Commuter fares show rail’s complexity

National Fare Rise Day produced plenty of heat but little light. Supporters and opponents of today’s privatised railway traded blows with dodgy statements.

We’ll take the supporters first. The Rail Delivery Group rolled out a pie chart that explained where the railway spends its money. It claimed that 97p of every pound is invested back into the railway. This is wrong. RDG’s chart showed that the railway spends 4p on fuel. That is not investment, it’s simply a day-to-day running cost. Likewise the 9p that went towards ‘interest payments and other costs’.

RDG would have been on safer ground had it stuck with saying that only 3p went to train operating company profits. Perhaps it should have closely read its chart because it included a 26p segment labelled ‘investment in the rail network’? It has confused investment with spending.

On the opponents’ side, rail union RMT tweeted: “Rail companies to make minimum of extra £337 million from fares rise.” This implies that rail companies would take this extra money as profit. General Secretary Mick Cash used the phrase ‘coin in yet more cash’ which hints that it’s the train operators that will benefit from the rise in fares.

The implication is wrong. Government will want its share in the form of rising premium payments, or falling subsidies while, yes, a small amount will flow through to TOC profits. To put this into context, train operators sent government £3,019m in premium payments and £81m tax in 2015/16 while paying shareholders £228m (government then gave Network Rail £4,300m).

It’s government that controls the fares whose rise in January is linked to the inflation figure announced on August 15 (they account for 36% of fare revenue). Government is using a power designed to prevent TOCs hiking commuter fares for its own ends. The power comes from a fear at privatisation that the TOCs would take advantage of a captive market. Instead, it’s given government a way to change the balance of rail bills between taxpayers and farepayers. This is in line with Bowker’s Rule – that there are only two sources of rail funding: farepayers and taxpayers.

Government links the rise in regulated fares to the retail prices index (RPI), a measure of inflation. August 15 revealed an RPI of 3.6% so that will be January’s rise in regulated fares. The rise could have been RPI-1%, RPI+1% or any other figure – government decides.

Loud voices are calling for a different inflation figure to be used, the consumer prices index (CPI). Be careful what you wish for. How about a fare rise of CPI+1%? OK, that will be 3.6% because CPI is 2.6% and it would be government that decides what plus/minus figure to tag on.

Commuters, travelling every day with season tickets, don’t want to see their fares rise. They have enough bills going up faster than their wages. Rail simply adds to their pain but government wants them to pay more because it wants taxpayers to pay less.

Less is a relative term. Rail companies, particularly Network Rail, are spending large sums of money to improve tracks, trains and stations to provide more seats and more space for passengers. However, the space is swallowed so quickly that few notice.

Rail is struggling to keep up with demand in some areas, particularly commuting into major cities. This has as much to do with house prices as it does rail. City living is unaffordable for very many families, forcing longer trips to reach work.

Yet, yet, yet… More passengers generate more income. Higher income pays for improvements. There should be a point at which individual passengers stop being asked to pay more. Perhaps we might even see commuters benefitting from the sort of cut in rail fares that leisure and infrequent travellers have seen by switching from expensive flexible fares to cheaper advance tickets?

There’s a but. If commuters trains into Waterloo, Charing Cross or Liverpool Street are full – and they are – then what effect will cutting fares have? It will either generate more passengers to increase overcrowding or it will cut the money available to fix today’s let alone tomorrow’s capacity crisis. Either way, it will be train operators rather than government that takes passengers’ brickbats and defend a system that ministers rather than they control.

Despite the many problems, with government cancelling improvement projects amid concerns over their costs, it must stop forcing passengers to pay more every year.

This article first appeared in RAIL 834 on August 30 2017.

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Philip Haigh

Freelance railway writer, former deputy editor at RAIL magazine - news, views and analysis of today's railway.

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