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Infrastructure blog

Transport subsidies are unsustainable - what next for infrastructure?

15 September 2021

The APPGI chair discusses revenue budget pressures versus capital pressures post-Covid.

Transport subsidies are unsustainable - what next for infrastructure?
During the pandemic, people have been discouraged from using public transport. Image credit: Shutterstock

For years, the message from government and environmental groups has been leave your car and use public transport as a means of cutting congestion and improving our environment.

During the pandemic, when we were allowed to travel, the messaging was about taking extra care to keep safe in enclosed spaces. It was part of the package designed to help us keep safe and that message really landed. Travelling down to Westminster on the train, I often had the carriage to myself.

Government subsidies

The subsidy from the government to keep services running was needed, as almost overnight, whole industries had become unviable. The cost to the public purse was huge – in excess of £10 billion and counting.

It was the right policy, but it is not a sustainable policy. There has long been subsidy of public transport in the form of payment for routes that are uneconomic but socially important, most obviously seen on bus routes, especially some rural ones. The costs of rail are less easy to see by route, but prior to the pandemic, such had been the years of passenger growth that the industry was getting to a much better place – in terms of revenue, not capital.

The subsidies cannot continue at anything like the current rate. The government has several hundred billion pounds less than it thought it would have just two years ago. There is the prospect of reduced taxation alongside increased cost for some time ahead, too. It cannot be business as usual.

What else effects subsidies?

There are political pressures to consider. There are demands for more public transport in the parts of country that are the target for levelling up. There are demands for progress on balancing the books in the public sector. There will be huge pressure for extra spending in other government departments.

So what is the answer to these competing factors, which are pulling in different directions? There will be a need to maintain support, as usage has not returned to anything like normal levels, and predicting when or if that may happen is not simple.

I suspect there are some difficult conversations taking place right across government right now, at the centre of those will be those between the DfT (Department for Transport) and the Treasury. I have been a minister in both departments and can confirm they were not easy even in good times. And we are far from those.

What does the future hold?

The best way out of trouble is to grow your way out. That means lots of efforts to recover passengers. There will be pent-up demand on leisure travel, and operators have reported demand to be strong.

Business travel is a different game and hard to predict. We will start to see what the future looks like this month, as the nation returns from holidays. That is the time for the marketing teams to incentivise a return to the office and to face-to-face meetings.

If I were having the ministerial funding conversations right now, from the DfT side I would be emphasising the difficulty in planning, that trends are not yet clear and that marketing campaigns are yet to land.

If in the Treasury, I would be asking about variable costs, marginal routes and trends in demand. I expect compromises to be reached.

  • Andrew Jones MP, chair of the All-Party Parliamentary Group on Infrastructure (APPGI)