Return to Archive -by date - by topic.
Guess who's paying for the SoFA?
Here's a familiar graph. And, no, it's not a sneak preview of the winning Intercity East Coast franchise premium profile.
It shows the Government's assumptions on future passenger revenues which underpin the High Level Output Specification (HLOS). As you can see, funding for the railways in England and Wales in Control Period 4 (2008/09-2013/14) is predicated on passenger revenue rising inexorably at a compound annual growth rate of 4.8%% a year before inflation.
In total this will bring in an additional £7 billion over the five years. Where will it come from? The Government is looking for a 50/50 split between increasing ridership and higher fares. In theory, ridership is the dominant factor since the additional passengers with pay the higher fares
Source: DfT and ORR
For the national media the White Paper was all about the passenger paying a greater share of the cost of the railway. A graph in the White Paper suggests that the Government's share of funding has increased from 26% in 2000/01 to 51% in 2005/06.
This sort of analysis is a minefield given the growing complexity of state funding for the railways, For example in each of the first two years of the current Control Period, the Government withheld roughly £1.5 billion of Network Rail's grant, the difference being covered by borrowing.
And as you will know from past exercises nailing down the true cost of the railways to the taxpayer is not easy. But, excluding grants of £1/2 billion to the Channel Tunnel Rail Link, I make the taxpayer's share 52% in 2006/07.
Meanwhile DfT Rail proclaims that the railway is now in ‘the most stable position in 50 years'. ‘Growth is delivering significantly enhanced revenues while industry cost control continues to improve'.
In this happy state, the Government thinks it right that ‘subsidy levels should start to return closer to the historic norm'. I have asked, more in provocation than anticipation, for a definition of ‘historic norm', The box has some helpful suggestions.
But until the norm is restored ‘the Government is delivering improvements without imposing new burdens on passengers, about 80% of whom travel on regulated or discounted tickets'.
After a misguided spell of RPI -1% from 1999 to 2003, increases to regulated fares are capped at RPI +1%. This will continue to 2014.
But the last three franchises to be let have come with warnings of RPI +3-3.4% annual increases for unregulated fares on some routes. Oddly, the White Paper notes that some train operators have made very steep increases in some unregulated fares shortly after winning a franchise, but does not make clear whether this is criticism or approbation.
Meanwhile the Commissar for State Railways is to lay down a new range of simpler People's Fares, with the same names common across the network ‘regardless of operator'. DfT Rail claims that this structure will ‘preserve the “walk-up” railway, with “Off-Peak” fares available on all but the busiest trains across the network'. Hmm, all those inverted commas are worrying.
Simplified fares structureFare name Validity (Day) Anytime Any train (Day) Off-Peak Any train outside peak (Day) Super Off-peak Any train at least busy time of day Advance One specific train All fares pre-book or turn-up-and-go except Advance which is Pre-book up to 18.00 the day before |
Meanwhile DfT Rail is handling Saver Fares with asbestos gloves and long tongs. In truth, it would like to get rid of them, since they depress revenue.
It claims that there was no case for regulation at privatisation on grounds of competition. Following a review DfT Rail feels that ‘in principle' the case for reform is ‘strong'.
However, (gloves on) ‘ customer support and confidence in such a move is essential'. Customers need to be convinced (pass me the tongs) ‘that change is to their benefit and that any new regulations blah blah blah while not increasing prices overall'. Don't you like that ‘need to be convinced'?
Anyway, simplification of the fares structure is the first stage of building this ‘confidence'. Meanwhile (No! I meant the really long tongs.) t he Government says it would only alter ‘Saver' regulation in future on a franchise-specific basis, when the train operator can demonstrate that it would replace the ‘Savers' with a single-leg ticketing structure which enjoys customer support and complements the new national fares structure.
Pure Sir Humphrey. Get the TOC's to do the dirty work and blame them if it goes wrong. What was that earlier comment about very steep increases in some unregulated fares shortly after winning a franchise?
Meanwhile, can I leave you with the Miles Conundrum, which flummoxed the finest civil service minds DfT Rail could assemble to brief the railway press on the White Paper? What is the point of the flexibility of the three trains per hour London-Manchester service, which makes a timetable redundant, if the book ahead ticketing structure stops you exploiting the flexibility?