Economics and Transport Policy

K.M. Gwilliam, P.J. Mackie

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351810531
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This book, first published in 1975, discusses the development of transport policy in the UK against a background of economic theory. It comprises a comprehensive review of transport policy both in urban and inter-urban situations from an economic standpoint. It provides the tools for analysis of policy changes in the transport sector.

PART I

Chapter 1

A STATISTICAL INTRODUCTION TO THE TRANSPORT SECTION

As a starting point let us set out some figures which show the order of magnitude of the transport sector.

OUTPUT AND EXPENDITURE

It is difficult to elicit from national product statistics a simple figure to indicate the great importance of transport within the economy, as transport elements are included, in an undistinguished form, in the recorded outputs of so many industries (e.g. communications, distribution trades, ‘construction’, etc.). However, the identity in national income accounting between total output and total expenditure allows us to obtain the impression we require by scanning expenditure patterns. This shows, in Table 1.1, that between 15 and 20% of national expenditure is accounted for by the transport sector.

Table 1.1 Expenditure on Transport and Total Expenditure (current prices) £M

	1960	1965	1968
Gross National Product at factor cost	22,817	31,342	36,975
Total users’ expenditure on road and rail transport	3,525	5,395	6,860
	(15.2%)	(17.4%)	(18.5%)
of which
Freight transport	1,730	2,520	2,985
Passenger transport	1,795	2,875	3,875

Sources:Annual Abstract of Statistics, Table 310
Highway Statistics, 1968, Table 55
Passenger Transport in Great Britain, 1970, Table 3

The statistics of Table 1.1 relate to all transport expenditures, by both persons and firms. In terms of consumers’ expenditure only, shown in Table 1.2 the proportion is a little smaller—around 10%— though like total expenditure on transport its significance has been rising over the last decade.

Table 1.2 Consumers’ Expenditure on Transport (current prices) £M

	1960	1965	1970
Private cars and motor cycles:
Purchases	568	697	980
Running costs	454	912	1,679
Total	1,022	1,609	2,659
Public transport:
Rail	145	170	232
Bus, coach, etc.	312	370	439
Other^1	115	201	354
Total	572	741	1,025
As % of total consumers’ expenditure:
Public transport	3.4	3.2	3.3
Motoring	6.0	7.0	8.5
Total	9.4	10.2	11.8

¹Expenditure on sea and air travel (including international travel), the hiring of taxis, and private hire vehicles.

Source: Passenger Transport in Great Britain, 1970, Table 3

CAPITAL EXPENDITURE

The importance of a sector may be gauged not only by its current expenditures but also by the share of national real investment for which it is responsible. As Table 1.3 shows, the transport industry has also taken between 15 and 20% of gross fixed capital formation during the last decade.

PUBLIC EXPENDITURE

Not only is the transport sector large, but it is one in which the government has a special role by virtue of its own direct activities.

Table 1.3 Gross Fixed Capital Formation in Transport (current prices) £M

	1960	1965	1970
Buses and coaches	22	29	42
Other road vehicles	306	408	535
Railway rolling stock	92	48	27
Ships	178	105	290
Aircraft	43	18	98
Roads	85	196	454
Other rail	78	74	66
Other air and shipping	12	29	51
Harbours, canals and docks	27	27	41
TOTAL TRANSPORT	843	934	1,599
As % of TOTAL	20.6%	14.9%	17.0%

Source: Annual Abstract of Statistics, 1971, Table 323

Thus, as Table 1.4 shows, transport is responsible for between 5 and 6% of public expenditure (i.e. direct government expenditure). This does not include the current expenditures (or outputs) of the nationalised transport industry.

Table 1.4 Transport and Public Expenditure (1971 Survey prices) £M

	Provisional Outturn 1970-71	Estimate 1975–76
Total public expenditure	23,823	26,740
of which
Roads and public lighting	816.8	1,067
Surface transport	201.1	223
Civil aviation and shipping	26.5	25
Nationalised industry capital expenditure—
Transport element	283.8	272
	1,328.2	1,587
As % of total public expenditure	(5.5%)	(6.0%)

Source: Public Expenditure to 1975–76. Cmnd 4829, 1971

Note: This table follows the conventions of the White Paper in excluding current expenditure by nationalised industries, but including their capital expenditure, and all current expenditure directly incurred by the central government.

The overall picture, then, is that transport is a large, and still growing part of consumers’ expenditure, public expenditure and total national expenditure and that although capital expenditure is more volatile, transport consistently accounts for nearly one fifth of national gross fixed capital formation.

INDUSTRIAL STRUCTURE

To complete this introductory picture the structure of the transport sector may be summarised. For freight transport, as Table 1.5 shows, total output has been rising steadily, roughly in line with GNP over the last fifteen years. But during this period the dominance of road transport has increased substantially, both in tonnage terms (from 75 to 85%) and more significantly in ton mileage (from 40 to 60%). Rail transport of freight has declined over the period, not only in relative, but also in absolute terms. Perhaps most surprising, however, is the large, though relatively declining, ton mileage performed by coastal shipping which performs a role in the UK not dissimilar to that performed in continental countries by inland waterways.

Table 1.5 Goods Transport in Great Britain

Source: Basic Road Statistics, 1973, quoting from Annual Abstract of Statistics and (1972) DOE estimates

For passenger transport, as Table 1.6 shows, the rate of growth has been even faster than that of national income, and this growth has been accounted for entirely by the growth in private road transport.

Table 1.6 Total Passenger Transport in Great Britain

Source: Passenger Transport in Great Britain, Table I, and (1972) Annual Abstract of Statistics, 1973

Passenger mileage by rail has remained approximately stable over the last fifteen years whilst that by bus has fallen by one third. In contrast, passenger mileage by car has increased by 1970 to over 350% of the level in 1955. These changes in market share have been accompanied by changes in the relative prices of the alternatives, as shown in Table 1.7. The costs of private transport have risen less rapidly than those of public transport, particularly of bus transport. Thus even the statistics suggest a vicious circle of relative decline in quantity of public transport followed by relative increase in price and so on.

Table 1.7 Passenger Transport: Cost to the Consumer

Index numbers of prices 1963 = 100
	1960	1965	1970
Railway fares	81	110	142
Bus and coach stage service fares	86	114	162
Prices of new and secondhand cars and motor cycles	115	99	117
Running costs of motor vehicles	93	109	137
Total consumer expenditure on all goods and services	92	106	134

Source: Passenger Transport in Great Britain, Table 4

These price trends for different kinds of transport service depend crucially on the prices of factor inputs. The relative increase of rail and bus fares over the decade is largely due to their relative labour intensiveness in a period of rising real wages. For the future there are two resource inputs, energy and land, which appear to be likely to command increased real prices. It is instructive, in conclusion of this chapter to look at the relative consumption of these inputs by various transport modes (Table 1.8).

Table 1.8 Transport Outputs per Unit of Selective Resource Inputs

	LAND	FUEL
	Passenger miles/hr/acre	Passenger miles/therm	Ton miles/therm
Car^a	3,100	17.8	—
Bus^b	28,900	147.0	—
Rail^b	10,100	153.0	66.7
Heavy load goods vehicle	—	—	100.0
Conventional aircraft^c	8,700	21.0	11.2

Source: Derived from I. C. Cheeseman; Transport Technology, A Hope for the Future’: University Transport Studies Group Conference, London, January 1973

Notes: ^aAssuming a load factor of 1.4 passengers per car, and 25 miles per gallon.

^bAssuming 60 % load factor.

^cAssuming 60 % load factor and 200 mile stage lengths.

In terms of use of land and fuel, public transport is clearly less prodigal than private transport. As between road and rail mode of public transport, however, there is less to choose and the differences shown in the table are likely to lie within the range of error of the assumptions concerning performance and load factors.

The picture that emerges from these statistics is that of a sector which has been growing very rapidly over the last quarter of a century, which has been experiencing very radical changes in structure and which might expect further changes in the future as the world resource situation changes.

Chapter 2

ECONOMIC OBJECTIVES

Formal definitions are not always particularly useful. Many things are easy to recognise but difficult to describe precisely and without ambiguity. Economics in general, and transport economics in particular, is a bit like that. So although we shall begin with a formal definition of our subject we shall only...