Vol 29 No 1 Autumn 1999

SECTION 14: UK TRANSPORT POLICY

UK transport policy: a data response approach

STEVE HURD

Statistics for Education

1 Introduction

This is an exercise on interpreting data. If you wish to improve your data skills, then examine carefully the evidence from the newspaper extract and the accompanying transport data and make a note of any insights you gain into the issue of transport policy. Compare your own conclusions with those in the succeeding commentary.

Improving Britain's transport network will be 'a long haul' and could make the government unpopular in the short term, John Prescott, deputy Prime Minister, said yesterday. Speaking on the first anniversary of the publication of the government's transport white paper, Mr Prescott said despite these difficulties 'a public transport renaissance' was under way. 'In the long term it will be better for the country and I must risk a bit of unpopularity to get the case across/But Mr Prescott faces considerable obstacles in financing these plans. And the paradox that Britain's motorists have never paid more in tax on fuel, but motoring has never been cheaper versus public transport, lies at the heart of the difficulties. Many critics blame the conservative attitudes of the Treasury to financing the transport network. The programmes devised by Mr Prescott and his advisers to deter car use and raise extra funds for public transport - congestion charging in cities and workplace parking levies - will not raise significant amounts of money for many years.

David Begg, a former Edinburgh councillor now chairman of the Commission for Integrated Transport, believes funds could be raised against future income streams from road tolls. But the level of government spending on transport continues to fall, from £4.7bn last year to £4.6bn this and £4.5bn in 2000-2001. 'The silver lining to the cloud of Labour's election victory was that they would spend more on transport,' said Steven Norris, a former Conservative transport minister who was critical of his own party's failure to devote resources to transport. 'But despite all Labour's rhetoric we could, end up with less money going on transport.'

Of every £10 paid at the petrol pump no less than £8.25 is tax. The Automobile Association has pursued a long campaigner more of the taxes paid by the nation's car drivers to go on transport improvements. Hauliers' organisations led by the Freight Transport Association and the Road Haulage Association have added their voices to the protest as their members face increasing competition from overseas truckers running on cheap continental diesel. It is clear that the government is reaching the limits of its policy of loading heavy taxes on to the motorist with no compensating spend on transport. Mr Prescott says he is prepared for unpopularity in fulfilling his transport plans.

(Adapted from: 'Prescott's public transport drive will be a "long haul": Deputy prime minister maintains white paper policy is best for the long term', by Charles Batchelor, Financial Times 21 July 1999)

Table 1 Distance travelled: by mode of transport (billion passenger kilometres)

 

1981

1991

1997

Mode

Car

394

582

619

Bus

49

44

43

Bicycle

5

5

4

Motorcycle

10

6

4

All road

458

638

670

Rail

34

38

41

Table 2 Household expenditure per head on transport (£ per week at 1995 prices)

 

1981

1991

1997

Motoring costs

Vehicles and spares

4.81

6.38

8.23

Petrol and oil

3.28

4.44

4.19

Repairs & insurance

1.93

2.51

2.99

Vehicle tax

0.58

0.89

0.95

Other

0.83

2.36

2.38

All motoring costs

11.31

16.57

18.74

Fares and other travel costs

Bus and coach fares

1.28

1.07

1.07

Rail and tram fares

0.87

0.98

1.06

Table 3 Real personal disposable income (1981 = 100)
 

1981

1991

1997

RPDI

100

133

156
Source: Secos CD-ROM Trends Database 1999

Table 4 Passenger transport prices (Indices 1981 = 100)

 

1981

1991

1997

Motoring prices

Vehicle tax & Insurance

100

220

314

Maintenance

100

195

266

Petrol and oil

100

156

230

Purchase of vehicles

100

144

172

All motoring expenditure

100

163

217

Bus and coach fares

100

198

270

Rail fares

100

201

265

Retail prices index

100

185

220

2 Commentary Insights from the article

1 Aims

For many years traffic volumes have been rising in the UK and road congestion has become an increasing problem. At the same time investment in public transport, such as railways and buses, has been low by continental European standards. The current Labour government is committed to increasing the proportion of journeys undertaken by public transport. Strictly speaking, as public ownership is the exception these days, we probably ought to use the term mass transport instead of public, as the latter implies a particular form of ownership.

2 Means

The government seeks to achieve this shift by combining motor vehicle taxation, road pricing and mass transport subsidies. The tax on fuel has been raised progressively by both Labour and Conservative governments, such that 82.5 per cent of the price of a litre of petrol is currently accounted for by excise duty. The annual motor vehicle tax (or licence duty) has also been gradually raised, although a lower level of tax has recently been introduced for more fuel-efficient cars under 1100cc. Taxes are also being introduced on city centre firms that provide parking places for their workers, in order to encourage a further shift to mass transport.

3 Economic justification

The case for government intervention in the transport market is based upon externalities. It is argued that motoring generates external social costs. Each motorist, by adding to the traffic volume and to congestion, imposes longer journey times on road users in general. Road traffic, especially when travelling at low speeds and in stop and start conditions, also generates air pollution and traffic noise which harm other motorists, cause health problems for people living in the vicinity of main roads and damage the fabric of buildings. These externalities distort the allocation of resources by leading to an over use of cars and under use of mass transport. It is argued that mass public transport, such as trams., underground trains as well as trains and buses, reduces the amount of noise and pollution per person transported.

Insights from the data

1 The pattern of journeys

Between 1981 and 1987 the number of billion passenger kilometres travelled by passengers using all modes of surface transport increased from 492 to 711, a rise of 44.5 per cent (Table 1). Over the same period the proportion of journeys made by car increased from 80.1 per cent to 87.1 per cent. Although rail journeys increased by 20.6 per cent they represented a smaller percentage of total passenger kilometres travelled. Bus journeys fell in absolute terms by 12.2 per cent. The use of motorcycles and bicycles were an insignificant part of the total in 1981 and declined further over the period. It is evident that a huge increase in the use of mass transport (i.e. buses and trains) will be necessary just to stem the total growth in road traffic volumes.

 2 Real expenditure on transport

Over the period 1981 to 1997 the average person increased their real expenditure on the purchase of motor vehicles from £4.81 to £8.23 per week (Table 2). This represented a 71.1 per cent increase at a time when real personal disposable income rose by 56 per cent (Table 3), thus suggesting that expenditure on cars is income elastic. In contrast, the income elasticity of demand for trains appears to be low (expenditure on train travel per week having increased only 21.8 per cent), and that for buses was actually negative (expenditure on bus and coach fares falling by 16.4 per cent). Unfortunately, it is not easy to compute the actual income elasticity figures as the relative prices of car use and of bus and train fares were changing at the same time. If we compare price movements with the retail prices index then the relative purchase cost of cars fell by 21.8 per cent in comparison with the RPI (Table 4). This is computed by comparing the 1997 price index of 172 for the purchase cost of cars with the change to 220 in the RPI over the same period (Calculation: (220-172) / 220)). Using a similar method we can see that the relative price of motoring as a whole rose by 1.4 per cent in comparison with the RPI. The cost of car tax and insurance, maintenance and fuel all increased by more than the purchase costs of vehicles. Although, as we can see from Table 2, almost half of the cost of motoring is accounted for by the cost of the vehicle and spare parts, with 22.4 per cent accounted for by the cost of fuel and only 5.1 per cent accounted for by vehicle excise duty. This allows us to see how relatively small the effects of petrol taxes and car tax are on the overall costs of motoring. Petrol taxes are assumed to be effective in influencing the decision to use a car once you have bought it as it affects the marginal journey costs. On the other hand, where a component of expenditure is a relatively small part of the total costs of an activity the responsiveness of demand to a change in price will be lower. Fuel duties that are 82.5 per cent of the price of petrol sound high, but we have to remember that this is only 18.4 per cent of what the average person spends on motoring per week (calculation: (4.19/18.74) X 82.5.