Windfall fail

Andy McDonald, the shadow transport secretary, has suggested introducing a higher ‘windfall’ tax (a tax on profits) made by train operating companies (TOCs), supposedly to pay for a fare freeze for commuters. This will punish both those commuters (who tend to be wealthier than the average Brit already), as well as all taxpayers.

The most recent figures show that TOCs total income less expenditure of £271 million. As a proportion of passenger income, this is just 2.9 per cent. They are clearly not robber barons exploiting commuters. And, of course, they are paying corporation tax and other taxes already.

Introducing a windfall tax will discourage companies from competing for a franchise in the first place. We have already seen a steep, and worrying, reduction in those who want to provide services. With even fewer in the running, all taxpayers, whether they get the train or not, would be liable if a franchise goes wrong. So even more taxpayers’ cash will have to be found to make train operating companies’ ventures viable in the first place.

The idea that renationalisation is the answer is already laughable. Almost two thirds of delays are caused by Network Rail (ie. the nationalised part of the railways). Furthermore, the end of British Rail has seen a huge growth in passenger numbers, with better rolling stock and much-improved accountability and service than the dark days of the past. That is not to mention the massive private sector investment that is finally starting to bear fruit in London Bridge, Kings Cross and large regional hubs.

Rises in ticket prices based on changes to inflation are understandably frustrating for commuters already struggling under the highest tax burden in the UK for 49 years. But knee-jerk measures like that proposed by Mr. McDonald will only add to commuters’ annoyance and cost us all more money further down the track.