Rail Fares facing a near 4% hike in January 2018

[gavin]

Today's London Evening Standard is reporting that rail fares a facing a 'Brexit fare rise' of almost 4% the biggest rise in 5 years

Text now added it wasn't available at the time of the post

From the Evening Standard today:

Rail commuters face 'Brexit fare hike' of nearly four percent - far exceeding public sector pay cap AND private sector wage rises

Hundreds of thousands of rail commuters face being hit with a “Brexit fare hike” of nearly four per cent, The Standard reveals today.

The increase will be the biggest for five years and nearly four times the pay rise of millions of workers.

It will be a further blow to commuters in London, and other parts of the country, already suffering from the worsening squeeze on living standards unleashed by the Brexit vote.

Regulated fares, which include season and other commuter tickets, are set to go up next January in line with the rate of RPI inflation this month.

Economists are predicting RPI will be between 3.6 per cent and 3.9 per cent in July.

This is far higher than salary rises for millions of public sector employees, capped at one per cent, and also some workers in the private sector getting small wage rises or pay freezes.

A 3.9 per cent fare hike would be nearly double average pay rises in the country, according to latest figures, and would be felt hard by commuters, including from some of the Cabinet’s most senior figures.

For London workers living in Theresa May’s Maidenhead constituency, a season ticket will rise by £116.50 from £2,988 to £3,104.50.

Passengers from First Secretary of State Damian Green’s seat of Ashford, Kent, will be hit by a £242.90 hike from £6,228 to £6,470.90 if they use the high speed service.....

 

[gordonthemoron]

unless the government do something about it

 

[LNW-GW Joint]

The formula is RPI+1%, set years ago and nothing to do with Brexit.
The government can intervene to reduce the rise, and has done several times in recent years (in the autumn budget).
This will be just the start of the campaign to force them to do just that.

The formula can be different in Wales and Scotland where the devolved government decides its increase for local fares, also Merseyrail is independent.
Some lines also have RPI+3% to pay for special investment, notably South Eastern to pay for high-speed services.

A lower rate of increase stuffs up railway finances, of course, with less to invest in franchises.
This rise is also only for regulated fares (inc season tickets).
TOCs can raise other fares whenever they like.

 

[IanXC]

The formula is RPI+1%, set years ago and nothing to do with Brexit.

I would agree that you are correct to say the "+1%" has nothing to do with Brexit.

However I do also like the way that you skirt around the issue that the fact that RPI has got to 3% is a direct result of Brexit - the highest level inflation has reached for many years.

 

[LNW-GW Joint]

I would agree that you are correct to say the "+1%" has nothing to do with Brexit.
However I do also like the way that you skirt around the issue that the fact that RPI has got to 3% is a direct result of Brexit - the highest level inflation has reached for many years.

Funny, I seem to remember living through inflation of 25% in the 1970s, and 10% in the 1990s...
Some of the 3% will be down to the devaluation of the £ after the referendum vote, although the trend was upwards anyway.
The real Brexit impact is yet to come.

 

[yorksrob]

I would agree that you are correct to say the "+1%" has nothing to do with Brexit.

However I do also like the way that you skirt around the issue that the fact that RPI has got to 3% is a direct result of Brexit - the highest level inflation has reached for many years.

That, and an underlying over-reliance on imports (exposed by the Brexit-related fall in Sterling).

 

[infobleep]

It goes on to say:

Stephen Joseph, chief executive of lobby group Campaign for Better Transport, said: “The Government’s commitment to not raise regulated fares above inflation now looks pretty paltry, given that RPI could be almost four per cent.

“London already has some of the highest commuting fares in the world - but if there have to be fare rises they at least need to be pegged to CPI, the formula the government uses when it calculates how much money it gives us in pensions and benefits.”

Corporate affairs director Jonathan Sheppard, who makes the daily 360 mile round trip from Newark to London with his wife Julie, said: “Hard-pressed commuters are already paying high fees to get to work in the capital - £10,180 for a standard annual season ticket.

“A near four per cent rise for the both of us would cost an extra £800 a year at a time when wages aren’t rising, there is no interest rates on savings, and the money will have to be found from somewhere.”

Finally at the bottom, as you'd expect from the Evening Standard, they finally have a quote for the Department for Transport and the Rail Delivery Group:

The Department for Transport said it “carefully monitors” how rail fares and average earnings increase.

“We are investing more than £40billion into our railways to improve services for passengers – providing faster and better trains with more seats,” said a spokesman.

“This is all part of the biggest rail modernisation programme for more than a century.”

The DfT insisted that it “fairly balanced” the cost of the investment between the taxpayer and the passenger.

On average, 97 per cent of every £1 of a passenger’s fare goes back into the railway, it added.

A spokesman for the Rail Delivery Group, which brings together train operators and Network Rail to improve services, said: “Increases to season tickets are set by government but money from fares pays to run and improve the network, ensuring the country has the railway it needs to boost the economy nationally and support communities locally.”

I am not surprised that Britexit is leading to higher rail fares. For once I agree with the Evening Standard when they link it to rail fare increases. Usually I don't think much of the Evening Standard's reporting on the railways. This might still not be great but I agree with the central point.

I'm surprised the the RDG and DfT don't mention Britexit in their statements. Either that or the Evening Standard selectively quoted them to avoid any references they might have made to Britexit.

Will the running costs of Britains railways go up by the same amount as the RPI?

If there were to be lower fares increases, i. e. less than 3.6-3.9%, would infrastructure improvements and maintenance be paid for? Maybe they won't be needed if people use the railways less due to the cost of travel.

 

[infobleep]

Here's a quote from someone they interviewed. I think Ms Williams needs to attend a fares workshop. They are free, which is a lot cheaper than £200 for a day return and with several people being unable to justify it.

Julie Williams, 42, works in marketing and regularly travels to Paddington from her home in Bristol

“The trains are ridiculously expensive. I usually travel from Bristol to London and it can cost £200 for a day return. It’s crazy. If you have several people travelling with you, you can’t justify it.

“I have two children and I wouldn’t bother at all with that, I know it’s too expensive and would rather just drive.”

 

[LNW-GW Joint]

I'm not sure why points about Brexit are being made.
RPI is RPI, and the railway can't do a lot about that.
The "+1%" is down to government decision, but the best they have managed in recent years was 0% (ie the fares rise was limited to RPI).

Brexit (£ devaluation) has impacted prices across the board, but may be nothing compared with what's to come when the trading rules actually change.
In any case, didn't the nation vote for it (not me)?
There will be many "unintended consequences" to come.

At some point in the general election campaign, I seem to remember the Tories saying they would "cap rail fares in real terms", meaning sticking to RPI+0%.
And it's also worth remembering that a below-inflation increase is taking money out of the railway.
I doubt the rail unions would be happy at an "RPI-" increase.

 

[infobleep]

I'm not sure why points about Brexit are being made.
RPI is RPI, and the railway can't do a lot about that.
The "+1%" is down to government decision, but the best they have managed in recent years was 0% (ie the fares rise was limited to RPI).

Brexit (£ devaluation) has impacted prices across the board, but may be nothing compared with what's to come when the trading rules actually change.
In any case, didn't the nation vote for it (not me)?
There will be many "unintended consequences" to come.

At some point in the general election campaign, I seem to remember the Tories saying they would "cap rail fares in real terms", meaning sticking to RPI+0%.
And it's also worth remembering that a below-inflation increase is taking money out of the railway.
I doubt the rail unions would be happy at an "RPI-" increase.

If it wasn't for Britexit then RPI wouldn't be at 3.6-3.9% is the claim being made I assume. It would be less were it not for Britexit.

 

[IanXC]

Funny, I seem to remember living through inflation of 25% in the 1970s, and 10% in the 1990s...
Some of the 3% will be down to the devaluation of the £ after the referendum vote, although the trend was upwards anyway.
The real Brexit impact is yet to come.

Couldn't agree more. In historic terms inflation is clearly low, however it is the highest it has been in what could be called the current fares settlement.

Whether said trend was due to the coming referendum we could probably argue until the cows come home...

Absolutely. This is nothing against what is to come(!)

 

[JohnR]

Here's a quote from someone they interviewed. I think Ms Williams needs to attend a fares workshop. They are free, which is a lot cheaper than £200 for a day return and with several people being unable to justify it.

An anytime return IS £204. But singles for tomorrow are available for much less (there seems to be one for £13 in the morning)

 

[paul1609]

Couldn't agree more. In historic terms inflation is clearly low, however it is the highest it has been in what could be called the current fares settlement.

Whether said trend was due to the coming referendum we could probably argue until the cows come home...

Absolutely. This is nothing against what is to come(!)

In reality Government policy has been that the Bank of England should target RPI of 2 % since Gordon Brown handed them responsibility in 1997 and it has averaged that amount since.
Worst case scenario is that Britex could be responsible for about 1.7% of the current spot rates. I take the view that this is about as bad as it will get and that that the post Britex economy will overtake the EU economy about 5 years after exit and then forge strongly ahead.

 

[infobleep]

An anytime return IS £204. But singles for tomorrow are available for much less (there seems to be one for £13 in the morning)

One reason why a fares workshop is so useful.

Here is the Evening Standard comment. I find it especially interesting because George Osborne is the editor and he use to be the chancellor of the exchequer. It never says who writes the lead comments but I believe it to be the editor of the newspaper.

I can't see Southern taking on any of the fare increases and were George Osborne still chancellor, I doubt he'd be calling for such a thing. He's probably be blaming the unions.

Evening Standard comment: An increase in rail fares is a tax on London

Just*as public-sector pay is in the news — it is capped at one per cent — it turns out that the cost of*rail travel may go up in the New Year by as much as four per cent. The funding formula for fare rises means ticket prices are linked to the RPI inflation index as it stands this month — this may turn out to be between 3.6 and 3.9 per cent. So commuters whose fares are already among the highest in Europe may well find that the increase will be double average pay rises or quadruple those in the public sector. It’s why commuters feel increasingly squeezed, given that so much of their pay is spent on fares.*

As for the unfortunate rail passengers on Southern, for whom a smoothly running service is a distant memory, a sense of shame should mean the operator taking the brunt of the fare increases on itself.

One solution to the problem may be to link rail fare increases to another measure of inflation, the CPI, which was just under three per cent in May; that measure is used for setting pensions and benefits. Alternatively, the funding formula could be itself capped, or linked to average earnings rather than inflation. Commuters, after all, are not free agents: very few of them can use another means of transport to get to work. Fare increases are in effect a tax on London. And London workers are *taxed enough already.

 

[AlterEgo]

Glad we've finally discovered what Brexit means.

 

[LNW-GW Joint]

George Osborne was behind the reduction of fares rises from RPI+3% to RPI+1% before he left office.
The "RPI+" formula goes back quite a long way, essentially to Labour years, post-privatisation.
In fact the original rule was RPI-1%, which was supposed to an incentive to the TOCs to make them "more efficient", but that was ditched early on.
The same approach was made for other utilities (water, energy).

It was Gordon Brown/Alistair Darling who (as chancellors), decided to ratchet rises up to +3% to redress the balance of railway funding between taxpayers and passengers.
It was also a way of clawing back the funds they had to spend on Network Rail that the regulator had insisted on c2004.
At that time the ratio was 2/3 (taxpayer) to 1/3 (passenger), and the intention was to reverse that to 1/3 to 2/3, which after a decade or so it has now reached.

But the policy has not been reset, and we are now stuck with RPI+1%.

 

[ChiefPlanner]

The automated reply from "RDG" , who's head is ex Network Rall will no doubt bleat over extra income fares = greater capacity , new infrastructure spend etc .."better railway ..blah, blah , blah"

Ignoring the crashingly obvious waste of money in major schemes like Sheffield Tramtrain , GWR non-electrification and a host of other projects that are either (a) overspent and late (b) or not needed like its of the Digital Railway , Sundon Loop and many others.

 

[island]

Glad we've finally discovered what Brexit means.

I thought it meant Brexit?

I wonder how much of the perception that "trains are expensive" comes from the media running the same story about what percentage fares are rising by in July when the percentage is set, in December when the new fares are published, and in January when they take effect, despite that the regulated fares only go up once a year?

 

[jon0844]

Those who voted Brexit will quite likely say it's a price worth paying anyway. At the end of the day, we get our country back so it's all good...

 

[infobleep]

Those who voted Brexit will quite likely say it's a price worth paying anyway. At the end of the day, we get our country back so it's all good...

Funny how they are happy to accept price rises when it suits them.

Wonder if they would say I am happy for price rises to occur because it helps fund the railway and its improvements to make my journey more reliable and better?

 

[jon0844]

I've heard so many dumb defences of price hikes, from it costing more for currency when going abroad (which probably hits a lot of Brexit voters), to the fact that nobody cares about (potentially*) being charged more for roaming in Europe because 'you're on holiday so shouldn't be using your phone' and other nonsense.

We've moaned about roaming fees for ten years or more - regularly highlighted on consumer programmes and the very same newspapers that are now pretending it's not a problem because it conflicts with their view.

The EU gradually reduced costs year on year with the eventual aim to axe all fees, which it did last month. People live on their phones more than ever and can now use their phone abroad at no extra cost. Yet now we have people saying they were never bothered and would gladly pay roaming fees, because leaving is more important than returning to when users were charged £6000/GB or more! [Not a typo, we really did have charges of £6/MB in the old days, and I'm doing a simple calculation of 1000MB = 1GB]

What scares me is that when people become so blinkered for a cause, it gives a Government the perfect opportunity to do bad things, using arguments that will get blind support where it would never have been forthcoming before.

Post election, however, a lot of that blind faith support seems to have waned - especially as business owners are now worried about how they're going to stay in business during this rocky process and beyond.

* Honestly, I think that any deal we make will likely seek to keep this agreement in place. Which does of course mean UK operators having to let those pesky EU members free access here. Damn those Romanian tourists coming over here and taking all our calls! Perhaps people will demand we impose hefty fees, even if we then have to pay them ourselves!

 

[pemma]

I would agree that you are correct to say the "+1%" has nothing to do with Brexit.

I'd disagree on that point. The Conservatives said in 2015 they would scrap the +1% part from January 2017. If they reinstate it in January 2018 (a guarantee about the +1% remaining axed wasn't in their 2017 manifesto) then you have to question what's changed since 2015.

 

[IanXC]

I'd disagree on that point. The Conservatives said in 2015 they would scrap the +1% part from January 2017. If they reinstate it in January 2018 (a guarantee about the +1% remaining axed wasn't in their 2017 manifesto) then you have to question what's changed since 2015.

Prize for tenuous link of the month...

 

[pemma]

Prize for tenuous link of the month...

Is it not obvious that the Conservatives are unsure what the effect of Brexit will be so wanted to remove any guarantees they had put in place at the 2015 election - whether it be no income tax rises, no NI increases, the triple lock pension guarantee, or the removal of the +1% from the rail fares formula?

 

[pemma]

George Osborne was behind the reduction of fares rises from RPI+3% to RPI+1% before he left office.
The "RPI+" formula goes back quite a long way, essentially to Labour years, post-privatisation.
In fact the original rule was RPI-1%, which was supposed to an incentive to the TOCs to make them "more efficient", but that was ditched early on.
The same approach was made for other utilities (water, energy).

It was Gordon Brown/Alistair Darling who (as chancellors), decided to ratchet rises up to +3% to redress the balance of railway funding between taxpayers and passengers.
It was also a way of clawing back the funds they had to spend on Network Rail that the regulator had insisted on c2004.
At that time the ratio was 2/3 (taxpayer) to 1/3 (passenger), and the intention was to reverse that to 1/3 to 2/3, which after a decade or so it has now reached.

But the policy has not been reset, and we are now stuck with RPI+1%.

Don't forget we used to have a Bank of England base rate of 5% (more than double the government's RPI target.) Now we've got one of 0.25% (an eighth of the government's RPI target) so instead of savers gaining money in real terms, they are losing money in real terms. If people are relying on using savings for leisure trips/holidays by rail, RPI+1 will be a lot more of a squeeze now than RPI+3 would have been 10 years ago.

 

[Qwerty133]

I've heard so many dumb defences of price hikes, from it costing more for currency when going abroad (which probably hits a lot of Brexit voters), to the fact that nobody cares about (potentially*) being charged more for roaming in Europe because 'you're on holiday so shouldn't be using your phone' and other nonsense.

We've moaned about roaming fees for ten years or more - regularly highlighted on consumer programmes and the very same newspapers that are now pretending it's not a problem because it conflicts with their view.

The EU gradually reduced costs year on year with the eventual aim to axe all fees, which it did last month. People live on their phones more than ever and can now use their phone abroad at no extra cost. Yet now we have people saying they were never bothered and would gladly pay roaming fees, because leaving is more important than returning to when users were charged £6000/GB or more! [Not a typo, we really did have charges of £6/MB in the old days, and I'm doing a simple calculation of 1000MB = 1GB]

What scares me is that when people become so blinkered for a cause, it gives a Government the perfect opportunity to do bad things, using arguments that will get blind support where it would never have been forthcoming before.

Post election, however, a lot of that blind faith support seems to have waned - especially as business owners are now worried about how they're going to stay in business during this rocky process and beyond.

* Honestly, I think that any deal we make will likely seek to keep this agreement in place. Which does of course mean UK operators having to let those pesky EU members free access here. Damn those Romanian tourists coming over here and taking all our calls! Perhaps people will demand we impose hefty fees, even if we then have to pay them ourselves!

Roaming fees being scrapped doesn't lead to a better deal for the customer, but rather everyone having to contribute to a service that only some people use. Unsurprisingly champaign socialists, which control most of the broadcast media, love this idea which they throw across as a victory for the consumer, when in actual fact it allows poor people to contribute to their phone usage on their multiple annual foreign holidays which said people can't get close to affording. It all harps back to the idea believed by the left that everyone is equal, but they are more equal than others.

 

[Deerfold]

Unsurprisingly champaign socialists, which control most of the broadcast media...

Assuming you mean "champagne socialists", whatever they are, do you have any basis for that claim?

 

[takno]

Roaming fees being scrapped doesn't lead to a better deal for the customer, but rather everyone having to contribute to a service that only some people use. Unsurprisingly champaign socialists, which control most of the broadcast media, love this idea which they throw across as a victory for the consumer, when in actual fact it allows poor people to contribute to their phone usage on their multiple annual foreign holidays which said people can't get close to affording. It all harps back to the idea believed by the left that everyone is equal, but they are more equal than others.

The actual cost to the phone companies of providing the roaming service is fairly minimal, and the previous high charges were largely there to soak extra profit out of people travelling abroad (or living in parts of Kent).

 

[LNW-GW Joint]

The actual cost to the phone companies of providing the roaming service is fairly minimal, and the previous high charges were largely there to soak extra profit out of people travelling abroad (or living in parts of Kent).

It was also part of the harmonised EU-wide economy that the single market was well on the way to achieving.
But since we aren't having any truck with that any more, and are embarking on "splendid isolation", we can look forward to higher costs everywhere.

 

[jon0844]

Roaming fees being scrapped doesn't lead to a better deal for the customer, but rather everyone having to contribute to a service that only some people use. Unsurprisingly champaign socialists, which control most of the broadcast media, love this idea which they throw across as a victory for the consumer, when in actual fact it allows poor people to contribute to their phone usage on their multiple annual foreign holidays which said people can't get close to affording. It all harps back to the idea believed by the left that everyone is equal, but they are more equal than others.

Phone charges (if you shop around) are very low these days and the expected price hikes to fund roaming never really happened. In fact, the desire for large amounts of data has made networks fight it out by offering 20-60GB data plans for the same money that bought 5-20GB previously.

The reason is because of the obvious; despite wholesale rates they can charge each other, most networks have negotiated their own reciprocal deals. We roam there, they roam here.

That's why leaving the EU may not change anything, but it could depending on the exact specifics of our deal.