buying standard
Electrostars or Aventras that can be readily leased to a different TOC
on another route.

[Roland Perry]

Post by Recliner

Post by Roland Perry
In message
mber.org>, at 11:17:32 on Mon, 8 Jan 2018, Recliner

Post by Recliner

Post by Roland Perry
How do you know what the cost of political upheaval after raising taxes
is likely to be?

But they wouldn't raise taxes. They'd just borrow the money more cheaply,
thus ultimately reducing future taxes.

What makes you think they have the power to borrow the money required?

Are you joking? Of course the Treasury can borrow more. It does so
all the time.

But can it borrow money to prop up TfL's current account? Remember - the
funds raised by the sale/leaseback are being used keep TfL going on a
day to day basis.

[Recliner]

Post by Roland Perry

Post by Recliner

Post by Roland Perry
In message
mber.org>, at 11:17:32 on Mon, 8 Jan 2018, Recliner

Post by Recliner

Post by Roland Perry
How do you know what the cost of political upheaval after raising taxes
is likely to be?

But they wouldn't raise taxes. They'd just borrow the money more cheaply,
thus ultimately reducing future taxes.

What makes you think they have the power to borrow the money required?

Are you joking? Of course the Treasury can borrow more. It does so
all the time.

But can it borrow money to prop up TfL's current account? Remember - the
funds raised by the sale/leaseback are being used keep TfL going on a
day to day basis.

No, as stated in Paul's tweet that started this thread, they're to
help fund the new Piccadilly line fleet.

[Roland Perry]

Post by Recliner

Post by Roland Perry

Post by Recliner

Post by Roland Perry
What makes you think they have the power to borrow the money required?

Are you joking? Of course the Treasury can borrow more. It does so
all the time.

But can it borrow money to prop up TfL's current account? Remember - the
funds raised by the sale/leaseback are being used keep TfL going on a
day to day basis.

No, as stated in Paul's tweet that started this thread, they're to
help fund the new Piccadilly line fleet.

As an outright purchase (which I agree would be sending money round in
circles) or to pay a different set of leasing costs?

[Recliner]

Post by Roland Perry

Post by Recliner

Post by Roland Perry

Post by Recliner

Post by Roland Perry
What makes you think they have the power to borrow the money required?

Are you joking? Of course the Treasury can borrow more. It does so
all the time.

But can it borrow money to prop up TfL's current account? Remember - the
funds raised by the sale/leaseback are being used keep TfL going on a
day to day basis.

No, as stated in Paul's tweet that started this thread, they're to
help fund the new Piccadilly line fleet.

As an outright purchase (which I agree would be sending money round in
circles) or to pay a different set of leasing costs?

The old stock will be worth much less than the new, so it's presumably
to part-fund the purchase of the new stock.

[Recliner]

Post by Roland Perry

Post by b***@cylonHQ.com

mix of internally generated surplus and govt investment grant pays for new =
train fleets. I can't recall a train fleet being "flogged off" to pay for a=
new one. It was Caroline Pidgeon who remarked that the proposal was "craz=
y" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys the
trains won't be doing it for the good of mankind, they'll want a long term
profit. As ever short termism rules in british government.

What government wants is stability (whichever political party in power
we are talking about).
Thus, raising taxes to fund those trains could result in voters making a
change at the top, which tends to cause all sorts of costly consequences
reversing earlier policy decisions.
A long term lease (which is the opposite of short-term-ism actually)
does at least make things predictable.

This is a form of off-balance sheet government borrowing. It would be much
cheaper if the Treasury borrowed the money directly. With the best PFI
deals, the greater efficiency of a private sector builder/provider/operator
more than makes up for the higher interest rates they have to pay, but
there's no potential for such efficiencies in a sale/leaseback deal.

And because the depreciating asset has very little value to anyone other
than LU, the lender has to include a risk premium. It's not like a building
sale/leaseback, where the asset has an intrinsic, and possibly growing,
value. At the end of the lease, the LU trains will be worth little more
than scrap value, so the lease charge has to be high enough to cover their
declining value. That's not true of, say, an office building.

[Roland Perry]

In message
<1065151883.537100101.989992.recliner.ng-***@news.eternal-sept
ember.org>, at 10:36:22 on Mon, 8 Jan 2018, Recliner

Post by Recliner

Post by Roland Perry

Post by b***@cylonHQ.com

mix of internally generated surplus and govt investment grant pays for new =
train fleets. I can't recall a train fleet being "flogged off" to pay for a=
new one. It was Caroline Pidgeon who remarked that the proposal was "craz=
y" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys the
trains won't be doing it for the good of mankind, they'll want a long term
profit. As ever short termism rules in british government.

What government wants is stability (whichever political party in power
we are talking about).
Thus, raising taxes to fund those trains could result in voters making a
change at the top, which tends to cause all sorts of costly consequences
reversing earlier policy decisions.
A long term lease (which is the opposite of short-term-ism actually)
does at least make things predictable.

This is a form of off-balance sheet government borrowing. It would be much
cheaper if the Treasury borrowed the money directly.

Does TfL have the powers to demand the Treasury take out such loans?

Post by Recliner
With the best PFI deals, the greater efficiency of a private sector
builder/provider/operator more than makes up for the higher interest
rates they have to pay, but there's no potential for such efficiencies
in a sale/leaseback deal.
And because the depreciating asset has very little value to anyone other
than LU, the lender has to include a risk premium.

Are you sure this leasing deal has no penalty for early termination?

Post by Recliner
It's not like a building sale/leaseback, where the asset has an
intrinsic, and possibly growing, value. At the end of the lease, the LU
trains will be worth little more than scrap value,

The same value as to TfL, had they owned them outright, then.

Post by Recliner
so the lease charge has to be high enough to cover their declining
value.

Which is what all leases for diminishing assets do, inherently.

[Recliner]

Post by Roland Perry
In message
ember.org>, at 10:36:22 on Mon, 8 Jan 2018, Recliner

Post by Recliner

Post by Roland Perry

Post by b***@cylonHQ.com

mix of internally generated surplus and govt investment grant pays for new =
train fleets. I can't recall a train fleet being "flogged off" to pay for a=
new one. It was Caroline Pidgeon who remarked that the proposal was "craz=
y" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys the
trains won't be doing it for the good of mankind, they'll want a long term
profit. As ever short termism rules in british government.

What government wants is stability (whichever political party in power
we are talking about).
Thus, raising taxes to fund those trains could result in voters making a
change at the top, which tends to cause all sorts of costly consequences
reversing earlier policy decisions.
A long term lease (which is the opposite of short-term-ism actually)
does at least make things predictable.

This is a form of off-balance sheet government borrowing. It would be much
cheaper if the Treasury borrowed the money directly.

Does TfL have the powers to demand the Treasury take out such loans?

Obviously not.

Post by Roland Perry

Post by Recliner
With the best PFI deals, the greater efficiency of a private sector
builder/provider/operator more than makes up for the higher interest
rates they have to pay, but there's no potential for such efficiencies
in a sale/leaseback deal.
And because the depreciating asset has very little value to anyone other
than LU, the lender has to include a risk premium.

Are you sure this leasing deal has no penalty for early termination?

I'm sure there would be, but I'm talking about what happens at the end of
the lease.

Post by Roland Perry

Post by Recliner
It's not like a building sale/leaseback, where the asset has an
intrinsic, and possibly growing, value. At the end of the lease, the LU
trains will be worth little more than scrap value,

The same value as to TfL, had they owned them outright, then.

LU could continue to use the trains if it owned them. But what would the
leading company do with a fleet of usable, but ageing, trains that couldn't
be used by anyone else? The only buyer at more than scrap value would be
LU, but it would have all the pricing power.

Post by Roland Perry

Post by Recliner
so the lease charge has to be high enough to cover their declining
value.

Which is what all leases for diminishing assets do, inherently.

Over the expected life of the asset. But I'm assuming the lease is for a
shorter period.

[Roland Perry]

In message
<1559821733.537103121.202392.recliner.ng-***@news.eternal-sept
ember.org>, at 11:23:18 on Mon, 8 Jan 2018, Recliner

Post by Recliner
I'm assuming

Well, there you go.

[Recliner]

Post by Roland Perry
In message
ember.org>, at 11:23:18 on Mon, 8 Jan 2018, Recliner

Post by Recliner
I'm assuming

Well, there you go.

Well, it's a pretty safe assumption, and you don't have any facts,
either.

TfL certainly wouldn't want to commit to a lease longer than the
minimum expected life of the fleet in question. The actual life is
probably much longer. TfL will then be in a position to pay a much
lower price for any extension lease or re-purchase -- which would
cause the bank to charge more for the lease.

[Roland Perry]

Post by Recliner

Post by Roland Perry

Post by Recliner
I'm assuming

Well, there you go.

Well, it's a pretty safe assumption, and you don't have any facts,
either.

Come back when you have some.

[Recliner]

Post by Roland Perry

Post by Recliner

Post by Roland Perry

Post by Recliner
I'm assuming

Well, there you go.

Well, it's a pretty safe assumption, and you don't have any facts,
either.

Come back when you have some.

And vice versa. Not having facts or the latest publicly available
information certainly doesn't stop you commenting on everything.
Indeed, why did you even join this thread, as you have zero facts
related to it?

[Roland Perry]

Post by Recliner

Post by Roland Perry

Post by Recliner

Post by Roland Perry

Post by Recliner
I'm assuming

Well, there you go.

Well, it's a pretty safe assumption, and you don't have any facts,
either.

Come back when you have some.

And vice versa. Not having facts or the latest publicly available
information certainly doesn't stop you commenting on everything.

Everything? Really!!

I don't even comment on a fraction of the postings in half of the
threads in this one newsgroup, let alone the rest of the big wide world
out there.

You appear to have a very severe persecution complex.

Post by Recliner
Indeed, why did you even join this thread, as you have zero facts
related to it?

My accumulated understanding of how public finance works, is not "zero
facts".

[Robin]

On 08/01/2018 10:36, Recliner wrote:

<snip>

Post by Recliner
This is a form of off-balance sheet government borrowing.

I am long past the need to know but thought that accounting standards
had now stopped such sale and leaseback deals escaping the balance
sheet. I can't see TfL arguing successfully it's an operating lease.
And I think IFRS16 removes even that distinction from next year for
plant and machinery so TfL would have to show a “right to use the stock”
asset and a "lease" liability on their balance sheet.

Post by Recliner
It would be much
cheaper if the Treasury borrowed the money directly.

Cheaper for TfL, yes. Whether it's cheaper for the country depends on
what the bond markets decide about UK national debt.

And people outside London paying increased fares year by year might ask
why Londoners who don't should be bailed out.

[Recliner]

Post by Robin
<snip>

Post by Recliner
This is a form of off-balance sheet government borrowing.

I am long past the need to know but thought that accounting standards
had now stopped such sale and leaseback deals escaping the balance
sheet. I can't see TfL arguing successfully it's an operating lease.
And I think IFRS16 removes even that distinction from next year for
plant and machinery so TfL would have to show a “right to use the stock”
asset and a "lease" liability on their balance sheet.

Post by Recliner
It would be much
cheaper if the Treasury borrowed the money directly.

Cheaper for TfL, yes. Whether it's cheaper for the country depends on
what the bond markets decide about UK national debt.
And people outside London paying increased fares year by year might ask
why Londoners who don't should be bailed out.

Yes, that does the raise the question of why TfL is still freezing
Tube fares when it doesn't have enough budget to renew life-expired
fleets.

[r***@cix.compulink.co.uk]

Post by Recliner

Post by Robin
And people outside London paying increased fares year by year might ask
why Londoners who don't should be bailed out.

Yes, that does the raise the question of why TfL is still freezing
Tube fares when it doesn't have enough budget to renew life-expired
fleets.

Trumped by a political promise. The costs of breaking them are
unquantifiable.

[Recliner]

Post by r***@cix.compulink.co.uk

Post by Recliner

Post by Robin
And people outside London paying increased fares year by year might ask
why Londoners who don't should be bailed out.

Yes, that does the raise the question of why TfL is still freezing
Tube fares when it doesn't have enough budget to renew life-expired
fleets.

Trumped by a political promise.

True

Post by r***@cix.compulink.co.uk
The costs of breaking them are unquantifiable.

Not unquantifiable, but unpredictable.

[Roland Perry]

Post by Recliner

Post by Robin

Post by Recliner
This is a form of off-balance sheet government borrowing.

I am long past the need to know but thought that accounting standards
had now stopped such sale and leaseback deals escaping the balance
sheet. I can't see TfL arguing successfully it's an operating lease.
And I think IFRS16 removes even that distinction from next year for
plant and machinery so TfL would have to show a “right to use the stock”
asset and a "lease" liability on their balance sheet.

Post by Recliner
It would be much
cheaper if the Treasury borrowed the money directly.

Cheaper for TfL, yes. Whether it's cheaper for the country depends on
what the bond markets decide about UK national debt.
And people outside London paying increased fares year by year might ask
why Londoners who don't should be bailed out.

Yes, that does the raise the question of why TfL is still freezing
Tube fares when it doesn't have enough budget to renew life-expired
fleets.

Because the Mayor made it an election commitment.

If he goes back on that, he may well not get re-elected, which party
politics aside, will very likely cause turbulence costing more than this
one-off deal's low interest rates on money to prop up day to day
operations; which they can't raise as a free-standing loan because
that's not how public financing works.

[Recliner]

Post by Roland Perry

Post by Recliner

Post by Robin

Post by Recliner
This is a form of off-balance sheet government borrowing.

I am long past the need to know but thought that accounting standards
had now stopped such sale and leaseback deals escaping the balance
sheet. I can't see TfL arguing successfully it's an operating lease.
And I think IFRS16 removes even that distinction from next year for
plant and machinery so TfL would have to show a “right to use the stock”
asset and a "lease" liability on their balance sheet.

Post by Recliner
It would be much
cheaper if the Treasury borrowed the money directly.

Cheaper for TfL, yes. Whether it's cheaper for the country depends on
what the bond markets decide about UK national debt.
And people outside London paying increased fares year by year might ask
why Londoners who don't should be bailed out.

Yes, that does the raise the question of why TfL is still freezing
Tube fares when it doesn't have enough budget to renew life-expired
fleets.

Because the Mayor made it an election commitment.
If he goes back on that, he may well not get re-elected, which party
politics aside, will very likely cause turbulence costing more than this
one-off deal's low interest rates on money to prop up day to day
operations; which they can't raise as a free-standing loan because
that's not how public financing works.

Again, get your facts straight: this is not to prop up day-to-day
operation. I know you love speculating without facts, while pretending
to know what you're talking about, but you could have at least read
the tweet that started this thread.

[b***@cylonHQ.com]

On Mon, 08 Jan 2018 13:50:15 +0000

Post by Recliner

Post by Roland Perry

Post by Recliner

Post by Robin

Post by Recliner
This is a form of off-balance sheet government borrowing.

I am long past the need to know but thought that accounting standards
had now stopped such sale and leaseback deals escaping the balance
sheet. I can't see TfL arguing successfully it's an operating lease.
And I think IFRS16 removes even that distinction from next year for
plant and machinery so TfL would have to show a “right to use the stock”
asset and a "lease" liability on their balance sheet.

Post by Recliner
It would be much
cheaper if the Treasury borrowed the money directly.

Cheaper for TfL, yes. Whether it's cheaper for the country depends on
what the bond markets decide about UK national debt.
And people outside London paying increased fares year by year might ask
why Londoners who don't should be bailed out.

Yes, that does the raise the question of why TfL is still freezing
Tube fares when it doesn't have enough budget to renew life-expired
fleets.

Because the Mayor made it an election commitment.
If he goes back on that, he may well not get re-elected, which party
politics aside, will very likely cause turbulence costing more than this
one-off deal's low interest rates on money to prop up day to day
operations; which they can't raise as a free-standing loan because
that's not how public financing works.

Again, get your facts straight: this is not to prop up day-to-day
operation. I know you love speculating without facts, while pretending
to know what you're talking about, but you could have at least read
the tweet that started this thread.

Whatever the reason, if it this has been devised by Boris or some other Tory
mayor you can gaurantee corbyn, abbot and the other usual suspects would be
making hay in parliament and on TV about it. You'd be able to hear the squeals
of righteous indignation from across the channel. But because its little khan
golden boy there hasn't been a squeak from any of them.

[Roland Perry]

you could have at least read the tweet that started this thread.

The one which was deleted before I had a chance to. That one?

[Recliner]

Post by Roland Perry

you could have at least read the tweet that started this thread.

The one which was deleted before I had a chance to. That one?

Yes, that one.

Hint: Chris quoted it in his posting.

[r***@cix.compulink.co.uk]

In article

Post by Recliner

Post by b***@cylonHQ.com
On Sat, 6 Jan 2018 07:06:02 -0800 (PST)

Post by Paul Corfield
mix of internally generated surplus and govt investment grant pays for
new train fleets. I can't recall a train fleet being "flogged off" to
pay for a new one. It was Caroline Pidgeon who remarked that the
proposal was "crazy" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys
the trains won't be doing it for the good of mankind, they'll want a
long term profit. As ever short termism rules in british government.

Yes, it's just a way of borrowing money at a significantly higher interest
rate than TfL would pay if it could offer its own bonds, or if the
Treasury funded the trains.
It's not as if the banks doing the lease-back will be bringing in any
private sector efficiencies like a main line ROSCO might. These trains are
completely specific to LU, so there are no potential benefits from their
being leased rather than owned.

The fact that a franchise like Greater Anglia was won on the basis of
replacing its entire rolling stock fleet shows us just how cheap new trains,
including leasing costs, have got, partly due to rock-bottom interest rates.
So I wouldn't assume anything about this deal.

[Recliner]

Post by r***@cix.compulink.co.uk
In article

Post by Recliner

Post by b***@cylonHQ.com
On Sat, 6 Jan 2018 07:06:02 -0800 (PST)

Post by Paul Corfield
mix of internally generated surplus and govt investment grant pays for
new train fleets. I can't recall a train fleet being "flogged off" to
pay for a new one. It was Caroline Pidgeon who remarked that the
proposal was "crazy" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys
the trains won't be doing it for the good of mankind, they'll want a
long term profit. As ever short termism rules in british government.

Yes, it's just a way of borrowing money at a significantly higher interest
rate than TfL would pay if it could offer its own bonds, or if the
Treasury funded the trains.
It's not as if the banks doing the lease-back will be bringing in any
private sector efficiencies like a main line ROSCO might. These trains are
completely specific to LU, so there are no potential benefits from their
being leased rather than owned.

The fact that a franchise like Greater Anglia was won on the basis of
replacing its entire rolling stock fleet shows us just how cheap new trains,
including leasing costs, have got, partly due to rock-bottom interest rates.
So I wouldn't assume anything about this deal.

So why isn't TfL leasing its new Piccadilly fleet from a ROSCO, rather
than funding it using a contrived sales and lease-back deal for one of
its existing fleets?

[Robin]

On 08/01/2018 13:30, Recliner wrote:
<snip>

Post by Recliner
So why isn't TfL leasing its new Piccadilly fleet from a ROSCO, rather
than funding it using a contrived sales and lease-back deal for one of
its existing fleets?

Possibly because TfL don't want/can't have a deal where a company owns
and *operates* the rolling stock.

The difference matters - for tax as well as the balance sheet. But I am
too lazy to have looked for the answer in TfL's documents. And also too
lazy (and intellectually depreciated) to have looked at just what the
tax treatment will be following IFRS 16.