OBR chief: Rail services may need permanent subsidies if WFH continues

OBR chief warns taxpayer may have to subsidise rail operators PERMANENTLY to keep services at pre-pandemic levels if people continue to work from home

  • Richard Hughes, from the Office for Budget Responsibility faced MPs today 
  • He said ticket revenues may never recover as commuters split working week 
  • Warned ‘it remains to be seen what the financial model … is in the long term’

British taxpayers may have to subsidise public transport ‘in perpetuity’ if services are to remain at pre-pandemic levels thanks to the growth of working from home, the head of the economic watchdog warned today.

Richard Hughes, chairman of the Office for Budget Responsibility (OBR), told MPs that ticket revenues may never recover as commuters split their time between the office and home.

Ministers were forced to implement emergency measures in 2020 as lockdowns brought business travel almost to a complete halt as millions stayed at home.

And while numbers have picked up since the end of the last lockdown they are yet to hit pre-pandemic levels as commuters split their workplace and stagger their return to the office.

Mr Hughes told the Treasury Select Committee this morning that national rail, the London Underground and local public transport could all be affected, saying ‘it remains to be seen what the financial model for public transport is in the long term’. 

‘We don’t know to what extent people are going to start returning to work five days a week. Revealed preference seems to suggest people are going to work from home more,’ he said. 

Richard Hughes, chairman of the Office for Budget Responsibility (OBR), told MPs that ticket revenues may never recover as commuters split their time between the office and home.

Ministers were forced to implement emergency measures in 2020 as lockdowns brought business travel almost to a complete halt as millions stayed at home.

Mr Hughes also made a warning about Rishi Sunak’s Budget plans, saying the Chancellor could struggle to reach his targets of both reducing debt and balancing the current budget deficit in three years.

‘Assumptions about when ticket revenues into the transport system recover to pre-pandemic levels I think have to be kept under constant review.

‘It may be the case there is a permanent hole in the rail system, the Underground in London and local transport systems, which are going to have to be subsidised in perpetuity if they’re not going to cut services.’

Mr Hughes also made a warning about Rishi Sunak’s Budget plans, saying the Chancellor could struggle to reach his targets of both reducing debt and balancing the current budget deficit in three years.

Asked by MPs on the committee why the officials said the UK was in for a ‘wild ride’ in terms of achieving the new fiscal rules, Mr Hughes said there is little wiggle room.

‘The Chancellor set himself some new fiscal rules in this budget and they are to get debt falling as a share of GDP (gross domestic product) by 2024/25 and balance the current budget,’ he said.

‘The headroom he set aside to reach those targets is the second-lowest headroom that any chancellor has had when setting fiscal rules.’

He added: ‘Just a 1 per cent interest rate rise could easily wipe out the Chancellor’s headroom.’

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