Rail 576: Fares policy conspicuous by its absence

I’ve never liked Which? magazine. It’s always seemed like a magazine that pretends to make choice simpler but ends up making you so confused and bewildered that you end up buying the first thing you see in the shop anyway. In any case, how can a supposed advocate for the consumer promote itself through bizarre ‘win £1m’ competitions that seems to involve cutting down more trees than an average forest just to get a few mugs to send back ridiculous raffle tickets with no hopes of winning in order that they can snaffle your address to send you junk mail for the next 30 years.

Therefore, I found the very limited survey carried out on the rail fares by Holiday Which? deeply unconvincing, despite the massive publicity it received. Ok, so it is cheaper to buy a weekly ticket than go from Swindon to Penzance twice in a week, but who on earth wants to do that anyway? And yes, it is less expensive to go by Hull Trains to Grantham, but that happens to be the only (until Grand Central’s tardy Sunderland service starts) open access operator on the network.

It just seemed yet another piece knocking the railway but it was a wasted opportunity for a more indepth look at a subject that is a headache for ministers and, indeed, for much of the industry: fares policy. It would not be totally inaccurate to say that the government simply doesn’t have a fares policy or, rather, that it is so incoherent that it does not deserve to be defined as such.

At the moment, and, it seems for the foreseeable future, regulated rail fares – season tickets and savers – can only rise by one per cent above the rate of inflation, a policy which changed from the initial days of privatisation when, in an effort to soften the blow, the Tories limited rises to one per cent below inflation. Unregulated fares – all the rest – are allowed to go up by whatever operators want to charge, and in recent franchise deals it is clear that

Season ticket rises are also dependent by performance which was great for commuters in the post Hatfield days when the number of delayed trains soared, but with the recent improvements, operators have been able to impose rises greater than inflation plus one per cent. Moreover, just to confuse matters, the Integrated Kent franchisee has been let on the basis of fares rises of 3 per cent above inflation because, according to the then Transport Secretary Alistair Darling, ‘to ensure there is fair balance between the taxpayer and fare paying passenger’.

Moreover, the aim, set out in the recent White Paper, is to shift the burden of the cost of the railway from taxpayers to passengers. However Darling, who in my view was a terrible Transport Secretary because his only interest was to avoid spending money as he always had his eye on his present job, used to bang on about trains carrying ‘fresh air’ rather than passengers. So logic would have it that government policy would be to encourage off peak passengers

No such luck. By giving freedom to franchisees to charge whatever they want for unregulated fares, and with operators keen – desperate even – to maximise revenue in order to pay their franchise commitments, we have the situation where several have made it more expensive to travel on off peak trains. First we had First Capital Connect banning people using cheap tickets from using their return tickets during the evening peak, which effectively made many people pay the full fare even though they were using sparsely loaded trains in the morning. Then, more recently, Stagecoach increased morning off peak fares by 20 per cent, arguing that those early trains had been getting too full.

The idea of using fares policy for modal shift is clearly not on the government’s agenda. I feel almost nostalgic for John Prescott who, it must be remembered, was brave enough to say that if he did not manage to persuade people out of their cars and onto the railways, he would have failed. Well, thanks to the government’s unwillingness to continue with the fuel tax escalator, by and large Prescott did fail. Yes, lots more people are using the railways, but the roads are as clogged as ever and most of the increase is a result of an increase in overall travel, rather than a shift from other modes.

Now, though, the very idea of encouraging modal shift by keeping fares low would be considered to be far too socialistic for the likes of New Labour ministers. Instead, Darling attempted to deregulate all fares, suggesting that the future of the saver was not safe, but the government has now retreated from this position, partly thanks to a rearguard action by Passenger Focus which has argued strongly that while it is great that lots of cheaper advance fares are available, the walk-on railway must never become unaffordable.

Indeed, could a more difficult question, too – why are season tickets protected? The reason given to me recently by Tom Harris, the rail minister, is that season ticket holders face a monopoly as they have no alternative but to travel by train. That, of course, is not always true. Sure, driving down the M3 every day from Winchester to central London might not be very pleasant and there is nowhere much to park when you get there, but there are many other season ticket holders who do have a choice, whether it is the bus or the car.

In purely economic terms, this is the wrong way round. Peak demand determines the level of investment needed on a commuter railway. Those people who benefit from living in Sevenoaks or Guildford while working in London are the ones which impose most cost on the railway. Their carriages may get used just twice a day and without these hordes, many extra facilities at stations would not be required. Yet, their tickets are not only regulated by the 1 per cent above inflation limit but season tickets are a bargain as passengers only pay the price of 40 weeks for 52 weeks travel, representing a discount of 23 per cent on every journey.

Therefore, not only do these commuters get the best bargain on the railways, but their decision to live far away from their place of work leads to the need to enhance the rail network at great cost. Rail subsidies to boost this mostly privileged group are a regressive tax. The taxes of many poorer people are supporting the choice of better off residents of leafy areas further from the centre of big conurbations. The truth is that season ticket holders are protected because they are a powerful and vociferous group of voters.

So what, ultimately would be a sensible policy if Ruth Kelly, who is struggling to make sense of fares policy on the railways, were able to impose one. That depends on what she wants from the railway. If she is keen to encourage more people onto the railways for environmental and transport reasons, then there is a case for greater regulation and some protection for off peak travellers. If, on the other hand, she just want to maximise revenue to keep subsidies down, which seems to be the case, then the ‘do nothing’ option is probably safest, even though it makes no sense as a part of wider political strategy concerned with the environment. Moreover, the train companies may find themselves in trouble if they get their calculations wrong about just how much extra off-peak rail passengers are prepared to pay, especially if there is an economic downturn.

Flat footed department shows lack of urgency

On November 14, four huge platforms at Waterloo will suddenly become redundant. This is not a surprise. It has been clear for some years that once the wonderful St Pancras was open, it would be pointless running the odd train to Waterloo, as this would use up a much needed asset at great cost and made scheduling far less convenient.

So far, though, apart from a consultants’ report which confirmed there should be a railway use for the platforms – a great relief that there was no suggestion that we needed another shopping mall – nothing has been done about preparing the platforms for an alternative use.

Partly that is the complexity of the rail system, with no British Rail to drive the process. Instead DfT Rail is thinking about options with all the speed of a slug negotiating a salt pile. There are many stakeholders such as Network Rail, Eurostar and South West Trains, and the financial decisions are complex.

The need for speed is pressing. This is Britain’s busiest station and it is getting fuller all the time. Yes, there are difficulties, such as the fact it would be better if the platforms were on the other side, but with a bit of preparation, work could be starting now. Anyone want to run a sweepstake on when the first domestic trains will be using those platforms. Mystic Wolmar suggests, optimistically, May 2009. Any other offers?

The PPP never was

In an extraordinary move, the Office of National Statistics quietly released the fact that it has reclassified the four year old Public Private Partnership on the London Underground as a public project. All the debt, therefore, is on the government’s books. This means that the ONS reckons that the risk of the project falls on the public sector, despite the convoluted contracts that cost at lest £500m to draw up (probably a lot more) and the huge political kafuffle about the creation of the PPP stimulated by Gordon Brown’s desire to ensure that the scheme was NOT on the government’s books.

Far be it for me to say ‘I told you so’ but the last sentence of my book on the PPP, Down the Tube, actually says that it was all a fuss about something that did not exist, because it was not a genuine partnership. And now, belatedly, the ONS, which seems never to have bothered to look at the contracts before, now agrees.

I don’t just want to score a cheap point (though that’s always fun!) or even to publicise a now out of print book. The PPP always made my blood boil for the huge waste of resources – just think of the extra cost of borrowing by the private companies, now shown to be totally unnecessary because government can always raise money more cheaply – and time created by all too clever people playing silly games because of their distrust of the public sector and their refusal to listen to the advice of anyone who understood anything about the workings of the Underground.

The PPP is, quite frankly, a criminal outrage for which the Prime Minister bears considerable responsibility but for which no one will ever be brought to book. Of the many such scandals in the rail industry over the past few years – the creation of Railtrack, the sale of the Roscos, the unfathomable franchising process, the abolition of the Strategic Rail Authority, the huge cost increases in rail infrastructure – I reckon that the PPP, and particularly the letting of the contract to Metronet, is probably the worst.

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