Can you believe it: rail profits enhanced by government policy

Government policy on rail fares could increase train operating company profits.

That risk is one of the startling findings of a report published by the National Audit Office yesterday under the title of “Reducing costs in the Department for Transport.”

The report highlights a number of issues around the DfT’s management of budget cuts, including £759 million from passenger rail services, following the ConDem Coalition Government’s Comprehensive Spending Review (CSR) in 2010.

One outcome from the CSR was that train operating companies were allowed to increase rail fares by as much as an average of Retail Price Index (RPI) Inflation + 3% for each of the three years from 2012.

The government had claimed that 2% of the increased rail fares would be used to reduce the burden on the tax payer, whilst train operators are on record of saying that they were only going to collect this money for the DfT.

But now it transpires that the National Audit Office (NAO) has found that the exact allocation of the fare increases is down to commercial negotiations with train operators which appears to contradict earlier ministerial statements.

The finding has led the NAO to comment:

“There is a risk that the benefit of the resulting increase in passenger revenues will not be passed on to taxpayers fully, but will also result in increased Train Operating Company profits.”

Together for Transport comments: “Despite the government’s recent decision to raise fares by an average of 6% instead of 8% many passengers will still be feeling ripped off and that feeling will be magnified by the latest news which could see the gravy train of rail privatisation further enhance the profits of train operators.”

“The news comes at a time when passengers are having to come to terms with George Osborne’s Christmas present of inflation busting fares rises, further undermining many families’ standard of living because of stagnant salary increases.”

“We always knew that the Conservative Party favoured business – just look at how they are passing the cost of the bankers’ bail out onto cuts in public sector workers’ pensions – but to raise the possibility of enhancing company profits at the expense of hard pressed passengers is simply scandalous.”

If you feel ripped off and misled by the government, join our Great Train Fares Robbery Campaign.

And why not let us know how much more your train fares will be from January?