Liebrary - Train fare price increases capped? Oh no they're not...

If you thought the inflation linked RPI + 3% is the worst fare increase you face in January, you’d be wrong (in a bad way). 

The media has already pointed out that this formula only provides the average increase. The real upper limit is an additional 5% - i.e. RPI + 3% + 5% = RPI + 8%.

But even that is only the half of it. Other ways rail companies can increase their income include:

a)      The fares cap only applies to ‘regulated fares’. Unregulated fares, which can go up by any amount, include

– all first class fares;

– all ‘advance purchase’ fares;

– tickets (other than Travelcards) which include through travel to destinations served by bus services, light rail services or London Underground;

– tickets which include a non-rail element such as entrance to a museum, theme park or other attraction;

b)      Changing the time of ‘off-peak’ travel is not controlled by regulation. In 2010 the Daily Telegraph reported some fares had quadrupled overnight!:

Some fares have effectively quadrupled overnight after the extension of what are classed as peak hours for travel. A survey found more than 180 services a week have been rescheduled by South West Trains and Virgin Trains alone…..On Virgin services an additional 75 trains have been redesignated as a result of extending peak hours by 35 minutes in the morning and 28 minutes in the afternoon. It means, for example, Virgin's 0915 from London Euston to Manchester, returning at 0855 the next day, which would have cost £66 last year will now cost £262.

c)      The constituents of the fares baskets were defined in 2003, and re-weighted in 2010. Any fare that didn’t exist in 2003 is unregulated, which perhaps explains the number of ‘new offers’ that were born since then. The following is from a 2012 Department of Transport consultation:

“the definition of each fares basket continues to be that established in 2003 following the last fares review.  From time to time operators may introduce new fares to cater for a new demand for travel e.g. an increase in commuting from a particular station, or travel to a new shopping centre. It would not be practical to re-define their fares basket each time this happened, so any new fares remain unregulated, at least until the next re-definition of the baskets.”

Extract from Department for Transport “Rail Fare and Ticketing Review” published in March 2012. 

d)      For regulated fares, the formula sets a maximum increase for each year. If a train operator does not use the maximum one year then it is permitted to use the extra ‘headroom’ in the next year.  So when George Osborne found £290m to keep the 2012 increases at RPI + 1% instead of RPI + 3%, could it be that the other 2% became ‘headroom’ to be applied later (if you know, please tell us)?

“Operators do not have to increase their fares by the maximum permissible amount in any given year, and some choose not to do so, leaving the actual value of their fares basket below the maximum level permitted by the cap in that year. This gap between the actual value of the basket and the maximum permitted by regulation is usually called ‘headroom’. The following year, such an operator can use up this headroom as well”

http://www.rail-reg.gov.uk/upload/pdf/sra-fares-conclusions-2003.pdf 

It is also the case that train companies have gained a huge revenue boost as the  number of passenger journeys has soared by 35% since the ‘fares baskets’ were defined in 2003. All credit to the companies for winning more customers, but it dents their arguments for fare increases. We will cover this in more detail with a separate post in the next few days – but just as a taster:

The Office of Rail Regulation statistics show that since 2004 the number of timetabled kilometres run by the trains has increased by only 15%, while the increase in the number of kilometres travelled by passengers has increased by 36% and passenger revenue has increased by 74%. 

Small increase in train kilometres and large increase in passenger kilometres must be achieved by packing them in tighter. 

Figures from the Department for Transport show nearly 20%, one in five, of peak time commuters into London don’t have seats! In my experience, travelling in to London Bridge and Victoria, it's far worse than that!