On too many occasions knee-jerk, prejudiced interventions from No 11 have had a negative and long lasting impact on transport

 

 
Follow the money. That is the guiding principle followed by the FBI, and doubtless other such agencies, when they try to unravel complex crime. Follow those who control the money might be a useful approach when working out this government’s transport policies.

For it would be naive to assume transport policy is always set by the Department for Transport and any lobbying outfit that does assume this is simply not worth whatever they are being paid.

Of course, it is normal in government, and sensible, for there to be a “write-round” for major decisions where colleagues from other departments are able to have an input. That is a structured process and helps limit silo mentality. That, however, is very different from what sometimes occurs.

I think back to one episode when I was transport minister. The department had applied a rigorous analysis to potential road schemes and scored them according to a formula that Philip Hammond, then transport secretary, and I had carefully worked out. The formula took account of a wide range of factors, including the impact on the natural environment and on climate change. Naturally, some road schemes performed poorly, with the Bexhill-Hastings link road bottom of the list.

A sound approach, until one day, about three weeks ahead of a budget, George Osborne’s office rang up and asked for a list of road schemes that were under consideration. He then announced the whole lot in the budget, irrespective of merit. All the careful work undertaken by ministers and officials at the DfT simply went out of the window, sacrificed for a quick headline for the chancellor.
Incidentally, that Hastings-Bexhill link road ballooned in price and ended up costing about three times its initial estimate, at vast cost to East Sussex taxpayers, including me.

It is generally bad news when either the Treasury or No 10 takes too great an interest in a specific transport matter

It is generally bad news when either the Treasury or No 10 takes too great an interest in a specific transport matter. The prime minister and chancellor in any administration, and especially their junior ministers and special advisers, tend to regard themselves as more important than those in departments like the DfT, so feel able to impose their view. They also tend to be more susceptible to pre-formed prejudices lacking a proper, or indeed any, evidence base.

In my experience, transport decisions are almost invariably better when they are taken by the Department for Transport rather than in No 10 or No 11. There is a good civil service team in the DfT and my engagement with ministers recently suggests there continues to be a competent ministerial team too. Charlotte Vere is particularly impressive. But what use is that if their writ does not run?

Take the Williams review of the railways. The shape of this has been clear for over a year: an end to franchising, and the creation of a strategic arms’ length body to oversee and co-ordinate matters. But wait. Up pops a story in The Daily Telegraph, the house publication for the Conservatives, suggesting the idea of a “fat controller” overarching body had been blocked by Nos 10 and 11 who presumably have just got round to reading the draft.

The Treasury has a legitimate, indeed important role in making sure public money is well spent, and it is right for it to query whether Network Rail is as efficient as it should be. There are certainly questions to be answered about the cost rises and slowed progress of electrification schemes. And the Treasury might also legitimately ask whether the government’s welcome rail reopening policy will in fact deliver any reopenings at all when it is projected to take up to five years even to reopen for passenger traffic lines where the track is already laid and in use for freight.

So the Treasury should certainly bear down hard on inefficiency, but all too often it then crosses the line into the territory of policy formation where it does not truly understand the science.

Take ticketing reform. Everyone – the train companies, the DfT, consumer groups and the public at large – accept that the present structure is out of step with the present travel patterns.

The weekly season ticket was designed for commuters who travel to work Monday-Friday in a narrow window in the morning peak. That was barely the case before Covid-19 struck, and it most certainly is not any more and will not be in the future. Those days have gone. A mixture of home and office working is here to stay.

For off-peak travel, there is widespread support for reforming the cheap day return to introduce single leg pricing.

So, if everyone, including the DfT, is in favour of these changes, why have they not happened? The answer is that notwithstanding the modelling that has been done by the industry and the DfT, the Treasury believes that these changes will lead to less money coming into the farebox. They do not want three-day season tickets which somewhat simplistically they see as a possible reduction in revenue of 40%. Instead, they want to force people back into the five-day variety. But that simply will not work. It is more likely that that policy will force people into a zero-day season ticket with the private car the beneficiary. Actually, my view is that the move to more flexible season tickets and single leg pricing is a great way to attract people back onto the railway and could even increase the farebox take.

Why does the Treasury think it understands passenger behaviour better than the industry, and better than the department charged with looking after transport policy?

Why does the Treasury think it understands passenger behaviour better than the industry, and better than the department charged with looking after transport policy?

Still, at least there is agreement across government on the need for reform even if the exact shape of that reform is not agreed. A more serious problem occurs when the Treasury behaves in a way that produces results in the opposite direction to those striven for in the DfT or other departments.

Take fuel duty. This has been frozen since 2011, a freeze that has lost the Treasury an income of more than £50bn. More to the point, it has made the car relatively cheaper than the bus or train. Traffic levels are estimated to have risen 5% as a result, while bus journeys pre-Covid dropped by 250 million.

This trend flies in the face of the government’s stated aims of decarbonising transport and tackling air pollution. Readers of Passenger Transport will not need reminding that a full bus can take 75 cars off the road.

I do not doubt that successive Treasury ministers have been aware that a freeze would have such consequences but in effect they have decided that the short-term political gain, and the neutering of the so-called “fair fuel” lobby, is more important that the policies being pursued by the DfT or Defra.

Then there were the changes to VED brought in by George Osborne just after the 2015 election, which pulled the rug from under less polluting cars and are at least partly responsible for the fact that hulking Chelsea tractors, or SUVs as manufacturers prefer to call them, now account for around 40% of new car sales. Yet SUVs were the second largest contributor to the increase in global carbon emissions from 2010 to 2018, ahead of heavy industry and aviation. Any sensible Treasury policy would use economic instruments to push down sales. Osborne did the opposite.
Then there is the longstanding Treasury objective of reducing public subsidy for bus and train, and transferring as much of the cost as possible onto the passenger. On the face of it, this might seem reasonable but the present plight of Transport for London shows the dangers. TfL has been getting 72% of its income from fares, a percentage double or treble that in other European capitals. When the passengers dry up, so does the revenue, leaving TfL very exposed. I am no cheerleader for Sadiq Khan but the state of TfL’s finances is not his fault, and it is dishonest of the prime minister to allege it is, no doubt because next year’s mayoral elections are not far away. As for the Tory mayoral candidate Shaun Bailey, his greatest intervention so far has been to suggest that the names of tube stations be put up for sale to the highest bidder. Starbucks St Paul’s? Costa Clapham North? Pret A Manger Circus? No thank you.

The Treasury is in danger of knowing the price of everything and the value of nothing

The Treasury is in danger of knowing the price of everything and the value of nothing. Have they ever considered what the overall impact to the economy would be from subsiding fares to a substantially greater degree? I am not an economist but it would clearly encourage modal shift to public transport, which in turn would mean less congestion for motorists, less air pollution, and more vibrant town centres. There is a reason bus and train fares are heavily subsidised in other countries, and it is not inefficiency.

Actually, I suspect Treasury officials have indeed considered such matters but find trying to persuade ministers a waste of time. I have always found the officials rather more switched on than their ministers, particularly when it comes to the medium and longer term.

Nowhere is this truer than when it comes to inter-urban road pricing, which many Treasury officials have secretly long supported. They know that the income stream from fuel duty is going to dry up as more and more electric cars take to the roads, which will leave a multi-billion pound black hole. They also know that such a scheme, if properly constructed, can help deliver the government’s climate change and air pollution objectives. Yet nothing happens.

It would be helpful if Treasury ministers would go further than just considering the bottom line, and assess for each financial change they want to make what the knock-on effects would be for other government policies. To date, there is little evidence that such considerations weigh as heavily with them as they really need to.

 
About the author:

Norman Baker served as transport minister from May 2010 until October 2013. He was Lib Dem MP for Lewes between 1997 and 2015.

 
This article appears inside the latest issue of Passenger Transport.

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