No more 'inflation-busting fare rises'? They must be off the rails
The Independant: by Christian Wolmar 09 March 2012
Failure to find cuts is likely to lead to precisely the opposite of what the Government has promised
The headline on the press release issued by the Department for Transport promises to end "inflation-busting rail fare rises". The truth is, passengers are likely to face above-inflation rises for some time. Indeed, the Transport Secretary, Justine Greening, admitted as much. Asked when the fares freeze would start, she suggested it might not be till the end of the decade, long after she will have departed from the transport brief.
The paper containing the proposals, Reforming Our Railways: Putting the Customer First, suggests some fares might actually rise. The Government will ask "those who drive the need for capacity enhancements by travelling at the busiest times to pay more over time for their journey by comparison". So people travelling at the height of the peak – say 8am or 5pm – may well have to pay extra, while those travelling slightly off-peak – say 9am or after 6pm – could pay less than now.
This sort of tinkering with an already complex structure is fraught with difficulties because it will inevitably lead to anomalies. Moreover, implementing a new formula would require the permission of the franchisees – the train operating companies – and they will always ask for extra money to agree to such changes, which a cash-strapped department may not be able to provide.
There is a more fundamental obstacle to lower fares. Stopping the annual round of "inflation-busting" fares depends on reducing costs in the industry. According to the McNulty report on the industry's finance, published last year, these are about 30 per cent, or £3.5bn, higher than they ought to be. A pan-industry body called the Rail Delivery Group, consisting of rather reluctant senior railway managers who are not paid extra to serve on the body, is supposed to find these savings.
Their task of knocking heads together in a disparate industry is nigh-on impossible. In fact, much of the extra cost of the industry, compared with its European counterparts, is the result of the structure created when the railways were privatised in the mid-1990s. Drivers' wages have soared, and contracting out services previously done in-house has led to escalating costs. What's more, a staggering £1bn each year goes on interest payments for Network Rail's £22bn debt.
Achieving such a draconian level of reductions is unprecedented and, given these difficulties, is unlikely to happen. Even more so given that the obvious way of reducing costs – reintegrating the industry into a new British Rail-type structure – has been ruled out.
Failure to find these cuts is likely to lead to precisely the opposite of what the Government promised yesterday: higher rather than lower fares, or a cutback in investment, currently running at a historically high level.