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Topic 28. French Rail 1

TALES FROM THE SNCF                                                                                                                                     Ref SNCF Stories English
Professer Rémy Prud'homme 17.11.2000

University Paris XII


This translation is by Transport Watch. It has not been approved by the original author.

For the French original click here.

We are told that the SNCF has “come out of the red” and "returned to profitability." What a fairy tale! It is like the story of Sleeping Beauty, with both Mr. Gallois and Mr. Gayssot in the role of Prince Charming. The figures, since it the figures that are in question, are approved by the auditors, scrutinized by the Court of Auditors, reviewed by the Inspectorate of Finance, backed by the Chamber of Deputies and the Senate, analyzed by the Commissariat Général du Plan, clarified by the Commission des Comptes de Transport de la Nation (equivalent to the National Audit Office), reviewed by the National Transport Committee, supervised by the Conseil Général des Ponts et Chaussées (Office of roads and bridges) and are repeated by all media.

However, if we want the truth we will find that subsidy to the rail amounts to about 60 billion francs annually. In 1999 the revenue paid to SNCF for freight and domestic parcel businesses plus the fares paid by passengers amounted to just under 54 billion. Rail-wages, supplies and interest on loans paid by the SNCF or by Réseau Ferré de France for the same year amounted to 112 billion. The salaries alone are almost as high as freight plus passenger revenue. The difference between the revenue and expenditure, amounting to 58 billion, was covered by contributions from the Government, from the regions and by increasing the debt. As the debt will never be repaid, we can say that the whole of the 58 billion has been taken from the taxpayer.

These figures do not include 19 billion paid by the Government to finance the SNCF pension scheme. That arises because the scheme has a special status in law. In addition to the 58 billion the SNCF enjoys various tax exemptions (e.g. reduced VAT rates for the transport of passengers, reduced fuel tax for diesel, etc....).  Those amount to 7 to 8 billion. Hence it could be argued that the subsidy actually amounts to 84 billion.  We do not do claim that here, preferring our conservative estimate of 58 billion.  After all possibly we could regard the other subsidies as a historic necessity or as an expression of national unity.

That 58 billion is substantial. It represents almost 1% of the nation’s GDP. It is more important than the budget of all the French universities. The famous scandal of Crédit Lyonnais (CL) did not cost the taxpayer more than 100 billion francs. In contrast the SNCF amounts to a CL every two years.

How has the 58 billion been hidden? There are many schemes. They include classing as income or placing off balance sheet such items "contribution to the costs of infrastructure", "contribution to the operation of regional services," "compensation", "capital”. “capital grants for equipment” and "other aids for combined transport”. Most of these arrangements were created by the Réseau Ferré de France (RFF), which inherited the network (and a large part of the debt), so as to enable the SNCF to fund maintenance and investment in infrastructure.

RFF may eventually reduce the cost of rail by judicious investment, but, for the time being, there has been no increase in the freight and passenger revenue nor has there been a reduction in costs.  None of the arrangements have actually reduced the subsidy. Instead all that has been achieved is to make that subsidy less visible.

To justify subsidy is one thing, to deny it is another. It would be reasonable to attempt to show that public spending on rail is desirable, in the same way as is public spending on education or justice, citing the benefits that the community derives in terms of safety, emissions, or national development. It would be a difficult exercise, particularly because railway users - the beneficiaries of these public expenditures - are mainly the rich so that the expenditures are regressive. Nevertheless the exercise would be legitimate.

What is not legitimate is to conceal the facts. As Tartuffe said in Molliere: "Oh, hide this hole from me lest I see it." It seems that for some people the main thing is for the subsidy to be invisible and inaudible - because “it is no sin to sin in silence." The actions of the SNCF and the RFF are perhaps understandable.  After all a deficit is not good for morale. On the other hand Institutions that have such a high opinion of themselves are perhaps unable to view the matter in its true light.

To suggest that the income from freight and passenger services balance expenditure, when it does not, is to distort the public debate on the need for rail. Would doubling up rail, seriously advocated by some, double the budgetary contributions? It was long thought not, because the cost to the railway would be less than the average cost. That is no longer certain. The very modest increase in activity in recent years has revealed all sorts of bottlenecks and the need to hire and invest whilst doing nothing to reduce the magnitude of subsidies.

The truth is, if more is to be spent on rail then there must be higher taxes, or, if you prefer, less spending on education. That should be clarified so that our nation may make a decision based on the facts. Fairy stories may be entertaining, but as we say “good accounts make good friends”.


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