Moans about rail fares rises always greet the New Year. But commuters paying the new fares for the first time this morning – the rises came in last Friday – will be fully justified in their anger. They are being hit by above inflation rises just at the time when the recession is beginning to bite hard and their pay cheques are not getting bigger. Meanwhile several operators are cutting back on the standards of service and others threatening to withdraw trains or cut back on the number of coaches. Could
2009 be the year when rail passengers finally decide enough is enough?
Passengers will vent their fury at the private train operators, who are taking advantage of the failure of government regulation to milk commuters for all they can get. Season tickets and off-peak returns (formerly called “savers”), which are regulated by the Department for Transport, have gone up by a whopping six per cent, because according to the Government’s formula, the private operators are allowed to impose a rise of one per cent above inflation. They are indexed not to the current rate of inflation, but the one in July, which was far higher than today’s. Other tickets are rising by even more, an average of seven per cent, as the operators are free to set those without reference to the Government.
But the train operators may be making a big mistake in thinking that rail passengers will just accept these rises and cough up their money anyway.
These unregulated fares are for journeys which are deemed “discretionary” – in other words, that trip up to town or the visit to friends which people may well not make if the train fare is too high.
And even on the regulated fares, the operators may have overplayed their hand. The reason why fares are regulated is because the train companies effectively have a monopoly. Try driving from, say, Guildford or Gillingham at 8am in the morning, and then finding a place to park in central London, and it is clear that most commuters have no choice.
However, the operators may be about to discover that the old certainties about train travel have disappeared. More and more people are discovering that they do have an alternative. For example, with fuel prices now lower, commuters living far out of town may choose to drive part of their way to London and park cheaply near a closer station. This may well happen in Kent where the train operator, SouthEastern, is being allowed to increase season tickets by eight per cent, because of investment in new trains that will use the high speed line to get into London but which do not even start until December.
Coaches, too, may be an alternative option for many rail commuters, particularly back office workers on relatively low wages. Instead of renewing their season tickets, they may choose to take one of the increasing numbers of coaches aimed at the commuter market.
Most worrying for the train companies, though, is the possibility that they no longer have a captive market because with flexible working arrangements, passengers may decide to come in later, using cheaper tickets, or decide to work from home two or three days per week in order to reduce their travel costs. All these options will mean fewer season tickets being sold, and these are the bedrock of the operators’ income.
The train operators are already preparing to go begging to the government for more money. The most outspoken of their bosses, Keith Ludeman of Go-Ahead, rather let the cat out of the bag when, just before Xmas, he decided to give his passengers a bit of seasonal cheer. He said that his company would go to the Department for Transport to renegotiate the contract if passenger numbers began to tail off. He said: “There is nothing to stop us, if demand falls off, going to the Department and asking to take services out.” He warned, too, that operators would cut the length of trains in order to save on charges they have to pay to Network Rail for access to the tracks. Ludeman, warned too, that train operators may well cut the length of peak service trains if passenger numbers decline, even if this means more people having to stand.
The Department, however, has made it clear that there will be no such renegotiation over cash. This has been the ministers’ line for several years and there is little prospect that they will relent. That is why the operators are already paring back on customer service. National Express, which has already admitted that it is being badly hit by the recession, has scrapped the very popular meals service on its Norwich trains and South West Trains is trying to close dozens of ticket offices to make savings in the face of widespread protests.
These moves, which come despite healthy profits being made by both companies on their franchises until now, have dismayed transport ministers who have found that there is very little they can do as the franchise agreements have been poorly worded. Indeed, the contract for the Southern franchise, which will be let later this year, has been more tightly drawn precisely to prevent the winning operator from cutting back on ticket office staff.
The fiasco of this year’s fare rises should lead to a rethink of the whole decision-making process on fare levels. Privately, some ministers are appalled that the train operators are being allowed to impose swingeing rises at such a difficult time and they want a revision of the RPI-plus-one-per-cent formula which Labour imposed in 2002 (previously, to encourage rail use, it was RPI minus one per cent. Yet ministers must look to their own policy for the root cause of this problem: it was they who decided that they want to reduce the subsidy to the railways in the first place.
This year is shaping up to be the most difficult in the railways’ history since privatisation in the mid 1990s. By pushing up fares so sharply, the operators have compounded the problem they face from the recession. But although it is easy for them to blame the Government, they signed their franchise contracts knowing that difficult times might lie ahead. If they come begging for more subsidy or ask to put fares up even more sharply, Geoff Hoon, the Transport Secretary, must tell them precisely where to go.