The railway fares myth

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22 August 2009

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In the nationalised era, a myth arose that rail fares were continually increased – and above the rate of inflation. Self styled ‘experts’ with no experience – continually advocated that reduced fares would solve BR’s financial problems. In 1951, the BTC told the Transport Tribunal (a unique court of law set up to decide rail fares & freight charges): "Despite extension of cheap tickets in the past year producing 26% more journeys, and 19% more receipts on cheap tickets - total receipts actually fell".

In Blueprints for Bankruptcy published 1993, republished 1995, I wrote:

A 25% cut needs 33% more volume for the same gross revenue. Any train loaded over 75% capacity would require more rolling stock, fuel and staff for the consequential longer or extra trains. More volume would be needed to cover these costs, to hold losses at existing levels. More volume would be needed to cut losses, which theorists expect to follow fare cuts. Logical minds, seeing that 40-50% more volume is essential on a 25% fare reduction, must address the down side scenario - who picks up the tab if revenue falls? Most wish to see lower prices of every commodity. Some would buy the same quantity, but pay less; some would spend the same, but consume more; few would spend more on any commodity. Savings, especially from rail fares, would be deployed elsewhere. A perspective of rail fares can be gleaned from a comparison with newspaper prices. Rail fares in 1991 were 14 times 1948 levels, newspapers were up to 80 times higher.

 

If rail fares had merely kept pace with inflation, BR would have been £11.8bn better off by the time they were privatised. The effect on their viability would have negatived any justification for privatisation. If rail fares had been pegged at 1% below inflation, then BR would have been only £11.6bn better off. (see Table 1 below)

 

Table 1 Comparison of fares & RPI (1948 = 100)

 

                                                              year

index of average fare

 

Receipts £m

 

lost revenue £m

 

 

 

 

actual

RPI based

actual

RPI based

in year

1994 prices

cumulative

1949

93

105

114

129

15

259

 259

1950

91

108

107

127

20

342

  601

1951

89

113

107

136

29

472

1073

1952

93

127

112

153

41

596

1669

1953

96

133

115

159

44

617

2286

1954

96

135

117

165

48

651

2937

1955

100

140

118

165

47

624

3561

1956

104

147

128

181

53

666

4227

1957

106

154

139

202

63

756

4983

1958

106

159

138

207

69

803

5786

1959

108

163

140

211

71

809

6595

1960

120

162

151

204

53

604

7199

1961

129

165

158

202

44

494

7693

1962

140

173

161

199

38

406

8099

1963

141

178

162

205

43

442

8541

1964

143

181

167

211

44

454

8995

1965

159

190

174

208

34

330

9325

1966

165

198

179

215

36

334

9659

1967

177

205

180

208

28

257

9916

1968

169

210

185

230

45

395

10311

1969

190

223

205

241

36

295

10606

1970

205

234

228

260

32

255

10861

1971

238

254

261

279

18

128

10989

1972

259

275

274

291

17

114

11103

1973

274

296

297

321

24

149

11252

1974

291

332

329

375

46

258

11510

1975

390

398

429

438

9

41

11551

1976

490

491

505

506

1

4

11555

1977

559

572

593

607

4

45

11600

1978

631

629

702

700

(2)

(7)

11593

1979

690

688

800

798

(2)

(6)

11587

1980

831

814

954

934

(20)

(44)

11543

1981

919

920

1023

1024

1

2

11545

1982

931

1031

924

1023

99

178

11723

1983

1041

1082

1150

1195

45

77

11800

1984/85

1133

1194

1227

1293

66

102

11902

1985/86

1207

1260

1331

1389

58

86

11988

1986/87

1279

1309

1428

1461

33

47

12035

1987/88

1345

1352

1604

1612

8

11

12046

1988/89

1431

1453

1780

1807

27

35

12081

1989/90

1569

1564

1883

1877

(6)

(7)

12074

1990/91

1698

1705

2033

2041

8

9

12083

1991/92

1810

1775

2093

2052

(40)

(42)

12041

1992/93

1862

1805

2129

2064

(65)

(67)

11974

1993/94

1966

1850

2166

2038

(128)

(128)

11846

 

 

From Day One of nationalisation until 1968, the unique court of law presided over rail fares (freight charges until 1962). It held fares well below inflation throughout. Thereafter, fares were subject to continual ministerial interference to keep fares below inflation.

The 1947 and 1953 Acts specified that the Transport Tribunal should do nothing to impede the BTC paying its way, but the Tribunal did exactly that. Its’ President told the Stedeford Committee in 1961 that "delays arising from Hearings cost the BTC money, and that they (the Tribunal) took social considerations into account in reaching decisions. No formula was applied and no attempt made to quantify the social element". The Acts made no provision for social considerations - their remit was not to impede BTC paying its way. Tribunal procedures and Hearings delayed BR price increases by an aggregate 12 years and had a serious effect on finances. (see Table 2 below)

 

Table 2  Summary of delays in raising fares & charges

 

scope of submission

submitted

revised

date of  decision

effect of decision

implement from

weeks delay

Charges index*

RPI/WPI

London fares

23.2.50

twice

23.8.50

reduced

1.10.50

27

91

108

all fares

7.4.51

 

16.5.52

reduced

1.9.52

72

93

127

all fares

5.1.53

 

20.7.53

reduced

16.8.53

31

96

133

London fares

1.4.54

twice

23.8.54

reduced

26.9.54

25

96

135

all fares

7.3.55

 

28.4.55

approved

5.6.55

12

100

140

London fares

30.11.55

 

2.12.55

approved

8.1.56

5

100

140

all fares

20.2.56

 submitted twice & withdrawn twice

 

104

147

police fares

17.4.56

 

12.2.57

approved

12.2.57

42

106

154

all fares

11.4.57

 

6.8.57

amended

8.8.57

17

106

154

all fares

1.9.58

once

8.7.59

reduced

1.8.59

47

108

163

all fares

1.3.60

 

14.4.60

reduced

14.4.60

6

120

162

all fares

1.11.60

 

14.6.61

reduced

1.1.62

61

129

165

London fares

16.3.62

 

26.3.62

approved

2.6.62

11

140

173

London fares

7.3.63

 

19.12.63

reduced

19.12.63

41

141

178

London fares

12.3.64

 

12.7.64

approved

19.7.64

16

143

181

London fares

10.7.64

 

22.1.65

reduced

22.1.65

23

159

190

London fares

4.1.66

 

18.7.66

approved

1.8.66

29

165

198

London fares

30.5.68

 

16.8.68

reduced

1.9.68

13

169

210

BR freight

28.11.49

 

6.2.50

approved

15.5.50

24

97

105

BR freight

20.3.51

 

6.4.51

approved

16.4.51

4

119

146

BR freight

17.11.51

 

3.12.51

reduced

31.12.51

6

119

146

BR freight

29.10.52

 

13.11.52

approved

1.12.52

4

134

149

BR freight

30.12.53

 

10.2.54

approved

1.3.54

10

138

150

BR freight

7.3.55

 

26.4.55

approved

5.6.55

13

148

151

BR freight

21.3.55

 

31.12.56

reduced

1.7.57

118

154

155

BR freight

1.3.56

 

3.4.56

reduced

23.4.56

7

154

155

BR freight

12.7.57

 

30.7.57

approved

1.8.57

3

 

 

                                                                   Total weeks =

667

 = 12.75 years

Delay of fares applications = 9.25 years, of freight rates = 3.5 years

* BR fares or freight rates respectively, 1948 = 100;   RPI/WPI also taking 1948 = 100

Not implemented on 1.8.66 - held up by NBPI for a further year, then reduced by the Tribunal.

 Made to the MoT, who asked the advice of the Tribunal. All others made direct to the Tribunal

 The Tribunal advocated a higher increase than sought, but the MoT held it to that requested.

 

The Acts specified: "Any body representative of persons..... providing .... services ....similar to  those to which Schemes relate", (viz. competitors: road, canal carriers and coastal shipping) may object. In no other case were competitors so empowered.

"If the BTC wished to increase a rate which was unduly low by reason of the competition of road haulage, canal carriers or coastal shipping ... any trader aggrieved by raising the rate may appeal to the Tribunal". Whilst a competitor offering a rate below rail rates could increase rates to narrow the margin of under­cutting, BR could be prevented from doing likewise, forcing BR to hang on to unprofitable traffic!

The Stedeford Committee reported to the Minister that "part of the deficit is due to delays in obtaining authority for fare increases. The level of fares is inordinately low in relation to the movement of prices since the war and passenger receipts make an inadequate contribution to running railways. Recently, the Tribunal agreed a 5% increase, delayed for six months, when 20% would have been justified. The Tribunal should disappear". Government did not implement the recommendations of its' own advisors, and locked their Report away for 30 years.

 

The unreality of Tribunal powers may be illustrated by a few examples:

·                204 objections were lodged to the first Passenger Charges Scheme in 1951 (3 years after nationalisation), the variety of which was such that it was argued that "even the Red Headed League had a right to be heard".

·                In 1954, the Tribunal President did "not like the proposed increase in weekly season rates [0.3p] per journey, and asked for figures showing the proportion of revenue".

·                In 1956, the Tribunal President said "Surely the question of concessions generally is whether we are the better judges of what will be best for railways or whether the BTC are the best judges!"

·                In 1957, the BTC submitted a Passenger Charges Scheme to amend the existing 1954 Scheme. After the BTC Counsel had spoken of increases in costs overtaking income as "nibbling away" - converting surplus into deficit. The Tribunal President asked: "Why not wait until they have nibbled away a sufficient amount to require remedying?" The BTC Counsel replied: "Because then it is too late". No business did so. The BR Operating deficit was £16m with a forecast deficit of £35m plus £40m for Central Charges (these paid interest on the Loans floated to buy railways). 

·                The President said: "We allow anybody who feels he has something to say, to say it even although he has no right to be heard, subject only to excluding reference to subsidies". This was supposed to be a court of law!

 

During the Tribunal Hearing pf the 1951 Passenger Charges Scheme (BR’s first scheme)

BTC executives were in the witness box for 15 days and answered 4,858 of a total of 8,634 questions; 45 speeches were made and 24 gave evidence. The Report covered 782 pages. (The proposed 10% increase was cut to 7.7% - after five years of no increase against over 20% inflation). The Govt sought to overrule this court of law, and asked the CTCC (its independent members had been individually appointed by the Minister!) to vet it, although it had no legal powers to do so. It said the increases were fair, which was a setback for the Govt. The Minister said he “was not fettered by CTCC recommendations” – so why put it to them? He decided to enforce cuts in fares the Tribunal had decided. Years later, when the Minister contemplated a similar move – again for electoral reasons – the Attorney-General told the Cabinet: "The MoT does not have power under the 1947 & 1953 Transport Acts to give a Direction which will relieve the BTC of the duty so to conduct their undertaking as to secure that their income is sufficient to meet expenditure taking one year with another”.

The Minister imposed a 12 month freeze on fares “to combat inflation”! Rail prices were the only ones in the UK below inflation! After the year ended, inflation had risen proving he had aimed at the wrong target. Rail fares had fallen from 40 points behind inflation to 47 points behind.

 

Objecting in 1959, Kent County Council "opposed any further increase in fares" - not this increase - by inference in perpetuity (Their rates rose seven times as much as fares 1948/1962. see "The Railway Closure Controversy", App C). Fares per mile were 115% above 1938, the RPI was 165% up on 1938.

 

In 1964, key witness for the objectors, Mr. S.W. Hill was asked "if it was any part of your case that BR is mismanaging its affairs", and replied "Oh, no".

 

In 1966, the QC for BR said "We have destructive criticism in fair measure, but of constructive suggestions - not a word".

 

Recently, I found on a Daily Telegraph ‘blog’ a claim by ‘Adrian H’ that under BR, fares rose by 25% pa. Given the incidence of rejection of my e-mail letters to the paper, I was pleasantly surprised to find my rebuttal appeared on the ‘blog’: “Adrian H (30.8.07) cannot possibly recall fares rising by 25% pa, because it did not happen. For 20 years fares were held down by a Court of Law. Annual Accounts show that it took from 1948 to 1960 for fares to rise by 25% and another 5 years before rising a further 25%. Had fares risen by 25% pa, a £1 fare in 1948 would have become £228,000 by 1993”. For some inexplicable reason, the £ sign was replaced by a small rectangle.

 

Bus fares claimed to be cheaper – it was an illusion:

Objector Rev. T.A. Craggs referred to "a village where people paid 3/- (15p) for a bus journey of 79 stops taking 72 minutes, rather than 2/- (10p) for a rail journey of 15 stops taking 55 minutes". Despite this he complained of "high fares which had destroyed a fellowship engendered after World War 1". How could he object to fare increases with this comparison - did they want to travel for nothing? 

"No sooner is a line closed than bus fares rose to heights which made it difficult for constituents to travel at reason­able prices". (Hansard 23.6.58, vol. 590, col. 202).

Objectors to rail closures frequently demonstrated that they would have to pay more to travel by bus than they were currently doing by rail. (see The Railway Closure Controversy).

Until 1968, BR had to subsidise private sector buses operating replacement bus services after rail closures.

Ribble Bus Company's spokesman told an Inquiry into the proposed closure of the Haltwhistle-Alston line “that a bus service would run at an even bigger loss than other rural services and would need local authority subsidies and fares would be higher than current rail fares”.  (Evening News 18.2.71).

 

Journalist David Wragg wrote in Signal Failure - Politics & Britains Railways (p132): “The abolition of 1st class day returns caused some to revert to road. The weakness of the measure was soon exposed, when weekend first tickets were introduced”. The two were completely unrelated. First Class Day Returns were used by commuters or businessmen Mondays to Fridays. As businessmen’s fares were a business expense they were unlikely to make other arrangements, except in a recession. If any commuters or business travellers were lost, they would not be tempted back by a ticket issued Saturdays & Sundays only – for obvious reasons. The rationale for weekend first tickets was a change in operating practice. Hitherto, at weekends, trains were reformed by replacing some of the 1st class coaches with 2nd class. This was a costly and time consuming shunting operation, and required extra 2nd class coaches being held for weekend use, whilst some 1st class coaches were idle at weekends. By maintaining the same train formation throughout the 7 days, whilst allowing 2nd class passengers to use some 1st class coaches for a small premium (then £3 – now much higher: £15 or more), costs were cut and revenue increased. In the private sector, such imagination would be applauded. BRB Accounts show that passenger revenue actually continued to grow above that in the year preceding the withdrawal of First Day Returns.

He also wrote (p156): “Passengers with 2nd class tickets in 1st class coaches had to pay full standard 1st class fares [rather] than just the difference as in earlier & more honest times”. I do not recall these “earlier honest times” when it came to travelling first with a 2nd class ticket. The common practice was long standing. The typical attitude of many holders of 2nd class tickets was ‘willing to pay if caught’. They got into 1st class coaches and paid the excess only if caught by a ticket inspector. An analogous practice in a private sector outlet would have landed the person into police custody.

 

 

 

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