Wednesday 24 November 2010

Time to stop pretending

In the latter days of the Soviet Union, it was said that "the workers pretend to work, and we pretend to pay them".  It was quite a neat summary of the state which the economy had reached.  But pretence about the true nature of things isn't limited to the old Soviet Union.

Closer to home, we have, since the days of the Thatcher government, pretended that the railways are operated as profit-making companies in the private sector.  So Arriva Trains Wales receives something like £165 million a year from the public purse towards the cost of running its services, and pays out around £10 million a year in dividends to its shareholders as a reward for their 'profitable' investment.  It's nonsense, of course; the truth is that the services are effectively making a loss of £155 million per year; and not only are we as taxpayers making good that loss, we are also bunging the shareholders a £10 million bonus as well.  And under the sort of 'not-for-profit' proposal announced by Plaid recently, that pretence would end, and that extra £10 million would potentially be available for further rail investment.

It's been announced this week that fares are to rise by an above-inflation amount in the New Year, and I heard a spokesman for ATOC explaining this in a radio interview yesterday.  One of the points that he made was that this is a result of long term government policy to shift the balance of paying for rail services from the taxpayer to the rail user.  That isn't a policy which has been introduced since May this year, nor is it a response to the recession.

The idea that a service should be paid for by the users of that service is a valid viewpoint - it's the principle generally applied to private sector services.  It isn't the principle applied in general to public sector services, however (although successive governments have tried to move things more in that direction).  More specifically, it isn't the principle used for the main competitor to rail, namely road transport.  Trying to run railways as though they are a profitable enterprise is something which most of the rest of the world has eschewed - and with good reason.  We should stop pretending, too.


Glyndo said...

Could you explain your opinion that road transport users aren’t paying for the use of the service? Surely the money collected by fuel duty and vehicle licences and a proportion of council tax, far exceeds the cost of the road system?

John Dixon said...


They're not paying for it on a usage basis. If you count contributions made through a general tax like council tax, then that's paid whether people use the roads or not. It could be argued that fuel tax is a pay-by-usage tax, since the more miles are travelled, the more tax is paid. Vehicle tax again is not a pay-per-usage tax, although it is a tax paid exclusively by road users.

I'm not actually suggesting that road users should pay for the roads on a usage basis (although some would argue that); merely that paying for roads out of general taxation whilst trying to put railways more and more on a cost-per-usage basis is not treating the two on a similar basis. And given the environmental benefits of shifting traffic from road to rail, it's rail we ought to be subsidising more than road.