Fare rises and Network Rail’s derivative losses

Yesterday the RPI for July told us that rail fares will go up by 3.6% next year. As I reported yesterday on this site, costs have been mounting at the nationalised Network Rail which supplies the expensive track, stations and train slots. The railways will want this substantial fare rise, which always bears heaviest on commuters. Off peak and leisure travellers can benefit from highly discounted fares designed to try to fill the many empty seats outside peak hours.

Rail travellers paying those fares will not be amused to learn that the losses Network Rail have been making from their derivative dealing continue. According to the last accounts Network Rail lost another £116 m on “movement in the value of cash flow hedge derivatives”, compared to a £232 m loss the previous year. (Accounts page 95) The total fair value of derivatives they hold rose again last year, from £963 m to £1102 million. (Accounts p 97). The liabilities on derivatives rose from £1408 million to £1529 million. The notional amounts were of course much greater, rising from £17,094 m to £17,974 million. (Accounts pp 120-121 Note 19)

I am surprised Network Rail continues to run such large positions in derivative instruments now that its financing is all secured by the government. The present management have inherited both foreign currency borrowing and index linked borrowing. Their predecessors took out various derivative positions in interest rates and currencies with the results I have reported before by quoting their Accounts, now updated for the most recent year.

I continue to ask why do they do this. What benefit is this to taxpayers who supply 70% of the revenue and who own 100% of the shares of this business?


  1. Lifelogic
    August 16, 2017

    You sensibly ask:- “What benefit is this to taxpayers who supply 70% of the revenue and who own 100% of the shares of this business?”

    But since when has any of the state sector had much interest in “benefit to taxpayers”? To the NHS, for example, the patients are just a nuisance (see for example Jeremy Hunt’s 15ft by 8ft private bathroom at a cost to taxpayers of £44K). I budget about £6K when building an luxury bathroom (of that size) in a rather upmarket house so he could have had seven for that price.

    They are generally run for the benefit of senior staff (and their personal contacts and suppliers) as we see all the time.

    Look for example at the location of their head offices. These are very often chosen mainly for easy commuting of the senior person (or people) and a pleasant environment for them. I have seen very expensive moves happen in the past with this being the main driving force for the move.

    Almost never are they located where it is economically sensible (or convenient for the job they actually have to do).

  2. Lifelogic
    August 16, 2017

    £3.5 billion wasted on the huge white elephant arriving in Portsmouth today, without any aircraft but with great (and very expensive) fuss. Still no aircraft for it and it may be operational in 2021 they say!

    Tax borrow and piss down the drain, that seem to be the speciality of the UK state sector. May clearly likes it like that.

    1. Lifelogic
      August 16, 2017

      The BBC say it is “magnificent” and “beautiful” and “an important day for the Royal Navy”. Important to show how incompetent their management & procurement system is I assume. Final cost perhaps £6.9 billion it seems.

      (They even had to dredge the harbour too).

      Surely to the tax payer it is just another sickening example of government waste and total incompetence.

      1. Lifelogic
        August 16, 2017

        Lots of effusive drivel from Harriett Baldwin (Parliamentary Under Secretary of State at the Ministry of Defence). Why is she not saying sorry for this appalling waste of public money and making sure such waste never happens again? Instead they are wasting even more money on helicopters, a grand show and hundreds of men standing around (doing nothing useful) in uniforms.

        A sitting duck, just as the Russian minister stated. Effectively redundant before it will even be available for use.

        1. Anonymous
          August 17, 2017

          Been better off with a lot of converted auto-piloted container ships carrying drones to support Royal Marines operations.

          And a fleet of rubber dinghies for UK shore patrol. (No. Hold no a minute – that would become a migrant ferry service.)

          A fraction of the cost.

  3. Mike Stallard
    August 16, 2017

    Mr Davis and his team’s offering about the all important Brexit? Not mentioned.
    Rail – oh yes. And I can see that affects a lot of constituents too and it is very important for them. But Brexit is going seriously wrong because the EU and the UK simply are on different planets. Mr Davis’ latest offering does not even mention the words “Single Market” for example. And it confuses the Customs Union with the EEA. Mr Barnier and his team are working to a written schedule which is simply not mentioned.
    When the balloon goes up – at midnight on 30/3/19 rail fares will be swept aside in the anger and frustration of our traders, service providers, bankers in the city and shoppers.
    Neither Conservatives nor Labour seem to realise the seriousness of the situation.
    Just like – yes – August 1914…

    1. alan jutson
      August 16, 2017


      Why don’t you give David Davis a chance, so far both sides have been sizing each other up, the real work is all being done behind the scenes (at least I hope so) eventually we will have the real position of both sides, then we will see how far apart they are.

      The one thing that both sides agree on at the moment is that “WE ARE LEAVING in March 2019”. at the worst this will be on WTO terms, at the best who knows.

      Do you really believe that the EU Countries leaders will allow all of their own Countrymen’s jobs to go down the drain, just because an EU official says they cannot agree terms.

      We need to remain strong we have a good case, and we are in a good negotiation position, our worst enemy is ourselves, with defeatist talk and action..

    2. Anonymous
      August 16, 2017


      1. Anonymous
        August 16, 2017

        And is there any point of a border with a country sized hole in it ?

        1. Denis Cooper
          August 17, 2017

          The Norwegians seem to think so, they have a thousand miles of land border with Sweden. Just to clarify:

          Sweden is in the EU, Norway is not in the EU and it is classed by the EU as being a “third country”.

          As an EU member state Sweden is in the EU Single Market, while Norway is not in the EU Single Market but has extensive although incomplete easy access to the EU Single Market.

          As an EU member state Sweden is in the EU Customs Union, while Norway is not in the EU Customs Union but has agreements for light touch customs procedures along its border with Sweden.

    3. Denis Cooper
      August 16, 2017

      Maybe it doesn’t mention the EU Single Market because we won’t be in the EU Single Market, just as we won’t be in the EU Customs Union. And nor does it mention the EEA because we won’t be in the EEA, and as the EEA is not mentioned there is no scope for it to be confused with the EU Customs Union. And Barnier may have his written schedule but it is not to be treated as Holy Scripture, it is his view of what should happen but it has no basis whatsoever in the EU treaties. You are coming dangerously close to taking the wrong side here, as is your mentor.

    4. Londoner
      August 16, 2017

      Mr redwood does seem to be trying to change the subject from the collapse of his plan for Brexit!
      The only question now seems to be just how big our bill will be, plus also the gov’t has agreed to follow the EU rules on customs

      Reply I do lots of subjects, and will continue to explain how good Brexit will be

    5. Roy Grainger
      August 16, 2017

      Many people seem to be obsessing about Brexit on a daily basis – the rest of us have other things to do. I am grateful John addresses a range of issues.

  4. formula57
    August 16, 2017

    Cash flow hedges might well have been undertaken to provide for certainty of outcome and so might have been reasonably prudent even whilst the result is a charge against profit.

    The actions of the previous management in opening up exposures through borrowing in foreign currency prima facie look negligent and ought to be a matter of the Attorney General and the Crown Prosecution Service to look at to assess if there was failure in fiduciary duty.

  5. Mark B
    August 16, 2017

    Good morning.

    I am surprised Network Rail continues to run such large positions in derivative instruments now that its financing is all secured by the government.

    Our kind host might be ‘surprised’ but I am disgusted ! What is the Minister for Transport, the Treasury and the Chancellor doing about it ? Nothing it would seem. And you people give away borrowed billions to other countries ?!?!?! This is a disgrace.

    As for the previous management, is there any grounds to bring criminal charges against them for misappropriation of taxpayer funds ?

    All this proves is what many here say about government funded and / or state bodies – Too expensive and too wasteful with little or no service to the end user. Just a easy meal and life all on those that have real jobs.

    1. Mark B
      August 16, 2017

      Oooh ! No Capture requested 🙂

  6. Bryan Harris
    August 16, 2017

    This huge annual fare increase has been going on for years, and as you say JR, it mostly affects commuters – It really is time for a massive re-think:
    – Why do so many people need to commute into big cities?
    – Why isn’t broadband used more to cut out journeys?
    – Why aren’t big city firms encouraged to provide reasonable housing for employees close to their work places?
    – Why are the bosses of NR not penalised for such poor performance?
    – Could it be time for a massive rebuilding/ rerouting / re-engineering project to establish railways fit for purpose?

    It’s time to get out of this little box and use some imagination.

    1. 37/6
      August 16, 2017


      The complaints from a lot of commuters (and I sympathise a lot) are of high fares. Yes. £3k is a lot of money out of an ordinary worker’s pay packet – after tax (why not tax deductable for people making an effort to be useful ?) but look at the mileage that money gets !

      One user complained on national TV of her 100 mile trip between Taunton-Bristol costing £3,604k a year. Assuming 240 days at work = 15 pence a mile. Lower if the card is used socially too.

      My local taxi firm charges 300 pence per mile. A private car (with tax, ins, MOT, repairs, depreciation) will cost at least 50p a mile – then parking costs.

      The problem in her life isn’t the train fare – it’s that she commutes so far. There aren’t enough houses where the jobs are.

      1. 37/6
        August 16, 2017

        Sorry for repetition. On revisiting one forgets that one has already posted if the first hasn’t appeared and cannot be seen.

        I think this may be others’ problem too and is why we should not complain when not published.

        Thanks for the good work, John.

    2. hefner
      August 16, 2017

      What about discussing the profits of train operators?

  7. alan jutson
    August 16, 2017

    Do they give a clue as to why they run a derivative position given it is such a large amount of money.
    Surely some comment in the covering notes.

  8. Sakara Gold
    August 16, 2017

    Network Rail is investing heavily in rail infrastructure repairs and upgrading the network due to the awful Hatfield crash. If they can’t successfully manage their derivatives book, they should bring in City specialists in this field, or appoint a third party to manage their positions for them. The necessary expertise is available in London.

    Network Rail are a railway engineering organization. Not being specialists in the field of finance, no wonder they are loosing money on financial engineering.

    In view of the complex problems with modernising the railways and the importance of them to the economy, in my view it would probably be best to re-nationalise the industry and have done with it.

    1. David Cockburn
      August 17, 2017

      Perhaps you are not aware that Network Rail has already been nationalised and is owned by the state. That doesn’t seem to have stopped them from being badly run, if anything it has encouraged them to be careless with public money.

  9. Bert Young
    August 16, 2017

    I’m very glad that I no longer use rail and I feel for those commuters in my area who not only have to pay higher costs for their train journeys but also for the higher costs of parking . One of the solutions is to move many of the London work places to locations outside . This happened in the 70’s and could be one of the outcomes today .

    1. 37/6
      August 16, 2017

      This has to be the answer, Mr Young.

      One young lady on the news complained about her 100-mile-a-day commute costing her £3000 a year but I calculate that to cost 12p a mile.

      My tiny city car is capable of 12p a mile but incapable of such distances – then the cost of parking it.

      The problem is not the train – it’s that she cannot find suitable accommodation within the range of decent work.

      And here it is the same. Houses upon houses being built without range of any decent work or facilities. Whole new towns of them.

  10. agricola
    August 16, 2017

    Derivatives have always struck me as casino finance. Network Rail should decide whether it is an organisation set up to maintain and improve the rail network or a gambler with taxpayers money. As it is run on public money I would suggest the government gives it some firm guidance as to it’s function.

    1. Leslie Singleton
      August 16, 2017

      Dear agricola–Derivatives should be and were once the opposite of a casino in that the idea was to kill (hedge against) risk – hence the name Hedge Fund – not create it (gamble). The simplest (?), viz a forward exchange deal, if taken out against a future currency flow, creates indifference to the exchange rate; but can equally be used to speculate on that rate, and worse, can be done ad infinitum in terms of size (subject to creditworthiness of counterparty). What a railway company is doing playing with this stuff and in significant amounts is hard to imagine.

  11. Richard
    August 16, 2017

    Well, I’m a taxpayer and I’m glad Network Rail hedges its interest rate and foreign exchange risks. I certainly don’t want it to take unhedged bets on the future direction of these markets. You cite the change in value of the derivatives without mentioning the change in value of the hedged assets.

    Reply I cited both the assets and the liabilities! Note the gap. The rest of government does not hedge these risks, but absorbs them as they occur, as you can afford to do when you control all tax revenue and money creation.

    1. Iain Gill
      August 16, 2017

      John, your reply was correct.
      It was the private sector, so it was different because they were risking their own and their shareholders money and not the publics money as is the case with Network Rail, but a while back one of my customers was a large paper company. Despite the large headcount and activity related to paper, in discussion with the finance director it turned out the company made more profit from its international monetary transactions. A few of the financial staff were playing the currency markets and international shares markets, and consistently making more money for the company than the actual paper related activities. All above board and declared to the shareholders, and note they MADE MONEY and were not making a loss on this activity as Network Rail appears to be.
      So this kind of thing does happen.
      If their finances are so bad I guess we could just do a Rail Track and make them insolvent and force them to go bust… but since we own it 100% surely we can just tell them what to do.

  12. Duncan
    August 16, 2017

    With all due respect John the absolute importance of the manner and the process with which the UK leaves the EU is of an importance that dwarf’s the issue of the use of derivative instruments by NR management

    The so called cabinet split between how long the transition process should be is causing concern among leave voters

    Leave MP’s must impose their influence NOW to prevent a Remain ‘stitch up’ led by that scurrilous Hammond

    At present, all else is utterly irrelevant

    Reply IT is likely to take 19 more months to exit the EU, and I do write and talk about it regularly. Normal life for a soon to be independent country also needs to proceed. I am not going to comment on every silly media story misconstruing what is happening or not happening. I will update you when there is something to update. Government policy remains as last described on this site!

    1. Peter
      August 16, 2017

      Duncan, I share your concern about leaving the EU. I fear ‘transition’ and ‘temporary’ are weasel words before the fix goes in.

      I note that Brexiteers – in the media at least – appear reactive. Remainers still make the running in the daily news.

      Reply The media do not govern the country!

      1. rose
        August 16, 2017

        “The media do not govern the country!

        But Mrs May seems to think they do. For the second time during this American Presidency she has blundered into American domestic politics without apparently knowing what she is talking about. She seems to think cowardly capitulation to media demands trumps the national interest.

        As we are seeing something of the same phenomenon here – statues threatened and history being rewritten, as well as left wing intimidation and stoking up of class and race hatred – she had better marshall her thoughts. History is not black and white; it is complex and detailed. No hero is wholly good, nor villain wholly bad. It is hard work to understand it. Perhaps you could arrange a tutorial for her, either with you or Jacob Rees Mogg.

    2. Anonymous
      August 16, 2017

      The London Standard (edited by Osborne) is one long “Brexit. Boo!” fest. It is quite open about how Remain is going to subvert Brexit.

      The leader article yesterday (by an ITV news anchor) proposed that Jeremy Corbyn’s party fight the next election on a second-referendum ticket – or simply a remain-in-the-EU ticket with no second referendum at all.

      May’s losses at the last general election have reinvigorated Remain.

      PS, Mrs May on Donald Trump on right wing extremism. Trump is right. The Left have killed hundreds of millions of people through violence throughout history. He WAS being diplomatic when he said Left and Right were equally as bad – Left are far worse in fact ! Let’s not imperil any trade deals with the US over this.

      One thinks that Remain (usually of the Left) would rather Britain fail than leave the EU. Let’s not give it to them.

      1. Ed Mahony
        August 18, 2017

        You’re missing the point.
        Yes, of course the left have done has much evil as the right (and social liberals) throughout history. But this specific case wasn’t about the evils of communism or socialism (or social liberalism), for example, but (largely) of anti Nazis confronting (largely) Nazis. There’s no moral equivalency.

        Trump is a disaster for the US.
        (Firstly, he’s not (largely) responsible for America’s recent economic spike). His political policies are bonkers:
        – economic isolationism
        – focusing on manufacturing when America is a services country
        – populists gimmicks like the Mexican Wall
        – Unable to unite America and forge win-win relations with other countries.

        With millions of young/middle-aged Tories (from 24 to 49) who voted remain and are now concerned the country will dip economically for the next 20 to 30 years because of Brexit, the Conservative Party is going to have a hard time keeping these Tories on board, including centre right Tories in general if a new centre Democrat party is formed, here in the UK, taking the centre ground like En Marche! in France.

        Until more Conservatives in Parliament start distancing themselves from Trump, then this is just one more reason why the Tories will find it harder to win votes in the next general election.

        Reply Thea Lib Dems offered those voters the second referendum option and they bombed badly in the GE. I doubt a new centre party will be formed in the UK. The SDP tried this by seeking to detach moderate Labour supporters from Labour in the 1980s but never broke through despite endless media speculation that it would. There are no signs of any Conservative MP wanting to lead and form a new party. Some in Labour would like to but there is little evidence that any are going to break away in the way Macron did from the French socialists.

        1. Ed Mahony
          August 18, 2017

          I think UK voters today are far more like French voters today than UK voters 30 years ago. Therefore some kind of En-Marche! here is very possible, i think, especially if Brexit doesn’t deliver quickly on the economy (and sustained growth over years), as well as bring down immigration. The one big weakness in my argument, i think, is that there isn’t a Macron, on the left or right, here to lead such a party. But one might appear in 5 or 10 years time.

          I couldn’t envisage voting for any other party than Tory in last election (just couldn’t vote Liberal Democrat, plus Tim Farron weak leader, plus i think he loves Europe too much).
          But i think the best way forward for our country is to remain in the EU BUT (just as importantly) get it REFORMED (for our benefit and of Europe’s, not forgetting how Europe’s future impacts us whether we’re in or out the EU). This would be best for the UK from the POV of the economy and peace and security in Europe as well as getting back political power. It would also unite the Conservative Party more and the country. And i know many Brexiteers agree with me!

          Lastly, prominent Conservatives, especially in the media, have to speak out more against Trump. His form of politics is bonkers. And he’s doing deep damage to Republicanism and Conservatism in general.


          Reply There is no way the UK can reform the EU – Conservative governments tried and failed, Mr Cameron failed. Dealing with Trump is not our business – do not interfere in other democratic country’s politics.

          1. Ed Mahony
            August 18, 2017

            I agree with you about Trump (I didn’t mean politicians get involved, but our right-wing media could do more to challenge Trump).

            Regarding reform, with respect, Mr Redwood, i think you (and others) are making a category error here. Mr Cameron (and others) tried to get CONCESSIONS for the UK. This is quite different to trying to REFORM the EU as a whole. Sure, in both cases you’re working for your own self interests ultimately. But the way to get there is different. With reform, you gain twice. Firstly, you get more powers back from the EU. Secondly, you reform the EU itself which strengthens / stabilises Europe more which in turn is good for the UK because our strength and stability is very much tied up with Europe whether we’re in the EU or not, whether we like it or not.

            And whilst gaining, you don’t lose full access to the single market.
            It’s not perfect but then we don’t live in Utopia (and we live with all kinds of threats from the world outside Europe – a strong, stable Europe is good for us but also serves as a strong anchor in the world in general in many important economic / political / security ways). Remain-but-Reform would solve the problem of the Conservative Party being divided (giving opportunities to the left) and our country being divided (which undermines patriotism, and so much more). And we could then get on with paying off our national debt, and building up our economy, and so on.

            Most importantly i know there are many Brexiteers (and Remainers) who share this view. Moreover, there are many across Europe who now want the EU reformed, along the lines that Brexiteers, and others here, would like to see it reformed.


            Reply Cameron did expressky try to reform the whole EU

    3. Iain Gill
      August 16, 2017

      I would have thought a senior labour politician having to resign because they stated the obvious truth about mass child rape should be front page today, on this site as many others. Really the Conservative party should be making hay about this, and really hammering home how wrong the political correctness on this issue is. Looks like the police being scared to be honest about this issue were correct if we have politicians being treated this way for stating the truth.

      Also I watched all of Trumps words last night, and am staggered how different what he actually said is compared to how the press on both sides of the Atlantic are summarising it.

      Then again the rubbish healthcare in this country, healthcare assistants running heart clinics, nurses running emergency GP surgeries, and all the rest of it. The deaths and injury the Rubbish NHS is causing every single day. We need to break the stranglehold of this national fiction that the NHS is great and get a little honesty.

      Or lets talk about the rubbish way motorway signs are run? Declaring junctions shut which turn out to be open, failing to id junctions which are shut, warning of workforce in the road when it isnt, and so very much more.

      There is much John can talk about other than Brexit!

  13. acorn
    August 16, 2017

    “Since becoming a public sector body in September 2014, Network Rail [NR] borrows directly from government and no longer issues debt on capital markets.” From the last ORR Rail Finance Brief http://orr.gov.uk/__data/assets/pdf_file/0005/22982/rail-finance-statistical-release-2015-16.pdf You wonder why the Treasury allows the current financial farce to continue; and, why it allowed the situation to be created in the first instance!

    Being part of the public sector, NR does not have to borrow or hedge with derivatives at all. The National Loans Fund and Public Works Loan Board (branches on the Treasury magic money tree) can supply the cheapest loans fully guaranteed till the end of the Pound Sterling; currently circa 1.2% – 1.5% but could easily be 0%.

  14. ChrisS
    August 16, 2017

    Sorry to be off-topic (but not off-message) again, but the reaction to our latest Brexit proposals has left me fuming.

    Brussels politicians led by that idiot Verhofstadt seem to be determined to destroy any chance of a sensible and practical outcome to Brexit, particularly with respect to Ireland and trade in general.

    Then you have Vince Cable on Newsnight attempting to rerun all the arguments from the referendum. It seems that the policy of the LibDems is now to do everything they can to undermine the negotiations with the stated intention of reversing Brexit completely.

    Both Remainers like Cable and a vocal and influencial cabal in Brussels need to accept once and for all that we are beyond the point of return and that WE ARE LEAVING.

    One would have thought that some sense of reason and practicality would have taken over throughout mainland Europe but it seems not. The 27, Juncker and those claiming to speak for MEPs can look no further than the politics of the situation. They are paying no regard whatsoever to the needs of trade, industry and the people on their own side of the Channel, let alone ours.

    Although the new Taoiseach is proving much more difficult than Mr Kenny, I feel sure that if Brussels could only bring itself to allow our two countries to sort out the issues on a bilateral basis, a good solution would emerge. Of course that won’t happen. The very worst trait of the Brussels dictatorship is that they have to be in control of everything.

    My view has not changed. Without even considering the size of any potential Brexit Bill, I don’t believe that any deal will emerge that would be better for us than WTO terms. So why even bother going through the motions ? Let’s pay them nothing and just get on and leave.

  15. A.Sedgwick
    August 16, 2017

    Well done for highlighting this again – this folly continues to be mind numbing.

  16. agricola
    August 16, 2017

    Off topic, but a subject you have already espoused in public, that of our future relationship with the EU. At a point not too distant I hope that the peoples and countries of the EU will realise that their mouthpieces at the EU itself are not doing them any favours. Quite the opposite in fact.

    If by the end of this year the EU are still prevaricating then we should spell out reality to them along the lines of your previously published thoughts, while at the same time , through advertising, make sure that everyone in Europe is aware of where we stand. We the UK do not have to wait until March 2019 to come to an agreement or tell them the terms on which we are leaving.

    By then I hope they will know how we are going to treat their citizens remaining in the UK, how we will manage the land border with Eire, what co-operations we consider it worth maintaining particularly on policing, intelligence and military, tariff free trade or trade to WTO rules, and finally how much money we will pay up until we leave and towards co-operations thereafter. At which point we should give them three months to decide what they want, not to further negotiate what they want. Again through advertising make sure the citizens of the EU know exactly what we are offering.

    This might concentrate their minds in the real world, rather than in that of fantasy, rhetoric, and insult they currently occupy.

  17. Epikouros
    August 16, 2017

    Logic suggests that it is consumers who as being the beneficiary of a specific good or services that they require and are provided with should be the only ones that pay for that which they receive. However for certain vested interests not least the consumers themselves government feels obliged to use taxpayers and borrowed money to assist them with their purchases. The reason given is that it is for the public good and to ensure social justice. However more often than not however morally well intended this action is the results do not live up to expectations and the consequences causes more harm than good.

    Unfortunately that does not deter so money is continued to be supplied to an ever expanding government and other organisations that by their very nature are incompetent to be misused and wasted. Civil freedoms, democracy and efficiency does not dwell in the hands of bureaucrats, politicians, experts and the righteously indignant. It dwells in every individual on the planet who are both citizens and consumers who through interaction and exchange have shaped our economies and laws much to our advantage. The growth of legislatures and bureaucrats are now the ones who undermine all that and now instead of being servants to the people are now their masters.

  18. Denis Cooper
    August 16, 2017

    As of 11 am today the government has not published its next Brexit position paper, but the media have already ripped it to shreds even before they have been able to read it.

  19. Javk snell
    August 16, 2017

    Leaving all talk about trains aside- riddle me this batman?

    How on earth can we leave the customs union and then still be in it?

    What is this talk about BMW cars that DD is on about? Does Angela Merkel know anything about it? I doubt it – so it must be for home consumption only… BMWs indeed as if the ordinary briton cares two hoots about BMWs!

    So how on earth then can we put forward an idea that suggests the UK wants to set up it’s very own economic union bloc in opposition and in direct competition with the EU and to expect that the EU will stand by and allow this to happen by accomidating us in some kind of transitional arrangement until we get it right? The mind boggles

    Listening to Verhafstadt and Barnier yesterday we can now be doubly sure that that is not going to happen. The 29th march 2019 is the date and the clock is ticking

    1. Denis Cooper
      August 16, 2017

      We will leave the EU Customs Union when we leave the EU on March 29th 2019, and we will not still be in it afterwards. So your question is meaningless, pretty much like the rest of your comment.

  20. margaret
    August 16, 2017

    This is vey similar to a post in 2012. I am not sure what derivatives Network Rail have, but index liked investments are at least safer. Down south your travel to the City is so important though and unfortunately Manchester’s motorways into central Manchester are becoming very congested and a solution here is needed.

    Reply They have borrowed index linked, not invested.

    1. margaret
      August 16, 2017

      whoops….although I suppose borrowing index linked is as safe as investing..

  21. Denis Cooper
    August 16, 2017

    I’ll be interested to see how the London Evening Standard deals with this news, given that its current editor used Treasury resources to produce a prediction that just a vote to leave the EU would immediately cause a massive rise in unemployment, up by half a million as I recall.


    “UK unemployment falls to new 42-year low”

    I repeat, he predicted that “just a vote to leave the EU would immediately cause a massive rise in unemployment”, not that this would occur over some longer period of years.

    (I have cut out the personal abuse of Mr O ed).

    1. Duyfken
      August 16, 2017

      I can imagine what the “personal abuse” would be, and reckon most of us (ie I) agree.

      1. acorn
        August 16, 2017

        So, why did all you Brexiter / Climate Change Denighing / Anti-Immigration “leave” voters, vote for a laissez faire, neo-liberal, Conservative Party government, in the general election? You have got exactly what you voted for!

    2. Leslie Singleton
      August 16, 2017

      Dear ed–In his case personal abuse is entirely warranted

    3. formula57
      August 16, 2017

      @ Denis Cooper – “I repeat, he predicted that “just a vote to leave the EU would immediately cause a massive rise in unemployment”” – well that was true really, wasn’t it, recalling Harold Wilson’s words that “if you are unemployed, the unemployment rate is 100 per cent..”. Poor old George. He was to be our leader of course.

    4. Lifelogic
      August 16, 2017

      “UK unemployment falls to new 42-year low”

      This despite the current socialist lunacy and total lack of vision of the May government and their greencrap energy agenda.

      The IHT threshold ratter who introduced 15% stamp duty rates and even threatened voters with a punishment budget if they dared to vote for Brexit deserves a great deal of personal abuse.

    5. Anonymous
      August 16, 2017

      More university places available for thicker kids.

      Low unemployment doesn’t necessary mean more employment.

  22. forthurst
    August 16, 2017

    If unpatriotic spivs had not flogged off all the Britsh Railway equipment businesses to foreigners, there would in fact be no excuse for holding large positions in foreign currency based derivatives and it is hard to see why Network Rail would need to protect itself from being overcharged by the taxpayer for ‘loans’ for ‘investment’; after all the government could purport to believe that such ‘investments’ would yield a positive return, but, probably, nobody else would.

    1. Peter
      August 16, 2017

      Indeed. Rail privatisation was a disaster. Doctrine taking precedence over practicality.

      Did not stop many of its champions taking a big fat profit from it either.

      Patriotism and safeguarding our ‘family silver’ went out the window decades ago I’m afraid. Supermac got that right.

      Reply Its the nationalised bit that is causing the problems

      1. graham1946
        August 16, 2017

        Reply to reply

        You keep saying that but didn’t respond to my post which said they took 3.9 billion a year away from Network Rail to give to the private operators – roughly what they lose. Funny that. Dogma over inconvenient fact? Not like you JR.

        Reply They did not give it – there are payments for the provision of trains and running of services.

        1. graham1946
          August 17, 2017

          Why take it away from a nationalised firm and ‘give payments’ as you call it to subsidise profits of foreign entities? Spin it any way you like it is not defensible and I am disappointed that indeed dogma is overtaking your normal rationality in this case.

      2. forthurst
        August 16, 2017

        Network Rail does not need rolling stock so the businesses referred to made such as signaling equipment which had always been in the private sector but had the misfortune to be engulfed by conglomerates run by spiv accountants who, being totally clueless about engineering and generally wastes of space, tried to create added value by buying British businesses and selling them to foreigners.

    2. 37/6
      August 16, 2017


      Thankfully British Rail was a lot more competent than their reputation.

      Otherwise we wouldn’t have 40-year-old trains and engines to rely upon today.

      For all its faults (mainly lack of investment and subsidy), in its final years BR was the most productive rail network in Europe, passenger miles per member of staff. And those staff were working for a fraction of what they get now.

      1. graham1946
        August 16, 2017

        Shows what companies can do when being fattened up for privatisation.

        1. 37/6
          August 17, 2017

          The trains I’m talking about were built 27 years before privatisation started.

  23. William Long
    August 16, 2017

    It sounds as if there is a very good salesman in whatever merchant bank they use, and like the directors of Barings when Mr Leeson had his spree, the directors of Network Snail have not got a clue how what they have bought, works.

  24. Mark
    August 16, 2017

    Those running large and losing derivatives positions tend to hang on to them until they expire (usually using some argument that they are hedges, which if it were true would show matching profit elsewhere in the business) or until forced to liquidate them. Forced liquidations are often at disadvantageous prices because they are sizeable enough to influence the market, and because the pressure to liquidate increases the larger the mark to market losses, and so often happen at close to maximum loss.

    That the derivatives portfolio has grown is highly questionable. However, unwinding needs to be done with care, and not all at once.

  25. Ali Choudhury
    August 16, 2017

    The CFO’s review in the 2016 accounts stated that since reclassification as a public body, existing hedges were being used and retired and no further hedges were being taken out. That text was missing from the 2017 review for the 2017 accounts.

    In any case the derivatives loss is smaller this year compared to prior year and largely offset by the £100m release from the hedging reserve resulting in a £16m net loss.

    What is rather worrying is the £1,075m loss (£373m loss PY) recognised on revaluation of the railway network and £799m loss on the pension scheme revaluation.

    Reply You also need to factor in the large total liabilities

  26. Laura Struthbucket
    August 16, 2017

    I have been listening on the BBC to the Derry Chamber of Commerce and it appears Brexit with the resulting lack of Certainty caused the Irish Potato Famine 1845 and 1852

    1. Beecee
      August 16, 2017

      I think the Romans left in the 5th Century for similar reasons.

      And I also think Julius aborted his first landing because of it but was persuaded to come back and lead the Remainers.

    2. Roy Grainger
      August 16, 2017

      Odd then isn’t it that the government’s response to a lack of certainty is to extend it by 2-3 years.

  27. Ton Hazel Almondsey
    August 16, 2017

    The makers of Walnut Whip have announced they are to make a series of Walnut Whips WITHOUT the walnut. The question is will it be a soft walnut they do not use or a hard walnut?

  28. ian
    August 16, 2017

    I would not sell off to private companies. Just give the 10 regions their share, with their share of the debt to size, to work off, with no government involvement, or local involvement from the like of northern power house and councils. I would like to see regions railways left as they are, with all money going to themselves to build on time and in budget, and be able to lower fares. I think left alone to build new line and stations where they think a profit will be made, with a doubling of the work force and trainees, with the money from the head shared out. Gov would have to pay redundancy if needed to the head, but the gov would be compensated by more workers income and more vat on sales on new routes and stations. They might want to look into HGV highways only to take the lorries off the motorways.

  29. E.S Tablishment
    August 16, 2017

    Sarah Champion Labour MP,Shadow Secretary of State for Women and Equalities is said to be resigning from Corbyn’s lot.Is this the second or third or tenth time? Mrs May could very well cross thre floor and take up her position in the Labour Party. Mrs May is well-versed and churched in the tenor of Socialism writ dictatorial and grossly offensive Venezuela-style.

  30. hans chr iversen
    August 16, 2017

    John, on the BBC interview “No Deal” with the EU “would be fine as wEll” and 19 months is enough to prepare the lot.

    John, ot use your own expression to me “absolute useless information from you”

    this does not help UK business at all what you are presenting to the UK pubic on business.

    Very disappointing.

    Reply yOu sound rattled!

  31. Boris Vanlov
    August 16, 2017

    Mass hysteria, shouting and crying broke out with how Trump managed North Korea. What happened with that one.?

    Now mass hysteria, shouting and crying breaks out with how Trump manages to say tryannically of course “the truth is on both sides” “There are good and bad people on both sides” A typical Hitlerite in the minds of lefties and liberals and persons who cannot keep their mind in equilibrium. Obviously, they are affected by their medicinal herbs.What other plausible answer could there be?

  32. Christopher Hudson
    August 16, 2017

    Ive heard it said that CEO’s of large businesses, Sainsbury’s for example, would much rather run around the City making-believe they’re doing “big deals” than actually doing what they’re paid to do, running a “grocery business”, I don’t doubt that heavily unionised Network Rail indulge in similar fantasies

  33. Jonp
    August 16, 2017

    Mrs may, now that she has returned from her holidays, thinks that the UK is going to return to being a world power now that HMS QE is operational..the natives are going to quake..what a load of poppycock.. making speeches from the deck of an aircraft carrier with no aircraft? This country is really going downhill fast if this is what govt is resorting to..why does theresa villiers call the EU people our european partners? what kind of language is that? We want to get away from the eu people and now they are our partners..such nonsense?

  34. Terry
    August 16, 2017

    I find it astounding that, in our so-called democracy with Private Industry, we are relying upon a formula that is more suitable in the Public Sector. The Big problem is that there remains NO competition on the Railways.
    I do confess not to know the answer but I would suggest that the alignment to RPI should be abandoned in favour of a system based around the profitability of the service provider, bearing in they do have a monopoly on their respective lines.

    1. graham1946
      August 17, 2017

      The simple answer is to stop pretending it is a private competitive industry, stop subsidising it and see how many private firms want it. Then it can be taken back where it belongs as a national asset and properly funded and when and if profits accrue they come to the nation, not foreigners.

  35. GregH
    August 16, 2017

    Just listening to michael gove talking about territorial waters and fishing waters as if yhey were the same..its clear that he hasn’t a clue either.heaven help us all.

  36. Lindsay McDougall
    August 17, 2017

    You haven’t asked why Network Rail is still in public ownership.

    1. graham1946
      August 17, 2017

      Maybe because no-one wants it – it is always going to be loss making whilst the faults of psat governments in not investing properly are sorted out. As soon as it becomes profitable, you may be certain that it will be flogged off to the lowest bidder to make private profits.

    2. acorn
      August 18, 2017

      Because it is a natural monopoly under any economic code. Privatisation of natural monopolies (sectors with very high fixed costs of infrastructure and high societal value) had nothing to do with economics. It was a Thatcherite ploy to destroy public sector trade unions and pass the manpower management problem to the private sector.

      Germany had the same problem; but, Germany had centre-left chancellor Gerhard Schröder. The UK had no such equivalent “strong man” then, or now. Fourteen years later, the UK is up S**t Creek without a “strong man” with a paddle and Germany is running the EU.

  37. Ed Mahony
    August 18, 2017

    ‘Reply Cameron did expressky try to reform the whole EU’

    – Technically, you’re right. But in reality, he was looking for concessions for the UK (which he got on a couple of points if I remember).
    However, no way was PM Cameron serious about reforming the EU. All he was focused on was getting enough from the EU, any way he could, to try and win the referendum.

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