The Department for Transport’s rail operating subsidies ranged from £355 million for Northern Rail to the premium South West Trains paid of £312 million in 2013–14. Measured per passenger mile, it ranges from 25.8p for Northern Rail to a premium from First Capital Connect of 8.5p. We propose that for operators where a subsidy is paid that the subsidy is eliminated. We also propose that where a premium is collected that this is increased by at least 33 per cent.
If a railway cannot cover its operating costs, taxpayers should not be told that they must part-pay for passengers’ journeys instead. To make up the difference, the train operating companies should be given more freedom to increase fares and change their fare structures to take advantage of yield management techniques and to let prices reflect the fact that rail capacity is much more scarce at peak times than it is off-peak. Additional revenue from higher fares could improve benefit: cost ratios for transport projects in some areas where it exceeds the cut in subsidy or the increase in the franchise premium.
These proposals do not apply to the network grant made to Network Rail.