Virgin and Stagecoach: more pigs, more snouts, more troughs

“Sir Richard Branson’s Virgin and Sir Brian Souter’s Stagecoach shared a payout of over £52m just months before the companies pulled out of the East Coast line, forcing a £2bn government bail out, it has emerged.

Virgin and Stagecoach received the pay out for the West Coast mainline which runs the route connecting London, Birmingham, Liverpool, Manchester, and Glasgow.

Virgin Rail owns 51 per cent of the West Coast mainline, with the remainder held by Stagecoach.

‘No surprise’

Shadow Transport Secretary Andy McDonald said Virgin Rail’s dividend increases came as “no surprise”.

“This is yet more evidence of a failing rail system which is costing taxpayers a fortune, lining the pockets of billionaires and making passengers feel like they’ve been mugged whenever they buy a ticket,” Mr McDonald told the Sunday Times.

“These vast payouts show exactly why we need to bring our railways back into public ownership.”

Virgin-Stagecoach bail out

The figures have come to light just four months after Virgin, run by Richard Branson and Stagecoach, run by Brian Souter, walked away from the East Coast main line franchise in June, three years into an eight-year deal.

The firms had agreed to pay the Government £3.3bn for the right to run the line, with the sum to be paid in instalments up until 2023.

Stagecoach had controlled 90 per cent of the franchise, compared to Virgin’s 10 per cent. Pulling out of the franchise early will allow Stagecoach and Virgin to avoid making Government payments of up to £2bn.

‘Virgin on the ridiculous’

One online critic described the situation as an “absolute laugh”, while another said: “They don’t even pretend not to be screwing over the taxpayers and the commuters anymore.

“Branson and chums make extortionate profits again while delivering nothing to rail users. It’s all Virgin on the ridiculous.”

Virgin Rail insisted its “industry-leading levels of customer satisfaction” warranted the dividends, with a spokeswoman pointing to company “innovations” such as automatic refunds for delays, free films and TV on board trains and mtickets (tickets you can buy and keep on your mobile phone).

“This drove a strong business performance which helped deliver a record payment to taxpayers,” the spokeswoman said.”

https://inews.co.uk/news/richard-branson-52m-virgin-rail-stagecoach-payout/

Community hospitals in Devon lost to nursing homes in privatisation move

“There was a staggering revelation yesterday at Health Scrutiny from Liz Davenport, Chief Executive of South Devon and Torbay NHS Foundation Trust, that they had made ‘block bookings of intermediate care beds in nursing homes’ when they introduced the ‘new model of care’. South Devon has closed community hospitals in Ashburton, Bovey Tracey, Paignton and Dartmouth and is currently consulting on the closure of Teignmouth – where I spoke at a rally last Saturday.

The ‘new model of care’ is supposed to mean more patients treated in their own homes, and there does seem to have been an increase in the numbers of patients sent straight home from the main hospitals.

But the idea that all patients can be transferred directly from acute hospitals to home is untrue. There is still a need for the stepping-down ‘intermediate care’ traditionally provided by community hospitals – the only difference is that now it’s being provided in private nursing homes instead.

It’s likely to be cheaper to use private homes, because staff don’t get NHS conditions, and crucially it frees up space in the hospitals so that the CCGs can declare buildings ‘surplus to requirements’ and claim the Government’s ‘double your money’ bonus for asset sales. It seems NEW Devon CCG has also made extensive use of nursing home beds, but we don’t yet know if there were ‘block bookings’.

However the private nursing home solution may not last – DCC’s chief social care officer, Tim Golby, reported that nursing homes are finding it difficult to keep the registered nurses they need to operate, and some are considering reversion to residential care homes.

This may be where the South Devon trust’s long term solution comes in – it had already been reported that it is looking to partner with a private company in a potential £100m deal which will include creating community hubs that contain inpatient beds.

The new model of care is also about privatisation.”

Shock revelation at Health Scrutiny suggests the ‘new model of care’ is more about switching intermediate care from community hospitals to ‘block bookings’ in private nursing homes – saving costs and freeing up assets. How long will it last?

Privatisation not making your company enough money? Don’tworry – taxpayers will stump up for your losses

“Carillion taxpayer bill likely to top £150 million

Taxpayers are on course to pay more than £150m following the collapse this year of Carillion after it was revealed the bill for redundancy payments is expected to hit £65m.

A freedom of information request by the Unite union showed an arm of the Insolvency Service has already made £50m of redundancy payments to former Carillion workers and expects to hand over a further £15m.

The cost of lawyers and accountants handling the liquidation of the construction and services companies is expected to be more than £70m and other costs are expected to escalate above £20m, taking the total beyond £150m.

Earlier this year the National Audit Office said the cost would hit £148m, prompting condemnation from opposition MPs who accused the government of mishandling the company’s collapse and leaving taxpayers to foot the bill.

Considered one of the most spectacular corporate collapses of modern times, Carillion filed for bankruptcy in January after its stock market value slumped 90% on the news it had racked up debts of about £1bn and was struggling to fill a £600m hole in its pension fund.

At the time, the Wolverhampton-based company had more than 19,000 employees, many of them working on Whitehall-commissioned contracts to build roads, schools and hospitals.

Ministers were accused of realising too late that the company was in financial difficulties and then making matters worse by offering fresh contracts in an attempt to boost investor confidence.

Several contracts were taken over by rivals after the collapse, but the £335m Royal Liverpool hospital will be finished with government money, the hospital’s chief executive said on Tuesday, while the £550m Aberdeen bypass will be completed by the joint venture partners Balfour Beatty and Galliford Try.

Labour’s shadow cabinet spokesman, Jon Trickett, said he had received pledges from ministers in response to questions in the Commons that the costs associated with Carillion’s downfall would be met by shareholders.

“We were assured that shareholders, who have taken hundreds of millions out of the company over the years, would bear the burden, not the taxpayer,” he said. “Now it feels like the taxpayer has been skinned twice. First by contracts ministers signed with Carillion that were a bad deal and then by picking up the tab for the company’s failure.”

The Redundancy Payments Office said: “The total amount we may pay out is approximately £65m, of which £50m has been paid so far based on actual claims received.”

Unite said ministers were to blame for allowing Carillion to file for compulsory liquidation with only £29m in the bank, rather than enter a managed form of administration.

It said the decision meant thousands of staff that transferred to other employers could not claim continued employment and fell outside the transfer of undertakings (protection of employment) regulations (Tupe) that protect a worker’s pay, terms and conditions.

“The lack of continuation of service means that the affected workers are considered new starters and have also lost many of their employment rights for a two-year period,” Unite said.

“The taxpayer will also have to pick up the bill for the work to complete several of Carillion’s key strategic projects including the Royal Liverpool hospital and the Midland Metropolitan hospital in Sandwell, West Midlands. The cost of concluding these projects is expected to be in excess of £100m. …”

https://www.theguardian.com/business/2018/sep/25/carillion-collapse-likely-cost-taxpayers-more-than-150m-unite

Hospital re-nationalised after PFI shambles

“The government is expected to bail out Liverpool’s new £335 million NHS hospital and take it back into public ownership, nine months after the failure of Carillion left the project in crisis.

Carillion, the public sector contracting and construction group, collapsed in the new year with £2.6 billion of pension liabilities and £2 billion of debts.

Matthew Hancock, the health secretary, is understood to have told officials to end the impasse surrounding the hospital, which had been due to open last year. He is ready to say within days that the Royal Liverpool Hospital private finance initiative deal is being cancelled and that the project is returning to full public ownership, according to Sky News.

The trust that runs the hospital is due to hold a board meeting today and a statement from ministers may be timed to coincide with it. Private sector contracts relating to the project are set to expire before the end of the month.”

Source Times (pay wall)

Should utilities be renationalised? Probably, if this is anything to go by!

Owners of Britain’s largest water companies use offshore tax havens as they load up the firms with £24bn of debt:

“The owners of Britain’s largest water companies used offshore tax havens as they loaded up the firms with £24bn of debt.

Thames Water, Anglian, Southern and Yorkshire Water – which jointly supply almost 30m people – are billions of pounds in the red and paid no corporation tax last year.

Critics claim their debts were racked up by owners to drive down tax bills and extract huge profits.

The Paradise Papers have shone a light on the use of offshore tax havens by the rich and famous – but they are also popular with utility firms.

Thames, Anglian, Southern and Yorkshire all used offshore firms to borrow money. In total from all forms of financing, Thames now owes £10.5bn, Anglian owes £6.8bn, Southern owes £3.5bn, and Yorkshire owes £3.7bn.

Utilities financing expert Martin Blaiklock said: ‘How much of that cheap money has just been going straight into the pockets of the owners as opposed to benefiting the customers?’

The four firms set up subsidiaries in the Cayman Islands more than a decade ago to get around rules in the UK preventing them from raising cash on the bond markets. Although those rules have since been scrapped, many continued to use the offshore firms.

Often interest payments made through havens do not incur tax as they would in the UK.

Analysis of accounts by the Mail suggests money has been lent between different parts of the companies, generating interest payments that reduce taxable profits.

Southern Water Services Ltd paid £133.6m in interest during 2016-17 to Cayman subsidiary Southern Water Services (Finance).

Southern Water Services Ltd ended the year with an £84.9m tax credit.

Thames Water Utilities Ltd paid £356.8m on interest on inter-company loans and ended up with a tax credit of £70.3m. The firm has paid no corporation tax since 2006.

Anglian Water Services Ltd paid £286.5m in interest to subsidiaries while earning £192m in interest from other parts of the company. It ended the year with a tax credit of £37.9m. Anglian Water group has issued bonds via a UK company with a Cayman holding company it says is dormant.

Yorkshire Water Services Ltd paid £198m interest on inter-company loans and ended up with a £101.5m tax credit.

Thames’s former owner Macquarie and fellow shareholders paid themselves £2.6bn in dividends between 2006 and last year, while the firm faces huge fines for leaks. Water firms stress they are allowed to delay corporation tax to encourage investment. Anglian said it had invested £1bn in the region and paid £210m in taxes.

Ofwat, the water regulator, is unhappy about the offshore structures, warning the sector faces a huge crisis of public trust.

It also wants companies to bring debt down, and is expected to introduce tougher rules on the amount they can charge customers.

Aileen Armstrong, senior director for finance and governance at Ofwat said: ‘It’s clear that many people don’t like the idea of public monopoly utility companies relying on complex financial arrangements.’ Yorkshire Water says it plans to close its subsidiary. Thames and Anglian have also indicated they might do so.

A Thames Water spokesman said both Thames and its Cayman financing company were resident in the UK for tax purposes.

He said: ‘There is no tax benefit associated with the companies being registered in the Cayman Islands and the companies operate and are managed wholly from our UK office.’

An Anglian Water spokesman said its Cayman firm is dormant and serves no purpose.

He added: ‘As Anglian Water has always been registered in the UK for tax, it therefore does not, and never has, benefited from any tax advantage from this.’

A Southern Water spokesman said the firm is resident in the UK for tax purposes and that ‘there is no tax benefit’ to its Cayman Islands structure.

Yorkshire Water said it was taking steps to remove unnecessary offshore structures and pays all tax in full.

Finance director Liz Barber added: ‘Our policy is not to enter into transactions that have a main purpose of gaining a tax advantage and not to make interpretations of tax law that are opposed to the original published intention of the law.’ “

https://www.thisismoney.co.uk/money/markets/article-5078471/Britain-s-water-firms-flush-profits-tax-havens.html