Three Studies In The Welfare State
by the time this article sees the light of day, we will all have had a surfeit of material on the railway problem. Why should NLR join in? One answer is that this is an outstanding example of the conflict between the values and criteria of commercialism and those applicable if social need is used as a guide. Here is a case where commercial accounting gives all the wrong answers. Secondly, it illustrates the contradictions that nationalised industries are caught up in within a mixed economy dominated by commercial interests. Moreover, here is a question which affects the whole fabric of our lives in a highly urbanised country, one that we will increasingly suffer from, and the Labour movement has no policy. True, Harold Wilson (New Statesman, 5 March, 1960) has written about railway financing, but what he has to say does not go to the root even of that problem, and he has very little to say in the context of broader problems of transport policy. The NUR, and all credit to it, has written a very effective pamphlet—Planning Transport for You (NUR 1/-)—but this still does not avoid being railway-minded instead of transportminded—nor is there any sign that there is any agreement in sight between them and other transport Trade Unions (notably the T & G) as to what should be done.
Some ideas as to the trends we have to allow for when discussing future transport policy can be gleaned if we glance at the experience of the USA. There, a commercial profit-and-loss accountancy has reigned supreme in transport, and under such pressures urban public transport systems have become vestigial, the cities have been re-shaped as ‘strip cities’ to fit the requirements of the motor car, and still—after enormous investment in roads at the expense of other public services—urban roads are congested, traffic crawls, air contamination becomes an increasing problem, and uncontrolled use of the motor car calls for further vast expenditure on road building. This in a country that has the space that we lack. The other day I met a professor from Los Angeles who argued that the fact that his family had two cars was not a sign of a high standard of living but of the high cost of transportation.
In Britain we move swiftly towards an overwhelming problem of transport, and the danger of a diversion of resources on an enormous scale towards a roads programme that will solve nothing. Urban public transport, and the railways, are in decline. Our congested roads are confronted with a car industry rapidly expanding its output capacity to nearly 3 million vehicles a year. This process is welcomed as bringing employment to development areas, although it is based on each company assuming it will increase its share of the market! Faced with the surplus capacity and underemployment of the motor car industry by 1962–63, will it be easy to resist the campaigns of the road lobbies (behind them, the oil companies) for a massive diversion of resources? This expansion programme (£160 million over two years) is being heavily subsidised by Government loan: is it really a first priority, while the modernisation of the railways remains undone—or is the community once again in the hands of the motor industry? This estimated capacity of 3 million vehicles is well beyond estimated demand, even if that demand continues to expand, at home and overseas, at the same rate as in previous years, Will we find ourselves, financing
Where then do the railways fit in? What is to be done?
All the complexities of railway policy need to be related to two general propositions. Firstly, the railway system exists, it represents a vast input of past capital, and consequently we will be under-utilising it if we divert traffic from the railways by charging the users more than the current operating costs. This is in fact what we do at present: the Transport Commission tries to earn a surplus over current costs where it can, even if that involves diverting passengers and freight from the railways. It is merely orthodox economic doctrine—although the orthodox economists are strangely silent on this one—to say that capital charges derived from the past (inescapable costs) should not be considered in a pricing policy aimed at the best use of the existing railway apparatus. A transfer payment on capital account has to be made by somebody, but that should not stand in the way of a rational use of public property. The proposal of Harold Wilson that the state take over capital charges but charge railways a rent based on ‘ability to pay’ is an unhelpful proposal because it does not make its criteria clear; it is still, in fact, viewing the problem in terms of commercial accounting, and would envisage creating new publicly owned capital equipment and then under-utilising it.
The second general proposition that railway policy needs to be based on, is adequate consideration of the social cost of diverting traffic from rail to road. It is not a question of comparing tariffs based on average rail costs as against average road costs. It is not a question of the costs that the ‘consumer’ of road transport is directly aware of (taxation, the cost of road congestion and delay to him). The costs relevant to the community are those that the community will bear as a result of additional traffic on the roads in the 1960’s—congestion on trunk routes and in urban centres pushed to the point of intolerable conditions, the resources committed on massive road building programmes, the increased death-roll. By contrast, a diversion of additional traffic to railways would carry no such social costs, and would lead to more efficiency with less under-utilisation of the system. Simply, we have under-capacity use of the railways at present, and over-capacity use of the roads. If the pricing system is to be used to secure the allocation of traffic to different types of transport, it ought to be a pricing system that reflects social costs as well as direct operating costs.