16 August 2011

Fair warning?

With news today on all media that rail fares will increase by 8% in January, the masses were not told why the current formula exists. One of the main reasons behind the 'July RPI figure + an agreed percentage point figure' was adopted is to redress the balance of who pays what for our national rail network. July's RPI figure was released today, 5%.

Agreed a number of years ago by the former Labour government, the traditional 50/50 split between fare payer and tax payer over who pays for the railway is being phased out and replaced by a 25/75 split in favour of the tax payer. The initial formula was RPI+1; it was altered by the Coalition to RPI+3. To pay for High Speed 1, Southeastern is able to increase its regulated fares by RPI+5. The Scotland Parliament has announced it will retain the original RPI+1 formula for regulated fares north of the border.

The broad thinking is that those who use the railway should pay for it, while the many million tax payers who seldom use the rails, should not. The down side is that those who do use (and rely heavily on) the railway will have to pay significantly more for the cost of their tickets.

While bringing the news of the increase to regulated fares to the fore many months ahead can help people plan for the rise, it does bring two bouts of very negative press for the railways each year, as a re-run will ensue from the start of 2012.

A further increase of up to 5% can be made by operators to non-regulated fares, but they have to demonstrate that others have reduced by the same amount. Fares for many unpopular journeys will go down, but at the expense of those which are frequently used. The lower, unregulated fares can be a boon to many people who do not use the railway for commuting, benefiting by the offset reductions, though very much at the expense of those who do.

Commuters are seen as an easy target as their season tickets represent excellent value for money. The cost of a weekly season ticket is generally calculated as the total cost of two full price return fares between the commuter's two nominated points. Each season ticket holder receives a week's worth of travel for the price of 2 returns. It is when you multiply this by 48 (weeks) that the annual cost becomes less palatable. £2,000 is seen as the average cost of an annual season ticket.

But what to do? Transport is, sadly, not at the top of the government's priorities. In the Coalition's eyes, the tax payer is getting a better deal with the planned 8% rise in rail fares from January as those who use the rails are paying for it, rather than everyone. As we mentioned last week, the industry is a victim of its own success, with 6% year-on-year growth. While people keep on coming, it will be a very long time before we hear the end of large fare increases.

1 comment:

Phil Parker said...

It would be easier to stomach massive fare increases if the people collecting the money wern't private companies. Ministers keep banging on about getting better vaule for money and cutting costs but the simplest and most effective solution is the one they won't contemplate - renationnalisation. Remove the massive layers of lawyers from the system and costs will go down. Hand the whole lot over to the Germans, French or Chinese as a job lot and they will go down further. We might even get some new lines and trains that work.