Train users set for fare inflation pain next year

COMMUTERS will be saddled with another above-inflation increase in train fares in January, as rail companies get the go-ahead to hike prices.

July’s retail prices index, which is used to determine fares for the next year, came in at 3.1 per cent. Rail companies are allowed to add one per cent above inflation, meaning a firm’s average fare can rise by 4.1 per cent in 2014.

In reality, this means individual fares can rise in price by a staggering 9.1 per cent, as long as an operator’s fares only increase by 4.1 per cent in total.

Victoria Clarke, of Investec Economics, commented: “At a time where wage growth remains subdued and still short of CPI inflation, let alone this pace of rail fare inflation, this would no doubt be unwelcome news for households affected and could dampen the recovery in consumer confidence”. Similarly, the Institute of Directors accused rail companies of being stuck in a time warp.

The consumer prices index (CPI), the most common measure of inflation, came in at 2.8 per cent for the year to July, down from 2.9 per cent for the year to June.

Inflation is still well above the Bank of England’s two per cent target, which it has been every month for more than three years.

Excluding the often-volatile items in the index, energy, food, alcohol and tobacco, CPI for the year to July was lower, at two per cent.

In the same 12-month period, producer price inflation, which measures factory gate prices, has risen by 2.1 per cent. The tax and price index, which also takes into account changes to national insurance and direct taxation, stood at 2.2 per cent for the 12 months to July.