Philip Haigh
Fares and ticket values.
“With movement restricted in many continental countries such as Italy, people in Britain are taking similar action in travelling less. Where they can, people are working from home, making commuter trains eerily quiet.”
LET’S all meet up in the year 2000.
That autumn, the railway was plunged into chaos. A fatal accident at Hatfield on the East Coast Main Line triggered one part of the meltdown. Its cause was a broken rail that forced track owner Railtrack into a hurried programme to replace rails that had similar cracks. Where lines remained open, they were subject to such severe speed restrictions that the normal timetable collapsed.
The ECML was closed at Hatfield for over three weeks and the West Coast Main Line closed at Gretna for a period. In came temporary schedules amid widespread criticism about the accuracy of information for passengers. When they did board a train, they endured slower journeys. The average speed for a London-Leeds train fell from its usual 77mph to 52mph, for example.
The second part of the problem came with that autumn’s bad weather, with lines across the country blocked by floods, landslides and fallen trees.
Little wonder that the train operators felt financial pressure from the fall in passenger numbers that resulted from this chaos. It was inevitable that the government and its rail agency, the shadow Strategic Rail Authority, would be drawn into the argument about financial help for the train operators.
The SRA provided some (possibly grudging) help by deferring penalty payments, and argued with government that risks of running rail companies lay with the private sector. Labour’s transport minister, Gus Macdonald, didn’t agree and argued that the SRA should not profit from the Hatfield crash.
Train operating company (TOC) revenue fell from £294 million in the four-week period immediately before the accident to a low of £158m in December (a fall of 46%). For the train operator directly affected by the accident, GNER, fare box income fell from £32m to £8.5m over the same timeframe.
History tells us that train operator income did recover, but for franchises such as Anglia and Central Trains with high discretionary travel, the meltdown exposed deep-seated financial problems.
As railway historian Terry Gourvish recounts: “The difficulties experienced by the TOCs in the aftermath of Hatfield, compounded by the disarray of Railtrack, provided a major headache for the fledgling SRA.”
The SRA was trying to produce its strategic plan that was to include major changes to franchising and infrastructure investment. Money became a sticking point between the transport department and its subsidiary body, with the Treasury (as always) pulling the strings in the background.
Now we hear of today’s train operators reporting a 20% fall in revenue, caused by passengers’ reaction to a virus called Covid-19. With movement restricted in many continental countries such as Italy, people in Britain are taking similar action in travelling less. Where they can, people are working from home, making commuter trains eerily quiet.
Train operators have high fixed costs, while 70% of their income comes from the fares that passengers pay.
The Office of Rail and Road’s recent publication of its annual financial summary for UK rail in 2018-19 reveals that 80% of train operator costs go towards running services with 20% going as payments to government (for some operators, the percentage going to government is higher than 20%, while others receive money as subsidy).
Unless TOCs lay off staff or persuade them to take unpaid leave (as the airlines are trying), there’s little chance of cutting the £3.3 billion staffing bill that comprises 23% of their spending. Rolling stock consumes £2.5bn (17%) and cutting the number of services might reduce this a little as train mileage reduces. The fuel bill of £0.4bn is 3% of total costs and could more easily be cut if timetables are trimmed to reduce unused capacity.
Franchised train operators pay Network Rail £1.0bn in fixed track access charges. This sum applies whether they run one train or one thousand trains and constitutes around 7% of their total spending. The variable element is £1.3bn (9%), and this comes from the charges that apply to each individual train. Cutting trains will cut this figure.
This gives some small scope for trimming costs, should timetables be cut to better match demand if the Government decide to restrict mobility, as Italy has done. So, it’s little surprise to hear via the BBC that train operators want government help. This help could come financially, but if services are to be cut that also needs government permission.
While this collapse in passenger numbers goes on, there are other problems that appear to be paralysing the Government.
One is what to do with the Williams Review. The other is what to do with franchises that expire very soon - Great Western Railway’s umpteenth Direct Award deal lapses in April. The Department for Transport and GWR have been talking about a further extension to April 2022, but this ambition was revealed back in 2017 (before Keith Williams started his review) and has yet to be agreed.
Southeastern’s franchise also expires on April 1, having received a short extension last November. DfT ditched last August its plan to find a new operator, despite having gone to all the trouble of launching and running a full competition in 2017. The winner should have started running trains in December 2018.
Then there’s South Western Railway, which only started in 2017 but quickly fell into financial and operational difficulties. It is widely expected to be the next operator to fall into the hands of the DfT’s Operator of Last Resort, following Northern and Virgin Trains East Coast.
Williams commented while conducting his review that franchising could not continue in its current form. Many agree, but government seems unable or unwilling to take any action other than activating its OLR team.
The DfT’s paralysis likely stems from the inclusion of fares reform within Williams’ report. The Times reports that the DfT is keen but the Treasury is not, doubtless fearing that reducing fares will reduce revenue.
The Treasury may have a point. If there’s demand for rail - and complaints about overcrowding suggest there is - then cutting fares should increase overall revenue as more people catch the train. But that same
overcrowding suggests there’s no room for more passengers. Thus, there will be no increase in sales and the tickets that are being sold will simply bring in less revenue.
Alternatively, the Government is landed with a bill for further upgrades to accommodate the extra demand from cheaper fares.
What of those trains that are emptier? Longdistance operators (and others) have already become adept at selling cheap book-ahead fares. But if a £30 advance single fare on Avanti West Coast’s 2115 Manchester-Euston isn’t filling the train (the anytime single is £180), then it’s likely that few people want to make that trip at that time. Will a reformed fares structure change this?
Or take the complaint that season tickets provide poor value. A weekly season from Basingstoke to Waterloo is £117.30. Travel to and from London on five days and that’s the equivalent of £11.73 for a single trip. That compares with a £25 single if you simply arrive at the station and buy a ticket in the morning peak. Even travelling just three days a week on a season still brings a discount.
Of course, value doesn’t come solely from price, and with SWR’s recent performance on the line from Basingstoke it’s little wonder that passengers are unhappy with the price they’re paying. But looked at dispassionately (and with an expectation that SWR, in whatever form the future holds, solves its poor service), that season ticket should provide good value.
Then there’s the other argument that it is peaktime commuters, many holding seasons, that prompt the need for longer trains, longer platforms and more tracks to cope with demand. Without that sharp morning peak, the railway could manage with less stock, fewer staff and less infrastructure. How does that all play into calls for even cheaper travel for peak commuters?
Perhaps in its strong support for lower fares, the Rail Delivery Group is admitting that its constituent train operators will never fix the reliability and customer service problems that have plagued the railway?