New research: “Rail tax” on commuters must be reinvested in the railways

New research has revealed that continued rail revenue growth could result in passengers effectively being charged a ‘rail tax’, equivalent to an income tax of up to 5 per cent for commuters or £7.50 per intercity journey, with an ever growing percentage of income from fares transferring directly to the Government.

The new report into the future of rail financing, “Future Rail Funding: Passenger Opportunities, prepared by consultants Credo for Campaign for Better Transport, has found that government income from rail franchise premiums could increase to up to £3.7bn by 2020, driven by passenger growth and improved cost management.

Campaign for Better Transport is calling for this windfall to be reinvested back into the railways by providing better ticketing for passengers, including flexible season tickets for part time workers, which the Government committed to trail in its rail fares and ticketing review.

Stephen Joseph, Chief Executive, Campaign for Better Transport, said:“This new research shows that even under conservative estimates there should be plenty of money coming in from the rail franchises for the Government to fund the commitments it made 2 years ago to develop fairer fares.

“With many commuters already having to fork out thousands of pounds a year on rail season tickets to get to work, it is no wonder that they are fed up with the value that they are getting. It is time that the Government committed to using their rail income to make good their promises for fairer fares, including a nationwide scheme of flexible ticketing for part time workers, or avoiding further cuts in transport spending, rather than sending it into the Treasury.”

The report modelled three financial scenarios which take into account increasing levels of growth in passenger revenue and a reduction in running costs through more efficient management.

The report also found that:

– In 2014/15 the train operating companies made an aggregate £1.1bn contribution to the government through franchise premium payments, more than double that paid four years ago

– This increase in franchise premium payments has coincided with a marked decrease in passenger satisfaction and low perceptions of value for money

– The forecasted franchise premiums will be sufficient to cover a 25 per cent reduction in public funding for the railways – even in a likely base case – which might be required through the Government’s forthcoming Spending Review

– Even including this spending reduction, there will be enough money left over to fund initiatives to make the rail network more affordable and accessible for passengers, thus addressing concerns about value for money

The report recommends these initiatives could include:

1) Three day a week season tickets (cost: £200m)

2) Switching the measure of inflation used to calculate regulated fare increases from the Retail Prices Index to the Consumer Prices Index (cost: £140m)

3) Fair single leg pricing for off-peak travel (cost: £270m)

4) Free travel for children aged 11 and under in England and Wales (cost: £210m)