Rolling Stock Details

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Railways: roll ing stock

Standard Note: SN3146

Last updated: 24 April 2013

Author: Louise Butcher

Section Business and Transport

This note provides information about the various rolling stock companies that supply train

carriages to the UK railways and explains the procurement policies and programmes of

successive governments.

The rolling stock (trains) that run on the railways is owned by three private companies (rolling

stock leasing companies, or ROSCOs). These companies lease the rolling stock to the trainoperating companies (TOCs) who then deploy it on their services. For the most part, the train

companies procure the rolling stock directly from the rolling stock companies.

In addition, in recent years the Government has stepped in to procure large rolling stock

orders directly from the train manufacturers. Procurements for schemes such as the InterCity

Express Programme, Thameslink and Crossrail have become mired in controversy due to the

award of successive contracts to companies based largely outside of the UK. Information on

public sector procurement rules is dealt with in a separate note, SN6029.

Information on other rail-related issues can be found on the Railways Topical Page of the

Parliament website.

Contents

1 How trains are procured and leased in the UK 22 Rolling stock policy 4

2.1 Conservative-Liberal Democrat Coalition Government, 2010- 42.2 Labour Government, 1997-2010 5

The early years 5Eddington, the 2007 White Paper and their fall-out 6Competition Commission inquiry, 2006-09 7

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Final proposals for reform 92.3 Safety 9

3 InterCity Express Programme (IEP) 114 Thameslink rolling stock project 135 Crossrail rolling stock project 156 Rolling stock leasing companies (ROSCOs) 16

6.1 Privatisation 166.2 Porterbrook Leasing 186.3 Angel Trains 196.4 Eversholt Rail 20

1 How trains are procured and leased in the UK

When the railways were privatised in the early-mid 1990s, the rail system was divided up

Network Rail owns and operates the infrastructure, the train operating companies (TOCs) bid

for and operate passenger franchises and the rolling stock leasing companies (ROSCOs)

own and lease out the trains to the TOCs.1

In a 2009 report the Competition Commission outlined the division of rolling stock between

the main leasing companies as follows:

Passenger rolling stock in Great Britain is predominantly owned by three rolling stock

leasing companies (ROSCOs), which were created at privatization to own the fleets of

ex-British Rail passenger vehicles (known as MOLA rolling stock). The Government

determined how this MOLA rolling stock should be divided between the three

ROSCOs. The three ROSCOs are: HSBC Rail (UK) Limited (HSBC); Porterbrook

Leasing Company Limited (Porterbrook); and Angel Trains Limited (Angel) [...]

In addition to the three ROSCOs, there is one other lessor of rolling stock to franchised

passenger TOCsVoyager Leasing Limited (Voyager Leasing)which was set up to

lease a new fleet of Voyager trains but has not undertaken any further leasing

activities. The ROSCOs market shares are fairly similar and have not changed

substantially since privatization, although there are differences in the shares of new

rolling stock acquired since privatization. Angel now has a 36 per cent share of total

available rolling stock used on franchised passenger services, Porterbrook 32 per cent

and HSBC 29 per cent. Voyager Leasing has a 3 per cent market share.2

It goes on to explain how rolling stock is deployed by the TOCS as part of their franchises:

Passenger railway services in Great Britain are operated by TOCs, in most cases on

the basis of franchises, which are let by the Department for Transport (DfT) through a

competitive tender process. The TOCs bid competitively on the basis of the subsidy

that they require (or in an increasing number of cases the premium they will pay) to

1

separate notes are available on rail privatisation, Network Rail (and its predecessor Railtrack) and the trainoperating companies on the Railways Topical Pageof the Parliament website

2CC, Rolling Stock Leasing market investigation, April 2009,paras 4-5

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operate the franchise. Lease rentals constitute a significant proportion of the total

franchise costs.

[...]

The franchise invitation to tender (ITT) sets out the DfTs expectations (its base case)

for the services to be provided on the franchise. Service Level Commitments, ie thespecification of services to be provided by the franchisee, are often very detailed and

may specify explicitly, or necessitate implicitly, the use of particular types, classes or

fleets of rolling stock. TOCs can also put forward variations of the base case. However,

the DfT generally awards franchises on the base case specification and only thereafter

considers whether the winners proposed variations would be desirable. TOCs

preparing franchise bids each approach the ROSCOs or other lessors to reach

conditional agreements for leasing the rolling stock they will require; these are finalized

once the preferred bidder is selected. Rolling stock leases are typically for the length of

the franchise although there are shorter-term leases.3

The TAS consultancy echoed this shift towards departmental decision making on rolling

stock allocations, removing the ability of TOCs to make their own decisions about the trainsets to use on their networks.4

The Competition Commission report stated that, while there had been significant investment

in new rolling stock since privatisation, much of this replaced retired rolling stock and the

number of passenger vehicles available for use had increased by only three per cent by

2009.5 The February 2011 report on rail investment by the TAS consultancy stated that

between 1997 and 2006 a total of 5,250 vehicles had been ordered for the train fleet, worth

approximately 6 billion, excluding maintenance.6 As to the extent to which this replaced

existing stock, TAS states:

It is interesting to note the extent to which these orders were intended to provideadditional capacity rather than as straight replacements for existing stock. Aside from

Virgins major orders for the Cross Country and West Coast franchises (which

represented significant increases in capacity), we estimate that over 500 vehicles in

the orders were for expanded services (around 10% of the total).7

As explained in more detail in sections 3-5, below, over recent years successive

Governments have become more involved in the direct procurement of major rolling stock

orders such as those for the InterCity Express Programme (IEP), Thameslink and

Crossrail. This involves the setting up of new companies to build and then lease out the

rolling stock for these specific projects. The process was summarised in the 2008

procurement notice and project summary and overview for the recent Thameslink contract:

The Department is initiating the process of procuring train provision and associated

services for, and on behalf of the train operating company operating the

Thameslink/GN franchise (the 'TOC') and the advertised contract is likely to be entered

into by the TOC. The procurement uses the negotiated procedure to select a party

which will supply and maintain the fleet of new rolling stock. The Department intends

that the chosen bidder will be required to arrange the finance necessary for the

acquisition and ownership of the rolling stock. The ITT would therefore require bidders

3ibid., paras 7&9

4TAS, Rail Industry Monitor: Rail Industry Investment, February 2011, p24

5

op cit., Rolling Stock Leasing market investigation, para 106op cit., Rail Industry Monitor: Rail Industry Investment, p23

7ibid., p24

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to submit bids covering the supply and maintenance of the new rolling stock, together

with arranging the necessary finance.8

Basically, what this means is that the winning bidder establishes a Special Purpose

Company (SPC), which includes investment from external equity and the manufacturers. It is

this SPC that then raises the funds required to build and maintain the stock. In effect, it is a

mini-ROSCO: the SPC owns the rolling stock and leases it directly to whoever is the winning

bidder for the relevant franchise. The Departments role is to ensure that the rolling stock

gets built (i.e. it puts out the procurement) and then it guarantees that the stock will be leased

by a TOC over a certain period.9

2 Rolling stock policy

2.1 Conservati ve-Liberal Democrat Coalition Government, 2010-

The Coalition Government stated very early on that it intended to reappraise and reassess all

rolling stock procurement proposals by the previous government for affordability,10 and that it

would consult on planned changes to franchising.

Firstly, on the various rolling stock procurement proposals, the government announced that,

there would be a pause for financial year 2010-11 to assist the Department in making its

contribution to the Government's in-year savings programme.11 This was described by the

then Secretary of State for Transport, Philip Hammond, as part of a 54 million deferment

that would have been spent on a small number of lower priority rolling stock and highway

improvement schemes.12

In early 2011 the Government stated its intention to deliver more than 2,100 new rail

carriages to the network by May 2019 (an increase of 1,850 net); and that the Department

would negotiate with train operators to provide more and/or better rolling stock on a number

of franchises.13 Deals for extra rolling stock were reached with Northern Rail, First Great

Western, London Midland, Virgin West Coast, South West Trains and Southern by the end of

2011.14

Separately, there was a great deal of controversy over the award of the Thameslink rolling

stock contract (see section 4, below) and delays to the timetable for procuring the Crossrail

rolling stock project (see section 5, below).

On franchise reform, the Governments J uly 2010 consultation on reforming the franchising

process aimed in part to implement longer franchises which would in turn incentivise TOCs to

buy their own rolling stock, bringing more competition into the market.15 The Governments

response to the consultation, published in J anuary 2011, concluded that it would opt for

8DfT, OJEU procurement notice for Thameslink, April 2008; see also: DfT, Thameslink Rolling Stock ProjectSummary and Overview, April 2008, section 3

9this is permitted under section 54 of the Railways Act 1993, as amended

10 HC Deb 7 June 2010, c39W



13 HC Deb 11 January 2011, c238W; improvements on the Northern franchise around Leeds were announced on

13 April, see: DfT press notice, Additional seats for Leeds commuters, 13 April 201114

DfT press notice, 8800 extra spaces for busy trains on key routes, 10 August 2011; DfT press nptice, WestCoast passengers in line for 28,000 extra seats as franchise extension signed, 27 October 2011; DfT pressnotice, Thames Valley & West Country Rail passengers in line for extra seats boost, 22 November 2011; DfT

press notice, New platform and 60 extra carriages for Waterloo commuters, 23 December 2011; and DfTpress notice, Southern carriages announcement, 28 December 2011

15DfT, Reforming Rail Franchising, J uly 2010, para 2.12

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longer franchises in the future to incentivise investment, including in new rolling stock. It

would also guarantee an enhanced residual value mechanism that will reward operators for

investment with a payback period longer than their franchise term. This will involve

guaranteeing a value for those assets (such as rolling stock) at the end of the franchise.16

In early 2013 there have been reports about the increased potential cost of rolling stock forthe planned High Speed 2 (HS2) line from London to the north of England. This is based on

analysis in HS2 Ltd.s March 2012 report on cost and risk modelling, published in J anuary

2013. It states that for various reasons the estimated costs of the train sets likely to be used

on HS2 have had to be increased.17 These figures are likely to change again, considering the

fact that an order for rolling stock is not likely to be put in for several years yet. 18

2.2 Labour Government, 1997-2010

The early years

In its October 2002 report into overcrowding on public transport, the Transport Select

Committee recommended in strong terms that the Strategic Rail Authority (SRA) had a duty

to draw up a rolling stock strategy as a matter of urgency.19 The SRA published its rollingstock strategy in December 2003.20 The report reaffirmed the leading role of the private

sector in the rolling stock market and clarified the role of the SRA.21 Announcing the

Strategy, SRA Chairman, Richard Bowker, said:

The private sector has brought clear benefits to the procurement, delivery and

maintenance of rolling stock in Britain. Since 1997, the rolling stock market has

delivered over 4 billion of new investment and procured 4,500 new vehicles for the

network. It is not appropriate for the SRA to meddle where the market does a better

job. The Strategy sets out a clear and limited role for the SRA - to ensure that there is

an efficient and sustainable market for rolling stock supply that encourages innovation,

and to let the market get on and deliver it.

22

The strategy concluded that the SRA should continue to support and facilitate the benefits of

private sector investment, commercial decision making and private risk-taking, by involving

itself in rolling stock markets in a limited, clear and consistent way.23 Further, the Train

Operating Companies (TOCs) should continue to determine their choice of rolling stock fleet.

The strategy also stated that the SRA would set out high-level rolling stock performance

output specifications; ensure that future procurement processes allow sufficient time for

construction and delivery of rolling stock; work with TOCs to achieve good value for money

when renewing Master Operating Lease Agreements (MOLAs); and appoint a Director with

responsibility for co-ordinating delivery of the actions set out in the strategy.24

In February 2004 the National Audit Office (NAO) produced a report on the state of Britains

rolling stock. The report concluded that although new trains were bringing significant benefits

16DfT, Reforming Rail Franchising: Government response to consultation and policy statement, J anuary 2011,para 9.11

17HS2 Ltd., HS2 Cost and Risk Model Report: A report to Government by HS2 Ltd, March 2012, pp15-16

18for more information on the timetable for HS2, see HC Library note SN316

19Transport Committee,Overcrowding on public transport (seventh report of session 2002-03), HC 201, 15October 2002, pp13-17

20SRA, Rolling Stock Strategy, December 2003

21SRA press notice, Future of rolling stock lies in the private sector, 19 December 2003

22ibid.

23

the SRA was disbanded following the Railways Act 2005 and most of its responsibilities taken on by theDepartment for Transport; for more information see Library Standard Note SN1344

24op cit., Future of rolling stock lies in the private sector

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to passengers, most were late entering service and the NAO thought it unlikely that the

statutory deadline of December 2004 for removing all the oldest slam-door trains from the

network would be met.25

The report also stated that new trains were not bringing all of the passenger benefits that

they should. In particular, passenger groups considered that manufacturers and TOCs hadfailed to consult sufficiently early with passengers, and had complaints about the layout of

some new vehicles and that new rolling stock was not always fully accessible to passengers

with disabilities. On some routes, passenger numbers had grown faster than the number of

carriages ordered and the railway infrastructures ability to accommodate more frequent or

longer trains. In addition, all of the TOCs that were running new trains experienced reliability

problems: most commonly concerning mechanical failure, on-train computers and air

conditioning.26 The report also found that:

bringing new trains into service is a complex task, involving at least nine

organisations and 60 key stages;

one of the reasons why new trains entered service late and had poor reliability wasmanufacturing and managerial difficulties due to a lack of steady demand for new

trains in the two to three years leading up to privatisation; other reasons were a

lack of organisational coherence within the rail industry and the absence of

standardisation of the network and trains;

there was a lack of information about the railway infrastructure, making it difficult

for manufacturers to build trains compatible with the network;

there was a lack of clearly defined pass/fail criteria for assessing safety risks; and

because there was no national facility for testing trains off the network and finding

time and space on the network to carry out tests is difficult, new trains were put intoservice without sufficient testing in all conditions, contributing to reliability problems

when the trains were in service.27

Eddington, the 2007 White Paper and their fall-out

Sir Rod Eddington was charged by the Treasury and the Department for Transport in 2005

with looking into the relationship between transport and the economy. He published his

report in December 2006.28 Sir Rod looked at the benefits of increasing capacity through new

rolling stock. He concluded that to do so would represent a relatively high return for a

reasonable investment and certainly for less investment than wholesale upgrades to the

infrastructure:

Upgrading rolling stock and lengthening trains on congested rail links, combined with

changes to timetables to increase frequency can significantly increase the effective

capacity of existing rail lines. Evidence of illustrative interventions to increase variable

capacity on inter-urban links into London by investing in new rolling stock, for example,

suggests strong returns are possible from well-targeted interventions, with wider BCRs

ranging between 1 and 13 and costs between 50 and 500 million but more typically

25NAO press notice, Strategic rail authority: improving passenger service through new trains, 4 February 2004

26NAO, Strategic rail authority: improving passenger service through new trains (session 2003-04), HC 263, 4

February 2004, paras 4-627ibid., paras 9-17

28DfT, The Eddington Transport Study, December 2006

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between 1 and 3.28 The higher returns are largely driven by the ability to add variable

capacity with minimal infrastructure requirements.29

In J uly 2007 the Labour Government published a rail White Paper which included its high

level output specification (HLOS); and was accompanied by the Rail Technical Strategy.30

On capacity, the White Paper stated that over 1,300 additional carriages, the Thameslink

upgrade, major station works at Birmingham and Reading and an ambitious programme of

platform lengthening, power-supply upgrades and depot facilities would be needed to cope

with the 40 per cent demand growth of the last decade and the 30 per cent projected for the

decade ahead.31 The White Paper set out a range of options to increase capacity and stated

that a one size fits all solution would be inappropriate.32 The Government also set out its

aim for overall capacity increases by 2014, which would include adding approximately 1,300

additional carriages, with associated platform lengthening, power upgrades and additional

depot facilities. This and the other measures mooted were intended to deliver a modest five

per cent increase in rails overall CO2 emissions.33

This was followed in J anuary 2008 by the rolling stock plan, which provided additional detail

about the deployment of new rolling stock.34

In J uly 2008 the Transport Committee published a report on the 2007 White Paper. This

raised concerns about both the procurement and deployment of rolling stock. In particular, on

procurement it said:

It is entirely appropriate that strategic decisions about rolling stock procurement and

specification should be taken centrally. Given the level of fragmentation of the industry,

there is no other way to ensure sensible use of tax-payers' money for long-term

investments such as rolling stock. However, we are concerned that the Department

may not have adequate and appropriate expertise to handle such vital strategic

decisions in-house, and to do so efficiently. Matters of such importance should not beleft to expensive external consultants []

We look forward to the Competition Commission's report on the rolling stock market in

the UK, due in 2009. In the meantime, the Department must improve its rolling stock

procurement strategy so as to create a stable and consistent pattern of procurement.

By doing so, it will achieve the best value for money for tax payers, and it will ensure

that Britain can continue to have a rolling stock industry.35

Competition Commission inquiry, 2006-09

In J une 2006 the Department for Transport made a complaint to the Office of Rail Regulation

(ORR) under the Enterprise Act 2002. The complaint alleged that the features of the market

for the provision of rolling stock to TOCs prevented, restricted, or distorted competition. TheORR consequently announced that it would conduct a market study to see whether there

were grounds to suspect that the rolling stock market was not working well and to determine

whether there was sufficient evidence to make a referral to the Competition Commission

29ibid., Vol. 3, para 4.166

30 all of the relevant documentation can be found on the Department for Transports archive website31

DfT, Delivering a Sustainable Railway, Cm 7176, 24 J uly 2007, p3832

ibid., para 4.933

ibid., para 4.2234

DfT, Rolling stock plan, 30 J anuary 2008; appendix B sets out the required number of additional units byfranchise to 2014; this can be compared with figures for how many had entered service by May 2011 and how

many were on order by the same date, here: HC Deb 7 June 2011, c194W35

Transport Committee,Delivering a sustainable railway: a 30-year strategy for the railways? (tenth report ofsession 2007-08), HC 219, 21 J uly 2008, paras 111&113

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(CC).36 The ORRs findings were published in November 2006. It concluded that there were

grounds for referral.37 This was subsequently made on 26 April 2007.38

On 7 April 2009 the CC published its final report. It concluded that competition in the market

for the leasing of rolling stock is restricted by the limited number of alternative fleets available

to TOCs when bidding for rail passenger franchises. The CC identified several factors whichin combination have restricted the choice of rolling stock available for lease at the point

franchises are being let, including: technical and operational factors which limit

interoperability; costs and risks in switching rolling stock or introducing new rolling stock; and

aspects of the way in which the franchising system currently operates. The CC took the view

that TOCs have in many cases little incentive or ability to negotiate with ROSCOs and

ROSCOs in turn have little incentive to compete with each other.

It recommended three main changes to the rolling stock market:

longer franchise terms (in the region of 12 to 15 years or longer), which would allow

TOCs to realise the benefits and recover the costs of switching to alternative new or

used rolling stock over a longer period, which should increase the incentives and

ability for TOCs to exercise choice;

assess the benefits of alternative new or used rolling stock proposals beyond the

franchise term and across other franchises when evaluating franchise bids. This

would encourage a wider choice of rolling stock to be considered in franchise

proposals, irrespective of franchise length; and

ensure that franchise invitations to tender (ITTs) are specified in such a way that

franchise bidders are allowed a choice of rolling stock.

The CC also thought that requiring the ROSCOs to remove non-discrimination requirementsfrom the Codes of Practice would provide greater incentives for the TOCs to seek improved

terms from the ROSCOs; and that requiring rolling stock lessors to provide TOCs with a set

list of information when making a lease rental offer for used rolling stock would give TOCs

the ability to negotiate more effectively.39

The ORR welcomed the report and urged the Department for Transport to seriously

consider the CCs recommendations.40 The Labour Governments response was published

in J uly 2009. It was not wildly enthusiastic about the CCs recommendations and was

disappointed that the CC did not think that some form of market intervention (price controls)

could benefit the market:

The work that the CC has carried out makes clear that there are problems in the rolling

stock leasing market which are having an adverse effect on competition, that ROSCOs

in many cases have weakened incentives to compete on lease rentals, and that costs

faced by TOCs (and hence taxpayers and passengers) could be higher than they

should be.

36ORR press notice, Office of Rail Regulation receives complaint regarding the provision of rolling stock, 28

J une 200637

ORR, The leasing of rolling stock for franchised passenger services, 29 November 2006, p138

ORR press notice, Leasing of rolling stock for franchised passenger services, 26 April 200739CC press notice, Rolling stock leasing market investigation: final report, 7 April 2009

40ORR press notice, Rolling stock leasing market investigation, 7 April 2009

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The CC has suggested that changes to the franchising system would foster

competition in the market, and recommends that the franchising authorities make

changes to the franchise system, wherever consistent with their functions and

objectives. The Government welcomes this acknowledgement that in considering such

changes, DfT would have to take account of a range of issues, not just the effect on

the rolling stock market.

When franchises are being re-let, DfT will consider carefully the potential for

stimulating competition in the supply of rolling stock, while recognising that this is only

one of a number of factors which determine how franchises are best designed in the

interests of passengers and taxpayers. For each franchise re-let, DfT will specifically

consider franchise lengths of over ten years. DfT will also introduce changes to the

franchise evaluation and award process to take account of beyond-franchise benefits,

where this is consistent with its wider rail responsibilities. And DfT will ensure that the

potential impact on the rolling stock market is fully considered in specifying ITTs in the

future.

However, the Government notes that even if the CCs recommendations could be fully

implemented and were successful in improving competition, there is no doubt that theywould take some time to take effect. In the meantime, DfT has an ongoing duty, as

franchises come up for renewal, to ensure that taxpayers and passengers are

protected from the consequences of the adverse effect on competition which currently

exists in the rolling stock leasing market.

DfT had asked the CC to consider whether price control might be an appropriate way

to address consumer detriment. While the CC panel did not agree on whether controls

to restrict increases of rentals are required in the short to medium term, the CCs main

report concludes that it would be open to DfT to seek its own legislative powers to

influence or control rentals. DfT will closely monitor the rentals proposed when rolling

stock is re-leased. While DfT currently has no plans to legislate, it will keep under

review the option of seeking new powers to control prices should it prove necessary.41

Final proposals for reform

The Labour Government indicated that it would publish a new rolling stock plan in autumn

2009.42 For various reasons, nothing was published before the 2010 General Election.

Labour did, however, publish a paper on reforming rail franchising in J anuary 2010. This

indicated that the government had taken note of some of the criticisms of the franchising

process highlighted by the Competition Commission (see above) and that it intended to issue

longer franchises in future (of at least ten years). This would have a number of benefits, one

of which would be that a longer planning period would improve financial incentives for

franchisees to procure new rolling stock (which takes about three years to procure anddeliver).43

2.3 Safety

The Railways Act 1993 brought all railway safety legislation within the framework created by

the Health and Safety at Work Act 1974 and confirmed the Health and Safety Commission

(HSC) as the principal provider of policy advice to Ministers on railway safety issues. 44 The

41BIS, Government response to the Competition Commission's report, "Rolling Stock Leasing marketinvestigation", J uly 2009, paras 31-35

42

DfT, Britains Transport Infrastructure: Rail Electrification, J uly 2009, para 743DfT, The Future of Rail Franchising, J anuary 2010, p10

44the HSC merged with the Health and Safety Executive (HSE) in 2008

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Office of Rail Regulation (ORR) has had responsibility for health and safety issues since 1

April 2006, following the changes to the rail industry structure in the Railways Act 2005.45

A Memorandum of Understanding was signed by the HSC and the then Departments of

Transport and the Environment on 10 October 1996. ROSCOs have several safety

obligations under the rolling stock leases signed in 1993. In his Review of the Rolling StockMarket, published in May 1998, the Regulator provided the following summary:

Rolling Stock Leasing Companies' (lessors) Obligations:

Delivery of the rolling stock to the lessee in an agreed condition

Allowing the lessee quiet enjoyment of the rolling stock;

Procurement from contractors of heavy maintenance and heavy repair and

ensuring that rolling stock meets prescribed performance criteria immediately

following such maintenance or repair;

Rectification of major faults and design or endemic faults, and paying thosecosts not met by the lessee;

Procuring and paying for any mandatory modifications required to rolling stock

by the safety regulatory authorities;

Procurement of property damage insurance of rolling stock

Train Operating Companies' (lessees) Obligations:

Payment of rent to the lesser;

Performance of running maintenance and repairs;

Use of the rolling stock in accordance with the criteria specified in the lease

supplement;

Paying for major faults and design or endemic faults (in full up to specified

thresholds and on a shared basis thereafter);

Insurance for the rolling stock against third party liabilities and repayment to the

lesser of premiums for property damage insurance;

Indemnification of the lessor against losses relating to the leasing, use and

operation of rolling stock in certain circumstances;

Return of the rolling stock to the lessor at the end of the lease period in the

condition specified in the lease supplement.46

If mandatory modifications to rolling stock are required normally for safety or operational

reasons the relevant ROSCO is responsible for affecting and paying for them. During the

term of the initial leases, however, the government agreed to share in the cost of mandatory

modifications above an agreed threshold. Up to ten per cent of the cost is payable by the

affected TOC, subject to a cap fixed by the Department (formerly the Franchising Director) at

five per cent of lease charge payable in respect of the relevant year. The ROSCOs are

45further information on the railways safety regime can be found in HC Library standard note SN605

46ORR, Review of the Rolling Stock Market, May 1998

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subject to no regulatory requirements beyond those normally applicable to private sector

companies but are subject to both competition and monopolies law.

3 InterCity Express Programme (IEP)

As stated in section 2, above, Labours 2007 White Paper specified that 1,300 new carriages

would be purchased, to relieve congestion, predominantly on urban services. The 2008

rolling stock plan stated:

It is expected that the vehicles for the Intercity Express Programme will meet the

aspirations in the RTS for the next generation of vehicles for longer distance travel and

inter urban routes. The IEP base case introduces approximately 90 full train length

equivalent diagrams from 2013 to 2017. There are options for a further approximately

50 full train length equivalent diagrams for introduction between 2014 and 2018. The

procurement for the IEP is led by DfT with industry stakeholder involvement, including

TOCs and Network Rail to deliver lowest whole life and whole system cost. The

winning bidder will be responsible for design, manufacturing, financing, long-term

maintenance plus operational reliability and availability.

47

In August 2007 the Labour Government announced the shortlist of bidders for the InterCity

Express Programme (IEP). At the same time it was announced that the Invitation to Tender

(ITT) would be issued to the shortlisted bidders in autumn 2007. Proposals would then be

received from bidders in summer 2008, with the award of the contract in winter 2008-09.48

However, following reports of disarray in the tendering process,49 the bidding consortia

comprised the following:

Express Rail Alliance (a consortium comprising Bombardier Transportation,

Siemens, Angel Trains and Babcock & Brown)

Agility Trains Ltd (a consortium comprising of Hitachi (J apan) Ltd, Barclays PrivateEquity and J ohn Laing Projects and Developments).

50

On 12 February 2009 the then Secretary of State for Transport, Geoff Hoon, announced that

Agility Trains had been selected as the preferred bidder for the 7.5 billion contract to build

and maintain a fleet of new Super Express trains for the Great Western and East Coast main

lines. The first of the new trains would enter service on the East Coast Main Line in 2013. 51

Although the Government described Agility Trains as a British-led consortium, the main

partner is Hitachi and most of the press comment on the announcement described the

consortium as Japanese-led.52 In connection with this, the unions raised questions about

whether the trains would be built in the UK or just assembled here.

53

When these concernswere raised in the Commons Mr Hoon, said:

We anticipate that something in the order of 2,500 new jobs will be created, and that

would have been the case whichever consortium had been successful. The contract is

47op cit., Rolling stock plan, para 11

48DfT press notice, Department for Transport announces shortlist for Intercity Express Programme, 16 August2007

49Rail contract tender in disarray as Alstom pulls out, Financial Times, 14 April 2008

50DfT, Change to IEP short listed bidders, 26 June 2008

51DfT press notice, Passengers and economy to benefit from biggest investment in trains for a generation, 12

February 200952see, e.g.: Britain's 7.5bn train order lost to J apans Hitachi, The Times, 13 February 2009

53RMT press notice, RMT seeks answers on rolling-stock contract, 12 February 2009

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for both the construction and the maintenance of carriages. That means that a

significant number of jobs will be created in the maintenance sector across the United

Kingdom. It also means that jobs in the supply chainthe estimate is up to 10,000

jobswill be protected and safeguarded, as they support the manufacture. Three

quarters of the value of the contract will be spent in the United Kingdom. That figure

means that the great majority of the benefit will be provided for United Kingdom jobs

and the United Kingdom economy.54

As indicated above, the announcement on rail electrification in J uly 2009 had a significant

impact on this programme.55 In response to a written question on 26 October 2009 the then

Minister said:

As part of the Intercity Express Programme, the Department is procuring new electric

and bi-mode (electric and diesel) Super Express Trains to operate services on the East

Coast Main Line and the Great Western Main Line. Bi-mode trains utilise the electric

wires where available and continue beyond the wires using the diesel engine. An

announcement on the placing of orders for Super Express Trains will be made in due

course.56

In February 2010 the Labour Government announced that it would not proceed with

negotiations on the contract for the IEP programme before the 2010 General Election

because the negotiations are for a contract of nearly 30 years, a multi-billion pound spend

over the course of many Parliaments. The Secretary of State also asked Sir Andrew Foster,

former controller of the Audit Commission, to provide an independent assessment of the

value for money of the programme and the credibility and the value for money of any

alternatives which meet the programme's objectives.57

It was reported in J une 2010 that the new Coalition Government would cancel or delay the

IEP order. Such a decision would be influenced by the outcome of the Foster report and by

any considerations of legal action that Hitachi might take in such an event.58 On 6 J uly thethen Secretary of State for Transport, Philip Hammond, announced that a decision on the

future of the IEP would be made at the same time as the spending review announcement in

October. He also outlined the broad conclusions of the Foster report, also published on 6

J uly. Sir Andrew concluded that the Intercity Express proposition was positive and attractive

in a number of ways and it had exceeded the Departments value for money thresholds.

However, he also expressed some doubts over the technical feasibility of the new bi-mode

trains and stated that the value for money had declined over time. There was also

widespread scepticism of the Programme within the rail industry and Sir Andrew was not

convinced that all of the viable alternatives to the Programme had been assessed alongside

it on an equal footing.59 Mr Hammond indicated that the government would use the period

until the spending review announcement in October to give further consideration to the

alternatives to IEP.60

On 1 March 2011 Mr Hammond said that the Department had reviewed the proposal against

the alternative of an all-electric fleet, with purpose-built diesel locomotives coupled to trains

to haul them beyond the electrified railway. He announced the Governments intention to

54 HC Deb 12 February 2009, c1535

55op cit., Britains Transport Infrastructure: Rail Electrification, paras 40-42

56 HC Deb 26 October 2009, c13W

57 HC Deb 26 February 2010, c92WS

58

Axe for InterCity carriages order feared, Financial Times, 4 J une 201059DfT, Review of the Intercity Express Programme by Sir Andrew Foster, 6 J uly 2010, pp3-8

60 HC Deb 6 J uly 2010, WS

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resume the IEP procurement and proceed with Agility Trains proposal, as preferred bidder.

He went on to say:

We will now work with Agility Trains with a view to reaching financial close by the end

of this year. That is, of course, subject to the Government's continuing to be satisfied

that the proposal offers value for money as the commercial negotiations are concluded

and that the final arrangements are compliant with the United Kingdom's European

Union obligations. This deal will allow us to provide better, faster, more comfortable

services and to continue providing through-journeys between London and parts of the

rail network that are not electrified. In total, there will be over 11,000 more peak-time

seats each day on the Great Western main line and the east coast main line post-IEP

compared with today.

Hitachi is today confirming its plans to locate its European train manufacturing and

assembly centre at Newton Aycliffe in County Durham. That investment is

expected to create at least 500 direct permanent jobs, as well as hundreds of

temporary construction jobs. Thousands more job opportunities will be created in the

UK manufacturing and service supply chains.61

In December 2011 the Railways Minister, Theresa Villiers said that the Department for

Transport was conducting commercial discussions with Agility Trains to bring the contract

towards financial close.62 Those discussions were finally concluded on 25 J uly 2012 when

the Secretary of State, J ustine Greening, announced financial close for the Great Western

elements of IEP, and commercial close for the East Coast elements. The East Coast

elements will be financed during 2013. She indicated that the contract would create 900 jobs

and secure thousands more. The contract, worth 4.5 billion, would see 596 railway

carriages (92 complete trains) built at a new train factory at Newton Aycliffe, County Durham,

in the north east of England. Hitachi would also construct maintenance depots in Bristol,

Swansea, west London and Doncaster, and upgrade existing maintenance depots

throughout Britain.63

4 Thameslink rolling stock project

Details of the Thameslink infrastructure programme can be found in HC Library note

SN1537.

The Labour Government committed to taking Thameslink forward in the July 2007 rail White

Paper, with a projected total cost of 5.5 billion, and a planned completion date of 2015.64

The J anuary 2008 rolling stock plan stated that the new rolling stock would consist of up to

1,300 next generation Electric Multiple Units (EMUs). Once these new vehicles were

introduced, it was anticipated that the existing fleet of EMUs operating the Thameslink routescould be used for cascade on to other routes to deliver additional capacity. 65

In April 2008 the Government placed a notice in the EU Official J ournal seeking expressions

of interest in the programme; this was accompanied by a summary document giving details

of the programme and matters of interest to bidding companies.66 In J uly 2008 the

61 HC Deb 1 March 2011, cc185-186

62 HC Deb 7 December 2011, c304W

63DfT press notice, 4.5 billion investment in new trains creates new jobs, 25 J uly 2012

64op cit., Delivering a Sustainable Railway, p50

65

op cit., Rolling stock plan, paras 12-1666

op cit., OJEU procurement notice for Thameslink, and: Thameslink Rolling Stock Project Summary andOverview

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Government released the details of the four shortlisted applicants: ALSTOM Transport;

Bombardier Transportation UK Limited; Hitachi Europe Limited; and Siemens Transportation

Systems. In November 2008 the Government published its train technical specification and

Invitation to Tender (ITT) for the programme.67 The then Railways Minister, Lord Adonis, said

that the tender was for some 1,200 new Thameslink carriages, including around 400

additional carriages on top of those being replaced.68

The ITT stated that the closing date for submissions would be 30 April 2009, with the

contract awarded in March 2010; the Department later extended the closing date for bids to

25 J une.69 In J uly 2009 the Labour Government published its rail electrification strategy. This

confirmed the procurement plans for the Thameslink rolling stock programme and stated that

the old Thameslink stock would be moved onto the Great Western Main Line.70 Nothing

further happened before the 2010 General Election.

On 25 November 2010 the then Secretary of State for Transport, Philip Hammond, confirmed

that the Coalition Government would fund and deliver the Thameslink programme in its

entirety, but with completion of the programme delayed to 2018. He said that as part of theThameslink programme, the government would procure a new fleet of trains-up to 1,200 new

carriages.71 On 16 J une 2011 Theresa Villiers announced that a consortium led by Siemens

and Cross London Trains (comprising Siemens Project Ventures GmbH, Innisfree Ltd and 3i

Infrastructure Plc) had won the contract to build the Thameslink fleet:

The Siemens-led venture will deliver the first new train on to the network by the start of

2015, with the order complete by the middle of 2017. The new trains will offer a step

change in passenger experience, with greater passenger carrying capacity, improved

passenger communication and easier access for passengers with specific mobility

needs. They will also deliver high-levels of reliability with the owner and manufacturer

of the trains liable for financial penalties if the trains do not perform.

The choice of Siemens Plc with Cross London Trains (XLT) as preferred bidder

represents the best value for money for taxpayers. Siemens is today confirming that

this announcement will create up to 2,000 new jobs in their UK operations and across

the UK supply chain in train component manufacturing, with a particular focus in the

North-East of England, and in the construction of the depots and subsequent

maintenance of the new fleet of trains.

These jobs are additional to those created by the Thameslink infrastructure works

which are currently underway. At the peak of construction activityduring the

reconstruction of London Bridge station from 2013 to 2018we expect around 3,000

people to be directly employed on the Thameslink infrastructure works as a whole, with

as many again employed in related jobs in the wider community.72

Even more than the decision by the previous Government to award the IEP contract to

Hitachi, this decision has proven deeply controversial. Of particular concern has been the

future of the Derby plant of Canadian-based Bombardier, one of the failed bidders.73

67all of these documents are available on the DfT archive website

68DfT press notice, Extra 14,500 seats due for Thameslink passengers, 27 November 2008

69Deadline for train orders put back, Financial Times, 24 March 2009

70op cit., Britains Transport Infrastructure: Rail Electrification, para 45

71 HC Deb 25 November 2010, c466; and: DfT press notice, More than 2,100 new carriages for rail travellers as

Government unveils rail investment package, 29 November 201072

HC Deb 16 J une 2011, c86WS; and DfT press notice, Rail passengers to benefit from 1,200 new carriages,16 June 2011

73see, e.g. Death knell for train industry as Germany wins key contract, The Times, 17 June 2011

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However, much like with the IEP, the Government has indicated that the decision will create

jobs in other parts of the country.

In December 2011 the Transport Select Committee published a report into the Thameslink

procurement calling for a review of the decision by the National Audit Office and more

transparency from the government as to the governments reasons for selecting Siemensand the relative cost differences between the various bids.74 The Government stated in its

response to the Committee that the NAO will conduct a value for money review of the overall

Thameslink Programme once the contract has been awarded, but that the amount of

information that could be released about the bidding process would be limited by commercial

considerations.75

There have been ongoing delays with the signing of the Thameslink contract with Siemens.

In December 2012 the Railways Minister, Simon Burns, announced that the Department had

reached commercial agreement on the key elements of the deal with the Cross London

Trains consortium and that the consortium had published its information memorandum to

potential funders.

76

Most recently, on 23 April 2013, Mr Burns said:Bank credit committee approvals have now been confirmed in principle for the full

funding required for the procurement. The Department is working with Siemens, Cross

London Trains and relevant banks to complete the large amount of necessary legal

documentation. We expect to reach financial close shortly.77

5 Crossrail rolling stock project

Crossrail is the plan to integrate the mainline railways to the east and west of London

through the construction of two tunnels beneath central London from Paddington to Liverpool

Street. The scheme will cost around 14.5 billion and will begin operation in 2018. Around 60

new trains will be required for the scheme.78

In March 2011 Crossrail Ltd.79 announced its intention to put out an Invitation to Tender (ITT)

by the end of 2011, to award the contract to build the Crossrail fleet in late 2013. The shortlist

of organisations invited to tender was: Alstom Transport; Bombardier Transportation (UK)

Ltd.; Construcciones y Auxiliar de Ferrocarriles SA; Hitachi Rail Europe Limited; and

Siemens plc.80

However, following the political fallout of the decision to award the Thameslink contract to

Siemens in J une 2011 (see above), the Government announced a review of its public

procurement practices and in August Crossrail announced that a delay to the procurement

programme.

81

The Railways Minister, Theresa Villiers stated that this delay would enable

74Transport Committee,Thameslink rolling stock procurement (eleventh report of session 2010-12), HC 1453,16 December 2011, paras 38-39

75 Government Response to the Committee's Eleventh Report of Session 201012 (fourteenth special report of

session 2010-12), HC 1935, 26 April 2012, p476

HC Deb 20 December 2012, c104877

HC Deb 23 April 2013, c841W78

for further details on the Crossrail scheme see HC Library note SN87679

a wholly-owned subsidiary of Transport for London (TfL)80Crossrail press notice, Crossrail confirms shortlist for rolling stock and depot facilities, 30 March 2011

81Crossrail press notice, Update on Crossrail rolling stock and depot procurement, 30 August 2011

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Crossrail to take account of the results of the Governments procurement review.82 The

Evening Standard reported:

The Government was already providing 30 per cent of the funding for the order and is

now prepared to guarantee more than half of the remainder. The rest will be financed

as a private finance initiative.83

In September 2012 the Chief Secretary to the Treasury, Danny Alexander, announced that

the Crossrail rolling stock could be could be the first beneficiary of the UK Guarantees

scheme. UK Guarantees, launched in J uly 2012, takes advantage of the Governments fiscal

credibility to provide guarantees for major infrastructure projects that may struggle due to

adverse credit conditions.84

In November 2012 the Transport Minister, Norman Baker, in indicated that the contract,

estimated to be worth 1 billion, was still on track. Four biddersBombardier, CAF of Spain,

Hitachi and Siemenssubmitted first-round bids by the deadline of 29 October. Those first-

round bids are being assessed by Crossrail Ltd. It expects to be in a position to shortlist

bidders in spring 2013. It is hoped that a preferred bidder will be announced later in 2013,with the project moving to financial close in 2014.85

On 1 March 2013 the Transport Minister, Stephen Hammond, announced a change in the

financing approach for the Crossrail rolling stock and associated depot facilities contract. In

effect, the Government has agreed to the Mayor of Londons proposal to move from a

financing model involving a substantial element of private sector funding, to one that is

entirely funded by the public sector. Mr Hammond said:

The decision reflects the unique circumstances that apply to Crossrail. As a new route

that is currently under construction it has no inherited train fleet and without new trains

the service cannot open.

Transport for London and the Government believe this decision is an appropriate

course of action to deliver a very complex and unique infrastructure project within the

delivery timetable. Trains need to be ordered by the middle of 2014, so that testing and

delivery of the fleet can start in spring 2017, well ahead of the opening of Crossrails

central tunnel section in late 2018.

[...] Within the current spending review period this will involve the use of existing TfL

budgets. The remaining costs that fall beyond 2014-15 will be factored into future

capital spending plans.86

6 Rolling stock leasing companies (ROSCOs)6.1 Privatisation

The previous Conservative Government's proposals for privatising the provision of passenger

rolling stock were set out in J anuary 1993 in Railway Privatisation: Passenger Rolling Stock.

Most of the privatisation changes were introduced on 1 April 1994, including the

establishment of three rolling stock companies Angel Trains, Eversholt and Porterbrook

82 HC Deb 21 October 2011, c1198W; for more information on public procurement and the outcome of the

review, see HC Library note SN602983

op cit., 240m bailout to prevent further Crossrail delays84

HM Treasury press notice, Crossrail trains first to qualify for UK Guarantees, 27 September 201285 HC Deb 20 November 2012, c132WH

86 HC Deb 1 March 2013, cc49-50WS

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to lease rolling stock to the new railway operators. At the time the British Rail (BR)

passenger fleet consisted of 11,000 vehicles ranging from brand new locomotives and

coaches to those that were nearing the end of their economic life. Each company was given

a portfolio of a similar mix of stock with a similar age profile. The new ROSCOs, as they

came to be called, would be responsible for acquiring new trains when needed. They were

not to have in-house maintenance capabilities but were responsible for specifying allmaintenance and for contracting with maintenance suppliers for all heavy maintenance and

refurbishment. The idea was that they should offer operating, rather than finance, leases

which meant they carried most of the risk of holding and maintaining the rolling stock.

In 1993 the BR passenger fleet was said to have a book value of some 2 billion. 87 The

proposed sale of the three companies was announced in March 1995 and bids for the

purchase of these companies were invited in May 1995.88 Details of the contracts for the

sales were announced on 9 November 1995 and were completed in early 1996.89 Eversholt

and Porterbrook were acquired by their managements with development capital backing

while Angel was bought by an external management team with the financial backing of

Nomura International.

All three purchasers took on the existing train fleet and the Networker fleet on order at the

time. They were also reported to be in a position to arrange additional funding for the

continuing modernisation of the passenger railways through investment in new trains and

refurbishment of existing rolling stock. All the purchasers committed themselves to introduce

incentive schemes for employees, whether by way of participation in ownership or otherwise.

The actual sale price payable by the purchasers was approximately 1.8 billion but some

800 million was also paid to the government in cash as dividends from the ROSCOs before

the sale. The government therefore maintained that total proceeds from the sale exceeded

2.5 billion, while opposition parties accused the Government of selling the companies "onthe cheap".90 However, some commentators such as Roger Ford, then editor of Rail

Privatisation News and not known as a fan of privatisation was quoted as saying "This has

to be a good deal for the taxpayer. We have got rid of a fleet of trains, two thirds of which are

geriatric, to the private sector for not a bad price".91

In March 1998 the National Audit Office (NAO) published a report into the privatisation of the

ROSCOs. Sir J ohn Bourn, then head of the NAO stated his belief that the then Government

saw major advantages in an early sale Their over-riding objective was to secure the sale

of the companies as soon as practicable in 1995. Sir J ohn further reported that the chosen

timing of the sale probably had an adverse impact on proceeds.92 The NAO reported that it

would have been possible to undertake a comprehensive valuation of the rolling stockcompanies on the basis of an analysis of cash flows, despite the absence of external

comparators. They calculated that at the time of privatisation the value of the companies

future cash flows, under continuing public ownership, would have been 2.9 billion. The

value obtained by the government (sale proceeds, risks transferred and possible tax

receipts) was considered to be only up to 2.2 billion.93

87DoT press notice, "New companies to manage passenger rolling stock after railways privatisation", 29 April 1993

88DoT press notice, "Mawhinney announces details of rolling stock sale", 20 March 1995

89DoT press notice, "Britain creates new train leasing market with 1.8 million sale", 9 November 1995

90 "BR rolling stock sold "on cheap" for 2.5bn", The Guardian,10 November 1995

91

"BR's train fleet sold for 1.8bn", The Times, 10 November 199592NAO, Privatisation of the rolling stock leasing companies(session 1997-98), HC 576, 5 March 1998, p2

93ibid., p4

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The Public Accounts Committee also published a report on the privatisation of the ROSCOs.

The report concluded:

We note that the timing of the sale of the ROSCOs and its sequence in the overall rail

privatisation programme was a key factor in the loss of value to the taxpayer as

demonstrated by the much greater price achieved for them by the new owners shortly

after privatisation.

We are concerned that the Department did not update their preliminary analyses of the

cost of selling the ROSCOs ahead of the Train Operating Companies. More than a

year ahead of the sale, they calculated the likely cost as being between 100 million

and 300 million. The actual cost may have been much greater. We find their

argument that there were too many uncertainties to arrive at a meaningful figure

unconvincing. We are also surprised that the Department did not attempt an analysis

of the wider benefits of early sale of the ROSCOs which they told us should be offset

against the financial loss. We consider that the Department should have given more

detailed consideration to the implications for value of the terms achieved.94

6.2 Porterbrook Leasing

Porterbrook was initially bought by a Porterbrook management/employee buy-out (MEBO)

consortium for 528 million in J anuary 1996. The MEBO sold the business to Stagecoach

Holdings for 826 million in August 1996 a gain of 298 million.95 When Stagecoach

announced that it was to buy Porterbrook, Brain Souter, the Chairman of Stagecoach, was

reported as saying he could reduce Porterbrook's spending on maintenance by up to 30 per

cent and he foresaw further savings through bulk purchases of components, some of which

were shared by Stagecoach's buses and trains.96 There was media outcry when it was

calculated that the Porterbrook directors and city advisers would make vast sums from their

shares. The Managing Director was forecast to make 30 million in the seven months

between the management buy-out and the subsequent sale to Stagecoach.97

The Rail Regulator98 immediately announced a review of the competition issues and warned

the bid might be referred to the Monopolies and Mergers Commission (MMC).99 He stated

that the takeover raised important public interest issues relating to investment in rolling stock,

future competition in rolling stock services and in passenger services. On 18 October 1996

the then Minister for Corporate and Consumer Affairs announced that he intended to refer

the merger to the MMC unless suitable, legally binding undertakings were received from

Stagecoach to cover the six principles of non-discrimination, confidentiality, provision of

information, cross-subsidy, co-operation with train operating companies, and separate

reports and accounting. The Director General of Fair Trading (DGFT)100 set out the following

possible adverse effects of the merger:

Although the merger has not involved any loss of competition at the horizontal level,

the vertical link which arises from ownership both of a rolling stock company and train

94PAC, Privatisation of the rolling stock leasing companies (sixty-fifth report of session 1997-98), HC 783, 10August 1998, paras 26 and 35

95op cit., Privatisation of the rolling stock leasing companies, para 4

96 "Stagecoach bids for rail stock leasing group", Financial Times, 1 August 1996

97 "The Great Train Robbery", The Sunday Times, 4 August 1996

98the rail regulator was reconstituted as the Office of Rail Regulation in 2004 following the Railways andTransport Safety Act 2003; for more information see HC Library standard note SN2071

99

ORR press notice, "Rail Regulator to consult on proposed merger", 31 J uly 1996; the MMC is now theCompetition Commission

100now the Office of Fair Trading

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operating companies does give rise to concern. Accordingly, I consider that adverse

effects arise both now, at the initial stage of passenger train franchising, and at the

later stages of franchise renewal and open access operation. While I recognise the

argument that it may not be in the commercial interests of the new group as a whole to

offer Porterbrook's customers terms which are materially dissimilar to those given to

Stagecoach train operating companies (TOCs), the vertical link creates both the

opportunity and incentive for the new group to operate to the detriment of the interests

of potential or actual competitors and, ultimately, to rail users. Accordingly, I consider

that the merger may be expected to lead to higher levels of subsidy and rail fares and

to a reduction in the quality, availability and frequency of rail services through the

following effects:

(i) the possibility of discrimination by Porterbrook against actual or potential

competitors to Stagecoach TOCs; and by Stagecoach TOCs against competitors of

Porterbrook;

(ii) the possibility that information obtained either by Porterbrook or by Stagecoach

TOCs, as the case may be, may be obtained and misused to the detriment of potential

or actual competitors;

(iii) the possibility that cross-subsidisation may occur between different members of the

Stagecoach Group;

(iv) the possibility that Porterbrook will not co-operate with potential or actual

competitors of Stagecoach TOCs, thus giving Stagecoach TOCs an improper

advantage both at the stage of bidding for franchises and in protecting themselves

from open-access entry once that becomes possible.101

On 23 December 1996, the Minister announced that he had accepted satisfactory

undertakings from Stagecoach and that the acquisition would not be referred to the MMC.102

His decision was in accordance with the advice he had received from the DGFT and wouldbe reviewed after five years.

The company was later sold to Abbey National Treasury Services plc in April 2000 for 1.3

billion.103 In October 2008 Abbey National sold it to a consortium led by Deutsche Bank (and

including Lloyds TSB and BNP Paribas) for an estimated 1.4 billion.104 In February 2009 OP

Trust Private Markets Group (a Canadian company which also owns rail equipment) was

cleared by the European Commission to take joint control of Porterbrook.105

6.3 Angel Trains

Angel Trains (former

Documents

Rolling Stock Details