The media are constantly looking for signs of policy splits within the Coalition. Across policy fields – the economy, welfare, housing, defence – the search is on for contradictions and conflicts, whether real, manufactured or imagined. While many of the stories have been given an airing here, one that passed relatively unnoticed was last week’s discussion of rail fares.
Transport Secretary Philip Hammond hinted that the current fiscal situation is so severe that it may be necessary to re-examine the formula restricting regulated rail fares to increases of no more than RPI+1%. The suggestion was that this might increase to RPI+2% or 3%.
The more lurid media reports stated that 10% increases were just around the corner. And, of course, altering regulated fares is only one way of raising revenues for the train operating companies. Strategies such as playing about with the boundaries of peak times or the regulations governing access to advanced tickets can also yield additional revenue.
The Economist, in a recent article on the prospect of rail fare increases, linked it very squarely to the need for state retrenchment. The gist of the argument is that because many people who benefit from regulated rail fares are not on low incomes this ‘subsidy’ should be placed alongside policies such as child tax credits for middle income families and other universal benefits as prime candidates for the chop.
Railways are, for many people, rather a dull topic. Some people never use them. But there are important matters of principle at stake here. It is about more than simply transport policy. This issue does in fact highlight different attitudes between the Coalition partners.
We shouldn’t lose sight of the LibDem pre-election position. The key pledge was to “cut rail fares, changing the rules in contracts with Train Operating Companies so that regulated fares fall behind inflation by 1 per cent each year, meaning a real-terms cut”. Hence, the Lib Dems would appear to be on a collision course with the direction of current policy thinking.
The Economist argument does not stand up to any real scrutiny: by definition most regulated fares relate to commuters, who tend to be working, which means that they are going to have a higher average income than those who aren’t; much commuting takes place in the South East where wages are on average higher, but so is the cost of living.
But to even think of the issues in these terms is to miss the point spectacularly.
The issue is not primarily about putative subsidies to rail travellers. It is about recognising the environmental burden of mass car ownership, in terms of congestion and pollution, land use, and the use of non-renewable resources. It is about redressing the financial treatment of the two modes of transport.
The revenue costs of motoring are typically seen as the costs of fuel, tax and insurance. Motorists do not typically factor into their decisions the maintenance costs per mile or depreciation of their vehicle, let alone the costs of infrastructure construction and maintenance or the externality their motoring imposes on others.
The railways on the other hand are typically expected to pay their way: infrastructure investment and maintenance has to be serviced from revenue (either ticket sales or government subsidy). And of course for the railways to pay their way has, since the 1990s, also included the need to show investors a return.
This disparity in how each journey is priced has distorted travel decisions in the UK for decades, leading to a progressive switch in the dominant trip mode in favour of the car. The LibDem policy was an attempt to redress this balance and move towards a more environmentally sustainably transport system.
Of course, it would also be necessary to introduce other measures such as road pricing to place the different modes of transport on a similar financial footing. But it was a step in the right direction. We shouldn’t lose sight of the bigger picture.
As Christian Wolmar makes clear in his recent book “Blood, Iron and Gold” examining the history of rail internationally, globally the industry is going through a renaissance. Rail lines are being reopened and many billions are being invested in high speed rail in countries such as China because it is seen as a key component of future economic development and success.
In Britain we are only just beginning to make headway with high-speed rail. But it is as likely to make the news because of fears about damage to domestic property prices and the inadequacies of compensation proposals as for its importance in securing a sustainable economic future.
While these are not trivial matters, it is speaks volumes about priorities.