Wednesday, 6 December 2017

Economic Myths: "Rail unions blamed for rising train fares"

Via MBK, fimsy excuse of the week from The Times. The only actual hard facts in the article to back up that claim are:

However, in a direct challenge to Britain’s powerful rail unions, The Times understands that ministers will only consider the move to CPI if unions lower their wage demands. RPI is currently used to calculate pay rises and last year staffing costs on the railway reached more than £2.8 billion.

That £2.8 billion figure is meaningless unless you compare it with total revenues of their employers, which appear to be about £10 - £11 billion according to this.

That doesn't seem disproportionate to me. All things being equal, whether rail worker salaries go up by CPI or RPI should not have any major effect on ticket prices, which are set by demand (supply being largely fixed), regulations (price caps) and subsidies.

Whether rail companies are fundamentally over-staffed, or even under-staffed is a separate topic.


Bayard said...

Ah, the "everyone works on cost plus, especially landlords" myth makes yet another appearance.

Mark Wadsworth said...

B, true, but to a large extent, fare rises are "as much as the government will allow". In the absence of price caps they'd charge twice as much.

Lola said...

MW. "....they'd charge twice as much...' which by the logoc of Georgism would result in lower land rents. Or you might say that rail fire rises are paid by landlords.

Bayard said...

M, the British have never been able to make up their mind as to whether the railways are a business, in which case they should be able to charge what the market can bear and be given no subsidies, or a public service, in which case the fares should be set at a nominal level.

Mark Wadsworth said...

L, agreed (except for the obvious typos).

B, also agreed. Tricky one, but surely there's a fair balance to be struck in the middle somewhere?

Lola said...

MW Typing on small smartphone screen....:-(