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Railways debate erupts again

The McNulty committee has produced a 350 page report on whether Britain’s railways give value for money and how things might be improved. Proposed changes to fares have naturally received the most attention and comment. Matters are, however, more subtle. The railways have suffered from a series of bad technical and engineering decisions since the mid-1950s, in part due to political interference. This is one reason why costs are high and capacity is squeezed. A fundamental mistake is the near-universal replacement of locomotive-hauled stock with unit trains such as the ones above. Of fixed length, extra vehicles cannot be added to cater for extra traffic at peak periods. This is one of the main reasons for the complicated structure of fares which are meant to tailor a variable demand to a fixed supply. Until about 1970, the railways had traditionally kept a pool of older vehicles in reserve, which would be brought out at peak periods, but modern methods of railway operation, and modern types of rolling stock rule, out this option. It is a point that McNulty has failed to spot.

There is a need for politicians and commentators to familiarise themselves more closely with the technical aspects of railways and their operation. It is essential if good policy decisions are to be made. Unfortunately, those who understand the technicalities of railways tend to be dismissed in pejorative terms.

An important issue that is also passing unnoticed is the external value that railways generate in helping to sustain land values. On this view, outfits such as the Institute of Economic Affairs argue that subsidies for railways should be abolished. The IEA is utterly wrong. Railways generate wealth which cannot be captured through the charges it makes to those who use them. This value is generally described as “externalised value” or “externalised benefit”.

Commentators who do not understand externalised costs and benefits are not worth taking seriously. Unfortunately, they represent a widespread view.