RAIL 806: Fares: urgent action needed

Fares debates are always controversial and difficult - fairness and balance are usually conspicuous by their absence - and worse is that the discussion is usually less than honest.

There’s an old saying that truth is always the first casualty in war and this is certainly the case around fares, where truthful explanation and honest analysis are infrequent visitors in the battle for public understanding.

The narrative that usually emerges is that a capricious and ruthless private sector is ‘exposed’ by the latest media or consumer ‘investigation’ for ripping everyone off. Government ministers piously wag their fingers in response and angrily proclaim the need for ‘transparency’ and ‘a better deal’ for passengers amid much condemnation of an alleged profiteering fat cat; there’s a regulator who could have acted already but who has chosen not to then weighs in with earnest promises of ‘action’. The industry tinkers around the edges of the problem and renames a few tickets amid some feeble PR bluster and after a day or two it all dies down. 

The Times was the latest to trigger this seasonal routine on July 26 with a lead story, two full pages inside and a leader lambasting the railway for hiding cheap fares, ripping off passengers and quoting ministers and regulators as outlined above. New Rail Minister Paul Maynard offered weak praise for some improvements while insisting that the Rail Delivery Group should tackle this problem urgently. “Passengers deserve better,” he told The Times - and he’s right, they do. However, before removing the splinter from the railway’s eye, he would be well advised to first remove the plank from his own.

I generally agree with The Times’ condemnation of our complex, confused and chaotic fares system and structure. RAIL has been endlessly critical of this horrible problem. But the conspiracy of silence continues about the real problems and their causes.

It is obvious not only what the problem is, but what the solution might be, when you can routinely and easily pay maybe 60% less for a fare if you buy it from one of the split ticketing websites. I decided to give it a try. A First Class Advance fare purchased through CrossCountry’s iPhone app from Newcastle to Peterborough on September 22 costs £78.50. A combination First Advance ticket on the same train - the 0630 departure - costs £58.50, a saving of 25%. (The same ticket on the day, by the way, costs £156, so great deals are available).

Or you can use ‘tickety-split’ on the Moneysavingexpert.com website run by the respected Martin Lewis. And this is where a feeble PR response by the RDG comes in. To say: “We know that in some cases it can occasionally be cheaper to buy more than one ticket when making a through journey and we are looking at ways to make ticket buying simpler” just comes across as weak and evasive.

Sometimes? Occasionally? Really?! How about ‘most/all’ or ‘always’?! The RDG response comes across at best as mealy-mouthed, but when you then see Martin Lewis telling The Times that when he introduced his ‘tickety-split’ online tool he “...got a very stern letter from train operators trying to warn me off,” then it leaves a very sour taste indeed. Mealy-mouthed starts to look conspiratorial and manipulative; this corrodes public trust.

If two independent websites can offer split ticketing today, then our railway could do it tomorrow - yet it chooses not to, offering only to “look at ways to make buying tickets simpler”. Again, it’s corrosive of public trust.

In a normal commercial environment, split ticketing would have rapidly been made available. So why not among train operators? This is where dishonesty comes in - no-one is truthful about the reasons why we are in this mess and The Times has failed to dig it out.

The upward pressure on fares ALL tracks back to government, or more specifically, the Treasury - no, operators aren’t blameless, and I will get to that. Bear with me for the moment.

Government not only sets all regulated fares, it also heavily influences ALL other fares through the terms of the franchises. And they are heavily influenced in turn by the Treasury. RAIL sources tell me that DfT Director of Passenger Services Peter Wilkinson’s team did a really good job on the new SWT franchise and incorporated an impressive quality premium. I understand that the Treasury eliminated this in favour of higher government income. At a time of tight public finances the Treasury sees the railway as a cash cow and squeezes as much as possible. This feeds through into bids which owning groups have to really stretch to win, resulting in an average profit margin across the industry of just 2%.

This leaves operators no option but to increase non-regulated fares to achieve even those very slender margins - and we all pay the price through fares. Add in to the equation that the Government has moved steadily away from the traditional 50/50 division of rail costs between taxpayer and passenger to something like 70/30 - and we see that the fare payer’s percentage contribution to the railway has more than doubled in the last decade while the taxpayer’s percentage has more than halved. No wonder fares are so high.

But government doesn’t admit this and the industry dare not point it out for fear of ‘biting the hand that feeds’. Hence, the narrative I described at the outset continues. And it will not change until someone politically has the cojones to rebuild this horrifically complex system from the ground up. And as everyone is terrified of damaging revenues through any such major reform, it is constantly avoided. What the ticket splitting sites have done is use modern technology to expose the fact that we retain an essentially Victorian fares structure which has been repeatedly overlaid with layers of change. And that modern technology has created the awkward and unsustainable reality that lower fares are already easily available via third parties, but not the railway.

Industry and government face a clear choice. Grasp the nettle and initiate reform or watch the inevitable and inexorable rise of ticket splitting websites. And in these circumstances, that driving down of revenues which everyone fears reform might bring will instead be painfully brought about by the unavoidable forces of the competitive market.

In the short term, the industry should do all those easy things which cost little to implement but whose absence imposes a heavy reputational cost, like clearly labelling all ticket machines that offer only limited fares and making clear that cheaper fares are likely to be available at a booking office.  

Finally, if anyone remains in doubt that reform is urgently required, I leave you with this question and its startling answer. How many individual fares do you think there are within the National Fares Database? 

Sixteen million.

Comment: RAIL 806: August 3 2016 - August 16 2016