Fare increases - trained to impoverishPosted on: 06 January 2012 by Alexander Hay
As commuters are hit with yet another above-inflation price increase, it is enlightening to find out just where all that money is going
Naturally, it had to happen on the first day back at work after Xmas. As rain and gale force winds lashed poor souls lurching out into the morning darkness, what remained of their festive cheer all but extinguished.
Yes, train fares have gone up again - by up to 11%, which is some way above the current rate of inflation. Likewise, for London commuters, the average cost of an Oyster season ticket has risen by an average of 5.6% despite inflation being only 4.8% the month before.
Still, as commuters board their claustrophobic, cramped trains - often dirty and frequently late - they should take comfort from the fact that all that money is going to a good cause - keeping the UK's transport infrastructure going... Right?
Well, not entirely. Take one of the most heavily subsidised of train companies, Northern Rail. Its net profits at the beginning of 2010 were just over £21 million, but only after receivinging government subsidies from the government totalling £315 million. In other words, every £1 of their profit depends on £15 of government funding.
Or Great Western Limited, which received revenue support from the Department for Transport of over £133 million, allowing it to make a dismal net profit of £4.9 million.
Then there is the London and Birmingham Railway, which somehow managed to achieve a £2.7 million loss despite being given £96.7 million.
You will no doubt have noticed a pattern here, where rail companies run railways for the government while creaming off profits when possible (or not, in London and Birmingham's case).
But if they're getting so much money, why put up their fares? The reason why tickets are becoming more costly is because the government is cutting its subsidy to the firms that run the trains. Trying to squeeze whatever profit they can, the companies resort to charging customers some of the highest fares in Europe.
What to do? Well, nationalising the railways again, removing the many middle men in exchange for one or two central bodies, and funnelling all profits back into the system wouldn't hurt. The railways may not be profitable, or barely so, but they are a public good (despite the best efforts of some firms, it seems) and will become vital for our economy as cars become more expensive to run. It is a sad fact, however, that the latter years of the last Conservative government actually made people nostalgic for British Rail.
So it is fitting that once again we have another false economy from the government. Cutting subsidy that leads to taxpayers having to spend less on everything else simply sucks more money out of the economy. Tellingly, the Godmother of rail privatisation, Margaret Thatcher, never travelled by train either. Nor will many of the people who imposed yet another fare increase ever have to worry about paying for a ticket, and there, perhaps, lies the problem.
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