The cost-of-living crisis is likely to get worse this winter, with the greatest consequences for the poorest. Of course, one of the biggest issues has been the rise energy costs and, in response, the government has capped energy bills to £2,500 for the average household at an estimated cost of £150 billion over the next two years (in the same period, UK gas producers and electricity generators are likely to make profits of £170 million).
The government has decided that the taxpayer can well afford to pay for it through future borrowing (rather than tax rises). The government has so far avoided scrutiny by the Office of Budget Responsibility so instead we have to imagine the back-of the envelope calculations being done in Number 11.
Repayment term? Let’s say 25 years.
Average interest rate? 3% per annum if we’re lucky?
Punch the numbers into excel on the old Windows 10: £150 billion borrowed – that’ll be £68 billion in interest with total payments of £30.8 billion per year
Dividing that between 34 million tax payers gives £905 per taxpayer each year for the next 25 years. That’s a whopping £23,527 each. The numbers here won’t be exact but show the order of magnitude of the cost this decision will cost us.
The government judges that we can afford this (assuming that you a tax payer – if you’re not you may not care). But using the same logic, what else can we afford that would limit the cost-of-living crisis and support the impressive growth ambitions wished by government (and the opposition).
Getting Britain moving
The current chancellor has told the Treasury to focus on economic growth with a target of 2.5% per year. Here is a key question: how is this going to happen if people can’t afford to get to work?
According to the Health Foundation, 6% of workers turn down a job or don’t apply for it in the first place because of transport problems – this rises to 18% for those who are unemployed. One reason could be that in while the transport system is designed for cars, a third of households don’t have access to one. For those that do, it’s about to get a whole lot worse. According to the RAC, growth in the cost of motoring over the last 10 years has been consistently below the cost of living; between 2015 and 2017 it even dropped by 5%. This made cars increasingly affordable and shielded car owners from the real costs of commuting which by 2021 was just 10% higher than 2012, only half the full cost of living rise over the same period.
A year on, motoring costs are rising much faster than the average cost of living. RAC figures show that motoring costs are now 39% higher than in 2012. In comparison, wages have gone up only 32%. It’s easy to see that even middle income earners are about to find out that they can’t afford to drive their car.
Is there an alternative?
The problem with buses
People could take the bus, except that many view them as too expensive, unreliable and don’t even go where they want them to. Unlike cars, the cost of taking a bus has increased by 66% since 2012, massively increasing in 2017. As this happened, the number of users dropped leading to services being cut and a self-fulfilling downward spiral of users. This will be exacerbated this autumn when COVID-19 subsidies end, and more bus services are cut.
One visionary is Andy Burnham, the Mayor of Greater Manchester, who has pledged to create a London-style network with maximum fares of £1 for a child and £2 for an adult, anywhere in Greater Manchester. At the same time, he’s invested in active travel infrastructure and appointed Dame Sarah Storey as the new Active Travel Commissioner (replacing Chris Boardman). The vision? To give people as many low-cost transport options as possible to take them where they want.
What if we were to go one step further? Why not make all buses free for two years?
Apart from cost (which we will come to later) what would the consequences be?
Firstly, free buses would ensure that the third of us without cars could get to work; this would also help middle-income earners suddenly finding cars a luxury they can’t afford. While this sorts out the short-term problem, 2 years of free buses would also kick-start a transport revolution to support the kind of economic growth the politicians seem to want.
Private sector bus companies would have time to sort out the perceived and real problems of public transport – in any deal, this should be mandated. With fewer cars on the road, local authorities would get the chance to improve the road infrastructure with less inconvenience to commuters, using the £2 billion of active travel funding already promised by the government. Bus lanes, pavements, crossings and cycle routes could all be improved in the trial period to create alternatives to the car which is increasingly seen as a harmful polluter, especially and ironically for those least able to drive (children, people living in deprived areas).
How much would this cost, you ask? If we were to use the same borrowing approach taken by the government on energy and taxes, then funding all the buses in Great Britain (not including London, which has its own deal) would cost around £7.3 billion for two years. This is around £12 per year per taxpayer over 25 years (£312 in total), a little over 1% of the cost of the energy cap giveaway.
The crux is that it would help people without a car or who can’t afford one to get to work; it would reduce congestion for those who do use one; and it would set up our transport system for the future and help economic growth. I haven’t even mentioned the positive impact it would have on the nation’s health – that’s for another time.
Not only does this seem sensible, in contrast to other spending commitments it appears eminently affordable. We really do need to get Britain moving.