Cobbles said:
Indeed - why not just ban subsidies and put up the fares to their true economic level.
Because where revenue support is provided for buses and trains, it is to subsidise socially desirable routes for which
there is no economic level of fares.
A good example would be a bus route through small villages in a country area. The level of fares that would be required to maintain the service at a break-even point would be so high as to deter any potential passengers. A fare £10 return from somewhere in the Beacons into the centre of Brecon would never be sustainable.
It is in recognition of the fact that there are people who live on such routes who would never be able to use their own personal transport (such as the poor, elderly or disabled) that government provides the funds to support the service.
Since the question has already been raised, it may be worth putting this into proper historical context. I'm more familiar with the bus industry, but I believe similar principles apply to rail.
In pre-deregulation days bus companies would 'cross-subsidise' loss making routes with revenue from profitable routes in the centres of towns.
This arrangement dated from the 1930 Road Transport Act, well before the partial nationalisation of bus services in the UK in 1947 when Thomas Tilling, Scottish Motor Traction and Red & White were sold by their owners to the British Transport Commission and with the formation of the National Bus Company in 1969, which acquired the operations of the last remaining major independent operator, British Electric Traction.
Traffic Commissioners for each region would regulate the routes that bus companies were permitted operate, and subsidies were paid after taking account of surpluses from profitable routes.
The 1985 Transport Act specifically outlawed this practice, on the basis that it was keeping the price of fares on profitable routes at an artificially high level. Outside London, Traffic Commissioners would have to find good reasons to reject applications for licences to run buses, reversing the previous rules. Operators would compete with each other in a free market to achieve the lowest prices. This is commonly known as 'deregulation'.
Subsidies from government would be only for those routes deemed socially necessary. Naturally, the levels of subsidy on some individual routes would be proportionately larger than they had been previously, as they would not be benefiting from hidden cross subsidies. These routes would be put out to tender to the lowest bidder.
The move was accompanied by the privatisation of the nationalised bus companies and those operated by local authorities (such as the West Midlands and South Yorkshire).
In the ten years following the 1985 Transport Act,
subsidies by local authorities fell from £974 million to £279 million. The average costs per mile of bus operation fell by 44% in real terms. Rural bus subsidies in the years since 2000 have been in the order of
£50 million, on approximately 16% of operated routes with the balance being operated commercially.
However, these gains have been at the expense of increased fares and reduced bus usage (an effect opposite to that anticipated by the 1985 Act). Bus passenger miles outside London fell from 9% to 6% as a proportion of all journeys in the 20 years after deregulation. Bus use in South Yorkshire
dropped 62% in the period.
The curiosity is that London, which retained its regulated bus environment under the 1985 Act (though with private operating companies) has bucked the national trend, with steadily rising levels of bus use. London is becoming an example for the rest of the nation that deregulation, open competition and bringing subsidies out into the open, while it
may have cost the taxpayer less and improved efficiencies within the industry, has also led to the public abandoning buses as a significant means of transport.
I've been chucked off nightbuses by the bastards before
