Tuesday, 14 August 2012

Train Fares

I'll declare an interest: I use the rail network, but not to commute. There has been an astonishing amount of bollocks being spoken about train-fare rises. Especially commuters, whose season tickets are rising by hundreds of pounds. "The trains are crowded" they complain. Yes, and cutting rail fares will help that, how exactly? "It's too expensive" Well move house, or change jobs. Or travel off-peak. This crowding is because more people try to use the network than is optimal at peak hours.

The effects are not just stress and misery on the journey. This underpriced peak-hour rail drives up house-prices along the rail corridors, and sucks life and employment out of the towns. It also makes people unhappy. People make bad decisions about what makes them happy. They overvalue big houses, and undervalue time not spent on an hour-long commute into town. They overvalue money, and undervalue social contact and family time. And they're aided and abetted in this happiness-destroying cultural artefact by heavily subsidised commuting.

 If the crippling over-dependence of the country on London is to be addressed, the market must be allowed to do its work on rail fairs. Shifting economic activity out of London is to be desired. Britain does not benefit from shifting millions into town and out again every day, when with a bit of thought, much of this economic activity could happen in Reading, or Northampton or Brighton or Hull. Making it easy to live in Cambride and work in London doesn't help Cambridge or its economy.

 You may FEEL you have no choice but to buy the season-ticket, and in the short-run you're probably right. But in the longer term, every person deciding the commute isn't worth it, and seeking a job locally helps the local economy. Every person moving nearer their place of work reduces stress at peak hours on the transport system. In the long run, people respond to economic incentives. It shouldn't be the government's role to insulate people from the reality of their choices.

So, you want to get into central London by 9am? Why not do what I did when I lived in London, and live in a grotty part of town instead, within cycling distance? OH! You want a big house out of London? So you want ME to subsidise your big house by keeping your rail-fare down? Is that fair? It's not like you're without choices: there are no solutions, only trade-offs. Compromise on your house, or compromise on your job. Or accept the real cost of rail-fares. You want a seat, guaranteed? Buy a first-class ticket. Overcrowding in the carriages is merely evidence that the price is wrong.

If there was a free market, rather than fares being regulated, peak hours would certainly be more expensive, and off-peak would probably be cheaper. So renegotiate your hours. Capacity-smoothing fares make sense. Ultimately the problem is one of mis-priced resources, especially space on the world's second busiest rail network. Like the Roads, the Rail Network is overused at peak times and underused off peak. Prices reflecting this are a step in the right direction.

Sorry, rail commuters, your fares are not going down any time soon. I don't mind paying for a rail ticket when I buy a ticket. I do mind paying for rail tickets I'm not using, subsidising people to drive up the price of a house I want where I live, when I fill in my tax-return. The fare rises are necessary, and will have positive economic effects, if you let them. It's not all bad news.


John Galt said...

While I agree with what you are fundamentally saying, I would point out that it is not primarily the 'big house' in a commuter town which is the issue, it is the cost of education.

It is very difficult to get children in a decent state school in inner London. Much easier to find a decent school in one of the feeder commuter towns (even Cambridge) and have the husband commute into London.

Especially for finance workers like myself (Energy Trading Risk Management specialist), it is very difficult to get work outside of London unless you are committed to working for a single specific company which has large out-of-London sites (such as RWE).

As with most things, there are no solutions, only trade-offs.

Tim Newman said...

"Making it easy to live in Cambride and work in London doesn't help Cambridge or its economy."

Gotta disagree there. Chances are, the bloke's wages are spent locally by his wife, not to mention what he spends in restaurants, garages, etc. during weekends. Other than his 12 quid baguette for lunch, is he spending much in London?

Anonymous said...

While I agree with your pricing argument per se I'd like to broaden the conversation.

The NHS, education etc. are free at the point of use. If I as a single bloke highlight that I do not have kids thus why am I paying for schools, I will be promptly told to sod off.

Yet the major reason for the train fares increase is the reallocation of cost due to the decrease in Government subsidy.

So this is somehting where the government wants to opt of the funding responssilbility.

I'd like to ask why? It seems to me that because the people paying for the season tickets etc. are generally people commuting to work.

So again the government effectively raises the costs of living for people trying to earn a living, and the dole scroungers can sit on the arses at home all day with no penalty.

That's why this policy sucks arse.

It's the same thing as Obama's "you didn't build this" bullshit. If you take his speech at face value, he is saying that if you're successful, then it's a result of the rewards for success that obligate you to chip in more money via tax.

Well when will we start penalising people who don't succeed because they make shitty choices.. or simply don't work?

We have to start rewarding the good choices and penalising the bad choices, not this arse backwards arrangement we've got now.

Anonymous said...

I'm pretty sure the Train companies would rather operate a 'rush hour commuter only service' as their cost to income ratio is much better.
A railway carriage weighs 45tons so uses a lot of fuel to move even when empty. One driver, one guard, one caterer, regardless of the number of passengers. The economics is simple, when worked out as the price paid against the cost the commuter is subsidising the off peak traveller.

Jackart said...

John Galt: There are no solutions, only trade-offs. The children's education is just another variable.

Tim Newman: So does someone working and living in a town spend more or less than a commuter?

anon 1: The NHS is risk-pooling. Tax funding is just the biggest insurance fund possible. Ditto the welfare state, which as well as providing an incentive to not work, also provides insurance against entrepreneurial risk-taking.

anon 2: No. Trains are expensive. Like airlines TOCs would like to sweat their assets. While the profit might be made in commuter hours, they want to maximise revenue, which means filling the trains where possible outside those hours. The economics is simple, but you don't understand it.

John Galt said...

Yes - I agree that education is also a trade off, just pointing it out is all.

On the matter of the TOC's - the fundamental problem here is that the rail privatisation was a complete fuck-up from start-to-finish.

The entirety of the infrastructure including all station properties should have been sold off as well.

The regulations should have nothing to do with pricing as the pure market should decide and the regulator should be there just to ensure fair access and prevent exploitation and monopolisation (e.g. on the shared suburban lines into London).

The ownership of rail infrastructure would provide the sort of mix of income and assets that would be appropriate for large institutional investors such as pension funds.

They could then bring companies such as Virgin and Arriva in to undertake the actual operation of the services as that is what they are good at.

By undertaking this on a purely market basis, this would have removed the subsidies and we would find out what the real cost of a peak rail ticket from Cambridge to London costs.

That might mean that a lot of people give up using the rail for commuting purposes and some would move nearer to their jobs.

That's the point of a market approach with regulation excluding price controls, you find out the true price of something even if that knowledge is that a proportion of the current commuting population can't afford to use it and have to find alternate jobs / means of transport.

Tim Newman said...

"Tim Newman: So does someone working and living in a town spend more or less than a commuter?"

It depends on the salary differential between the two. A city lawyer living in a satellite town might well spend a lot more money than his small-town counterpart (or at least his household might) because he earns so much more. Put it this way: I live in Phuket but work in Nigeria. I spend one hell of a lot more money in Phuket now than if I lived in Phuket earning peanuts.

Tim Newman said...

In fact, isn't the complaint that well-paid city workers price the residents of rural towns out of contention in housing, etc. when they buy weekend homes there? That suggests these city workers are outspending the locals by quite some margin.

Anonymous said...

Seems to me there's a difference between 'sweating your assets' and having to run loss making services because of your operating license.
Airlines move aircraft constantly because to move an aircraft is cheaper than leaving it standing somewhere expensive, cheap airlines have longer downtimes at cheaper, provincial airports & never park up overnight at Heathrow etc if they can avoid it.

TOCs run mostly empty, loss making, off peak services because they have to.

Anonymous said...

The current model of privatisation has worked very well. It would have been daft and unsafe to have split the track up and to have sold portions to different operators. Safety is paramount on the railway and should be the responsibility of a single state owned or highly regulated owner.

Although I can see the author's point, unfortunately, most people don't live in a world of perfect choice or anything close to it. For many people, particularly in today's jobs market, changing jobs to an out of town location is not feasible for sufficient people to make the author's vision tenable.

David C said...

It's great that Caroline Lucas, queen of green, has come out against these rises.
Surely green policy should be to encourage people to live close to work?

There was an error in this gadget