The Government should legislate for a system of railway bonds on which interest would be tax-free. These would be issued for or by different parts of the rail network, so that, for instance, commuters on the Fenchurch Street-Southend line could buy bonds whose proceeds would be earmarked for capital improvements on that line.
Similarly, people in the West Midlands could subscribe to a bond issue to build the planned West Midlands Metro, accepted by the Government as a good investment but delayed by budgetary cutbacks.
Bond issues would be open to all purchasers, but would give commuters, residents, businesses and local authorities a chance to 'vote with their cash' for improvements in their localities, as well as giving them a tax-free return of, say, 4 per cent on their investment.
The principle of tax-free investment for prescribed purposes is already well established in, for instance, PEPs, Tessas and business expansion schemes. Rail bonds, if given the margins of return and promotional push afforded past privatisation issues, could scarcely fail to attract a substantial inflow of capital. This could transform both the investment prospects of public transport and morale in a battered and investment-starved sector.
The bond system could work with Mr MacGregor's commercialised railways, provided at least a reversion of the capital assets so funded were reserved to public or publicly accountable bodies. It would arguably command greater public support if the Government simply used the tax-free bait to fund our present system.