There's been a lot of talk lately about new rail investment. Projects like HS2, upgrades to lines, and big projects like the rebuilding at Reading Station. But almost nothing is said about who really benefits. Where does all that investment go?
During construction of course, it means more jobs and payments of money to workers, suppliers and construction industry bosses - but that effect is temporary. What's left should be a valuable investment. In the first instance, that investment goes to providing higher rail capacity, more reliable services, shorter journey time. In short, it provides a higher value service.
So what effect does this have on fares? As always, it comes down to supply and demand. People are willing to pay more for a more valuable service. This means that the demand is higher. On the supply side, operators have more seats to sell. This may encourage them to supply them at a lower price. But why should they? The demand has gone up, and there was previously overcrowding, suggesting some people were probably discouraged from traveling before. The most likely outcome is that the operators will wish to increase fares, but be capped by the rail regulator. Do not expect all this investment (subsidised or not) to reduce fares.
But there's something else going on. A better train service from towns into major centres of employment, like London makes those towns more desirable to commute from. The immediate effect is that commuters will have more comfort, more leisure time - or more time at work in the office. The improved conditions will attract people to the area. People will be willing and able to pay a bit more for their mortgages, tenants will be willing and able to pay higher rents to landlords. House prices will rise. Further from London, people will be willing to commute to the city who previously didn't realistically have the option. This is where the prices will rise the most.
Who benefits from rising house prices? Existing home owners might be able to sell out, capitalising these gains. But most house purchases are made with the help of a mortgage. Higher house prices mean bigger mortgages, and more interest paid to banks. And of course better bank security on existing mortgages.
In summary, all this rail investment goes into
- higher house prices
- higher rent payments to landlords
- higher mortgage payments
- higher bank bonuses
plus ça change, plus c'est la même chose.
1 comments:
Not sure about the French at the end...but this is just a brilliant contemporary Georgist article.
Thank you, Adrian...fantastic!
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