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16 June 2015

Transport subsidies are an inequality issue. No, really

What government chooses to subsidise - trains - and what it chooses to cut - buses - says more about its commitment to reducing inequality than any number of press releases and warm words.

By Tim Stacey

With the Budget fast approaching there is widespread speculation over government spending plans and where the promised cuts will fall. We know further education, public health and other areas are seeing their funding greatly reduced, in some instances fueling intense debate. But other areas are receiving comparatively little attention.

The latest records show the government spends £5.4bn on public transport subsidies. That’s more than double the amount spent on NHS A&E services across the country, so hardly small change. And yet the value of this subsidy seems to have gone unchallenged. In fact transport subsidies have effectively been guaranteed for the future with promises to freeze rail fares.

Transport is often seen as an unglamorous area of policy and it’s never likely to generate the same headlines as our health and education systems. But beyond the crowded commuter services and rising fares there is another important and worrying story not being told. The way we subsidise transport is increasing inequality. In our new report Taken for a Ride the Equality Trust shows just how transport subsidy is spent and exactly who benefits. In total the richest ten per cent of households receive £978 million in transport subsidy; over three times more than the £297 million received by the poorest ten per cent. When broken down by household, and you adjust for the fact that different households are different sizes, the richest ten per cent still gain nearly double the subsidy of the poorest, £294 per year per household compared to just £162.

One of the reasons this happens is that the government spends large amounts on subsidising rail travel in London and the South East. For the rail system alone a household in the richest ten per cent benefits from over three and a half times as much subsidy as one in the poorest ten per cent. And a household in London benefits from almost four times as much rail subsidy as a household in Wales. On the other hand the benefit from subsidy for bus travel is much more evenly distributed across income groups, but is much smaller than the subsidy for rail travel.

The consequences of this uneven subsidy are profound. The poorest are effectively being locked out of access to good jobs, schools, health services and cultural activities. We’re spending an awful lot of money to get relatively wealthy people into good jobs, but not so much helping those in real need.

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This inequality of travel subsidy is not a recent development either, for most of the last 20 years the richest ten per cent has received over four times the level of subsidy of the poorest ten per cent. However, it’s far from being a necessary part of our transport system, and there are many better options open to the government which wouldn’t perpetuate existing inequality. It could use the money earmarked for subsidies to invest more in transport infrastructure in poor areas. In doing so it could help rejuvenate these areas rather than spending more in places that are already wealthy. It could invest more in types of transport used by people on lower incomes (like the bus network) and less on transport that people on low incomes can’t afford even after it’s been heavily subsidized (like rail). Or it could even give the subsidy directly to people on low incomes for use on transport.

The fact that these sorts of solutions haven’t been sufficiently considered is largely due to a failure of public policy making. The process for considering new projects fails to ask the important question of what the projects effects will be on existing inequalities. Largely because the Government and its constituent departments in turn fail to consider the large and growing evidence base of the harmful social and economic effects of inequality.

A project which doesn’t harm the poorest, but involves boosting the incomes of the richest, is seen as a net positive because the question of increased inequality simply isn’t asked.

Our transport system is vital to us all. It’s how we get to work, send our kids to school, how we shop and generally move around. It literally binds the nation together. But despite this it is still failing many of our poorest. The only way to avoid this in future is for Government to embed inequality reduction into all of its decisions from transport, to education to healthcare. Until that happens, we’re on a road to greater inequality. 

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