This paper reviews the system of rail freight grants in Britain, its performance prior to the vesting of the Strategic Rail Authority (SRA) and describes the enhanced role for grants under the SRA's freight strategy which aims to grow rail freight and market share. Until the introduction of FFGs in 1974, there was no specific rail freight support in Britain. Substantial capital investment was undertaken under the 1955 Modernisation Programme and subsequently but not specifically targeted at freight. The key reason for rail freight grants is to encourage freight to switch from road to rail because of the large external disbenefits associated with the growth of road haulage. These disbenefits are represented in proxy by the values used for lorry miles switched to rail, last reviewed in 1996 and now being revisited by the SRA. The dominance of road freight and consequent scale of external disbenefits is the result of many years of unequal competition between road and rail and of structural changes in the British economy. Raising freight mode share is a particularly tough challenge which requires great care in allocation of public funds and much parallel work to improve Britain's rail freight offer.
Abstract