Seven ways to cut the cost of Britain’s rail tickets

Even for commuters long used to rising fares, last week’s news of another hefty increase was particularly painful: the cost of season tickets and most off-peak standard fares will rise by 3.6% in January. The increase – the biggest for five years, was announced in the midst of Brexit gloom, while holidaymakers are adapting to a plunging pound. To add insult to injury, the increase was pinned to a measure of inflation, RPI, that was one full percentage point higher than the normal measure of inflation employed by the government, CPI, which added from £30 to £100 on to the price of annual tickets.

For many commuters – most painfully, of course, on Southern – the cost of their ticket already looked dubious value for crowded and often-disrupted services. Even as the news broke, passengers were being turned away from London Waterloo after a derailment, after a month of reduced service due to engineering work – with no compensation. The industry line that higher fares are helping to sustain record investment looks dangerously complacent when a host of upgrades around the country have been cancelled.

Are spiralling fares inevitable, or is there another way? There are seven main ways in which the cost of rail travel could be reduced. Are any of these more palatable?

Higher government subsidy

The taxpayer’s share of the cost of running the railways has been proportionately reduced under successive governments, starting with Labour in 2005. Around 67% of the cost was met from ticket revenues in 2016, with another 6% coming from parking and other passenger sources, while the government coughed up £3.7bn, mainly to Network Rail.

Reducing the subsidy has chimed with the austerity imposed by governments since 2010, but campaigners say the balance has tipped too far. One demand is that at the very least fare increases should be in line with the CPI inflation measure, which the government prefers when it comes to paying pensions and benefits. That would have meant only a 2.6% increase this year.

Junk High Speed 2

The government likes to draw a line between so-called capital investment and revenue grants, whether it be in axing subsidies to Transport for London or declaring building HS2 won’t affect other public spending on the railway network. And yet, last year the government paid out £463m to HS2, before shovels were in the ground – on top of £803m to Crossrail – and at least another £3bn a year on average will be spent until the £55.7bn high-speed route is completed in 2033.

For some, claims that this money won’t affect other rail budgets are not really credible. In France, state-owned operator SNCF had complained that its high-speed rail network had sucked up investment needed to maintain the conventional railway lines even before a fatal derailment in Brétigny-sur-Orge near Paris in 2013 underlined those fears.

Make Network Rail more efficient

With billions of overspending on one project alone, electrification of the Great Western mainline, financial issues at rail’s infrastructure manager have become painfully public.

“That’s at the core of what keeps pushing fares up – Network Rail gobbles up all the money,” says rail historian Christian Wolmar. “There is no doubt that Network Rail has no incentive to reduce costs and has not driven down costs. It insists on using this old model of contracting out – but it doesn’t have the skills at the centre to ensure that contracts are done at a reasonable price. It runs projects second-hand and can’t keep costs down.”

The McNulty review of 2011 into value for money in the rail industry, concluded that costs were bloated by around 30% and identified an annual £580m to be trimmed in “asset management and supply chain management” and creating “lean and agile engineering approaches”.

Cut personnel costs

The second-biggest annual target for cost cutting, according to McNulty, was to reduce the rail industry’s wage bill by £260m. Salaries have outstripped earnings outside rail at all levels. At the top end, Mark Carne of Network Rail, on a basic salary of £683,000, has taken home less than previous chief executives did in some years; Southern’s boss, Charles Horton, earns around £500,000.

But the rank and file have also done well, boosted by strong unions and by a side effect of privatisation: it created competition among rail operators for train drivers. A pay offer rejected by Aslef members on Southern would have seen drivers earn more than £60,000 for a four-day week, before overtime.

McNulty recommended driver-only trains as the default option, paving the way for disputes that look set to spread from Southern around the country. Transport for London has been surveying passengers about fully driverless trains – whether they would prefer to pay less and have no one in the cab.

End franchising

This is the big one, according to Labour, trade unions and other campaigners. Even supporters of privatisation, such as McNulty, admit to “misaligned incentives” and structural issues in a fragmented industry.

Aslef’s Mick Whelan describes it as “a deeply flawed model that doesn’t work in an industry which needs to be vertically integrated”. The unions’ central point is that profits made by private train firms could be reinvested.

The Rail Delivery Group, which represents train operators and Network Rail, insists profits are slim, with margins of around 3%. Private operators paid out dividends of £228m in 2015-16, according to the Office of Rail and Road. Large sums were also made by rolling stock companies, which enjoyed a total profit of £286m in the past year.

The RMT union calculates that taking the UK network’s rolling stock into public ownership would save more than 2p in every pound on fares. General secretary Mick Cash says: “These overseas outfits are creaming our railways for fat profits and have complete control over the crucial fleet operations. They use that power to exploit the British train passenger in what is nothing less than a government-sponsored racket.”

Tax car and air travel more?

Hypothecated taxes have rarely won the trust of the public or the approval of the Treasury – and increasing the duty on other forms of transport would light the fuses of the UK’s Fair Fuel campaigners and airline bosses. Both groups already claim that motorists and air passengers are unduly taxed in Britain compared with other countries.

However, motorists appear to have successfully bent the ear of chancellors in recent years, winning an absolute freeze on fuel duty since 2010. It could be time for the pendulum to swing the other way. Stephen Joseph, chief executive of Campaign for Better Transport, argues: “Just a small rise in fuel duty, a quarter of a penny, would pay for a fares freeze on rail. Why aren’t government charging motorists more, while commuters keep getting charged more?”

Overhaul the fares structure

Passenger groups, the government and industry appear to be united in agreeing in that an overhaul of ticketing is needed – although major reforms have been slow to arrive.

The Rail Delivery Group claims the spread of advance tickets has been a boon to passengers. Pilot schemes are looking at separating legs of journeys, ending the long practice of often charging as much for a single journey as for a return, and simplifying the number of fares on offer, particularly from machines. That would mean, at least, that a passenger should no longer pay more than the cheapest fare available.