UK mini budget on Friday or a fiscal non-event for rail freight sector
Rail freight has been feeling the pinch as much as any other sector in the UK economy. The direct costs of operations have been going down the fast line like an express train running late, while every freight customer has been experiencing costs and inflationary pressures at a level not seen since the early nineteen eighties. It could be time for the government to step in with direct support, but no one in the sector is holding their breath.
After one hiatus after another, the UK government gets down to work this week, just before breaking for the round of party conferences. Before that, the new chancellor will manage to fit in a quick budget. With the ‘cost of everything’ crisis threatening to derail the entire economy, what can rail freight hope for in the first dispatch from number eleven Downing Street?
Energy legislation could alleviate operational costs
Friday’s speech from the new chancellor of the exchequer will be a maiden speech like no other. Kwasi Kwarteng is no stranger to the parliamentary dispatch box. Still, the House of Commons will be less interested in his oratory skills and more interested in his prowess at balancing the national books. What that can do for rail freight is still the subject of speculation.
The new prime minister, Liz Truss, has already stolen some of the chancellor’s thunder. She has already announced that huge sums will be spent this winter supporting energy bills for residential and business premises. Whether that might meaningfully reduce running costs for rail freight is not yet known – the details of the package have not been laid out yet. It would, however, be very concerning if the rising energy costs forced rail freight operators to take radical action, like suspending electric traction operations or reconsidering pricing to offset fuel costs.
Freeze on taxes
The slim margins in the rail freight sector make any legislative changes critically important. The chancellor has already dropped heavy hints that there will be significant tax cuts in the Friday statement. However, those tax reliefs will likely be aimed at personal taxation to relieve household costs immediately. Any more comprehensive economic benefit will have to feed through later.
The most likely outcome that the rail freight industry can look forward to enjoying is the status quo. That means a somewhat less than exciting freeze on corporation taxes and the reversal of national insurance rises brought in by the previous prime minister Boris Johnson. In fairness, as any financial officer will agree, anything left on the top line benefits the bottom line. Stopping that express train may prove more complex than the new chancellor imagines. He would do worse than seek the experience of the rail industry to set the right signals in that respect.