A lop sided debate on public spending

Throughout the long period of debate about the “cuts” prior to seeing how the extra cash amounts in the budgets for the next few years will be allocated, we have heard mainly about the defence and welfare budgets. There has been little attention paid to transport, the local government grant settlement, public sector housing, the European budget or agriculture and climate change. It is important if we are going to review all budgets fairly and sensibly to cut out waste and less desirable spending that these and other areas are not neglected.

Yesterday I wrote about the obvious scope for cutting the costs of social housing whilst delivering more and better results for those in search of a home. Today I invite readers’ views on the large subsidy programmes in place for railways. I will move on to farming and certain kinds of energy production over the next week.

The railways are mainly used by the better off. They attract very large subsidies relative to number of journeys conducted, combining this with high fares. There is some necessary price control in place given the substantial monopoly elements in their provision. Trains run with many empty seats on lots of off peak services, and run with people having to stand for long distances at popular times of day. They would seem to me to be a case where a combination of fare control and subsidy reduciton could act as a necessary stimulus to much more efficient working.

Network Rail fails to harness private capital to improve and develop its property estate rapidly and widely enough. I have tried over many years to get the owners of Wokingham Station and the surrounding land to set up a development which could transform the area, provide a new station and offer shopping and travel interchange facilities on railway land. Such a development would make them money. It is a modest scale example of missed opportunities in many places in the UK.

The train leasing and operating companies procure expensive foreign trains that are heavy and not very fuel efficient. These heavy trains cannot brake quickly and constrain use of the limited track available, leaving us with inadequate train services at peak times. The railway fails to maximise revenue when people would most like to use it, owing to capacity shortages.

The railway industry does not show much imagination in finding additional streams of revenue from its travellers and from passangers waiting for trains or using station car parks. A subsidy reduction programme might act as a stimulus to more enterprise and more efficiency. At many stations you cannot buy a morning paper or a cup of coffee, cannot have your car cleaned or serviced whilst away for the day, and cannot buy your supper on the way home at a shop on railway land. The retail offer on trains is also limited to a narrow range of eating and drinking items. Air travel offers a much wider range of additonal services to the traveller.

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29 Comments

  1. P Haynes
    Posted September 17, 2010 at 8:58 am | Permalink

    It is a myth propagated by the BBC (Beeching is almost up with Thatcher as a hate figure) and the train industry that trains are "environmental".

    When you take into account the stations and track maintenance, the inevitable indirect nature or the journeys made, door to door, ticketing costs and the need for transport to and from the stations. Train are often worse in this respect even worse than air travel. High speed trains worse still.

    In a small country like the UK they make little sense other than for some daily commuting in congested cities and a few intercity routes. They spend most of the day and night empty and unused or getting back to where they are needed for the next day.

    Why therefore over tax cars and under provide roads yet subsidise rail – what is the justification?

  2. Nick
    Posted September 17, 2010 at 9:52 am | Permalink

    Lets look at one you've been in favour of, presuably for pork barrel reasons, because it benefits a small number of your constituents. The others suffer. Namely, Cross Rail.

    Given the estimate is 16 billion (Olypmic terms so its going to rise), the debt payments are 3 million a day. On top you have running costs, say 1 million.

    4 million then to be found from ticket payers. How many extra can we expect? The reason extra matters is that if they move from other public transport to Cross rail, you still have the costs of the other transport to find. Crossrail just means 4 million a day needs to be found.

    Howver, lets live in fairyland for a moment. How many passengers? It's two tunnels, and that sets the limit. The Jubilee line extension is an example. It takes 180,000 passengers a day. The limit is 250,000, set by the tunnels, but that's a permanent rush hour. So 200,000 is back of an envelope number for Cross rail being a success.

    So 4,000,000 / 200,000 = 20 pounds. Breakeven cost is 20 pounds a day.

    Do you think people will pay 20 pounds a ticket? Clearly not evey day. It's not like a once in a while Heathrow express.

    That means other people are going to be screwed to pay for people to use Crossrail. Could be cuts in other services. Increases in other ticket prices.

    If you're a user, great. Good transport and other people paying the majority of your cost. If you're not, like most of your constituents, its tough. You're going to be taxed. So the question they have to ask. What spending on their family are they going to cut to pay for it all?

  3. Posted September 17, 2010 at 9:54 am | Permalink

    The railways property department is a complete nightmare and totally unfit for purpose. It is full of jobsworths who know nothing about property.
    In my own case I bought and paid for a property in the north of scotland over 20 years ago, and STILL they have not managed to transfer the title to me nor refunded the money with interest.

  4. Martin
    Posted September 17, 2010 at 9:54 am | Permalink

    Regarding Long Distance services – most of the privatised railways do run airline style demand management systems whereby cheaper tickets are available on less popular services. (No signs of time of day pricing/tax on the roads incidentally.)

    Trains are a lot more fuel efficient than they were. FGW and others recently re-engined the generator units of the 125 fleet and saved a lot of cash on fuel. The other way the railways can save fuel is to electrify more lines. We need more Nuclear Power stations to close that loop.

    You are right about capacity shortages. Getting land and planning permission to say double the track capacity between Wokingham and Waterloo would be as nightmarish as trying to widen the M4 in Maidenhead.

    As for Air Travel offering more services – I almost laughed. On one legacy airline I get a free cup of tea and a birdseed snack bar. That is the catering in short haul economy class – take it or leave it. You cannot buy a sandwich full stop. As for time keeping on this airline – it resembles British Rail in the 1970s. (I won't even start on airport terminals and their awful queues.)

    I do like low cost carriers – on time, ditto my luggage.

    Most of the privatised rail companies on longer services do offer trolley services. Yes the trolley isn't cheap but don't get me going about prices in Motorway Services.

    Re station redevelopment and facilities – you may have a point about the cost structure and my old bug bear the planning "system".

    I recently saw a programme on BBC4 about Kings Cross redevelopment. The cost was pushed up by what I thought was over the top conservation rules even when the Nimbys were not as active as usual.

    Incidentally – the rail franchising system the last Conservative government brought in has helped drive passenger numbers up in an impressive way.

  5. Posted September 17, 2010 at 10:08 am | Permalink

    I wish people, particularly the Tories would stop talking about cuts and speak of the savings. As I understand it budgets are actually increasing, but just not as much as some people would have hoped. When people don't spend so much as anticipated in their personal lives, they talk of having made a saving, which can hopefully be used elsewhere for some other purpose such as paying of debts. The government should adopt the same outlook – what's happened to their PR?!
    The main problem with Rail in particular is that is a government run organisation and there are too many vested interests who get involved in its policy decisions, and, like defence, its money is often used for other objectives.. For all its faults, as far as I can tell, Railtrack gave better value for the government subsidies as the board was doing its best to run a business. Its failure was probably more due to government interference than its own ineptness, and the present set-up seems to be costing us far more. But wasn't the government takeover mainly to appease the Unions?.

  6. Iain Gill
    Posted September 17, 2010 at 10:17 am | Permalink

    Quite a number of things to observe about the railways

    1. Since the East Coast main line was taken back into state ownership I note that there are a lot more diesel trains running up and down what is an electrified main line. We spent a fortune on electrification why are we running so many diesel trains on electrified routes? The managers must be doing it for a reason? It makes a mockery of all that investment in electrification.

    2. Companies like Grand Central are running trains to Sunderland with lower fares than the main East Coast line trains to Newcastle, they should be congratulated on shaking the market up. More like this is needed. Grand Central allow you to buy you ticket onboard too – what the customers actually want.

    3. Services like the sleeper trains to Scotland really are a public service which are one of the few things about the railways I agree we should subsidise. For all sorts of community and wider business building reasons.

    4. The ticket system is a shambles, the public have no idea how to get the best value tickets and there are far too many ticket combinations. Some simplified structure to tickets would help a lot.

    etc

  7. Colin
    Posted September 17, 2010 at 10:46 am | Permalink

    I like trains, mainly because I prefer to sit around reading rather than driving and they are less complicated and have better timetables than the bus ( in Wokingham at least ).

    However the price of the trains is clearly too high for most journeys. In all cases that I've tried the cost of a single person travelling in an average car is cheaper than a single person travelling by rail ( assuming about 40p per mile ). It normally is quicker to drive too.

    I hope that this is due to inefficient procurement rather than inherent in the nature of the transport system. One suggestion I've heard is that increasing the length of time of the contracts of the individual train companies ( about 10 years I believe ) would allow them to invest in the rolling stock correctly, I believe Austrian and German train companies have sensible contract times ( 15 to 20 years ).

    Dropping the subsidy may make the trains even less efficient as people will than be inclined to travel by car. There is a level of economies of scale in public transport and so a subsidy might be required to get people to use the service. Is the level of subsody correct, I don't know. Certainly if the price of a ticket from Wokingham to Reading doubled I probably wouldn't use the train at all.

    About Wokingham station… it does have a vast car park. I think that an improvement to the area might be worthwhile. Is there a market for much more than a coffee shop there? Or are you suggesting that it takes business from Wokingham centre?

  8. Bill
    Posted September 17, 2010 at 10:46 am | Permalink

    I’m probably not contributing much to the debate here, I don’t understand the complexities of the railway finances, but there seems to be something wrong somewhere.

    I regularly fly Newcastle to Exeter – small Dash 8 costs around £60-00 one way and the aircraft is only about 70% full

    Last trip I got a train back up – cheapest first fare £309 and second £168 – they were restricted tickets – train 20% full

  9. Y Rhyfelwr Dewr
    Posted September 17, 2010 at 1:12 pm | Permalink

    Why would the train operators need to "show much imagination in finding additional streams of revenue " when all they have to do is raise their fares yet again? It beats me why anybody still uses the trains at all. I avoid them like plague. It's more convenient, quicker, pleasanter and generally cheaper to drive.

    For example, from my house near Caerphilly to Cardiff Central by bus and train return costs £7.80 (no advance fares offered) and takes an hour in each direction. By car it takes 20 minutes and costs less than a pound. The difference in price will cover the cost of parking. Go figure.

    If the government wants us all to go green and leave our cars at home, it should look at making public transport competitive.

  10. Richard1
    Posted September 17, 2010 at 2:51 pm | Permalink

    A major consideration with rail – which should be considered before £billions are spent in order to shave 20 minutes or so off the London-Birmingham route – is that they can be brought to a standstill and the management & public held to ransome by politicsed unions. Do we really want to spend £10billions of our money on infrastructure the effective operation of which is then dependent on the whim of the likes of Bob Crow?

  11. Robert Taggart
    Posted September 17, 2010 at 3:51 pm | Permalink

    Speaking as an anorak and a 'righty' the following truth may be hard for some to swallow… British Rail was both more efficient and effective running our railways than what the privatised set has ever been ! Granted, it took BR c.35 years to achieve this, but, after the mid 1980's and sectorisation, they really were 'getting there' ! Now ? confusion and profiteering reign. Back to the future ? anybody ? !

  12. Alan Wheatley
    Posted September 17, 2010 at 5:12 pm | Permalink

    We need some railways. But railways are not the heart of the transport future in Britain, as their lobby group supporters would have you believe.

    The railways that we do have should work as efficiently and effectively as possible, and JR's points are valid and well made.

    The railways provide examples of British innovation squandered. For instance, Freightliner, scotched by the unions. For instance the Advanced Passenger Train, which would have been a success but for the management drive to see it through. The APT is a really desperate case, as Virgin are buying the Panderlino from Italy, which uses the same principle invented and proven in the UK. Lets hope on many counts UK railways will in future give us more to cheer.

  13. Mark
    Posted September 17, 2010 at 5:58 pm | Permalink

    To make rail more economic traffic needs to be spread over the day. The only people who can really influence that are employers who set working hours. Therefore employers should pay the premium on fares for peak travel (leaving the employee paying off-peak cost) so that they can decide whether it is truly worthwhile requiring employees to travel in rush hour.

  14. Simon Cutler
    Posted September 17, 2010 at 9:36 pm | Permalink

    PART 1: I have travelled to work from Wokingham to Swindon by rail for over a decade, at a cost in excess of £4000 pa. This represents a significant investment in terms of both time and money, a decision which I accept is within my control to change. I can generally get a seat, but over the years the service has been far from perfect, with delays and poor timetabling being the bane of my life.
    If we are to encourage more to opt for train over car and fill the empty seats Mr Redwood refers to, prices must be cheap, ideally at a level where it would make no sense at all to travel by car. The benefits to the country in reducing our reliance on road travel and using the rail network more effectively are clear. But this comes at a price, where the Holy Grail is to figure out a way to tension competitive private investment with efficient use of the subsidy. Ctd…

    • HJ777
      Posted September 19, 2010 at 8:00 pm | Permalink

      If it's within your power to change the fact that you travel from Wokingham to Swindon every day, then why are you asking other people to subsidise your travel?

      The problem with subsidising transport (any transport) is that it encourages extra traveling over and above what people would normally be prepared to pay for. Why is this a good thing?

      If rail subsidies were removed, then either Network Rail would have to cut its costs (which are 40% higher than its European equivalents) or companies would help staff work from home, or move to lower costs locations, or encourage their staff to live closer to the office.

      • Simon Cutler
        Posted September 22, 2010 at 3:05 pm | Permalink

        Good point, taken on board. However, one needs to look at broader drivers and incentives encouraging movement of a skilled workforce throughout the UK and the fact that (as in my case) decisions have to be made considering one's partner's situation as well as one's own. If society sees value in keeping families together and provides incentives to do so, the workforce will commute less. Until that day, we will all seek out relevant and challenging jobs wherever they may be found, in my case Swindon. As it happens, it is a jolly good job that I travel Westwards to work, otherwise the majority of commuters who travel Eastwards to London would find their fares rising considerably if train operating companies (who would no doubt pass on costs to the poor commuter) had to subsidise empty trains themselves!

  15. Simon Cutler
    Posted September 17, 2010 at 9:37 pm | Permalink

    PART 2: Fully privatising the rail network would be a disaster. Instead a significant subsidy is needed, which if managed well and used to reduce ticket prices, would encourage more people to use the trains, which in turn would generate more revenue, which in turn etc etc. I do recognise the situation is more complex than this simple model suggests, particularly given the already overcrowded trains. So coupled, incentives should be used to encourage organisations to allow staff to work from home, work flexibly and travel off peak. Rail season tickets should also reflect flexible work patters where a 4 day annual pass, for instance, could be purchased alongside the almost pointless 7 day annual pass.
    Finally, Wokingham station is a disgrace. Considering how affluent the Borough is, the fact that this eyesore is the first impression that our visitors get is appalling. Surely local taxes can be used to leverage private funding to develop the area as suggested and provide our guests (and residents of course) with the warm Wokingham welcome they deserve. END

    Reply: The obstacle to redeveloping the station has been Network Rail.

  16. John Wrexham
    Posted September 18, 2010 at 12:57 am | Permalink

    John, our railways certainly need a shake up as recent trips using trains in Germany, Spain, Poland and the Ukraine showed how poor the service is that we have to endure in this country.
    Wrexham & Shropshire Railways are a great example of private enterprise in the railways, but they were nearly throttled at birth by continuous lobbying of the DOT by vested interests – Arriva and Virgin Trains – who were desperate to stop anyone competing for the passengers travelling to London and thereby ending their cosy duopoly in the north-west. Having recently been on a packed off peak Arriva 'train' with just two carriages where people had to stand from cardiff to manchester, the status quo cannot continue.

    The current railway companies have the profit motive of the private sector and the lack of accountability to customers of the worst of the old nationalised industries, a rather deadly combination!! thanks to the two johns (major and prescott) for the current shambolic system!!

  17. Woodsy42
    Posted September 18, 2010 at 1:05 am | Permalink

    It currently costs £8 per day to park in the official rail car park near Crewe station. And note this station is not in the town centre and there are no park and ride schemes to make access easier. That's a significant additional cost for anyone considering using the railway rather than driving down the motorway.
    How much 'additional revenue' would you suggest is reasonable for them to extract? Personally I fnd £8 per day extortionate already!

  18. Trev
    Posted September 18, 2010 at 12:53 pm | Permalink

    The problem is I can get into my car outside my house and drive to where I want to go.
    Trains have to cope with peak commuter and holiday demand. they will always have to run empty at times, just like the motorways are empty at times

  19. Posted September 18, 2010 at 1:52 pm | Permalink

    The cost of housing rose with the increase in mortgage availability – credit, after all, skews the market.

    The solution then is to restrict access to credit. We should return to mortgages based on 3 times salary, at most, with a 25% deposit.

  20. Rollo Clifford
    Posted September 18, 2010 at 3:37 pm | Permalink

    ••The cost of new construction is now double that in other major EU States. That is well documented (see the HS2 report). It is a UK Civil Engineering on major projects, not a specifically railway problem. It is attributed to the way the UK insists of interpreting EU Directives into UK law (other Counties leave them to be interpreted), to Health & Safety requirements that increase cost without increasing measured site safety, to a public procurement regime that inhibits contractors building up a workforce / supervision really skilled in specific tasks, and to the inclination to use project managers (usually US) which alone is said to add 15% to costs. It equally applies to highways and nuclear power stations. The President of EDF has joked (off the record) that the cheapest and easiest way to build new UK power stations would be to build them in the Pas de Calais first, and then cede that ground to UK.

  21. Rollo Clifford
    Posted September 18, 2010 at 3:38 pm | Permalink

    •There is no way of simply altering costs or outputs to suit changed economic times. Any significant change (for example to Network Rail funding or the amounts a franchisee is required to pay) is inhibited by the nature of the agreements between the parties, and between parties and Government. These agreements are legal, and bind the parties. Hence the advice being given to ministers that there is relatively little they can do except cut capital programmes. Contrast this with the recession in the early 90s, when the level of Government support was paramount (through PSBR), and costs were trimmed accordingly (and immediately).
    •There is no longer a guiding mind for the Railway. No single person whom a Secretary of State can build a relationship with (such as Ridley with the first Bob Reid), and agree at high level what needed to happen. This destroys financial flexibility, and also looses Government the ability to achieve strategic ends. For example, BR had clear (unpublicised) objectives in moving coal to power stations which received priority even during rail strikes and which played a major role in deciding the outcome of the coal strikes.

  22. DBC Reed
    Posted September 18, 2010 at 5:44 pm | Permalink

    One difficulty with using the car instead of train is that for London and other big towns the advantage lies with rail travel because trains go into city centres. Parking a car in central London is not a possibility,never mind the congestion .The same disadvantage afflicts airports as most large ones are some distance from the towns they serve . A philosopher once made a good joke (for a philosopher) that Paris needed an airport some distance in the direction of Belgium; Brussels needed something similar France-wards.The solution would be something midway reached by car where travellers could walk from the French to the Belgian part without getting on a plane.(Well I thought it was quite amusing).The real answer is of course land value tax.

  23. Jan
    Posted September 18, 2010 at 6:00 pm | Permalink

    My first thought was that Wokingham has a new station! I remember the old Victorian one which had a lovely warm waiting room. I agree the "new" one isn't very attractive and it was a missed opportunity when the Victorian station was demolished and the present station built. I remember the Dr Beeching cuts and living in nearby Crowthorne we were very relieved when that line (Guildford to Reading passing through Wokingham) was saved. The train journey between Crowthorne to Wokingham is approx 10 mins and the bus journey at least half an hour back then I daresay it's still the same.

    More recently I use the GWR and used to travel from Cardiff to Paddington which is much quicker by train than by car along the M4. If you look on the internet for the cheapest tickets and can travel off-peak and buy tickets in advance I much prefer travelling by train and isn't always too expensive although I agree there are many improvements to facilities which could be made eg toilets, shops, refreshments onboard etc.

  24. Iain Gill
    Posted September 18, 2010 at 7:51 pm | Permalink

    id recommend the book "on the wrong line" by "chritian wolmar" to any politician wanting to input into the future of the railways, in my view its a great book, very simple business language, written in a fairly balanced way, shows how the professional railwayman is often right, and how often politicians have got it wrong, lots of good simple lessons

    john you could probably read it in one or two nights and well worth it

  25. dacriz
    Posted September 18, 2010 at 8:34 pm | Permalink

    As an alternative to the astronomically expensive proposed high speed rail link between London & the North, how about monorail?
    Even better, how about monorail overhead the existing motorway network.
    Inherently motorways go where people need to go. Stations & carparks at existing motorway junctions, link systems into city centres, traffic off the streets.
    It requires no additional land for it's infrastructure. Re-engineering of bridges is likely but that's about the only significant obstacle.
    The rolling stock is lightweight & efficient, up away from people & can be run at greater densities than conventional rail.
    Cambridge has recently invested £140 million in the world's longest guided busway. What a colossal sum for such a 19th century solution to a 21st century problem.
    Monorail… The answer in the city & inter- city.
    Simples

  26. john eastwood
    Posted September 19, 2010 at 1:08 am | Permalink

    The basic problem with the rail network is a determination of politician's to deny the laws of physics, and common sense.

    First off is the "no passenger deaths is acceptable" mantra. The reason modern trains are so heavy is related in no small part to an expectation that it is possible to have a derailment at 125mph, and expect most people to survive unscathed. If we built cars and coaches to this sort of standard (invert a bus a 60mph, never mind 125mph, and consider what happens), they would also weigh 30 odd tones a vehicle.

    Secondly, we pursue ever increasing top speeds, which means a heck of a lot more energy to dissipate when it comes to stopping, and a lot more fuel to keep stuff moving. Braking distances can't be reduced very much, as things are, full service brake applications get very close to the limits of adhesion as things are (almost every year someone stuffs a 3rd rail EMU set through a red light due to leaves on the line reducing the amount of adhesion available).

    The Disability (campaigners-ed) also cost us a small fortune – if we didn't have disabled toilets in ever coach on a Virgin Pendlino, we could almost certainly save enough space to equal another coach full of seats. Faulty push button external doors are on of the biggest causes of lost time, but simple and effective manual slam doors are banned on elf n' safety grounds.

    As another commentator said, its painful for us right-wingers to admit, but for all its ills, British Rail was a lot better than the mess we have now – it cost us a tiny fraction of the current subsidy levels, and delivered better service. I don't think this is because privatisation is wrong per-see, just because our short contract, train and track separated system is flawed in just about every way. I could explain why in detail, but this comment would then run to about 50 pages.

    I've posted this before, but we should be looking at slower, lower tech trains, run more frequently, and lots of them. Most of the costs of the current system are a mixture of technology and bureaucracy, neither of which is necessary to actually run trains.

    As a final suggestion, if you want a decent briefing on the rail network, I would suggest the best person to talk to is Roger Ford <a href="http://(http://en.wikipedia.org/wiki/Roger_Ford)” target=”_blank”>(http://en.wikipedia.org/wiki/Roger_Ford). His common-sense understanding of the issues surrounding railways, and the problems of our privatised railways is almost certainly second to none.

    Reply: The subsidy goes to a nationalised company. Under past nationalised regimes we also had periods of high subsidy and poor efficiency.

  27. Simon
    Posted September 19, 2010 at 1:12 am | Permalink

    The rate at which a train can slow down should be constrained by the coefficient of friction between the materials used for rails and the materials used for wheels . Heavier trains breaking harder may accelerate rail wear .

    Leaving the braking late and fuel efficiency are mutually incompatible .

    With electification presumably a significant proportion of the kinetic energy removed by arresting one train can be recovered to generate electricity to power other trains without any need for temporarily storing the electrical energy . I don't know whether this happens today .

    As the cutbacks of the 80's showed , it is false economy to try and cutback on infrastructure maintenance and takes decades to catch up .

    Perhaps the train doors could open within 5 seconds instead of delaying everyone 14-20 seconds and contributing to missed connections which run into hundreds of thousands of man hours per day .

    This would be popular too .

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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