Everything you know about British train fares is wrong

The good old days. Image: Getty.

Railways are complicated. Their mechanical complexity required the invention of the modern engineering profession to stop them from killing people (mostly). Just as importantly, their business complexity required the invention of the modern accounting profession to stop them from going bust (mostly).

A century and a half on, and many mergers, nationalisations, privatisations and re-nationalisations later, railway finance remains hard to follow. So when fares go up, you generally get to read misleading, knocked-together copy about how fares today are unreasonable and outrageous, how everything is better in other countries, and how everything used to be much nicer in the old days.

The blame for the sky having fallen varies with the publication’s bias. The Guardian blames privatisation and profiteers; the Telegraph blames regulation and bureaucrats. Both are almost entirely wrong.

Charging by use, not by set price

The very worst reporting on the cost of rail involves a cherry-picked comparison of particular journeys, where a foreign ticket is compared to the most expensive available walk-up UK ticket for a long-distance journey. This allows the Telegraph to pretend a ticket from London to Bristol costs £96.50, compared to £29 for the similar distance from Marseille to Nice.

In fact, a morning peak ticket from London to Bristol booked a day in advance costs £42.50, and an off-peak ticket booked a couple of weeks in advance costs £18. Newspapers run the same trick when they compare walk-up rail fares to advance-booked plane fares, which should amuse anyone who’s ever tried to buy a walk-up plane fare.

Look more closely, and you’ll find that UK long-distance and regional train fares are on a par with other high-income countries; the only exceptions are expensive peak-time walk-up tickets. In other words, the UK is better at yield management, selling cheap tickets on empty trains and expensive ones on full trains.

Who pays the piper?

The data required for a proper comparison is available, but is also confusing. To keep things simple, we’ll use data for England here (funding regimes in Northern Ireland, Wales and Scotland are different, reporting isn’t always consistent, and England makes up over 90 per cent of total spending).

In 2013-14, trains in England were subsidised to the tune of £2.3bn. That number is the subsidy that the government pays directly to publicly-owned track operator Network Rail (£2.9bn), minus the premium that train operators pay the government for the right to operate (£616m).

Passengers in England paid £7.1bn in fares in 2012-13. The 2013-14 data is not yet available, but if we assume there was no increase in fares paid, that would mean that total rail funding was at least £9.4bn.

So 24 per cent of the cost of running the rail network in England in 2014 was paid by taxpayers, and the remaining 76 per cent was paid for by train fares. This compares to 2010-11, when 36 per cent of the cost was paid by taxpayers and 64 per cent out of train fares.

In other words, the amount by which the state is subsidising the rail network is falling. The subsidy is also far less than is paid elsewhere. In New York City, taxpayers pay 44 per cent of the rail system’s operating cost. In Montreal, Canada, it’s 43 per cent, while in Sydney, Australia it’s 80 per cent.

In 2012, German rail consultants Civity carried out a study for the UK’s Office of Rail Regulation. That confirmed that the level of subsidy for Great Britain (including Wales and Scotland but not Northern Ireland) was low compared to other western European countries, particularly for commuters:

Percentage of train operating company revenues from taxpayer grants

Commuters pay a lot, but they still come

So commuter train fares in England are more expensive than those elsewhere. The pro-austerity coalition government has made deliberate and conscious policy decisions that reduce the amount that taxpayers pay towards the railways, and increase the amount that passengers pay.

The drive to cut subsidy has been concentrated on high-demand commuter services. Regional passengers get a good deal by international standards; so do long-distance passengers, so long as they’ve bought their ticket in advance.

Whether that’s a good way to structure things is very much open to personal taste. There is plenty of research to suggest that greater rail usage has benefits for society at large. On the other hand, rail usage in the UK has grown by 70 per cent since 1995 and by 9 per cent from 2010 to 2012 despite rising prices; most of this growth has been among commuters. In other words, as much as people grumble about lower rail subsidy and higher fares in the UK, they aren’t actually putting many people off.


But what about the privateers?

A final common complaint about the railways is that the train operating companies remove significant amounts of money from the system in dividends. You’ll be shocked to hear that this isn’t true either.

Train operators in England made a total profit of £250m in 2012-13. That’s about a 3 per cent margin on the industry’s revenue. By way of comparison, supermarkets make a revenue margin or about 6 per cent; Apple makes 40 per cent.

The upshot of all this is that, if we were to keep the subsidy at the same rate, eliminate operators’ profits tomorrow, and pass all the money saved straight onto commuters, it would lead to a cut in rail fares of 4 per cent. Once.

That’s even if you accept the case that train operators are useless parasites with the tendering process providing no benefits over recreating British Rail in-house, and if you assume that the process of restructuring would be cost-free.  That’s a pretty bold set of assumptions to make for the sake of a one-off 4 per cent cut in your ticket.

Rail subsidies are complicated, analysing things is difficult, and hacks are lazy: it’s no surprise that most commentary on the relative value of UK rail fares should be worthless. But, if you do the analysis properly, it turns out that when fares are higher, there’s a good reason for it: people don’t like paying tax.

Want more of this stuff? Follow CityMetric on Twitter or Facebook.

 
 
 
 

Was the decline in Liverpool’s historic population really that unusual?

A view of Liverpool from Birkenhead. Image: Getty.

It is often reported that Liverpool’s population halved after the 1930s. But is this true? Or is it a myth?

Often, it’s simply assumed that it’s true. The end. Indeed, proud Londoner Lord Adonis – a leading proponent of the Liverpool-bypassing High Speed 2 railway, current chair of the National Infrastructure Commission, and generally a very influential person – stood on the stairs in Liverpool Town Hall in 2011 and said:

“The population of Liverpool has nearly halved in the last 50 years.”

This raises two questions. Firstly, did the population of the City of Liverpool really nearly halve in the 50 year period to 2011? That’s easy to check using this University of Portsmouth website – so I did just that (even though I knew he was wrong anyway). In 2011, the population of the City of Liverpool was 466,415. Fifty years earlier, in 1961, it was 737,637, which equates to a 37 per cent drop. Oops!

In fact, the City of Liverpool’s peak population was recorded in the 1931 Census as 846,302. Its lowest subsequent figure was recorded in the 2001 Census as 439,428 – which represents a 48 per cent decline from the peak population, over a 70 year period.

Compare this to the population figures for the similarly sized City of Manchester. Its peak population also recorded in the 1931 Census as 748,729, and its lowest subsequent figure was also recorded in the 2001 Census, as 392,830. This also represents a 48 per cent decline from the peak population, over the same 70 year period.

So, as can be seen here, Liverpool is not a special case at all. Which makes me wonder why it is often singled out or portrayed as exceptional in this regard, in the media and, indeed, by some badly briefed politicians. Even London has a similar story to tell, and it is told rather well in this recent article by a Londoner, for the Museum of London. (Editor’s note: It’s one of mine.)

This leads me onto the second question: where have all those people gone: London? The Moon? Mars?

Well, it turns out that the answer is bit boring and obvious actually: after World War 2, lots of people moved to the suburbs. You know: cars, commuter trains, slum clearance, the Blitz, all that stuff. In other words, Liverpool is just like many other places: after the war, this country experienced a depopulation bonanza.


So what form did this movement to the suburbs take, as far as Liverpool was concerned? Well, people moved and were moved to the suburbs of Greater Liverpool, in what are now the outer boroughs of the city region: Halton, Knowsley, St Helens, Sefton, Wirral. Others moved further, to Cheshire West & Chester, West Lancashire, Warrington, even nearby North Wales, as previously discussed here.

In common with many cities, indeed, Liverpool City Council actually built and owned large several ‘New Town’ council estates, to which they moved tens of thousands of people to from Liverpool’s inner districts: Winsford in Cheshire West (where comedian John Bishop grew up), Runcorn in Halton (where comedian John Bishop also grew up), Skelmersdale in West Lancashire, Kirkby in Knowsley. There is nothing unique or sinister here about Liverpool (apart from comedian John Bishop). This was common practice across the country – Indeed, it was central government policy – and resulted in about 160,000 people being ‘removed’ from the Liverpool local authority area.

Many other people also moved to the nearby suburbs of Greater Liverpool to private housing – another trend reflected across the country. It’s worth acknowledging, however, that cities across the world are subject to a level of ‘churn’ in population, whereby many people move out and many people move in, over time, too.

So how did those prominent images of derelict streets in the inner-city part of the City of Liverpool local authority area come about? For that, you have to blame the last Labour government’s over-zealous ‘Housing Market Renewal Initiative’ (HMRI) disaster – and the over enthusiastic participation of the then-Lib Dem controlled city council. On the promise of ‘free’ money from central government, the latter removed hundreds of people from their homes with a view to demolishing the Victorian terraces, and building new replacements. Many of these houses, in truth, were already fully modernised, owner-occupied houses within viable and longstanding communities, as can be seen here in Voelas Street, one of the famous Welsh Streets of Liverpool:

Voelas Street before HMRI implementation. Image: WelshStreets.co.uk.

The same picture after HMRI implementation Image: WelshStreets.co.uk. 

Nonetheless: the council bought the houses and ‘tinned them up’ ready for demolition. Then the coalition Conservative/Lib Dem government, elected in 2010, pulled the plug on the scheme. 

Fast forward to 2017 and many of the condemned houses have been renovated, in a process which is still ongoing. These are over-subscribed when they come to market, suggesting that the idea was never appropriate for Liverpool on that scale. 

At any rate, it turns out that the Liverpool metropolitan population is pretty much the same as it was at its peak in 1931 (depending where the local borough boundaries are arbitrarily drawn). It just begs the question: why are well educated and supposedly clever people misrepresenting the Liverpool metropolis, in particular, in this way so often? Surely they aren’t stupid are they?


And why are some people so determined to always isolate the City of Liverpool from its hinterland, while London is always described in terms of its whole urban area? It just confuses and undermines what would otherwise often be worthwhile comparisons and discussions. Or, to put it another way: “never, ever, compare apples with larger urban zones”.

In a recent Channel 4 documentary, for example, the well-known and respected journalist Michael Burke directly compared the forecast population growths, by 2039, of the City of Liverpool single local authority area against that of the combined 33 local authority areas of Greater London: 42,722 versus 2.187,708. I mean, what bizarre point is such an inappropriate comparison even trying to make? It is like comparing the projected growth of a normal sized-person’s head with the projected growth of the whole of an obese person, over a protracted period.

Having said all that, there is an important sensible conversation to be had as to why the populations of the Greater Liverpool metropolis and others haven’t grown as fast as maybe should have been the case, whilst, in recent times, the Greater London population has been burgeoning. But constantly pitching it as some sort of rare local apocalypse helps no one.

Dave Mail has declared himself CityMetric’s Liverpool City Region correspondent. He will be updating us on the brave new world of Liverpool City Region, mostly monthly, in ‘E-mail from Liverpool City Region’ and he is on twitter @davemail2017.