The latest rail subsidy figures show Network Rail was given 7% more in 2014-15 as operating grant compared to the previous year. In addition it received £6.4 billion of Treasury guaranteed/subsidised loans for its capital spending programme. When Parliament returns I will want to ask more questions about value for money, progress with curbing inefficiency, and prospective returns on investment.
The main Train operating companies in England sent money to the Treasury as payments to run their franchises. Once again the train companies in receipt of the largest subsidies were Merseyrail, Scotrail and Arriva in Wales. Merseyrail’s subsidy ran at 19.8 p per mile, Scotrail at 13.8p, Wales at 13.6p and Northern at 7.8p. In contrast South West Trains paid in 9.6p a mile, East Coast 8.2p, Thames Link and First Capital each paid in 7.2p a mile to the Treasury. ( I have converted the published figures into pence per mile from pence per km as I thought we had agreed to keep miles for distance measures in our country)
There was an increase in private sector investment in new trains and total net payments by the train operating companies of £802 million to the government. This reflects the fact that the train companies required to pay in money sell more tickets to more passengers than the companies in need of subsidy.
Prior to Labour’s creation of a nationalised Network Rail total rail subsidies ran at around £2 billion a year (in today’s prices) compared with more than double that now. Total net rail grant of £4.8 billion and £6.4 billion more public borrowing means the railway alone now adds £11.2bn to annual public spending. There is considerable scope to improve on this performance.
August 29, 2015
I see we are subsidising the Scottish railways to a large extent. Yet another reason to let them have independence.
Railways are a money pit and the fact you are even considering HS2 shows just how stupid Parliament is.
I see the NHS is playing fast and loose with our taxes.
Who gives them the right to write off 145 thousand and millions more letting half of Nigeria give birth here.
I see the immigration figures are a myth again. Underestimated as usual Dave is very quiet.
August 29, 2015
Ian
Yes, seen the same headlines with regards to health tourism.
The attitude sums up many who work for the NHS I am afraid.
We will treat anyone who turns up, and are not bothered about the cost.
In the same breath they then complain about lack of investment, so called poor wages, working conditions, and non availability of some treatment options.
They do not seem to see any connection between taxation, cost, budgets, entitlement, value, performance, patient service.
We could quadruple the spend on the NHS and it would not be enough for some of them.
August 29, 2015
Indeed and complaints for Cancelled Operations on the rationed and inept NHS are hugely up. If you are having one assume it will probably be cancelled one or twice.
Trains make little sense for most journeys in the UK, outside a few commuter routes airport trips and a few intercity ones. The make little environmental sense either. The are vulnerable to union blackmail too. Despite the tax advantage and huge subsidies they get they still cost a fortune.
HS2 is clearly bonkers. Doubtless some one will be on the make while everyone else loses out.
Good to see the Mile conversion why is it not in miles already.
August 30, 2015
After all what are trains? They are just large coaches that are restricted to very limited and expensive routes and limited stops? Totally lacking the flexibility of cars or planes to adjust (quickly and inexpensively) to the changing demands of customers.
Furthermore they are hugely vulnerable to union blackmail and government incompetence.
August 29, 2015
Of course he’s quiet as immigration figures are worse under the Tory’s than Labour. It’s not a mistake as over half of immigrants come from outside the EU but no insistence on health insurance etc. Glad to see I’m being taxed to pay for foreign peoples healthcare. I wonder if I can go to Nigeria for free healthcare? How are those non existent EU negotiations going? Anything in them to stop free movement other than some minor benefits changes?
This Government is a completely incompetent. The invasion continues.
August 29, 2015
Indeed totally incompetent and essentially dishonest. Looking at Osborne’s (the pension mugger, IHT ratter, tax complexity increasing and robber of landlords) budget they are essentially a bunch of socialists too. What a choice Corbyn or Corbyn light!
August 30, 2015
The money saved on subsidising railways in Scotland would be dwarfed by the extra costs arising from independence. And why limit it to Scotland when there are other parts of the UK receiving subsidies, why not get rid of them as well?
August 29, 2015
It would be more informative to have a more forensic examination here. Take Merseyrail for example, simply because they have the highest per mile subsidy. Is it wage costs, fuel, maintenance or some other costs which are the main and obvious offenders?
August 29, 2015
Joe
Why are private train companies getting any subsidy at all. !
Surely if you bid for a contract/franchise, you have done all your homework and due diligence on what your costs/income should be.
If you have made an error then that is down to you, if you have made such an error that you cannot fulfil the terms of that contract/franchise, then you quit, or are sacked before you quit, probably with additional costs, because then a new contract has to be re offered to others.
I simply do not understand why the taxpayer (in the form of Government) should be subsidising private business.
If I was in charge of the railways, if a company failed to fulfil its terms of business, then likelihood of them ever getting business again would be almost non existent.
I certainly would not be handing them money to continue, when other competitors are around, as that is unfair trading.
August 29, 2015
Merseyrail subsidy also includes infrastructure maintenance of their tracks & tunnels something which no other figure includes. Not that you would know that from having read the ORR figures as they completely omit what you might think is an important footnote!
August 29, 2015
As the train operators are private companies, why are the Government buying trains?
August 29, 2015
A reminder if we needed it of what an economic disaster nationalised industries are. No market pricing to determine cost of capital, and usually (as in this case), no competition. So huge amounts of money are wasted – sorry ‘invested’ – at the behest of a self-serving management, the taxpayer forks out and the public suffers inferior service. We’ve seen it all beforehand with every other nationalised industry – coal, BA, BT, etc etc. yet absurdly there are still academic economists stroking their beards & debating whether nationalisation is really such a bad thing, and Labour’s pantomime 1970s lefty Jeremy Corbyn is actively advocating more of it! These nincompoops should ask themselves why Margaret Thatcher’s privatisation policy was imitated and followed around the world with such tremendous results for global prosperity, and why it is no prosperous country seeks to reverse it.
August 29, 2015
So who paid for all the improvements to the road network, which made most of the much more limited and restrictive railway network obsolete and unprofitable?
Why was Thatcher willing to lend her personal endorsement to the investment of huge sums of taxpayers’ money in roads, for example by officially opening the final section of the M25 in October 1986, without pointing out that of course it would be a disaster as it hadn’t been a private enterprise?
Railways were originally very profitable, so much so that it created a railway mania which led on to failures; but by the time they were nationalised they were already an economic disaster, although also an economic necessity.
This is not as simple as any “private good/public bad” rule would suggest.
Reply Drivers paid for all the improvements to our roads many times over from the special taxes placed on road transport
August 29, 2015
‘Roads’ do not operate as a business. It would be better if there were more privately financed owned and run roads – as in France
August 30, 2015
Well, some were run as businesses for a period, with varying levels of subsidy from public funds and with varying success, and it was mainly the spread of the privately constructed railways which put a welcome end to that turnpike system for the roads and made it necessary to transfer the responsibility back to county and local councils. Since when the use of public funds for extending and improving the roads has switched it back so that now it is the railways which struggle to compete on a purely commercial basis and need subsidy from public funds to keep them running.
Reply There are several private residential roads in my constituency
August 30, 2015
I think “several” in one parliamentary constituency is about the level of it, the rule is that they are adopted as public highways with just a few exceptions.
August 29, 2015
Denis Cooper
“So who paid for all the improvements to the road network”
Motorists and far more money than has ever been spent on roads too.
Railways were profitable BEFORE the invention of cars and planes. So were stagecoaches
August 29, 2015
Railways are a nineteenth century technology – except for a few specialist applications they’re done for in a small island like ours, anyone can see that.
Driverless cars will put an end to the argument within 10 years.
August 30, 2015
Driveless cars could have such a revolutionary impact that I expect it would take decades to cope with it.
August 30, 2015
Horse drawn stage coaches were no longer profitable once a railway had been built, and most of them stopped running within a few years. Later the invention and then the mass production of cars with internal combustion engines, running on roads which had been improved largely at public expense, made the privately owned railways unprofitable in their turn. If we were starting from scratch to design a transport system we would not include many of the existing railways in the plan, but of course we are not starting with a blank canvas and so it is a messy evolutionary process.
August 29, 2015
“This is not as simple as any “private good/public bad” rule would suggest.”
Whoever suggested it was? Some things clearly are far better done by governments. but only about 40% of what they currently attempt (totally incompetently) to do.
August 30, 2015
A perfectly reasonable interpretation to put on the comment from Richard1, starting with the assertion “A reminder if we needed it of what an economic disaster nationalised industries are”, when almost all of the road system which has made almost all of the rail system unprofitable to run is publicly owned and maintained even if not technically “nationalised”.
August 30, 2015
So did motorists get together and set up private companies to improve the roads for the running of their cars? Nope, it was done by the government, at one level or another, using public funds, and it started long before there were even any motorists to be taxed. Even where private developers built access roads as part of their developments they have almost all been adopted as public highways and are maintained at public expense. What we have basically is a publicly funded road network which in combination with privately owned, by number mostly personal, automotive vehicles to run on them, had made it increasingly difficult to run most of the existing railway network at a profit, even after Beeching’s drastic pruning, and that will still be the case whether the railways are in public or private ownership.
August 29, 2015
Richard 1 – Railtrack was private.
It failed – after alleged mismanagement stemming from track replacements after the Hatfield crash and money lost in the West Coast Main Line upgrade.
This is why we now have Network Rail.
British Rail was the least subsidised of the EU railways and ran more 100mph services than anywhere in the world. Mrs Thatcher did not want to privatise it.
It’s not that it was privatised by HOW it was privatised that was the problem. It remains a fact that some of our rail companies owned and run by nationalised companies that are, in turn, owned by foreign governments.
(All available on the net.)
August 29, 2015
The Department for Transport and the way you privatised the rolling stock supply, is the major problem. The DfT sets the specification and decides which of three companies will supply it; and, maintain it at exorbitant cost. Network Rail has little control over any of the fundamentals.
Reply And you presumably think it is all Margaret Thatcher’s fault and Mr Corbyn could make all the trains run on time. The fault lies in Network Rail.
August 29, 2015
Well I doubt they would run on time, but there would be female only carriages rather like muslim countries. You would probably still have to stand up though.
August 30, 2015
There you go again! You chop the bits out of my post, that contain the documented evidence of where privatising the railways, for purely ideological reasons, went wrong!
August 29, 2015
What a bloody Financial shambles.
I really do wish the media would pick up on all of this.
Thank you for bringing this a little bit more into the open.
August 29, 2015
I thought the whole of this govt was in a shambles financially. We get austerity cuts yet illegals are put in hotels and get better treated than our own pensioners.
August 29, 2015
Surely the simple, central fact is that trains restricted to a very limited railway network cannot compete effectively with automotive vehicles which are free to run anywhere on an enormously more extensive network of roads, which will actually take people and goods directly from A to B as required without having to go by road from starting point A to railway station C and then by road from railway station D to destination B, quite likely having had to change trains at stations E and F on the way?
Even after the Labour government having spent some years doing as much as it could to try to hamper road transport, with the result that now parts of the road system are so congested that even minor improvement works can precipitate massive traffic jams, it is still usually the preferred alternative for those who have it available.
Left to themselves almost all of the railways would be loss making and would shut down, in the same way that the old system of horse drawn coaches around the country quickly shut down when it became obsolete, and the canal system more gradually declined when faced with competition from the railways; really the primary reason for the government to use taxpayers’ money to keep the railways running is as a matter of social policy, to cater for the minority who do not have private road transport at their disposal.
The train operating companies do not make huge profits, almost all of the subsidies being just to compensate for their inevitable losses in running a public service for the benefit of a minority, albeit a substantial minority, but I do wonder whether it would not be much simpler to understand and hence to control, and hardly less efficient, if the railways were just renationalised as some people would like.
After all, if greater efficiency in the private sector is driven by the profit motive, the old argument, then it doesn’t really apply in the same way if there is no realistic prospect of there ever being any profit other than that provided by public subsidies.
August 29, 2015
Lifelogic – Could you explain to me why a nearby station will add to the value of a house or why property speculators buy in areas where new rail links are anticipated.
Could you tell me why there is travel chaos everywhere when the railway is closed.
In our ever more crowded little island more mass passenger transport is needed, not less.
As for ‘direct from A to B by car’ fewer people are choosing to do that. One of the reasons is young people being unable to afford £3000 a year car insurance which is literally 4 months take home pay for most of them. Another is the cost of parking in towns and cities.
August 29, 2015
Sorry – Dennis.
August 29, 2015
…Denis
August 30, 2015
There’s no contradiction. I haven’t said that the existing railways are of no use, just that it is difficult to run them economically in competition with the more extensive and flexible roads.
August 29, 2015
Spot on.
August 29, 2015
The railway system in the UK is a complicated scheme to transfer taxpayer cash to Network Rail bureaucrats and various corporate operators who have the right political connections.
All subsidies are wrong. If a service is worth providing then the people using it should pay. If it is uneconomic then it impoverishes the rest of the population and should be replaced with a more efficient system. This applies to railways, banks, the BBC and most importantly government itself.
August 29, 2015
And the energy industry. I am so glad the Conservatives are reducing drastically the subsidies for renewable energy. Well done and long overdue.
August 29, 2015
I confess that I don’t understand it all. My guess is that the profit made by a trainload of passengers is equal to staff wage costs and stock depreciation costs subtracted from the fares paid by passengers. Since commuters are forced to pay the same fare whether they have seats or not, there is little incentive on the rail companies to improve their service either by providing longer trains or by providing double decker trains or by lengthening platforms.
When I travel on a train in Germany or Italy, I find double decker trains are in operation but my guess is that we cannot do this because tunnels and the height of electric cables prevent this. Thus our only options are (a) to run more trains per hour or (b) to run longer trains.
One would hope there are people in the Department of Transport intelligent enough to talk to other branches of government to work out the likely future number of commuters from towns where new housing is to be built. One would hope someone has calculated the theoretical limit to the number of trains that can be run per hour and what implications this has for signalling technology.
I should also like to see the cost of subsidies calculated as a function of passenger numbers.
August 29, 2015
One would also hope the government can calculate how much extra transport to the new towns necessary to house all the extra immigrants will be needed! There was some guy on BBC news this morning going on about building a new town just for immigrants. Where is it all going to end? More like it will never end. The way things are going everything will shut down and come to grid lock.
August 29, 2015
How much are senior NHS staff being paid for providing the worst healthcare in the developed world?
August 29, 2015
Rather a lot. Much of the job must be deciding how to avoid/delay (or deter) treating them as much as they can, by back door methods.
August 29, 2015
I am certain that the number of people transported by rail is not equal to those by road . If the road network was given the same priority , the delays , poor surface conditions etc would be substantially improved . Getting priorities right seems to be beyond the Government mechanism .
August 29, 2015
London is now the worse congested city in Europe and getting worse.
August 29, 2015
Not what the Telegraph (30/08/2015) is saying!
And Boris should be thanked for that!
August 30, 2015
Look at the chaos and underground strike causes! Maybe we should ban hgv’s & private low capacity vehicles on strike days and revert to cycle/road/bus transport via private contracts with reserve bus fleets just like standby power generators.
August 29, 2015
Prior to Labour’s creation of a nationalised Network Rail total rail subsidies ran at around £2 billion a year (in today’s prices) compared with more than double that now.
I’m not an expert in rail finance, so I’d just like to ask some questions:
What were the subsidies prior to privatisation prior to 1996?
If Railtrack was so successful, or potentially successful, as a private company, why was it sold for only £500 million in 2002?
The fall-out from the Hatfield Rail disaster was huge. The charge against the owners of Railtrack was that they were more interested in the land value of their asset than in running a railway track. They were accused of having no idea how many more ‘Hatfields’ were waiting to happen because it had discarded its in-house engineering capability following the closure of its engineering and maintenance groups -laying off most of its skilled workers in the process.
Is there any truth in this charge? Did privatisation lead to a lowering of safety standards? Was the crash at Hatfield an indirect consequence of privatisation?
If the railways are to be run as a private company, is it reasonable to say there should be no government subsidies at all? Is it reasonable to be paying subsidies at the same time as shareholders are receiving a dividend?
If not, is it better to have total public ownership?
Reply There were more crash fatalities under nationalisation. the subsidies were also higher.
August 29, 2015
One of NR success has been no Rail death for 8 years a record. Granted there are suicides, track workers and level crossing fatalities. This is the best safety record in Europe. Raitrack saw an increase under its watch, which shows that privatising a railway is no easy task. I am all for privatisation, get it away form the Treasury penny pinchers. But it funding must be well thought out.
August 29, 2015
Reply There were more crash fatalities under nationalisation. the subsidies were also higher.
Do you have the figures on subsidy ?
Re fatalities – there have been new technologies since nationalisation. TPWS has prevented many collisions. As has better and longer training.
August 29, 2015
Subsidy history here:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/385070/rai0302.xls
August 29, 2015
Thanks for that information. The key column is “I” on your spreadsheet which shows total government support at 2014 prices.
So 1986- 1996 the railways (fully nationalised) cost on average of £1.3 billion (at 2014 prices) every year.
In the next 6 years of totlat privatisation it was £2.1 billion p.a.
Since then (a mix of public and private) it has been ~ £5 billion p.a.
I’m not sure how to make much sense of these figures. They support my argument than chopping and changing is both disruptive and expensive.
It’s likely that the old BR was under resourced and more money should have been spent on the network. But, as with all stats, we can cherry pick those we like to suit our political argument.
August 30, 2015
It would certainly clarify matters if they were publicly owned and controlled, rather than have taxpayers providing subsidies so they could declare a profit rather than a loss. As I say, if you are relying on the profit motive to drive improvements then that is understandable when there is some prospect of running the business profitably but not if it is bound to be loss making in the absence of subsidies.
August 29, 2015
Off-topic:
https://euobserver.com/tickers/130035
“Germany’s interior minister Thomas de Maiziere on Friday told Euronews that an EU-funded refugee camp in Turkey with an asylum processing centre is needed. “We may need to use European funds to build a large refugee camp to decide there [in Turkey] who can come to Europe,” he said.”
He seems to have forgotten that according to the officially approved line these people are all fleeing war and persecution, etc, and so there can be no question of deciding “who can come to Europe” when they all have an absolute human right to do so.
August 29, 2015
Was it as many as 40 economists ( Keynesians ) backed some aspects of Corbynomics? This is a blessing in disguise should he become leader. Why? Because they and proper economists cannot even get a handle on the theories and policies of Cooper/Burnham and Kendall. They do not have ANY well-rounded economic policy or even a virgin idea of what to do with the economy. They are just full of:
1. “Let me make this perfectly clear..”
2. “We need to invest in the future…”
3. ” We need to openly admit past mistakes and go forward ”
4. ” We need to set our country straight ”
One can hear Wall Street and the London Stock Exchange snoring as they wait for these go-getters to actually say something, even say something wrong, like Corbyn. At least in a manner of speaking Corbyn can be headed off at the pass by the cavalry if need be. But Burnham/ Cooper/Kendall are clueless, aimless, pointless and a waste of space. They have not got it in them to even put their case to their own Party members. Do not even know what they themselves think. Quite dangerous to have anyone like that anywhere in any government.
No, Corbynomics as of old, starts off spending and spending and in the case of a nationalised trains comes off the rails when they run out of other peoples money to spend. About half-way through a Parliament. Any other Labour leader than Corbyn could do far worse damage to the economy through indecision and lack of common-or-garden wherewithal and would need expensive police security hourly to see they did not wander off and got safely home each day.
August 29, 2015
they (Keynesian) and proper economists”
Chris,
I agree with some of what you say. The other three candidates aren’t at all inspiring. They are bland and are offering a varying mixes of ‘more of the same’. The public are tired of all that and want their politicians to actually believe in something. Even if they don’t quite agree themselves they will respect others’ views if they consider them genuine. That respect may even lead to a vote.
I found your remark as quoted interesting. I’d just question why you think the kind of economic thinking that has created the eurozone and caused the economic mainstream to be quite oblivious to the approaching GFC to be “proper”?
When The Queen visited the LSE in 2008 she asked why no one had spotted the recession. This was a very good question indeed! It’s true that some economists and politicians did, but to have predicted the recession required at least some ‘contamination’ with dangerous Keynesian thought patterns. In the minds of conventional economists money isn’t that important. If you and I wish to trade our goods and our labour it doesn’t really matter if we use pounds, euros, bitcoins or whatever. Prices will always automatically and perfectly adjust to the trading medium of choice. So in their minds every worker will always accept a pay cut if demand for their labour is weak. Workers won’t work in a job for less wages than they can get somewhere else. Companies when faced with falling sales will always cut their prices and reduce the wages of their employees to maintain sales and profitability.
There is of course some truth in this, but it is not generally what we see happen in our economy. Companies do lose profitability. They don’t cut prices or wages but they do lay off their staff. Unemployment does increase under such circumstances in the real world.
So I’d question your choice of the word “proper”. Economics should be about the study of real economies, run by real people in the real world. We need to better understand why the crash of 2008 occurred and why the same thing is happening all over again in China right now. It’s important to know that regardless of where our politics lie on the overall spectrum.
August 29, 2015
Are you alone in drawing attention to the Network Rail mess?
Reply. Yes. The main media are not interested in how much money we lose or waste in the public sector
August 29, 2015
The main stream press no but the railway trade press have noted this
August 29, 2015
Yes railways are expensive to run but is it really waste to spend money on them and keep them safe? London and most cities wouldn’t be able to function without them. The alternative would be a ‘Los Angeles’ type solution which would require the construction of many new motorways and parking lots to enable workers to drive in to work.
It is natural for those on the right of the political spectrum to want to have as high a degree of private ownership and control of any industry but some realism is needed too. Where in the world does that happen with public transport? It certainly doesn’t happen in America.
So, before we start making yet more changes ( and we have to recognise that changes themselves are both disruptive and expensive) we need to take a look at what everyone else does and learn form their experience and mistakes. It’s a good deal cheaper than learning from our own mistakes.
There are getting on for a couple of hundred countries in the world with public transport systems to choose from. If we do have to change ours, yet again, let’s pick the most successful model and copy that.
Reply I would have thought it possible to agree that we want these national assets to be better used by more people in an efficient way, which would cut the costs to the taxpayer. I have not proposed privatisation in this piece. the main reason some parts of the railway loses so much money is too few passengers.Where the railway network is used a lot , as with commuting into London, the revenue and profit and loss is much better. The privatised railway was much better at boosting usage, so if you look at subsidy per passenger mile it fell under privatisation.
August 29, 2015
By the way, I have this minute received your book “Public Enterprise in Crisis: The Future of the Nationalised Industries” which you recommended I read as a Reply to my Comment on a previous article on here.
When I first tried to order it, I found it was out of print. But a “Discarded” library book was available. I could not believe, and continued to disbelieve the price until in actually arrived by post today.
It cost me £0.03p. Plus postage and packing of £2.80p. Total = £2.83p. And it is in excellent condition! I shall read it with interest.
August 30, 2015
It is my experience that most writers who could be broadly described as to the right of the political spectrum are almost invariably quote out of print unquote when asked for at a bookshop.
August 29, 2015
Now we do not want a railway system only the rich can afford also there is the Govs power house of the north promise depends a lot on improving the Railways. I think no developed country has a truly subsidy free passenger rail net work ( correct me if I am wrong) But it is that or over crowded roads, total gridlock. what cost to the economy that? Granted NR needs to get more efficient, privatising is option but the Railtrack debacle is a lesson to be learned. One thing NR and the train operation companies have not got under control is salary costs. Train drivers seem to be a very well paid species. perhaps cost can be brought under control by more curbs on transport unions power?
August 29, 2015
Under BR our railways were the least subsidised and most productive in Europe.
I certainly don’t recall the ticket fares being the issue that they are today.
Maggie told you not to do it.
August 29, 2015
I measure height in metres and centimetres, I measure weight in kilograms, my sat nav tells me I have kilometres to go before I rest but Robert Frost told me I have miles and miles to go before sleep . He talked of promises to keep and stopping to view the English woods on a snowy evening, but being English kept his promises.
August 29, 2015
No challenges :of course he was an American speaking in English about Britain.
It is the British who had to keep their promises , not the English ,yet the Scots and Welsh also spoke English for the greater viewing and their languages were subsumed in English Britain. Going off the rails a little here ( continuing a theme from yesterday), but good to see at least some are getting rises whilst the rest of us are frozen in the woods.
August 29, 2015
Labour effectively stole the shares in the privatised RailTrack claiming that it was bankrupt because it needed a subsidy. The subsidy now is far higher in real terms than RailTrack ever had and there is no proof the present set-up is any better. So much for nationalisation.