Comments tothe Keynote
LectureDr. Hironori Kato
Department of Civil Engineering
The University of Tokyo
1Photo: Hironori KatoMy Recent Experiences in Using UK’s Rail• I traveled to Leeds from London by rail on 2nd November 2023.
• In a return trip, I met a rail service disruption caused by blackout
under an attack of Storm Ciarán to UK.
Weather Forecast in BBC news on 2nd Nov 2023

Live Report in BBC news on 2nd Nov 2023

2Photos: Hironori KatoHigh Inflation and Rail• HS2 was scrapped in UK. One of the reasons is “huge inflation incosts.”• I also found the extremely high cost of food and stay in UK lastyear.
• Recently, one of the main policy agenda for many governments is
how to manage high inflation after Covid 19.
• Many infrastructure investment projects including railway projects
have suffered from cost escalation under high inflation also inJapan.
3International Comparative Study on Urban
Rail Funding by Xuto et al. (2023)

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Source: Xuto et al. (2023) https://doi.org/10.1016/j.tranpol.2022.10.005

Discussion with Prof. Graham (ICL)
Meeting with Prof. Graham on 31st Oct 2023

Queen’s Tower of Imperial College London

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Photos: Hironori Kato

UK’s High Inflation in Post-COVID Period

CPIH=Consumer Prices Index including owner occupiers' housing costs
Source: Office for National Statistics, UK

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https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/l55o/mm23

What are Impacts of High Inflation on Rail?
Compound effect for rail operators• Cost escalation in railway industry• Capital and labor costs may increase under high inflation.
→ “Operating cost (particularly employee wages) may be allowed toescalate higher than inflation” (Xuto et al., 2023)• Fare control by transport agency• “There is considerable political pressure to try to control fare growth to
reduce cost of living for people.” (Xuto et al., 2023)→ Rail fare cannot be increased under the political pressure.

Operation cost coverage ratio should decline7

UK’s Experiences of High Inflation in 1970s• Oil price shocks in 1973 and 1979 contributed to exceptionally high inflation rates.
• Inflation rose sharply in the 1970s before falling back in the 1980s

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Source: Office for National Statistics, UK (2022)

Operation Cost Coverage in London Underground9

Source: Xuto et al. (2023) https://doi.org/10.1016/j.tranpol.2022.10.005

Consequence of High Inflationin London Underground in 1970s• London needed substantial subsidies for the first time during the1970s.
• However, there can also be movement in the opposite direction:• “High inflation periods often coincide with economic difficulties in thecountry, with constrained government finances” (Xuto et al., 2023)→“Government funding is cut back and/or redirected to higher priorityspendings.” (Xuto et al., 2023)

Finally, London had raised its fares and gradually controlled
costs with subsidy.
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Dynamics of Fare in London Underground11

Source: Xuto et al. (2023) https://doi.org/10.1016/j.tranpol.2022.10.005

Question• London Underground survived the high inflation throughfare and cost controls in 1970s.
• UK has experienced high inflation in 1989-91 again, butLondon Underground overcome it without fare escalation.

• Meanwhile, HS2 was cancelled in 2023.
• High inflation? Political reason? No clear vision?

“What are lessons from UK’s experiences to Japan?”12