Rail season ticket prices could rise by 8%
Rail commuters could see their season tickets increase in cost by 8% next year.
Under a new system, introduced by the government, rail companies are allowed to increase the cost of their season tickets with 3% above inflation.
In previous years rail fares have been pegged to inflation, plus 1%; however, the Department for Transport's move to increase this to RPI plus 3% results in an 8% hike for ticket holders on next year's season ticket.
Annual season ticket from Reading to London currently costs £3,584. It could rise by £286.72. While an annual £4,496 rail pass from Birmingham to Manchester could go up by £359.68.
Campaign for Better Transport spokesperson Alexandra Woodsworth calls the massive fare rises a "disaster" for commuters already struggling with the cost of living and even threatening to price out low-paid workers out of city jobs.
She adds: "The country simply can't afford fare rises on such a punitive scale. It's time to burst the bubble on inflation-busting fare hikes."
In a statement on the rail fares Transport secretary Philip Hammond concedes the department's decision "has not been popular".
However, he says that the extra revenue raised by these hikes will go towards improving services.
"We are now embarked on one of the biggest programmes of rail investment for a hundred years, delivering more than 2,700 new rail carriages, a £900 million programme to electrify more lines and the vital Crossrail and Thameslink projects in London."
"Due to the scale of the deficit, these investments would simply have not been possible without the difficult decision we have made to increase rail fares."
A Department for Transport spokesperson says that rail companies do not have to enforce the full 8% hike.
"The reason regulated fares are linked to the July RPI is to give the train operators a decent amount of time to work out costs. But it's an operational matter for each company and they don't have to raise their fares."
David Mapp, commercial director for the Association of Train Operating Companies, disagrees though, saying in reality train operators have to pass on the higher rail fares.
"There's no real grey area, companies will have to charge more.
"This is not a matter of train companies increasing their profits though. Increasing the money raised from fares will mean that taxpayers contribute less to the running of the railways, whilst ensuring that vital investment can continue.
"All additional money raised through the change to RPI plus 3% will go straight back to the government," Mapp adds.
Replaced as the official measure of inflation by the consumer prices index (CPI) in December 2003. Both the Retail Price Index and CPI are attempts to estimate inflation in the UK, but they come up with different values because there are slight differences in what goods and services they cover, and how they are calculated. Unlike the CPI, the RPI includes a measure of housing costs, such as mortgage interest payments, council tax, house depreciation and buildings insurance, so changes in the interest rates affect the RPI. If interest rates are cut, it will reduce mortgage interest payments, so the RPI will fall but not the CPI. The RPI is sometimes referred to as the “headline” rate of inflation and the CPI as the “underlying” rate.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
The Consumer Price Index is the official measure of inflation adopted by the government to set its target. When commentators refer to changes in inflation, they’re actually referring to the CPI. In the June 2010 Budget, Chancellor announced the government’s intention to also use the CPI for the price indexation of benefits, tax credits and public sector pensions from April 2011. (See also Retail Prices Index).