The railway fares myth

The railway fares myth

22 August 2009

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 = 3.5years
^*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 & Britain’s 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 2^nd class coaches being held for weekend use, whilst some 1^st class coaches were idle at weekends. By maintaining the same train formation throughout the 7 days, whilst allowing 2nd class passengers to use some 1^st 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 2^nd class tickets in 1^st class coaches had to pay full standard 1^st 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 2^nd class tickets was ‘willing to pay if caught’. They got into 1^st 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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