COMMUTERS are suffering from more than just the symptoms of an Olympic hangover. Once again, the annual ritual of fare increases is upon us. Some newspaper headlines have declared increases of 11 per cent. In fact, the average increase for the so-called “regulated basket” of fares, due to come into effect in January 2013, is 6.2 per cent – still eye-wateringly high.
Around half of all fares on the railway are subject to regulation. Increases are made up of two parts. Firstly, July’s RPI inflation figure (which came through at a whopping 3.2 per cent), and secondly an additional 3 per cent increase that the government has given the green light to (which may yet be softened by the chancellor, as happened last year). Contrast that with changes to average earnings and it is understandable why the rises are difficult for commuters to swallow. In 2011, household earnings fell in real terms by more than 3.5 per cent. They are unlikely to rise by much in 2012.
So what lies behind the government’s approach? Firstly, there is a long-term policy to shift more of the cost of the railway onto its users. Excluding London Underground, government support stands at around 33 per cent of the £12bn annual cost of running and improving the railways. In an ideal world, the Treasury would like to bring this close to zero.
Secondly, the investment needs of the railway have been growing. Passenger numbers have been increasing rapidly and are expected to continue. For London and the South East alone, the government estimates a 31 per cent increase in demand by 2026. Finding room for that growth means major projects such as Crossrail and Thameslink and lots of new rolling stock. These cost billions of pounds. The government is determined that a significant chunk of that should be picked up at the farebox.
Thirdly, the government is looking to drive through efficiencies. Last year, a value for money study by Sir Roy McNulty estimated that efficiencies of around 30 per cent are achievable over the next five or so years. By reducing the level of subsidy, the hope must be that the railway will be subject to more financial discipline and that will help to drive down costs.
These are understandable objectives but the problem for ministers is that the travelling public doesn’t appear convinced. Commuters into the capital have limited choice. Apart from moving house or changing jobs, commuters are pretty much stuck with the train into work, irrespective of what it costs. The annual season ticket is often seen as another form of tax that has little relationship to the service they are getting. And improvements on the railway can take a long time. The hugely important Crossrail project was talked about for decades before finally being given the green light. People don’t tend to pay in advance for a better car or home – they enjoy the benefits up front and pay later. Also, trains are victims of their own success. As official forecasts show, many improvements are rapidly soaked up as passenger numbers rise. Getting your fellow passenger’s armpit or elbow out of your face, or guaranteeing a seat in the morning rush, is a long-term challenge.
How can the circle of increasing demand, reduced government support, fare rises and a perceived lack of accountability be squared? One solution may lie in handing more powers to London government. A fierce debate about Tube investment and fares in London gripped the recent race for mayor. This is testament to the fact that voters recognised candidates had some power over these issues and they could choose between a mayor who would cut fares and one who was more reluctant to do so.
Putting locally elected politicians in the frontline for defending fare increases will increase accountability. Debates about investment, service levels and the price of tickets can then take place between those who use them and those who are directly responsible for ensuring their delivery. Giving a voice to passengers outside Greater London would be important. Technical and administrative boundaries would need to be overcome, but New York and other cities appear capable of addressing these problems.
The democratic deficit for this vital public service makes price hikes on the railway hugely unpopular and hard for people to accept. Let’s give the mayor – and the counties – control of the commuter railway and the fares that go with it. Hardly an Olympian challenge compared to delivering London 2012.
Alexander Jan is global head of Arup’s Transaction Advice team for transport.