RAILWAY FARES (Hansard, 2 March 1976)

§ Mr. Julian Critchley (Aldershot)

I am fortunate enough to have the Adjournment debate on the problem of railway fares. It is fortunate because I can reflect in the House of Commons the legitimate anxieties of so many of my constituents. I am unfortunate, how- 1276 ever, in that it should have fallen on a night when we had not one, but two, Scottish Bills to deal with. I used to be a staunch Unionist, but my conversion to Scottish nationalism in the course of the evening has been something like instant. This is perhaps something that the Minister and I will be able to agree about in this short debate. I have the added disadvantage in that last night I went to bed in Paris, which means that whereas for the Minister it is almost one o'clock, for me it is almost two o'clock.

The whole question of the seemingly ever-increasing rise of commuter fares has been put in focus by the Government's decision to place a cash ceiling upon the subsidy for British Rail. Already there have been three fare increases within a year, there is the prospect of a further increase this April of 17 per cent., and yet another is threatened for autumn 1976. The last is necessary to pay for the wage increases which are scheduled for later this year.

It appears that the heaviest increases in fares will fall upon the long- and middle-distance commuters rather than upon the inter-city services. The increase in this sector will come in spite of an 11 per cent, decrease in usage in 1975 and a further fall, estimated by British Rail at about 3 per cent., in 1976. One is forced to conclude that British Rail is leaning heavily on a sector of the market which is obliged to use its services—the commuter.

I have one example of a constituent who has written to me to express his disquiet about the situation. I could give many examples, but I shall restrict myself to this one. My constituent lives in Yateley and travels every day from Farnborough to Waterloo, a line which, I believe, actually makes money. In July 1975 his first-class yearly season was £419. It rose to £485 and in April this year it will go up to between £557 and £575. My constituent makes the point that he needs to earn £1,690 a year before tax in order to pay for this season ticket.

If we add to that cost the cost of car parking at Farnborough, which amounts to £42, we are almost approaching a figure of £600 a year for a first-class season ticket, for which £1,818 has to be earned. In this case, as the commuter earned more than £8,500 a year, 1277 he has not been permitted any increase in salary following the "instruction", if I may use that word, of Mr. Jack Jones, and the inclusion of that element of redistribution in the Government's incomes policy.

That is an example of a man who is comparatively affluent, and who can afford to travel first class. However, only about 7 per cent, of those travelling on the railways travel first class. If that man is in some difficulty, how much more difficult is it for the less affluent among my constituents and for the young marrieds who are obliged to use the trains?

Some months ago, the Secretary of State for the Environment said, with all that radical chic of someone who lives in London, W.8, that members of the middle-class had been far too successful in persuading the State to subsidise their rail tickets from their commuter homes. That is a curious point of view because it suggests that only the rich use the railways. It is not true but it is a myth that may be foisted upon us. It is the lower income groups that are by far the greatest users of public transport, and 50 per cent, of the families in this country have no car.

If, for a moment, it is accepted as true that the middle-class commuter is to a degree subsidised by the subvention of himself as a taxpayer, he would argue, not unreasonably, that he is fairly entitled to claim back something from the amount of money that he pays to the Inland Revenue.

There is no doubt that the middle classes—and I use the term "middle income group" now because it has been introduced into my short speech by the Secretary of State for the Environment—are suffering from Socialism's three-way stretch. Socialism's three-way stretch is, first, that we suffer from the highest rate of income tax in Europe, save for Sweden; secondly, that we now endure European levels of indirect taxation; and, thirdly, that we suffer from the highest rate of inflation in Europe. The middle class, in particular, is caught all three ways by this Government.

Over and above that we have the steady increase in rates which bear so heavily upon owners of property. I fear that another five years of Socialism and 1278 we shall find that the middle class has nothing left, save its accent, and British Rail will lose a third to a half of its passengers.

I make no pretence to solve, particularly at this hour of the night, the extremely difficult economic problems that face the railways. I see a need for a ceiling on Government moneys and subsidies. However, in looking at the problem of the railways and trying to find somewhere some relief for the person who is obliged to use them to get to work every day, we have to look at the whole problem of overmanning on British Rail. That is one part of the problem. The second part is the sheer managerial inefficiency with which British Railways are run.

Restrictive practices are still prevalent in British Railways. The second man on the trains, a hang-over from the days when British Railways had steam locomotives, is still there—earning £47 a week, mainly for making tea. Restrictive practices on the freight side are quite alarming. If a particular foreman in a marshalling yard does not feel like using the new equipment for which we have paid in order to make British Railways more profitable, he refuses to do so, and management is quite unable to persuade him to its point of view. There is already planned a reduction in manpower on British Railways from 230,000 to 190,000 by 1981. But I submit that a larger reduction than that will be required.

However, the unions are not the sole villains. Indeed, anyone who watches television will have noticed a very curious alliance that has sprung up between the leaders of the railway unions and the commuters. There was a time when commuters in my part of the world had nothing good to say of Mr. Ray Buckton, but there now seems to be an alliance between the two.

If the unions are not the only villains, the other is the management of British Railways. The sum of £115 million a year, or 14 per cent, of the budget of British Railways, is spent on administration. A number of people working in the industry have suggested that this budget might easily be cut by half, with all the savings in money and the additional efficiency that would occur.

1279 The essential point for British Railways is that they must persuade the public that they, the public, are actually beginning to get value for their money, both by holding down what appears to be an irrevocable rise in fares, and at the same time attempting to limit the subsidy, which is now running to the tune of £500 million of our money each year on the railways.

§ The Under-Secretary of State for the Environment (Mr. Kenneth Marks)

When I saw the subject for tonight's Adjournment debate, I had visions of being faced by several ranks of hon. Members from commuter-land. Perhaps they have all caught their trains.

I am grateful to the hon. Member for Aldershot (Mr. Critchley) for the way in which he has made his points. As he says, the increase in rail fares, and particularly the cost of commuting, is causing a lot of anxiety. I want to make it perfectly clear at the outset, therefore, that the Government realise that the fares increases are biting into family budgets, and that we do not regard commuters as a group of captive plutocrats who should be soaked for every penny that British Rail can get out of them.

The example that the hon. Gentleman gave of the £8,500-a-year man travelling first class was not a typical example and, not a good one to use on this occasion.

Certainly no one wanted fares to increase. If the rise this month could have been avoided in an acceptable way, I can assure the House that the Railways Board and the Government would have seized it. My aim tonight is to explain why the increase could not be avoided and what the Government are doing to help maintain the passenger system.

The London and South-East area of British Rail accounts for about 40 per cent, of all the passenger mileage travelled in the country. About 1 million passenger journeys are made each weekday. This is a very formidable operation and one which makes an essential contribution to the working of London. Although there is quite a lot of commuting into other large cities, the vast majority of rail commuting journeys are made into London. What I shall say tonight, therefore, will be concerned mainly with the South-East Region.

1280 As the hon. Gentleman pointed out, there have been four railway fares increases since June 1974, amounting to an overall rise of about 68 per cent. The increases at the end of this month will average 12 per cent. I fully realise that these are very substantial increases. They have been essential in order to keep up with sharply rising costs. One reason for fare rises in the past two years having to be so steep was to make up for the way in which rail fares were allowed to fall behind the general level of inflation—and, in particular, the rise in rail costs—during the period of price restraint imposed by the previous Government between 1971 and 1974. During that period, rail fares rose by 2 per cent, less than the retail price index, and 12 per cent, less than average earnings. I am not making a party political point, but merely explaining that the increases of the past 18 months were required to keep up with not merely current cost increases, but the rise in costs in previous years.

I can indicate the extent to which there had to be catching up for past fares restraint when I tell the House that even after the 1975 fares increases, rail fares had risen only slightly higher than the retail price index from 1971–75. Rail costs had increased substantially more than both the price index and fares.

I must also emphasise that the Government have not allowed rail fares to rise to the full extent of the rise in rail costs. Fares increases would have had to be considerably greater if it had not been for the massive subsidy of over £300 million which taxpayers paid for the support of the rail passenger system alone in 1975. The Railways Board also received payments towards its freight deficit, passenger services in metropolitan areas, level crossings and historic pensions liabilities. Altogether, this brought the total level of Government financial support for the railways to almost £500 million last year.

As the hon. Gentleman will recall, in the Railways Act 1974 we set aside a total of £1,500 million for the support of the rail passenger system. At the time, it was hoped that the money would last for five years. By June 1975, however, it was clear that the £1,500 million would run out much sooner unless strong counter-measures were taken to increase the railways' revenue and reduce their costs. We have, therefore, had to set 1281 British Rail the short-term target of limiting the passenger support grant for 1976 to no more than the 1975 level in real terms—namely, allowing for the general level of price increases expected in 1976 as compared with 1975. The fares increases of September 1975 and March 1976 form a vital part of the action British Rail considers it must take if it is to meet this short-term target.

The alternative to these fare increases would have been either to increase public expenditure or to make cuts in other vital programmes, such as housing or our efforts to combat unemployment. Neither of these would have been acceptable, so we have had no alternative but to hold to the financial target for 1976. British Rail believes this makes the March fares rise unavoidable. It is in the best position to judge what action is needed to meet the financial target. We could not both set the Board the target and prevent it from taking the action to achieve it. Even so, it should be remembered that the Government will be giving the passenger system as much financial support this year as we did last year. Without this aid, even higher rises would be needed.

Having explained the background to the recent increases, I shall try to answer the specific points about this topic that have been made by the hon. Gentleman and in the Press. The first is the contention that commuters pay for a disproportionate share of British Rail's total costs. It is often said that British Rail increases commuter fares by larger amounts than other fares because it believes that it has a captive market in commuters. It is true that in the increases which will take place in March, fares in London and the South-East—the area where most commuting by rail takes place—will rise by more than fares on inter-city services—namely, by 10.17 per cent, compared with 5.12 per cent. However, fares in London and the South-East will be going up in general by a smaller percentage than fares for non inter-city services in other parts of the country.

Moreover, while it is very difficult to allocate British Rail's costs between its various services, the indications are that in general commuter services are more heavily subsidised than inter-city services. 1282 This will continue to be so after the March fare increases.

There is not any question, therefore, of the Board "soaking the commuter". The differences between the average increases in inter-city, commuter and all other rail fares are small. Inter-city fares are to go up by slightly less than commuter fares, and commuter fares by slightly less than "provincial" fares because the Board believes that this is the best way to get the optimum increase in earnings and thus enable it to meet the financial target for 1976.

There are two further points which must be remembered when comparing the commuters and other rail users. First, the commuter makes more costly demands on the railways than do other users. Most commuters travel during short peak periods. To cater for these British Rail has to have large amounts of rolling stock, large numbers of staff, and a vast and complex infrastructure of track and signalling, which, though intensively used during peak periods, cannot be profitably employed for most of the rest of the day.

Secondly, despite the recent fare increases, commuters purchasing season tickets still obtain a substantial discount. When the price of a weekly season ticket is compared with the price of purchasing the requisite number of single ordinary tickets for the rail journey concerned, the discount the regular traveller receives is very large.

A weekly ticket from Brighton to London, for example, costs about 50 per cent, less than 10 single tickets. To quote another example, an annual season ticket for travel between Guildford and London costs about 40 per cent, less than single tickets would. I take a further example, from the commuting journey to London from the hon. Member's Alder-shot constituency. Even after the fare increases in March this year, the cost per mile of a quarterly season ticket from Fleet to London will be about 2.2p compared with nearly 4p per mile for an ordinary return ticket. I am sure that a great many bus users would be pleased to travel at a rate of 2.2p per mile. Thus, although it is undeniable that increases in commuter fares in the last two years have been very heavy, the commuter is still receiving a very significant discount for a service which, 1283 by its nature, makes less efficient use of resources.

It has been suggested that repeated fares increases will lead to lower total earnings—in other words, that so many people will be driven away from rail travel that the railways will die for lack of custom. In fact, passenger journeys in 1975 were 2 per cent, less than in 1974. To some extent this reduction in rail travel was caused by fares increases, but it was also caused by the business recession.

The Board says the fares increases in 1975 added an extra £90 million to the passenger system and it estimates that the March increase will yield an additional £30 million this year. The Board is convinced, therefore, that the point of diminishing returns has not yet been reached.

I have been asked whether commuters could receive tax relief on their fares. Tax changes are a matter for the Chancellor of the Exchequer, but, as my hon. Friend the Minister for Transport has pointed out, a subsidy in this form could be highly regressive, giving most benefit to those on high incomes with high marginal rates of income-tax, such as the example given by the hon. Gentleman.

I know that there is resentment among many commuters that they are having to pay higher fares for services which are sometimes unreliable or overcrowded. I wish that we could replace all the old rolling stock and upgrade all services, but in our present financial position that just is not feasible.

As I have already said, it is already very costly to provide for a huge peak period demand when the services are little used during the rest of the day. The costs of a general increase in services at peak times, in terms of rolling stock, train crews and improvements to track and signalling, would be prohibitive. The avoidance of all delays and cancellations of services would require even greater investments in staff and equipment.

1284 I am certainly not saying that there will be no improvements made to the quality of commuter train services. Wherever they can be justified, improvement and modernisation will continue to be carried out. But even to maintain the present level of service in the London and South-East region will require substantial investment in rolling stock and infrastructure over the next decade.

I know that the "No Rail Cuts Campaign" has alleged that a constant, rather than a constantly rising, level of investment in the railways will lead in a short period to either massive line closures and service reductions or to a "rotting railway". I cannot accept this. The level at which we have decided to stabilise investment in the railways is higher in real terms than at any time since the mid-60s.

As I said at the outset, the Government recognise the problems and frustrations of commuters. We are giving very substantial financial support to the passenger system this year. We could give more only by cutting other vital programmes. We could not do that without unacceptable consequences. That is why the March increase in fares in unavoidable. Even so, the average commuter is not having to pay much more than about 2p a mile for his journey on British Rail to work. By any standards, that is very good value in these days.

For the longer term, we are examining the whole question of commuting and the rôle of the railways in the transport policy review. Before we reach any conclusions, there will be wide consultations and, I am sure, debate in this House. Our aim is to achieve improved integration, and better public transport and this must be as much to the benefit of rail commuters as to any other section of the community.