Passengers pay twice for rail journeys

The British version of Le Grand Retour takes place today as everyone finally returns to work. But those commuting by rail are in for a shock. Fares have gone up by 6 per cent and a few unlucky season ticket holders will find they are paying up to 10 per cent more.

Commuter fares, according to the Campaign for Better Transport, are now on average 3.5 times more than those paid in other major European countries. Why on earth, British commuters will ask with justifiable anger, is rail travel so expensive?

Let’s get one thing clear straight away: the train operators won’t be profiting from these rises. The Department for Transport decides on the increase and extra money raised at the ticket booth effectively passes through the hands of the train companies, whose income is adjusted through the subsidy system so that, theoretically, they do not gain or suffer from price changes.

These rises are part of a long-term strategy, stretching back to the Labour Government, of making passengers carry more of the burden of financing the railways. While in the past about two thirds of the cost was picked up ny taxpayers, the Government wants to reduce that to 50 per cent and by 2019.

So European rail tickets are cheaper because of greater state generosity? No, not only are the British passengers paying the highest fares in Europe, they are also still shelling out vast sums (£4bn this year) through tax. I have calculated that in 2007 Germany subsidised its railways at €0.105 per passenger km travelled, France €0.113 and the UK €0.125.

In the British Rail days, the railways were, indeed, starved of public funds. But since privatisation in the mid-1990s they have been sucking up subsidy as fast as the new Pendolinos thunder through Watford Junction. Taxpayer support reached a peak of more than £6bn in 2006 and the Institute of Economic Affairs, no fan of state control, calculates that subsidy “more than tripled since the British Rail era”.

It is the inefficiency of the railways — and the dysfunctional privatised structure — that means we have ended up with the worst of both worlds, high fares and a large subsidy. This was confirmed by Sir Roy McNulty’s review published in May which found that the costs of maintenance and renewal on Britain’s railways are 40 per cent higher than in Europe.

The separation between the quasi-state-owned Network Rail which control the tracks and the private train operators who run the services, means that not everyone has the same interests in driving down costs. For example, GNER, which ran services on the busy East Coast line gave up its franchise in 2006 in part because Network Rail had so improved that GNER no longer received sufficient compensation payments to make its service viable.

Similarly, salary costs have soared because of the divided nature of the system. Competition between operators for train drivers means that average pay is £35,000 and many earn well over £40,000.

McNulty’s report suggested that nearly £2bn of the £7bn cost of running the railways could be saved by the end of the decade through efficiencies and better co-operation. Anyone who closely follows the rail industry will be deeply cynical about whether these juicy savings can be delivered at all.

The only hope for the cash-strapped strap-hanger is to keep the pressure on the Government. Fares were due to go up by 8 per cent until the Chancellor reduced it to 6 per cent in the Autumn Statement. Commuters will have to show ministers how politically expensive that new season ticket really is.

  • Richard Mann

    CBT’s comparisons were a bit exaggerated for effect. Comparing a limited-stop commute from Woking with a small town on a branch line is not exactly like-for-like.

  • Matt

    Christian, I know you’ll keep on saying that fragmentisation is the
    cause of the higher costs of railways in UK, but you have to accept that
    it is not the only reason.

    Surely part of the reason there is much more money spent now on the
    railway is that so little was spent in the last days of BR. Even if BR
    was still in its 1992 form, spending would have had to risen due to the
    previous investment holiday.

    Train drivers wages are another example – perhaps the wages have risen
    is because supply is constrained – and this is because training a driver
    now takes so long. Is this really down to privatisation? More likely it
    is due to more stringent standards – and this probably would have
    happened anyway.

    The legal system is another reason. Look at the hundreds of millions
    Network Rail is proposing to spend on closing level crossings – compare
    this to France where there is an automatic crossing every few hundred
    yards in some places. As I understand it, France’s Napoleonic based
    system puts the onus on the user of the crossing to keep themselves safe
    – our Common Law system puts the onus on the Asset Owner, Network Rail.
    This further pushes up costs.

    What about the planning system? In the hands of local politicians, this
    can delay enhancements and puch up costs – not the case in Dirigeste
    France and its network of TGVs

    Land density – again, the UK is far denser that other major European countries, pushing up costs further

    I am not saying that fragmentisation doesn’t push up cost – it surely does. But it is not the whole picture.

  • Anonymous

    Yes Matt, I agree with much of that, but many of the examples you give are precisely a result of the way that the railways were broken up and privatised.

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  • David James Arnold

    Hi Christian – Very interesting post! Do you have a source for the subsidised costs per passenger mile?