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Insufficiency of rail subsidy data

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Labour’s “plan to renationalise the railways” is unrealistic and ill-conceived, but could win votes, according to Jake Wallis Simons (April 4th, 2014).

[Jake Wallis Simons, The Telegraph, 4 Apr]

According to The Times, Miliband is considering allowing a state-backed body to compete alongside existing rail franchise owners such as Virgin and Stagecoach when contracts are put out to tender.
[…]
But the problem is that nationalising the railways would simply not be a silver bullet. And the East Coast line is a case in point.

It is true that the line attracted a respectable 19 million passengers last year, and required a subsidy of just 0.5p per passenger mile. But rail use has risen across the board, doubling since privatisation in 1994. Lines that were ailing under British Rail, like the Chiltern Railway, have been re-invigorated by private investment and are now flourishing.

Moreover, other lines are far more profitable than East Coast. South West Trains, for instance, paid 1.2p per passenger mile back into the public purse, and First Capital Connect returned 3p; in total, the amount paid back by train companies to the Government amounts to well over £1.5 billion per year.

Contrary to the impression given in the article, useful efficiency conclusions cannot be drawn from comparing the subsidies per passenger-mile of South West Trains and East Coast. The difficulties of so doing were mentioned in the House of Commons Transport Committee’s Rail 2020 report, and the November 2012 GB train operating company benchmarking.

[House of Commons Transport Committee – Seventh Report, ‘Rail 2020‘]

[23.] Although the Government is committed to subsidising the railway, it is unclear what level of subsidy it wishes to provide nor what exactly it wishes to achieve for the money. The rail Command Paper goes no further than ruling out a subsidy-free railway. The Minister was unable to shed further light on this issue, declaring that he “would like to see reductions in the subsidies by the taxpayer to as low as possible as soon as it is viable to achieve that without cutting corners”. Although the direction of travel is clear, the destination is not.

[24.] More information is available about who benefits from the rail subsidy. The DfT has published figures for subsidy per passenger mile for each rail franchise, which show a wide variation between franchises. The Government has also published information on the ratio of taxpayer to farepayer funding for different types of railway service, as set out below:

Table 1: Source of funding for railway services
===============================================

Service group Net
cost
to Government
per passenger
mile (p)
Ratio
of
taxpayer
to
farepayer
funding (%)
Long distance 7.3 25 : 75
London and South East 4.8 19 : 81
Regional 31.1 61 : 39

[25.] pteg dispute these figures, arguing that they depend on assumptions about how Network Rail’s direct grant from Government is spent on the network. Professor Chris Nash said he “could not find any published explanation of how [these assumptions] were derived”. In addition, pteg point out that the McNulty analysis excludes Network Rail’s capital investment budget, which is “heavily skewed towards London and the south east”. “Once this expenditure is taken into account” pteg argue “the estimated level of public support per passenger can actually be shown to be greater for inter-city passengers than for those travelling on regional services”. We recommend that the DfT publish the assumptions underpinning its analysis of the ratio of taxpayer to farepayer funding on different types of rail service.

[26.] The ORR has started to publish more information on taxpayer support at the level of individual train operating companies. This is a welcome step towards greater transparency. However, there are many questions about who is paying for rail services which simply cannot be answered using available data. For example, the ratios of taxpayer to farepayer funding for different types of passenger (e.g. season ticket holders, off-peak, advance purchases) or in relation to different services are unknown. The absence of information of this sort is extremely significant. Strategic decisions, for example about capacity enhancements, are being taken without it being possible to quantify their impact on the total subsidy for different parts of the network.

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Written by beleben

April 7, 2014 at 4:02 pm

Posted in Politics, Railways

One Response

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  1. The subsidies per mile cited above probably omit capital expenditure. Our calculations show that for the years 2006 to 2011, and at 2011 prices, the Government expenditure per passenger-km amounted to 10.5 pence, equivalent to circa 16 pence per mile. Alternatively, if tonne-km and passenger-km are added the sum comes to 7 pence per km or 10.2 pence per mile, see
    http://www.transport-watch.co.uk/sites/default/files/LATEST%20COST%20DATA%20web%20%2802%29.xls

    From that tabulation the reader will see that rail costs the taxpayer around 7 times as much per passenger-mile as does the road transport. Nationalisation cannot change that – its a product of the hardware, rail being appallingly expensive whilst making trivial use of the track, see
    http://www.transport-watch.co.uk/topic-15-london-waste-battersea-and-north-marylebone

    transportwatch

    April 7, 2014 at 6:57 pm


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