The railways: Yet another broken market in the UK

We’ve got to get people off our trains and into their cars. Nobody’s exact words, but they may as well be. The rail industry, firmly backed by successive governments, seem hell bent on seeing how far they can put up fares and get away with it.

This week commuters were met with the wearingly familiar news that rail tickets will rise by an average of 8% from next January. On top of the increases from last year, and the year before, and all the years before that.

With a 60% rise in passenger numbers since privatisation, rail travel has never been more popular. This has resulted in state subsidies ballooning from a pre-privatisation high of £1.5 billion, to just over £4 billion a year since 2006, but with an assumed acceptance that it should now be the passenger who foots a greater proportion of the bill, rather than the taxpayer.

Hence, since 2007 ministers decided on a reduction in train subsidies with the passenger being asked to eventually shoulder 75% of the costs, moving away from the 50-50 split with the taxpayer, as has previously been the case.

But, according to Passenger Focus, an independent transport watchdog, ministers would be wise to avoid such an intended shift, proposed at the height of the economic boom, and coming just before the credit crunch and then recession:

“This policy was born in very different economic times. Passengers cannot be expected to continue paying above-inflation fare increases year on year.”

The same argument to justify the trebling of tuition fees can also be heard when talking about increasing rail fares: those who use the service are affluent (students are expected to earn more in their lifetime than non graduates), and in the minority (however significant a minority they may be).

Yet this view is flawed and ignores the fact a huge proportion of rail journeys are done by people commuting from the suburbs and home counties into London, partly because living in the capital has become so unaffordable. Using the car means endless traffic jams, the congestion charge, and the daily struggle to find a parking spot.

Some commuters have little choice but to take the train. So, while the rest of Europe gets on with expanding their high speed rail lines, reducing the need for domestic flights, and generally making peoples’ lives a lot easier, our train companies do their best to discourage travel at rush hour and make that last minute trip as expensive as possible.

All wonderfully helped by their convoluted, and quite frankly baffling, price structure, with huge peak versus off peak variations.

Beyond this, further explanations for the cost of rail travel come with the allegation a couple of years ago that the previous government put pressure on train companies hoping to secure rail franchises, to increase fares, with those who offered to lower prices losing out. While in opposition, the Tories accused Labour of using:

“The rail franchising process to squeeze the train operators to pay the Government higher and higher franchise payments, when ministers were fully aware that this would push fares up.”

Thus, the huge cost paid to the government to run a franchise has meant that companies have had to recoup their costs somehow, the easiest way being in the form of charging passengers more to use their service.

Passenger Focus has also found that the confusing nature of purchase tickets online has also played a part in inflated prices being paid.

In 2009, Passenger Focus, released its findings from a government commissioned report into fares and ticketing (see page 15 in particular). To nobody’s surprise, Britons paid the most of all the countries surveyed, four times more in some cases, and in particular its ‘walk up’ fares, the ones you buy at the time of travel.

Yet according to the Association of Train Operating Companies (ATOC):

“Fares have risen at a significantly lower rate since privatisation than during the last 15 years of British Rail.”

Indeed, ATOC notes that because of the numerous types of tickets that are now available, the last 10 years has seen the average fare “consistently fallen below the headline increases in fares, as passengers have increasingly switched to buying cheaper fares, such as Advance tickets.”

This of course will resonate most with that ultra-organised traveller, who has little need for flexibility, and a desire to travel sometime between 10am-3.30pm, ideally avoiding London. Needless to say, this is not how many of us lead our lives. 

If you compare this to a country like Belgium for example, this level of planning is unnecessary. The peak and off peak ticket is unheard of. You pay the same whether you book your ticket weeks in advance, or on the day.

In fact, when you buy your ticket, you are able to travel on any train you like, and sit wherever you like. If you work for the public sector, season tickets are heavily subsidised.

One of the problems is that the railways can be firmly placed in the ‘unsexy’ box when we think of all things political. Discussions about fare increases and over-crowding tend to be fleeting, provoking outrage and newspaper columns one day, but then almost as quickly forgotten about the next.

They just don’t generate the level of debate that issues such as crime or immigration do. In fact, they don’t really create much debate at all, being an issue that meets with broad support from all the main political parties, and an area where the public’s views are routinely ignored.

I can’t remember an election campaign where public transport has ever been mentioned.

Our fragmented, over-priced railways, where the interests of private shareholders come before passengers, will ensure that we revisit these same arguments again soon.

Meanwhile, passengers are now paying even more for their season ticket, so that they can stand in an overcrowded train, where the windows don’t open, but where they can still get some work done, if only they manage to balance their laptop on the head of the passenger sitting below them.