New figures show that 1,625m passenger journeys were made on UK railways in the 12 months ending September this year. This compares with 800m in 1997.
Some argue this shows the success of railway privatisation brought about by the Railways Act 1993, passed during the government of Conservative Party UK Prime Minister John Major. Others say it doesn’t
What’s indisputable is that more people are travelling by rail more often despite higher fares in real terms and further growth in car ownership.
Population and economic growth since 1997 probably explains much of the increase. But there is another factor.
Studies show that people living in cities tend to use railways more. The number of people living in towns and cities in the UK has grown by no less than 4 million since the mid-1990s. London’s population alone has grown by almost 1 million since 1996.
People living in towns with reasonable public transport have less reason to own a car and pay a higher price for parking it. Getting out of major cities can be more time consuming than going by rail. And those travelling to larger towns can find it more convenient to arrive in urban centres where taxis and buses are located.
The question therefore needs to be asked: why are London in particular and larger UK towns in general growing so rapidly when the cost of buying and renting is so much lower in smaller towns and rural areas?
The answer is that the rise of service industries which account for more than 80 per cent of employment in the UK has fuelled population growth in urban areas. This is partly because service workers create value by interacting with other people and are more productive when this happens promiscuously and easily, as is the case in cities.
But another factor is at work. Many of the largest service industries employers are based in London and larger UK towns. This is not natural. It is the by-product of the rise of intangible capital as the dominant factor in advanced economies.
Companies based on intangible capital can be located anywhere. They are often based in London not because it makes economic sense. It is because it suits the lifestyle of senior managers. Only very well-paid people can now afford to rent or buy decent housing in the British capital. The fact that so many are obliged to live there reflects the choices of the people at the top, not the workings of the market.
Demand for railways is the product of a complex mixture of factors. But there is evidence it will continue to grow robustly in the UK for the indefinite future. This is raising huge questions about how soaring demand can be addressed, the scale of required investment and where it should be directed.
Britain’s biggest new rail project is High Speed 2 (HS2). Its first phase is to run between London Euston and the proposed new Birmingham Curzon Street station. Phase two will create two branch lines: a western section to Manchester Piccadilly, and an eastern section to the proposed Leeds New Lane station via the East Midlands Hub serving Derby, Nottingham and Leicester) and the Meadowhall Interchange, serving Sheffield. It’s going to cost about $60bn and is one of the biggest infrastructure projects in British history.
HS2 has been the subject of intense scrutiny. Objections to it are based either on its likely environmental impact or the argument that this money should be used to improve rail services in other parts of the UK.
There is little doubt that it will mainly help those living and working in London and intensify demand for housing and office space in the city.
HS2 will have a substantial and long-term impact on the British economy and British society. Railways therefore matter for policymakers to an extent that they haven’t for more than 70 years.
This should encourage economists to focus attention on the rise of Britain’s urban population, the disproportionate increase in the number of people living in the London and the extent to which this is the consequence of the rise of intangible capital, something which is neither natural nor, in many cases, acceptable.