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Annex 1 Subsidy to rail and profits from roads.

 

Subsidy to Rail

  1. Table 1 provides National Rail’s annual operating subsidy back to 1954. The annual average for the period at 2004 prices is £2.5bn compared with £2.0 bn for the 10 years to 2003 and £3.7bn for the single year 2003.  The data for the years 1986-03 is from Table 2 of annex B of the DfT’s Bulletin of Public Transport Statistics 2004. Discussions with the DfT suggest that the data in that table may be regarded as operating subsidy. Since there is indeed operating subsidy it is unreasonable to expect that the loans or capital can ever be recouped from the fare box. Instead the amounts should be added to subsidy as though were current expenditure. There appear to be at least three approaches to estimating the values, namely:
  1. Table 1 of Annex B of the above cited bulletin provides “investment” amounting to close to £3 billion annually at 2004 prices for the period 1994 to 2003 or, if rolling stock is excluded, £2.5 billion.  Some of that may be funded from other than Government but, if in broad terms it is regarded as all subsidy, or funded from guaranteed borrowing, then the total of capital/borrowing plus the operating subsidy for the decade has the range £4.5bn to £5.5 bn annually for the decade.
  2. The Memorandum “Statutory contingent liabilities in support of Network Rail” provided by the DfT to the Government says that borrowing, guaranteed by the Government, will rise to £22 bn by 2009 with no guarantee that it will not continue to rise. Strangely, in view of the past 50 years, there is a belief that the guarantees will never be called in.  However we feel confident that nothing can be further from the truth.  Hence the £22 billion will inevitably turn out to be the taxpayer’s liability - equivalent to £2.2 bn annually for the decade. Adding operating subsidy of £2.5 bn provides £4.7 bn, which is broadly consistent with the (a) above.
  3. The written statement to Parliament by the Transport Secretary, Alistair Darling, with the title “Spending on Rail”, dated February 2005 provides total Government commitments (void of loan guarantees) of £4.55 bn in 2005/06, £5.81 bn in 2006/07, £4.59 bn in 2007/08 and 4.39 bn in 2008/09. Probably the annual loan of £2.2 billion from (2) above should be added to those numbers providing £6.8 bn in 2007/08.
  4. Against that background it is fair to say that subsidy to national rail may amount to between £4.5 bn and £6.5 bn annually for the decade ending 2009. £5 billion is equivalent to:
    • £200 per year for every household in the land (at a time when half of us use the train less than once a year).
    • £250,000 per year per track-mile.
    • 19 pence per passenger-mile – implying subsidy of £38 for a £100 mile return trip.

Profits from roads

  1. Table 7.15 of the TSGB 2004 editions provides Fuel Tax (excluding VAT) plus Vehicle Excise Duty in 2002/03 of £26.517 bn. HM Revenue & Customs provided a figure of £8.42 bn for VAT on private motoring.  Some £0.3 bn of fuel duty is reclaimed by the bus industry. Hence the total tax revenue from motoring is close to £35 bn. Deducting expenditure of £7 billion yields £28 bn. Possibly tax on motor insurance should be added but we have no figure for that.
  2. Table 7.3 of Transport Statistics Great Britain 2004 shows that 32% of vehicle-miles are on the motorway and Trunk Road Network. Hence if the tax take is proportional to vehicle-miles the Strategic Road Network earns the exchequer £9 billion annually.  The lane length for that network is between 40,000 km and 52,000 km (see facts sheet 1). Hence the contribution per lane-mile made to the exchequer has the range £275,600 to £360,000 annually. Alternatively dividing the net tax take of £28 bn by the network wide vehicle-miles (306 bn) yields a net payment to the Exchequer of 9 pence per vehicle-mile.

Comment

  1. The contrast between the contribution made to the Exchequer by road traffic and the drain on the Exchequer from the rail industry is telling.

 

Table 1 Subsidies to National Rail 

 

Year
RPI
Out turn
Prices
£M
Public
Service
Obligation
Grant
June
2004
Prices
 £M
Notes
1954
10.42
25
 
448
(a)  The figure of £25m for 1954/5 is from the British Transport Commission's accounts.
(b)  The figure from the same source for 1958/59 is £90m.  However interest charges were relegated to a "special account", depreciation was under estimated and some track changes were transferred to a maintenance expenditure account. The true figure, excluding the loss of the British Rail pension fund was £134m.
(c)  Figures for the years 1955, 1956 and 1957 have been obtained by interpolation.  The figure for 1959 has been obtained by extending the series for previous years.
(d)  Values for the years 1960 through to 1980 are from Robert Millar of the Institute of Economic Affairs writing in February 1982.  That data is quoted at 1979 prices.
(e)  Data for the years from 1980-1984 are from Transport Statistics Great Britain.
(f)   Data for 1985 to 2000 are from the DfT Transport Statistics Bulletin and include Freight Grants except that the Public Service Obligation Grant for the years 1979 to 1994.  The latter are from a letter from Dr Pritchard of the Department of Transport writing to Gabriel Roth on 5th January 1995.  Clearly the PSO should be added.
(g)  The 2004 prices are the outturn values multiplied by the ratio of the 2004 RPI (186.7) to the index for the year. That produced slightly different numbers from the GDP deflator.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
 
1955
11.00
52
 
883
1956
11.51
80
 
1298
1957
11.89
107
 
1680
1958
12.40
134
 
2018
1959
12.29
161
 
2446
1960-65
55.67
976
 
3273
1965-70
55.67
5959
 
19985
1970-75
55.67
2539
 
8515
1975-80
55.67
3093
485
12000
1980-81
67.35
634
575
3351
1981
74.98
933
749
4188
1982
81.85
1002
817
4149
1983
84.84
1003
854
4087
1984
89.20
1013
1066
4351
1985
95.00
995
820
3567
1986
98.00
852
680
2919
1987
101.9
615
761
2521
1988
106.9
448
534
1715
1989
115.2
796
499
2099
1990
126.1
1196
600
2659
1991
133.5
1585
900
3475
1992
138.5
2173
1150
4479
1993
140.7
1631
930
3398
1994
144.1
1700
 
2203
1995
149.1
435
 
545
1996
152.7
1071
 
1309
1997
157.5
1858
 
2202
1998
162.9
1615
 
1851
1999
165.4
1441
 
1627
2000
171.0
1250
 
1365
2001
173.0
1883
 
2032
2002
176.2
2637
 
2794
2003
181.3
3607
 
3714
Averages
1954-2003
2482.2
1994-2003
1964.22
 


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