Rail operators ordered to slash prices

Rail operators have pleaded with the government to override pricing rules as deflation is now looming, although for the first time since privatisation train companies are likely to be forced to cut the price of season tickets and off-peak fares.

This is likely to result in train companies having to cut services as well as jobs, and for those operators who are struggling financially certain franchises may need to be temporarily nationalised.

Rail companies use a formula whereby fares will rise by 1 per cent above the retail prices index (RPI) each January, although rail companies are arguing that this is not designed to cope with inflation. However, as it stands operators are looking at losing millions of pounds as commuters renew their season tickets in 2010.

Economists are predicting that the RPI will fall to between -2 and -3 per cent in July resulting in fares falling from between 1 and 2 percent so the average commuter season ticket holder is likely to save up to £40 a year.

Dr Mike Mitchell the civil servant in charge of Britain’s railways has said that 25 percent of the franchises were being carefully monitored by the Department for Transport’s traffic light system.

A spokesman for the Department for Transport said: “RPI will be significantly negative in July, according to independent forecasting. Andrew Adonis will tell the Transport Select Committee that if these predictions prove accurate then the Government intends to allow regulated fares to fall.

“He will dismiss any suggestions that fares might be frozen simply to benefit the train operating companies, as this would be grossly unfair to passengers, said the spokesman.”

Story link: Rail operators ordered to slash prices