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INFORMED SOURCES April 2005

Fares row exposes little change

Is travel cheaper or more expensive compared with British Rail – excluding subsidies, of course.

There was a bit of a spat back in February when the Lib Dems put out a press release claiming that full price rail tickets in Britain were the most expensive in Europe (Table 1). Naturally, this upset the Amalgamated Terribly Optimistic Contractors (ATOC).

Table 1

Average fare per mile (pence)     
1       Slovakia          3.05  
2       Hungary    3.73  
3       Czech Republic    3.92 4 Poland  4.50  
5       Italy   5.75  
6       Portugal        8.26  
7       Holland 11.63 
8       France  11.90 
9       Belgium 11.90 
10      Finland 12.66 
11      Austria 12.66 
12      Spain   13.51 
13      Sweden  15.87 
14      Switzerland     16.95 
15      Ireland 19.61 
16      Norway  20.41 
17      Germany 21.28 
18      Denmark 23.26 
19      Britain 40    
 

NB January 2005 fare for a typical inter city journey averaging 300km / 186 miles. Standard class open ticket purchased for use on any service on the day of travel. Converted to £ at current exchange rate.

Sources: Thomas Cook European Railway Timetable.

Director General George Pangloss responded vigorously, claiming that comparisons based on full price tickets was ‘unfair' because the train operators in Britain offer a far greater range of discounted tickets than other European railwaya. The rebuttal concluded ‘Over 90% of all tickets sold are at discounted rates. With rail revenue at £4 billion a year and over one billion passengers last year the average price of a rail journey in Britain is just £4'.

In a parallel newspaper report one train operator added ‘ People are becoming much more astute and making use of all the offers available. Before privatisation, such offers were very limited. People used to be getting a Morris Marina service, now they are getting a BMW service'.

Following privatisation, regulated fares increases were pegged at RPI-1. Add in today's BMW-type cut-price offers and you might expect that average fares today would be lower than at, say, the peak of the last economic boom in 1990/91.

Table 2

* 2003-04 subsidy excludes CTRL, freight grants and SRA running costs

Table 2 provides the answer and, yes, I too was surprised to see that the average cost per journey is exactly the same at £3.84. Of course, cost per journey is not that illuminating, so I have also calculated cost per passenger mile. The difference of 1p is mere noise.

Of course, the fare doesn't cover the true cost of the journey. Hence the second set of columns where the unit costs include BR's Public Service Obligation and support for the passenger railway in 2003/04.

Note that in 1990/91 fares covered 75% of the cost per mile, while in 2003/04 it was 55%. And as you will have read above, the ratio is getting even lower.

Affordability

If despite RPI-1% and all these Shrove Tuesday BOGOF Ultrasaver fares, revenue per journey and per passenger mile has remained sensibly constant over the last 13 years and 90% of travellers using discounted tickets, walk-on fares must have risen disproportionately.

When I give talks to local organisations I usually ask if anyone knows the cost of a standard return ticket from London to Manchester . When I tell them it is £184 there is usually a collective gasp.

Like them, I can't see that £184 is value for money, particularly when for £138 you can buy a standard return from London to York – a similar distance. But has value for money got worse?

There are all sorts of indices you can use to compare historic prices. Here is the Mars Bar Index, for example. And the price of a Big Mac can be used to compare the cost of living around the world.

What we need for walk on train fares is a ‘Perceived good value' Index. Seat prices at Covent Garden provide the answer.

We have been sitting in the same seats in the amphitheatre slips since we started going when I joined English Electric in London . Covent Garden operates a sophisticated yield management system and tickets for the ballet ‘La Fille mal Gardee' (e acute on first e in gardee please) for a performance in January this year cost £10 each. This seems very good value.

Rummaging around in the archives produced an autumn 1965 leaflet which also included a performance of ‘Fille'. The same seats cost 8/6d each or 42.5p in modern money. And since we sometimes went twice a week BC (before children) that must have seemed good value too. So here is my perceived value index.

Table 3; Relative costs 1965-2005

At its launch, the Ford Cortina was promoted as ‘ The medium sized car at a small car price', and was seen as good value for money. The Ford Focus represents similar good value today.

Note that today's price is 50% more than you would expect from inflation alone – but, as remarked previously in this column the modern car is much more capable than its predecessors. Similarly, my Covent Garden seat costs 80% above inflation but is still perceived as good value.

But what about the walk on train fare? When the electrified service opened in May 1966 a London-Manchester return was £5. So today's walk on fare is 185% on top of inflation.

Put it another way, at 2005 prices, a Cortina would have cost £7100, the theatre seat £5.50 and the train fare £64.50 Had fares increased in line with new car prices, which is the competition, a Manchester walk on return today would be £95.

This seems much more in line with the fare of £56 at the current 15p per mile. The next question is which fares will rise after the election?

Continues.....

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