Fact Sheet 4 - Subsidy to Rail and profits for roads
Updated September 2005
Subsidy to Rail
The previous version of this facts sheet
(numbered 13)
assessed the subsidy to rail by reference to (a) the then capital programme, requiring in excess of £100 bn, and (b) Government and PTE Grant. Since national rail has required operating subsidy every year for over 50 years we regarded the £100 bn as effectively subsidy. Repaying that sum over 30 years coupled with the Grant itself, provided an annual subsidy of nearly £10 billion per year. Against that background we cited the range £5 billion to £10 billion. Today we take a different approach.
We have available the annual operating subsidy back to 1954. (see link below) The 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 from 1986 is from Table 2 of annex B of the DfT's Bulletin of Public Transport Statistics 2004. (see link below). Discussions with Jacob Wilcock of the DfT Suggest that the data in that table may be regarded as operating subsidy. Since there is indeed an operating subsidy it is unreasonable to expect that loans or capital expenditure can ever be repaid or recouped from the fare box. Instead the capital and loans should be added to subsidy as though both were current expenditure. There appear to be at least two approaches to estimating the values, namely:
- 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 and the operating subsidy provides the range £4.5bn to £5.0 bn annually for the decade.
- 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. (see link below). 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, which is broadly consistent with (1) above.
Separately from that the memorandum with the title Spending on Rail, February 2005, the written statement to Parliament by the Transport Secretary, Alistair Darling, 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 (see link below).
The average for the 4 years is £4.83 billion. Probably £2.2 billion for loans should be added providing £7 billion annually for the period.
Against that background it is fair to say that subsidy to national rail is running at 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)
- £156,000 per year per track-km (£250,000 track-mile).
- 12 pence per passenger-km (19 per passenger mile) - implying subsidy of £42 for the round trip from London to Birmingham
at a time when the distance travelled by surface rail by those in highest income quintile is more than double the distance travelled by those in the next highest quintile and over 4 times that for either of the two lowest quintiles, reference the National Travel Survey (see link below).
(In comparison Appendix 5 of the SRA's Annual Report for 2005 provides operating subsidies of 5.28 pence per passenger-mile in 2002/3, 8 pence in 2003/4 and 3.8 pence in 2004/5. Multiplying the value of 8 pence for 2003/04 by passenger-miles provides a total of £2 billion for that year. That compares with the £3.6 bn available from Table 2 of Annex B of the Bulletin of Transport Statistics 2004 edition, to which an allowanced for capital expenditure should be added. The reason for the discrepancy is that the SRA value represents payments direct to the Train Operating Companies - ignoring support and grant to Network Rail and (of course) ignoring all capital expenditure and loans guaranteed by the Government).
Profits from roads
Table 7.15 of the TSGB 2004 editions provides Fuel Tax (excluding VAT) plus Vehicle Excise Duty in 2002/03 of £26.517 bn. Dawn Wolley of 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. The total of Hence the total tax revenue from motoring is close to £35 bn. Deducting expenditure of circa £7 billion yields £28 bn. Possibly tax on motor insurance should be added but we have no figure for that.
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).
On that basis the annual contribution made to the exchequer has the range £172,000 to £224,000 per lane-km, (£275,600 to £360,000 per lane-mile).
Alternatively dividing the net tax take of £28 bn by the network-wide distance driven, 490-bn vehicle-km (306-bn miles), yields a net payment to the Exchequer of 5.7 pence per vehicle-km (9.2 pence per mile).
Comment
The contrast between the contribution made to the Exchequer by road traffic and the drain on the Exchequer from the rail industry is telling. Links
- Transport-Watch subsidy to Rail from1954
- "Statutory contingent liabilities in support of Network Rail"
- "Spending on Rail"
- Table 5.5 Travel by household income quintile and main mode: 2004. (Source: National Travel survey with London Underground and Surface Rail disaggregated by special request to the DfT).
- Bulletin of Public Transport Statistics 2004. (Note at the time of writing the 2005 edition is available on the web but will be void of financial data until late November 2005).
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