IEA - Capping rail fares classic short-termism

From: Think Tanks
Published: Fri Dec 23 2022

Professor Len Shackleton, Editorial and Research Fellow at the Institute of Economic Affairs, responded to the government's decision to cap March's rail fare increases at 5.9 per cent

While the decision to cap rail fare increases below inflation may be relatively good news for passengers, it will increase the already massive subsidy from the taxpayer to keep the trains running. Caving in to the RMT will increase it further, while probably preserving many of the restrictive practices which pervade Britain's railways.

Some people may say that this could be partially covered by nationalising the train operating companies (TOCs). However three of the largest TOCs - LNER, SouthEastern and Northern Rail - are already in the public sector under the control of the Operator of Last Resort. The others are on operating contracts which allow only a minimum return on capital. This is why the TOCs and their negotiators, the Rail Delivery Group, can't really resolve the Rail strikes without further Department for Transport finance - itself dependent on the Treasury. Given the other pressures on government, this surely going to drag on well into next year.

The situation might be improved if we had the new strategic authority advocated in the Williams-Shapps report, but progress on this is glacial and it appears that the Great British Railways' brand is being quietly dropped. It was, apparently, a piece of Boris Boosterism.

So passengers may be pleased that their fares are not going to be hiked as much as might have been expected. But it is classic short-termism from a government which finds every challenge too difficult to meet.

Notes to editors

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Biggest government intervention ever to keep rail fares down

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