The nationalisation of the National Express route from Kings Cross to Edinburgh has rightly been getting a lot of attention. The taxpayer has just lost out to the tune of over £1 billion as a big company uses dodgy accounting practices to avoid paying the price for making a far too optimistic bid for the route. Hopefully Iain Murray, who has some experience in this area, will have the time to give us his thoughts on how similar problems might be avoided in the future.
This week's other transport story is arguably going to be far more important to far more people though. The news that £29 billion is going to be cut from the transport budget over a 10-year period has huge implications, arguably even more serious for the Conservatives than for the Government. I've opposed the policy of stopping the growth of Heathrow for some time on the grounds that international travel shouldn't be put beyond the reach of ordinary people and is economically vital. The proposed high speed line would be an inadequate replacement and phenomenally expensive.
That policy now needs to be reassessed, even if you didn't find my earlier arguments persuasive, as it is simply unaffordable.
City AM describes the potential consequences of a £29 billion cut over ten years:
"The £16bn Crossrail scheme linking Heathrow to Canary Wharf and Essex could be delayed; a £6bn motorway improvement scheme could be cut; a mooted high-speed rail route may be delayed; and train fares could rise substantially, with the current one per cent plus inflation cap on fares lifted."
The argument that Theresa Villiers used to make, that the £15.6 billion (in public subsidy alone) high speed line could be funded from the Transport budget without compromising other projects, is clearly untenable. Other projects are already being compromised even without another big new commitment.
The Conservatives have two options if they still intend to minimise the burden on taxpayers and avoid a crisis in the public finances:
1) Add Transport to the list of departments that are immune from cuts, and make the cuts in other departments - including Defence - even more savage.
2) Make some very unpleasant, but important, decisions about priorities within the Transport budget.
The first option seems implausible. The cuts required in other departments are already being pushed up by the ring fencing of health and international development. Are Education, Defence and Welfare - the only big spending departments left if you take out Transport - really able to do almost all the work in cutting the cost of government?
If we accept that the first option is probably off the table, the question is, what are the priorities for transport spending within a given budget? I'd argue that the order is roughly the following, from most to least vital:
1) Maintaining a functioning road network with congestion within manageable limits. Motorists pay a fortune in motoring taxes - smokers and drinkers come off lightly by comparison - and can reasonably expect a functioning road network in return. Beyond that, if we doubled the numbers on the trains we wouldn't take ten percent of traffic off the roads. Roads are essential to keep Britain moving, they move (PDF) 92 per cent of passenger traffic (remember that buses, coaches and motorbikes travel on the roads as well as cars) and 68 per cent of freight traffic. As Allister Heath noted in City AM this morning, "the UK has fewer miles of motorway per car than all other major European economies and less than half the EU average."
2) Maintaining commuter train routes into the cities. The ten most overcrowded passenger train services all appear (PDF) to be commuter routes. If they get too overcrowded or break down then the road network very quickly becomes overloaded, people can't get to work and companies can't move their goods.
3) Keeping international travel affordable and safe. The ability to quickly, safely and affordably travel to other countries is vital to Britain's international competitiveness. Beyond that, it would be awful if ordinary people no longer had access to the hard won pleasure of regular foreign holidays. The most obvious reason why international travel needs to be at least this high on any list of priorities, though, is that running airports beyond their capacity can be dangerous and an avoidable crash would be a huge tragedy and policy failure.
4) Keeping intercity trains working, affordable and reasonably speedy. The intercity trains aren't quite as vital as the commuter routes but are still hugely important to many people who want to make important journeys. They also move a significant amount of freight.
5) Minimising the use of compulsory purchase and disruption to those living near transport infrastructure. Compulsory purchase is a power that should be used as sparingly as possible and disruption to those living near roads, railways or airports should be minimised. The relative benefits of different schemes are often overstated, though. While the current Conservative plan reduces the inconvenience to those living near Heathrow, it would almost certainly mean compulsory purchase and disruption along the route.
6) Meeting broader environmental objectives. The Department for Transport acknowledges that flights are already overtaxed relative to the environmental harms they create and research by the TPA and the IFS finds the same for road transport. That research is summarised in our most recent report on green taxes (PDF). There are already further interventions planned with the changes to Vehicle Excise Duty and the integration of air travel into the European Union Emissions Trading Scheme. Those new interventions should be scrapped and further attempts to reduce the environmental impacts of the transport sector should take a back seat to the priorities identified above.
That set of priorities would clearly imply focussing public spending on roads and commuter rail while keeping the intercity network in reasonable shape until financial conditions improve and it can be upgraded when resources are less scarce. International travel should be left largely to privately financed airports. Other people might have a different set of priorities and hopefully we'll come to a democratic decision about how to allocate resources in this area.
The Conservative Shadow Transport team face another dilemma if the Treasury team aren't feeling exceptionally generous, though. They can either admit that their policy needs to change in light of the dire fiscal situation. Or, they can explain a set of priorities under which it makes sense to block private industry spending £13.3 billion on a major infrastructure project, just so that £15.6 billion of taxpayers' money (and £4.4 billion in private investment) can be spent instead at the same time as countless other transport infrastructure projects are cancelled, cut back or delayed for lack of funds.
