16 August 2011    Rail fare increase could further damage the economy

Rail commuters will find out today how much their train tickets are likely to go up by next year. The average increase is expected to be around 8%, well above inflation.

The increase is part of the government’s agenda of reducing the cost to the government and taxpayers of running the railways.

The inflation figures to be announced at 9:30 are expected to be to be at the 5% figure.

The rail fare formula for regulated fares such as season tickets, long distant off peak fares etc is RPI plus 3%, therefore the average increase for fares next year will average out at 8%.

Some routes are expected to rise above this figure as train companies can add an extra 5% on top, making a staggering increase of up to 13%,  as long as they balance that extra increase with a decrease elsewhere.

The argument by the government is that the increase will save the taxpayers’ money by transferring part of the cost to the commuters.

However, there is a downward cost effect to such rises. Increased rises force a person off the railways which adds to our already congested roads and crucially it stops people from looking for jobs, which overall could have a reverse effect and further damage the economy.

UPDATE

Spokesperson for the government Teresa Villiers MP speaking on the BBC 24 hours news said ‘we have taken a difficult decision to ask passengers to accept a 3% ahead of inflation fare increase for 3 years’.

Ms Villiers went on to justify this: ‘because it will enable us to deliver a massive programme of rail improvement, relieve overcrowding and strengthen economic growth'.

'Without asking passengers to pay a little bit more It simply wouldn’t be affordable’.

‘Yes, the taxpayer is contributing significant sums. £18 billion is what is going to be spent on what is the biggest rail improvement since the Victorian era’, she said.

The government simply did not take into consideration inflation figures when deciding on a 3% above inflation rise. Arguably the consequences of this decision where the increases will go on for another 2 years could force up the cost of a rail ticket towards 30%.  

ATCU agrees with Maria Engels MP, when she said this is simply ‘too far too fast to cut the deficit’. Passengers income spend will be reduced which will have a knock on effect to the growth of the economy.

Ms Engels said she agreed that there is a need to ‘cut the cost of the railway, which we support, as well, that’s a third way’. Would this be investment or ticket prices? We assume the latter.