13th Aug 2013
- The government regulates half of all rail fares; the rest are set at commercial rates.
- Regulated fares have to rise, on average, by RPI inflation plus 1% each year. Some can actually fall as long as it averages out as this.
- Fares have risen faster than inflation since 2004 as passengers contribute an ever greater proportion of the rail industry's funding.
The government doesn't control all fares
There are two types of rail fare: regulated and unregulated.
Regulated fares are those that were set aside after privatisation for the government to oversee. They include most standard and saver return fares, as well as weekly season tickets. They also tend to apply to London and major city commuter routes as they carry the most passengers.
Unregulated fares are set by train operating companies at commercial rates, and include first class and advance purchase fares.
About half of rail fare revenue comes from regulated fares, the other half from unregulated fares.
Rail fares are designed to rise faster than inflation
This tends to happen first in August when Retail Price inflation (RPI) figures for July are published. The reason is that July's RPI is used to set how much regulated fares can increase in the following January.
At the moment the government sets a formula: regulated fare rises in January have to average out at RPI plus 1%. So since RPI was 3.1% in July 2013, regulated fares will rise by an average of 4.1% in January 2014.
Not all fares actually rise by what the headlines say
Regulated fares have to rise by RPI+1% on average, so individual fares can vary as long as the weighted average (which takes into account revenue from services) is the same. This means that some fares can actually fall (as did Shenfield to London services at the start of 2013).
The rises aren't unlimited either. Individual fares can rise a maximum of 5% above the regulated cap. So the highest possible regulated fare rise in January 2014 will be 9.1% so long as lower fare rises or falls elsewhere balance this out.
This has nothing to do with unregulated fares. The Association of Train Operating Companies (ATOC) brings together ticket price plans across the rail industry and publishes the average rise across all fares for the next year every December.
Passengers have been contributing more since 2004
Since privatisation in 1996 and until 1999, regulated fares increased in line with RPI inflation. From 1999 to 2004 prices were rising slower than inflation. Since 2004 they've risen faster. In 2010 the government planned to up fares by RPI+3% for three years from January 2012, saying it needed to increase capacity for passengers crammed in on services.
The overall trends since 2004 still show that as a portion of total rail industry funding, passengers are paying more and taxpayers (via government subsidies) are paying less. In 2011/12 the government gave £3.9 billion in support to the rail industry, compared to a total £7.2 billion from passenger fares revenue.
The first version of the piece contained a graph showing the proportion of rail industry revenue coming from passengers and government subsidy. We've since been advised by the Department for Transport that these don't take into account other forms of funding such as payments made by Network Rail to train operating companies because of delays. For now, we're finding out whether these figures are available for a more robust comparison.
In the meantime, we've taken down the graph until we get a better dataset. We're sorry for any confusion that might have been caused by this.