Which fares are regulated?

Hello

I'm doing a little research into fares regulation.

I understand the basic principles of what is regulated (eg season tickets, fares in former PTE areas, former 'saver' fares on former InterCity services), and I understand that fares are now regulated in 'baskets' rather than 'flows'. However, I would like to know if there is any list of precisely which fares are subject to regulation. For example, can one say for sure that the SOT to MAN off peak return (currently priced £18.50) is a regulated fare, and how can we be sure?

Thanks

The set of regulated fares is still defined by a set of 'flows' and a subset of the available fares on these flows.

But, as you allude to, each individual regulated fare may increase up to a certain percentage provided that there are counterbalancing reductions/freezes/lower increases which mean the overall predicted revenue increase does not exceed the regulated percentage (for the last few years, this has been the previous July's RPI).

FGW (as they then were) made significant use of this 'easement', to increase London Thames Valley commuter fares significantly more than the regulated percentage whilst freezing, and in some cases even cutting, local fares in areas like Cornwall.

The DfT disclosed all regulated fares and flows under FoI about 9 years ago. The Stoke to Manchester Off-Peak Return, route Any Permitted, is a regulated fare as you can see in page 1306 of part 3 of the attachment:



(2BFP is the CAPRI code meaning "the successor to the fare that was called a Saver Return in 2003" - i.e. the Off-Peak Return on this flow)

You can find some more information in this House of Commons briefing paper, but in a lot of ways fares regulation is now academic anyway - all ex-franchised TOCs are now operating under management contracts with (and therefore, under the direct control of) Transport Scotland/the DfT/Welsh Ministers.

Thanks very much, that's super helpful.

However, I wonder to what extent it is indeed academic? TOCs are still aiming to maximize revenue, and are still offering TOC-specific fares.

tomoufc said:

Thanks very much, that's super helpful.
However, I wonder to what extent it is indeed academic? TOCs are still aiming to maximize revenue, and are still offering TOC-specific fares.

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And so are the DfT and other funding bodies.
It's difficult to know how much the "regulators" are involved in the new contracts, or how much of this power will devolve to GBR.

LNW-GW Joint said:

And so are the DfT and other funding bodies.
It's difficult to know how much the "regulators" are involved in the new contracts, or how much of this power will devolve to GBR.

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Yep, fare 'regulation' was always a bit of a weird phrase. In reality, fares were never 'regulated' in the sense of having an independent regulator deciding what fares should be, they were always set by government, through the Franchising Director, the SRA, then directly.

One does indeed wonder how GBR will be any different. Being explicitly a government body running services through outsourcing, they will be responsible for setting all fares, not just the ones protected for social and economic reasons. Perhaps that will further politicise the sometimes massive cost of unregulated fares, such as those for peak InterCity services?

tomoufc said:

they were always set by government, through the Franchising Director, the SRA, then directly.

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That's nonsense. Each Train operating Company has a pricing manager who is responsible for setting fares within the limits set by the DfT. The people and bodies you have mentioned have not been involved in fare setting.

Haywain said:

That's nonsense. Each Train operating Company has a pricing manager who is responsible for setting fares within the limits set by the DfT. The people and bodies you have mentioned have not been involved in fare setting.

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Very amusing, thanks.

tomoufc said:

Thanks very much, that's super helpful.

However, I wonder to what extent it is indeed academic? TOCs are still aiming to maximize revenue, and are still offering TOC-specific fares.

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Before Covid, fares regulation was a (half hearted) attempt at stopping TOCs from profiteering. This was because, at the time, they kept fares revenue, and independently paid/received their subsidy/premium to the government. So they had a significant incentive to maximise revenue as much as they could.

Now that fares revenue is remitted to the DfT, that incentive is virtually eliminated*. Fares regulation has become a matter mostly within the gift of the government, and the only true remaining 'check' on fares increases is the potential for political backlash. Which, in line with commuter loadings, has significantly diminished.

Fares regulation is now a self-imposed check by the government on contractors acting to its own instructions, which means it's liable to be effectively scrapped when the Treasury start putting the screws on the DfT.

*The new ERMA etc. contracts still require TOCs to maximise revenue, but the reward for doing so is now mostly a small percentage of revenue.

So do annual increases in percentages for regulated fares have to mean the amount of money brought in is neural across the board.

Or can they lower prices of cheap fares and raise prices of more popular ones so that percentage-wise of increase across ticket types it is the same but in terms of the number of tickets actually sold it isn't.

infobleep said:

So do annual increases in percentages for regulated fares have to mean the amount of money brought in is neural across the board.

Or can they lower prices of cheap fares and raise prices of more popular ones so that percentage-wise of increase across ticket types it is the same but in terms of the number of tickets actually sold it isn't.

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You're referring to elasticity values, but as Watershed states above the concept of regulated fares is now entirely academic given that Government holds the revenue risk. Whatever fares increase is finally agreed will be a tussle between Treasury (wanting to plug the hole in rail industry finances) and No.10 (wanting to mange the voter PR) with DfT applying whatever is decided to the 'regulatory' levers. These are purely contractual so completely up to Government to decide.

thedbdiboy said:

You're referring to elasticity values, but as Watershed states above the concept of regulated fares is now entirely academic given that Government holds the revenue risk. Whatever fares increase is finally agreed will be a tussle between Treasury (wanting to plug the hole in rail industry finances) and No.10 (wanting to mange the voter PR) with DfT applying whatever is decided to the 'regulatory' levers. These are purely contractual so completely up to Government to decide.

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So when South Western Railway introduced evening out and Sunday out fares recently, was it the DfT who worked it all out?

infobleep said:

So when South Western Railway introduced evening out and Sunday out fares recently, was it the DfT who worked it all out?

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I did not make any reference at all as to who actually puts the fares in the system. But to answer your comment, the SWR were not free to make these changes without DfT being willing to let them do so. This is very different to the pre EMA/ERMA/PSC set up where a TOC was free to make changes to unregulated fares unless specifically restricted from doing so within their franchise agreement.

thedbdiboy said:

I did not make any reference at all as to who actually puts the fares in the system. But to answer your comment, the SWR were not free to make these changes without DfT being willing to let them do so. This is very different to the pre EMA/ERMA/PSC set up where a TOC was free to make changes to unregulated fares unless specifically restricted from doing so within their franchise agreement.

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So TOCs can still have ideas and make decisions so long as the DfT agrees to them, which is different to them only doing something if the DfT tells them to do it.