Jan. 4 (Bloomberg) -- The U.K. government must rule out using higher fares on the rail network to cut demand at peak times, a panel of lawmakers said, as commuters returned to work for the New Year faced with above-inflation fare rises.
Transport Secretary Patrick McLoughlin must “urgently set out a long-term policy on fares” and “shine a light on complacent management, waste and profiteering by ensuring greater transparency in the finances of the rail industry,” Parliament’s cross-party Transport Committee said in a report published in London today.
Returning this week from seasonal vacations, passengers on London’s Underground and commuter rail networks saw an average 4.2 percent rise in fares. Overall, prices have gone up by 3.9 percent in England, Wales and Scotland under rules that allow them to rise by 1 percentage point more than the retail price index. Average weekly earnings rose by 1.8 percent in the year through October, less than RPI inflation of 3.2 percent.
“There are good economic, social and environmental reasons for the government to provide a 4 billion-pound ($6.5 billion) subsidy to the railway,” the committee chairman, opposition Labour Party lawmaker Louise Ellman, said in an e-mailed statement. “It is vital we know far more about how public money is spent so that there is confidence it does not leak out of the system in the form of unjustified profits.”
Train companies such as Stagecoach Group Plc’s South West Trains, Virgin Rail Group Ltd. and Chiltern Railway Co. Ltd. that run services to and from London may vary regulated fares by up to 5 percent above, or by any amount below, the average change in response to demand.
The Trades Union Congress, which represents 6.2 million workers, published research last month showing that average train fares have risen nearly three times faster than average wages since the beginning of the recession in 2008.
“We are looking at how fares might be used to spread demand more evenly, including rewarding passengers who are able to avoid the busiest services,” Transport Minister Simon Burns said in a statement. “However, we have been quite clear that the government’s fares and ticketing review, which is due to conclude in May, is not about squeezing more revenue out of regulated fares and that any changes stemming from it would need to be balanced and fair.”
The committee said today it also supports a target to achieve substantial savings across the rail network set out in a 2011 report by a civil servant, Roy McNulty, who advised on best business practice. Even so, it said it considers his target of saving 3.5 billion pounds by 2018-19 to be “challenging” and expressed specific concerns about safety, staffing and the protection of passengers’ interests.
The report did not focus on the lessons of last year’s stalled award of the West Coast Main Line franchise, which lawmakers dubbed a “debacle.” The award was halted in October after the Department of Transport reported serious flaws in its choice of FirstGroup Plc’s 5.5 billion-pound bid over one from Virgin, the incumbent.
The panel said it “sees merit in continuing with longer rail franchises but suggests the government explores options for reviewing contracts every five years and looks at spreading premium payments over the full length of each franchise contract.”
The lawmakers also recommend that franchises, which need to be re-let soon, should be tendered on the basis of medium-term franchises of seven to 10 years’ duration.
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