This paper explains the rail fares framework, including who sets fares, what constitutes a ‘regulated’ fare, how regulated fare levels are calculated and it also looks at the question of why fares go up. It also explores changes to ticketing – including smart and flexible ticketing, travel cards and penalty fares.Jump to full report >>
Around 45 per cent of fares are subject to regulation (by the Secretary of State in England and Wales and Scottish Ministers in Scotland). Regulated fares are set by a formula based on the RPI figure for the previous July, and for many years with a degree of flexibility (called the ‘fares basket’ or ‘flex’). All other fares are set commercially by train operators.
The regulated fare increase for 2016 was 1% (based on an RPI +/-0 formula); the total fare increase was 1.1%. This disguises variations across different routes.
Almost without exception, when the annual fare increases are announced every year passenger groups express concerns that significant increases could ‘price people off the railways’ and put a strain on those who use the railways to commute to work, particularly into and out of London. However, it has been the policy of successive governments to rebalance the funding of the railways between passengers and taxpayers: reducing the relative contribution of the latter. A consequence of this is higher fares. The train companies themselves are keen to rebut claims that they are ‘profiteering’ off higher fares, noting that fares income is spent on upgrades and investment projects and, in some cases, is passed on to the Government as part of the financial package for the franchise.
In terms of ticketing, successive governments, working with the industry, have made efforts to simplify the fares structure, though some passenger groups feel that it is still too complicated. In recent years, technological improvements combined in some cases with devolved decision making has led to the introduction of ‘smart’ ticketing across parts of the rail network, though there is concern about a lack of integration between these systems. The Government has also sought to promote ‘flexible’ ticketing, such as part-time season tickets and other innovations, but progress has been slow.
A statistical overview of rail fare changes since privatisation can be found in HC Library briefing paper Public Transport Fares (CBP7470), 18 January 2016.
Information on other rail-related matters can be found on the Railways Topical Page of the Parliament website.
Commons Briefing papers SN01904
Author: Louise Butcher