Increase in passenger journeys.

Passenger numbers are growing again despite fare increases

Statistics show that growth in both the number of rail passenger journeys and rail revenue was restored in the first quarter of the current financial year, despite the disruption experienced by Thameslink and Northern passengers after the failed introduction of the May 2018 timetable.

Some 429 million passengers were carried in the period from April to June. This was a rise of 3.1% compared with the corresponding three-month period in 2017, which suggests that more than 1,750 million journeys will take place in the 201819 accounting year. It’s hard to believe that in the final year of British Rail’s tenure just 735 million trips were recorded, and that the number of passengers crowding our stations is 140% higher than at that time.

Despite protestations that raising fares in line with the Retail Price Index (RPI), which last year was 3.5%, would deter the use of rail services, there seems to be no indication of that.

Fare box revenue increased by 6.8% to reach £ 2.55 billion in Q1 2018-19, suggesting that annual revenue from fares and from charges such as car parking will be close to £11bn this year.

Perversely, individual passengers seem to be prepared to pay more to make fewer journeys - ordinary ticket income surged by 7.6%, while season ticket receipts were static. Analysts are perplexed by the trend, as past forecasting methods are being rendered obsolete by the market change.

In addition, although train operating companies do not publish detailed load factors, regular travel experience suggests that far fewer travel-to-work journeys are being undertaken on Fridays. For many, this now seems to be a work from home day.

Traditionally, timetable planning policy has been to run similar weekday services from Monday to Saturday throughout the year, but this increasingly looks a poor fit with the market. Train operators will need to recognise that if demand on Fridays switches from travel to work journeys to leisure- orientated weekend trips, then timetable changes will be necessary.

Regulated fares are due to rise again in January, in accordance with RPI inflation in July which was 3.2%. Increases in average take-home pay continue to lag behind that figure, and there is published research to suggest that in the past ten years the average cost of a rail journey has increased by 42% while earnings have been restricted to an 18% increase.

Traditional economic modelling would translate this data to suggest that the rail product would not be in a good place, but there is increasing evidence that it is a cheaper option than private car use, where ownership among younger people in urban areas is in decline. The shift of employment from market towns to larger population centres has also underpinned rail growth, as transport alternatives are not available.

The reopening in September 2015 of the Borders Railway between Tweedbank (close to Galashiels) and Edinburgh is an unchallengeable example of where the availability of rail travel has created access to jobs that justify the level of fares. In 2016-17, 436,000 users were attracted at Tweedbank (35 miles from Edinburgh) and 346,000 at Galashiels (33 miles distant).

The extension of rail services to Ebbw Vale Town station (30 miles from Cardiff) is a similar success story - the station attracted 232,000 users in 2016-17, the first full year of operation.

These routes are typical of reopenings that produce many external non- cash benefits as well as a favourable benefit:cost ratio. But fare box income remains a critical part of the business case to meet operating costs - if fares do not keep up with inflation it will not be long before a funding gap emerges, as pay for railway staff is generally negotiated on the basis of rising prices in the general economy using RPI as the benchmark.

It has been a long- standing gripe that while line reopenings have proliferated in Scotland and Wales, there has been much less enthusiasm in England to replicate the process, although a positive has been the upgrading of diversionary routes such as the Joint Line between Peterborough and Doncaster, and the Settle-Carlisle Line.

The Oxford- Cambridge route is a reopening - and in some style, as it will need a new alignment to reach Cambridge given the loss of the closed formation.

Other routes await their turn - such as through running beyond Stratford-uponAvon and Cheltenham, the restoration of the Keswick branch from Penrith to alleviate road congestion in the Lake District, and re- connection between Okehampton and Plymouth (again in the news, as flood damage curtails West of England services).

Yet dare one whisper that some lines which remain open are very poor financial performers, and although it is hard to contemplate closures the idea of placing the network at the mercy of the Treasury could be a reality if the ‘nationalisers’ get their way.

In reality, line closures are unlikely. But to reduce costs, local lines might have to be operated independently using greater community volunteering.

For the national network as a whole, because of the growth in passenger numbers revenue levels exceed day-today operating costs (assessed by the Rail Delivery Group at £ 10.3bn per annum). This is a transformation from 20 years ago, when income from fares was £ 2bn below the annual cost of providing the train service - resulting in a large subsidy being necessary for individual journeys by the general taxpayer.

The Government continues to provide a large element of network infrastructure costs, and part icularly capacity enhancement such as the Crossrail project, which could not realistically be funded from future users. But it is accepted these passengers will create significant economic advantages on the line of route to justify the investment.

However unpalatable, it is not good for the railway if fares do not increase in line with inflation. The cost of providing the network and train services will not be subject to the same cap and, if applied, money to sustain operations will have to come from taxpayers who do not use the services.

Commentators who suggested that fare increases would lead to a fall in demand have called it wrong, if the trend shown by current statistics continues.

In summary, people want - and are prepared to pay for - their rail service.

“Perversely, individual passengers seem to be prepared to pay more to make fewer journeys.”