The head of the economic watchdog said today that British taxpayers may be required to subsidise public transport “in perpetuity” if they want services to remain at pre-pandemic levels due to the rise of working from home.
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 OBR (Office for Budget Responsibility), stated that ticket revenues could never recover since commuters split their time home and work.
Ministers were forced by emergency measures to implement in 2020, as lockdowns brought about a halt to business travel while millions stayed at home.
Hughes also warned Rishi Sunak about his Budget plans. He said that the Chancellor might have difficulty reaching his targets of reducing the deficit and balancing it in three years.
“Assumptions regarding when ticket revenues into transport system will recover to pre-pandemic levels, I think, should be under constant review.
“It may turn out that there is a permanent hole between the rail system and the Underground in London. Local transport systems will also need to be subsidized in perpetuity if services are not to be cut.
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.
Asking Mr Hughes why UK officials stated that the UK was in for a wild ride in terms of achieving the new fiscal regulations, the committee asked him. Hughes responded that there is very little leeway.
He stated that the Chancellor had set new fiscal rules for this budget. These include a reduction in debt as a percentage GDP (gross domestic products) by 2024/25 and a balance to the current budget.
“The headroom he left aside to reach these targets is the second-lowest headroom any chancellor has had for setting fiscal rules.
He stated that a mere 1 percent interest rate rise could easily wipe the Chancellor’s headroom.