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.