So just what is the subsidy to rail then?

As we all know, there are those who insist that a tax break, to not have to pay a particular tax, is a subsidy.

And even busy routes will be hit next year when the tax rebate on fuel for buses is cut by 20%. This simplification makes economic logic, but bus operators point out that trains don\’t have to pay tax on diesel at all. Bertie the Bus could never match Thomas the Tank Engine for glamour.

So just how much is this subsidy to the railways worth? And if we account for it as a subsidy, can railways (outside of the commuter lines into London) ever actually make economic sense?

Yes, even if it\’s electric engines: for as we all also know major users of electricity now have to pay yet even more for the emissions created by the electricity they use.

So, railways not paying that is a subsidy as well, by this logic, no?

17 thoughts on “So just what is the subsidy to rail then?”

  1. This is just the ‘Guardian’ trying to calculate who they can afford to throw over the side of the sleigh as the wolves approach, making sure their treasured diversity and multi-culti staff are retained.

    Pensioners probably don’t read the ‘Guardian’, and are all closet racists anyway, in the mind of ‘Guardian’ staffers.

  2. I’m quite happy to call a tax break on fuel for railways a subsidy. One I’m quite happy to continue to support.

    Pigouvian wossname, roads are congested, charging for road use outside urban areas an intrusive PITA, so subsidise other competing forms of transport so they can try to actually compete.

  3. Isn’t the reason the railways don’t pay fuel duty because trains don’t generally drive on the road?

    There are two levels of fuel duty; a very high one for road use, and a very low one for non-road use.

    Non-road use includes fuel for generators, but also things like tractors used on fields or trucks used purely within a factory. And, of course, choo-choos.

  4. Hmm, now this is very interesting. Found whilst looking for more information on this:

    “there is a compatibility problem
    between biodiesel and dyed fuel, with the biodiesel removing the dye marker.
    Thus, HMRC cannot readily identify the fuel in use.”

    Don’t know if it’s accurate, or still true, but the source seems reliable:
    http://www.rssb.co.uk/sitecollectiondocuments/pdf/reports/research/T697_rpt_final.pdf

    ‘Red diesel’ is the low-tax version (see above), for off-road use only, and is marked with a dye so that the police or HMRC can check that you aren’t using it on the road.

    Does this mean that if some scallywag bought cheap red diesel and mixed it with some cheap biodiesel, and used it on the road (which of course would be illegal and naughty), HMRC wouldn’t be able to detect it?

    Quite shocking. Just think how much tax people could evade that way.

  5. Pigouvian wossname, roads are congested, charging for road use outside urban areas an intrusive PITA, so subsidise other competing forms of transport so they can try to actually compete.

    It strikes me that this is self-regulating. If the roads are too congested then it slows the roads down, people will consider rail travel as a better option.

    Rail already does this on profitable services. People don’t want to travel into central Reading from Newbury (because it’s a PITA) so they pay for a train instead. If you’re travelling from Newbury to Hungerford then you aren’t going to encounter much traffic, so people drive.

  6. Indeed congestion (and lack of parking) are the only reasons for choosing trains (not that the railways are un-congested – sat outside London Bridge in the morning rush-hour recently?)

    Season tickets on the SE railways now cost about 20p/mile, and the very cheapest, off-peak tickets about 15p/mile. Even so, the taxpayer subsidises these railways by about 4p/mile (the subsidy is a LOT more for country lines).

    If you buy a used, small diesel car and look after it well, it will easily deliver transport at 25p/mile. But of that cost, about 10p/mile is tax.

    So, net-net, the actual cost of going by train is about 20p/mile, and by car 15p/mile. But the real killer is that the train cost is per seat (ha! standing space, I mean), while the car has four or five seats…

    The difference is so staggering that I don’t understand it at all. How can it be so expensive to operate trains?

  7. Matthew

    Not the only reason – you have to drive a car.

    The problem is that once you own a car, it makes little sense in using the alternative option unless you’re going to the centre of somewhere large (like London, Birmingham, Bristol or Reading). And if you don’t live in a large urban centre with good rail links then you’ll probably need a car (try going from Swindon to Northampton by public transport).

  8. Matthew – and you have to pay the driver of the train.

    However that cost is shared between so many people that the amount per traveller usually should be small.

  9. agn :
    “How can it be so expensive to operate trains ?” Where to start ? It’s a long story this , the process by which since privatisation the subsidy to rail has increased to a point where it now stands as at least twice that to British Rail in its final years. I can probably distill it down to one word, fragmentation. It didn’t have to be like this but somehow politicians, civil servants and rent seeking private operators, many of the latter being bus companies, have managed to come up with the worst possible system of faux private management and ministry micro-managing imaginable, quite an achievement really.

  10. AGN: you’ve artificially removed infrastructure cost from the road example, and added it into the rail example. If there weren’t any roads, or if they were never maintained, then going by car would be a rather more stressful and expensive experience.

    Thornavis: the comparison with the very end of BR is unfair, as the government of the day deliberately slashed BR’s subsidy in the last couple of years (basically so they could ensure that privatisation => improved services, awesome new trains just by turning the money tap back on).

  11. john b :
    An oversimplification to put it mildly. Whatever the reason for the lower subsidy in the final years the fact is that BR were managing with it, there had been a considerable improvement in BR’s financial position throughout the eighties due to investment, some good management and a growing economy. You might think that the Tories would have been rather proud of this ( the Thatcher years saw the largest single electrification project, the East Coast Main Line, in British railway history ). Instead John Major decided to throw it all away on the most misconceived of privatisation plans. If the post ’94 structure were any good we would have seen drastic improvements in efficiency coupled with a fall in subsidy as the economy boomed, we’ve seen neither.
    What are these “awsome new trains” of which you speak ? The Voyager or Meridian perhaps ? Hollow laughter off.

  12. I’m not defending the post-94 structure – just pointing out that there were *no new train orders at all* in the two years before privatisation (which, separately but relevantly, destroyed the UK-owned train industry).

    As far as Awesome New Trains go, that was partly sarcastic (they were just new trains, the point about the ban on new stock orders in the final year of BR meant that the private sector got to announce them), but actually, many of them were pretty decent.

    The Electrostar family and the Desiro family are bloody good trains – interestingly, they’re the two families of trains that properly established themselves in the UK, because they were good – one was built by Bombardier-ex-BREL in Derby; the other was built by Siemens in Germany.

    The 22x family get a bad press, but I reckon the Meridians are pretty good trains. The Voyagers have a toilet problem and there weren’t enough of them (or, more accurately, as with the Pendolinos, there were enough of them to run at the speed and hence higher frequency Railtrack promised, but not at the speed and hence lower frequency Railtrack delivered).

  13. john b:
    Can’t really agree with you re the Electrostars, at least not those south of the Thames which are uncomfortable and prone to shy away from ice and snow. As for the ban on new stock in the early nineties that’s being replicated now, how many days is it since the last new order ? Over 650 I believe.
    I don’t know if you read Modern Railways but Ian Walmsley has an excellent article this month on the way passenger comfort has been disregarded in train building in the last twenty years or so.

  14. I am puzzled by the railway’s need for a subsidy. When the first railways were built in the eighteen hundreds those who invested the money to lay the track, buy the rolling stock, build the stations, and so forth, received no subsidy. They were investors, gamblers if you like. In most cases their gambles paid off and they made money, some became extremely rich, J. Pierpoint Morgan for example, or Hudson, the railway King. So when and why did it become necessary to subsidise them?
    When I travel the ‘new’ Overground route which runs between east and west London I observe very many gangs of railwaymen, all in high visibility clothing, but, and remember I ride this railway often, I rarely see as many as a half of them actually working. Granted, though it’s stretch, that the old Silverlink that used to run these rails needed some new stock, I doubt there was ever any question that all the stations, all their lights, all their signs, much of the track needed to be renewed. It’s great to have new and longer rolling stock, but what bothers me is the huge amount of money being spent. None of us, as individuals, could afford to keep so many gangs of men doing not–very–much for two months or more. Is that how London’s ratepayers’ subsidy is being spent? I recall with alarm that although the track at Potters Bar had been ‘walked’ those who were paid to inspect it missed some pretty obvious faults. Is the large subsidy the consequence of breaking up the railroad into numerous ill–managed companies?

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