Friends of the Rail Forum

Rail fare rises of 13% 'may break government', campaigners warn

Passenger groups, environmental lobbyists and unions predict average fares will rise four times faster than wages in 2012

Dan Milmo and Heather Stewart
guardian.co.uk, Sunday 14 August 2011 18.25 BST

Hitting rail commuters with a swath of double-digit rail fare increases will carry "economic and political consequences" for the government, campaigners have warned on the eve of inflation figures that will mean some tickets rise by 13%.

Millions of rail passengers will get an indication of the fare increases due in January when the inflation rate that sets annual price rises is published on Tuesday.

Under the government's austerity drive, from next year season tickets will rise by the rate of retail price index inflation plus 3% until 2014, with room for a further 5% increase on some services. With the RPI due to hit 5% next week, commuters face a 13% increase on certain routes – to the dismay of passenger groups, environmental lobbyists and trade unions.

"It will be a straw that breaks the camel's back," said Stephen Joseph, chief executive of the Campaign for Better Transport (CBT), which has warned that average fares will rise four times faster than wages in January. "There are both economic and political consequences for this. For some people in the London labour market and some cities outside of London, this will be a big chunk of money.

"If you look at places where there is a large number of rail commuters, there is a significant number of marginal seats. Those are precisely the places that will be affected by eye-watering rail fare rises."

The Department for Transport has confirmed that it will retain the so-called flex system, which allows rail companies to average out fare increases across a basket of tickets instead of applying uniform price increases. Under this framework, a further 5% can be added to the RPI + 3% hike on certain fares, provided that the total increase within that batch of fares is in line with the official limit. This means that an annual season ticket from Bournemouth to London, currently £5,424, could rise by £705 to £6,129. Increases could be even higher on fares that are not capped, such as advanced purchase fares.

Train operators, who levy the fare increases and are often a lightning rod for passenger ire over ticket prices, will pass on the increased revenue to the government and are keen to emphasise that they are only following DfT policy.

"Increasing the money raised from fares will mean that taxpayers contribute less to the running of the railways, whilst ensuring that vital investment can continue," said David Mapp, commercial director at the Association of Train Operating Companies. The government spends around £4.6bn a year on the railways with the farepayer contributing £6.2bn, a gap the DfT wants to widen after setting a target to reduce industry costs by a further £1bn by the end of the decade.

Theresa Villiers, the rail minister, ruled out scrapping the flex system, which had been dropped in the final year of the Labour government. "The scale of the deficit means that the government has had to take some very difficult decisions on future rail fares, but the long-term solution is to get the cost of running the railways down. That way we can get a better deal for passengers and taxpayers. We are determined to do this and if we succeed, we hope to see the end of above-inflation rises in regulated fares," she said.

Nonetheless, a concerted campaign against the rises has already begun. The environmental group Climate Rush will join the CBT, unions and the shadow spokeswoman for transport, Maria Eagle, at Waterloo station, in London, tomorrow to protest against the increases. According to the CBT, train fares will rise by an average of 8% – four times more than the average wage rise.

Eagle said: "For many, the cost of getting to work is now the biggest single item in the monthly budget, bigger even than rent or mortgage payments. These fare rises are the direct consequence of the decision to cut too far and too fast, meaning commuters are having to pay more to plug the hole in the transport budget."

Despite warnings that inflation-busting hikes will dent demand for rail travel, journeys on the network rose by 6.9% last year to 1.32bn.

Inflation fell modestly in June, to 5% on the RPI measure, as hard-pressed retailers slashed the price of electronics goods such as televisions. City analysts expect a similar reading for July, with average earnings growing at less than half that pace, many households are already enduring a painful squeeze on their living standards.

High oil prices, January's increase in VAT and the weakness of the pound, which pushes up the cost of imports, have all boosted prices. CPI inflation, the measure targeted by the Bank of England, is expected to be above 4%, for most of this year.

Sir Mervyn King will be forced to write to George Osborne this week to explain why inflation remains more than half a percentage point above the government's 2% target.

Inflation could push up rail season tickets by 8%

• Fares allowed to rise by inflation plus 3%
• RPI expected to touch 5% for July
• Bank of England governor to write to chancellor

Press Association
guardian.co.uk, Tuesday 16 August 2011 07.54 BST

Hard-hit rail commuters face more misery as inflation figures on Tuesday reveal how much more they will have to pay for their season tickets in the new year.

The July retail prices index rate is used to determine the following January's annual rise for regulated rail fares, which include season and saver tickets.

The formula used to calculate the new fares is RPI plus 3%. The rate is expected to come in at 5%, meaning fares will increase by 8%.

Elsewhere, the wider consumer prices index (CPI) rate of inflation is expected to increase to 4.4% from 4.2% in June, underlying the pressure on household budgets and triggering an explanation letter from Bank of England governor Sir Mervyn King to George Osborne.

And a quarterly survey from Saga revealed a sharp fall in the standard of living for older generations. For the third quarter in a row, Saga's Quality of Life Index has fallen, as soaring price levels continue to erode living standards for over 50s.

The government changed the fare-rise formula for 2012, with the formula previously being RPI plus 1%.

As train companies are allowed to make the increase an average figure, some season tickets could go up by much more than that.

The rise in rail fares comes as utility groups announce future electricity and gas bills, all of which are expected to push the CPI rate of inflation to 5% by the end of the year.

But with the UK facing a period of continued sluggish growth, the Bank expects inflation to fall below the 2% target to 1.8% in two years' time, particularly as the impact of this year's VAT increase falls out.

Victoria Cadman, an economist at Investec Securities, said lower food and petrol prices will limit the rise this month, with recent data from the British Retail Consortium showing prices fell by 0.6% in July from June.

Oil prices have also fallen, with some of the main supermarkets cutting their forecourt prices, while motoring organisation the AA indicated prices of both petrol and diesel had eased a little.

If the figures come in as expected, July will be the 20th month running that CPI will have missed the Bank of England's target of 2%.

Sir Mervyn is required to write to the chancellor when the rate of inflation has been above target for more than three months – this will be his seventh successive letter and his 12th in total.

Fair Fares Now campaigners, led by the Campaign for Better Transport, will be at London's Waterloo station to demonstrate against the hike before the RPI rate is revealed by the Office for National Statistics.

The campaign is also supported by the RMT transport union which on Tuesday published a report saying rail privatisation had "bled £6.6bn out of the rail industry since 1997".

The RMT-commissioned report by research company Just Economics also said that the future "bleed" would amount to around £6.7bn over the next 10 years.

RMT general secretary Bob Crow said the government was "forcing through inflation-busting fare increases and savage cuts to maximise private train company profits".

Campaign for Better Transport's public transport campaigner Alexandra Woodsworth said: "Affordable rail travel is vital for passengers, for the environment and for our workforce. These massive fare rises will be a disaster for people already struggling with rising costs, and risk pricing those on lower incomes out of jobs in our major cities.

"Our demonstration is sending a clear message to government that the country simply can't afford fare rises on such a punitive scale. It's time to burst the bubble on inflation-busting fare hikes."

Shadow transport secretary Maria Eagle will meet commuters at Waterloo and call on the government to rethink the rail fare increases planned for each of the next three years.

She said: "The Tory-led government is totally out of touch with the cost of living crisis facing commuters and fails to understand how these eye-watering rail fare rises will add to the burden on families. The cost of getting to work is for many people the biggest single item in the monthly budget, bigger than mortgage payments and bigger than rent."



BBC 16 August 2011 Last updated at 08:03

Inflation figures to set rail fare rises

Rail commuters are set to find out later how much their season tickets are likely to go up by next year, as the latest inflation figures are revealed.

July's RPI inflation figure, released at 09:30 BST, determines the rise in regulated fares, like season tickets.

RPI inflation for July is expected to be around 5%, meaning the average season ticket will go up by around 8%.

The rises are part of the government's agenda to reduce the cost to the taxpayer of running the rail network.

For the last few years the formula for rail fare increases has generally been RPI inflation plus 1%, but for the next three years it is RPI plus 3%.

The formula affects regulated fares, such as season tickets and long distance off-peak tickets. Some fares will go up by far more than the 8% average, because train companies are allowed to increase fares by another 5% on top, as long as that is balanced with reductions elsewhere.

Edward Welsh, corporate affairs director at the Association of Train Operating Companies (Atoc), said all the extra money raised will go to the government and not train companies.

'Difficult times'

He told BBC Radio 4's Today programme the "good news" was that the money would help to sustain investment in the railway network.

"It's about ensuring that there is money there to pay for improvements for more trains, for better stations, for faster services - and that's what passengers want," he said.

Earlier, an Atoc spokesperson said companies knew these are "difficult financial times for many people".

But that many fares needed to rise above inflation for the next three years to help pay for more trains, better stations and faster services.

"Increasing the money raised from fares will mean that taxpayers contribute less to the running of the railways, whilst ensuring that vital investment can continue," the spokeman added.

There are some exceptions to the formula. Scotrail is sticking to the RPI+1% formula, whilst Merseyrail will use RPI+0%.

A combination of more people travelling, above-inflation fare rises and cost-cutting has led to rail users' contributions to the railways rising from £5bn in 2006/07 to £6.6bn in 2010/11, whilst over the same period the amount contributed by taxpayers has fallen £6.3bn to £4bn.

Campaigners though are due to protest at London's Waterloo station about the fare rises.

"Affordable rail travel is vital for passengers, for the environment and for our workforce. These massive fare rises will be a disaster for people already struggling with rising costs, and risk pricing those on lower incomes out of jobs in our major cities," said Alexandra Woodsworth from the Campaign for Better Transport.

"The country simply can't afford fare rises on such a punitive scale. It's time to burst the bubble on inflation-busting fare hikes."

Rail fares rise condemned as 'eye-watering' by Labour

Transport secretary defends 8% average rise, saying funding is needed for new carriages, Crossrail and Thameslink

Sam Jones and agencies
guardian.co.uk, Tuesday 16 August 2011 18.32 BST

Commuters will have to endure an average rise of 8% in the cost of their rail tickets next year following the latest inflation figures – a price hike Labour described as "eye-watering".

The extent of the increase was revealed on Tuesday when the Office for National Statistics published the July 2011 inflation statistics.

They showed that while the consumer price index (CPI) rate of inflation rose from 4.2% in June to 4.4% in July, retail price index (RPI) inflation remained unchanged at 5.0%.

The July RPI figure determines the following January's increase in regulated rail fares, which include season tickets.

The government has recently changed the annual price rise formula from RPI +1% to RPI +3%.

This means that regulated fares will rise by 8% in January but – as this is an average increase – train companies can put some regulated fares up by as much as 5% above 8%. For example, an annual season ticket from Bournemouth to London, currently costing £5,424, could rise to £6,129.

Scottish rail travellers will be spared some of the pain of their English counterparts in the new year as the higher annual price rise does not apply to ScotRail, which will be carrying on with the RPI +1% formula for regulated fares.

The transport secretary, Philip Hammond, accepted that the increase would not be well received, but said it was vital in helping to overhaul the national rail system.

"We are now embarked on one of the biggest programmes of rail investment for 100 years, delivering more than 2,700 new rail carriages, a £900m programme to electrify more lines and the vital Crossrail and Thameslink projects in London," he said.

"Due to the scale of the deficit, these investments would simply have not been possible without the difficult decision we have made to increase rail fares. I know this decision has not been popular, but I hope passengers will appreciate the improvements it allows us to make."

Hammond said the government was determined to bring the cost of the railways down, as suggested in an independent review earlier this year by Sir Roy McNulty, the former chairman of the Civil Aviation Authority.

In his study, McNulty recommended an overhaul of the fares system, noting that fares in the UK were 30% higher than in France, the Netherlands, Sweden and Switzerland, while operating costs were running 40% higher than in those countries. McNulty called for £1bn in costs to be stripped out of the industry.

Hammond said: "Better value for money on the railway will deliver a better deal for taxpayers and farepayers alike and will allow us to put the era of above inflation rises in regulated fares behind us."

Labour, however, described the fare rises as "eye-watering" and said they were further proof of just how out of touch the government was with the spiralling cost of commuting.

"These fare rises squeezing commuters are the direct consequence of the Tory-led government's decision to cut too far and too fast, and travellers are having to pay more to plug the gap in the transport budget," said the shadow transport secretary, Maria Eagle.

"The cost of getting to work is, for many people, the biggest single item in the monthly budget – bigger than mortgage payments and bigger than rent.

"With train fares set to rise four times faster than wages in the next year, ministers should think again and give commuters a break."

David Mapp, commercial director at the Association of Train Operating Companies, acknowledged that times were tough, but said the government had decided that the best way to pay for more trains, faster services and improved stations was to increase many fares above inflation.

"Increasing the money raised from fares will mean that taxpayers contribute less to the running of the railways, while ensuring that vital investment can continue," he said.

But David Sidebottom, director of the rail customer watchdog Passenger Focus, said that while regulating some fares was clearly in passengers' interests, allowing train companies to set fares on individual routes was "deeply unfair".

"Some passengers who may have seen no investment or improvements can get hit year after year," he said.

Gerry Doherty, the general secretary of transport union TSSA, contrasted the affordable, "publicly-owned, socially-inclusive" railways in mainland Europe with the British system.

"Here, ministers seem determined to create a system which will exclude the poor, many families, the elderly and the young who will not be able to pay these ridiculous increases over the next three years," he said. "The taxpayer will have to fork out £4bn a year for a system that many will simply not be able to afford."