UK: end of the line for £1,000 rail fare?

[John Ashworth]

Train ticket shake-up could mean end of the line for £1,000 fare

Review of fare policy aims to narrow gap between cost of cheapest and dearest tickets

* Dan Milmo, Transport correspondent
* The Guardian, Monday 22 February 2010

The notorious £1,000 rail fare from Cornwall to the Scottish Highlands could be banished as train operators launch a review of the government's much-criticised ticketing policy.

Public perception of rail fares reached a nadir last year when it emerged that a turn-up-and-go, first class return from Newquay in Cornwall to the Kyle of Lochalsh, in the Scottish Highlands, costs £1,002.

Although that is acknowledged as an extreme example, the Association of Train Operating Companies (Atoc) is launching a review of rail fares policy that it hopes to present to the new government in the summer and, according to industry insiders, it will look for a way to eliminate the disparity between the cheapest and most expensive tickets.

A rail industry source said train operators will not call for increased government subsidy or wholesale fare increases.

Train operators make £6bn a year in revenues from passengers, with the entire industry including the network's owner, Network Rail, underpinned by government funding of £5bn per year.

"There is no question that we are saying we should have a massive influx of money either from passengers or the government," said the source. "We're trying to see if we can change the system entirely, so that we still raise the same amount from passengers but in a more equitable way."

The Atoc study will consult train operators, thinktanks, MPs and the rail user watchdog on issues including the proliferation of ticket types, whether the right fares are subjected to price caps and whether the government has struck the right funding balance between the taxpayer and the farepayer.

While train operators have the power to set some ticket prices, fares policy including the level of price caps and the industry's overall revenue target is controlled by ministers. This often frustrates train operators, who feel they are unfairly blamed for the public outcry that follows January fare hikes. One operator expressed the hope that the study will "stop us getting beaten over the head every January".

Only 45% of rail passengers feel they get value for money from their ticket, according to Passenger Focus, the commuter watchdog.

However, the review is taking place against the backdrop of lower-than-expected travel costs for commuters. Regulated fares such as season tickets and savers, which account for 40% of fares sold, fell in price this year because negative inflation transformed a price cap of 1% above inflation into a price cut.

Atoc chief executive Michael Roberts warned that the state of the public finances could put further pressure on rail funding. Rail fares remain a politically sensitive issue, but the industry fears that the state's share of rail funding, including a growing subsidy for franchise owners who miss their revenue targets, could become unsustainable. In that scenario, larger fare increases could be possible.

"The pressure on public spending means government will need to take a hard look at funding for rail which in turn will have major implications for future fares policy," said Roberts. "That is why we think it is right to carry out our review now, so train companies can help shape government thinking on this important topic following the general election."

The funding balance between passenger and taxpayer is a particularly important issue for rail travellers, because the farepayer is expected to pay for 75% of the industry's cost by 2014 – the equivalent of £9bn per year.

The industry believes that the range of cheap fares available belies the public perception of costly rail travel and it argues that four out of five people travel on some form of discounted ticket. Train operators privately admonished Arriva, the company that offered the £1,002 Kyle of Lochalsh fare, because the ticket price was entered into the national ticketing system despite the near-certainty that no one would ever buy it.

Passenger Focus, which has urged the government to hold down fares, said the myriad of fare types was creating unwarranted bad press for the industry.

"The fares system is overcomplicated and leads to a misleading perception of higher prices," said Ashwin Kumar, the watchdog's passenger director. Kumar added that long-distance fares need particular attention because ticket prices are often inconsistent, with single fares sometimes costing as much as a return.