Criteria for local transport subsidies

Governments have rarely been content to leave the provision of public transport services entirely to the market. Competition has been regulated and increasingly services have been subsidized from public funds. However, the criteria for such subsidies have been a continuing source of debate. Economists have tended to emphasize efficiency criteria and advocated the use of cost‐benefit analysis, but, for a variety of reasons, in the U.K. at least, this approach does not seem to have played a major role in the allocation of subsidies. Others have advocated more needs‐based approaches. Whilst these have been tried, they also have their limitations. The first few sections of the paper, therefore, review the development of these approaches in the U.K. and consider their shortcomings from the point of view of deciding on transport subsidies. In the latter part of the paper it is suggested that developments in the appraisal of health care procedures, particularly in the use of cost‐utility techniques, indicate a possible alternative approach. The approach in the health context is outlined and it is demonstrated how it might be applied to the appraisal of local transport services.