Green Scottish Government bonds could save £362m in replacing ScotRail's ageing trains

SNP ministers have been urged to use “green bonds and the Scottish Government's borrowing powers” to save hundreds of millions of pounds in replacing Scotland’s ageing trains.

Union bosses commissioned research from academics at Glasgow University to investigate the use of private finance schemes such as private finance initiatives (FPIs), used previously by Labour politicians and the non-profit distributing (NPD) model, used by the SNP Scottish Government.

A ScotRail diesel train more than 30 years old being tested at Leven Station (Photo by Network Rail Scotland)

In December, SNP Transport Secretary Fiona Hyslop announced that the Scottish Government’s target for phasing out ScotRail’s remaining diesel trains - one of the world’s most ambitious - had been put back a decade to 2045.

The current procurement system for replacing Scotland's ageing fleet of trains, known as the rolling stock programme, relies on private rolling stock companies (ROSCOs) and PFIs.

The new study has pointed to other countries that use public financing for rolling stock investment, concluding that private financing systems are a political choice rather than an economic one.

Read more: New call to replace ageing Scottish transport fleet - and it's not ferries

The research, conducted by Professor Andrew Cumbers and Grace Brown, has stated that up to £362m of saving could be made through public funding models.

The Aslef union has proposed that the Scottish Government issues green bonds through its global capital investment plan to finance new trains. The union said this model would focus on critical infrastructure investment aimed at the net zero transition - ensuring revenues are used for environmental and social sustainability rather than private profit.

Kevin Lindsay, Aslef Scottish organiser, said: "Aslef is proud to have commissioned this important report that we hope is a wake up call to the Scottish Government.

“Rolling stock companies and the use of PFI to replace rail rolling stock have resulted in huge profits being made for these companies - none of which is reinvested in, but all of which is lost to our industry as it is transferred into shareholder dividends and sent off to offshore tax havens.

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“As Scotland looks to replace our rolling stock now and in the coming years it is time to reject this failed model and introduce instead a public financing model, using green bonds and the Scottish Government's borrowing powers, which could save ScotRail hundreds of millions - all of which can be reinvested into rail infrastructure, staff and reducing fares and making our trains more affordable.

“There is no logical, economic, reason why the Scottish Government should continue to use flawed, private models to finance our rolling stock, or indeed any other public good or service.

“Now is the time to reject this unfortunate legacy of privatisation, and once and for all rid our railways of this last bastion of profiteers."

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Professor Cumbers said: "Our research suggests that funding the next generation of rolling stock directly through the Scottish Government’s existing borrowing powers, using green bonds, could be as much as 70 per cent cheaper than through private finance.

“For the next order of suburban passenger trains, we have calculated that savings of at least £144m and up to £362m, compared to a private finance deal, could be made.

“Rather than leaking out of the system to fund private profits, this revenue could be used to reduce ticket prices and invest further in the country’s transport infrastructure, while creating local jobs and training opportunities.”

A Transport Scotland spokesperson said: “We note publication of this report and will take time to consider its findings, alongside current Scottish Government policy for the procurement of significant contracts such as rail rolling stock.

“Public ownership has created the opportunity to deliver a railway which is run for the benefit of customers. The ability to plan for the long term brings with it the opportunity to modernise Scotland’s railway and deliver passenger services which are efficient and sustainable, including modernising our train fleets.

“As with all long-term government action, spend in this area will be aligned with future capital spending review and infrastructure investment plan cycles. With ambitions of such magnitude regarding rail decarbonisation and fleet replacement, it is imperative that there is a relentless focus on cost and delivery efficiency, and maximising benefits.”