I'm hoping that someone can explain what's going on with rail fares.
At a time when they are increasing taxes and reducing benefits, the Government has every reason to encourage (or even force) private companies to limit price increases.
Train operating companies (TOCs) receive income from two sources - the taxpayer (see How much!) and the rail traveller. It doesn't look like there's any change on the former, but they are allowing major increases on the latter. This year is covered by the old formula, RPI +1%, but future increases will be higher.
Why? There's talk of the rail fare increases being imposed now funding the future purchases of rolling stock, but the list of routes that are due to receive the new trains don't include London Midland. Sorry, but I don't understand...
One final thought. When it suits the Government they have been switching pricing formulae from being calculated against Retail Price Index (RPI) to being Consumer Price Index (CPI) based (e.g. with pensions). This means lower increases. For rail fares, despite the review of the formula, we remain RPI based. Why?
Can anyone help make sense of this? I know I can't.
See ATOC press release - Train companies confirm fare changes for 2011
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The BBC are reporting on a Coalition Government proposal that rail franchises could be granted for periods up to 15 years (see Train franchises to double under government proposals).
The Government's proposal also includes giving the train operating companies more freedom to determine the frequency of trains and the stations served.
So what does this mean for our line? The current London Midland franchise is up for renewal in September 2015 so the parent company, the Go-Ahead group would undoubtedly welcome an extension. If the Government proposal went ahead and the terms & conditions of the franchise were made less prescriptive then the management would welcome this too (anyone interested in seeing how the Department of Transport have dotted every 'i' and crossed every 't' should look at DfT - current franchise agreements). But would this result in improvements? The jury has to be out on that one.
A cynic might suggest that the reason why this has cropped up now is that the Government is willing to consider any option to reduce costs, and the subsidies that they are paying out to the train operating companies offer plenty of scope for shaving tens if not hundreds of millions off the annual bill (London Midland subsidy for 2010 = £185 million - see "How much?!!).
There will apparently be consultation on this. I eagerly await the opportunity to comment :-)
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:
- They keep the full subsidy for 2011 (the amount paid reduces year on year but for it's apparently £175 million); or
- 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
Andrew Gilligan in the Daily Telegraph has done it again... In his column in yesterday's Daily Telegraph ("The personal agony that will forever be public transport") he launched his second attack on our railway system in a fortnight (see also "High Speed rail?").
In this second article he suggests again that very little of the investment in railways since privatisation has gone into increasing capacity (he suggests that much of it has been spent on repainting carriages!) This mention of subsidies interested me, so I did a quick search on Google and what I found shocked me.
On the Investis website I found a summary of the subsidy payments that London Midland are receiving from the government (Go Ahead Group - London Midland operating review). The total changes year on year from the start of the franchise to the end, kicking off with £203 million in 2008 dropping to £155 million in 2015, but for 2010 it's £185 million.
For anyone who might be thinking that £185 million doesn't sound so bad given the scope and scale of London Midland's services, please do bear in mind that Network Rail separately receives government support for the maintenance and development of the railway infrastructure (I figure that identifying how much that would amount to for the London Midland area is an impossible task for an outsider).
Finding the above then left me wondering how much the senior management at London Midland were receiving in salary and other rewards. A quick look didn't reveal any detail for London Midland's top executives, but I did find a useful summary on the Reuters website for the Go-Ahead Group (London Midland's parent company):
- Keith Ludeman, Group CEO - £916,000
- Nicholas Swift, Group Finance Director - £470,000.
These gentlemen of course oversee the running of a number of rail and bus companies (plus Meteor, the company operating Bletchley's car park, and other transport-related businesses), and we need to be careful because whenever we get into a debate about how much the senior executives are getting paid there is no doubt that envy has a major influence on people's opinions.
Quite honestly, I wouldn't care what the people who were responsible for the running of the trains that I use to get me into London were being paid as long as the service was satisfactory and offered value for money, but:
- I don't believe that the train service that we have between Bletchley and London Euston is anything like as good as the one that we deserve
- I don't believe we do get value for money given what we pay directly for our season tickets (in my case £3332 pa) and indirectly as tax-payers (this year's £185,000,000 susbsidy)
Come back British Rail, all is forgiven (Andrew Gilligan does suggests in the 10/06/2010 article that the improvements in punctuality that we've seen have only taken us back to BR levels and that the only reason that they've managed that is because of the slack that we've now got built into the timetables).
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