With fare rises curbed from 2014, how can we tackle the cost of rail travel in the long term?

INCREASED COMPETITION

There are far better ways to limit rail fare rises than top-down, draconian caps from Whitehall. Today, only a small part of the long distance passenger rail network is open to competitive pressure. On the East Coast Main Line (ECML), two non-subsidised “open access” operators – Grand Central and First Hull Trains – compete with the franchise holder East Coast. New Centre for Policy Studies statistics show that competition leads to more journeys, higher revenues, lower fares and happier passengers. Importantly, between 2007 and 2012 average fares increased by 11 per cent at ECML stations with competition, compared to 17 per cent at those stations without it. In the case of the ECML franchise holder East Coast, it has been able to increase its premium payments to government year-on-year with no need for subsidy, while facing competitors. Encouraging more competition will help keep fares down. Tony Lodge is a research fellow at the Centre for Policy Studies.


BETTER INVESTMENT

Rail funding is the issue, not caps or regulation. After years of subsidising train operators, the government now wants its money back. Operators paid £420m to the government last year. Instead of directing this cash towards infrastructure, Network Rail’s public funding has fallen by £719m since 2006-07. Passengers are now subsidising the taxpayer’s contribution to deficit reduction. Rail infrastructure is expensive and, since 2006, Network Rail’s debt has increased from £14.2bn to £32bn. Interest payments alone cost it £1.32bn last year. The Office of Rail Regulation projects that Network Rail’s debt will hit £100bn by 2030 due to rising infrastructure costs. Other funding will be needed. Network Rail could sell infrastructure, but further privatisation is deeply unpopular. If fares are to be capped, taxpayer contributions will have to rise, otherwise safety standards will suffer and rail travel could become dangerous again. Mark Rowney is a research fellow at the Institute for Public Policy Research.