The release of the UK’s inflation figures for June has grabbed the attention of keen-eyed rail commuters and analysts: not the Consumer Price Index the government generally prefers, but the Retail Price Index measure (RPI) lurking near the bottom of the Office for National Statistics press release.
The RPI figure for July is the one used by the government for setting its regulated basket of rail ticket prices that come into effect the following January. Its present policy, part of its never-ending quest to shift the cost of railway travel on to those who need it most, is to add one per cent to the July RPI.
The figure for June was 3.9 per cent. Since the turn of the century the figure for July has been twice as likely to be the same or higher than the one for June. In other words, there is a two-in-three chance that this July’s RPI, to be published in August, will lead to fare hikes of 4.9 per cent or more in the New Year.
This bad news for the nation’s rail-users extends to TfL passengers too. The government’s latest emergency financial settlement to deal with the impact of Covid on TfL’s finances compels Sadiq Khan to agree to the same overall RPI+1% increase at the start of 2022. Headlines anticipating a “fares bombshell” have already appeared.
Fares, of course, have always been a political minefield. The Mayor’s freeze was criticised by opponents as “squandering” money. But that line of attack now looks likely to backfire. Given that many economists and urban experts believe we should be trying to encourage people safely back into our city centres, it is hard to see how such a substantial increase could come at a worse time.
Pre-Covid, the British railway and London Underground systems were probably more dependent on fare income than any others in the developed world. That model has been turned upside down by a Covid-induced collapse in passenger numbers TfL is struggling to recover from. The risk is that a big New Year increase will deter people from using public transport, leading to a reduction in revenue rather than an increase and slowing the capital’s economic recovery.
Londoners and many others who will be using the network next year, should prepare themselves for hefty fare increases as well as months of blame-gaming amid fallout from one of the most unpopular transport policies affecting commuters.
Alexander Jan is chair of the Central District Alliance business improvement district covering Holborn and Clerkenwell, and chief economic adviser to the London Property Alliance. Follow Alex on Twitter.
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