Every January in Britain, the rail companies put up some of their fares. And every January in Britain this leads to outrage.
Which is odd, because most other businesses are constantly changing their prices but we don’t get anything like the fuss when they happen to put some of those prices up.
The reason, of course, is government. In Britain the government regulates a certain number of fares, usually on the busy London commuter routes. Or, to put it another way, in Britain the government uses violence and the threat of violence to regulate fares. It is in January that the government allows rail companies to increase their fares in line with inflation plus or minus a small percentage.
Not only is this practice wrong but it also distorts the market leading to overcrowding (see A generic piece on overcrowding). It also deprives rail companies of the sort of price signals they need to run their businesses successfully. Because they don’t know how much people are genuinely prepared to pay for a seat, against how much they are prepared to pay to stand, companies don’t know what sort of mix of seating and standing they should be providing. Nor do they know how many trains they should run and whether increasing the number of trains would justify the cost of, for instance, new signalling.
Worse still, while allowing rail companies to charge something nearer the market rate is a step in the right direction so long as regulation and the threat of regulation exists, companies are unable to plan for the future.
So, you would allow train companies to charge whatever they like?
But wouldn’t they charge the earth? And when they do wouldn’t that mean that lots of people could no longer afford to get to work and end up unemployed?
What we have here is a conflict between the short term and the long term. The advantages of market prices will for the most part only be seen in the long-term while the disadvantages (higher prices) will be seen almost instantly.
One of the sad things is that we don’t know how severe the short term pain is likely to be. It might indeed lead to the doomsday scenario but equally other things might happen. For instance, in many cases employers may find that they don’t need all their employees to show up on the dot at 9 o’clock in the morning. So, it may be possible for many of them to travel off-peak. Equally, many rail companies may take the view that the profit-maximizing price isn’t that much higher than it is at the moment or that a better way to gain goodwill would be to approach it at only a slow pace, say 20% a year or so.
What sort of long-term gain do you see?
It is difficult to gaze into the future. That’s one of the weaknesses being in favour of freedom. You can’t predict with any certainty what will happen. For instance, it may be the case that something comes along which replaces railways for good.
I could speculate on rail companies running longer trains or double-deck trains or having different classes of carriage: guaranteed seat, standing-room only etc or introducing seats that are locked out of use at peak hours, but I really have no idea what would happen. All I can be sure about is that it is likely to be a lot better than the situation that we have at the moment.
Notes for the next version
“Outrage”. We need a better explanation as to why. I think a lot of it is to do with fear: “I’ve got my job, bought my house and if the fares go up too much one of them is going to have to go. Hey, I could even end up destitute.” Hmm, actually that’s the fear of fare freedom. The outrage at a rise is different.
We need something on the history of this. Before 1940 there was almost no fare regulation at all. Things seemed to work fine. Certainly, there was nothing like the outrage we get these days. OK, there were some problems immediately after the First World War with delays and overcrowding. I’ve heard the explanation that this was to do with the introduction of an eight-hour day but I would like to get to the bottom of this.
“Not only is this practice wrong...” Weak. What I want to get across is that the government is using violence and violence is wrong. I want to point out the inherent niceness of freedom.
Price signals. Too technical. I think we need to imagine a situation where price signals would have an impact and avoid using the term entirely.
Could do with a piccie as well.
Actually, I’m not even sure this is the right article. “A generic piece of fares” might be more appropriate.
The reason for this is simple enough: plain ordinary supply and demand. Normally prices adjust so that supply and demand are in balance. But when fares are artificially held down by the government - as they are in London - supply falls and demand increases. In this case it means less space and more passengers and thus, overcrowding.
[As an aside. I always find it funny how the same people who condemn high fares also condemn overcrowding which is a direct result of low fares.]
There is also an issue with investment. Even if the incentives lined up there would be a problem. Train operating companies (last time I looked) typically have a government-mandated franchise period of about 7 years. But trains take 20 years to justify the investment so it makes no sense for operators to buy longer trains - let alone build the longer platforms needed to accommodate them. [Not that they could given that these are owned by Network Rail.]
Now the overcrowding situation in Tokyo is far from perfect but if I had to be overcrowded I would be overcrowded in Tokyo. There is more standing room so you are more likely to be able to stand up straight and there are more doors per carriage so it’s easier to get out. And if you are extraordinarily lucky and manage to get a seat it is at least comfortable. I can’t help but think that this is due to Japan’s rather more sensible private railway system in which operators own both the trains and the track and can do more or less what the like with them. [Except, incidentally, when it comes to fares which like London are held down. Hence the overcrowding.]
Isn’t all this just a case for state ownership?
We tried that. It was called British Rail and there was plenty of overcrowding there too.
Why was overcrowding so bad on British Rail?
Because politicians liked keeping fares down but disliked shelling out for new rolling stock.
But if fares were free wouldn’t the train companies put them up sky high?
I don’t know what would happen initially. When markets are introduced overnight all sorts of funny things happen because the price signals aren’t in place. It takes a while for things to adjust and (in this case) for train companies to work out just what their customers really want. What you have is a choice between short-term pain and long-term gain or short-term gain and long-term pain. There is no short-term gain, long-term gain option to my knowledge. [Writing this I am reminded of Brian Micklethwait’s quest for examples of where freedom makes things better overnight. Not here I’m afraid, Brian.]
It is worth remembering that in the days when fares were freer (before nationalisation) although people grumbled (particularly about freight rates - but that’s another story) it wasn’t that big an issue.
Isn’t it pretty obvious what people want? What they want is a seat.
Is that true? Sure they want a seat but how much do they want it? Let’s face it on many lines in London you can get a seat if you are prepared to pay the First Class fare. But how many people are prepared to do that? The truth is that people are prepared to forgo the comfort if it means saving some money.
For what it’s worth, my guess is that given enough freedom and enough time things will work out for the better for just about everybody. Some companies will change their working hours for some staff encouraging them to travel outside the peak. Train companies will have a variety of classes ranging from luxury to standing-only depending on what people are prepared to pay. And standing will be nicer. One of the worst aspects of standing in London is that you can never stand up straight. You’re always standing at a slightly contorted angle. Usually because you are bang next to a seat.
But I think you would also find that train companies would invest heavily on routes people wanted to use. They would lengthen trains and platforms and improve headways and remove bottlenecks.
I haven’t yet watched Richard Wilson’s programme on British railways that was on Channel 4 the other day but I’ll stick my neck out and guess that it makes the following claims:
Fares are really expensive
Trains are frequently delayed
Subsidy is high
Trains are frequently overcrowded
This is all the fault of privatisation
I’m going to stick my neck out again and guess that it won’t be saying any of the following:
Railways are highly regulated
Rail fares are highly regulated
The wheel-rail split is the source of many of the industry’s problems and is mandated by the EU
That trains are much cleaner, brighter less vandalised and more reliable than they used to be
That many fares (restrictive as they may be) are extremely cheap
Overcrowding is a classic example of price controls causing shortages
That railways are expensive
That most of the subsidy goes to little-used rural lines
That railways are capital intensive, that it takes a long time for investments to become profitable and that franchises are typically short-term thus removing any incentive for rail operators to invest for the long-run.
Or, to put it another way, a lot of the things that get blamed on freedom are, in fact, the result of state violence.
I keep complaining that trains have a terrible user interface for payment: tickets. For example: if you get to the station and there is a very long queue, you might miss your train.
The Register is reporting that two German rail networks are interlinking their payment and ticketing systems:
Frankfurt’s regional travel authority is to merge its NFC infrastructure with the national rail operator, creating an interoperable network for travelling across Germany with a tap of the phone.
The cool part is NFC. Near field communication uses magnetic induction to send data over short distances. This is how Oyster works, but it is also appearing in phones, especially Android phones. This means you could buy a ticket using an app on your phone, then use your phone to touch-in at the gate. No queuing or ticket printing required.
The Reg article also mentions that thetrainline.com are doing something similar in the UK with barcodes. It’s early days: one recent press release suggests that this will work “when rail operators start supporting this feature in the coming months”.
I think NFC is a better long term bet. NFC readers should be cheaper than barcode readers, and easier to use. Around London we already have Oyster readers everywhere, and people are familiar with them. It should only require an electronics upgrade at the gate to the existing Oyster reader, rather than larger physical changes that barcode readers would need. It might take a while for NFC to be ubiquitous in phones, but phone technology moves very fast.
The annual rise in train station tea and coffee prices will see an inflation-busting average hike of 6.2% while some prices, particularly for popular lattes and double espressos will rise by a whopping 10%.
A spokesman for train station cafe-operator, National Espresso said that the price rises, which are regulated on an inflation plus 1% basis, were needed to pay for the new high-speed coffee machines.
But these remarks were condemned by the drinker watchdog, Frappucino Focus. In a statement they said: “This will simply drive more people out of stations and into roadside cafes.”
Meanwhile the junior beverage minister explained that government cut backs meant that more revenue had to come from consumers. “While we regret these rises, caffeine-addicts must understand that we are all in this together in these straitened times.”
It wasn’t difficult to find outrage among consumers. “This is outrageous.” said one. “I am outraged.” said another. A commuter said: “They have the cheek to put up their prices like this and we still can’t find a seat.”
Patrick Crozier of TeapotBlog said: “This was never a problem before the government got involved with its subsidies, regulations and fare controls. The choice and quality of teas and coffees available to commuters were second to none and no one had a problem getting a seat. Thank goodness we don’t have any of this nonsense anywhere else on the railways.”
If Transport Blog were still going I would be very inclined to link to this piece:
Good thing too, I would say. Fare control is a form of regulation, regulation is a form of intimidation, intimidation is a form of violence and violence is wrong. That’s the moral side. On the practical side: violence doesn’t work. So any removal of violence is likely to lead to a better world in the long run (though, not necessarily, sad to say, in the short run). So, that’s sorted I’d say.
However, I would add one thing. If the government wants to do this with the minimum amount of political damage, I would suggest freeing all fares but at the same time allowing everyone with an existing annual season ticket the right to renew that ticket at that price in perpetuity. My guess is that the number of people so privileged would decline to next-to-nothing in next-to-no-time.
I would then go on to say that freed of all that fare control (an all that Euro-regulation, of course) train companies would be free, through the process of price discovery, to offer the sort of services passengers really want. You know, that’s “really” as in: what they want and are prepared to pay for, not: what they want and are prepared to make other people pay for. Which for all, I know will include things like carriages without seats or even, seats you can actually sit in.
But Transport Blog is not going, so I won’t.
Every year (or near enough as makes no difference) the government allows the rail companies to increase those fares that they, the government, control. Result? Instant outrage. “Why should we pay more when the trains are so overcrowded/unreliable/expensive etc...” Sometimes there are feeble attempts to justify these rises along the lines of “Oh they are needed to pay for longer trains, taller trains, newer trains, more trains, faster trains etc.”
If you want to see the absurdity of this situation you need only compare this state of affairs with that state of affairs at Tescos. There’s none of this outrage when Tescos puts up the price of, say, a tin of peaches and no attempts to justify it on the grounds of “Oh we need to raise prices in order to fund the new store at Banbury.” No, there’s just the acceptance that if Tesco is putting up the price of something it is either because it costs them more to buy or because they want to prevent empty shelves. The store at Banbury will be expected to pay for itself.
Actually, you don’t even have to look as far afield as Tescos - simply look at those times and places when fares have been free. There was none of this outrage in the past when fares (for the most part1) unregulated. Mind you in those days fares for the most part were coming down and conditions improving2.
You don’t even have to delve into the history books. Currently, first class, most inter-city fares and freight rates are completely unregulated and there are few complaints.
The simple fact is that none of this outrage would exist if we had a true free market, with private rail companies having absolute freedom to charge whatever they liked.
So, why don’t we just return to that system as quickly as possible?
Vested interests. Or the man on the 0822 problem. He’s the guy who needs the 0822 to get to work but if fares went up dramatically (as they probably would if they were free) he would either have to lose his job or move home. Clearly he wouldn’t be very happy and would resist any dramatic move to a proper free market. And I can’t say I’d blame him. The point I’d make is that when you fix a problem it often involves pain but do you blame the person trying to fix it or the person who got you into that problem in the first place?
1. 100 years ago regulation such as it was extended only to what were known as Parliamentary Trains and Workmen’s Fares.
High fares are good for you
Free the fares
On the weirdness of popular rail economics
Here isn’t the news from the BBC
High fares are good for you - ultimately
At Richmond station there are no automated machines for topping up Oyster pre-pay, so one has to queue behind people making unfathomably lengthy and complicated transactions. Said I to the ticket clerk, “are there any plans to install Oyster machines?”
“That’s up to the London Underground People,” said he. “They would have to pay for those machines. We are South West Trains; it is nothing to do with us.”
Protested I, “But I am a Southwest Trains customer. Care you not for my convenience and the marginal benefits of such that might encourage others like me to favour your interchange over other routes? Could not some agreement be made to the satisfaction of all?”
Alas, it was nothing to do with him. He was a mere employee of South West Trains.
Overheard on a train yesterday:
Passenger: Can I have a ticket from North Sheen to Reading please?
Guard: This train doesn’t stop at North Sheen.
P: Oh, I changed at Richmond.
G: Why didn’t you buy a ticket at Richmond?
P: There wasn’t enough time to make the change, I’d have missed my train. And there was no-one selling tickets at North Sheen.
G: It’s your responsibility to buy a ticket before you get on the train.
And with that the passenger was made to sign a slip of paper and got booted off at the next station. I don’t know the rights and wrongs of the situation. It seems a little harsh to me but perhaps the guard knew that North Sheen is well staffed. On the other hand the passenger didn’t look like one of the ticket dodging kids I frequently see who hide in the toilet.
But all this is just another user interface problem. No-one would put up with software that threw away half an hour’s work because they didn’t have time to click the right button when they first loaded it up. Being thrown off a train half an hour into a journey because you didn’t have time to buy a ticket, or there was no-one there to sell it, is a similar problem. Being too late to buy a ticket but not wanting to miss the train is a dilemma I’ve faced. Another is forgetting to extend my return ticket and, having hunted the train for a guard who won’t sell me an extension, choosing between breaking my journey half way to buy one or risking getting in trouble at the end.
The solution is a better user interface. Oyster pre-pay is better than paper tickets, although not without its own UI problems. The best idea I’ve heard of is buying tickets by text message. This has the advantage of working wherever you are, so no queuing and no missing trains. Happier customers and less aggravated guards will result.
The idea was that I would get up early, travel up to Putney1, take some photos and report back on the sardine-like conditions on London’s trains in the rush hour.
So what went wrong?
- The sardines didn’t show. What I actually saw were scenes like this:
So, everything’s hunky-dory, then? Proof positive that overcrowding can be solved without your plan of punting the fares into the stratosphere.
- Well, hold your horses. While things were a lot less crowded it could have been because it was a Friday. More to the point, it did occur to me that almost no one on board could be described as comfortable. If you were standing the chances were you would be doing so in a rather contorted position and if you were sitting… well, the seats are too narrow, there’s no legroom, they’re far too upright (Tornado position3) and if you’ve got a window seat your legs’ll be crushed by what appears to be metal trunking placed there for that sole purpose.
- Frankly, I think I’d rather take my chances with the Tokyo rush hour.
You’re kidding me! Don’t they have people pushers?
- Apparently they do, not that I have ever seen them. And I’ve my own memories. But last time I went things were much more civilised.
The point about this, is that although everyone’s standing - they have to be the seats are locked out of use - they’ve all got a grab handle and can stand upright. Plus there at least four doors per carriage2 so they’ll be able to get out easily.
The thing is I suspect that British seats are so bad with knock-on effects to those standing because of incentives written into the franchise agreement between government and TOC.
- Well, these thing are subject to commercial confidentiality.
1. I chose Putney because in the days when I did commute, this was by far the worst stop with long waits as people shoved themselves aboard.
2. In some cases there are six.
3. So named due to the amazing similarity between the position they force the passenger to adopt and the position a Tornado pilot adopts immediately prior to ejecting.
Update. People pusher link fixed.
I see Which? have yet again been conducting a survey:
Millions of rail passengers are paying nearly 60 per cent more than they should to travel because of bad booking advice, a consumer watchdog claimed…
Half the calls resulted in too high fares being quoted, adding £1,263.60 to the cost of journeys which should - if the cheapest ticket had been offered - cost £2,174.
To which I don’t think I am going to say anything different from what I said a few years ago. With the possible exception that, if anything, things seem to have improved. To sum up: ticketing is difficult.
The Disgruntled Commuter finds out how easy it is to dodge the fare - so long as you are hard enough:
The ticket guys had a good go at stopping him - after he’d blown off the first one, the second ran after him and had a second try but they didn’t seem either willing or able to actually lay hands on him. I’m guessing that unless the police are there too they can’t actually physically detain someone.
Oh come on this is straight forward enough. It’s insurance against train cancellations in India, isn’t it? Not quite:
“My favourite ticketing system was in Mumbai, India,” Kim enthuses. “No one actually buys a ticket, but you can buy ‘ticket insurance’ from private entrepreneurs who work at the entrance of the station. The ‘ticket insurance’ is about half the price of a regular rail ticket. It gives you a guarantee that, in the extraordinary event that you are booked by a railways inspector for taking a free ride, your fine will be paid. A relative was once booked and the ticket insurer paid the fine exactly as promised.”
The ticket hike will help pay for 40 more carriages and 3,000 more seats on the new Cross Country service…
Is there any other business that’s run on these lines? Did Tescos charge more for tinned peaches in order to pay for their self-service checkouts? Of course not. Any decent well-run company is charging top whack anyway. And any investment should be able to pay for itself.
Of course, neither of these things apply to the rail industry where fare control with its concomitants of losses and subsidy mean that all sorts of perfectly sensible investments cannot be made without someone - whether the passenger or taxpayer - being made to feel a loser.
The answer is to abolish fare control.
Arriva’s proposed new livery
Strange that in the days when Britain's rail network was much closer to a free market, the fare system was much simpler. Could it be that state-imposed fare control and franchising just might have added to the confusion?
I see that the government is set to spend £1bn on 1,000 extra “carriages” to ease overcrowding. Groan.
Groan, because, if the last train splurge is anything to go by the new trains will be either unreliable, inappropriate, expensive or late - or all four.
And groan, because that’s going to be something like a £1,000 subsidy that people who don’t use trains will have to pay each London-bound commuter. Doesn’t sound quite right, does it?
Overcrowding is caused by fare control. The answer is to abolish fare control.
It’s a complicated explanation but railwaymen rarely talk about carriages these days, preferring to refer to multiple-units.
Update 16/03/07. Tim Hall has further thoughts.
Yesterday I watched a trainspotting documentary TV show fronted by trainspotting fanatic Pete Waterman, in the house of a friend who owned the DVD. Waterman made his money producing pop songs but he apparently likes to spend it, some of it, buying up and restoring classic steam locomotives.
Anyway, in part two of this four part series, which covered the pre-WW2 pre-nationalisation period, Waterman said something interesting, which I did not know. He said that Britain’s four great pre-nationalisation railway companies, LMS, LNER, the Great Western and the Southern, were obliged to become “common carriers” of freight. Whoever wanted to use trains to send freight could do it, at a price determined by the government, however inconvenient and hence unprofitable it might be for the train company. Nor were the train companies allowed to charge less than the government-ordained and publicly announced price for freight. No wonder freight on the roads took off, if you will pardon the use of a transport metaphor to describe transport. All they had to do was (a) undercut the railways by a few quid for convenient jobs that they wanted, and (b) just refuse to do all the inconvenient stuff, which the railways then had to do. No wonder the railways went into decline, and were unable, after the war, to resist nationalisation.
“They were forbidden”, said Waterman, “to be entrepreneurial.”
Is that true. Or is Pete Waterman just a rich and rabid trainspotter, who believes what he wants to believe?
Tube travel was supposed to be free on New Year’s Eve, something to do with NatWest sponsoring tube travel. On the way home the gates were open but I touched my Oyster card anyway because we are constantly told to ”always touch in and touch out” on posters and in P.A. announcements. I didn’t want to find a closed gate and have to pay the £4. When I got to my destination the gate announced that there was not enough credit on my card. What? Not enough credit to pay for a free fare? I was tired and no-one was around to help, so I walked through the open gate.
When I checked a few days later, it turned out I had been charged for an incomplete journey on that New Year’s Eve. £4 for a free journey seems a lot. When I challenged it at the counter, I was told that I could only be refunded £3. So that’s £1 for a free journey. I am sure that NatWest would not be happy at their money being stolen by TfL in this way.
TfL means Transport for London, by the way.
To me the real rip-off here is that you only get refunded the mere cash that you lost, or in this case not even all of that, rather than all the cash you lost plus ten quid minimum for all the bullshit involved in getting the cash back.
Rob also links to an article about what programmers can learn from the good and the disturbingly numerous bad things about the Oyster system.
Today rail fares have gone up. This is good news for taxpayers as the railways will require less subsidy and good news for passengers as their trains will be less crowded.
This has prompted renewed calls for the abolition of all fare controls. Patrick Crozier of Transport Blog said: “The abolition of fare control would improve time-keeping, reduce overcrowding, allow rail companies to stand on their own two feet and look into investing in more capacity, more seating and all sorts of new services no one’s even thought of yet.”
- They're probably right but only in the short run. In the long run things would be a lot better if we abolished fare control and allowed fares to rise.
- This is not a passenger group it is a state-appointed Quango and one that keeps changing its name - I can just about remember when it was known as the Rail Users' Consultative Committee.
- Isn't it funny how while car and and plane costs (minus taxes) keep coming down rail costs stay more or less the same?