ESSENTIAL FUNCTIONS OF GOVERNMENT IN RELATION TO TRANSPORT
1.1 Different
Levels of State Involvement in Transport
1.2
Economic, Political, Financial & Ethical Philosophy of
State Involvement in Transport
1.3 Essential
Functions of State Involvement in Transport
1.4
Optimum Level of Essential Functions of the State in
Transport
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(1.1) DIFFERENT LEVELS OF STATE INVOLVEMENT IN TRANSPORT
Transport is a very diverse activity from local walking to bulk movements by enormous vessels.
Transport requires access (terminals) a Way (path, railway, sea, etc.) with the aim of fulfilling demand for safe arrival of goods or people.
In the very simplest of societies the Way will be developed as a path by little more than walking and clearing the Way to enable produce to be carried from producer to market, the market being the destination access terminal. The Way may have been developed by the producer to enable him to carry his own produce, or the community may have worked together to prepare the Way in an organised manner, an embryonic form of State provision.
In a modern complex society (I will concentrate on Britain) there are many levels of State involvement in transport. Local Authorities are responsible for provision and upkeep of footpaths, bridleways, cycle routes and roads (except Trunk Roads and Motorways). They may also provide support for socially required but commercially non-viable public transport, including support provision of community buses and hospital car schemes.
Through responsibility for planning, have a major effect on transport as plans often generate demand for transport, indeed as a condition of planning consent Local Authorities may include the provision of transport infrastructure, or access to public transport.
In carrying out their responsibilities Local Authorities are heavily influenced by central Government, not only by primary legislation but also because much of their funding comes from Government Grant. Many would argue that this reduces the Local Authority’s role to that of administrator of central Government policy rather than being democratically accountable to their local communities.
Central Government has the overall strategic responsibility and, through legislation, sets the rules and regulation framework within which transport must operate. This especially involves safety, but also economic factors in terms of competition law etc.
Much Government involvement is delegated to executive agencies e.g. the Highways Agency which is responsible for provision and maintenance of Motorways and Trunk Roads, Strategic Railway Authority (incorporating former Office of Passenger Rail Franchising) responsible for letting out franchises to operate the national rail network.
The Government has historically maintained the provision of ports and airports (now mostly privatised in the UK), and exercised a level of control and subsidy for ferries and airlines using arguments based on the economic well being of the whole community.
The shift in Government emphasis from public to private funding of transport
projects can be observed from the differing funding arrangements for the aborted
1970’s Channel Tunnel and the completed 1990’s Tunnel.
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(1.2)ECONOMIC, POLITICAL, FINANCIAL, AND ETHICAL PHILOSOPHY OF STATE
INVOLVEMENT
At one extreme there is the argument that transport is commercial and should be left entirely to market forces; at the other extreme it is sometimes argued that transport is a necessary social service that should be provided free at point of use. Unfortunately both arguments are unsustainable; balance therefore needs to be found.
Economically speaking transport is a facilitator enabling people to be where they would prefer to be and goods to be where they have greater value.
The argument for State involvement would say that by enabling transport to take place increased value can be placed on goods moved increasing prosperity of the producer which will trickle out to the producer’s local community; the movement of people will enable them to travel to make best use of their resource for work without necessarily moving home, travel around generating business which will benefit their local community, find products to purchase outside their immediate area thereby increasing competition for products and encouraging greater efficiency. Therefore the State should provide transport to match demand even if a subsidy is required.
However, if subsidised transport enables a company with locally available materials to send it a large distance for manufacture by cheap labour, then transport back the finished product for high sale price, then that company’s profits have been artificially increased at the expense of local , damaging the local economy. Subsidised transport also enables people to move substantial distance away from work places, taking up housing in communities at artificially inflated prices and forcing local people and employment out, turning diverse sustainable communities into dormitory towns and villages. Other effects are people travel for shopping and other purposes damaging the viability of local shopping and local facilities, thus making these communities just places for homes but not for employment, leisure or commerce, creating major problems for those who have difficulty travelling.
The principles of State involvement in transport epitomised by nationalisation resulted in the conventional wisdom becoming widespread that transport provision was a duty of the State to provide in order to meet personal and economic needs. The impression developed that public transport and all transport infrastructure could not exist without State support. However, State support has to be paid for and political arguments are made about why non-users should pay for transport from which they receive no benefit. Transport priorities become politicised, with different pressure groups arguing for extra provision for their favoured mode of transport and calling for cuts in others without necessarily reflecting what people and transport users really want. Different levels of subsidy lead to imbalance in the transport system where the favoured mode(s) become cheap at the point of use, creating excess demand that can cause quality-of-life problems such as severance and pollution that a more balanced policy may avoid.
Privatising transport – opening up to market forces – has a very mixed political reaction, especially where after so many years of public ownership some people feel they own the transport network. However, Government involvement still remains in the form of subsidy for which the private operators’ customer, (effectively the Government), requires them to provide a service or infrastructure which is not necessarily the optimum, but serves political requirements. Governments of all political colours appear to lack the courage to withdraw subsidy from providers of transport, fearing the public backlash when prices increase, despite the alternative of subsidising the user who could then choose which mode(s) of transport to use in a balanced market, thereby moving decision making away from the Government to the User.
With a market for transport provision the main political involvement of the State will be the regulation of transport e.g. fair competition, standards of safety etc.
As provider of transport provision, the State bears a very heavy burden, paying for infrastructure and operations. In order to pay for this the State needs to raise finance. Subsidised public transport would receive fares, freight receive freight charges, roads receive fuel and vehicle taxes and in certain circumstances tolls. (NB the principle of the British tax system of non-hypothecation of taxes means that road and fuel taxes go to the Treasury rather than being dedicated to pay for roads). Where there is a shortfall between revenue and cost, transport is subsidised.
The subsidy roads receive is mostly hidden and borne by society as a whole. There are no road accounts showing the asset value of the road network, the proportion of debt burden being serviced as a result of building the road network, or the return on asset value that should be returned to the Treasury as guardian of the road shareholders (citizens) investment. Before Railtrack was privatised an 8% return on its asset value was required – the same should apply to the road network. Pollution and accidents create costs for the Health Service and Social Security and there are many more external costs subsidised by the State on behalf of citizens and in some cases subsidised directly by the individual e.g. the person having to change to light employment due to pollution illness is in effect subsidising through his lower earnings; the transport user should pay him the difference in earnings and compensation for lower quality of life.
Subsidies for modes other than road tend to be more open (although there are still externalities) in the form of revenue support, capital grants and franchise agreement subsidy. The State pays these on behalf of the citizen with money usually raised from general taxation.
The ethical debate centres on whether the State as guardian of the citizens money should pay for and provide transport they feel the citizens need for quality of life and economic well-being, or should citizens have the money and make their own transport decisions, or is there an optimum balance between these two positions.
The State has a responsibility for the safety of its citizens and is therefore required to make rules backed up by rigorous enforcement to ensure transport is safe.
Unregulated laissez-faire allows unfair competitive practices, which may
lead to exploitation. The State has an ethical responsibility to ensure that
fair-trading takes place, predatory practices are prevented and monopolistic
prices are not charged.
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(1.3) ESSENTIAL FUNCTION OF STATE INVOLVEMENT IN TRANSPORT
(b) Provision of Access for Weaker Citizens
(d) Ensuring Free Fair Competition With No Abuse Of Market Position
(e) Ensuring Safe Healthy Transport
The State needs to ensure citizens have adequate access to services, goods, facilities and employment for economic well-being, high quality of life without damaging health of people or sustainability of the environment upon which everyone relies.
The starting point is the transport system as it now exists within the fabric of society which has developed over centuries, and not as we may have designed it had we landed here and been able to design land use and transport from scratch.
In view of the limited resources and damage transport can inflict, a State priority must be planning. Rules for all future development must include a transport dimension designed as much as possible to reduce need for transport e.g. provide facilities and employment as close to residential areas as possible. Where this is not possible, the developer should be made responsible for the provision of transport infrastructure to service the development and, if necessary, improvements to transport infrastructure and provision throughout the new development’s catchment’s area.
(b) Provision of Access for Weaker Citizens
Where Access would otherwise be denied, a caring society needs to look after its weaker members, whether due to age, disability, or simply low income. These groups of people may require help with transport due to being unable to afford to pay commercial rates for their transport needs or the extra costs for specially adapted vehicles and infrastructure. These people may need subsidy to help provide transport both to get them access to facilities and employment, and to enable goods e.g. shopping to be delivered to them.
Many would argue an essential function of Government is the enabling and encouragement of integrated transport. Some argue this can only be achieved by state control. However, there are many examples of private operators integrating services and fare structures e.g. various Railbus initiative with many local bus companies, airport interchanges, Freightliner transport of containers by rail, road or ship, carrying cycles by train.
The essential function of Government is to encourage this integration through favourable planning rules, incentives for through fares and coordinated timetables, encouraging the production of joint publicity etc.
Considering that customers’ requirement of transport is safe arrival at required time not usually caring which company: - where operators do not provide interchangeable ticketing a regulatory body should have powers to force this if in the public interest e.g. two bus companies should accept each other’s tickets, the more expensive bus free to charge the difference in fare, tickets retained for sending to clearing house to reallocate the money, similar to South Central collection and exchange of Gatwick Express train tickets.
(d) Ensuring Free Fair Competition With No Abuse Of Market
Position.
There is sometimes the temptation for private companies to use market power to destroy competitors by unfair practices. These can include charging unrealistically low prices at a loss to drive the weaker company out, then increasing prices; running services immediately in front of competitors to pick up all available customers; abusing monopoly position to charge high prices and generate excess profits.
The problem for the State is drawing the fine line between what is and is not fair, and providing sufficient deterrent to prevent bad practice destroying competitors. Regulation authorities are required with sufficient resources to observe malpractice immediately and power to inflict the severest of penalties for worst offences including closing companies down. Other sanctions that should be available include directing companies (if necessary with an arbitrator) to cooperate in planning timetables to ensure headways are relatively even, e.g. two bus companies compelled to have their buses run no closer than 20 minutes from the competitor so customers do not have the situation of two buses at the same time with nothing for an hour.
(e) Ensuring Safe Healthy Transport
Ensuring safety is a paramount responsibility of the State, providing rules and standards that transport providers must adhere to. The regulation must be fair and as discussed in PART 3 the current situation of targets for road transport being 5 times more lenient than rail must be eliminated so that all modes have equal safety standards and therefore a mode cannot save on safety costs which another mode maybe required to maintain. E.g. Train Drivers are re-examined every two years, the same should apply to road vehicle drivers.
The State is also responsible for ensuring rigorous environmental standards are set and adhered to for the health and future well being of the community.
It is interesting to note the pollution externality per passenger mile or
tonne mile of aircraft is many times that of any other major mode of transport for
which airlines do not pay, hence a massive air transport subsidy.
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(1.4) OPTIMUM LEVEL OF ESSENTIAL FUNCTIONS OF THE STATE IN
TRANSPORT
(a) Optimum Principles For Planning Rules
(b) Optimum Provision of Access by the State for Weaker Citizens
(c) Integration of Transport – Optimum State Involvement
(d) Ensuring Free Fair Competition With No Abuse of Market Position Optimum State Involvement
(e) Ensuring Safe Healthy Transport – Optimum State Involvement
A general principle of transport should be that the user at the point of use should pay for the full cost, so that the user decides which is the most appropriate mode in a free fair market. During recent history much transport has been heavily subsidised, leading to excess demand and location of the structures of society that requires excessive use of transport and generates even more traffic.
The only modes that are nearly universal are walking and cycling, these also being the modes with by far the smallest external impact on the environment or other citizens. Therefore considering walking and cycling are by far the cheapest modes to provide for, it seems reasonable that these should be the only modes for which the State should be responsible in providing universal provision, with other modes (including motorised road use) left to fend for themselves commercially.
(a) Optimum Principles For Planning Rules
The Government needs to ensure a planning framework that is designed to improve access but also to reduce transport need.
Transport is expensive financially and environmentally and much is heavily subsidised, representing a major burden on the State.
Therefore Government planning policy should encourage development of production of goods and services close to where they will be consumed reducing the demand for freight transport.
Government should encourage development of all facilities for modern society to be located where possible within walking distance of residential areas – especially facilities used every day such as retailing, healthcare and education.
If as a side effect this regenerates local communities, increases social interaction, with people becoming more familiar with their neighbours, more people in the streets so a virtuous spiral of streets being friendly safe places develops – all to the good.
Current rules that insist on parking spaces for new development should be replaced by rules that insist where walking is not practical that the developer has a duty to provide and maintain public transport (including disabled access) and cycle storage.
(b) Optimum Provision of Access by the State for Weaker Citizens
Accepting that more extensive transport will be required for the foreseeable future due to current land use patterns, distribution and manufacturing networks, demand for products and services that cannot be provided locally together with demand for longer distance personal travel, care needs to be taken to ensure weaker members of society are not denied access to their needs which cannot be provided locally.
Traditionally the answer has been to subsidise transport providers, and provide travel passes etc. No system of subsidising transport providers is possible without distorting the transport market by making some modes unrealistically cheap at the point of use in comparison with what may be the more appropriate mode to use.
The extensive subsidy of the road network, which has partly been justified on social grounds and was based on the false premise that universal access to motorised transport was inevitable, has resulted in the wealthiest members of society who do not need their transport to be subsidised benefiting the most from virtually unlimited access to the road network at a very low point of use price. At the same time those without access to motorised transport, generally the weakest members of society have much worse access as a result of severance, unpleasantness and danger of non motorised routes, together with access to facilities becoming more convenient for car users often beyond walking distance.
Balance has been suggested by subsidising public transport, but to provide subsidies comparable with road transport would probably bankrupt the country and would still not serve the needs of the most vulnerable.
Therefore all subsidy of transport provision should be withdrawn (see Part 2 for discussion of removal of road subsidy), all users paying the full price of transport at point of use. Subsidy paid direct to weaker members of society. The subsidy could be a fixed amount say £500 per person each year, reduced by £1 for every £100 of annual income, paid as transport benefit, or transport tax allowance, benefiting those whose need is greatest. The amount of subsidy could be varied according to need e.g. higher subsidy to reflect greater need for rural people or disabled etc.
The most appropriate transport would then be purchased in a balanced market taking account of price, convenience, quality etc.
(c) Integration of Transport – Optimum State Involvement
In setting the rules for commercial transport, the State should understand the paramount needs and desires of the transport user. The passenger user’s ideal is a door-to-door journey without transfer to arrive at a specified time paid for by one transaction. Whilst not often possible for public transport, the next best is for all operators to coordinate timetables and have common tickets available on all operators’ vehicles.
The Government White Paper (“A New Deal for Transport: Better for Everyone”, DETR, 1998) proposed a Strategic Rail Authority. However, a Strategic Transport Authority (STA) would be more sensible to work with providers of all modes of transport.
The STA would be responsible for compiling an integrated timetable and fare manual for all public transport. Public transport operators would be obliged to provide accurate information by a fixed date and be prohibited from making alterations during the period of validity without agreement of the STA and requirement to pay for the production of alteration supplement.
The STA would be responsible for organising timetable conferences of transport providers to facilitate the industry partners planning their coordinated timetables.
The STA would be responsible for organising ticketing conferences of transport providers, to facilitate and enable the industry partners to work together planning the national fare and ticket validity structure designed to be understood by users.
Within the agreed structure, transport providers would be free to set their fares as they feel appropriate. For through fares using more than one operator, the operators should be encouraged to work together offer discount add-on fares so that the user only need buy one through ticket which will always be the lowest price. Where more than one operator offer the same journey, when sold off-vehicle, the user must always be offered the choice of lowest price or fastest journey or other enhancements such as additional comfort impartially. This way different operators could offer different levels of quality of service, the customer has a choice of going on the next vehicle, waiting for a cheaper one, or one with the required facilities. When users travel on different vehicles to that for which the ticket purchased it will be up to the operator to collect and exchange the users ticket (and any excess fare), returning the ticket for reallocation of the revenue.
(d) Ensuring Free Fair Competition With No Abuse of Market
Position Optimum State Involvement
The STA should be given responsibility of ensuring free fair competition and trading practices in the passenger market.
The conferences proposed above for planning timetables and ticketing should reduce the opportunity for unfair trading to a minimum. Complaints of unfair trading including predatory pricing or any other malpractice should be brought before a STA hearing. If serious and a threat to other operators viability the STA should have the power to order a standard price and service to be set while investigated, so that competitors are not driven out of business. If found guilty sanctions should include unlimited compensation to those damaged (including customers if necessary) and in the worst cases handing over company assets and services to a more responsible operator. This should prevent a repeat of the Darlington bus fiasco or driving smaller airlines out of business.
In the freight market, the existing laws and institutions should maintain fair-trading.
(e) Ensuring Safe Healthy Transport – Optimum State Involvement
The State should set safety standards based on categories e.g. deaths, serious injuries, property damage etc. For each category a tough target of number of passenger or tonne miles per event should be set which will be the same for every mode, instead of the current targets which are 5 times less stringent for road than for rail.
To achieve these targets the existing rules and if necessary more stringent rules should be set carrying the force of law e.g. The Highway Code and the Railway Rulebook.
The safety targets may be revised tougher with the development of technology, targets must be equal for different modes, one mode must not be able to gain commercial advantage by having cheaper safety practices, e.g. one driving test for life for road vehicle drivers yet an examination every two years for train drivers. Also note within the shipping mode, differing safety standards resulted in flags of convenience where operators take advantage of cheaper to implement safety regulations than in their home country.
Although pollution from transport should be much reduced by charging its
full external costs (Part
2), there will still be the requirement of the State to set and monitor
tough emission standards.
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