This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at http://www.guardian.co.uk/uk/davehillblog/2012/sep/19/boris-bus-roll-out-economics
The article has changed 7 times. There is an RSS feed of changes available.
| Version 5 | Version 6 |
|---|---|
| Boris's Bus (A Political Journey) Part 38: The Language of Accountancy | Boris's Bus (A Political Journey) Part 38: The Language of Accountancy |
| (4 months later) | |
| Do you speak accountancy? If so, I'd value your translation of certain passages from a paper to be considered on Thursday by the Transport for London (TfL) board (chair: Boris Johnson): | Do you speak accountancy? If so, I'd value your translation of certain passages from a paper to be considered on Thursday by the Transport for London (TfL) board (chair: Boris Johnson): |
| This paper outlines proposals to purchase 600 New Bus for London (NBfL) buses to be delivered into passenger service by the end of April 2016. The total fleet size will be 608 taking into account the eight initial buses already in service. | This paper outlines proposals to purchase 600 New Bus for London (NBfL) buses to be delivered into passenger service by the end of April 2016. The total fleet size will be 608 taking into account the eight initial buses already in service. |
| So, far, so Esperanto. It doesn't last: | So, far, so Esperanto. It doesn't last: |
| The current model of ownership, with buses in London owned or leased by the bus operating companies, is not the most advantageous in the case of NBfL. Due to its uniqueness there is currently no market for an off balance sheet leasing structure for NBfL buses, they will therefore be considered on balance sheet initially reducing TfL's borrowing capacity and cash. The most cost effective approach is for TfL to purchase and own these buses direct taking advantage of its preferential cost of capital in this case. | The current model of ownership, with buses in London owned or leased by the bus operating companies, is not the most advantageous in the case of NBfL. Due to its uniqueness there is currently no market for an off balance sheet leasing structure for NBfL buses, they will therefore be considered on balance sheet initially reducing TfL's borrowing capacity and cash. The most cost effective approach is for TfL to purchase and own these buses direct taking advantage of its preferential cost of capital in this case. |
| Que? Further down it says: | Que? Further down it says: |
| NBfL is a unique vehicle, which, at the proposed volume of vehicles, may be purchased only from Wrightbus and is intended to be used in London for its full economic life. Because of these factors, the value of the NBfL fleet will have to be included as an asset on TfL's balance sheet regardless of whether it is purchased by operating companies or TfL. As such it will score against TfL's borrowing capacity under either option. | NBfL is a unique vehicle, which, at the proposed volume of vehicles, may be purchased only from Wrightbus and is intended to be used in London for its full economic life. Because of these factors, the value of the NBfL fleet will have to be included as an asset on TfL's balance sheet regardless of whether it is purchased by operating companies or TfL. As such it will score against TfL's borrowing capacity under either option. |
| The London Assembly's Greens have stared long and hard at this mystic text (pdf) and cried "gotcha!" Their reading of it is that TfL has discovered, contrary to its predictions, that no other cities in the UK or anywhere else in the world want to include the NBfL in their fleets. | The London Assembly's Greens have stared long and hard at this mystic text (pdf) and cried "gotcha!" Their reading of it is that TfL has discovered, contrary to its predictions, that no other cities in the UK or anywhere else in the world want to include the NBfL in their fleets. |
| This means, contend the Greens, that companies operating London routes don't want to buy or lease them in the usual ways, which generally entail a bus being used in the capital in the first years of its life then sold to Norwich or Truro, where it can enjoy a more restful middle age. Instead, argue the Greens, each New Bus will be flogged unto its deathbed in The Smoke. Moreover, the cost of buying the 600 NBfLs between now and 2016 will be "upwards of £160m," they say - meaning further upward pressure on fares. | This means, contend the Greens, that companies operating London routes don't want to buy or lease them in the usual ways, which generally entail a bus being used in the capital in the first years of its life then sold to Norwich or Truro, where it can enjoy a more restful middle age. Instead, argue the Greens, each New Bus will be flogged unto its deathbed in The Smoke. Moreover, the cost of buying the 600 NBfLs between now and 2016 will be "upwards of £160m," they say - meaning further upward pressure on fares. |
| But TfL says - though not in so many words - that the Greens' grasp of the, admittedly obscure, language of accountancy is deeply flawed. It makes perfect sense, they say, for TfL to buy the buses themselves because they have the cash to purchase them in bulk, which means they get a discount. The buses will then be leased to the route operators cheaply, which means the contracts they draw up with those operators will be cheaper accordingly. | But TfL says - though not in so many words - that the Greens' grasp of the, admittedly obscure, language of accountancy is deeply flawed. It makes perfect sense, they say, for TfL to buy the buses themselves because they have the cash to purchase them in bulk, which means they get a discount. The buses will then be leased to the route operators cheaply, which means the contracts they draw up with those operators will be cheaper accordingly. |
| This arrangement, says TfL, will also enable it to move the buses from one operator to another and hence to different routes, meaning (presumably) that they may have quieter, more suburban lives, as they approach retirement. After the initial outlay, this ownership model will usher in a golden future of ongoing savings, says TfL. | This arrangement, says TfL, will also enable it to move the buses from one operator to another and hence to different routes, meaning (presumably) that they may have quieter, more suburban lives, as they approach retirement. After the initial outlay, this ownership model will usher in a golden future of ongoing savings, says TfL. |
| But what about those promised future sales across the nation and globe? That's for the future, says TfL. And those bits about reducing or scoring against borrowing capacity? Don't worry about it, says TfL: it's just an accounting term... | But what about those promised future sales across the nation and globe? That's for the future, says TfL. And those bits about reducing or scoring against borrowing capacity? Don't worry about it, says TfL: it's just an accounting term... |
| Readers will reach their own conclusions based, no doubt, on their own careful scrutinies of the document in question (pdf). I've decided to believe both TfL and the Greens, because it's so much easier that way. My long personal journey with "Boris's Bus" can be read about here. | Readers will reach their own conclusions based, no doubt, on their own careful scrutinies of the document in question (pdf). I've decided to believe both TfL and the Greens, because it's so much easier that way. My long personal journey with "Boris's Bus" can be read about here. |
| Footnote: Did someone mentions fares? TfL's business plan assumption is that public transport fares as a whole will rise in January by RPI inflation as measured for the preceding July plus 2%. If I've read this BBC graphic correctly, RPI in July 2012 was 3.2%. Does that mean a coming hike of over 5%, on top of all Mayor Johnson's previous increases? New fares packages are traditionally announced in the autumn. So we'll soon know. | Footnote: Did someone mentions fares? TfL's business plan assumption is that public transport fares as a whole will rise in January by RPI inflation as measured for the preceding July plus 2%. If I've read this BBC graphic correctly, RPI in July 2012 was 3.2%. Does that mean a coming hike of over 5%, on top of all Mayor Johnson's previous increases? New fares packages are traditionally announced in the autumn. So we'll soon know. |
| Our editors' picks for the day's top news and commentary delivered to your inbox each morning. | Our editors' picks for the day's top news and commentary delivered to your inbox each morning. |