Campaign for Better Transport responds to RPI rate announcement and calls for a fare freeze

Responding to the announcement of a 12.3 per cent RPI rate for July, Paul Tuohy, chief executive of Campaign for Better Transport, said:

“Even a minus RPI rail fare rise next year will hit passengers hard and could mean people stay away from the trains altogether. The Government must go further and commit to a fare freeze for 2023 now so that commuters are not left with the uncertainly of whether they’ll be able to afford to get to work next year.”

Campaign for Better Transport has previously called for a tax on aviation fuel on domestic flights to help fund a rail freeze and boost rail passenger numbers. The transport charity says that taxing kerosene on domestic flights at the same rate as it taxes petrol and diesel for car drivers would raise £1.53 billion, enough to fund a rail fare freeze.

ENDS

Notes to editors

1. RPI for July is 12.3 per cent.
2. Ministers have pledged to spare passengers a double-digit rail fare rise next year, but have as of yet not indicated what the rise will be.
3. Regulated rail fares, including season tickets on most commuter journeys, some Off-Peak return tickets on long distance journeys and Anytime tickets around major cities, make up almost half (45 per cent) of all fares and increases are set by the Government. In recent years, fares have risen each year by either RPI or RPI+1%, based on the previous July's RPI figure. In 2022, fares rose by RPI.
4. The Government continues to use the Retail Price Index (RPI) to calculate annual fare increases, rather than the accepted and more accurate measure of inflation, the Consumer Price Index (CPI). RPI over-estimates real inflation so consistently that the Office of National Statistics ceased using it as an official measure in 2013 and the Government has already switched to CPI for most other sectors. In July 2018, the then Transport Secretary, Chris Grayling, indicated that future fare rises would be pegged to CPI, but gave no date for the switch. Had CPI been used to calculate this year’s increase, fares would be going up by 2.1 per cent instead of 3.8 per cent.
5. There is mounting evidence to suggest that a rise in rail fares leads to a reduction in passenger numbers. A 2003 report by ITS Leeds found that for suburban rail, a fare increase of five per cent leads to a three per cent reduction in patronage, and for inter-urban rail a fare increase of five per cent leads to a 4.5 per cent reduction in patronage. This calculation was done at a time when commuters were a very large proportion of rail travellers and were a fairly captive market. Since widespread working from home has become established during the pandemic, commuter journeys are now much more discretionary, on a par with leisure travel. Hence fare increases will lead to an even larger reduction in patronage. A recent Institute of Economic Affairs report stated that “Even if rail companies hike fares, they may still receive less revenue than pre-pandemic, as a high proportion of what were compulsory commuter trips with a low elasticity of demand are likely to become discretionary with a higher elasticity of demand. For example, an elasticity of −0.5 would still allow the railway to generate more total revenue from a ticket price rise, but elasticities of −1 and higher lead to an absolute loss of revenue.”
6. In the UK, kerosene currently costs£0.83 per litre. Taxing kerosene at the same level as fuel duty for cars (£0.58 plus 20% VAT) would raise £0.79 per litre. 12.96% of total aircraft kms are domestic, which uses 1.94 billion of the 15 billion litres of aviation fuel used annually for UK airports. Taxed at £0.79 per litre, this would raise £1.53 billion from domestic flights. For more information see the full calculations.