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Osborne to Announce Rail Fare Cap

A TrainIn today’s autumn economy statement, Chancellor George Osborne is expected to announced a cap on regulated rail fares. Ticket prices for peak and seasonal travel were scheduled to increase 8.2% this January, which is 3% more than the inflation rate of RPI. However, it’s expected that this will be limited to a 6.2% increase, while a cap is due to apply to London Tube and bus fares.

Then Transport Secretary Philip Hammond said in September that some fares were very expensive and the fact that the better-off use trains was uncomfortable. Speaking to the Commons transport committee, he called the British rail network a ‘rich man’s toy’ and noted that the people using the railway on average are more well-off than the population as a whole.

This followed a review from Sir Roy McNulty, the former chairman of the Civil Aviation Authority (CAA), that was published in May and expressed the same sentiments. The document found that rail fares were too expensive and concluded that they should be more equitable and less complex. Aside from the structure of fares, the key barriers for improving efficiency were found to include the role of the government, how major players in the industry operate and the franchise system. Sir Roy sad running the network should cost 30% less, which would bring it in line with other rails across Europe.

The decision to reduce the fare increase comes as calls have grown for the government to help families that are struggling to make ends meet. Last week, figures showed that households are spending nearly £40 per week less than four years ago – prior to the recession.

Shadow Transport Secretary Maria Eagle says that this reduction in fare hikes comes after ministers backed down from the 3% above inflation rise. Ministers seem to have backed down on the plan, which has been demanded for the past year. However, commuters are still facing a rise in fares unless the government also changes its mind to allow train companies to average-out the amended fare increase across a spectrum of tickets. This means that many fares will still jump a whopping 9% this January.

The decision has been recognised as positive for passengers by the Association of Train Operating Companies (ATOC). Passenger groups have been calling for a fare structure for a long time, as trains are usually empty after peak hours but busier at the start of the off-peak period.

Rail users’ contributions to the network have risen from £5 billion four years ago to £6.6 billion in the last year. This has been due to a combination of more traveller numbers, cost-cutting and above-inflation fare increases. On the other hand, taxpayers have contributed less during the same period – from £6.3 billion to just £4 billion.

 

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