Friday, 2 January 2015

Rail Fares

From the Guardian

It’s the first week of January, so it’s time for that painful annual ritual – the introduction of yet more rail fare rises. No wonder rail passengers have had enough.(1) Fares are increasing much faster than wages, with regulated ticket prices having risen by more than 20% since 2010.(2)

Figures released today by the Campaign for Better Transport show what this could mean for a constituency like mine in Brighton. Average ticket prices have soared(3) by more than 20% for Brighton-London commuters, for example, whose journey to and from work could cost the equivalent of 8.6 weeks of net earnings – more than £4,400. That’s 17% of the average regional salary, and a price increase of £745 under the coalition. And while today’s rise sees regulated fare hikes capped at 2.5%(4), the cost increase on unregulated fares, such as off-peak leisure tickets, will be left to train companies’ own discretion.(5)

Passengers in this country pay the highest fares in Europe to travel on services that all too often are unreliable, understaffed, and overcrowded. After two decades of privatisation, the private sector has not delivered the innovation and investment that were once promised.(6)

Moreover, private rail companies still remain dependent on public subsidies to run their services.(7) But these same companies can then turn over up to an estimated 90% of their operating profits to shareholders.(7) This blatant transfer of public money means that the public purse is effectively propping up a failing rail system for private gain.(8)

The Rebuilding Rail report(9), published by Transport for Quality of Life, conservatively estimates that about £1.2bn is lost each year as a result of fragmentation and privatisation. The irony is that some of the biggest profiters are the state-owned rail companies of our European neighbours. Yet that’s money that could, and should, be reinvested to improve our own rail services and reduce fares.

That’s why on Monday, I will be joining campaigners from groups including RMT, Action for Rail, Compass and the People’s Assembly at rallies at stations all around the country to call for rail to be brought back into public ownership, with passengers having a greater say in the development of the system. We are proposing that the government would take back individual franchises when they expire, or when companies fail to meet their conditions. The enormous savings generated could and should then be reinvested in rail infrastructure, and to reduce the soaring cost of fares.(10)

1. Really? People are quitting their jobs in London to work in Brighton because of rail fares?

2. Which is about 3.6% per annum.

3. 3.6% is hardly "soared"

4. Why? Why 2.5%? There's limited supply. Why shouldn't rail companies charge more?

5. So, why do commuters get their fares capped but non-commuters don't? Where's the logic in that? The rail firms get subsidies for running unprofitable routes, but if we just allowed them to charge the market rate for commuters, that would make the thing more profitable, and so we could reduce our subsidies to them.

6. Well, probably because the private sector is no longer responsible for the bits that require the investment and innovation, which is to say, track and signalling. And because there's not much to "invest" in. Plus the franchise thing means that none of them can invest in the long term. The Stagecoach buses I go on have nicer seating than most trains and wifi, but that's because they own those buses and no-one can take it away from them.

7. Yes, but so did British Rail when they ran their services. So do SNCF for lots of services. If you want a rail service rather than just commuter services, you need subsidies.

8. Failing rail service? No, that was British Rail. Rail's not perfect today, but compared to the days of BR, the trains are more reliable than they were then.

9. Which is full of romantic idealising of European rail services. No mention of the near 8 billion euros of subsidy per annum (no, really) that SNCF receives.

10. You can't. Not without changing EU law. The thing that is almost never mentioned about rail privatisation is that it was done that way because EU directive 91/440 said we had to do it that way. True, lots of countries have dragged their heels on it, but Lucas is pro-EU, so presumably wouldn't want us to go breaking any EU laws, would she?

12 comments:

Mark Wadsworth said...

Yup.

1. Although the privatisation has been a bit of a mess, many of the franchises are now owned by foreign state rail companies, who are getting all the lovely dividends/rent. So overall, we are poorer than if it had been done properly.

2. My annual travel card was due to expire on 5 January 2015, so I renewed it a couple of days ago to the old price (a saving of £52).

The ticket office man pointed out that to get the old price, the new card would commence on 1 January 2015, so I was "losing" four days.

"True," I replied, "But I'm going to lose those four days any way, but this way I can save the £52."

paulc156 said...

Of course if we were ever to adopt anything remotely akin to direct democracy we would most likely renationalise rail services because that is what most want even though most media and all the main parties haven't wanted any such policy change for many years.

The Stigler said...

Mark,

I'm not sure how much difference that makes. Profit bothers me, especially if it's just rent-seeking (and really, network rail should be a lot more demanding of value in franchises). But the idea that 3% profit makes any significant difference to ticket prices is daft. SNCF and Deutsche Bahnhof have cheaper fares because of massive subsidies.

The Stigler said...

paulc,

And direct democracy also means that you'll get the death penalty, OK? And 90 day imprisonment without trial. OK? It gives even greater prominence to the sort of knee-jerk, emotive tabloid politics of the dangerous dogs act, the ban on landmines and the ban on pistols.

If we look at what people really want, which is better, cheaper railways (whether you privatise or nationalise, that should be the end desired consequence), the only real solutions to that are to accept a bit more risk and reduce the spending on safety or to build a lot more rail lines. As I said - the railway companies make a 3% profit. In terms of a Swindon to London fare, assuming that the railways are only rent-seeking, that means an off-peak fare falls from £120 to £116.40. Maybe every penny counts and all, but it's not going to make the sort of difference that the nationalisers suggest.

DBC Reed said...

All of this is rather unnecessary on an LVT website: the standard land tax argument is that railway lines put up the price of residential and commercial land so you cream this off with LVT and hand it as subsidies to the railway operators.This is what Dave Wetzel was trying to do with Fares Fair in London (in essence).He eventually hankered after making suburban rail travel completely free.
It would be simpler if the railway operators were nationalised, of course.
Absent LVT and you are subsidising the landowners by providing captive customers.
If you are forcing people to commute long distances into London by pricing them out of London houses, maybe you should provide cheap transport if you want cheap-ish labour in Town.
@TS What exactly is wrong with bans on dangerous dogs, pistols and landmines?

Ben Jamin' said...

@dbc

" that railway lines put up the price of residential and commercial land so you cream this off with LVT and hand it as subsidies to the railway operators."

So, the TOC get free access to the rail networks AND rent from residential/commercial property?

If goods and services are not correctly priced, this leads to deadweight losses.

Our transport network is a natural monopoly. The potential rental income and efficiency savings from correctly pricing the use of it should be enormous.

HGV's stuck in traffic jams, and an unprofitable rail network(for the taxpayer) shows we haven't got things quite right yet.

The Stigler said...

DBC,

Agree on LVT. Not sure about running the railways. Above all else, my strongest problem with nationalisers isn't current vs BR (although my own memories of BR aren't at all good), it's more the idea that having that 3% profit back is going to make much difference (and that 3% is only the train operating, not the signals and track stuff).

Nothing wrong with bans on dangerous dogs. But the Dangerous Dogs Act is a dog's breakfast piece of legislation done in haste that didn't do much against bad dog owners. Bans on pistols? Well, ruining large numbers of people's hobbies because of the actions of 1 man with little debate about competing rights. And landmines? What happens if we go to war with France? Wouldn't we want to at least have the option of putting landmines on the beaches like we did with WW2?

DBC Reed said...

Two interesting debates on the Net :
Mark Wadsworth website 20 August 2013 on Caroline Lucas again with a lot of the usual suspects saying much what they're saying now;

a trainspotter heaven piece called What explains the demise of Pacific Electric Railway by Tom Wetzel (no relation?)which makes it clear that all the light railways and trolley bus lines in Los Angeles were built and paid for by the real estate developers.
This would appear to be the right commercial relationship IMO.

Another discovery: Denis Healey did not say in February 1974 he wanted to tax the rich until the pips squeaked.He said he wanted to tax property tax speculators until the pips squeaked and named the odious Lord Carrington for making £10 million for selling land at 30 > times its agricultural value

paulc156 said...

@TS. Actually the 3% profit margins you mention aren't the full picture. McNulty identified the rolling stock as the main area where profiteering was rife [in so many words]. Margins more like 10%. And if you don't want plebs making 'knee jerk reactions' [direct democracy] I'd settle for DBC's antidote to hugely expensive rail travel. Parliamentary led LVT on the landowners that benefit from railways and bigger subsidies to a renationalised rail network, that includes procurement of rolling stock in house rather than subbed out to Jersey based rentiers and the like.

Mark Wadsworth said...

Just to defuse the whole thing a bit, there's an interesting article here.

Fact is, for many people, rail travel is still cheaper/more convenient than using a car - or else they'd use a car.

It's difficult to design a perfect bidding process, whereby the 'community' gets the easy to earn bit (the rent) and the operator gets the extra bit for being better than the next best bidder.

So the orginal version didn't quite work out and the government is trying something a bit different next time round.

Ed P said...

Last month I used trains to get to London City Airport, then Swiss trains & German trains.
The differences in standards between the UK and the others is quite astonishing. It's very obvious that UK trains, compared to those in just those two countries, are: dirtier, less frequent, unreliable, poorly maintained, not a 24 hour service & at least twice as expensive per mile.

Bayard said...

I would have thought that BR was a textbook case on why nationalisation is a bad idea (BTW, SNCF is not a nationalised company, but an arm of the state). Even before nationalisation, the railways were known for bad management, and nationalisation simply allowed things to get worse, to the point that, by the end, BR managers were hiring a hotel in the country for an entire weekend, simply for an internal meeting.
Anecdotal, I know, but last weekend, I was picking someone up from what was my local railway station when I was a child and found that not only was everything cleaner and smarter, but the service was now hourly instead of two-hourly and the car-park, which was much larger, was also much fuller, despite no longer being free. There were many more passengers waiting for a middle-of-the-day train (my memories are that there were usually only one or two) also. On the downside there was no longer either a waiting room or any toilets.