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Rail fares could rise by 10% following latest inflation figures

• Fares likely to increase 5.8% next year under RPI plus 1% rule

• Passenger watchdog fears higher price hikes will be allowed

Graeme Wearden

guardian.co.uk, Tuesday 17 August 2010 15.26 BST

Rail passengers face the threat of 10% fare rises next year following the publication of July’s inflation data today.

The retail prices index (RPI), which is used to set many rail fares, rose by 4.8% last month compared with a year ago. Under the current rules, train operators can raise fares by one percentage point more than July’s RPI figure, suggesting that fare increases of 5.8% are likely in 2011.

But passenger groups and unions, believe the government is poised to change these rules to allow companies to raise prices by significantly more — suggesting that ministers intend to cut the rail industry’s £5bn annual subsidy and force firms to raise more money through ticket revenue.

Transport secretary Philip Hammond has inflamed the row by refusing to confirm that the current RPI plus 1% rule will be implemented as usual, and there are fears that tickets could be allowed to rise by as much as 3% above inflation.

Passenger Focus, the train customer watchdog, is also worried that Hammond may give train operators the flexibility to increase some fares by more than the official cap, as long as other tickets rise by less. His predecessor, Lord Adonis, had pledged to clamp down on this practice this year. If it was allowed to continue, then operators could raise certain fares by a maximum of 5% over RPI – or nearly 10%.

“In the past, the average fare rise has masked increases on some routes of 10% or 11%,” said Ashwin Kumar, Passenger Focus rail director. “We hope the government continues to limit train companies’ flexibility so passengers on some routes don’t face double digit rises.

“Our research has shown that passengers in Britain already pay some of the highest commuter fares in Europe. For example, an annual season ticket for a journey such as Warrington to Manchester costs 60% more than an equivalent journey into Paris. Just because you can increase fares, does not mean you should – this is a time for restraint.”

The RPI formula is used to set season ticket prices, as well as certain off-peak fares, and accounts for roughly 40% of all fares.

Southeastern Trains, though, is already allowed to raise prices by 3% more than RPI to pay for improvements such as the new Javelin train. Its passengers, who travel between London and Kent or East Sussex, can already expect fares to go up by 7.8% in 2011.

The government is not due to announce its decision on rail fares until October, when the comprehensive spending review is published.

With wage rises still lagging behind inflation, Kumar said it was important for train operators to show restraint.

“Now is not the time for train companies to sweat passengers off the train,” he said.

The issue is politically sensitive for the coalition government, as the Liberal Democrats’ election manifesto included a pledge that rail fares would be capped at RPI minus 1%. The TSSA transport union argues that the deputy prime minister should stick to this ambition.

“Nick Clegg will let down millions of rail passengers if he fails to stop these unfair fare rises in the middle of a recession,” said Gerry Doherty, head of the TSSA.

Yesterday, Hammond warned passengers that 2010 was not a normal year. “The scale of the financial crisis that we have inherited means that we will have to make some tough decisions in the spending review which concludes this autumn,” he said.

A spokesperson for the Association of Train Operating Companies said: “Train companies understand that these are tough times for many. The government is currently reviewing its position, so we will need to wait and see what happens.

“With demand for rail travel expected to double within the next 20 to 30 years, it is vital to sustain investment and the money raised from fares will make a significant contribution to improving services for passengers.”

xref Inflation story, City

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