Publication details

Railway Finance in Europe

Authors

NASH Christopher Alfred

Year of publication 2017
Type Article in Periodical
Magazine / Source Review of Network Economics
MU Faculty or unit

Faculty of Economics and Administration

Citation
Web https://www.degruyter.com/view/journals/rne/16/2/rne.16.issue-2.xml
Doi http://dx.doi.org/10.1515/rne-2017-0039
Keywords CAPACITY; COMPETITION; COUNTRIES; SERVICES; SECTOR; POLICY; COSTS
Description Governments make substantial contributions to the finance of railways in Europe. This paper first considers the possible justifications for subsidies - namely normalisation of accounts, public service obligations, economies of density, relief of externalities on other modes, wider economic benefits and option values. It then considers the alternative ways of giving subsidies in the form of contributions to infrastructure costs, investment grants and subsidies to services. It concludes that there are good reasons for subsidising railways - in particular a first best argument for subsidising infrastructure will usually exist and a failure to do so will lead to fewer services being operated than are economically justified - but there is a need to ensure subsidies are used efficiently. Ways of achieving this include the setting of clear objectives and financial constraints, decentralisation of decision taking to focussed sector management, regulation and benchmarking of infrastructure costs and the introduction of competition for and in the market. Together these should reduce or eliminate the link between subsidies and inefficiency observed in earlier times.

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