Train ticket price rise gives an issue to rail against

LONDON BRIEFING:Commuters are bearing the brunt of a changed policy on fares. Rises may go as high as 13%

AFTER NEGOTIATING the rush hour on Britain’s overcrowded and underfinanced rail network, commuters arrived at their desks yesterday morning to more bad news: from next January, they’ll be paying an average of 8 per cent more for their journeys, even though Britain’s rail fares are already among the highest in Europe. On some lines, the increase will be 13 per cent.

For someone who commutes from Swindon to London Paddington, for example, a distance of 50 miles, that would mean the cost of an annual season ticket rising from just over £7,000 this year to £7,586 in 2012. Passengers from Reading, some 30 miles outside London, face a near-£300 a year rise, to £3,871.

It gets worse. Under a new formula for calculating fares on regulated routes (including season tickets and off-peak saver fares) which make up half all tickets sold, prices will rise at the rate of inflation plus three percentage points not just in 2012, but for the next three years. Rail commuters thus face increases of as much as 30 per cent by 2014.

These are the largest fare hikes since Britain’s rail network was privatised in 1995 and will price some commuters off trains altogether, say consumer groups, which calculate fares are rising four times faster than wages.

Protesters, including environmental campaigners, were out in force early yesterday at Waterloo station, one of the capital’s busiest hubs, warning weary commuters just what lies ahead and demanding that the rail network be brought back under state control. There’s even a Bring Back British Rail lobby group.

Cash raised by the higher fares will go to the government to fund much-needed improvements to the rail system, extra carriages and more electrification. It will also fund new routes to link the north and south of the capital, Thameslink, and the Crossrail project which will link east and west London.

The cost of the modernisation programme has largely been borne by the public purse but, as part of its austerity drive, the government is determined to reduce the burden to the taxpayer, currently running at almost £5 billion a year.

The inflation figure used by the government in its annual rail fare formula is the July retail price index (RPI), which the Office for National Statistics announced yesterday as 5 per cent. But the soaring cost of living is only partly responsible for the punitive rises. Last year, the government changed the formula on regulated fares from RPI +1 (percentage point), which had been in force since 2004, to RPI +3, hence the average rise of 8 per cent. Within that, rail operators have the flexibility to raise prices on some routes by a further five percentage points, taking the increase to 13 per cent, as long as their overall rise is within target.

Meanwhile, consumer price inflation (CPI), the government’s target measure, climbed back up to 4.4 per cent last month, from 4.2 per cent, and is rapidly heading towards 5 per cent, bringing further misery to savers and cash-strapped households whether or not they use rail.

Fuelling the increase, which was larger than City economists had expected, was January’s VAT rise, together with higher bank charges, increases in commodity, clothing and footwear prices, and rises in rental costs, particularly social housing. The traditional July sales season brought little relief this year, as struggling retailers had already brought forward their sales to June.

CPI remains more than double the government’s 2 per cent target and will almost certainly hit 5 per cent once the recent double-digit gas and electricity price rises take effect.

Bank of England governor Sir Mervyn King was once again forced to write to the chancellor explaining the overshoot, as he is required to do in every quarter that the figure remains one percentage point or more adrift of target. The correspondence file between the bank and the treasury is expanding rapidly. This was the governor’s seventh consecutive letter and his 12th in total.

In his letter, King said he expects inflation to fall back in 2012, although he cautioned that the precise timing and extent of the drop was highly uncertain. He warned also that the big risks currently facing the UK economy come from the rest of the world.

He reiterated his long-held view that the cost of living is being driven by temporary measures, such as the increase in the standard VAT rate to 20 per cent, together with past increases in global energy and import prices. Without these, he maintained, inflation would already be below the government’s 2 per cent target.

For those commuters contemplating another miserable and expensive journey home last night, however, the governor’s words will not have brought much comfort.

Fiona Walsh writes for the Guardianin London