Rail fares in England and Wales are on track to rise at their fastest rate in a decade unless ministers decide to prevent steep price increases to encourage commuters back on to trains.
Annual increases in rail fares are usually governed by the July retail prices index (RPI), plus another 1%. The Office for National Statistics (ONS) said on Wednesday that RPI for July was 3.8%, meaning prices could rise by 4.8% in January. That would be the steepest increase since 2012.
However, the government has not yet revealed its plans for January price rises as it considers the effect of the coronavirus pandemic on British transport and moves control of train services to a new arm’s-length body, Great British Railways.
A steep fares rise could also prove politically contentious in the run-up to the United Nations climate summit, Cop26, which is being held in Glasgow in November. The UK has already come under fire for its implicit subsidies for polluting petrol and diesel cars with a decade-long freeze in fuel duty. Campaigners say fares should be frozen to encourage passengers back to the railways and help reduce emissions.
Ministers are facing a dilemma over whether to try to entice commuters back on to the railways with lower prices, or to allow train companies to raise fares – potentially allowing them to recover some of their losses during the pandemic.
The government stepped in to bail out rail companies at the start of the pandemic after the first national lockdowns, and the number of people using public transport is still well below pre-pandemic averages in some cities.
Regulated rail fares in England and Wales have already risen by 2.6% in March this year, an increase delayed from January in part because of pandemic restrictions on travel at the start of the year. About 40% of fares are regulated, according to the Rail Delivery Group, which represents train companies.
It is understood that fares will be considered as part of a “rail recovery” package as the government tries to get people who have been working from home back on public transport. However, the government has not yet given any details of when this will be announced, other than saying it is due later this year.
A Department for Transport spokesperson said: “No decision has been made on national rail fares. The government is considering a variety of options and we will announce our decision in due course.”
Labour said its analysis showed that an annual season ticket between Birmingham and London will have risen by 50% since 2010 under coalition and Conservative governments to more than £12,000 if the latest predicted rises go ahead. During that time, a season ticket from Coventry to London and from Swindon to London will have risen by £3,600 and £3,300 respectively, it said.
Jim McMahon, the shadow transport secretary, said it would be “yet another eye-watering hike” for commuters.
Paul Tuohy, the chief executive of the Campaign for Better Transport, said the government should freeze fares to increase passenger numbers, while helping to reduce climate emissions by reducing the number of trips taken by cars.
“In the face of a climate emergency, the government should be doing everything it can to encourage people to choose low-carbon public transport by making it the cheapest option, not hiking rail fares,” he said. “If the government can freeze fuel duty for 10 years, it can freeze rail fares next year.”
Anthony Smith, the chief executive of Transport Focus, an independent watchdog, said: “After an extraordinary year, it’s good to hear the government is considering a range of options. It’s important to consider what would help get even more people back to travelling by train.”
The use of the RPI measure is particularly controversial because flaws in its calculation mean it is higher than other measures of inflation, such as the consumer prices index (CPI). The ONS on Wednesday said that CPI inflation was only 2% in July.
Unlike CPI, which is the main measure of inflation used by the Bank of England and the Treasury, RPI includes some housing costs. It also uses a mathematical formula abandoned by other countries in recent years because it can distort inflation readings.
The House of Lords economic affairs committee has previously warned the government against picking RPI or CPI when it suits the exchequer best, a tactic known as “index shopping”.
Economists and statisticians are highly critical of RPI, which lost its status as a national statistic in 2013. The UK’s national statistician, Prof Sir Ian Diamond, in November said RPI is “not fit for purpose and we strongly discourage its use”.
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Rail passengers in England and Wales could see biggest fare rise since 2012