Out-Law News 2 min. read
15 Aug 2012, 9:07 am
The annual increase, which affects the majority of commuter fares, is traditionally based on July's retail price index (RPI) measure of inflation; which stands at 3.2% according to today's figures from the Office of National Statistics. Some regulated fares in England will rise by RPI plus 3%, according to the BBC, while fares in Scotland where public subsidies are higher will rise by RPI plus 1%.
The Welsh Assembly is yet to announce a figure for its increase according to the BBC, while fares in Northern Ireland are not linked to inflation.
Infrastructure law expert Patrick Twist of Pinsent Masons, the law firm behind Out-Law.com, said that the reported rise represented almost double the reported annual inflation rate.
"At a time of continuing downward pressure on incomes, this will be even more unwelcome to passengers than usual," he said. "The Government has the laudable aim of reducing the taxpayer subsidy of day-to-day running costs on the railways while supporting continued investment in rail infrastructure, and the Transport Secretary says that, in the long term, this investment will bring down operating costs and avoid the need for big fare increases. However passengers may reflect, with Keynes, that in the long term we are all dead and that continuing above-inflation increases in fares will not incentivise the rail industry to get to grips with costs."
The Government decides the average increase of commuter ticket prices and other 'regulated' fares, including season tickets and 'off-peak' fares on most intercity journeys, using a formula based on July's RPI inflation rate. Train companies may vary regulated fares by up to 5% above, or any amount below, the average change in regulated fares to help them deal with changes in demand on particular routes or at individual stations. However, any of these 'flex' fares that go up by more than the average must be balanced on other routes as weighted by revenue.
Rail minister Theresa Villiers said that the revenue raised by rail fares would be used to deliver an £18 billion programme of rail improvements to tackle overcrowding and improve passenger services.
"Rail fares are helping to deliver this at a time when taxpayer funds are limited by the pressing need to tackle the deficit," she said. "We are determined to drive down the cost of running the railways so we can put an end to above-inflation fare increases in the future. Our reforms aim to deliver £3.5 billion in efficiency savings while continuing to expand services."
The reforms, set out by Transport Secretary Justine Greening in a discussion paper (78-page / 735KB PDF) earlier this year, include the creation of more third-party concessions and improving franchise arrangements so that operators have to deliver better value for passengers. As part of the paper, Greening suggested that the savings would ultimately be used to cap increases in regulated fares at the rate of inflation.
The Government announced £4.2bn worth of spending on new rail schemes last month including the electrification of lines in England and Wales, upgrading the network around Manchester and station upgrades. These schemes are in addition to previously announced measures which will cost £5.2bn, it said at the time.
Michael Roberts, chief executive of the Association of Train Operating Companies (ATOC) said that it was "government policy" for passengers to pay "a larger share of the cost of operating the railways and to focus taxpayers' money on investing in longer term improvements to the network".
"Any flexibility train companies have within the rules is to maximise revenue for the government," he added.
Public funding for the railways has dropped by a third since 2006/07 according to ATOC, while the money raised through fares has steadily increased. Following the average 5.9% increase applied in England from January this year passengers contribute around £6.5bn annually to the running of the railways, while £4bn comes from taxpayer-funded subsidies.
