Transport subsidies unsustainable, warns IEA

A new report from the Institute for Economic Affairs warns that “the scale of the total costs and government subsidy of the railways is now clearly out of any reasonable alignment with ridership and passenger income”.

Arguing that existing transport subsidies are no longer sustainable, the IEA says that the case for government spending on projects such as HS2 “has weakened further”.

The paper also suggests that increasing fares might even reduce revenue, due to the relatively high elasticity of demand for discretionary trips rather than the commuting that previously made up such a large part of ticket sales.

Writing in Planes, Trains and Automobiles: the future of transport after COVID-19, David E Tyrrall says: “The implicit message of Great British Railways is that the dominant strategy for the government with respect to the railways is bound to be cost containment.”

However, the IEA says that while GBR “will begin to reunite the management of track and train operations within one organisation”, it suggests that “a rather larger number of organisational parts will remain than are optimal.”

Contending that the number of train operators could be reduced, the paper argues: “Eventually, a fully reintegrated organisation can be achieved but on a lower cost base than pre-Coronavirus, and effective re-privatisation would then become possible.”