Everything we hear about rail fares is probably wrong...

Railways are complicated. Their mechanical complexity required the invention of the modern engineering profession to stop them from killing people (mostly). Just as importantly, their business complexity required the invention of the modern accounting profession to stop them from going bust (again, mostly).

A century and a half on, and many mergers, nationalisations, privatisations and re-nationalisations later, railway finance remains hard to follow. So when fares go up, you generally get to read misleading, knocked-together copy about how fares today are unreasonable and outrageous, how everything is better in other countries, and how everything used to be much nicer in the old days.

The blame for the sky having fallen in varies according to the publication’s bias. The Guardian blames privatisation and profiteers, while The Telegraph blames regulation and bureaucrats. Both are almost entirely wrong.

 

Charging by use, not by set price

The worst reporting on the cost of rail involves a cherry-picked comparison of particular journeys, where a foreign ticket is compared to the most expensive available walk-up UK ticket for a long-distance journey. This allows The Telegraph to pretend that a ticket from London to Bristol costs £102, compared to £29 for the similar distance from Marseille to Nice.

In fact, a walk-up off-peak ticket from London to Bristol costs £44.70, and an advance single booked a couple of weeks in advance costs £25.50. Newspapers run the same trick when they compare walk-up rail fares to advance-booked plane fares, which should amuse anyone who’s ever tried to buy a walk-up plane fare.

Look more closely, and you’ll find that UK long-distance and regional train fares are on a par with other high-income countries; the only exceptions are expensive peak-time walk-up tickets. In other words, the UK is better at yield management - selling cheap tickets on empty trains and expensive ones on full trains.

 

Who pays the piper?

The data required for a proper comparison is available, but is also confusing. To keep things simple, we’ll use data for Great Britain here (the regime in Northern Ireland is very different).

In 2014-15, trains in Great Britain were subsidised to the tune of £3.5bn. That number represents the subsidy that the Government pays directly to publicly-owned track operator Network Rail (£3.1bn), minus the premium that train operators pay the Government for the right to operate (£1.2bn), plus the subsidy from devolved administrations and regional passenger transport executives. 

Passengers in Great Britain paid £8.8bn in fares in 2014-15, leaving total rail funding at £13.5bn.

So 26% of the cost of running the rail network in Great Britain in 2014-15 was paid by taxpayers, and 71% was paid for by train fares (the rest is ‘other income’, like Network Rail’s property leasing). This compares to 2010-11, when 36% of the cost was met by taxpayers.

In other words, the amount by which the state is subsidising the rail network is falling. The subsidy is also far less than is paid elsewhere. In New York City, taxpayers meet 44% of the rail system’s operating cost. In Montreal, Canada, it’s 43%, while in Sydney, Australia, it’s 80%.

In 2012, German rail consultants Civity carried out a study for the UK’s Office of Rail Regulation. This confirmed that the level of subsidy for Great Britain was low compared to other western European countries, particularly for commuters:



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