10% railfare increase?!!

The press has been full of stories this week about the comment from Philip Hammond, the new Government Transport Secretary, that there is no guarantee that the current inflation + 1% formula for railfare increases can be maintained.


Commuters are staring down the barrel of a 6% increase in 2011 anyway (5% inflation + 1%), and the prediction is that the Government may allow the train operating companies (including London Midland) to raise prices by up to 10%.  In the current climate of pay freezes and even salary cuts, that wouldrepresent a significant hit on commuters.


In a previous posting ("How much?!!") I mentioned that the cheque that the taxpayers have written out to London Midland to cover the 2010 subsidy is a whacking £185 million.  According to this week's press articles, the total subsidy paid to the rail industry is £5.21 billion.  That bill needs to be cut, but why should this be to the cost of the rail passengers?


London Midland seem to come out on top whatever happens.  If I've read the situation properly then there are two possible scenarious:

1. They keep the full subsidy for 2011 (the amount paid reduces year on year but for it's apparently £175 million); or
2. The subsidy is reduced but they then get permission to make up the difference by increasing our fares.

Is it an exaggeration to say that the arrangements between central Government and the train operating companies are scandalous?   London Midland et al are in a "heads I win, tails you lose" situation.  Private enterprise is meant to be about risk.  take the risk and you potentially get the reward.  These guys get the reward without any risk...  

Anyone interested in reading more on this subject may like to look at the following press articles

• Millions of passengers face inflation-busting fare rises of 'up to 10%' - Daily Mail
• Train prices 'could face even further price hikes', transport secretary warns - Daily Telegraph
• Rail industry prepares for public spending cuts - Guardian
• Why pile more pain on commuters, minister? - Evening Standard