Are rail fares too high?

January 03, 2017 3:38 PM

Rail fares increased this morning, prompting outrage from unions. The average fare will increase by 2.3 per cent with regulated fares, which include season tickets, increasing by 1.9 per cent.

A report from “Action for Rail”, a union backed campaign, claims that UK commuters pay up to six times more on rail fares than their European counterparts.

The report makes a number of leaps of logic such as the suggestion that delays (two-thirds of which are caused by Network Rail), overcrowding and cancellations could be alleviated by opening more ticket offices.  There are also calls for higher staffing levels which would inevitably increase costs and the perfunctory expression of concerns about “passenger safety.”

But the thrust of the argument is that taxpayers should pay more so that (richer) commuters can pay less.

In 2014-15 the UK rail industry had income of £13.5 billion. Of this, £9.6 billion came from passengers (£8.8 billion from fares) and £3.5 billion came from taxpayers. So 71 per cent of the rail industry’s income came from passengers

The big difference between the railways of UK and the four European Countries identified in the report as having cheaper fares (Germany, France, Italy and Spain) is that they all have significantly higher levels of taxpayer support.

In Germany for example, where the number of passenger kilometres travelled is 40 per cent higher than the UK, taxpayer funding for the railways is approximately €17 billion (£14.4 billion), or 410 per cent higher.

If the government increased taxpayer support for the railways to the same level as is the case in Germany, after accounting for the difference in the number of passenger kilometres travelled, an additional £6.9 billion would be required. This is the equivalent of a 1p increase in the basic rate of income tax and a £1,500 cut to the personal allowance next year.

Action for Rail also suggest that if Train Operating Companies were nationalised, huge savings could be passed on to passengers because less would be paid to shareholders in dividends. The argument fails to hold water: in 2014-15, train operators paid a total of £222 million in dividends – 2.5 per cent of the amount they received from passengers.

The unions complaint is not so much that people are being fleeced, just that taxpayers are not being fleeced enough.

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