Fare enough?

CAN YOU hear a whirring sound? Go on, listen a bit harder.

That’s it. Anyone can hear it if they try, because it’s the Government’s spinning wheel, rotating busily to make today’s announcement about a cap on rail fares sound as luscious and family-friendly as possible. Anyone would think there’s an election in 2015.  

Just to recap (so to speak), what has happened today is that the Department of Transport has announced that the ‘flex’ on regulated rail fares will be cut from 5 to 2 per cent in January.

Yippee! That means the highest increase in regulated fares will now be 6.1 per cent — bearing in mind that the base formula is 4.1 per cent, because that’s what you get when you add 1 per cent to last July’s Retail Price Index of 3.1 per cent.

The flex is now only 2 per cent, so that’s a worst case scenario of 6.1 per cent (4.1 + 2), not 9.1 per cent (4.1 + 5). Good old Government, easing the burden on commuters.

Well, up to a point. What has not really emerged today is that the flex has to work both ways. The train operators must achieve an average increase in regulated fares of 4.1 per cent, as measured across a ‘basket’ of fares.

That was the case yesterday, and it’s still the case now. That means for every fare which takes advantage of the flex and goes up beyond the base figure of 4.1 per cent, another fare rise must be less than 4.1 per cent to maintain the average.

The result is that some rail users will be spared 9.1 per cent (the worst case scenario) and pay another 6.1 per cent instead. But there will be others who could have seen their fares FALL by 0.9 per cent (the best case scenario). Because that’s what you get if you subtract 5 from 4.1 (and not 1.1, as I said in a moment of abstraction myself in an interview early today).

This means that if some people are spared the top 3 per cent, others are facing an extra 3 per cent, because a potential fall of 0.9 per cent has become a minimum rise of 2.1 per cent, which is 4.1 minus 2, of course.

I say ‘of course’, but in the weird and faintly scary land of railway tariffs, where the shadowy Anytime Monster lurks at the far end of the platform, ready to leap out at you with fangs bared to snatch your credit card if you delay your homeward off-peak journey by more than a microsecond past the afternoon deadline, anything is possible.

In short, the range of the flex has narrowed. There will be some winners and some losers, but so long as the operators play fare (ho, ho) about maintaining their 4.1 per cent average, their revenue should be about the same as it was before. In other words, the passengers who save 3 per cent will only do so because other people will now pay up to 3 per cent more than they would have done.

What happens to that extra 1 per cent — the slice which is added to 3.1 per cent of inflation?

The generous, kind-hearted Government gets that, not the train operators. Goodness, you could have worked that one out for yourself.

Tomorrow’s lesson: why Santa Claus is in line to become the next Transport Secretary.

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