Some types of rail fare are far higher in Britain than anywhere else in Europe. It is hard for comparisons to be exact, as UK rail fares are not determined by a rigid formula of so many pence per mile. But season tickets, and ordinary single or return tickets bought for travel the same day, are about 70% more expensive in Britain than on Europe’s next most expensive railways, which are those of Germany and the Netherlands.
WHICH RAIL FARES IN BRITAIN ARE SO EXPENSIVE?
Rail travel is cheaper if you can book ahead. Buying single or return tickets a month in advance is cheaper for rail travel in Britain than for comparable journeys in other wealthy European countries. Even buying one day before is cheaper in Britain. But in both cases you may be committed to catching one particular train. If so, and you catch a different train, your ticket will be invalid and you will be charged a penalty fare.
The Labour Party is currently campaigning against rail fare increases, portraying them as a Conservative policy. In fact New Labour from 1997 to 2010 also increased rail fares, often by more than inflation.
Nor did they or the privatised rail industry invent the policy. British Rail was known for raising fares to “suppress demand” on lines where trains were getting crowded. That cynical policy avoided the expense of building enough trains to give every passenger a seat.
BRITAIN HAS FURTHER TO GO
It is inefficient for railways to provide huge passenger capacity that is fully used only when commuters travel, about four hours a day, five days a week. Many of those trains are idle, and many railway lines less than fully-used, for all but about 20 hours a week. Inefficiency costs money.
On average, workers commute further in Britain than anywhere else in Europe. This makes the inefficiency of commuting more acute. At the end of the 1970s British Rail’s High Speed Trains extended the London commuter belt to Bath. People now commute to London by rail from Worcester, Warwick, Newark and the Isle of Wight.
A train on a commuter line only half an hour long may make three fully-loaded trips in one morning peak period. A train on a line two or more hours long will make only one fully-loaded trip in that time. The train on the shorter line has taken three times as many people to work in the same amount of time.
Two factors making people in Britain commute so far are a chronic and acute shortage of affordable homes closer to work, and the imbalance between London’s strong and growing economy and the weaker economies of some other parts of Britain.
TRAIN OPERATOR PROFITS
In the 1990s the Conservatives not only privatised British Rail but dismembered it. As a result, at least four companies profit from each train journey you make.
The operating company that runs your train is only one of those four. One estimate is that on average, only 3% of your fare is profit to the operating company. Some make more than 3%, others less. But we cannot simply call train operators greedy, or assume that taking their franchises back into public ownership will make much difference.
TRAIN LEASING COMPANIES
Most trains in Britain belong not to the operator, but to a leasing company owned by banks and other financiers. Leasing trains is almost guaranteed to be profitable. If an operator goes out of business, whoever takes over that operating franchise will need to lease just as many trains to keep going. And choice is limited, so they will probably need to lease the same trains from the same supplier.
When the Conservatives dismembered Britain’s railways in the 1990s, just three leasing companies were created to provide the trains. Others have tried to enter the UK market, but 20 years later the same three companies still dominate it.
By the way, free marketeers may have believed that privatisation would solve rail overcrowding. Supply would answer demand by building and leasing enough trains to give every commuter a seat, and by Railtrack upgrading those railways that needed more capacity to carry enough extra trains.
But Railtrack was more interested in dividends than capacity improvements, and in 2002 collapsed in disgrace. Network Rail has increased capacity, but it still lags far behind demand. 20 years after privatisation, overcrowding is still rife not only on commuter trains but also on some long distance inter-city services.
WHO BUILDS OUR TRAINS, AND AT WHAT COST?
The market for building trains is wider and more competitive than that for leasing them. Canadian, French, German, Italian, Japanese and Spanish companies all compete to build new trains for operators in Britain.
But one cannot buy a standard foreign train to run in Britain, because it will not fit our tight “loading gauge” – the maximum height and width that a train can have to fit through tunnels and under bridges. A train for the UK market can be built with many standard components, but its body design has to be tailored significantly slimmer and slightly lower than a train for most other parts of the World.
For train builders the UK is a much smaller market than the rest of the World. Europe, North America or the Far East may be able to buy “prêt-à-porter” trains, but railways in the UK have to order bespoke trains at bespoke prices.
YOU HELP TO PAY NETWORK RAIL’S DEBT
Each train operator has to pay Network Rail a “track access charge” for each journey that its trains make on each line. NR spends most of that income on operating costs (such as paying signal staff who control train movements), maintenance, and investing to modernise lines or increase their capacity.
But NR also spends a fortune in interest on its huge and growing debt. New Labour founded NR in 2002 with debts of £6 billion. That debt is now £38 billion, and by 2020 may reach £50 billion. NR doesn’t say what it is currently paying in interest, but a couple of years ago it was £1.5 billion a year.
Nor is NR to blame for that debt. New Labour, the Coalition and now the Conservatives all ordered NR to fund improvements to the railways by borrowing billions of pounds. Like Blair’s obsession with private finance for hospitals and schools, increasing NR’s debt is a short-sighted policy that stores up trouble for the near future.
WHAT MIGHT NATIONALISATION DO?
Labour proposes to renationalise the railways slowly, by letting each franchise lapse as it expires. But some of those franchises have decades left to run. Labour’s approach would have the advantage of letting the new public operator settle in to running each reclaimed franchise one by one, gaining experience each time. But it would take a long time to piece back together the national operator that Attlee’s government tried to create overnight on 1 January 1948.
And Labour must also address the fact that foreign-owned private companies make the trains, another set of private companies leases them, and each company in the supply chain takes its profit.
The private sector can build very good trains. Decades ago the UK had some of the World’s most famous train-building companies. At the same time, each large UK railway company built many of its own trains. After nationalisation, BR built many trains for itself but also bought trains built by the private sector. Between them the two sectors gave the UK huge train manufacturing capacity. But very little UK train-building survives, and most of that remnant is foreign-owned.
LINK RAIL COSTS WITH HOUSING AND EMPLOYMENT
Reducing commuter distances is vital to reducing fares. For that, housing, economic and transport policies have to work together. The UK needs to concentrate economic growth on those regions where housing is more affordable. This is cheaper than building more homes in areas where a strong economy means land prices are already high.
Thatcher letting tenants buy council homes in the 1980s was popular but short-sighted, because she forbade councils from using the proceeds to build new homes. Tenants profited, but the policy cut the affordable housing supply. David Cameron letting tenants buy housing association homes threatens to repeat this disaster.
Housing prices in more expensive parts of the country could be mitigated. In parts of London and southeast England they are being inflated by speculators, some of whom buy luxury properties and keep them empty as investments. A new higher band of council tax might help. So might a tax on empty homes.
It is expensive to clean up and redevelop brownfield sites, and especially sites of some industries that have contaminated the ground. Developers therefore build on those sites whatever makes the most money to pay for the cleanup plus a profit. Hence luxury riverside apartments appear on the sites of former gasworks and paper mills. There need to be incentives to redevelop these sites into affordable homes that will let people on modest incomes live closer to their work.
Workers who cannot afford to live in the expensive areas where they work include rail and other transport staff. When I worked for London Underground, colleagues commuted from Northampton, Peterborough and the Isle of Wight. More recently, one of the bus operators in Oxford is so concerned that its workers cannot afford to live there, it is considering building a staff hostel.
RAIL COSTS IN CONTEXT
Only in such a wider policy context can the cost of rail travel be addressed. Moving work closer to where people can afford to live, and increasing affordable housing in wealthier parts of Britain, are two policies that would reduce commuting distances. This would make it less of a strain for all public transport, not only trains, to provide enough capacity to get everyone to and from work.
By all means debate whether Britain’s rail industry is too fragmented, and whether too many private interests profit from different parts of its complex supply chain. Ask whether more integrated ownership, perhaps in public hands, would reduce costs. But do not expect rail fares in Britain to fall to more typical European prices until Britain reduces its average commute to a more typical European distance.