Virgin Trains locomotive. Image by FreeFoto.com
Rail privatisation figures: fares up, costs up
New figures released by the Office for Rail and Road (ORR) last week revealed that since privatisation took effect, ticket prices have skyrocketed, with much of the rise happening in unregulated fares – so-called ‘stealth increases’. Between 1995 and 2015 fares rose across all ticket types (including both unregulated and regulated tickets), by an average of 117.2 per cent, or by a staggering 24.1 per cent in real terms, adjusting for Retail Price Inflation (RPI). Between 2014 and 2015, all fares rose by an average of 2.2 per cent. The Railways Act 1993, which enabled the then government to transfer separate parts of the railway to the private sector, came fully into force on 1 April 1994.
The Financial Times reported on the new ORR data in May, primarily focusing on the huge rise in unregulated long distance fares: ‘UK rail fares on long distance routes rise 71% in 10 years‘.
Between 1995 and 2015, the ORR report that standard class regulated fares rose by an average of 86.4 per cent, or by 6.6 per cent in real terms. Between 2014 and 2015, these fares rose by an average of 2.4 per cent. While this represents a lower rise than the average rise across all regulated and unregulated tickets, it still means that successive governments have allowed fares to rise above inflation, at wage-busting levels. Regulated fares are determined by the government, and include season tickets for most commuter journeys and Off-Peak fares on most journeys between major cities, while unregulated fares are those which operators are free to determine.
Unregulated fares make up about 55 per cent of all fares and are determined by train operating companies (TOCs). In contrast to regulated fares, between 1995 and 2015, standard class unregulated tickets rose by an average of 132.5 per cent, or by nearly 33 per cent in real terms. Between 2014 and 2015, unregulated standard class fares rose by an average of 1.9 per cent. If we investigate the ORR data further, we see that within ticket types, long distance fares have risen much higher than other fare types, such as tickets across operators within different regions of the UK. For the period between 1995 and 2015, standard class unregulated long distance fares rose by an average of 162 per cent, or by nearly 50 per cent in real terms. In contrast, standard class unregulated fares across all regional operators (excluding those in London and the South East) rose by an average of 111.5 per cent, or 20.9 per cent in real terms.
The ORR also provide data on ticket types from 2004 to 2015. Within this period, Off Peak tickets and Season tickets rose across all operators by 62.2 per cent and 60.2 per cent respectively, or by 16.3 per cent and 14.9 per cent in real terms. However, Advance and Anytime tickets, most of which are unregulated, rose by 70.2 per cent and 72.4 per cent respectively, or by 22 per cent and 23.6 per cent in real terms. The ORR also include a category of tickets marked ‘Other’, which rose by 81.3 per cent between 2004 and 2015, or by 30 per cent in real terms.
For long distance journeys, Season tickets rose by an average of 59.2 per cent or by 14.1 per cent in real terms between 2004 and 2015, while Anytime fares in this period rose by a shocking 83.2 per cent or 31.3 per cent in real terms. For journeys within regions (excluding London and the South East), Season Tickets rose by 56.4 per cent or by 12.1 per cent in real terms, while Super Off Peak fares rose by a high 80.5 per cent, or by 29.4 per cent in real terms. In all of these cases, the higher rises are all in categories of ticket which are almost all unregulated.
The ORR report that the main driver of overall price change between 2014 and 2015 was the London and South East sector, which “had the largest increase of 2.3%”. Within London and the South East, between 1995 and 2015, standard class regulated fares rose by 88 per cent, or by 7.5 per cent in real terms, while unregulated standard class fares rose by 117.7 per cent, or by 24.4 per cent in real terms. Both of these rises are higher than the respective rises for the same fares in other regions.
What do all these figures tell us? The ORR data tells us firstly that privatisation has coincided with successive year-on-year ticket hikes, and secondly that while all fares have risen significantly since 1995, unregulated fares have risen far higher than regulated fares, especially so for long distance journeys. Rises in unregulated fares are what are often called ‘stealth increases’, whereby train operators keep regulated fares at the prescribed level (which in itself is high), yet seek to raise income by hiking up unregulated fares.
Along with data on fares, the ORR has also released performance data between the financial years 1997-98 and 2014-15. The data shows that long distance journeys in this period were much more often cancelled or significantly late than journeys within regions and other national journeys. For example, in the last quarter of 2014-15, 4.4 per cent of trains making long distance journeys were cancelled or significantly late, compared with 3.1 per cent of trains in London and the South East, 2.2 per cent of trains within other regions including Scotland, and 2.8 per cent of ‘other’ national trains.
The ORR also provide a breakdown of performance data by train operator during this period. In the last quarter of 2014-15, Southern Trains were the worst performer, with 6.2 per cent of their trains cancelled or significantly late. Close behind Southern Trains were Virgin Trains for their West Coast franchise, where 5.4 per cent of trains were cancelled or significantly late, followed by Govia Thameslink, where 5.1 per cent of trains were cancelled or significantly late.
This coincides with Network Rail data for 2014, which revealed that in the 12 months ending on 6 December 2014, just 64.6 per cent of trains reached their destination within 59 seconds of their scheduled arrival; the 59 seconds measure is referred to as ‘right time’. Over a third of trains were late in 2014, with many of them on peak commuter services such as the 7.29 am London to Brighton service operated by Southern Trains. Network Rail’s data also revealed that only 45.6 per cent of Grand Central’s trains were on time and only 50.9 per cent of Virgin Trains’ services were on time in 2014.
Fares have risen far faster than wages and the cost of living
As we have blogged previously, regulated fare rises have still risen far faster than average wage increases. We heard before the general election that the Conservative Party pledged to freeze regulated rail fares for the next five years, and we blogged at that point about how the pledge actually entails capping rises in regulated fare rises to the RPI inflation measure, while pensions and benefits are linked to the lower CPI inflation measure. Capping rises to inflation measures in the vast majority of years still represents a real terms increase for passengers – coming on top of successive year-on-year increases, and does little to help people meet the cost of living crisis.
Analysis conducted by Action for Rail at the time of the most recent fare rise in January 2015 found that commuters on the UK’s privatised railways could be spending more than twice as much of their salary on rail travel than passengers on publicly-owned railways in France, Germany, Spain and Italy. Our research also revealed that since 2010, the average season ticket has risen by 27 per cent; more than two and half times faster than average wage increases.
Privatisation represents poor value for money
Finally, as we have consistently argued, privatisation itself represents very poor value for money for taxpayers and passengers alike. Research by campaign group Transport for Quality of Life (TFQL) shows that extra costs of over £1bn per year are being incurred through a combination of debt write-offs, dividend payments to private investors and various administrative and legal costs.
Indeed, figures released by the ORR in February confirmed once again that private operators are using public subsidies to fund pay-outs to shareholders. In 2013-14, taxpayers contributed £3.8bn to the UK rail system, while private train companies paid out £183m in dividends to shareholders. Before the East Coast main line was privatised, in public hands it had returned over a billion pounds to the Treasury, in stark contrast to private operators on similar inter-city routes.
Public ownership is popular
Public ownership is consistently popular, as has been revealed by successive opinion polls, and could fund a substantial reduction in fares while making significant efficiency savings, by reducing the wastage that has occurred through the broken system of privatisation. The best way to end stealth fare increases is radical change in the rail network. Bringing the railways into public ownership would ensure a much fairer system that delivers a better deal for the public, for passengers and for taxpayers.
Action for Rail will continue to campaign for a nationally integrated, publicly owned railway that puts people before profit.
Click the table below to enlarge
For the report by ORR in May 2015 please see Rail Finance: Rail Fares Index (January 2015)
For the relevant data tables please see:
1995 – 2015: Index showing average change in price of rail fares by regulated and unregulated tickets – Table 1.81
2004 – 2015: Index showing average change in price of rail fares by ticket type- Table 1.8
1997-98 – 2014-15: Cancelled and significantly late (CaSL) moving annual average (MAA) by sector
1997-98 – 2014-15: Cancelled and significantly late (CaSL) by train operating company