Leasing Passenger Trains: The British Experience

Abstract

This paper reviews the experience of the train‐leasing model, a vital but invisible component of Britain’s privatized railway system, using publicly available financial information. As a result of the leasing regime established at privatization, the leasing charges for the old trains, paid for by the state, are high, contributing to the need for higher fares and subsidies, and the highest profits in the industry. The cost of commissioning new trains via leasing is higher than public debt. Operating and reliability problems have imposed extra costs on other stakeholders. Leasing charges are likely to continue long after the trains have been fully paid for.

Acknowledgements

The author would like to thank Catalyst Form for funding the research; Peter Macdonald for assistance with the data; and the anonymous reviewers for very useful comments. An earlier version of this paper was given at the Thredbo 9 Conference on Land Transport, Ownership, Regulation and Competition, and is to be published in the book of the conference.

Notes

1. The number of trains has not been published systematically by the Department for Transport since privatization. While the most recent Department for Transport press release (28 June 2006) claims there are approximately 12 500 trains and carriages on lease, on being asked for the source of this statistic, the press officer checked and admitted that the number was incorrect and that it was in fact about 11 500.