Wednesday, May 19, 2010

Where will the transport spending axe fall?

Given the Coalition's commitments to increase spending on the NHS, reduce the deficit, increase personal tax allowances, fund the pupil premium from from outside the schools budget by reductions in spending elsewhere, allow parents to set up their own schools, create a green investment bank... (pause for breath)'s pretty clear that massive cuts are on their way in other, less 'sexy' departments. So the cross-hairs will be lining up on transport.

But wait. As well as Crossrail, the Coalition has also agreed to the establishment of a high-speed rail network. They've also ruled out national road pricing, and promised to 'end the war on the motorist'. Now I'm not too sure what this war entailed other than fining dangerous drivers, but it looks like the Treasury can look forward to less revenue from speeding fines.And unless the Coalition finds some other way of improving road safety, the Treasury will be paying for the considerable financial consequences of increased deaths and injuries on our roads.

There's also the "fair fuel stabiliser" which could ensure that fuel duty is reduced when world oil prices rise, and duty will rise when the oil price falls. Of course, this would depend on the ability to see into the future to know what the long-term trend of the oil price is. Presumably the intention is that this measure will be revenue-neutral but consider the following problem. The price of petrol rockets from its current £1.20/litre to £2.00/litre. According to the rules, fuel duty would be reduced. Let's say that price level is sustained for a year. You're now in deficit. Do you gamble on the oil price going down in the future, worsening the deficit still further, or do you increase fuel duty, risking the wrath of motorists? They just haven't thought this through.

So where can you cut spending? Forget about cutting cycling spending because that is such a miserly amount it won't make much difference. Road spending is another matter - approximately £8bn is spent annually on the roads network, according to government stats. Another £8bn is spent on railways. Raising rail fares won't be popular, which is what will happen if the rail budget is cut. So the roads budget looks the most vulnerable...

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