Train fares may have to rise to pay for a huge taxpayer-funded bailout of the railways, Grant Shapps suggested today as he unveiled the biggest reform of the network in almost 30 years.
The transport secretary said that the government would have to weigh up the balance between taxpayer support and the prices paid by passengers after £12 billion of public money was spent in the past year keeping largely empty trains running during the pandemic.
He denied that there was any hidden agenda to increase fares and insisted that running a “more efficient railway” could bring overall costs down in the long term.
However, asked if he could promise that fares would not rise above inflation in future, he said: “I’m not here to give guarantees for years to come.”
The comments were made as Shapps unveiled the most radical reform of the railways since privatisation.
A new public body, Great British Railways (GBR), will be set up to manage all parts of the rail industry for the first time since the abolition of British Rail in the mid-1990s.
The group, which will be independent from the Department for Transport, will be given complete oversight of train operations and management of the 20,000 miles of track. It will set fares and timetables as well as acting as a central point for ticketing, replacing the existing National Rail Enquiries service.
It is designed to replace the heavily fragmented system introduced when the railways were privatised by John Major in 1993, in which trains and infrastructure were hived off to separate entities.
The new organisation, which will use an updated version of British Rail’s double arrow as its logo, is unlikely to be fully established until 2023, although some reforms will be introduced sooner.
Shapps said that railways were built to provide affordable and rapid travel but added: “Years of fragmentation, confusion and overcomplication has seen that vision fade and passengers failed.”
As part of the reforms, flexible season tickets will be introduced next month to tempt people back onto the railway after a collapse in use since March last year. The tickets, on sale from June 21 for use from June 28, are designed to appeal to commuters who will continue to work for at least part of the week at home after a change in working habits prompted by the pandemic.
All train companies will be expected to allow passengers to buy a ticket that can be used for eight return journeys in 28 days, the equivalent of two days a week. This is expected to provide savings of about £220 a month compared with a full-time season ticket between Manchester and Liverpool, and £250 a month between Woking and London.
The flexi-tickets will have to be available as smartcards and on smartphones, with passengers able to tap in and out at the station with no need to select the days of travel in advance.
At present the government sets regulated rail fare rises, which includes regular season tickets on most commuter journeys, some inter-city off-peak returns and any-time tickets around big cities. In March prices increased by 1 per cent above inflation — 2.6 per cent overall — the first real-terms rise in eight years.
This was in response to the government’s huge investment in the railways during the pandemic, when passenger numbers collapsed, wiping out train operators’ income.
Appearing on BBC Breakfast, Shapps was asked whether a ticket would be cheaper under his reforms. “My instinct is, of course, as a commuter I would love all train tickets to be cheaper,” he said.
However, he added that “any government has to make the very legitimate play-off between ‘Should people who don’t use the railways be subsidising people who do and to what extent?’ and we are always trying to get that balance right”.
He told Today on Radio 4 that it would be a “more efficient railway” as a result of having a single organisation in charge and the formula for setting regulated fares would not change.
However, asked if he could promise that fares would not rise higher than inflation, he said: “I’m not here to give guarantees for years to come.”
Shapps said there was “absolutely not” a “hidden agenda” but pointed out that the taxpayer had plugged a £12 billion hole during the coronavirus crisis and fares were subsidised. “Of course any government in the future will have to weigh those things up,” he said.
The plan stops short of full renationalisation of the railway, which has been demanded by Labour, with ministers insisting that it instead represents “simplification”.
Private companies will compete for contracts to run individual train lines, as they do now, although the system will be based on London Overground-style “concession” agreements. This will involve GBR collecting fare income directly and set close specifications for private operators to follow, with companies penalised for failing to run punctual and reliable services. Long-distance intercity rail operators will have “more commercial freedom” than those running commuter lines.
The two-year concession agreements will be signed with existing train operating companies later this year before being put out to tender more widely from late 2023.
Network Rail, the state-owned company that presently operates and maintains railway infrastructure, will be absorbed into the new body, which is based on a model recommended by Keith Williams, the former chief executive of British Airways, who was commissioned by the government in 2018 to overhaul the railways. It followed the chaotic introduction of new timetables earlier the same year, which led to the meltdown of services in the north and southeast of England.
Boris Johnson said: “I am a great believer in rail, but for too long passengers have not had the level of service they deserve.”
Jim McMahon, the shadow transport secretary, said: “Labour has long argued that public ownership of the rail network will provide better value for the taxpayer and for passengers, who deserve more than rhetoric from this government.”