West Somerset Railway General Discussion

You hit the na

You hit the nail on the head. The charities don’t exist for the general benefit of the railway, only for certain prescribed aspects of it. It’s fine to focus on those things the charities can fund legitmately within their respective charitable purposes but the unspecific support of the operating company’s finances for its general benefit would be outside those.

 

Hypothetically though

The WSR Board identifies the annual loss

They then look at what they need to spend money on

So having identified a need to spend say £100K on carriage maintenance & improvement they approach the WSRA asking if they can run an appeal to fund this (assuming its within the remit of the WSRA)

That then releases some of the PLC's funds to spend on things that the WSRA cant fund

There is a bit of a history though of rather unspecified appeals with unclear outcomes

 

Which has always been a given in my view of this situation. As the boundary between those two is almost infinitely flexible, and payments towards getting stuff done free up cash for day to day running, it should be possible to find a way to structure this so that any grants are in accordance iwth charitable purposes

 

If they really don't have spending priorities, even for opex on their vehicles, then things are worse than the appeal to shareholders would imply.

 

Could you point to where this concern has been expressed please, from one trustee to another? I'd be interested to see it in full.

Let's not complicate discussion by including mention of gift aid on tickets, that's a totally separate matter.

Sent from my PGT-N19 using Tapatalk

 

I'm struggling to understand why this is considered another 'oh dear' story specific to the WSR? Anyone who has been paying attention and not living in a parallel universe should surely realise that every heritage railway is engaged in a serious fight for survival especially the longer ones. Since Covid the farebox hardly covers day to day costs if at all let alone contributing towards projects, major renewals, overhauls etc. Costs have rocketed up (fuel, overheads, just about everything) and footfall has fallen (cost of living). It's blindingly obvious that appeals will be made from time to time as they are on many railways, and that supporting charities will be asked to provide support for improvements or major repairs. Fortunately, the WSR along with the likes of the SVR has been adept at increasing its income from external sources, which is helping it to survive.

 

The "oh dear" is that WSR need to run an appeal. The wider discussion is both specific to the organisational structures in West Somerset (relatively unusual in preservation and discussed exhaustively before), and general in respect of the wider constraints upon charities. It's also fair to say that some of us have been less than convinced by the analysis or presentation of arguments of @Lineisclear, hence a relatively exhaustive interrogation of the comments.

 

I can't help thinking you are seeing problems where none need exist.

For example - the railway knows it needs to overhaul a loco, and has the capability to do so in its own workshop, but no budget. Support charity raises money from an appeal and pays for the overhaul, both materials and any staff time chargeable to that project - no problem that I can see. The charity has achieved an objective that meets its own aims and, by-the-by, the company has obtained funding both to do something useful to the long-term aim of running the railway, and also covered part of its staff cost.

Of course, you need some good discipline that the staff time record correctly, but that is not beyond the whit of man.

What the charity can't do is simply pour money into the company without any expected outcome. And it is probably difficult (though I suspect not completely impossible) to support costs in non-engineering areas like marketing, sales, catering etc. But it should be eminently doable to support both materials and staff time on the engineering side, provided there is a clear goal.

That is partly what is behind my earlier comment about the objectives being a bit wishy-washy. "We need £250k for unspecified things" is almost certainly impossible for one of the support charities to get behind. But break that up into a series of clear deliverables such as "we need £x to retrim the seats in our main service set" and "we need £y to effect repairs to a bridge to give it another 100 years of life" and it all becomes much more amenable to being supported by grants from the charities, while at the same time still delivering something essential to the continued operation of the railway. The end result as far as the Plc balance sheet is concerned is the same - an injection of £250k of cash - but the means to raise it become easier.

Ultimately, cash is fungible - so if a charity supports something the company needs to do which is also aligned to the charity's objectives, and thereby frees up the company to repurpose cash to an activity it also needs to do but isn't charitable - where is the issue?

Tom

 

Ah yes, this may well work in practice but will it work in theory?

 

Clearly, you are not a lawyer and accustomed to think of unnecessary difficulties and complications to bog down any organisation foolish enough to listen.....

 

Tom,
Let’s take your example of a loco overhaul. If a charity funds that and it releases the operating companies funds to be used for other non charitable purposes, such as paying the wage bill, that’s fine.
However , if the immediate need for the non charitable operating company is for cash to pay the wage bill or to reduce a bank overdraft then funding the locomotive overhaul does not help. A charity funding something the operating company would like to do, like a loco overhaul, only frees up cash for other purposes if the company would otherwise have funded that itself. Inability to pay the wage bill, replace a withdrawn overdraft facility or similar cash crisis could be an existential threat to the company’s viability. In that event the inability of a support charity to fund such non charitable payments could mean the railway failing even though the support charity was sitting on substantial funds.

 

All well and fine, I won't even contest the point that a charity could help with the wage bill if those staff are doing something like working in engineering functions on heritage equipment as Tom outlined. BUT, I go back to what the appeal itself says it's for:

• Restore historic locomotives and carriages.
• Renew and maintain vital infrastructure.
• Support the volunteers who keep the railway running.
• Protect and preserve our heritage for future generations.

None of that is "Paying the wage bill or reducing bank overdraft". As you rightly say, if you don't have the money to do those things right now because of pressures on cashflow, then those activities don't get done. But you know they still need to be done fairly soon, so you do an appeal to raise some money for those things. Which takes us back to - those things are perfectly within a supporting charity's remit.

 

Yes, but I'd suggest that any railway that had got itself to such an existential cash crisis that the only urgent thing was as you suggest would be unlikely to get very far with an appeal - at least unless it could convince those donating that the cash crisis was in some way due to some "act of God" like external circumstance. When Covid struck, many railways were successful in running "survival" appeals, because I think most donors could see that while there was an immediate need for cash, it was also as a consequence of an unprecedented event that was entirely outside the railway's control. I can't see a general appeal for cash of the kind you are suggesting being viable without the kind of circumstance - at least not unless it also came with a very convincing recovery plan to turn the business round. Whereas railways - even in poor financial health - have often been successful in running appeals to fund outcomes that are necessary to enable them to carry on operating as railways.

If you had - oh, I don't know, let's choose a random scenario - a situation in which a bridge closure stopped you operating trains to your major destination, then an appeal to repair the bridge and thereby resume operations and restore cashflow may well be successful, and such an appeal could almost certainly also fit with a charity's objectives. Whereas an appeal on the lines "we can't operate trains due to a bridge closure, and now we desperately need funds to pay the wage bill" is probably rather less likely to succeed. After all, in that scenario, a potential donor would be permitted to ask "if you aren't planning to operate trains any time soon, what is that wage bill paying for?"

In other words, the TL,DR: if you have reached the point whereby funds are needed for things that can't be made to fit the support charity's objectives, things are already probably too late. And for the avoidance of doubt, I am making no insinuation that the WSR is in the position.

Tom

 

As you say there were examples post Covid of successful survival appeals but where the railway was owned and operated by a separate company (as is the case for the WSR and some others) funds contributed by support charities could only be used by the owning/ operating company for things in harmony with those charities’ purposes. That’s different to the situation where the charity owns and operates the railway or relies on a subsidiary operating company to run the railway for it (or for the increasing number of railways converting to a single charitable entity.)
In the not too distant past there was a pertinent example on the WSR. The S&D Trustees ,who then had a material interest in the survival of the WSR, were unable to contribute to its request for financial support because doing so would not have been in keeping with the S&D Trust’ s charitable purposes. As Charity Commission guidance makes clear the fact that something is desirable does not make exceeding the charitable purposes legitimate. That is an inevitable constraint on the support charity model especially when, as was the case with some survival appeals, the immediate need was for cash to pay for things that were not remotely charitable.

 

Not really a pertinent example, the S&D Trust charitable objectives are very different to the WSRA's, and indeed any other general railway support charity that the S&D Trust never claimed to be.

 

I may be wrong but wasn’t the S&D Trust basically a tenant of the WSR but NOT a supporting organisation? If that was the case, I agree it’s not a good exemplar. Happy to be corrected.

 

I believe that financially supporting WSR plc-owned locomotive and carriage restoration meets WSRA's charitable aims BUT given that WSRA is in the locomotive and carriage owning business, with very significant restoration expense required now and for the foreseeable future, should it not fulfil those particular charitable aims by investing in its own vehicles as a priority over those owned by a legally unconnected entity? There is a lot more security in such investment.

As regards Gift Aid on ticket sales. WSR plc is registered at Companies House as an interurban passenger rail transport company, rather than as a tourist attraction. Curious in that fares don't reflect the stated raison d'etre. It would probably be difficult to justify Gift Aid application even if the structure existed to allow such an application.