For any British commuter, it is difficult to square yearly ticket price rises with the fact they can expect to pay up to five times as much rail fare on average as the rest of Europe.
The news, then, that rail fares are set to rise yet again, this time by up to 2.8 per cent, may fill train passengers with despair. So what’s the reason behind the increase?
At a policy level, the reason for the raise is simple, and predictable. Fares are pegged to a specific measure of inflation: the Retail Price Index (RPI), one of the two measures of consumer inflation produced by the Office for National Statistics (ONS).
“The basic reason they're raising is that it's fundamentally written into every franchise’s contract, that the annual fare increase will be set at the level of RPI,” says Anson Jack, professor of international railway benchmarking at the Birmingham Centre for Rail Research and Education. “It's a sort of government imposition.”
From this perspective, the rise is inevitable. Every year, at about this time, there are news stories lambasting the rail price hike. “It’s a sort of annual ritual that this country goes through the day that the GR RPI figure is published, we have this story,” says Jack. “It’s formulaic – unless the government intervenes, that will be the fare increase. But the media pick it up and it’s a national story – and on January 1 we will have the same story again – because that's when it will happen.”
The figure is used to set “regulated” rail fares. The current fares regime began in 1995 with privatisation, explains transport consultant Steve Chambers.
The logic behind this move, says Christian Wolmar, a transport expert and rail analyst, is that the government regulates two types of fares – season tickets and off-peak returns. “The logic here is that season ticket holders are pretty much tied to the railway company – if you live in Guildford you can’t really travel to work in London in any other way,” he says. “You therefore don't want companies to have a monopoly over people’s transport systems, so you regulate that fare.” Off-peak returns, he says, are also regulated to give people the chance to use railways across the country relatively cheaply.
The fair raise was originally intended to be increased at a rate lower than the rate of inflation, explains Wolmar, though over the years it has fluctuated around this point (currently it is pegged directly to the RPI measure of inflation).
It’s important to bear in mind, then, that the raise itself is a political choice: it isn’t tied to, for instance, investment in the quality of infrastructure. “I mean, the really difficult message to get across is that fares and the quality of service are not really connected,” says Jack. “If the fares went up five per cent, it wouldn't itself lead to improvements in service – what lead improvements in service are good management, good planning and long term investment.”
Wolmar agrees. “By and large, it’s nothing to do with the level of service that is provided apart from the fact that sometimes if there’s a really poor level of service season ticket holders get a rebate,” he says.
Factors like shareholder interests, which would have been considered during contract agreements but do not affect the pricing on a day to day basis, and increased driver wages, are also irrelevant. “There is absolutely no link here whatsoever,” says Chambers, referring to driver wages. “It was Chris Grayling who tried to make this link last year, and it's just nonsense.”
For instance, if the train operating companies tried to give their drivers a ten percent increase, they’d still only be able to put fares up by the set RPI formula and their margins would just decrease. Adjusting the rate of other rail costs will not directly affect the fares.
At present the government has commissioned an independent rail review that's looking at how whether the governance of railways should change. The review is due to report later this year. However, Keith Williams, a former British Airways boss who is leading the review, says an independent body should oversee the rail industry. Williams has said rail franchises should be underpinned by punctuality targets and the ticketing system should be totally overhauled.
One other option is nationalisation. Even if the relatively radical change did happen it wouldn't solve high fares, Jack says. “The Labour Party would argue that, if we didn't have private companies running them, then the profit element could be used,” says Jack. “But the profit element, I think on the total turnover of the train operators, is about two per cent. So if you take that two per cent out, you wouldn't even be able to waive the fare increase for one year.”
The real issue, explains Wolmar, is that the fare payer, not the taxpayer has slowly been conscripted into bearing the brunt of the costs. “Over time fares have shifted to covering one-third of the cost of railway to two thirds,” Wolmar says. “Now my argument would be that this is very blinkered economics, one that removes any consideration of externalities: the benefits that railways offer to people who don’t use them, like the environment.”
It’s at this split, which pegging fare increases to RPI disguises and facilities, that fare payers should target their ire, explains Nicole Badstuber, research associate in Urban Infrastructure Governance and Policy. “The concerted effort from national government to shift the burden from one on the government to one on the taxpayer demonstrates a lack of acknowledgment of the widespread benefits of rail to all, both passengers and those not directly using the service,” she says. “Such benefits include improved air quality, congestion relief and the feasibility of high capacity employment hubs.”
The bottom line, then, is that your raising ticket prices are a governmental decision. “The government's in charge here,” says Chambers. “There are sound reasons for the cost of the railway coming out of general taxation and not from fare payers. But that’s the choice that’s been made.”
This article was originally published by WIRED UK
