Britain's transport policy in deep crisis

Allister Heath

BRITAIN’S transport policy is in chaos. This is hardly news, you might say, but the issue is once again at the fore. It is clear that there is a big problem with the way the rail franchises have been allocated. Firms have an incentive to bid too much for a franchise because they know that the costs of failure are very low; taking their cue from big banks as well as the government, the rail firms have set up off-balance sheet vehicles in which the liabilities for the franchises are ring-fenced. Bottom line: they can walk away at a very low cost, knowing that the government will always nationalise a franchise. This is a disgraceful system, infected by moral hazard, which needs to be reformed. The problem is not that private firms are involved; the problem is the way the system is structured.

If National Express’s shareholders have any sense, they will ask their management – minus Richard Bowker, who has quit as CEO and who one must hope will do better in Abu Dhabi than he has done in Britain – to open talks with FirstGroup. The latter recently made a very informal approach, which was unceremoniously and stupidly rebuffed. FirstGroup has the merits of being a much better managed company.

But we are facing another, altogether more predictable crisis. The dire state of the public finances means that there are growing chances of swingeing cuts to infrastructure projects. Spending on transport has risen substantially in real terms since 1999 from £9.4bn in 1999-00 to £20.6bn in 2007-08. This is about to be reversed, which is likely to mean delays to Crossrail and just about everything else. Most readers of this newspaper commute to work by public transport – but we shouldn’t forget that cars are by far the most important means of transport, yet they too have been woefully neglected in recent years. Road transport accounts for 82 per cent of passenger travel and around 63 per cent of freight traffic. A reliable road network is therefore particularly crucial for our quality of life and our economic competitiveness. Yet the UK has fewer miles of motorway per car than all other major European economies and less than half the EU average.

But with Gordon Brown’s finances in an unimaginably bad state, expect the transport budget to bear the brunt of the looming cuts.


It is hard to see what all the fuss was about with Marks & Spencer yesterday. The news that its like-for-like sales fell yet again – this time by 1.4 per cent in the 13 weeks to 27 June – was greeted with a cheer in the City, which was worried that the result would be even worse. For some reason, Sir Stuart Rose is always able to get away with a much worse performance than his rivals. Had it been Tesco’s Sir Terry Leahy or J Sainsbury’s Justin King who had unveiled such poor results, there would have been outrage. Results were boosted by the timing of Easter, weather conditions and weak comparables. Underlying sales in general merchandise were down 2.4 per cent; underlying food sales slumped by 0.5 per cent in a buoyant market. Every large supermarket chain is doing well apart from M&S; its strategy to use margin-busting promotions (Rose said gross margins would drop 125-175 basis points) to drive sales makes sense but has yet to do the trick. Rose is lucky; for all the mounting pressure, he still seems to walk on water.