A week or two back, I tweeted a link to a newspaper article about the profitability of train operating companies, or TOCs as we now call them. I thought it was time I also blogged about this, for the benefit of both of you out there who read my ramblings.

The author’s point was that the privatisation of previously state-owned utilities or other essential services was supposed to bring in lots of investment as well as private-sector efficiency. The case in point when he wrote was the flotation of Royal Mail; but he predicted that the expected extra investment might not happen, by studying what had happened with the railways. If that privatised industry was indeed investing heavily, it would be reflected in the TOCs’ returns on investment and that data is surely available through the companies’ financial reports.

The numbers were almost unbelievable and I’d never heard them before: the AVERAGE return on capital by the TOCs in the year ending 5 April 2012 was 147%. Yes, you read that right: 147%. What’s more, this figure was not an upward blip; since 2004, when the financial data began to be collated and publicly available, it had never been less than 100%.

Do you know any other business that consistently makes that kind of return, dear reader? If you do, why aren’t you investing in it?

This answers one question I’ve always pondered; why is it that the level of state subsidy of the railways is no less now (inflation-adjusted) than it was before privatisation?

But it leaves another question unanswered. If this kind of financial overview of the privatised rail operators has been compiled since 2004, why has so little been made of it?


(As they used say on exam papers in the far-off days when I was at school.)


I’m a big fan of Michael Portillo’s excellent TV series “Great British Railway Journeys”. Even when they are repeated I often watch them again. Last week we were at the Royal Exchange in London. Allow me to paraphrase the conversation.

Michael Portillo: “In the 1850s, when my Bradshaw guide was published, were railway shares a big thing?”

Historian: “Yes indeed, they were the biggest share issues. Railways were promoted as a foolproof way of making money.”

Foolproof, eh? No change there, then, judging by that 147%.


For the newspaper article I quote above, here’s a LINK:

I loved the “larceny” headline. The subhead (“not what the Tories promised”) is also fair enough factually speaking. However, when Labour came in (1997), four years after the enabling legislation but before privatisation had been fully implemented, they did not reverse the decision. To quote my old chum Wikipedia:

“This process was very controversial at the time, and the Labour opposition announced its intention to re-nationalise the railways, although this was not implemented by the subsequent Labour government. The manner in which privatisation was carried out has also received criticism for the number of companies involved (over 20), and its complexity.”


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