Which rail fares are regulated

They need not be valid for any journey beginning between and on Mondays to Fridays from London-area stations or when travelling away from London stations between London and Reading, Watford, Luton or Stevenage, inclusive. However, the SRA will consider applications from operators to apply a greater restriction to savers where it can be shown that this is necessary to reduce overcrowding. This includes both fares for which the operator is Lead Operator and sets the fare, and fares where another train company sets the fare, but the operator in question receives a share of the revenue.

Each fare within the basket is weighted by the revenue received by that operator from the sale of that fare in the financial year to 31 March The total value of the fares basket is the sum of all the weighted fares that it contains. To simplify the basket, fares with very low revenue are excluded. However, all Commuter Fares must continue to be made available for sale, whether or not they are in the Commuter Fares basket. Each year, the train operator must ensure that the total value of its fares basket does not exceed the cap on the basket.

Commuter Fares around Cardiff and Edinburgh are also subject to regulation by fares basket. These baskets contain the standard singles, standard returns, and season tickets for journeys wholly within the defined commuter area.

The weighting and annual cap increase operate in the same way as for London-area Commuter Fares baskets. Fares, which are neither Protected Fares nor Commuter Fares are unregulated, and train operators are free to determine these fares according to market forces.

For example, an unregulated Supersaver fare cannot logically exceed the price of the regulated and less-restrictive Saver fare. In two PTE areas Greater Manchester and West Yorkshire , fares are set by the relevant train operator in the normal way and commuter fares are regulated by a version of the fares basket mechanism. All standard singles and returns for journeys wholly within the Greater Manchester and West Yorkshire PTE area are included in a fares basket that is capped in a similar way to the fares baskets described earlier.

Fares regulation has been in place since the first franchises were let in However, the above-described fares regulation is the result of an extensive review of fares regulation carried out by the SRA in — Not surprisingly, the SRA's consultation showed that passenger groups, individual passengers and PTEs generally want the same or more regulation, while train operators want less regulation and more freedom.

The SRA's own view is that fares regulation is justified only where it is necessary to prevent or correct market failure. Table 1 shows the dominance of national rail and London Underground travel for commuters in the Greater London area in Autumn The SRA concluded that although some aspects of the Commuter Fares regulation could be simplified, the scope of regulation applied to most commuter fares should be maintained because of rail's position in the market for commuting in urban areas.

Away from the big cities, there are generally more alternatives to rail and the case for regulating commuter travel becomes less compelling. Nevertheless, there are still many journeys where people do not have an alternative means of travelling to work, and on balance it was decided to continue regulating weekly season tickets outside urban areas as well, but using a more flexible fares basket mechanism.

The SRA considered whether regulation should be extended to cover long-distance full-fare tickets standard open singles and returns , some of which have risen significantly since privatization. However, while there is a clear argument for regulating commuter fares because of the lack of practical alternatives to rail, this is not the case for long-distance fares where there are generally alternatives, such as car, long-distance bus, or air.

In the case of standard open fares, price would be expected to reflect the flexibility that these fares provide and the type of passenger at which they are targeted. Equivalent fares on competing modes, such as fully-flexible domestic airfares, are priced at similar or higher levels. The SRA also has to consider affordability and value for money, and regulating standard open fares at a much lower level than current prices could only be done at considerable cost.

Regulating standard open fares would limit all other fares, stifling innovation and leading to overcrowding on some trains. For all these reasons, the SRA decided that it was undesirable to extend regulation to this type of fare. The SRA considered the advantages and disadvantages of continuing to regulate saver fares; research suggests that regulation of saver fares has led to overcrowding on some trains and may have prevented operators from managing their capacity effectively.

It may also have constrained development of other more innovative types of ticket, possibly preventing operators from introducing the sort of pricing used so successfully by budget airlines.

Leisure passengers are generally very price sensitive and if saver fares were deregulated, operators would still need to offer competitively-priced tickets to avoid losing these passengers and revenue. Research suggests that most passengers are willing and able to transfer to different types of ticket and can use alternative forms of transport such as car, bus or aeroplane. The leisure market for long-distance rail travel is already moving away from the traditional approach represented by saver tickets towards airline-style ticketing where price is the main attraction for passengers and a seat reservation is included with the ticket.

Yield-management schemes are being improved and a new reservation system that can work in conjunction with them is due to be introduced in late December This would allow operators to maximize both ridership and revenue while offering the lowest possible fare to each passenger.

However, some people still rely on saver tickets, and most rail passengers are not yet used to booking rail journeys in advance as they do with airlines. A new reservation system allowing dynamic airline-style pricing is not yet available, so it has been decided to continue regulation of saver fares until late , but with some changes. Since , each saver fare has been regulated individually, but a fares basket mechanism was introduced in January , giving operators a degree of flexibility to vary the price of individual fares within the basket.

The SRA will also allow changes to the maximum restriction that can be placed on saver fares on a case-by-case basis where an operator can show that the current maximum restriction needs to be relaxed to prevent overcrowding. The SRA will further review saver regulations with a view to replacing the current regime by Changes may be made earlier if train operators put forward proposals showing clear benefits to both taxpayers and passengers.

Table 2 shows the percentage of farebox revenue that would be subject to regulation if saver fares were deregulated or if standard open fares were regulated. Consultation responses showed that train operators feel regulation has kept fares too low in real terms, stifling investment and creating overcrowding. On the other hand, passengers, passenger groups, local authorities and PTEs do not believe that fares regulation should be used to price passengers off railways to reduce overcrowding, suggesting instead that capacity should be increased.

The SRA considered the need to recover rail industry costs and how the balance of cost recovery should be set between fares paid by passengers and subsidy provided by taxpayers.

At privatization, it was assumed that more efficient private-sector management would drive costs down. In the event, efficiency gains did not materialize and rail industry costs have actually gone up rather than down.

As a result, the taxpayer has borne most of the increase in costs. SRA research also suggested that regulated fares may be significantly below their economically efficient level, or long-run marginal cost. The result is overcrowding on both commuter services and long-distance trains, and lack of investment incentive. The SRA concluded that an increase in regulated fares may be justified on both cost-recovery and efficient-pricing grounds to redress the balance between taxpayer and passenger and more accurately reflect the long-run marginal costs of providing rail services.

Some consideration was given to applying different increases in caps to different operators to reflect slightly different levels of investment or service quality, etc. However, the extent of interaction between fares set by different operators made this impractical, particularly in the London and South East area.

Each operator's fares basket contains fares that it sets and controls itself, and fares that are set by other operators. If one operator is permitted a large increase in its fares basket and so increases its own fares significantly, other operators whose fares baskets contain these fares would be forced to reduce their own fares to offset the increase, unless they are allowed a similar increase.

If different permitted increases were applied to each operator's fares basket, there would be a disproportionate effect on each operator's own non- Travelcard fares because these were adjusted to keep the total fares basket within the cap. Ultimately, the SRA concluded it was more appropriate to apply a consistent increase to all operators.

Many consultation responses said that fares increases above inflation could be justified to fund investment as long as the increases were applied after the improvements were delivered to passengers.

To help fund specific investment, the SRA will continue to allow increases over and above the basic policy where agreed with operators.

Since —96, fares regulation has included an automatic link between London commuter fares and train service performance generally known as the Fares Incentive Adjustment Payment FIAP regime.

FIAP involved a long time lag between the fares change and the related performance, and since it was based on relative performance, a performance improvement from bad to merely poor permitted a fares increase, whereas a worsening from excellent to merely good performance required a fares decrease. Almost all consultation responses from both train operators and passenger groups said that the FIAP automatic link between London commuter fares and performance has not worked well and should be abolished.

In addition, a performance-related fares adjustment will create inconsistency between SRA and TfL fares policies. This meant that passengers using Travelcards saw little or no benefit from the FIAP fares adjustment while passengers using non- Travelcard rail-only tickets enjoyed a disproportionately large effect. The SRA has decided to eliminate FIAP and rely on the compensation arrangements set out in each operator's Passengers Charter to compensate passengers directly for poor performance.

Fares baskets provide much greater flexibility compared to regulating fares individually but still control the level of the fares concerned. This flexibility can be used by operators to reflect market conditions in the fares structure—promoting growth or managing capacity—and to correct anomalies or control overcrowding.

Individually regulating some fares generated significant work for both train operators and the SRA, because approval was needed each time an operator wanted to adjust an individual fare although the effect may be very small. But ORR seem recently to have become rather more keen on open access, much to the irritation of the Department for Transport.

This is in part an Arup report in showed that, where passengers have a choice of operator, fares were kept down and service frequency and other quality measure improved. It is of course a fundamental feature of competition that it drives down prices and drives up quality on average. But it carries no guarantees about which particular customers or providers may win and lose from the process - and the losers can be very vociferous.

In the case of railways, there are frequent complaints about the complexity of fare structures - the result of franchisees:. The resultant complexity is unpopular, not least with occasional travelers, but the low fares certainly appeal to students, families, the retired and many others who happily trade speed and flexibility for the some remarkable cost-savings. But successive governments and regulators are forced to keep up the pretence of seeking this holy grail by ordering the production of report after report.

Here are some examples, together with brief mentions of the problems that often catalyse the reports. DfT used to frequently complain about ROSCO profits which are achieved, they feel, as a result of over-charging the TOCs who lease the sometimes very old trains from the ROSCOs and then pass on the cost to the Government through reduced franchise payments or to passengers through fares.

They could, for instance, lengthen the franchise lengths and so encourage both the ROSCOs and the franchisees to invest in new rolling stock. DfT have not yet taken this option. The construction projects were also criticised by passengers and the media for being too disruptive to existing services. The Government, too, expressed severe concerns, and temporarily suspended work on the upgrades of two of the UK's most congested lines.

Partly as a result, Dame Colette Bowe led a review which recommended that ORR should have a greater role the planning of Network Rail's major infrastructure projects. DfT were considering how to respond to this suggestion. I do not know what they concluded. The CMA has from time to time carried out investigations into the letting of new franchises which often involve mergers when they threaten to reduce competition on short stretches of lines.

There was, for instance, a fairly brief investigation into the provision of rail services between Peterborough and Grantham and Lincoln as a Stagecoach dominated franchise was allowed take over the East Coast Main Line, even though Stagecoach already ran the only other rail services between those cities. This seemed a bit of a sledgehammer to crack a small nut - especially as much of the rest of the network and much of the rest of the East Coast Main Line already had no competition whatsoever - but the issue obviously mattered a lot to a number of passengers, and the CMA have a pretty good track record in handling these small investigations sensibly and efficiently.

This blog by Dieter Helm is an excellent review of railway industry performance, and what might be done about it. Its report was published in and called for the government to encourage competition by increasing the number of open access services see above or by splitting up franchises. In the longer term, the CMA recommended the more radical option of scrapping the franchise system in favour of licensing multiple operators on the main intercity routes.

Nicola Shaw has reviewed the future shape and financing of Network Rail. She recommended in that NR should:. She also recommended that the Government should develop and maintain a long-term vision for the industry.

Don't hold your breath! It was therefore entertaining to see the Shadow Chancellor blame the private sector when a problem with state-owned infrastructure led to his missing an appearance on BBC Question Time - see Twitter exchange on the left.

Similar misconceived criticisms of Virgin Trains were aired in September when problems with Network Rail's equipment delayed delegates returning to London from the Labour Party annual conference in Liverpool. There was huge disruption in and after May when the industry was found to be far from ready for significant timetable changes.

Almost trains a day were cancelled. The regulator's report into the disruption spread the blame fairly widely but pointed out that Transport Secretary Chris Grayling or his officials had contributed to the problems by delaying key decisions. Mr Grayling denied responsibility for the problems, arguing that he had had little choice but to accept the assurances of the industry that all would be well when the new timetables came into force.

He had clearly not heard of the Prevention Paradox which encourages risk-taking in organisations such as Network Rail for fear of being blamed for being over-cautious when planning project timescales etc. But he did announce - surprise! It was interesting, against this background, that saw the first mainline trains operating under 'driverless' computer control in order to ensure reliability on the new very busy Thameslink tracks north of London Bridge.

Many London underground trains had of course been under automatic control for many years, and some such as the Dockland Light Railway had no 'driver' at all. Spotted something wrong? Please do drop me an email if you spot anything that is out-of-date, or any other errors, typos or faulty links. Railway Industry Regulation. Rail - Comment Turning specifically to railways - It is important to remember that our public transport systems create real winners in the form of those of us who own property near roads, railway lines etc.

As Andrew Nock commented in Modern Railways in There is no right way of structuring, funding and governing a complex public service like the railway, just a variety of wrong ones, each with its own disadvantages and advantages'. And James Ball summarises the problem in this way: People want rail services to be cheaper, faster, and less full. Further detail follows:- Current Regulatory Issues 1. One year later it was stripped of the route.

The current situation is as follows: Heathrow Express is one open access operator - but a very special one. Somewhat ironically, they complained that ORR intended to allow TfL's Elizabeth Line to access the Heathrow Express spur to Heathrow without paying a large enough access charge, but their challenge was dismissed in the High Court.

A service from Shrewsbury to London was subject to so many restrictions that it never attracted sufficient passengers. They together carry c. Grand Central is owned by Arriva which is in turn owned by Deutsche Bahn. Hull Trains is owned by First Group. Interestingly, the East Coast franchised operator responded to this competition by improving the frequency of its services to e.

Grantham and Northallerton. And consumer body Transport Focus reported in that the three competing east coast operators were rated, by customers, as the three best operators in the UK. The new services will not start until and will clearly offer interesting competition for the low cost airlines that currently fly the Edinburgh - London routes. Overall, however, open access accounts for only c. Great North Western Railway has been given permission to launch open access passenger services between London and Blackpool in early Complex Fare Structures It is of course a fundamental feature of competition that it drives down prices and drives up quality on average.

You may also consider seeking advice from Transport Focus or London TravelWatch , who may be able to help. Fares and penalty fares. We are not the regulator for fares and have no role in relation to penalty fares. Unregulated fares Collapse accordion Open accordion The price of these is set by train companies on a commercial basis.

Penalty fares Collapse accordion Open accordion ORR has no role in relation to penalty fares schemes. Further information Collapse accordion Open accordion Complaints about rail fares and car park charges Competition Act Related links. Enquiries about fares and penalty fares.