Transport Economics Conference 2015

Ben White

18th September 2015

On Friday 18th September, I took my Upper Sixth economists to the annual 'Transport Economics Conference' at the University of Huddersfield.

Dr David Warnock-Smith introduced the conference by considering the state of transport in Britain against the rest of Europe. Comparable rail fares between the UK and other parts of the EU revealed that rail fares for commuting vary widely between countries. Indeed commuting costs for a UK worker can take cost up to 17% wages whilst they make up only 6% in Spain. In discussing the reasons for such differentials, relative demand, relative exchange rates, government regulations referring to road, rail and air externalities were all considered.

We are on route, but not yet achieving achieving the goal of reducing CO2 emissions to the EU's stated targets, current solutions have not provided the answer! Harmonised conditions for regulation in the European airline industries have been a fair success story of aiming for and achieving parity for the different countries. As a result, competition has significantly increased: "Easyjet is a product of EU's deregulation and would not exist without these market changes", air fares as a result have significantly decreased over the past decade.

Road haulage has struggled to harmonise policies due to vast differences in domestic transport companies operating under individual laws, for example UK roads allow lorries carrying a maximum capacity of 44 tonnes whilst in Sweden the limit is raised to 64 tonnes.

Eric Njoya then asked us to consider the current crisis surrounding UK airports and the fact that they are close to maximum capacity (Heathrow is at 98%, Gatwick at 85%). In 2014, the UK handled 248million passengers with London handling 61% of this. Options include a second runway at Gatwick, an extra at Heathrow or an extension of Heathrow's current runways. Doing nothing is not an answer! Whether demand forecasting, CBA or EIA is used to help, the decision is not an easy one - externalities, land ownership and nearby housing issues make the decision a difficult one. If capacity is limited in the long run, there is substantial risk that the aviation benefits, investment, business transactions and productive firms will be lost to alternative locations.

Dr Alexandros Nikitas then introduced the uncertain world of driverless cars that will dramatically transform the urban development as we know it. Virtually every car manufacturer in the world is investing heavily in driverless technology, particularly as consumers place more and more trust in automated vehicles. Potential benefits included safety aspects, greater efficiency, environmental benefits, potential for revolutionising both public transport services and car ownership. Yet the fears over connectivity, equity, technology, ownership, socio-economic, road traffic and modal change amongst many others means that the future landscape is very, very uncertain.

Professor Colin Bamford finished the conference with a session on bringing the views on privatisation and deregulation up to date. The benefits of a deregulated UK market have been the emergence of many of the big companies that offer passenger transport services as we know them today. Are the gains from privatisation and deregulation truly beneficial to all? The market dominance in some markets and obvious price discrimination at peak periods would say not. Excluding London, passenger demand has continued to fall consistently, fare levels have increased well above the rate of inflation and the overall structure is often a oligopolistic or monopolistic; Stagecoach in particular have had several referrals to the OFT. On the rail front, the controversial bidding process for 21 franchises on the rail network makes things very complicated indeed. Is it fair to say that the airline industry have been winners, the rail network negligible and the bus industry losers? Discuss!

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