die belebende Bedenkung

Buses on the skids

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Ian Mulheirn’s paper Osborne’s choice, published on 20 February by Robert Skidelsky’s Social Market Foundation, asked, “what can be done to boost the economy without borrowing more”?

This paper makes the case for five specific growth-friendly consolidation measures […] These include:

• Halving higher rate tax relief on pension contributions, saving around £6.7 bn annually.

• Capping maximum ISA holdings at £15,000, saving around £1 bn per year.

• Rolling Child Benefit into the existing tax credits system, saving some £2.4 bn each year.

• Cutting Winter Fuel Payments and free TV licenses to better-off pensioners, saving 1.7 bn per year.

• Scrapping free bus travel for the over 60s, saving around £1 bn annually.

Recycling £15 bn per year raised through such measures into infrastructure capital spending from 2012-13 would return the capital budget to around £63 bn in that year, just short of the level it was planned to be at for that year at the time of the 2008 Budget.

The SMF website listed various responses to Mr Mulheirn’s proposals, and there was coverage in the national press. Rather than discuss all the proposals in this blogpost, I’ll focus on the press favourite: bus passes. The Express headline was ‘BUS PASS BAN WILL HELP BOOST ECONOMY‘ and the Daily Mail’s was ‘Strip OAPs of free bus passes and winter fuel allowance to save £3bn a year, says leading think tank‘.

According to Mr Mulheirn’s paper,

Since 2008, the Exchequer has funded free bus travel for those over the age of 60. This perk is now estimated to cost around £1 bn per year.

It is unclear what the multiplier effect of this spending is, since the state effectively reimburses transport providers for any lost revenue. What is clear, however, is that there are more growth-enhancing uses for this money and that
there are higher priorities for this spending in the long-run. The policy should now be scrapped.

My guess is that a large proportion of pensioner bus travel is discretionary, and in the absence of concessionary passes, would not take place. As a result, the axing of passes could have some ‘interesting’, and doubtless unintended, consequences. For example, in the West Midlands, concession passes have been progressively extended, and now account for about one third of public transport use in the county. So they shore up a bus network which has seen massive declines in patronage over the last fifty years.

Income from concessionary travel is a determining factor in the quantity of local public transport across England and Wales. It follows that abolition of pensioner passes would likely be accompanied by a major, um, growth-unfriendly contraction in metropolitan public transport services.

Written by beleben

February 23, 2012 at 1:25 pm

One Response

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  1. One measure that no one seems to be considering is helping all UK households to escape the serious drain on resources, that many have through the ownership of a motor car. For the poorest households, the Poverty Index site reports that up to 60% of their income is spent on keeping a car on the road. Indications from those collating household income statistics, suggest that UK-wide an average household will unlock a boost of some 20% to their disposable income – i.e. a UK-wide ‘pay rise’ of 20% at no cost to employers, and with no income tax penalty to the employees.

    It is both possible and much less stressful to live without owning a car. Note here the very precise statement “not owning a car” I have not owned a car full-time since 1976, and know others who have never owned a car at all, but we still drive cars. Currently I’m driving around 7,000-10,000 miles per year always in a ‘new’ car kept in good condition. Increasingly people are doing this, especially in London, where the main car sharing club (Zipcar) has around 1800 vehicles available 24/7 from £5/hour. For longer periods the regular users are hiring cars from around £12/day (Enterprise – special offers).

    Businesses can also make massive savings though looking at the inefficiencies in their use of company vehicles. To park in Central London you are talking of annual leasing costs of at least £5000/year (regional rate – £2000) and valuable land sterilised by it use for car parking, when development of additional site facilities, delvers a far higher rate of return. Some people are surprised to discover that a lot of city centre car free housing developments are being pressed for by the developers, against resistance from local planners. The reason is simple, when car parking and access roads are omitted you can build 3 car free flats for every 2 with a parking space, and you get a lot more money for that extra flat than the 2 parking spaces.

    Corporate members of car sharing clubs have dropped their leased car fleet, and gained a better audited system, that only requires payment for the time used. One Leeds engineering office cut the £17,000/yr cost of 3 leased cars available in Leeds to a £5,000/yr cost of access to the UK fleet of their car club, at any UK location – just a 60% reduction in their car travel costs but with reported added value in the reduced minor damage and cleaning bills though the better audit of who was using the cars and when.

    Car sharing clubs are also surprisingly good for the motor industry. Instead of the capricious and fickle pattern of private owner purchasing, car clubs have a planned renewal regime, and do not need the promotional puff and glitter, cutting the huge promotional expenditure by the car sales, and eliminating the surge/suffocate demands on production and stock of completed vehicles. Fewer vehicles might be made but they would be made on a production line running steadily through the year, and the need for vast yards of completed vehicles to cover sales fluctuations would be reduced. Employees issued with a car club membership for company use could equally use the system for private journeys, as the computer generated billing can allocate charges with high transparency. With a low cost for the membership as a benefit in kind, we press the chancellor to rule this membership as de minimis, as long as the private use is paid for at the normal public rates by the employee.

    At long last in the UK we have some public transport operators realising that in the absence of being able to ‘sell’ a viable journey by bus or train to every front door, they should be part of selling the facility to do it by car or bike, as part of a wider travel card, and Go Northeast is perhaps the first UK operation to offer the Go Ahead Key Card to deliver discounted bus fares when these are prepaid on the card, and including membership through the same card of Commonwheels, and Scratchbikes – the local car and bike sharing clubs.

    Dave H

    February 24, 2012 at 1:39 am

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