Rail fares are out of control

Rail fares have got out of control. Year after year since 2004 they have risen by more than the rate of inflation and now, at a time of austerity and cuts, passengers are finally saying ‘enough is enough’. Kevin Steele, a regular rail user between London and Scotland yesterday tried to buy a ticket to travel this weekend between Dundee and Manchester and found that the lowest fare for this 420 mile round trip journey was a staggering £188.40 each for him and his wife. And that was off-peak; the ‘Anytime’ return fare was £340 and, as for first class, it was nearly £600 each return.

Mr Steele is not alone. Far from it. The fares expert Barry Doe who has analysed ticket prices over many years has found that prices have risen far faster than inflation since privatisation. When the railways were privatised in the mid 1990s, the government realised that private firms would try to exploit what was, in effect, a monopoly since for many people there is little alternative to travelling by rail. Therefore it was decided that season tickets and off-peak fares – known at the time as savers – would be regulated, whereas the private train operators were free to impose whatever increases they wanted on the rest.

Inevitably, as a result, it is the unregulated fares that have risen fastest. While inflation has been 66 per cent since 1995, Mr Doe found that single fares from London to Exeter and Cardiff have been increased respectively by 205 per cent and 196 per cent (which effectively means they have tripled) by First Great Western. Richard Branson’s Virgin beats the lost with a 208 per cent rise between London and Manchester and 177 per cent between London and Birmingham, where the rise has been less because there is competition from two other operators. One reason for these sharp rises is that the private operators get to keep all the extra money on these unregulated fares, whereas for regulated season tickets, they end up having to share it with the government.

But regulated season tickets have, since 2004, gone up by 1 per cent above inflation ever year, rather than as previously, below inflation, which means that regular commuters are being fleeced even though most have to use the train since it is impractical to drive or take a bus into the capital or other major towns at rush hour. And because under the very complicated rules governing rail fares, some companies have put prices up by even more. In January this year, for example, the annual ticket from

Canterbury in Kent to London went up from £4,588 to £4,860 – a 5.9 per cent rise.

So why are we paying such high fares? It is a mix of government policy and rail industry inefficiency.

For years, successive governments have said they want rail passengers, rather than taxpayers, to meet more of the overall cost of the railways.  Whereas in Europe, where fares are mostly cheaper, the railways are recognised as part of a social service which is necessary to keep people off the overcrowded roads and is good for the environment, in Britain the government wants to see the railways run as a business.

Secondly, rail privatisation has, suprisingly, led to far greater subsidies being required to keep the railways going, despite promises to the contrary when the industry was first broken up and sold off. Whereas under British Rail subsidy levels were around £1.5bn annually (in today’s money), now they are around £4bn. Much of this goes to Network Rail, the not for profit company which runs the infrastructure and which is under enormous pressure to reduce costs. Yet, under the daft rules that the railway operates under, every year Network Rail pays out £500m in compensation to the private operators to make up for loss of revenue when it has to close the railway either for maintenance or because of problems with signalling or the track. Cutting out such payments would allow fares to be reduced. There are many other examples of inefficiencies created by the complicated structure of the privatised railway.

Moreover, around £250m per year goes in profits to private operators many of which are owned fully or in part by other European governments such as Deutsche Bahn(Germany), Nedrail (Netherlands) and SNCF (France). Yet, the Coalition recently decided to reprivatise East Coast Railways even though it had been run since 2009 by Directly Operated Railways, owned by the Department of Transport after the private operator, National Express, threw the towel in because of losses. Yet, Directly Operated Railways, paid the government £177m last year, more than any other operator, for the right to run the service and is reckoned to be a very efficient business. However, the Coalition appears to be happier allowing foreign state owned operators to come in and make profits at passengers’ expense, rather than ensuring the money stays in this country.

The train companies argue that lots of bargains are available because more than a million people a week buy advance tickets that are heavily discounted for long distance journeys. But that represents only around 5 per cent of tickets sold and many people cannot take advantage of them because the tickets are only valid for a specific train and taking an alternative service results in the poor passenger having to pay the full single fare in addition to the cost of the original ticket.

The answer to all this is more flexibility and an end to above inflation rises. Very few people who have the choice will pay the crazy prices of the ‘walk on’ fares and consequently the railways are losing business. Long distance trains at peak times often have a high proportion of empty seats and this pricing policy of heavily discounted advance fares and overpriced walk on fares no longer makes sense. It creates artificial bottlenecks such as Euston on Friday evenings when thousands of people let earlier empty trains go so that they can pile on the first cheap ones.

As for Mr Steele, not surprisingly, he will be driving this weekend, and staying in a hotel that, he said,  ‘is far cheaper than the rail fare would have been. And my turbodiesel car petrol will cost about £70 to fill to the brim’. So much for the ‘greenest ever’ government wanting to get people out of their cars and on to the trains.

The issue of rail fares is becoming a political hot potato, just like fuel prices and already the government has reduced planned increases in the past two years. Any attempt to increase fares next year by higher than inflation is likely to be met by widespread protests, especially in the Tory commuter heartland around London.


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