Don’t price people off the railways

Rail fare rises have become almost as toxic to politicians as fuel tax increases. So today’s July inflation figures, which mean that rail fares will rise by up to 5.5 per cent next January at a time when wages are only creeping up, are likely to lead to backtracking by ministers in the months ahead.

The July inflation figure is crucial because it is the benchmark for rises in season tickets and off-peak fares, regulated by the Government: for the past 10 years, the increases set by government have been at RPI plus one per cent — so 3.5 per cent next January. Consequently there has been a 23 per cent increase in fares in real terms since 1995. Last year, however, George Osborne, under pressure from commuters, announced that the average rise would be just RPI inflation only.

But the train operating companies are free to determine the other fares, such as advanced tickets and first class: some have gone through the roof. While the operators point to lots of bargains on advance purchase tickets, rises in peak-time single fares have been far greater. According to Barry Doe, Rail magazine’s fares expert, the highest increase since 1995 has been on Virgin’s London-Manchester route, where the single peak-time fare has gone up from £50 to £160.50 (the 50p seems an unnecessary extra), a rise of 221 per cent over a period when inflation has totalled 70 per cent.

Londoners are particularly hard hit. First, they are heavy users of rail. Nearly three-quarters of rail journeys in the UK either start or end in London, and for many there is simply no alternative. Commuters feel, with justification, that they are been exploited when they have no alternative way of travelling.

Second, they face a double whammy. With the integration of many national rail fares into the Oyster system, it has become more difficult to set different increases in Tube fares to national rail services. Transport for London bosses are very worried that political pressure to limit fares rises will hit their ability to continue the investment of around £1 billion per year needed to upgrade the Tube network. With the need to accommodate a cut in central funding of £220 million for next year, on a budget of around £9 billion, it is very likely that the Mayor, who ultimately decides on the rise, will stick with whatever figure the Government imposes on national rail.

The RPI plus one per cent formula was devised by the Labour government as a way of making passengers pay a higher proportion of the cost of the railways. It has worked. Whereas a decade ago around two-thirds of the cost of the network came from taxpayers rather than passengers, that ratio has been reversed: now nearly two-thirds of the revenue comes from the fare box. However, given the flak, this has now probably reached the limit of what is politically acceptable and, indeed, reasonable.

The legislation privatising the railways in the mid-1990s was supposed to protect those with no choice from greedy private companies. These regulated fares represent almost half of all rail journeys. But far from being used to protect these passengers, regulation has been employed as a way of extracting money from a captive audience. It has been convenient for governments, too, as the train operators, who are not responsible, get the blame

This has to stop. The railways are vital to London’s infrastructure and its continued success. Yet Londoners, already suffering from soaring housing costs, are being squeezed off the railways by the continued rises. Many use buses or even coaches as an alternative, or if they can, such as in parts of outer London, drive some or all of the way to work, further clogging up the roads.

This makes no sense economically or environmentally. Building extra road capacity would be expensive and further worsen air quality. And there is no point building wonderful new lines such as Crossrail if people end up being priced off them.

With many marginal seats in London and the South-East — made even more vulnerable by Ukip, even though it has yet to make any coherent announcement on transport — the Government is unlikely to sanction a significant fares rise.

There are a couple of things the Conservatives could do. They could abolish the “flex” arrangements which allow train operators to choose which fares go up by more than the formula and which are kept down. It is supposed to balance out, but passengers do not believe it does. Labour, which abolished flex when it was in government, has already pledged to do so again if it wins the election.

Second, watch for a statement in the autumn by the Chancellor promising to keep rail fare rises to inflation. Planned higher fares rises were set aside in the past two years, so it is almost inevitable this will happen in the run-up to an election.

Watch, too, for much political posturing. Labour could steal a real march on the Tories by going further, promising to end the policy of putting more of the burden of the cost of the railways on passengers. It could even go back to the RPI-1 formula, which, ironically, was scrapped by the then Chancellor, Gordon Brown, in 2004.

Affordability is going to be a key election issue. So far Ed Miliband has only promised that “a Labour government would cap annual fares on every route”, which implies that fares rises will continue to be at inflation or even more. While there would inevitably be a cost to making this commitment to keeping fares down, a one per cent rise is only worth around £40 million in the first year, a cheap price to pay for an electorally popular policy — and a real tonic for London commuters.

  • marksl

    Thank you very much for posting the excellent ‘Evening Standard’ 19th August article on fares which would otherwise only have been read by people in the London area.
    The headline figure about the London-Manchester standard class walk-on single fare, as provided by Barry Doe, is very useful and needs repeating: from 1995 to 2014 the London-Manchester single peak-time fare has gone up from £50 to £160.50, a rise of 221 per cent over a period when inflation has totalled 70 per cent.
    Until 1995 the London-Manchester service was provided by BR InterCity and the fare set by the InterCity Sector. The WCML fares in the 1980s were generally good value and at the time the late James Towler when Chairman of the NE TUCC used to have a grumble that ECML fares were higher (London-Leeds cf to London-Manchester, for the same distance). This difference may have been partly because it was on the WCML that the ‘Saver’ tickets started (by Ron Cotton in the Liverpool Division) but also because the ECML even then had a reputation for rather high fares.
    The London-Manchester single fare would today be £85 (£56 with a Railcard), had fares been set to rise only with inflation since 1995. This shows well how badly the nation has been served by privatising the train operators and putting our trains in the hands of people like Richard Branson. Under Chris Green from early 1992 (rather than his predecessor John Prideaux) BR InterCity was in its last few years aiming to be a ‘people’s railway’. That has been lost thanks to privatisation.

  • Dan

    That is a very good comment. I recall that BR ECML fares were justified as being higher due to the investment it had had in electrification and new trains from the late 1980s, yet WCML was still using mostly 1970s (and 60s) era kit.

    Of course Virgin made the situation worse for Std class passengers by insisting on over provision of 1st class carriages, which Virgin seem unable to sell using Advance ticket pricing mechanisms to maximize occupancy.

    By contrast EMT do well at selling 1st class seats and filling them at sensible prices. I often trade up to 1st as the tickets are available on occasion at £6 or less than the equivalent std ticket. By the time you have had a the free tea and biscuits etc that is superb value at off peak.

  • Fonant

    Given government policies towards modes of transport that compete with cars (I’m thinking of cycling, as congestion-free and sustainable local transport, as well as rail and bus services) I’m beginning to suspect that government _does_ in fact want us all to use private motor cars for as many trips as possible. There is no logic apparent in national transport policies, unless road traffic congestion is the overriding aim.

    Is there perhaps a hidden agenda that requires the country to suffer terribly from motor traffic congestion? Are they worried that sociable transport modes like trains, buses, and cycling, could result in the population discussing politics, to the dis-benefit of the political classes? Or is it simply that “one always travels by car” and that our leaders just can’t stomach the alternatives as being perhaps rather “left-wing” and “lower-class”?

  • Paul Holt

    If you think back, the explosion of private car ownership was a direct consequence of Beeching. Not only was this a natural consequence, it was the *desired* consequence by the politicians behind Beeching, so they could guzzle the consequent motoring taxes. Once that penny drops, what is now called the war on the motorist is revealed as a simple tax grab, involving double and triple taxation. The dropping of *that* penny reveals congestion as desirable for politicians, because more tax is generated from vehicles going nowhere. Arguably the first chapter of CW’s long overdue vision for transport will be how to wean politicians off the crack-cocaine of motoring taxes.

  • Paul Holt

    Final paragraph, second sentence: ‘So far Ed Miliband has only promised that “a Labour government would cap annual fares on every route”, which implies that fares rises will continue to be at inflation or even more.’. A “cap” surely means no fare rises?
    Accepting the “no fare rises” interpretation, the consequence of that will mirror energy bills, with all rises occurring ahead of the election ahead of the Miliband price-fixing.

  • Fonant

    Perhaps when the addicted government finally realises that ever-increasing congestion also means that the economy gradually dies. A dead economy generates no tax income. But perhaps that’s a problem for “the next government” and short-termism rules so the best thing is to milk the population for taxes now, sell off national assets, and then leave government to a semi-retirement involving several lucrative non-executive directorships on the boards of private companies who benefited from all the privatisation (see Private Eye for full details).

    Having said that, here in West Sussex the Tory-lead County Council still thinks that building more motor roads is a way to reduce congestion (!). They may not realise that they need to do the exact opposite before it’s too late…