Fare hikes are needed to change the rail system – but there are better ways to do it

The prime minister and the shadow chancellor share a curious constituency boundary. The parliamentary frontier between Uxbridge and South Ruislip and Hayes and Harlington follows Brunel’s Great Western rail line. That is appropriate because the only other thing Boris Johnson and John McDonnell have in common is the recurring political nightmare of what to do about Britain’s railways – with regulated fares set to rise by 2.8 per cent next year.

The essence of the problem: tens of millions of UK citizens who never go near a train contribute a large slab of the £6.4bn annual subsidy to run the nation’s rail industry. And the system is largely devoted to facilitating the lifestyle choices of relatively well-off commuters in southeast England.

There are sound socio-economic and environmental reasons for bankrolling rail journeys to work. It keeps cars off the roads and increases productivity. Partly through the labours of commuters shuttling from the Home Counties, the capital powers the UK economy and generates a huge tax surplus for the Treasury. Some of that cash goes to helping connect remote and less-wealthy parts of Britain.

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While the average subsidy for a 10-mile rail journey is £1, in Scotland the figure is £3.70. And on what is left of the once-majestic Welsh railway network, the 15-minute hop from Swansea to Llanelli might cost an annoying £6.10, but the fare is matched pound-for-pound by the Exchequer.

As you will have spotted, so far this analysis has ventured no further than the journey to work, school, shops or hospital – and hopefully (floods, signals and pestilence permitting) home again. The railway has another purpose, which is to connect the nation with a long-distance network that has more appeal than driving or flying.

Inter-city travel is a more commercial undertaking – exemplified by the UK’s flagship route from London to Leeds, Newcastle and Edinburgh. Even though Virgin Trains East Coast ended up subsidising the traveller and taxpayer to the tune of £200m in three years before its franchise hit the buffers, the nationalised LNER generates a surplus.

Central to the living nightmare shared by Labour and Tories: the tangled web connecting fares, subsidy and capacity. When in government, both parties have opted for ticket prices increasing largely in line with inflation; to do otherwise is regarded as politically toxic. Less controversial, perhaps because it is less visible, is the massive financial support contributed by the taxpayer: close to 40 per cent of the cost, not counting vast projects such as HS2 and the prime minister’s promised high-speed trans-Pennine link.

Meanwhile, a ludicrous fares system baked in at privatisation means some trains are wastefully empty, such as the 9.15am from Manchester to London, while the service 20 minutes later is absurdly overcrowded.

The route to optimising supply and demand on Europe’s oldest and most constrained railway is clear: protect and underwrite essential services that meet social needs, particularly in rural areas and connecting less-wealthy towns and cities. But for the vast majority of travellers, tear up the fares book and instead price journeys according to demand. Cut fares deeply for less-popular departures, and increase ticket prices sharply to tackle overcrowding.

Insist on arriving at Britain’s busiest station, Waterloo, between 8am and 9am? You’ll pay 20 per cent more but will actually get a seat. Prepared to get there before 7am? There’s a 40 per cent cut as a reward for shifting to a less-desirable train.

I predict Keith Williams, the wise man with the unenviable task of chairing the current Rail Review, will recommend this solution – though perhaps with less blunt language. The test of statesmanship for Messrs Johnson and McDonnell: will they tolerate the temporary political damage of fare hikes for the long-term benefit of the traveller and the taxpayer?

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