Fare basket to increase by 3%

[whole diary]

[JayMac]

The January 2019 regulated fares price rise will be 3.2%.

Barring any political intervention...

[didcotdean]

State Pension rises were still governed by RPI^▸ (Revenue Protection Inspector (or Retail Price Index, depending on the context)) until 2011 which was the first year of the triple lock. Oddly this didn't make much of a difference; by 2017 pensions had risen by 19.3% under the triple lock regime but would have risen by only 19.1% under RPI.

RPI has a built-in tendency to overstate the overall inflation for prices that are volatile, ie going up and down periodically (*). This didn't really show up when everything tended to rise in step, but in the more recent lower inflation environment these such as food, petrol and clothes have had an odd effect.

RPI is still calculated because of its use in certain contractual arrangments, in particular UK^▸ (United Kingdom) index-linked gilts. There is no reason though for it to be used as a benchmark for other prices.

(*) as a consequence of using a Carli rather than Jevons index

[want2workrail]

For me the fare rise is very straight forward:  it's conservative view vs socialist view.
Conservative View
Demand is outstripping supply - mainly due to outdated infrastructure.  How do you get rid of the bottom tier of the commuters? Simply price them out of the system.  Income is probably still matched or increased due to excess in demands. This is all about profit and the money-generating system of profit for shareholders and some investment.
Socialist View - a Nationalised Railway
This is where the focus is on the consumer - the customer. Regardless of cost, a service is provided for the best interests of the passenger.  The introduction of standee tickets on routes which so over capacity that getting a seat is practically impossible.  Yes you may get some income for future investment, but you provide the SERVICE for the PASSENGER even if it costs more than the revenue generates as it's a passenger SERVICE to serve the people.

[stuving]

Does the RPI^▸ (Revenue Protection Inspector (or Retail Price Index, depending on the context)) include the cost of transportation ?

Don't know without googling RPI and CPI but a major difference in the two is RPI includes mortgage costs whereas CPI does not. This is a legacy of Mrs. Thatcher. When wages were steaming ahead during her tenure of No. 10 state pensions were uplifted by the average of wage inflation and so her administration changed the state pension uplift rate to be based on the RPI which was lower until some bright spark looking for promotion to her cabinet pointed out that the RPI included mortgage costs for which most state pensioners did not of course have and so was born the CPI which subsequently became the trigger point for state pension uplifts and was thus the ridicule of the infamous 50p state pension rise in Gordon Browns first budget. This was subsequently revised to the triple lock of the 2010 coalition government which was the higher of, 2 1/2 %, wage inflation or CPI and ever since wage inflation and CPI have remained below 2 1/2 % much to the chagrin of the present administration who have an ongoing exercise to define a fairer method of uprating the state pension, fairer to whom.

As history, that's a bit garbled. CPI was developed by ONS^» (Office for National Statistics - website) (as it then wasn't) and other European statistics agencies as a harmonised index, or at least with harmonised methodology (the weights are national ones). It was introduced in 1996, and renamed CPI when it was adopted as the preferred national index. Being told by the statisticians that is removed an upward bias in RPI helped to sell it to the politicians. It replaced RPIX, which was the variant of RPI without mortgage payments.

CPI omits a lot of housing costs, notably mortgage interest and indirect taxes (rates and council tax). They were left out because there are serious issue with both, in theory and in practice. They also differ widely between countries, so no agreement was possible initially. And despite their best efforts, there is still no agreement (though there was a plan to introduce an experimental index of owner occupiers' housing costs based on nett purchases, i.e. essentially new houses).

ONS has a preferred national index called CPIH, which includes some of those missing items. It makes no attempt to measure house owners' actual expenditures; instead it estimates an equivalent rental for houses (shades of Schedule A!). The inclusion of uncorrected interest payments in an index that is used as a measure of inflation is a serious distortion, as it produces shift (an error) due to inflation.

[martyjon]

I need help to get my head round this one.

All day today news bulletins have stated claims by the government that 98% of fares paid are reinvested in the railways.

Really, whos trying to kid who.

Lets look at the complimentary 2%.

Of my £15.50 Advance Single from Bristol To Paddington is only £0.31 needed to contribute towards GWR^▸ (Great Western Railway)'s costs of wages, fuel, stock leasing, NR^» (Network Rail - home page) track access, shareholder profit and those things I've not mentioned, not that there has been a First Group dividend for years.

I don't think so.

Perhaps the wallies at the DfT^» (Department for Transport - about) meant to say that 98% of the profits on the railways are reinvested in the industry which is what has been stated in the past I would believe it, not 98% of the farebox.

[rogerw]

Contrasting news reports today.  Grayling, as usual, is blaming someone else for the fares rise - the standard Conservative whipping boys, the unions.  However on local radio this morning GWR^▸ (Great Western Railway) placed the blame squarely on the government stating that they imposed the fares rise.

[grahame]

There were a couple of Chris Grayling's statements I didn't understand.

1. He talked of the greed of the unions being responsible for the rises being so high.   Now I thought the rise was based totally on the price rises in the year to last August and nothing to do with the industry's labour cost. Or is he blaming the whole general inflation on the unions?

2. He talked about how busy trains are now, with passenger numbers doubling, so there was a need to put up fares by a bigger percentage to provide for them. But surely with passenger numbers so much higher, the cost is spread across so many more people and the need for a big percentage rise goes away.   Could it, perhaps, be that the headlines fares are going up because so many more railcards are coming in .. rumour has it that the next one will be a tall person's railcard for anyone over 6' 3".

[Robin Summerhill]

There were a couple of Chris Grayling's statements I didn't understand.

1. He talked of the greed of the unions being responsible for the rises being so high.   Now I thought the rise was based totally on the price rises in the year to last August and nothing to do with the industry's labour cost. Or is he blaming the whole general inflation on the unions?

2. He talked about how busy trains are now, with passenger numbers doubling, so there was a need to put up fares by a bigger percentage to provide for them. But surely with passenger numbers so much higher, the cost is spread across so many more people and the need for a big percentage rise goes away.   Could it, perhaps, be that the headlines fares are going up because so many more railcards are coming in .. rumour has it that the next one will be a tall person's railcard for anyone over 6' 3".

These things aren't for understanding, they are for believing unquestioningly... That's what politicians want you to do.

Grayling was spinning for all he was worth. I too heard the "union swipe" on radio 4s Today Programme this morning. The first thing I thought was "I see - nothing to do with track access charges, nothing to do with shareholder dividends, nothing to do with any price increases for goods and services that a TOC^▸ (Train Operating Company) buys, just the b;*/*dy unions" Absolute drivel.

This man could be outflanked by Arthur Scargill's cat...

[Red Squirrel]

.. rumour has it that the next one will be a tall person's railcard for anyone over 6' 3".

Wouldn't that be ironic, with me becoming eligible for a wrinkly's wrailcard next year...

[grahame]

.. rumour has it that the next one will be a tall person's railcard for anyone over 6' 3".

Wouldn't that be ironic, with me becoming eligible for a wrinkly's wrailcard next year...

So you're as tall as Chris Grayling are you?

[TaplowGreen]

Leaving the chest beating & politics  (on both sides) to one side, just remember this.......the poor bloody customers are paying higher fares for a lower quality of service, the worst for more than a decade, despite colossal investment from the taxpayer, and that's something for which the rail industry and the Government  (as well as the Unions) share responsibility.

[Adrian]

Perhaps the wallies at the DfT^» (Department for Transport - about) meant to say that 98% of the profits on the railways are reinvested in the industry which is what has been stated in the past I would believe it, not 98% of the farebox.

Is even that true?  What percentage of costs are paid to the ROSCOs^» (Rolling Stock Owning Company - about)?  I was under the impression that they were primarily investment companies, and their profits went into pension funds and the like - or are those not profits if you are committed to giving a certain rate of return to investors?

[stuving]

There were a couple of Chris Grayling's statements I didn't understand.

1. He talked of the greed of the unions being responsible for the rises being so high.   Now I thought the rise was based totally on the price rises in the year to last August and nothing to do with the industry's labour cost. Or is he blaming the whole general inflation on the unions?
...

Grayling was referring (maybe because he was asked) to what he said last August about lower prices rises that RPI^▸ (Revenue Protection Inspector (or Retail Price Index, depending on the context))+0 - see this post earlier in this thread. Of course it was all political point-scoring, rather than a serious suggestion.

[TaplowGreen]

Do you not think it's a little ironic how the RMT^▸ (National Union of Rail, Maritime & Transport Workers) froth at the mouth re:fare rises yet in the next breath demand above inflation pay rises for its members? 🙂

[Red Squirrel]

So you're as tall as Chris Grayling are you?

A couple of centimetres tallerer, by my reckoning! I am taller than the average squirrel.