3.8% Fare rise announcement delayed

[jfollows]

3.8% fare rise in March now announced, given that today's news is as bad as it can be for the government they might as well announce "bad news" on the same day (https://www.theguardian.com/money/2021/dec/17/rail-fares-increase-march-inflation).

Rail fares to increase by 3.8% in March

Industry welcomes decision not to raise fares above July’s RPI inflation rate as some had feared

Industry leaders had argued for a freeze on ticket prices to tempt passengers back to the railway.

Gwyn Topham Transport correspondent

@GwynTopham

Fri 17 Dec 2021 11.52 GMT

Rail fares are to rise by 3.8% in March, the government has confirmed, in line with July’s RPI inflation rate.

The latest increase – revealed in the Guardian after a leak this month – is less than some feared after fares went up above the RPI inflation rate in March of this year.

However, with current inflation rates running much higher, and many former season ticket-holders in the commuter belt working from home, the fare rise is likely to be met with less political outcry than in previous years.

Industry leaders have argued for a freeze to tempt passengers back to the railway, with numbers again declining with the Omicron coronavirus variant. Numbers had peaked at about 70% of pre-pandemic levels in November.

However, the Treasury is keen to reduce subsidy, with the government having invested more than £14bn to keep services running during the pandemic, and said the fare rise would help meet some of these costs.

The rail minister, Chris Heaton-Harris, said: “Capping rail fares in line with inflation while tying it to the July RPI strikes a fair balance, ensuring we can continue to invest records amounts into a more modern, reliable railway, ease the burden on taxpayers and protect passengers from the highest RPI in years.”

The government said the flexible season tickets it launched this year, whose savings were widely regarded as insufficient to attract many passengers, had now been purchased by more than 100,000 people, who could still save travelling two or three days a week.

The rail industry welcomed the decision not to raise fares above RPI as some had feared. Andy Bagnall, the director general of the Rail Delivery Group, said: “It is important that fares are set at a level that will encourage more people to travel by train in the future, helping to support a clean and fair recovery from the pandemic.”

News of the fare rise comes as rail unions gear up for industrial action, with a wave of job cuts expected as train operators and Network Rail have been told to find savings of £1.5bn a year.

 

[bramling]

3.8% fare rise in March now announced, given that today's news is as bad as it can be for the government they might as well announce "bad news" on the same day.

Nice bit of burying bad news.

 

[JonathanH]

Nice bit of burying bad news.

Still isn't RPI+1%, nor current RPI of over 7% so perhaps better than feared.

 

[Watershed]

3.8% fare rise in March now announced, given that today's news is as bad as it can be for the government they might as well announce "bad news" on the same day (https://www.theguardian.com/money/2021/dec/17/rail-fares-increase-march-inflation).

It could certainly be worse. But it puts paid to any notion that the government is prepared to put its money where its mouth is on climate change and net zero. The way to encourage people onto the railway isn't pricing them off.

Fuel duty revenue decreased 25% - more in real terms - from £28.0bn in 2018-19 (the last full pre-Covid year) to £20.9bn in 2020-21. Yet the government froze duty for the 12th year running in the Budget.

If fuel duty had been increased even just by CPI - let alone the deeply flawed RPI mechanism - over those 12 years, it's estimated the Treasury would be nearly £50bn better off. The perpetual freezes make it very difficult politically to restart the escalator, given that wholesale oil prices have increased to 10 year highs in recent months.

Of course, this sadly reflects the view of a lot of the electorate. Many drivers couldn't even fathom shouldering a proportion of the costs they impose on society. And yet they complain that public transport is so expensive

 

[AGH]

As a commuter who can work from home and didn't get a 3.8% pay rise this is a net pay cut. I will simply work from home more. I regularly use my monthly tickets also at weekends so suspect my trips to the same city will be reduced as well. Self defeating.

 

[bramling]

Still isn't RPI+1%, nor current RPI of over 7% so perhaps better than feared.

Oh yes could be a lot worse, but still not exactly a good headline - “with 7% inflation government *chooses* to put up fares for squeezed rail commuters”.

Less toxic than putting up fuel duty, of course.

 

[splashoutradio]

If anyone would like to see how thankful the nation should be at the rail fares increase, the government have kindly compiled such an article.
https://www.gov.uk/government/news/rail-fares-capped-to-prevent-high-increases-for-passengers

This article does include confirmation of the extention of the Book with Confidence Scheme, until March 2022.

 

[Kite159]

It will be interesting to see if Wales or Scotland follow suit with a similar rise.

 

[Merseysider]

The way to encourage people onto the railway isn't pricing them off.

Agreed.

I work as a teacher and the government thanked me and all my colleagues for our efforts by giving us a pay freeze. Thankfully our Academy Trust was able to finance a 1% increase but it still represents a pay cut when compared to the increasing cost of living.

Every time the fares go up it makes me think a little more about the money I’m spending on leisure trips by train, and whether I’d be better off starting to save up for an electric car (I can already drive, just no car).

If the government truly cared about cutting carbon emissions then we’d see fare freezes / reductions on the routes which have the capacity for more passengers.

 

[MadCommuter]

As a commuter who can work from home and didn't get a 3.8% pay rise this is a net pay cut. I will simply work from home more. I regularly use my monthly tickets also at weekends so suspect my trips to the same city will be reduced as well. Self defeating.

This. Despite the rising fuel prices, I can still drive to work, park at the periphery of the city centre for free and walk 12 minutes to the office and it cost less than an Anytime Return. I've also suffered no delays or cancellations. I've been doing that once a week since, September and will continue when I'm dragged back in.

 

[Trackman]

It will be interesting to see if Wales or Scotland follow suit with a similar rise.

Scotland have announced 3.8%, nothing from Wales at the mo I think.

 

[Horizon22]

Agreed.

I work as a teacher and the government thanked me and all my colleagues for our efforts by giving us a pay freeze. Thankfully our Academy Trust was able to finance a 1% increase but it still represents a pay cut when compared to the increasing cost of living.

Every time the fares go up it makes me think a little more about the money I’m spending on leisure trips by train, and whether I’d be better off starting to save up for an electric car (I can already drive, just no car).

If the government truly cared about cutting carbon emissions then we’d see fare freezes / reductions on the routes which have the capacity for more passengers.

I am in two minds about it - whilst yes we should encourage people back with fares that are value for the money its not like the railway (or any other industry) is immune to inflationary costs on the supply-side either. The government / DfT probably don't have a very long-term view about this though.

 

[LNW-GW Joint]

Scotland have announced 3.8%, nothing from Wales at the mo I think.

They have recently gone for RPI I think, with Wales making some significant fare adjustments to correct long-standing anomalies (eg higher fares in the north compared to the south).

The DfT adjustment of the fares formula is a bit like the pensions formula correction in reverse, which otherwise penalised the government with a high RPI rise.
I'm not sure the "3.8% fare rise announcement delayed" is accurate, as the last rise was in March this year.
The percentage probably fell out of the spending review last month.

 

[tbtc]

Fuel duty revenue decreased 25% - more in real terms - from £28.0bn in 2018-19 (the last full pre-Covid year) to £20.9bn in 2020-21. Yet the government froze duty for the 12th year running in the Budget.

If fuel duty had been increased even just by CPI - let alone the deeply flawed RPI mechanism - over those 12 years, it's estimated the Treasury would be nearly £50bn better off. The perpetual freezes make it very difficult politically to restart the escalator, given that wholesale oil prices have increased to 10 year highs in recent months

1. If RPI is "deeply flawed" then what would be an appropriate measurement for rail tickets to go up by (given that the railway's costs increase each year, e.g. staff get wage rises)?

2. Fuel duty is only one of the taxes that apply to the petrol you buy at a garage - if the price of fuel at the pumps rises then the Government get more money, whether that's from fuel duty or other taxes - as you say, wholesale prices have gone up a lot in the last few years - maybe if wholesale prices were going down then the Government would increase fuel duty to compensate from the reduction in other taxes - maybe if wholesale petrol prices only went up in line with inflation then it'd be be a better comparison

 

[Nicholas Lewis]

We know what the unions starting point for pay negotiations is going to be............

 

[Watershed]

1. If RPI is "deeply flawed" then what would be an appropriate measurement for rail tickets to go up by (given that the railway's costs increase each year, e.g. staff get wage rises)?

The majority of rail fares are set much higher than the cost of driving (regardless of if you use the 10-20p per mile cost of fuel or include fixed and other variable costs and call it 30-40p per mile).

So, really, there ought to be a substantial downward adjustment. Realistically, no government is going to bring fares down to continental levels, but even just resetting them to pre-privatisation levels (in real terms, using CPI not RPI!) would be a start.

The Welsh Government recognised that North Wales fares were set disproportionately high and cut most by 10% a few years back. That's certainly a step in the right direction but you would have to cut fares by something nearer to 25% (more in some cases) to offset the inflation-busting increases that have occurred over the last 25 years.

Once that one-off 'adjustment' is made, I think it would be reasonable to increase fares in line with CPI each year. Accordingly, pay awards would have to be restricted to CPI as well. Of course, the unions won't take kindly to that, but the railway doesn't owe anyone a living. The government needs to be prepared to take a hardline stance on this.

2. Fuel duty is only one of the taxes that apply to the petrol you buy at a garage - if the price of fuel at the pumps rises then the Government get more money, whether that's from fuel duty or other taxes - as you say, wholesale prices have gone up a lot in the last few years - maybe if wholesale prices were going down then the Government would increase fuel duty to compensate from the reduction in other taxes - maybe if wholesale petrol prices only went up in line with inflation then it'd be be a better comparison

I think there is a wider point here - it seems eminently unreasonable that VAT is charged on fuel duty. Double taxation if you will! In fact, I don't even know why fuel should have much (if any) VAT, given that it means a very volatile income for the government, and exacerbates the inflationary effect of wholesale fluctuations.

If it were up to me, I'd grasp the opportunity of high prices (they are unlikely to rise further - they have been artificially inflated by OPEC et al, but they have an interest in ensuring prices do not become so high they reduce total revenue).

Reduce VAT on fuel to 5%, or eliminate it entirely. And then increase fuel duty to match what VAT currently brings in on fuel. It'd be revenue neutral now, but ensures the government benefits when prices drop, whilst taxpayers aren't unduly penalised when prices rise.

 

[MadCommuter]

We know what the unions starting point for pay negotiations is going to be............

I've not got my backdated pay award for April 2021 yet.

 

[swt_passenger]

I'm not sure the "3.8% fare rise announcement delayed" is accurate, as the last rise was in March this year.
The percentage probably fell out of the spending review last month.

I’m pretty sure that the thread title dates from December 1st, when the source article was forecasting that the announcement was being delayed, not the actual date it would come into effect…

 

[trainmania100]

All over my Facebook:

"Rail fares to rise at fastest pace for nine years."

 

[Starmill]

1. If RPI is "deeply flawed" then what would be an appropriate measurement for rail tickets to go up by (given that the railway's costs increase each year, e.g. staff get wage rises)?

CPI(H).

RPI has been "in retirement" for many years. It's no longer an official statistic. In a few more years thank goodness it will finally "pop its clogs".

 

[jfollows]

CPI(H).

RPI has been "in retirement" for many years. It's no longer an official statistic. In a few more years thank goodness it will finally "pop its clogs".

Sure, but in practice we see RPI being used as the basis of an index for payments in and variants of CPI used as the basis for payments out, which is a sleight of hand - deferred pensions are indexed upwards by CPI, as one example, but essentially the effect is to collect more money for the government over time than would otherwise be the case. So it's politics and expediency rather than which measure is in some way "better", except that "better" means less money paid out and more money collected.

 

[Starmill]

Sure, but in practice we see RPI being used as the basis of an index for payments in and variants of CPI used as the basis for payments out, which is a sleight of hand - deferred pensions are indexed upwards by CPI, as one example, but essentially the effect is to collect more money for the government over time than would otherwise be the case. So it's politics and expediency rather than which measure is in some way "better", except that "better" means less money paid out and more money collected.

Indeed. It's a con that has allowed some politicians a veneer of economic credibility. Whenever I see RPI being used in any official capacity I get very cross. There is absolutely no longer an excuse.

 

[jfollows]

And one of my pensions which I start collecting when I'm 65 is a civil service pension, which is increased annually by CPI, not RPI.
There are many similar examples. RPI>CPI by the way.

 

[yorksrob]

There's always the fun of seeing what's in the RPI basket this year:

"Microwave oven, in, Goblin Teasmade out"

"Punnet of strawberries, in, toasted sandwich maker out"

"I-phone, in, tinned prunes out" etc..

 

[geoffk]

But it can afford a fuel duty freeze for the 11th consecutive year running?
The UK Conservative Government has made a political decision to subsidise driving and car ownership, whilst penalising rail users.

Exactly. And industrial relations in parts of the industry are not great atm (see other threads passim), meaning that passengers will be paying more for a service that's often disrupted at short notice!

 

[ScotGG]

I’d be surprised if Government can afford a fares freeze.

Of course they can. The Bank of England uses QE and UK Govt borrows at ultra low rates.

It's a choice to do this not a neccesity.

 

[6Gman]

Of course they can. The Bank of England uses QE and UK Govt borrows at ultra low rates.

It's a choice to do this not a neccesity.

But using either of those to fund revenue rather than capital expenditure would be foolish.

 

[su31]

We know what the unions starting point for pay negotiations is going to be............

London Underground's 2022 pay rise is the last of a 4 year deal. It is based on February's RPI figure plus a 0.25%. Due to the Bank of England increasing their interest rate, inflation will drop by then.

 

[Andrew1395]

The fare increase won’t be going on wages, most rail staff are earning less in real terms now then they were, as inflation has shot up and no wage rises for most since 2019.

Inflation on fuel, energy and consumables will be the other side of the coin to the reduction in revenue. Increasing prices and reducing costs will be the strategy for the next 36 months at least.

 

[bakerstreet]

Given HM Government are effectively in control of every aspect of the running of the railway, do you think this increase will be across the board or to regulated fares only?

Ie given the decimation of commuting and the increase in leisure travel, could we see existing ’non regulated’ fares increase much higher, fares like super off peaks (in the cases where these are not the regulated) and advances etc which could well be the majority of all tickets purchased.

Already we’ve seen postings here noting the restricting of some of the lowest tier advances from sale.