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Posts Tagged ‘Skidelsky

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