The Shaw Report into the future financing and shape of Network Rail.

Nicola Shaw has recently published her invitation to us all to send in our ideas on how Network Rail should be structured and financed in future.

I will be sending in evidence. My first three conclusions for her are

  1. As a business with all UK sterling revenues it should not borrow in foreign currencies again
  2. All the time it remains a nationalised business with a full Treasury guarantee it should be lent money by the government  at government rates, borrowed by the government in the gilt market in the normal way.
  3. It should stop all derivative hedging and trading.


When I first argued that Network Rail should not trade in derivatives in July 2012 it followed their reports acknowledging substantial  losses  in the year to March 2011, and again  in the year to March 2012.

The year to March 2012 saw £409 million of losses  in derivatives that were not hedge accounted and a further £45m of such losses in the year to March 2013.

I wrote a letter to the members of Network Rail, the group responsible in those days for the corporate governance and strategy of the business on behalf of the taxpayers who pay the bills. I asked them to explain their derivative strategy and why they thought it was good thing to be doing. My own  view was it should  be stopped.

Network Rail continued with derivatives, and reported losses of £982 million on them in 2013-14.  Their response claimed that although some of their derivatives were accounted as trading, they saw  them as a hedge against foreign currency borrowings which for some unknown reason they had chosen in preference to borrowing in pounds, and as a hedge against rising interest rates during a long period of ultra low rates.

Now Network Rail is fully under the control of the Treasury and Department for Transport I am asking again that all open derivative positions be closed down, or matching positions the other way be taken out to stop all future losses on these dangerous instruments.  They have had to ask for more taxpayer cash to put up against some of these positions, so they do matter within the budgets of the state.



  1. Lifelogic
    November 17, 2015

    Indeed why on Earth were they ever not obeying your 3 points above and under an obligation to? One assumes some companies were benefiting hugely from the losses they were making on this speculation. Questions need to be asked about the real forces driving this activity and not just at network rail but all such organisations.

    Why on earth are they borrowing in other currencies then hedging them. If they have a full Treasury guarantee anyway then best for the government just to borrow and lend to them. Doubtless some clever banker/salesman managed to convince them what a good plan it was to take these losing positions. The managers perhaps not caring too much (as it was not their money or they were not to bright and trusted the “expert”) or possible even worse forces were at work, who knows?

    1. Lifelogic
      November 17, 2015

      The real problem with rail is it makes so little sense economically in a small country like the UK. Even with huge subsidies and huge tax advantages over cars it still cost so much more than car travel, coaches or trucks.

      The real problem with the roads is they need far more of them and they need to be charged for per mile used with variable charging at peak times. Get uber or someone to sort a system out and then build some more roads with the money. At the moment people pay through congestion and no money is raised. It just wastes their time and money.

      1. Bob
        November 17, 2015

        @lifelogic – The roads are already effectively charged per mile by virtue of fuel duty & vat, although some pay more per mile than others depending on the fuel efficiency of their chosen vehicle.

        A lot of congestion is caused by:
        – Poor road layout
        – Overcrowding
        – Lengthy and uncordinated road maintenance
        – Inflexible and improper phasing of traffic lights
        – Accidents caused by poor driving standards
        – Police response to traffic incidents

        I suspect that some of these issues are allowed to persist and maybe even encouraged to create congestion so that the “solution” of road pricing will be more readily accepted or even welcomed by the motoring public. Problem, Reaction, Solution.

        We could obviate the need for further tax based measures with more prudent spending decisions from government, spending more of the huge sums raised raised from motorists sorting out of the above issues istead of the bizarre ways they currently choose to dispose of our money on things like EU membership, foreign aid, HS2 and a bloated public sector.

        1. Lifelogic
          November 17, 2015

          I agree much of what you say. But the real problem is that congestion and delays are the only deterrent to using the roads at busy times the only variable cost is the fuel and that does not vary by time. Train and planes just charge more for peak times. Charging more can be used to increase road space and junction, over passes and underpasses and create a profit motive to do so. Congestion is just a complete waste of everyone’s time and money. It is a very, very inefficient method or rationing. How many doctor, nurses, engineers … are sitting in these huge queues?

          They have rather the same rationing and pushing from (pillar to post) problem at the totally dysfunctional (free at the point of non delivery, delaying techniques and queues) – the wonderful N H S.

          1. Bob
            November 18, 2015


            “Problem, Reaction, Solution.”

            Why restrict ourselves to just one solution, especially when it involves increasing the capacity of Big Brother? Increase the capacity of the roads instead.

            Imagine if the issues I enumerated above were properly addressed; would we still be discussing road pricing?

            The capacity issue has been kicked into the long grass for far too long, and the govt tax us for their mismanagement of domestic infrastructure while splashing money around overseas, such as the £300m that Mr Cameron is spending on roaduilding in Jamaica and the billions that we have poured into road building on the continent.

            We need to get our own house in order before spending money on everyone elses.

      2. graham1946
        November 17, 2015

        This is quite impractical as long as we have city and town centres to which people commute. London alone has over a million commuters every day, just by rail and tube. How would that work by road? The Capital is already practically gridlocked during the rush hours with commuters using buses, coaches and cars. My sister lives in London and often walks to work which is more than a couple of miles, because she either can’t get on a bus at all, or they move at less than walking pace.

        I agree that freight will never be economic by rail except for bulk items which have a railhead at both ends and for the bulk parcels operators who have the infrastructure. Rail is also far too slow for most freight.
        Roads will get more clogged as internet buying progresses. At the moment it is in its infancy and relatively small amounts are bought and shipped this way. Imagine what the roads will be like if all the shops were to shut down and goods were delivered individually to all addresses.

        Governments always think transport is a cost centre rather than a contribution to profit (as do many manufacturers) and do not give the job the relevance it deserves, although it is the 8th largest spender (though probably the biggest contributor in taxes and efficiency). For some reason politicians regard things like the Foreign Office as more important for their careers. Unless there is a change in this attitude, we are going to come to a grinding halt. This is the same scenario as power generation, ignored until it is too late whilst they posture around the world achieving practically nothing but making themselves feel important.

      3. Bazman
        November 17, 2015

        You have been pulled on this before.
        Repeating the same thing does not make it true. The rest of the world is investing heavily in rail and for good reason. All evidence and reason points to this. Reactionary nonsense is not fact. Are they all deluded? Imagine if all the commuters came into London by car and all freight was on the road?! Idiotic and I have challenged you as to why privatisation should carried out when it is more expensive than state owned this being the reason that the railways are so expensive. Network Rail trading in derivatives!? A railway business entirely funded by the state gambling with our money? You could not make it up.

        1. Lifelogic
          November 18, 2015

          Rail can make sense over certain distances and in special situations. But in the main is it just inflexible and far more expensive than cars, coaches and trucks. Especially in the smallish UK.

          An HS shuttle train (taking about 15 min) to link a 2 runway Gatwick and a 3 runway Heathrow to create a proper hub airport would be a very good plan indeed.

          Trains after all are just like buses and coaches but very restricted to very expensive and inflexible lines. They spend much of the day and night empty and unused. The opposite direction trains to commuting are also largely empty.

          1. Bazman
            November 18, 2015

            All evidence points to the efficiency of rail and if`investment is not carried out to match competitors than we will be left behind in particular high speed links to the northern cities and Scotland which is not a short distance by any means. Hence the level of investment across Europe, the rest of the world in Trains. Buses may well have their uses in cities and medium distance journeys, but traffic hold up are no fun and comfort is dire. You take the bus often? As if.
            Turning everyone into a car flea via unregulated taxi services may well have its uses, but not for serious travel.
            You have to laugh at the Black cab drivers crying over Uber taxis putting them out of work. I wonder if they had the same views on the mines and shipyards closing? No doubt citing progress to Mrs T in the back of the cab.

          2. Edward2
            November 18, 2015

            So sell your car Baz and use public transport.
            Or is just everybody else, other than you, who you want to stop using cars?

    2. Richard1
      November 17, 2015

      Was there ever an explanation as to why Network Rail had been speculating on the currency markets in the first place? (which what such borrowing by a 100% GBP revenue business such as Network Rail is).

      Again we have to contrast the treatment of failure and negligence in the public sector with what is – mostly – seen in the private sector. There is of course failure, incompetence and sometimes corruption in the private sector. But because there is market discipline, in the end people are generally held to account. We do not see nearly enough of this in the public sector. The most extreme recent example is of course the Iraq War, where no-one, not a politician not a civil servant, has so far been held to account for the greatest error in British foreign policy since Munich.

  2. Mike Stallard
    November 17, 2015

    I have asked once and now I ask again. What is the power of DG REGIO over its creation Network rail? Would that explain why, Mr Redwood, you aren’t getting anywhere? Would it also explain the foreign linkage?

    1. Dame Rita Webb
      November 17, 2015

      Mike following on from your commendation of Mr Cameron yesterday, even though he has failed his own self imposed target with regard to immigration, consider the following. Here are how competent leaders act. Last year Japan took in 16 asylum seekers. Mr Abe the PM says “Japan must improve the living standards of its own people before it can consider accepting Syrian refugees”. Instead he has bunged the refugee camps around a billion dollars to make life easier for them there. While unselfish Norway has worked out that when you factor in the costs of integration, 127 refugees can be cared for in the camps for the cost of admitting one asylum seeker into their country.

  3. Mike Stallard
    November 17, 2015

    I do apologise – there is no edit button. I meant, of course, DG MOVE!

  4. Antisthenes
    November 17, 2015

    If Network Rail was a privately owned company and not a state owned monopoly it would not be so cavalier with taxpayers/customers money. The answer to Network Rail’s many serious shortcomings derivative trading being only one of them is to privatise it. There appears to be no suggestion that that idea is being contemplated which to me is a negligent oversight.

    No doubt it is because doing so is fraught with considerable practical difficulties but I am sure there must be a few clever people around who can come up with a workable way of doing it. The major obstacle of the political aspect has been removed the Conservatives now govern alone.

    Reply I am working on a scheme to change and improve Network Rail, which would shift it into the private sector.

    1. Antisthenes
      November 17, 2015

      I was thinking of you when I said clever people.

    2. hefner
      November 17, 2015

      Have you already forgotten that before Network Rail, we had Railtrack plc. Are you telling me it was so much better at the time? Or maybe you were one of its shareholders?

  5. The Prangwizard
    November 17, 2015

    Who is encouraging and enabling Network Rail in all this? Conscienceless City spivs and brokers? Where do they fit into this, have they been asked not to take on this business, business from the naïve who don’t understand what they are doing? From posturing and ego driven executives who want to appear to be playing in a glamorous world with the big boys. I suppose it’s all routine work for them, selling loans to bankrupts, never crosses their minds to restrain themselves.

    Reply Network Rail is run by professionals who should know their own needs and minds on financial products.

    1. stred
      November 17, 2015

      It is not possible to see who the lucky hedgers and forex chappies were but, as a £1436 million loss so far is rather large, I had a quick wik at the names on the customers side.

      The lady JR has to write to in order to help is Nicola Shaw, who used to work for First Group. They have proudly put the GWR livery on their new line, according to adverts, but still run the old trains on a track where Network Rail haven’t managed to put up the pantographs. When finished diesel engines under the new trains will be switched on at Bristol onwards. They or DfT didn’t want to use a separate engine. Since then Nicola has gone on to run HS1, built for £5.8bn and sold by Oz for 2.1bn and now profitable. Nicola won’t say whether she is keen on HS2 but thinks it will be built anyway if the politicians like Oz have the will, and presumably ones who are financially constipated are ignored.

      While heading the NR board of private civil servants, we now have the ex- boss of TFL, where he earned £650k pa and kept costs down. My day ticket went up from about £7 to £13 over 9 years. Peter knows the industry well and started off on the buses.

      But they have plenty of financial experts too. Mark Carn (not Carney) who is paid £675k, then Patrick Butcher, an accountant, Richard Brown and Sharon Flood, 10 in all. I gave up counting salaries, but they do have a ‘deep pool of talent’, according to Network Rail Consulting. To keep their talents up, they have a remuneration and incentives committee and, althought he print is too small to see, the graphs shown the targets being met quite well.

      One of this pool was Simon Kirby, who was Network Rail MD for Infrastructure Projects and has given the top job by HS2, to ‘hold down costs’, and has given himself £675 pa to help him make a start. Simon must have been in charge of Reading Station redevelopment, which was was estimated at £400m and rose to £850, so he has the necessary experience. Perhaps he ought to get some French engineers in, as ther HS tracks cost £22m/mile and HS1 cost £80m.

      I think Nicola Shaw used to be a civil servant in DfT too, but probably when they were not paid and incentivised so well.

      1. stred
        November 17, 2015

        Sorry, I was selling Mr Kirby short. It should read £675k and £850k..Usual typos too.

      2. A different Simon
        November 18, 2015

        Quote “While heading the NR board of private civil servants”

        The international accountancy firms , well known law firms , household name consultancies can open doors to govt departments for you – or close them if you don’t use their services .

        Shouldn’t those parasites be considered part of the civil service too ?

        I don’t think the UK can afford this sort of cronyism any longer .

        Mrs Thatcher would have smashed it up .

  6. alan jutson
    November 17, 2015

    Staggering that they should borrow in a foreign currency, unless of course the excuse was buying foreign equipment, although the losses seem huge.

    Sounds more like a fast growing weed than a hedge, you need to get to the root of the problem, well spotted in the first place.

    Seems like yet another Government controlled organisation (like so many) just doing their own thing knowing the taxpayer will fund it all.

    1. forthurst
      November 17, 2015

      “Staggering that they should borrow in a foreign currency, unless of course the excuse was buying foreign equipment, although the losses seem huge.”

      I can’t see that that would have shown up as a loss; if they needed a known amount of foreign currency for a known delivery date and had bought an option which matured to satisfy the due amount, why could that have shown up as a loss in their accounts, irrespective of relative currency movements between purchase and maturity?

      Reply They have been hedging long term foreign currency debt.There’s no matching realised profit as they are not immediately repaying the debt.

      1. ian wragg
        November 17, 2015

        Network rail should not be hedging currencies even for buying foreign equipment.
        tenders should be quoted in Sterling and the vendors should be doing the hedging.
        Once again the bankers suckle at the publicly funded trough.
        How come so many highly paid executives are needed by NR. The government guarantee should be removed immediately and the management held responsible.

        1. alan jutson
          November 17, 2015


          Agree absolutely with you about putting out and asking for all tenders to be in Sterling.

          I was just searching for a reason.

          But Network Rail are the Customers and so should be laying down the rules for any specialist Equipment.

          Different matter perhaps if it was simple standard stuff, but then you would think such stuff would be available in the UK, like purchasing British made steel etc !.

    2. Lifelogic
      November 17, 2015

      “Seems like yet another Government controlled organisation (like so many) just doing their own thing knowing the taxpayer will fund it all.” Indeed.

      If you spend someone else’s money on something for someone else then you don’t care what you pay and you don’t care what value you get. That in essence is government and we get it in spades.

      The only check is a vote every five years for the least bad option, and that is so weak a control as to be virtually worthless.

  7. JoeSoap
    November 17, 2015

    I agree they should be accountable to Parliament, and hence to you on this matter. There seems to be some wriggling going on. More power to your hand to sort this out.

    1. Denis Cooper
      November 17, 2015

      It seems from the article that they don’t consider themselves to be accountable to Parliament in any meaningful way, and if that is really the case then maybe we should ask why. I hesitate to make this leap, but if over time many members of the Parliament have themselves ceased to think of it as being the supreme legal authority for the land then inevitably that attitude will rub off on others and Parliament will be increasingly treated with contempt.

  8. Anonymous
    November 17, 2015


    But what if Network Rail had made lots of money from derivative hedging and trading ?

    My point being that professional City traders are capable of making huge mistakes. Investment banking is largely a game of guess work and luck – those that are rewarded so handsomely are not gifted or savvy but have been lucky.

    Anyone who didn’t increase their mortgage and invest in property agreed with Network Rail. That interest rates could not be held for so low for so long and that the Bank of England (and the Government) would beggar so much to keep house prices high.

    Taking out a long fix, higher interest loan was the sensible thing to do … but completely wrong, as it happens.

    In both cases something had to be done to preserve monies but in trying to do the best we can often do the greatest harm.

    Network Rail projects do not happen quickly. They take long term planning and so there is often a lot of money sitting around and we all know how far we are from Real money since the days of Captain Mainwaring. Moves have to be made to protect it from its uncertain nature. Sticking it in a low interest account would have done no good either.

    On another issue. Spare Network Rail land. This is an issue which they called right. They held on to it – a rising asset and may be able to release it at high prices.

    Also scrap metal. The left it lying around in situe for a long while but have since picked it up and sold it at a price that made its removal profitable to do so.

    Will you be praising them for this, John ?

    The main issue in support on Network Rail is that there has not been a major accident in well over a decade.

    They have made massive improvements in operational and project safety and now have the best record in the EU.

    Reply I do not want Network Rail dealing in derivatives, even if they were any good at it. The failure to use and develop their land is a major impediment to the improvement of our economy and towns. They can do so much better.

    1. Leslie Singleton
      November 17, 2015

      Dear John–I am not quite so keen for rail land to be sold off and in particular in many cases track ways should be preserved against future need as we get more crowded. By no means easy or cheap trying to re-establish (or establish) rights of way through built up areas–witness HS2. Heartbreaking to see a potentially re-establishable line stymied by a single development that scotches the whole thing just like that. Of course in many cases the line should never have been dismantled in the first place instead being kept alive by infrequent so-called ghost trains. Imagine the need in say 100 years’ time. Yes I well appreciate that 100 years would be a very long carry but cycle routes and wildlife footpaths are a possible mitigation. And “they” can stop demolishing bridges (often beautifully built–real stone arches no less doing wonderful things) just for the fun of it and in particular across wild rivers where the salmon do not see the risk of swimming under a bridge as too worrying.

      Reply I am not suggesting selling trackways. The surplus land is in old goods yards and near stations.

      1. Anonymous
        November 17, 2015

        Reply to reply – It turns out to have been financially prudent to have held on to the land.

        I wonder if this outweighs the losses.

    2. ian wragg
      November 17, 2015

      Also scrap metal. The left it lying around in situe for a long while but have since picked it up and sold it at a price that made its removal profitable to do so….

      Most of it got stolen together with the copper cabling.

      1. Anonymous
        November 17, 2015

        Ian – This isn’t true.

        Local managers have been given authority to recover the metal and return the profits they make from it to their own budgets.

        The theft of fixed cabling is not the fault of Network Rail but of our government and legal system which is not tough enough on criminals.

        1. Anonymous
          November 17, 2015

          Reply to reply – It turns out to have been financially prudent to have held on to the land.

          I wonder if this outweighs the losses.

  9. ChrisS
    November 17, 2015

    Network Rail is owned by the taxpayer as are the NHS, Education, the prison service and many other infrastructure-rich services.

    Like so many problems, the financing losses at Network Rail have their origins with Gordon Brown who was heavily involved in setting up the organisation in 2002-2003. Like his daft and hugely expensive PFI scheme for keeping hospital and school buildings off the government balance sheet, he was determined to con the public into thinking that government spending was not running wildly out of control as it so obviously was.

    As a result, like hundreds of PFIs, Brown insisted that Network Rail was financed in the markets, not via Government gilts denominated in Sterling which would have been risk-free and much, much cheaper and require no hedging.

    Why the coalition government via its civil servants, did not keep a better eye the financial antics of Network Rail after 2010 is a question that needs to be answered.

    All Network Rail borrowing should be on the Government balance sheet and while there may be a case for hedging currency, it should only be necessary in respect of equipment that is only available from abroad and where the purchase can only be made if it is denominated in a currency other than sterling. However, why this should be the case, I cannot understand : it is the supplier that should be taking the currency risk not Network Rail.

    It would be interested to know what percentage of GDP the government is actually responsible for if all publicly-owned organisations and infrastructure are included in the borrowing figures. I suspect the figure would be higher than the most efficient Western countries and as a result the real size of our deficit will be even more shocking.

    HS2 would then be a non-starter.

    1. oldtimer
      November 17, 2015

      I suspect your are right in thinking that this started with Brown. I recall, several years ago (late 90s?), being at a meeting with a science and technology theme at which a Treasury representative spoke. I cannot recall if he was an official or a Spad. But his message was a surprise, at least to me in the context of the meeting. It was extolling the virtues of PFI and how, as he put it to his equally astonished audience, “I`m from the Treasury and I am here to help”.

  10. Bert Young
    November 17, 2015

    Network Rail is a nationalised business and , as such , is obliged to follow the directions it is given by Central Government ; what it is doing dabbling in money exchange matters is beyond comprehension . From what has been indicated it has already been given sufficient reminder not to dabble around , this being the case , heads should now roll . The Ministry responsible is equally at fault .

  11. formula57
    November 17, 2015

    We should be seeking criminal prosecution against Network Rail’s finance managers and its board for the clear breach of fiduciary duty in speculating with foreign currency borrowings and derivatives. Perhaps the prospect of a day in court (followed by prison time) will motivate them enough to provide an explanation for their perfidy that we can all hear.

  12. MikeP
    November 17, 2015

    Your revelations are unbelievable, unforgiveable and totally unacceptable.

    Today we hear that EasyJet’s profits are up, that Lidl and Aldi continue to take market share from the Big 4 retailers, other than Sainsbury, and yet Network Rail can rack up losses that eclipse anything the media prefer to trot out and the public are completely unaware. If Network Rail’s appalling treasury management weren’t bad enough, we hear that HS2 costs have increased (already, without an ounce of soil being dug), and the electrification of the GWR route is over-running. In common with other parts of the country no doubt, we in the Thames Valley continue to experience over-crowded (ie seatless) travel in rush hour, “leaves on the line”, signalling failures and all manner of other excuses for a sub-optimal service. I hope your recommendations are taken up and that Network Rail’s profligacy and incompetence are exposed for all to see, it’s a disgrace!

  13. yosarion
    November 17, 2015

    On R4 this morning it seems that the Irish Chancer in no 11 thinks the Midlands is part of the North and even though both Birmingham and Coventry declined elected Mayors through the ballot box it would now appear they are having it forced upon them at EUSSR Regional level. Has Jo Moore been appointed to Gideon’s team because it would appear it is a good time to bury bad news.

  14. Chris
    November 17, 2015

    O/T, but of very great significance to those concerned about the future of the UK,
    could you possibly also write about the following planned action:

    Reply. I have already said I intend to vote for Out, so have some other Conservative MPs. More may come to that conclusion now we have seen the list of demands. I would not overstate the importance of today’s meeting of CFB.

    1. Denis Cooper
      November 17, 2015

      When only 50 Tory MPs “want an end to the supremacy of EU-law over UK law” presumably the other 280 are eurofederalists who would prefer it to be the other way round, with EU laws supreme over the laws of its member states.

      That was in the EU Constitution, of course, as Article I-6, which paralleled the Supremacy Clause in the US federal Constitution*, but was later relegated to a non-binding Declaration 17 attached to the Lisbon Treaty.

      I think we can guess that the level of covert support for a pan-European federation is even higher among the MPs of most of the other parties.

      * “This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding.”

  15. Mark
    November 17, 2015

    Presumably now some other way will have to be found to subsidise banks to make up for the profits they have made from providing these derivatives if Network Rail are going to be required to wind down their portfolio. There seem to be a number of schemes whose main beneficiaries are the banks, including ZIRP, measures to support house prices, PFI deals and so forth.

    1. stred
      November 17, 2015

      The latest help for the banks must be the £2bn promised to support the loan from RBS to EDF, or perhaps France, to enable them to buy British Energy and build nukes that had been rather delayed. But they can be built now, providing the Chinese can improve the quality of the reactor construction and find the money. Like PFIs the CHIFIs will be paid for by doubled bills.

      Back in 2009, banks were helped out too, when Yvette Cooper was chief sec. of the Treasury and Gordon was saving the world. The banks had run out of money for their lucrative PFIs, so they were rescued by a £2bn loan from HMG. Re www. supplymanagement .com 4.3.2009.

      The official running the show then was Gordon McKechnie from Deloitte and then Charles Lloyd, from PWC took over. Gideon was not keen on PFIs but changed his mind for some reason. Re. My old Private Eyes and Partnership Bulletin.

      I see they are now reporting that Robert Goodwill (who?), a transport minister has told Scottish business leaders that the HS2 debate is over. Better find another 200bn on the CHIFI account.

      Another way to cut cosst while we pay more has been found by our local authority in London. They are cutting services but planning to build solar parks and wind turbines, which will make lots from the subsidies. LAs can still put up windfarms if they give themselves permission. Re the Romford Post.

      The comuter thinks I am spambotting so trying again

  16. Bob
    November 17, 2015

    Will the geniuses behind this derivitive trading be keeping their jobs or will they handed generous golden handshakes before moving on to their next lucrative govt funded sinecure?

    1. alan jutson
      November 17, 2015


      Do not forget the very lucrative pensions.

  17. ray
    November 17, 2015

    But won’t this make UK borrowing appear higher?
    And therefore George Osborne will never allow it.

    Reply He has already put all Network Rail debt into the state totals as we guarantee it.

  18. Denis Cooper
    November 17, 2015

    How is it that a highly respected elected representative of the people can ask such pertinent questions but get no satisfactory answers? There’s something wrong somewhere.

  19. A.Sedgwick
    November 17, 2015

    These losses show staggering incompetence and unprofessionalism.

    November 17, 2015

    “derivatives…as a hedge against rising interest rates during a long period of ultra low rates…” ( line 21 onwards )

    There are…voices in the greater economic community perhaps describing themselves as Contrarians who have persistently poured scorn on the idea that the Fed and one of its attached shark-pups the BoE will in fact raise interest rates as they repeatedly promise but never deliver.
    Network Rail professionals, as with properly qualified authorised Financial Advisors and Fund Managers are legally and personally obliged to “follow the flow ” like lemmings with high intelligence, cruel, aware of what is happening but trapped into the stampede by their peers, professional institutions governed by rules, laws.

    Network Rail has been brave in the sense of using derivatives. But perhaps wrong in believing the financial world’s own propaganda. They should jump to their ruin over the financial world’s self-made cliff with the rest.

  21. Iain Gill
    November 17, 2015

    I hear France has activated Article 42, a distress call that compels other EU states to send military and other support ? I suppose that means us. Pretty much the whole of NATO apart from the US?

    France has managed to mobilise more armed police and soldiers than the size of our entire army. If it tells me anything it tells me we need more regular infantry.

    1. Leslie Singleton
      November 17, 2015

      Dear Iain–But what would you do with regular infantry, who I would have thought would have a very limited role to play within the UK? It’s not as if ‘boots on the ground’ in Syria is being proposed, though not sure why not myself, that’s if we want to achieve anything and we believe we are right.

      1. Iain Gill
        November 18, 2015

        On the contrary regular infantry have a very flexible use. They have been used recently for allsorts, help at the Olympics, help with flooding, help with snow drifts, help when fire/ambulances strike. As well as their proper job of taking on our enemies. Our armed forces are top heavy with far too many senior officers, and far too few regular troops. Most likely threats to this country require more infantry.

    2. Anonymous
      November 17, 2015

      Iain Gill – there is a terrifying article written by a police commissioner in The Express today.

      That our armed police are woefully equipped and small in numbers. That their guns are underpowered and single shot – unable to compete against fully automatic Kalashnikovs (the preferred weapon of the jihadist.) Worst of all the standard police issue bullet vest cannot withstand a Kalashnikov round.

      Imagine not one but FIVE Michael Ryans turning up in Hungerford today.

      The rampage could go on for hours and hours. This WILL happen.

      Talk of the SAS filling the gap is childish. They are in even smaller numbers and policing is not their purpose. They are for pre-emptive strikes and take time to deploy.

      The negligence over this and our borders (and our economy) has been utterly criminal.

      1. Iain Gill
        November 18, 2015


  22. Iain Gill
    November 17, 2015

    Do network rail staff still get government guaranteed final salary pensions? If so stop that. If the rest of us in the real world cannot have final salary pensions I don’t see why they continue in these state funded organisations.

  23. alte fritz
    November 17, 2015

    Striking really that these three very cogent points arise from baffling financial decisions rather than doing the job which the title implies. Where does the rail network figure in their strange world?

    November 17, 2015

    Off topic: Today’s G20 Paris Attack Statement LIVE on “BBC Parliament” with Rt HonMr Cameron and Rt Hon Mr Corbyn…:

    Many reasons could be cited why publicly expressed opinions absolutely differ from reality.
    But I have in my time on Earth rubbed shoulders with a number of MPs and their close friends and relatives. Not that many were aware of any significance,- in that I am not the least bit important. So I do know that quite alot of their public performances as in the above debate are in fact, contrary to commonsense, actually their true opinions albeit amateurishly histrionically expressed. They are ordinary human beings. Most worrying.

    Shooters with reloading kalashnikovs had much more than adequate firepower to kill several times over the 1500 youngsters at the Bataclan Theatre in Paris. I believe the death toll is 132 at the moment.

    I being absolutely unimportant, no false modesty,- Muslims, Catholics, foreigners here and abroad at levels of intelligence and social status far below Mr Cameron’s pay-rate with whom I have worked and talked have had no reservations whatsoever in speaking with me as if I am of their own nationality and faith. It is a cross I have to bear which I still am unable to offer explanation. A mostly unwelcome gift.

    The viability of what politicians call “multiculturalism or “diversity” does not work on one single street in the UK. Most people are not the politcos of BBC Question Time and they appear to the “man in the street ” be he Russian, Muslim, Greek, black, white as weirdos to put it politely.

    The UK cannot defend itself against domestic terrorism. I cannot for legal reasons explain why: my explanation and text would amount to a terrorist handbook.
    Mr Cameron’s externalisation of the enemy and childish changes to words into “Daesh”, the spelling of which let alone its meaning I have needed to look up, does not solve the problem and enemies he and his predecessors have lined up in whole regiments in UK housing estates.

    1. Anonymous
      November 18, 2015

      Christopher Huston – Will the politicians wait until people have been massacred in their thousands before treating this as the war that it is ? I do not exaggerate these numbers. In most parts of Britain a rapid response to ten or twenty jihadists on the loose with machine guns cannot be mustered. It would take many hours in fact.

      As usual security is discussed with London centricity.

      It may not just be the police we need to arm but much of the citizenry.

      Some of us here have been telling the Tories time and time again that we must be beefing up our homeland security and our borders.

      The worry is not just the atrocities but the revolt that will follow.

      If we are at war then it is about time the politicians started acting like we are at war.

  25. ian
    November 17, 2015

    Only 1.5 billion, not bad, with spending going up 5.5 billion in one weekend alone the same amount that came in from the sale northern rock mortgages and housing credits that now look likely be cut by 2 billion pounds a year, have thought about any plans for the wave homeless people in the private sector who will be hitting your streets.
    Should you be making plans for all big city park to have tents and facility made available just in case.

  26. ian
    November 17, 2015

    I still cannot see how thing will change if you win the EU in/out election, I feel that most your party is made up of liberals and socialist which are chosen by your party local HQ and that would leave a few people like yourself trying to make changes against your leadership and big business, you are out numbered, a part from small changes hear and there and more laws coming in from your own party for big business instead of the EU.
    It was a good idea to mps had to let the EU to take the blame but I think spin will win the day hear with boarders left open and more oversees workers taking up work hear with most EU laws left in place, the only good thing may be the money you save but I am sure that will be wasted on rubbish in a bink of an eye.

    Have you any input on your losing position if you win the in/out vote or would it be the case that you have done what wanted to do and now is the time to leave the job.

  27. Lindsay McDougall
    November 17, 2015

    Any second now, Jeremy Corbyn will be dubbing Network Rail as ‘the people’s hedge fund’.

    You haven’t included a requirement for Network Rail to make a surplus in order to avoid making further calls on tax payers. It is already £40 billion in debt.

    The fact that European railways make bigger losses is not important; sanity is something we can enjoy by ourselves.

    1. Leslie Singleton
      November 17, 2015

      Dear Lindsay–I often wonder how big the losses and the debt would be if we had just left British Rail (subsidised of course but straightforwardly and transparently so) well alone. I doubt BR would have been doing derivatives.

      Reply Network Rail is a nationally owned business just like BR

      1. Anonymous
        November 18, 2015

        Reply to reply: It has to be pointed out here that the vast majority of people doing Network Rail work are private sector contractors.

        The people that you see wearing orange suits and hard hats are the very privateers that the Tories wanted – they compete in a completely open market.

        Sure. Since the Hatfield crash track examiners have been taken back in-house from the private sector but there hasn’t been an incident since.

        Privatised Railtrack was turned into nationalised Network Rail because privatised Railtrack failed.

        Why ?

        Because the Tories made a right hash of privatisation. In fact it should not have been privatised at all and my proof being that it costs a hell of a lot more to run now than it did then.

  28. Bill
    November 17, 2015

    To the ordinary taxpayer and voter what you write comes as an extraordinary revelation. Who on earth was responsible for such damaging financial management and how could it be justified as relevant to the running of a better railway? Is this part of Labour’s general incompetence?

    I have only one other comment: it is important not to allow the Rail Unions a stranglehold on the rail industry at any point in the future. The only way to do this is to continue with separate companies with separate employees in separate parts of the country while at the same time (and this is the difficult bit) ensuring a unified system such that travellers cross seamlessly from one part of the network to another.

  29. hefner
    November 17, 2015

    Mr Redwood, good luck with your proposals, and I hope they will be more successful than the scheme you presented in 1993 and was refused by John Major.

  30. petermartin2001
    November 17, 2015

    I’d just suggest that railways should be viewed more in the same economic light as roads. We don’t expect every road to make a profit and close it down if it doesn’t! We look at each road as a piece of infrastructure which is there for the common good.

    It looks like some of the promised rail electrification program may not go ahead. Is the wider economic picture taken into consideration when making these kind of investment decisions? Every £ of spending has an effect on the economy in terms of increased employment levels, increased taxation revenue levels, reduced unemployment benefit payments etc. Govt isn’t in the quite the same position as private owners. What may not make sense for them can make sense for Govt when all factors are included.

    Agree with your comments about borrowing in a foreign currency BTW. That should apply to all government not just the railways.

    Are we sure that isn’t going on elsewhere too?

    reply All roads are loss making because they are supplied free to the user by the taxpayer. We’re they to be based on user charging most of them would be very profitable at anything like rail fare equivalence, but there are no plans to do that

    1. Lifelogic
      November 19, 2015

      To reply:

      There should be plans to road charge using modern electronics and too use the money to create more road space under passes, bridges, over passes, more efficient diversions & get rid of vehicle duty, reduce fuel duty and encourage some people (the poorer but time rich ones) to defer their journeys to more off peak times. Get UBER engineer types on to it now.

      1. petermartin2001
        November 20, 2015

        This is all possible. The technology is available off-the-shelf. It could involve each car carrying a transponder which can be linked to your credit card, or the number plates could be automatically read.

        Everyone would get a monthly bill which could be more or less depending on the your car usage and also on the tariff rate of particular roads which can be time dependent as you suggest.

        It is straightforward to time users between the toll-points and if that’s too short your speeding fine can automatically be added to your bill. Everyone’s journey can be logged and a record kept.

        Is that what everyone wants?

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