MPs urged to halt rail subsidies

Few current Government rail schemes make economic sense, a free market think tank chief has told MPs.

Rail policy seemed to reflect "a thinly veiled version of Soviet-style central planning", Dr Richard Wellings, deputy editorial director of the Institute of Economic Affairs said.

Rail planning was being "hugely distorted" by Government subsidies to the rail industry, Dr Wellings told the House of Commons Transport Committee.

Such subsidies should be phased out and markets should be liberalised so rail companies could make money from property development, he said.

Dr Wellings said rail scheme announcements seemed to be more based on political considerations rather than economic ones.

He said the recent announcement of electrification of rail lines in South Wales had come in a rail area "already hugely subsidised".

Dr Wellings went on: "Few rail schemes make economic sense and the worst example of this is (the London to Birmingham high-speed rail plan) HS2. What we have is a thinly veiled version of Soviet-style central planning here. These people can't make sensible decisions."

He continued: "I would be sceptical as to whether huge rail cost savings can be delivered unless there are big structural changes. Politicians want to retain control of the railways. In many ways, rail has been a sham privatisation."

Network Rail group strategy director Paul Plummer told the committee that rail subsidies, which were around £6 billion a year, were now "closer to £4 billion", with the hope that by 2019 the annual figure would be £2 billion. Mr Plummer added that having no subsidies could lead to a "substantial increase in fares" and a cutback in some commuter services.

Association of Train Operating Companies chief executive Michael Roberts told the committee that rail firms believed there was "an ongoing case for some degree of public support for the railways". He added that for every £1 spent on rail "the country benefits by four-and-a-half times that amount".