Micro - train fares; very topical

Two posts, one from 2014 looking at the usual complaints about fare rises, which has some useful arguments about privatisation (both sides of the arfument, don't forget), and another from this year:

  Yes there's a problem with train fares - they're too low

Tim Worstall, January 2017

This year, as every year, the New Year has been accompanied by a chorus of whining about how the price of rail tickets has gone up again. The Campaign for Better Transport called the latest rises a “kick in the teeth” for passengers. Railfuture accused the Government of acting like Blue Meanies. Transport Focus called for a price freeze, while Action for Rail insisted that British passengers are paying six times as much as Europeans. All were in agreement that passengers are being asked to pay far too much. 

 But there’s an argument to make – an overwhelming one, in fact – that train tickets in the UK, and even in the South-East, aren’t too expensive, but too cheap. It’s an argument that has nothing to do with privatisation – in fact, it would still be true if the whole system were nationalised again. 

 In a recent interview, Paul Plummer of the Rail Delivery Group, which represents train operators and Network Rail, said: “With passenger numbers doubling in the last 20 years, money from fares now almost covers the railway’s day-to-day operating costs.” In other words, the rise in ticket prices in recent is the result of a specific, deliberate and entirely correct policy decision: that those who travel on the iron roads should pay the costs of their own damn choices. 

 So yes, it is true that rail fares in Britain are higher than in most other places in Europe. It is also true that the costs of running the railways are largely the same across Europe. The difference is that in other countries, the general taxpayer has to subsidise those travellers as they sit nice and warm in their carriages. Here, the passenger pays the cost of being a passenger. Which, of course, is right and proper – you do not pay through your taxes for my shoe leather if I walk to work, my energy expenditure if I cycle, or my petrol if I drive. So why should you pay for me to be in a comfy seat, or crammed into the aisles, as the train takes the strain? 

 In fact, fares still don’t cover the full cost of the journey – because they only pay for the running costs of the railways, not the capital costs. Which suggests that prices are actually still too low. The rail system should, as any system should, cover its costs from the voluntary payments of those who wish to use it. All that is happening here is that rail users are being confronted with the real costs of their choices, or something approaching them. 

 And if they were confronted with the full and true expense – for infrastructure as well as operational costs – perhaps they would realise that an integrated transport system isn’t such a cheap option after all. What these annual moans boil down to, in other words, is rail passengers complaining about being told to pay for their chosen form of transport. I’d be sympathetic – if it weren’t for the implicit demand that those of us who don’t use the trains should cough up instead. To which the correct response is that Anglo-Saxon thing with the waving of the two fingers. You pay for yourself, matey. 

Willy Hutton on train faresAugust 24, 2014 By Tim Worstall

"This is devastating. British rail fares, the highest per passenger mile of any country in Europe, are set to become higher still. This is a poll tax on wheels, to many, an unavoidable impost that must be paid at the same rate by rich and poor alike, even though rail transport is an indispensable public service."

 Err, no, not really. If everyone in the country is taxed so that fares can be subsidised by the Treasury then that’s more like a poll tax. Because no one has any choice about whether they pay for the railways or not. If passengers pay for the trains then not everyone has to pay do they? Those who so organise their lives so that they don’t take trains aren’t paying for the trains, are they?

 Conceptually, it was absurd to divide the network from the train companies that run on it; any rail system works as an integrated whole. That’s the European Union that insists upon that. Nowt to do with domestic politics at all: and also something that wouldn’t be changed if there was nationalisation.

 It was equally a conceptual disaster to imagine that because each train licence is of necessity a monopoly – you can’t have two services from London to say Manchester competing against each other – the monopoly had to be temporary with renewable licences auctioned at 10-year intervals. 
Odd that. There’s at least two different companies competing on one route I know, London to Bath. 

What’s more, it was crazed to believe a public good required minimal or no public grants. Trains are a public good now? If they were they’d never have been built, would they? For the point of a public good is that it is non-rivalrous and non-excludable. Neither of which apply to a railway. They might well be public services but that’s a very different marmite de poisson.

 Lastly, it was asinine not to understand that private capital demands financial returns well above the cost of capital available to the low-risk state. As a result, there have to be never-ending and ongoing efficiency gains beyond the initial round of layoffs and wage cuts to deliver those extra returns. Err, yes, that’s the point.

 That cannot be done even by the hand of God. The only recourse is poorer service provision. Trains are worse now then they were? When you also, in the same piece, say this? After all, investment is booming, passenger numbers rising and safety is better. It’s not all bad.

Privatisation has made the service worse? Directly Operated Railways is the 100% publicly owned company that took over the east coast mainline when the incompetent private operator walked away from its obligations in 2009. Five years of public ownership and it is now the best run and most efficient operator, making a net surplus of £16m for the taxpayer. Its reward? To be sold back to a private operator next February. Yes, note that verb there: sold. That means cash coming into the state, doesn’t it?

Networks of key public services such as rail are natural monopolies; Eh? We have competing ways to get to Scotland, to Birmingham, from Bath to London. What sodding monopoly?

It’s time to build and expand the public institutions we have and insist that any private holder of a franchise designed to deliver a public good is constituted as a public benefit company with a charter that sets outs obligations to match the privileges, including paying UK tax. We can discuss that when you learn the meaning of “public good” Willy.