There must be a permanent end to above inflation fare increases

Whoever is in power after the General Election urgently needs to adopt a much fairer approach to ticket prices.

Whoever is in power after the General Election urgently needs to adopt a much fairer approach to ticket prices

Rail fares are going up again in January. The annual cycle of ticket price hikes attracts howls of anguish from all those who rely on the trains, and this year is no exception.

Consecutive governments have hung the case for increased fares on the need for passengers to pay a higher share of the cost of running the railway.

But there is a strong case for saying that this has now been achieved. Research carried our for Campaign for Better Transport suggests that by 2018 fares revenue will exceed operating costsand the government’s share of funding the railways will have fallen to just 20 per cent, down from 38 per cent in 2009.

Given the strong growth in passenger numbers, revenue will outstrip running costs without the need for fares hikes. But isn’t all this extra revenue funding investment in a better railway? And why are more people using the train if it is so expensive?

Last year the number of passenger journeys rose by 86m to 1.6 billion – an increase of 5.6 per cent. It is certainly true that major investment is going into the railways, but there is still a huge amount to do and not all passengers are getting a service which is up to scratch. Ask passengers trundling between Manchester and Sheffield on a dismal 30-year-old diesel Pacer train if they are getting value for their higher fares. The answer will be no.

The investment is great news, but much of it is making up for the failure of past administrations to invest in the network.

Rail is growing because it is in line with what people need. For example, around 1m people a day now arrive in London by train, city centre rail stations across the country are busier than ever, and plans for the Northern Powerhouse are based on improved rail connections. The country benefits hugely from its railways and this is increasing.

But are passengers getting a fare deal?

First, it’s important to note that there are two types of ticket prices – regulated and unregulated. Regulated fares are mainly season tickets, and the 2.5 per cent rise here is set by government policy. Unregulated fares are things like day returns and advance fares, and the 2.2 per cent increase here comes from the train operators who have been trumpeting in as the lowest increase in five years.

Also, look at season tickets. Back in September, the chancellor announced he was going to freeze regulted fares. But unlike the freeze in Road Fuel Duty for example, freezing rail fares actually means increasing them by 2.5 per cent. Since 2003, the formula the government has used to set fares is the July Retail Price Index plus 1 per cent. The ‘freeze’ comes from the ‘plus 1 per cent’ bit being dropped for the last two years.

Ditching above inflation rises is welcome and should be made permanent. But fares should also be based on a much more accurate measure of inflation – the Consumer Price Index (CPI).

Before you dismiss this as fiddling at the margins, note that between 1996 and 2011, the cumulative inflation rate shown by RPI was 53.6 per cent while that for CPI was 35.6 per cent. Over time, switching to CPI would save rail commuters hundred of pounds.

Just as significantly, the UK Statistics Authority certainly does not think government should be using RPI either. In March 2013, it announced that RPI would no longer be designated as a national statistic because it failed to meet international standards.

Moreover, the government seems to agree – when it’s handing out money, anyway. Since April 2011, tax credits, most benefits, public sector pensions and tax bands have risen in line with CPI rather than RPI.

The issue of industry-set fares is complicated. Train operators use a commercial strategy to set. As the Office of the Rail Regulator notes, “Ultimately, if a train operator’s commercial strategy runs contrary to the broader public interest, it is for the government to consider as part of its fares policy.”

With rises which are typically below what government imposes through regulated fares, there is no reason to suspect that any intervention on public interest grounds. In this regard, the beginnings of devolution to English city regions perhaps hold the key to a fairer fares.

Consecutive governments have deliberately forced up rail fares and it needs to stop. During this Parliament, many fares have risen three times faster than wages, affecting all those who rely on trains and putting enormous strain on household budgets.

Whoever is in power after the General Election urgently needs to adopt a much fairer approach to ticket prices. There must be a permanent end to above inflation fares rises, not just the small-scale, temporary respite currently in place.

Andrew Allen is a policy analyst at Campaign for Better Transport. Follow them on Twitter

7 Responses to “There must be a permanent end to above inflation fare increases”

  1. Keith M

    There is it’s called public ownership.

  2. JohnRich

    The inefficiencies and spiralling costs of nationalised industries was the reason they were privatised.

    In most cases privatisation has worked well. Just look at how the number of rail passengers has multiplied since privatisation. A huge success !!!

  3. Leon Wolfeson

    It’s worked well for shareholders.

    Meanwhile, you’re using false equivalences – the question is not why they’ve risen, but why they’ve risen less than older projections.

    (There’s also the displacement effect caused by people being unable to run cars, and now one where people are being displaced off rail by cost).

    Also, let’s discuss Railtrack, shall we?

    (Network Rail was actually formally renationalised in September, after always being effectively a state-controlled company)

  4. swat

    A National Rail Service would provide Through Ticketing at a cheaper cost and more efficiently. So you could take a trip from St Pancreas to Moscow on the Orient Express without any trouble at all. A return ticket. Ypou could even commute from Warsaw or Sofia or Belgrade, if you felt inclined on a weekly basis.

  5. Leon Wolfeson

    Quite – CPI is good enough (or not even that) for uprating, but it’s RPI down the line for prices.

    Funny that!

  6. Helicanus

    A curious claim to make in the context of the UK, given that privatisation was accompanied by a massive increase in public investment in the railways. It’s hardly an illustration of the merits of privatisation if most of the infrastructure improvements have come from Network Rail’s (a state-owned entity) hard work, or when numerous franchise holders are owned by other countries’ state-owned railway companies (see Chiltern, one of the highest-rated TOCs on the network and owned by Deutsche Bahn, the German state-owned railway operator).

  7. Leyla Miln

    The railway is necessary in any country. I think people will not stop using it in near future, that is why the owners can still earn a lot of money on train transporting. People have just no other variant to replace the railway, that is why it is like monopoly in some way. So if you need to get to the other side of the island, but you do not have enough money for this trip, you can always apply for online loans in UK. this financial service will help you to solve all monetary problems just in 24 hours.

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