Opinion: railing against the direction of policy

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.

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13 Comments

  • Some rail travellers are already not subsidised – the South West Trains franchise, for example, was let at a premium that the company is now recouping from passengers. About £1 per journey is tax at the moment, disguised through the franchise system.

    Nevertheless, as a party it would be odd for us to complain that the coalition is not progressive enough, and then to defend a policy that subsidises people who are richer than average (from memory around 50% of passenger miles are by higher rate taxpayers)

    (If you want my longer analysis of post war British railways as your library to order a copy of “Paradoxes of modernisation”, Oxford University Press 2010…)

  • Should we break manifesto commitments? No.

    Should we have made this particular commitment? No.

    As noted above, rail users are (generally) disproportionately higher earners. Bus users are disproportionately low earners, yet have faced real terms increases that are eye-watering (24% over inflation since the mid-90s – thanks, Labour).

    There is also a flaw in the theory that subsidised rail commuting is environmentally friendly – don’t they just commute further?

    Finally, what is the logic in charging less for peak-hour use (which demands high resourcing) than for off-peak use?

  • Matthew Huntbach 29th Aug '10 - 12:58am

    crewegwyn

    Should we break manifesto commitments? No.

    A “manifesto commitment” is surely a statement of what you would do in the event of having an absolute majority. Even then, it seems to me to be silly to regard something written in a manifesto as an unbreakable guarantee since government must obviously deal with changing circumstances, so what looked as though it would work before the election may prove impossible after.

    Quite obviously, as the junior partner in a coalition, we are not in a position to implement everything that is on our manifesto. We should strive to do as much as we can towards it, yes, but how much we can get depends on circumstances.

    I say this simply because it needs to be said, not because I disagree with the thrust of this article. I’m happy to agree that support for railways is not one of the first things I’d be happy to throw away in bargaining.

  • Peter Roberts 29th Aug '10 - 8:10am

    It is a false statement to say car use does not pay it’s way in environmental terms.

    For a start, a passenger journey on high speed rail is more carbon intensive than a modern car with 2 or more passengers and car travel is severely taxed through fuel duty, VED & VAT. Train passengers who are generally the most wealthy travellers pay no tax at all on their journey yet receive an overall subsidy from the taxpayer of about £5.6billion.

    It is time passengers paid the true cost of providing the transport service they enjoy and adding VAT at the standard rate to ticket prices would be a good first step.

  • Peter Roberts 29th Aug '10 - 7:26pm

    Chris Jenkinson,

    Please take a look at the government consultation paper on HS2 page 3 fig. 1.1A. You will see that CO2 for HS2 is about the same as car travel but is higher if construction is taken into account:

    http://kvisit.com/S6Mhr

    “the preliminary analysis showing CO2 emissions by mode on the basis of moving equal passenger kilometres”

    And as you probably know, electricity and diesel for trains is taxed at far lower rates then motor fuels for road use.

    It is absurd to suggest the untaxed and subsidised public transport industry is paying the full costs associated with the environmental damage caused by trains and buses whilst suggesting that the heavily taxed car user is not paying the full costs of their travel.

    Please go and calculate the realities of your assertions before making such absurd statements.

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