Rail fares Q&A: Why are they going up again?
- 13 August 2013
- From the section Business
Rail tickets are about to go up again - by an average of 4.1% from January 2014.
That's 1% above inflation - and will apply to all regulated fares, including season tickets.
The actual pounds and pence price hikes won't be revealed for a while yet, but why the seemingly inexorable rise?
Why do some fares go up by more than the average that is regulated by the government?
Rail companies are allowed a little wiggle room, called "flex", which currently lets them put some fares up by as much as RPI plus 6%, as long as it's balanced out with smaller rises, or even cuts elsewhere. So you may be facing an even bigger hike than the average rise announced.
Oh, and the government has promised a similar RPI plus 1% rise in 2015. We've actually had inflation-busting fare rises every year since 2004. It all raises a few questions, doesn't it?
Why are fares going up regardless of the service you're getting?
In a nutshell, the government wants passengers to pick up more of the bill for running the railways.
It all started in 2007 when a White Paper called Delivering a Sustainable Railway effectively set a target to get about three-quarters of the money from fares and just a quarter from the taxpayer by 2014. At the time the bill was split about 50-50; it's now about 68-32, so it's changed a lot but there is still a way to go.
So that's why fares keep going up, and will keep going up for a while yet. The government also says it is paying for huge, multi-billion pound improvements across the network, from electrifying lines to brand new stations and trains.
If our fares are so high, why are record numbers of people using the trains?
Our regulated fares are some of the highest in Europe. But there are still lots of cheap deals out there if you can book well in advance and travel off-peak. Couple that with the cost of running a car, with the pricey insurance and petrol, and the train becomes a very attractive proposition. They are also rather nice when you get on them, and very safe.
Here is a very interesting thing that a senior rail executive told me, and I trust them. If you analyse it per person per mile, season tickets are by far the cheapest deal they offer. In fact, he said, they make a loss on them, and the fare rise goes to the government.
Why do they use RPI and not CPI as a measure of inflation?
The Office for National Statistics has two inflation indexes - the Retail Prices Index (RPI) and Consumer Prices Index (CPI) - that measure the rising costs of goods and services in different ways.
One of the key differences between the two main indexes is that RPI includes housing costs such as mortgage interest payments and council tax, whereas CPI does not.
RPI is normally bigger than CPI, which obviously means fare rises are higher. Yet the government uses CPI for setting pension and benefit rises, for example, so the accusation is that they use CPI it when it's useful to have a smaller number, RPI when they want a bigger number.
Here is what they sent me: "The use of RPI is consistent with the general indexation approach adopted across the rail industry. The Office of Rail Regulation uses RPI as the index for Network Rail's revenues, eg Track Access Charges."
You can make up your own mind.
Is it the same across the UK?
The Scottish government says increases in regulated peak fares will be capped at RPI in January 2014 and January 2015. And regulated off-peak fares are frozen after 2013 provided that RPI remains below 3.5% per annum.
There are no planned rises for Northern Ireland. And the Welsh government has yet to decide what to do.
What would Labour do?
This is what they told me: "There is no conceivable way we will go into the next election backing a higher cap than 1% above inflation and will decide whether we can make a more generous pledge nearer the election."
They would however, abolish the "flex" I mentioned earlier, which would stop those big, 9-10% rises.
Interestingly, Labour has crunched some numbers and says that the government could have afforded to limit 2014's fare rise to just the RPI figure if they had negotiated better deals with the train firms when they extended their franchises after the recent problems with the West Coast Mainline deal.
Will it ever end?
In its last command paper, the government promised to address "the concerns about rail fares and the impact they have on hard-pressed families - by ending inflation-busting increases in average regulated fares at the earliest opportunity".
That is the promise, although they can't put a timescale on it. So your guess is as good as mine. It certainly isn't due to happen before the next general election.
For the record, I have just bought my first yearly season ticket. For the princely sum of £4,240. I could buy a 2003 reg Ducati Monster for that.