Rail 571: Government tries to wish rail growth away

Pity the poor rail passenger. The big idea behind the Rail White Paper was not a major new high speed line, electrification or even a series of major enhancements. It is, instead, that passengers will bear the burden of any investment which the industry needs to meet the expected growth.

All was made clear just a couple of days before the publication of the Paper in a quote in a Guardian news piece about rising rail fares a couple of days before the launch of the White Paper. A Department for Transport spokesman said, in response to Passenger Focus’ complaints of the sharp increases: ‘The reality is that 6 per cent of the population travels on railways. Why should people who don’t use the railways regularly fund people who do?’

Oh dear, where to start? It is such an narrow-minded and economically illiterate view of the railways that it raises serious doubts about whether any coherent thinking will ever emerge from the Department. Yet, it is this philosophy which has clearly underpinned the strategy of the White Paper. Far from using the boom in the railways to improve them and develop a more sustainable transport policy using, perhaps, increased motoring taxes which would balance out the fact that cost of car use has risen far slower than public transport fares in the past decade, the aim is to extract as much money as possible out of passengers in order to pay for very modest improvements to the system.

The line of thinking encapsulated in the quote is that the railways are a conventional business which ought to pay for itself. But for many reasons they cannot, and historically, since the advent of the motor car, they have not. If they could, there would be no justification for any subsidy. The railways are a catalyst for economic growth and always have been. Eminent economists have even tried to put a value on the extra growth stimulated by the development of the railways in the 19th century.

You only have to look at the huge increase in land prices around the stations on the Jubilee Line Extension to realise that railways are probably the most potent regenerative force available to the government, and yet we now have a White Paper which is focussed only on the notion that, as it says on page 7, ‘it is right that subsidy levels should now start to return to closer to the historic norm’. If I were churlish, I would mention that this norm was only upset by the ‘botched’ privatisation and the failure of the Labour government to address the problems it had inherited, a privatisation, incidentally, which was at the behest of the very same Treasury which is now demanding some of its money back. But I won’t!

There are, of course, plenty of other reasons why those who don’t use the railway should contribute towards its cost, just as non-parents pay towards education and non-drivers’ taxation goes to the highways budget. Put simply, the benefits are an economic phenomenon known as ‘externalities’. Essentially the railways cannot capture all their benefits through the fare box and therefore require subsidy in order to obtain them. This is GCSE level economics which seem to be beyond the Department.

The aim of the White Paper is to drive down the taxpayers’ contribution from its current level of just over 50 per cent to something nearer 25 per cent by 2014. In the meantime, though, there is a recognition that growth will have to be accommodated, most notably in urban areas where commuting by train is rising fast. The civil servants, with the help of consultants LEK have made a very careful calculation basing their forecast on a 22.5 per cent increase in passenger usage between now and 2014, but a near 80 per cent rise in revenue. It does not take a genius, therefore, to realise that there will need to be hefty fares rises well above the rate of inflation for non regulated fares especially as interestingly, despite criticism of the regulated fares system in the White Paper, savers and season tickets will remain regulated

In fact, the issue of fares shows that the government is impotent in the context of the franchising system which leaves it, in most instances, at the mercy of the operators. The government would like to change the saver system because as the Paper rightly points out, it is rather bewildering for passengers that they can buy a one way saver for £69 and a return on the same route for £70. Passenger focus groups, they say, would prefer the low-cost airline approach of quoting single leg fares.

However, the document suggests this would require ‘customer support and confidence for such a move’ and yet in the previous paragraph it says that focus groups already back the idea. No, the truth is that the changes would need the approval of train operators, many of whom have only recently signed up to deals so onerous that any threat to revenue would send them to the High Court seeking judicial reviews.

Therefore, instead, the Department wants to establish a simplified ticket system involving four broad types, three of which – anytime, off peak, super off peak – can be either pre booked or not, whereas a fourth, advance would have to be booked up to 18 00 on the previous day. Confusingly, there would still be different fares within these categories, as tickets bought more in advance would be cheaper, but this system will presumably ensure I will never have to buy a ‘half saver return’ again as I did recently from Virgin.

Senior department sources tell me that this simpler system will be enforced on operators whether they like it or not because it is expected to be revenue neutral. However, another change, the introduction of a new structure with a ‘price promise’ – makes the railways sound ever more like Tesco’s – will be dependent on the acquiescence of operators. It will ensure that ‘where passengers are pointed to one deal when another deal was available, they will be refunded the difference’. How they will ever find out remains unclear. Moreover, if passengers board the wrong train, they will not be asked to pay the full price of a new ticket but, instead, the amount they have paid already will be taken into account. Clearly this is a recognition by the department of the widespread dissatisfaction with massive rises and the punitive attitude of train guards – at the behest of their employers, it must be said – on many lines in relation to passengers with the wrong tickets who are treated like fare dodgers.

The fact that ministers cannot impose such a perfectly reasonable change which, in other words, stops rapacious operators from exploiting their clients, is testimony to their powerlessness and shows why radical changes cannot be made to the railways in a structure governed by a myriad of contracts.

Nor will any of this supposed better deal for passengers stop ridiculous incidents like the one which happened to a friend of mine recently. Held up by a queue at the ticket office at Wokingham, his train arrived and he spotted the guard with a portable ticket machine. So my friend approached him and asked if he could buy a ticket. The response from the man from South West Trains was robust: ‘if you put one foot on that train, I will charge you a £20 penalty fare and then sell you a ticket’. My pal waited for the next service.

In a way, this encapsulates the failure of the White Paper. Ministers used to talk about attracting more people onto the railways and one almost hankers for the days of John Prescott who genuinely believed that he could get people out of their cars. There is no longer such vision. The new transport minister seems to be powerless in the face of an explosion in transport and travel, and therefore made little attempt in her speech to suggest that the railways were anything other than a business which ought to reduce its burden on the taxpayer. Neither environmental considerations, nor the railways role in helping to reduce congestion on the roads seem to figure on the political agenda. As for the visionary aspects, such as electrification, a high speed north south or a major new freight railway, they are simply not on the horizon

The White Paper was produced by civil servants who can only see a very narrow role for the railways and who therefore framed it in terms of keeping taxpayers’ contributions as low as possible. Sure, there are a few goodies in it, but there had to be in order given the massive increase in passenger numbers over the past decade. But in truth, one suspects that the authors of the White Paper and, now that Douglas Alexander has gone, their ministers, really wish the railways would stop growing so that the ever louder demands for costly investment would be damped down.