Discounted fares now account for nearly half of all rail journeys

Discounted fares now account for more than 40% of all rail passenger fare income and generate nearly £3bn. This is one of the key findings contained in the 3rd Office of Rail Regulation’s Rail Industry Report.

The report, which covers the period 1 April 2012-31March 2013, also states that the £12.3bn cost of running the nation’s railways has remained consistent over the last three years.

Government support for the industry was £4bn in 2012-13, mainly for Network Rail track access charges, and was funded through the DfT (£2.8bn), Transport Scotland (£0.7bn), the Welsh government (£0.1bn), with TfL, the PTEs, and other bodies footing the bill for the remaining £0.4bn. In real terms state funding has decreased by 4.2% (on 2011-12) and by 9.1% (on 2010-11).

Government funding makes up 31% of the industry’s total £12.9bn income; passenger revenue contributes 59%, while car parking, property rentals, freight, open access and other charges account for the residual 10%.

State support for TOCs (the franchised train operating companies) continues to decline: In 2012-13, £1,939m was received in premiums, as against £1,231m paid out in subsidises, plus an additional £746m payouts through profit-sharing and revenue support schemes. This reduced taxpayer support to £38m (£0.04bn), £0.01bn down on 2011-12, and £0.04bn down on 2010-11 levels.

The passenger-taxpayer ratio of industry income continues to increase to 59.2% (2012-13), as against 57.4% (2011-12) and 55.6% (2010-11).

Service provision and government support show wide regional variations: In England government funding per passenger journey works out at £2.19 per journey, whereas the corresponding figures for Scotland and Wales are £7.60 and £9.33 respectively.

Likewise, there are wide variations in performances by the 19 individual TOCs. Although 12 make premium payments, some receive more money than they contribute as they are eligible for additional payments through complicated revenue support and profit-sharing schemes.

Some TOCS are more dependent on the public purse than others: If the Network Rail infrastructure grant and franchise payments are combined, then the total exchequer support is found to exceed 50% in four cases: Northern Rail (69%), Merseyrail (66%), Arriva Trains Wales (65%) and First ScotRail (64%).

At the other end of the scale, (state-run) East Coast Trains and South West Trains make a net contribution to the exchequer, as their franchise premiums exceed their track access charges. ECT made a ‘profit’ of £68m (approx 2% of turnover) and likewise SWT made £41m (approx 1% of turnover) in 2012-13.

Most of the remaining TOCs lie between these two groups.

The ORR, however, cautions against overdue reliance on some of the statistics it quotes. For instance, the East Coast performance is partly influenced by the low rolling stock leasing charges (£53m for 27 year old HST sets) whereas Virgin Trains pays £302m for its nine year old Pendolinos.

645/Apr 14


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