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Government must change fares formula to tackle ticket price hikes

23 December 2013
Campaign for Better Transport has called on Government to do more to stop runaway increases in rail fares.

Stephen Joseph, Chief Executive, Campaign for Better Transport said

"Next month, passengers will see season tickets going up three times faster than their wages. Government needs to do more to stop the squeeze on commuters and avoid pricing people off the railways. We need a permanent end to inflation busting fares rises calculated using an out of date formula."

Campaign for Better Transport has questioned the use of the Retail Price Index (RPI) rather than the Consumer Price Index (CPI) as the basis of the Government's fares formula. Independent research due to be published next week found that replacing the RPI with the much more widely used CPI would help tackle soaring ticket prices and have only a minimal impacts on revenues.

Stephen Joseph said

"Government should stop using RPI to calculate ticket prices. It over-estimates real inflation so consistently that the Office of National Statistics has dropped it as an official measure. Government has already switched to CPI for most things. Doing the same for train fares would have little impact on railway revenues, but it would save passengers money and bring fares into line with things like public sector pensions."

Notes

1. On 23 December, details of ticket prices for 2014 were published on the National Rail Enquiries website www.nationalrail.co.uk

Campaign for Better Transport fares analysis shows that from January 2nd:

 

  • London season tickets passing £4,000 include Reading, Maidstone, Basingstoke.
  • A season ticket between Swindon and London will cost £8,000
  • Annual fares to London rising by around £150 include Canterbury (£148), Chichester (£156) and Milton Keynes (£152)

Away from London, January will see the following fares increases

  • Middlesbrough to Newcastle - £2268 (up £128 (5%))
  • Manchester to Liverpool - £2888 (up £88 (3.1%))
  • Cambridge to Peterborough - £3168 (up £124 (4.1%))
  • Leicester to Derby - £2096 (up £64 (3.1))
  • Leeds to Sheffield - £2332 (up £92 (up 4.1%))

Over the course of this Parliament Rail fares are predicted to rise by 18%. For selected fares, this equates to:

  • Ashford - London - £797 increase
  • Cambridge - London - £717 increase
  • Winchester - London - £764 increase

If Government had raised fares by CPI inflation alone between 2011 and 2014, from January selected fares would be lower than actual fares by the following amounts:

  • Basingstoke to London - £336 cheaper
  • Colchester to London - £228 cheaper
  • Southampton to London - £352 cheaper

Campaign for Better Transport analysis shows that in the 10 years since the RPI + 1 per cent formula was adopted, regulated fares have risen by 48 per cent  Over the same period, using CPI + 0 per cent would have led to increases of 30 per cent. 2. Since 2003, it has been Government policy to set regulated rail fares (season tickets and some intercity journeys) using the formula RPI + 1 per cent. In his December 2013 Autumn Statement, the Chancellor announced that for 2014, the formula RPI + 0 per cent would be used although no permanent change to Government policy has been made.

 

3. New analysis has been commissioned by Campaign for Better Transport to look at the impact of moving from RPI to CPI. Among the findings are that moving from RPI + 1 per cent to CPI + 0 per cent from 2015-16 to 2018-19 would result in the following benefits:

 

Fares and Rail Financing has been carried out by independent consultancy Credo and will be published on 2 January.

 

4. Retail Price Index (RPI) and Consumer Price Index (CPI) are measures of inflation. Since April 2011, tax credits, most benefits, public sector pensions and tax bands have risen in line with CPI rather than RPI.

RPI usually shows a higher rate of inflation than CPI. Between 1996 and 2011, the cumulative inflation rate shown by RPI was 53.6 per cent while that for CPI was 35.6 per cent. In March 2013, the UK Statistics Authority announced that RPI would no longer be designated as a national statistic because it failed to meet international standards.

In November 2013, the UK Statistics Authority confirmed the designation of Retail Price Index Jevons (RPIJ) as a new National Statistic ostensibly to replace RPI, although Government has yet to make any statement concerning when or how it may use the new statistic.

November 2013, the 12-month rate for CPI was 2.1 per cent. RPIJ stood at 2.0 per cent and RPI at 2.6 per cent (see Office for National Statistics).

5. Credo is an established advisory services firm, helping many of the world’s leading organisations to make and implement better strategic decisions. Founded in London in 1999, it operates globally and has carried out assignments in over 40 countries. Credo employ a team of around 50 world-class professionals, working primarily in five core sectors including Transport.