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

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