A new way for fares regulation in a nationalised railway?

[Trainbike46]

With the railway being nationalised, the current way fares regulation works is likely to be abolished. At the same time, the government may not be willing to set no limits on fares at all.

A potential option I would propose is to replace it with a new style of fares regulation. Elements I would include are:
- A maximum price per kilometre for Anytime and Off-peak standard-class singles.
- These maximum prices would increase once per year with the CPI (or CPIH) of the previous year, to ensure rail travel doesn't become more expensive relative to people's other expenses, while fare income does increase with increasing costs.
- A rule that an individual ticket can be increased by no more than CPI+3%, provided it does not exceed the maximum prices set above.
- A rule that advance tickets must be at least the higher of £5 or 10% cheaper than the relevant Anytime or Off-peak fare

What are people's thought? Anything you'd do differently?

 

[Lewisham2221]

With the railway being nationalised, the current way fares regulation works is likely to be abolished. At the same time, the government may not be willing to set no limits on fares at all.

A potential option I would propose is to replace it with a new style of fares regulation. Elements I would include are:
- A maximum price per kilometre for Anytime and Off-peak standard-class singles.
- These maximum prices would increase once per year with the CPI (or CPIH) of the previous year, to ensure rail travel doesn't become more expensive relative to people's other expenses, while fare income does increase with increasing costs.
- A rule that an individual ticket can be increased by no more than CPI+3%, provided it does not exceed the maximum prices set above.
- A rule that advance tickets must be at least the higher of £5 or 10% cheaper than the relevant Anytime or Off-peak fare

What are people's thought? Anything you'd do differently?

Just to be "that person" - the railway would then actually have to pay at least 90p to every person who "bought" an Advance from Levenshulme to Manchester Piccadilly.

 

[Trainbike46]

Just to be "that person" - the railway would then actually have to pay at least 90p to every person who "bought" an Advance from Levenshulme to Manchester Piccadilly.

The point of that rule is to prevent advances with tiny discounts relative to the equivalent flexible ticket. For (very) short distances, advances do not really make sense anyway, so why would advances be offered on that route at all?

 

[JonathanH]

With the railway being nationalised, the current way fares regulation works is likely to be abolished. At the same time, the government may not be willing to set no limits on fares at all.

In theory, the risks of a private monopoly are removed by nationalisation. A public monopoly does not need to be answerable to anyone other than the electorate, because regulations are made and changed by Parliament.

 

[AlterEgo]

With the railway being nationalised, the current way fares regulation works is likely to be abolished. At the same time, the government may not be willing to set no limits on fares at all.

A potential option I would propose is to replace it with a new style of fares regulation. Elements I would include are:
- A maximum price per kilometre for Anytime and Off-peak standard-class singles.

By far the worst idea. Firstly, shorter, and often faster routes become cheaper, and secondly, distance based pricing would kill some branch or rural lines.

It’s absurd to have basically the same cap for the 65 miles from Newquay to Penzance as it is for Rugby to London.

Some routes are shorter but have low capacity; Chiltern from London to Birmingham for example, would be cheaper than the express with Avanti.

- These maximum prices would increase once per year with the CPI (or CPIH) of the previous year, to ensure rail travel doesn't become more expensive relative to people's other expenses, while fare income does increase with increasing costs.

But the cost of running the railway isn’t necessarily CPI or CPIH; costs are very significant and that is largely because of the belt and braces safety culture on the railway.

- A rule that an individual ticket can be increased by no more than CPI+3%, provided it does not exceed the maximum prices set above.

Back to fares buckets then and even more split anomalies!

 

[Trainbike46]

In theory, the risks of a private monopoly are removed by nationalisation. A public monopoly does not need to be answerable to anyone other than the electorate, because regulations are made and changed by Parliament.

All true.

However, I would hope that parliament and/or the relevant ministers would not be micro-managing fares, leaving that to railway pricing managers, but the principles are set by the politicians. My suggestions are an attempt to introduce these principles in a way that suits better post-nationalisation

By far the worst idea. Firstly, shorter, and often faster routes become cheaper, and secondly, distance based pricing would kill some branch or rural lines.

It’s absurd to have basically the same cap for the 65 miles from Newquay to Penzance as it is for Rugby to London.

Some routes are shorter but have low capacity; Chiltern from London to Birmingham for example, would be cheaper than the express with Avanti.

Note how I proposed maximum prices - what each actual fare is set at would be determined individually by pricing managers (as now), and spreading demand would be a major reason for setting fares on some routes lower.
I was not proposing an overall decrease in rail fares, in case that was not clear.

But the cost of running the railway isn’t necessarily CPI or CPIH; costs are very significant and that is largely because of the belt and braces safety culture on the railway.

The point of that rule is to ensure the railway can raise it's prices annually, without rail travel consistently increasing in costs above inflation levels. If you believe a different measure of inflation is more suitable, feel free to suggest it.

Back to fares buckets then and even more split anomalies!

Not at all - every fare would have to stay at or below the above mentioned macimum price per kilometre.

 

[SynthD]

With the railway being nationalised, the current way fares regulation works is likely to be abolished.

Why do you think this?

These maximum prices would increase once per year with the CPI (or CPIH) of the previous year, to ensure rail travel doesn't become more expensive relative to people's other expenses, while fare income does increase with increasing costs.

What happens when these two (customers other expenses and industry's increasing costs) rise differently?

I think that it'll be far less obvious that the government are in charge. Any benefit made will reduce the subsidy, not the fare. The aim of the last several decades has been to reduce the cost to the Treasury. While it would be nice to think customers could pay less or be provided more seats in times of higher demand, if I were imagining what will happen, it would be Treasury focused.

 

[Trainbike46]

Why do you think this?

The purpose of current fares regulation is to prevent private TOCs from over-charging, and it was introduced at privatisation for that reason. Post-nationalisation, that is no longer the case.

What happens when these two (customers other expenses and industry's increasing costs) rise differently?

If necessary, parliament and or ministers would have to step in, either by increasing subsidies or by increasing prices more than by the standard process.

I think that it'll be far less obvious that the government are in charge. Any benefit made will reduce the subsidy, not the fare. The aim of the last several decades has been to reduce the cost to the Treasury. While it would be nice to think customers could pay less or be provided more seats in times of higher demand, if I were imagining what will happen, it would be Treasury focused.

I'm not sure what you mean here?

 

[AlterEgo]

All true.

However, I would hope that parliament and/or the relevant ministers would not be micro-managing fares, leaving that to railway pricing managers, but the principles are set by the politicians. My suggestions are an attempt to introduce these principles in a way that suits better post-nationalisation


Note how I proposed maximum prices - what each actual fare is set at would be determined individually by pricing managers (as now), and spreading demand would be a major reason for setting fares on some routes lower.

Why would managers set the price lower when they are hampered by an absolute price cap? Why, in fact, would Chiltern be, say, half the cost of the price cap, in a fully nationalised world where they aren’t meant to be competing for business with intercity flows on the WCML? This is a recipe for political direction and it will absolutely lead to micromanagement.

On price caps; these are completely artificial. I suppose you’ll think “well Newquay to Penzance should still be cheap and Rugby to London is going to be expensive.” Why? The only answer is “pricing managers (plural?) will respond to demand” because people won’t pay £75 to go from Newquay to Penzance.

Distance based pricing or price caps are a total non starter because if you still envisage the above situation then you’ll get very little out of it politically except a large increase in subsidy needed, or a decrease in service as costs are inevitably cut.

The point of that rule is to ensure the railway can raise its prices annually, without rail travel consistently increasing in costs above inflation levels

That’s the same principle we have with some regulated fares at the moment though, plus a few percent. It hasn’t led to affordable fares. What will happen is the distance between the farebox and subsidy will grow and you’d be better off simply advocating for a political solution where train fares are much more heavily subsidised as a social good.

Not at all - every fare would have to stay at or below the above mentioned macimum price per kilometre.

But you’re giving latitude for variable price increases on certain flows. So you’ll still get “cream” flows where the prices get increased and others where they do not; this is exactly what exacerbated the rise of split ticketing in the first place.

 

[Howardh]

Something has to be done to prevent the sort of "I flew from Edinburgh to Amsterdam/Paris/wherever then Heathrow cheaper than my quoted train journey Edinburgh to London" headlines - it doesn't make the railways look good and it isn't very "green". There should be an absolute cap on any UK journey, and it should be under three figures. Yes, one can get very cheap advances, but if a family of four needs to travel urgently from Manchester (let alone Scotland) down to the south, the bill can be eye-watering.

Let's face it, if a ticket costs over £100 who will buy that? Most will baulk leaving an empty seat so the rail companies don't get a penny. To avoid "same price Birmingham/Penzance as Aberdeen/Penzance argument it could be distance-related; so under (say) 300 miles one cap, over is a slightly higher one.

 

[Zomboid]

Something has to be done to prevent the sort of "I flew from Edinburgh to Amsterdam then Heathrow cheaper than my quoted train journey Edinburgh to London" headlines - it doesn't make the railways look good and it isn't very "green".

I suspect that kind of things will always happen because it's not a fair comparison. The travel at an inconvenient time advance airline ticket is compared to the walk up any train rail fare. And they neglect to count the transfers to/front airport (admittedly not zero for most rail journeys, too).

If the advance rail ticket is uncompetitive with flying on what are effectively advance tickets then something will need to change.

 

[crablab]

costs are very significant and that is largely because of the belt and braces safety culture on the railway.

What would you suggest here to make the railway more affordable?

 

[stevieinselby]

Just to be "that person" - the railway would then actually have to pay at least 90p to every person who "bought" an Advance from Levenshulme to Manchester Piccadilly.

Precisely. So there is no incentive for the railway to offer Advance fares for short journeys where they are totally inappropriate.

 

[Bletchleyite]

Just to be "that person" - the railway would then actually have to pay at least 90p to every person who "bought" an Advance from Levenshulme to Manchester Piccadilly.

There shouldn't be Advances for that. It's as ridiculous as there being Advances on the London Underground.

Journeys like that should be based on single fare pricing with peak and off peak and a daily zonal cap, mostly paid by contactless but also with a paper and e-ticket option at the same price, similar to the Project Oval area.

 

[stevieinselby]

Why would managers set the price lower when they are hampered by an absolute price cap? Why, in fact, would Chiltern be, say, half the cost of the price cap, in a fully nationalised world where they aren’t meant to be competing for business with intercity flows on the WCML? This is a recipe for political direction and it will absolutely lead to micromanagement.

But there won't be such an entity as "Chiltern".
One situation could be where trains running on the WCML from Birmingham to Euston are full and overloaded, while those running to Marylebone have loads of empty seats. At that point, it might be a reasonable strategic decision to keep prices on Route: High Wycombe tickets below the cap increase, in order to encourage passengers to use the spare capacity and reduce demand on the Euston trains. Nothing to do with politics, nothing to do with micromanagement, just a good way to maximise capacity.

 

[styles]

Don't agree with most of the proposals.

But on the CPI/CPIH front, I do think it's fair to set those caps. Nothing apart from a measure of inflation consistently rises in line with that level of inflation in practice, but that doesn't stop us writing employment contracts which guarantee CPI-linked pay rises, or landlords from writing tenancy agreements which include clauses to raise rent each year in line with RPI, etc. The purpose of such a cap wouldn't be to keep industry costs the same, but keep consumer fares the same.

 

[AlterEgo]

But there won't be such an entity as "Chiltern".
One situation could be where trains running on the WCML from Birmingham to Euston are full and overloaded, while those running to Marylebone have loads of empty seats. At that point, it might be a reasonable strategic decision to keep prices on Route: High Wycombe tickets below the cap increase, in order to encourage passengers to use the spare capacity and reduce demand on the Euston trains. Nothing to do with politics, nothing to do with micromanagement, just a good way to maximise capacity.

That’s what we have at the moment, except it’s not “strategic”, it’s just a competing entity. One thing hugely overlooked is the effect caps have on the market; a cap is fine, but distance based caps or distance based pricing is literally the only incorrect answer when it comes to the railway, which is not a series of straight lines serving equally valuable markets. It is the first idea out of people’s heads when they start speculating about how to improve the fare structure because it seems abundantly simple. People who have worked in the industry and feel the ebb and flow of the business know this can’t work.

What would you suggest here to make the railway more affordable?

I don’t think the OP is on about making it more affordable.

 

[Zomboid]

there won't be such an entity as "Chiltern

We don't yet know how GBR will be set up, it could be a similar kind of structure to today but with a common owner and a more integrated approach to the network.

I think that would probably be something of a missed opportunity, but it's not beyond possible.

don’t think the OP is on about making it more affordable

Affordable to whom?

 

[deltic]

If we go back to BR days then financial targets will be set for GBR. To reach those targets GBR will need to grow the market, reduce costs and or increase fares. If the latter these will need to be signed off my ministers. Highly unlikely there will be any formal fare regulation.

 

[Hadders]

- A maximum price per kilometre for Anytime and Off-peak standard-class singles.

Are you proposing a national cap or a cap by route?

Take London to Manchester where the Anytime Single is £193, I really don't see how that is going to be an effective cap to 'off-peak' fares.

 

[SynthD]

I'm not sure what you mean here?

The first priority of the government is to spend less, the second aim is to please the people. In rail, this will be done by continuing with the current setup, regardless of who operates the services. Additionally, there is no uncontroversial alternative system, no logic that answers all needs. I am failing to entertain your question, because I don't think there is a possible path to something as rational as you set out.

 

[Lewisham2221]

The point of that rule is to prevent advances with tiny discounts relative to the equivalent flexible ticket. For (very) short distances, advances do not really make sense anyway, so why would advances be offered on that route at all?

Precisely. So there is no incentive for the railway to offer Advance fares for short journeys where they are totally inappropriate.

There shouldn't be Advances for that. It's as ridiculous as there being Advances on the London Underground.

Journeys like that should be based on single fare pricing with peak and off peak and a daily zonal cap, mostly paid by contactless but also with a paper and e-ticket option at the same price, similar to the Project Oval area.

Totally agree! Like I say, I was just being that person, as no mention was made of minimum fare/distance for advances. For what it's worth, I'd probably also return to advances only being available to purchase until 23.59 the evening before travel.

 

[AlterEgo]

If the advance rail ticket is uncompetitive with flying on what are effectively advance tickets then something will need to change.

Why? Only a tiny proportion of rail journeys are made with the plane as a primary competitor. The main competition is the private car, and "not making the journey at all".

 

[Zomboid]

Why? Only a tiny proportion of rail journeys are made with the plane as a primary competitor. The main competition is the private car, and "not making the journey at all".

Obviously only the ones where a comparison would mean anything.

 

[Bletchleyite]

Why? Only a tiny proportion of rail journeys are made with the plane as a primary competitor. The main competition is the private car, and "not making the journey at all".

It's notable that the LNER fare increase trial is on some of the few journeys where the plane is the main competitor.

 

[AlterEgo]

Obviously only the ones where a comparison would mean anything.

Why would that need to change? Do we run empty trains between London and Edinburgh, or are they mostly very full?

 

[Zomboid]

Why would that need to change? Do we run empty trains between London and Edinburgh, or are they mostly very full?

I've no idea, though the one Glasgow to London train I took wasn't full at any point in the journey (though it was reasonably busy between Lancaster and Warrington).

If a train is competing with flying then it should actually compete on a like for like basis, that's all I'm saying. And that comparing the walk up train fare to an advance air fare is meaningless.

 

[Bald Rick]

It's notable that the LNER fare increase trial is on some of the few journeys where the plane is the main competitor.

Indeed. And also it doesnt seem to be putting passengers off.

 

[Bletchleyite]

Indeed. And also it doesnt seem to be putting passengers off.

I would be interested to know if it actually is. What LNER seem to want is to charge fewer people more money, thus reducing overcrowding, due to the fact that London to Edinburgh capacity is well below demand. It will be interesting to see the impact the extra Newcastle service from December has on these fares.

What it does do is allow a more direct comparison with air fares because it is a more air travel like fare structure.

 

[Bald Rick]

What it does do is allow a more direct comparison with air fares because it is a more air travel like fare structure.

Indeed so. Although only really Edinburgh - London, as very few people fly Newcastle to London unless they are changing planes at Heathrow. And at peak times Easyjet will charge you £200+ one way even booking ahead for a non-flexible fare.