Railway subsidy figures

Some have queried my comment that rail sibsidies fell in the early years of privatisation, only to rise rapdily again after the nationalisation of Railtrack.
The figures are:

1993/4 £1627 m

1995/6 (post privatisation) £431 million

2000/01 £1214 million (lowest Labour level)

2009/10 £4619 million

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35 Comments

  1. lifelogic
    Posted March 10, 2012 at 2:32 pm | Permalink

    Why do they need such subsidy when they charge so much for tickets and, unlike cars, are not hugely taxed with VAT, fuel duty and road tax. Could it be that they are just an inefficient mode of transport for most UK type length journeys perhaps?

    • libertarian
      Posted March 10, 2012 at 11:47 pm | Permalink

      Exactly rail is a 19th century solution to a 21st century problem

  2. Gideon Mack
    Posted March 10, 2012 at 2:42 pm | Permalink

    Very interesting but what are you doing about the illegal mini thin waste sack stealth tax scam being implemented by your buddies in Wokingham Borough Council?

    Reply: I have sent some constituents’ complaints about the new scheme to the Council for their consideration. This is a matter entirely within the control of our elected Councillors.

  3. Bill
    Posted March 10, 2012 at 2:57 pm | Permalink

    Do we have comparable figures for other countries? Difficult I know given differences in population, miles of track, and so on. Is there a standard figure giving subsidy per mile or subsidy as a percent of GDP?

    I gather Warren Buffett has recently invested in rail in the USA much to everyone’s surprise. That must tell us something about profitability.

    Reply UK subsidy levels are currently high. IN some parts of the network subsidy is as much as 80% of total revenue, with an average of under half coming from fares.

    • lifelogic
      Posted March 10, 2012 at 7:53 pm | Permalink

      Only half from fares, half from subsidy, huge tax advantages and still they cannot compete on most routes. They are just big buses that need expensive rails to run and then are stuck on just one route and cannot go door to door anyway.

  4. rose
    Posted March 10, 2012 at 3:22 pm | Permalink

    Why did Nicolas Ridley advise Mrs T that rail privatisation was one too far?

    I would guess for the same reason that EU opposition to Cal Mac’s monopoly is wrong: sometimes there is only room for one operator and it needs government subsidy if the public is to be properly served by an essential service. The GPO is another example. Please correct me if I am wrong on these.

    Reply: Some argue that railways are natural monopolies requiring you to keep together track, train, signals and station management under the same control. They say it is unsafe to do otherwise. Yet we accept different owners and managers for airports, for air traffic control, for airlines and for airport services, despite the bigger safety risks with planes.

    • lifelogic
      Posted March 10, 2012 at 7:54 pm | Permalink

      Privatisation is good but the structure and regulation is poor as usual.

    • rose
      Posted March 10, 2012 at 8:51 pm | Permalink

      I wasn’t thinking of safety, but of viability.

      • rose
        Posted March 11, 2012 at 2:29 pm | Permalink

        By which I mean how could there be two profitable and useful Cal Macs, even if there weren’t aeroplanes?

    • Electro-Kevin
      Posted March 11, 2012 at 12:00 pm | Permalink

      Airports in the UK are an awful experience too.

      Some key differences:

      The infrastructure doesn’t go every inch of the way and there are myriad ways in which paths can be altered. Suffer a two hour delay and no one bats an eyelid – in fact air passengers tend to build that expectation into their timings.

      Per mile ground transport is bound to be more expensive – that’s why we learned to fly.

      • Electro-Kevin
        Posted March 11, 2012 at 12:06 pm | Permalink

        My previous in explaining why privateers might find modern railways too onerous to cope with.

        The UK unsuitable for railways ?

        There isn’t a country more perfect for them. That’s why we invented them.

        • Electro-Kevin
          Posted March 11, 2012 at 12:09 pm | Permalink

          … in answer to those commenters who state otherwise.

          (Oh to have a self editing button on this site)

  5. sjb
    Posted March 10, 2012 at 3:41 pm | Permalink

    An Institute of Directors report claims the substantial increase in subsidy was “in part a result of the dramatic increases in track maintenance expenditure following the Hatfield rail crash. A further escalation to over £4.5 billion in 2005-06 was largely due to a big jump in the capital grant for the Channel Tunnel Rail Link (CTRL).”
    http://www.iod.com/MainWebSite/Resources/Document/policy_paper_transport_policy_2007.pdf
    (p47 of the report; p48 of the pdf)

  6. Electro-Kevin
    Posted March 10, 2012 at 4:04 pm | Permalink

    Well I didn’t question your comment about subsidies.

    The infrastructure privatisation broke down when costs over-ran and Railtrack was unable to get enough revenue from the train companies to make a profit.

    There have been massive upgrades in the past decade but the recent Panorama documentary highlights that these seem to have been very expensive.

  7. Alte Fritz
    Posted March 10, 2012 at 8:36 pm | Permalink

    And this when one regularly can commute in a train in which more passengers must stand than can sit.

  8. uanime5
    Posted March 10, 2012 at 9:51 pm | Permalink

    Good news everyone I was able to find a list of rail subsidies paid from 1954 to 2003 in June 2004 prices:
    http://www.transport-watch.co.uk/transport-committee/how-fair-are-the-fares-annex.pdf

    1993: £3,398 million
    1994: £2,203 million
    1995: £545 million
    1996: £1,309 million
    1997: £2,202 million
    1998: £1,851 million
    1999: £1,627 million
    2000: £1,365 million
    2001: £2,032 million
    2002: £2,794 million
    2003: £3,714 million

    So the cost dropped from 1993 to 1995, then rose in 1996 and 1997, fell until 2001, then started rising.

    Of course one of the reasons why large parts of the railways were renationalised was that the private companies didn’t maintain them properly leading to the Hatfield rail crash. Perhaps the lower levels of maintenance is why they needed less money.

    • APL
      Posted March 11, 2012 at 6:21 pm | Permalink

      uanime5: “Of course one of the reasons why large parts of the railways were renationalised was that the private companies didn’t maintain them properly leading to the Hatfield rail crash.”

      The reason the rail companies were nationalized in the first instance was that the government ran them into the ground during the two European world wars of the twentieth century then expected them to be viable after the event. Of course they required massive investment to recover from the wars, which the government then used as a pretext to Nationalize the rail companies.

      • sjb
        Posted March 12, 2012 at 3:14 pm | Permalink

        “In 1919 a decision had to be made on how the railways should be returned to the private sector. Coordinating and pooling arrangements during the [First World War] had saved costs, suggesting there should not be a return to the pre-war network of more than 130 separate lines and 21 major companies. Four regional groupings were created.

        Thus four ‘historic’ railway companies were less the product of private enterprise than of the rationalising efforts of government, […]”
        http://www.bath.ac.uk/management/cri/pubpdf/Occasional_Papers/23_Glaister.pdf

    • Manicbeancounter
      Posted March 11, 2012 at 7:38 pm | Permalink

      Alternatively, post Hatfield the Government panicked. Having failed to properly regulate the industry and read the signals of impending disaster, Labour needed to cover up. As a consequence, the government virtually shut down the railways and then imposed an overly stringent safety regime, blaming everyone else to deflect the flack. In this you will find an analogy with the later credit crunch.

  9. Alan Wheatley
    Posted March 11, 2012 at 8:49 am | Permalink

    With private companies running the trains why is government buying trains?

    Reply: One of the franchises is nationalised

  10. lojolondon
    Posted March 11, 2012 at 9:20 am | Permalink

    A good example of how totally inept Labour are, we need a total re-think to get competition into the system. And somehow to stop the rape of the public and private purse by these shysters.

  11. BurnleyClaret
    Posted March 11, 2012 at 9:59 am | Permalink

    I’m normally in favour of privatisation, however, the form of privatisation of the railway has produced over inflated costs and a poorer service to passengers. Track and train should never have been seperated, not on safety grounds but because of the fragmentation. There is a thriving cottage industry created for employees to attribute and dispute delays to each Train Operating Companies service. For example, TOC A (allegedly) delays TOC B. Network Rail attributes this delay to TOC B, TOC B review this attribution and dispute it, forcing Network Rail to review this attribution again involving TOC A, train planners, station staff, signallers. How much of this is unproductive work? The end product is money changing hands for the affected party, but this whole game is replayed in reverse the next day so the net result is not much change. There are thousands of delays every day, so not comparable to to airlines who will only delay each other infrequently at airports.

    One other (of many, I could go on!) flaw is the procurement of rolling stock. Not only are leasing costs extremely high, but TOCs have been largely allowed to go their own way which has resulted in a wide variety of types, and with no, or very limited, cross compatibility resulting in huge delays when one breaksdown as they can’t be rescued by the train in rear.

    The only privatisation of the rail industry that could work would be a “big 4” style operation where a large operator is responsible for track and train. The only objectors would be the tiny number of inter-regional operators, and freight users. The fair competition of these could be easily overseen by a much smaller arbitration panel.

  12. Matt
    Posted March 11, 2012 at 10:26 am | Permalink

    It’s convenient to forget that the country has not had a transport strategy for the last 40 years. The UK has rail strategies and air strategies and at one point in the past (but not for 20years) a road strategy. It would help if we looked at what we are trying to achieve -which is moving stuff and people around and what is the best way to do that rather than bicker about how much each mode of transport costs.

    Aren’t outcomes more important than outputs at a national level?

  13. Andy Man
    Posted March 11, 2012 at 11:41 am | Permalink

    The figures are bang on to show that any increase in government involvement causes corresponding increases in costs and decreases in efficiency. A natural law of the universe.

  14. Martin
    Posted March 11, 2012 at 12:44 pm | Permalink
    • Electro-Kevin
      Posted March 11, 2012 at 7:18 pm | Permalink

      Bankers ?

      Martin – I disagree with this payment to tube staff too btw.

  15. Jon
    Posted March 11, 2012 at 5:02 pm | Permalink

    An issue is the Unions who survive either in the civil service or monopolies. They are still driving up costs, bonuses for working over the Olympic period are running over £40 million and rising. It seems no party nor Mayor wants to take them on fearing the political fall out, better to pay the cost it seems. It must come to a head at some point though.

    The NHS reforms as Labour found themselves, are a way of circumventing the unions. As long as they aren’t private monopolies then I think the union strangle hold of inneficiency will be rid off. How do we do that with the rail firms?

    • Electro-Kevin
      Posted March 11, 2012 at 7:26 pm | Permalink

      The railway was heavily unionised under BR and yet staff were paid a pittance.

      Certain staff are paid highly because of scarcity. In fact train drivers are more scarce than airline pilots.

      Airline pilots can become qualified independently of an airline (often self funded) Train crew can only be trained in house.

      The reason why a train driver is paid more than a bus driver is because it takes at least a year to qualify to a basic level (a couple of years to reach full depot competence) A bus driver is qualified in two weeks.

      To become a police officer qualified to patrol a beat alone requires 21 weeks training. Minimum age 18. To qualify as a train driver able to work alone in the ‘baby’ link requires at least 52 weeks training.

      That is the shortest they could get the courses down to after much rejigging of the system in the early nineties.

      It has little to do with unionisation and everything to do with supply/demand economics.

      • Electro-Kevin
        Posted March 11, 2012 at 7:27 pm | Permalink

        Minimum age 21 to be employed as a driver.

      • Winston Smith
        Posted March 12, 2012 at 11:57 am | Permalink

        That does not ring true. Are you saying, with 5m+ on out of work beenfits and 1.4m part-timers wanting a full-time job, there is no demand to be a train/tube driver, even from existing rail/tfl staff? Sounds like restrictive practices in training and barriers to applicants. What role do the Unions have in the training of drivers?

        • Electro-Kevin
          Posted March 12, 2012 at 8:46 pm | Permalink

          Winston – Where did I say there is no demand to be a train driver ? In fact the competition to become one is intense.

          They did reduce the training but the Ladbroke Grove disaster involving a newly qualified driver on an accelarated scheme was found to have been caused by rushed route learning.

          Of Union protectionism. In fact the reverse is true as far as Union involvement is concerned. I appeared in the Aslef journal recently expressing my views with regard to the mechanical aptituded assessment being dropped.

          Aslef had been party to this change; so far from being protectionist they have been involved actively in training reduction programmes such as the Driver 2000 scheme and the Traincrew Concept.

          The MP12 training scheme under BR required a training path which lasted up to 7 years.

          Now we are down to about 18 months. Please tell me where Aslef have been obstructive except to insist on a minimum safety standard ?

          Clearly what I say rings true – otherwise Richard Branson wouldn’t pay what he does.

          • Electro-Kevin
            Posted March 12, 2012 at 9:43 pm | Permalink

            PS – I’m not saying that this has anything to do with the job being particularly highly skilled. Like infrastructure issues a lot of it is down to lack of planning in the past.

            The staff demographic hit a high level of retirements around 2000 and so followed a driver auction between TOCs. BR pay had been appalling and so there had been a shortage of applicants and limited numbers of courses.

            The skills shortage hit at a key point in privatisation when mainline TOCs were increasing their traffic and being faced with cancellation penalties.

            Simple supply over demand constricted by a minimum level of – by necessity – local training and aptitude/medical selection on first applying . All of this is highly expensive.

  16. Conrad Jones (Cheam)
    Posted March 11, 2012 at 6:17 pm | Permalink

    Mr Redwood,

    You are right to point out the levels of cost to the taxpayer regarding Rail Subsidies, but the Banks receive over a £100 billion pounds. Perhaps you should focus more on that.

    Reply: I have on many occasions, and opposed the subsidies when they happened

  17. Old Slaughter
    Posted March 13, 2012 at 1:59 am | Permalink

    You cannot privatise a technical monopoly and expect good results.

    Privatisation without competition is far more pernicious than government control.

    And this is only nominally competition.

  18. David Hope
    Posted March 13, 2012 at 1:27 pm | Permalink

    “Reply: Some argue that railways are natural monopolies requiring you to keep together track, train, signals and station management under the same control. They say it is unsafe to do otherwise. Yet we accept different owners and managers for airports, for air traffic control, for airlines and for airport services, despite the bigger safety risks with planes.”

    BAA’s airport monopoly has been many people’s least pleasant part of travel but there is good airline competition and much higher satisfaction with airlines themselves. I think aircraft and trains are a little different because with aircraft you don’t have the aircraft dependent on rail, they are independent once in the air, i.e. for most of their journey, unlike trains. Further there is far more competition if say you want to go to Barcelona.
    Different domestic and destination airlines and sometimes different airports
    With trains you often have only one rail company and one station.

    My feeling is that in those situations it might be best to have one company own the rail and the stations so they take responsibility for their service BUT…. to have much better road competition. Right now it’s a very artificial situation because petrol is taxed so high, parking costs a lot plus roads are rarely improved and widened and expanded because of environmental campaigns other costs. Traffic alone can make some journeys unviable, for example if trying to get into london or for anyone whose spent time on the M62.

    What we need is a situation whereby the car can compete so that people have an alternative and the railway must do a good job to compete

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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