Transport is a key factor in an economy. It is essential for an economy to function effectively and efficiently. We use different mode of transport in our every day lives such as bus, train, air etc. Moreover, we use some transport more regularly than the other depending on facilities, consumer needs and cost. E. g. we may prefer to use private motor car than a bus service because of the facilities and comfort it brings. There are other factors that affect the mode of transport such as time it takes to travel using a particular transport, the cost of using the transport, the distance we travel and flexibility.
In this essay I would like concentrate on recent trends on the demand for railway service in the U. K. Domestic passenger travel by mode, 1980-2003 diagram in the transport economics book shows that the overall demand for transport has increased over the past yeas. Railway transport also has increased after privatising in 1995, although rail transport is about 6 percent of the total transport share. Privatisation in railway also increased the demand for rail freight transport by 40%. Furthermore, this increased rail freight transport overall market share by 10%.
The reason for privatisation according to "new opportunities for British Rail" white paper 1992 is that- encourage better use of the railways by consumers, to provide high quality railway service, to generate new capital investment, to provide good responsiveness to customers needs and to give better value for money for rail users. The privatisation has encouraged 23 franchise companies to run the railway service including the famous National express group, Virgin rail group and Arriva Trans Ltd.
Many private railway companies were given huge amount of subsidies to keep the ticket cost down so that it encourages consumers to use the train services. The government also provided revenue to rail operating companies to support capital projects such as upgrading the west coast main line. One of government's aims is to get people out of private cars and encourage them to use public service. This reduces road congestion and helps the environment. The diagram above shows the affect of running a rail service without subsidies and with subsides.
Without subsides the rail ticket price will be high and number of ticket bought will be low. On the diagram the point "P" shows that the high price of the rail ticket without subsidy and the point Q shows that the number of ticket bought is low. The point P1 shows the low price ticket after subsidising and therefore increased number of ticket bought from Q to Q1. This allows more people to afford the ticket price and allow them to use the railway service more frequently.
After privatisation many mainline train operating companies ware able to use their monopoly through price discrimination. This is one of the reasons that have increased the train transport. Train companies were able to cut the price down ridiculously to fill the off-peak capacity. For example GNER Railway Company was able to offer off-peak return fare from Leeds to London Kings Cross for i?? 19 in September 2005. However, the standard class ticket was i?? 149. There are also other type of bargain tickets were available such as cheaper saver and business but they have travel limitations.
For example cheaper saver was available after 8pm. This type of deal is more beneficial for leisure travellers as their time is flexible. Therefore, this type of price discrimination encourages people use the railway service more. Transport allows people to do many jobs swiftly. However the situation is changing as traffic growth on all type of road in England is increasing gradually. For this reason the government would like to encourage people to use service such as train by privatising them in 1994.
By doing this the government was successful in getting more people to use train services. The improved quality of the service encouraged more people to use them. The government has targets such as relieving congestion in heavily populated areas and to invest on sustainable existing transport. For this reasons it has encouraged railway projects by funding them. Besides, the government subsidises the railway companies so that everyone can afford the tickets and take advantage of them.