Ministers ready to change track over how rail fare rises are set

MINISTERS are considering plans to change the way rail fares are calculated following a backlash after it emerged some season tickets will rise to £10,000 a year from 2018, The Daily Telegraph understands.

A Whitehall source said officials are looking at whether the Retail Price Index is the right measure to base fare rises on, or whether the Consumer Price Index or some other measure might be fairer.

But they warned the rail industry must get to grips with staff pay, which accounts for a large amount of expenditure by rail companies and is often calculated using RPI rather than CPI.

Earlier this year the RMT union boasted about winning an “inflationproof ” pay deal of 2.2 per cent with a 29 per cent hike in the London Allowance.

RPI was used to calculate the pay deal, a more generous measure than CPI, which does not include housing costs. Whitehall sources said this raises serious questions which must be answered about whether the industry would switch to a new measure of inflation as a whole.

James Tucker, ONS head of consumer price inflation, said RPI “is not a good measure and we do not recommend its use” in the calculation of rail fare increases.

Ministers are understood to be looking at a number of options to change the way fares are increased, which could be announced in the Budget. These include CPI, a cap, or RPI minus a set percentage. At present the measure is RPI plus 0 per cent, but under Labour the measure was RPI plus 1 per cent, so variations are possible.

The Government has the power to set the measure of inflation used in fare increases and a statement issued by the Department for Transport stated: “The Government carefully monitors how rail fares and average earnings change, and keeps under review the way fare levels are calculated.”

However, the Rail Delivery Group, which represents train operating companies, said: “Money from fares pays to run and improve the railway, making journeys better, boosting the economy, creating skilled jobs and supporting communities across Britain, and politicians set increases to season tickets.

“It’s also the case that many major rail industry costs rise directly in line with RPI. Rail companies are working together to improve performance now, adding thousands more seats over the next 18 months and simplifying fares.”