Calls for rail fare freeze as RPI forecast hits at 17.7%
3 August 2022
Responding to The National Institute of Economic and Social Research forecast that the Retail Prices Index (RPI), which is used to set rail fares and student loans repayments, will hit 17.7 per cent, Paul Tuohy from Campaign for Better Transport said:
“We need people to use the trains to help cut congestion and air pollution and stimulate economic activity in our towns and cities, but with a double-digit fare rise on the cards for next year, we are in very real danger of pricing people off the rails. The Government has helped out drivers with the cost-of-living crisis, now it’s time to help rail passengers with a fare freeze for 2023.”
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Notes to Editors
- The National Institute of Economic and Social Research forecasts 17.7 per cent RPI.
- RPI for June 2022 was 11.8 per cent.
- Regulated rail fares, including season tickets on most commuter journeys, some Off-Peak return tickets on long distance journeys and Anytime tickets around major cities, make up almost half (45 per cent) of all fares and increases are set by the Government. In recent years, fares have risen each year by either RPI or RPI+1%, based on the previous July’s RPI figure. In 2022, fares rose by RPI.
- The Government continues to use the Retail Price Index (RPI) to calculate annual fare increases, rather than the accepted and more accurate measure of inflation, the Consumer Price Index (CPI). RPI over-estimates real inflation so consistently that the Office of National Statistics ceased using it as an official measure in 2013 and the Government has already switched to CPI for most other sectors. In July 2018, the then Transport Secretary, Chris Grayling, indicated that future fare rises would be pegged to CPI, but gave no date for the switch. Had CPI been used to calculate this year’s increase, fares would be going up by 2.1 per cent instead of 3.8 per cent.
- There is mounting evidence to suggest that a rise in rail fares leads to a reduction in passenger numbers. A 2003 report by ITS Leeds found that for suburban rail, a fare increase of five per cent leads to a three per cent reduction in patronage, and for inter-urban rail a fare increase of five per cent leads to a 4.5 per cent reduction in patronage. This calculation was done at a time when commuters were a very large proportion of rail travellers and were a fairly captive market. Since widespread working from home has become established during the pandemic, commuter journeys are now much more discretionary, on a par with leisure travel. Hence fare increases will lead to an even larger reduction in patronage. A recent Institute of Economic Affairs report stated that “Even if rail companies hike fares, they may still receive less revenue than pre-pandemic, as a high proportion of what were compulsory commuter trips with a low elasticity of demand are likely to become discretionary with a higher elasticity of demand. For example, an elasticity of −0.5 would still allow the railway to generate more total revenue from a ticket price rise, but elasticities of −1 and higher lead to an absolute loss of revenue.”
- Transport is now the biggest source of greenhouse gas (GHG) emissions, accounting for 27% of all domestic GHG, but different vehicles make different contributions to this. Collectively, cars are the main contributor of GHG (55 per cent), followed by lorries and vans (32 per cent), while buses, coaches and rail collectively account for just four per cent. (Department for Transport, 2019, Table ENV0201)
- Driving in a medium petrol car with one occupant produces more than 4 times as much greenhouse gas emissions per passenger kilometre as travelling by rail. (Most cars have only one occupant) (Source: Our World in Data using the BEIS/DEFRA Greenhouse gas reporting conversion factors 2019)
- Campaign for Better Transport operates in England and Wales. Campaign for Better Transport’s vision is for all communities to have access to high quality, sustainable transport that meets their needs, improves quality of life and protects the environment. Campaign for Better Transport Charitable Trust is a registered charity (1101929).