All’s fare in train robbery

Rob Ray looks into the strange case of train travel price hikes which have no apparent economic basis for Freedom newspaper

Submitted by Freedom on June 19, 2007

Two major train companies have announced large price rises this month, with Arriva deciding to raise their off-peak fares by over 30% and South West Trains 20%.

The hikes, which have sparked outrage in consumer groups and unions, follow annual price rises which were substantially above the average for each company, at 5.7% and 5.3% (over a percentage point above inflation and above the industry average of 4.5%) earlier in the year.

The exceptional rises have caused controversy because despite the high level of the hikes, regulator Office of Rail Regulation (ORR), led by Chris Bolt (a leading pro-privatisation specialist who was instrumental in steering through the privatisation of water utilities) have refused to investigate it.
Neither Arriva nor South West trains – part of the Stagecoach Group, have seen significant problems on any of their train lines prior to the rises.

Arriva saw a slight reduction in profits at the end of last year following the ending of a major franchise in the North, and additional bid costs to the government, but nevertheless paid out a dividend 5% higher than for 2005, and boosted executive David Martin’s pay packet by over £150,000, just under a 50% increase, along with a £246,800 bonus.

Stagecoach meanwhile had reported an outstanding year, with revenue up 5.7% and profits rising from £50m to £58.9, and dividends up by 12% per share. Again renumeration for the directors was up.
The discrepancy between companies in apparently healthy circumstances and in a period where fuel prices have not been unpredictable.

Both the TSSA and RMT rail unions demanded that an investigation be launched when the companies scrapped their cheapest fares, saying it amounted to abuse of he monopoly positions in the market.
RMT general secretary Bob Crow said: "Talk about the climate challenge and the importance of reducing carbon emissions will remain just talk if the government allows never-ending fares hikes that can only result in ever more polluting road traffic".

"A fundamental shift in policy is needed that will use fares policy to encourage people out of cars and onto trains, and alongside that we need to recognise the need for substantial public investment in new rail capacity.

"Only last year the Commons Transport Select Committee condemned the shambolic state of rail-pricing structures and exposed the private sector's inability to operate the railways as a public service.
Consumer groups have expressed strong concerns that avoiding an investigation of such high rises, on the back of several consecutive years of hikes, will simply tempt other monopoly contractors to follow suit.

Between 1998 and 2006 train fares have risen by an average of 46.2%, while staff cuts, poor maintenance of rolling stock by many companies, the threat of closing rural lines and poorer timekeeping than under British Rail has continued.

On many main lines this is the fourth successive year in which tickets have risen by more than inflation.
Train companies say the extra money is to pay for service improvements. But allegations have surfaced that overcrowding on the network, combined with an unwillingness to invest have led companies to hike prices, in order to cut down on rising passenger numbers and improve profits.

The cost of bus and train travel has outstripped the price of motoring since Labour came to power, according to the latest official figures. According to the Office for National Statistics, bus fares have risen by 52.9% over the past decade. According to the AA, the cost of running a small family has risen rise from 41.52 pence a mile in 1997 to 56.15 pence in 2005 - 26%.