Gravy-Trains
The costly legacy of Britain's 200-year-old railways
By David Starkie, author of Airport Enterprises: an economic analysis.
Railways as we know them are 200 years old this year. An invention in which Britain takes much pride and about which, no doubt, the nation will reminisce as the year progresses. Yet, one feature that we can be certain of, the technology is no longer cheap, if indeed it ever was such; today Britain’s railway industry is costing both passenger and taxpayer a great deal, although exactly how much is sometimes difficult to pin down from confusing, if not sometimes opaque, financial accounts spanning a structurally separated industry.
According to the ORR, the industry regulator, in 2023/24 taxpayer funding for the operational railway was £12.5 billion, 58% higher than the last full year before Covid. Capital expenditure aiming to enhance the existing network, together with spending on entirely new projects, not always well selected as HS2 indicates, totalled £9.6 billion. This is topped off with interest on a public debt of £60 billion accumulated by Network Rail since 2002 when railway infrastructure was effectively re-nationalised. In total, last year the railways billed the taxpayer £22.3 billion, equivalent to half the UK defence budget. Considering that passengers (many if not most, also tax payers) chip in an additional £10.4 billion through the fare box, it will be apparent that operating trains and attempting to improve 10,000 route miles, is a very expensive proposition.
Why are the railways so expensive? In part it is because of a legacy technology: steel rail rafted and bedded on large quantities of stone aggregate lie at its heart just as was the case nearly two centuries ago. Several hundred tonnes of rolling stock (staffed by well-paid, if not overpaid, crew) moving rapidly along rails, shake and distort the track’s underpinnings. With a safety regime of zero tolerance, constant line checking leads to constant maintenance. Costly in itself but made more so because, to minimise service disruption, most remedial work is undertaken at weekends or, as neighbouring insomniacs know well, late at night, using labour adequately compensated for the unsocial working hours involved. The travelling public do not as a rule see this nocturnal activity and therefore do not appreciate its extent, nor expense (over £8 billion p.a.).
Many argue that this is the price we must pay for an environmentally friendly form of transport. The Climate Change Committee’s figures show that emissions per passenger mile are very much lower for rail than for the car (but only a little better than for the bus). This however is an exaggerated difference. The focus is pollution coming from powering the (sometimes electric) train, compared with propelling an existing car stock that uses mostly petrol or diesel. It neglects emissions associated with engineering work involved keeping the track infrastructure safe, and that for rail involves using a great deal of material energy intensive in its manufacture (think steel rail, concrete sleeper and granite chippings).
Nevertheless, in the environmental stakes, the train wins hands down when it comes to well-used services, especially in crowded conditions of a daily commute. The environmental case crumbles however for the off-peak and rural railway. Here an energy hungry heavy vehicle conveys, at best, a smattering of customers. Add in the carbon (and financial) cost of maintaining track, signalling and stations (astonishingly over a hundred of which have on average 6 or fewer daily passengers) and the environmental case becomes at best rather weak, and increasingly so as the car stock becomes more electrically powered.
The extravagant call on public finances by the railway contrasts strongly with that Cinderella of the transport world, the bus. Despite its put-down image, the bus industry shifts annually nearly as many (generally poorer) passengers as does rail and for a fraction (about one-fifth) of rail’s operational subsidy. Its capital subsidy (mostly for investment in ‘green buses’) by comparison is also negligible
Despite the government continuously exhorting citizens to use public transport, and the increasing difficulty of using the car in cities, ridership generally is stagnating. Prior to Covid, train travel, measured by passenger journeys, had changed little over the preceding six years. Ridership collapsed during the pandemic, since when numbers have been slow to recover. Rail passenger journeys in 2023-24 remain well below the peaked-out pre-pandemic levels. What remains is increasingly leisure related, with commuting less common, a trend that also pre-dates Covid. Both stagnating passenger numbers over the last decade and changing journey purpose are fundamental shifts that, surprisingly, has garnered little general comment.
In these circumstances the inevitable question: can the taxpayer continue to afford a railway of current scale and size? Should the much cheaper, more progressive and similarly environmentally friendly, bus play a relatively more important role in providing public transport?
The government might economise by seriously examining its current proclivity to open more stations and lines. Its push to decarbonise much of the car stock by the early 2030s weakens the railway’s environmental advantage. For similar reasons, a review of lightly used services is called for. Following World War II and rail’s nationalisation in 1948, the British Transport Commission lost little time in setting-up a committee tasked with identifying lightly used lines suitable for closure. During the following 14 years, and before Beeching, 3,300 miles of route was chopped from the publicly owned and run railway. The Government’s decision to renationalise might at least present a similar opportunity for review.
Fallen ridership suggests also there is scope for reducing service frequencies. Frequencies escalated after rail privatisation, to some extent due to a lack of a sensible charging structure for use of congested tracks. A review and audit of services will no doubt justify the vast bulk of those existing, which then throws the spotlight on operational efficiencies and particularly on Network Rail’s maintenance and renewal policies including old Spanish practices engaged in by its unionised workforce.
Finally, HS2. At the end of February, the House of Commons Public Accounts Committee issued the latest damning report on what it referred to as a delivery “mess”. It went on: “We are sceptical of government’s ability to successfully deliver even a curtailed scheme, one which we already know will…bring very poor value for money”. Now might be the time to freeze all further contracts until a fundamental review is conducted, a review that is able to consider supplementary or alternative uses for the right-of-way (for gridding green electricity or trunking the supply of water for example).
In times of nostalgia especially, and for such a politically driven industry what is proposed here will no doubt prove a challenge to implement, but it is also a time when national economic circumstance and a search for economies in public spending suggest that even the totemic Great British Railways should make some budgetary sacrifice.
David Starkie is on the Executive Board of the Journal of Transport Economics and Policy. He writes here in a private capacity. His most recent book is Airport Enterprises: an economic analysis.
Nice piece David. I am positive that the economy can cope with expensive costs such as a fast railway such as HS2. We can’t keep making cuts, we have to supply an economic model that fully copes with all our populations needs. At this time we see playing out the consequences of a monetary system that makes the rich richer at the cost of the poorer being poorer and saddled with the debt that comes along with that system! So the view that we must ‘cut our cloth’ all the time is not going to work. Eventually we will all see the system is broken! The main problem with our economic model is that the pool of people who generate tax revenue haven’t got enough money in its pot to rotate on a daily basis. Vast sums of money are held outside of that working pot unused, unspent and untaxed as a consequence by the minority few. It’s the majority of tax payers who spend all their money each day/month that generate tax revenue. Those who hold it unspent and unused and untaxed are the few who don’t have to spend all their money as they have more than is needed. It’s that simple! The few rich hold the most money. Whereas the majority poor don’t have enough swishing around for them to pay the tax revenue we all need rich and poor! Included in that is Railways. The key is in the tax system which many get its understanding wrong. Most don’t realise for instance, that tax is only triggered by money moving by spending like VAT or having to change hands like Council tax. They can’t see that it’s not employees that pay income tax and NI it’s employers who have to pay it! It may be calculated by income but it’s paid by employers! That’s how badly we understand tax revenue! It’s akin to a Ponzi scheme as the statement is misleading! Tax deducted like that, not from the earner but the payer means the earner never got it to spend it! So it’s not an earnings tax it’s a tax on business and like a highwayman stealing your money before you have had time to spend it! Spending money makes it enjoyable. A key to a happy society. The second common error is not seeing how tax is triggered? Just as income tax (which should be called employment tax) and NI are triggered by the spending of the employer on the employee all taxes are also triggered by SPENDING and or money moving by day spending to incur Vat or by having to change hands like inheritance tax. Alcohol, tobacco and fuel duty for example, are taken when we all spend on them! But a statement showing that tax take is not clear, it’s hidden! So it feels we aren’t paying it but, we are! At the fuel pump we get a bar receipt but that doesn't show the amount of duty taken in tax! Just like a Ponzi scheme statement it’s all hidden! The need to know means we can see when tax is paid and how and by how much! It’s smoke and mirrors! Used by the government only to hide how much we all pay! We know that because so often those who spout ‘we the taxpayer’ get it spectacularly wrong! The taxpayer is not the worker it’s the employer! We the taxpayer are those who spend ALL their money each month! The taxpayers who pay less are all those who don’t spend all their money each month…. The rich! Because money unspent and not moved pay no tax on that unspent unused money in the same time frame! Holding money and let’s be clear the vast majority of money, is idle outside the tax system because it is not spent or not changing hands so that vast amount remains untaxed! And it’s that unspent, untaxed money that makes the tax system devoid of it swishing around to trigger a tax revenue! It’s simple!!!!! Make all money move snd you will have a tsunami of tax revenue. Spend nothing and you have a system that is dead or dying. We are dying in a monetary way now. That’s why you question the gist of railways David!… if we have a system that makes money rotate every day we will have a system that works. We need a spending policy model. Now that said, let’s get into railways. You are right it’s outdated and overdue for a overhaul! We have tracks that go into the heart of all towns and cities. My view is, especially as we are such a small island that, we should concrete all that trackway and put all lorry’s and buses and vans on them and leave all roads to the cars! We now have hydrogen power and electric vehicles. We now have radar assisted cruise control that brakes for you! Snd we now see driverless cars coming. Use the technology to make it work fast! It’ll be cheaper and better and let’s face it modern! In a similar vein use computer digital banking to put our economy right. Put a ‘spend by date’ on all money digitally. Use it or lose it to the government exchequer. Make ALL money move all of the time to stoke up the ability to grow the tax revenue of our nation! Be rich off stuff not money itself. No loopholes, no interference just autonomous and perpetual spending! Have one tax only, VAT based on all spending. Streamline government snd governance. What do you say to that David?