Roland Perry wrote:
In message , at 09:49:27 on Mon, 8 Jan
2018, remarked:
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.