Plan for discounted train tickets hits the buffers
Plans to let train companies offer cheaper tickets are being blocked by the Treasury amid claims that officials are trying to “run down” the railways.
The Department for Transport (DfT) is championing moves to introduce dynamic budget airline-style pricing to lower fares and help restore passenger numbers to pre-Covid levels.
Treasury officials are understood to be blocking the plan amid fears it could increase the approximate £11 billion annual cost to the taxpayer of subsidising the rail network. They want to cut rail network costs instead, but critics say this would cause a spiral of lower passenger numbers and revenues.
Under the proposals backed by the DfT, rail operators would be able to follow budget airlines, car-hire companies and hotels in offering so-called demand-led pricing. This would mean offering tickets at a significant discount on routes and at times when demand was low, to fill more seats.
Prices at peak times or on busy routes could rise, but the hope would be that increasing rail usage overall — even at lower prices — would raise total revenues and reduce the subsidies required to keep the network going. A source said: “Even if you sold an empty seat for a pound, that is still a pound you would not have got it if no one is in it.”
Figures published this month show that rail usage in the first quarter of the year was 88 per cent of that in the same period before the pandemic. Passenger revenue was £2.2 billion, 70 per cent of the £3.2 billion four years ago.
While rail companies can already offer cheaper prices for advance fares, these are set and agreed in advance.
The new proposals have won the backing of the transport secretary, Mark Harper, but Whitehall sources said they were being blocked by Treasury officials who have told the DfT that they are not prepared to take the risk of losing existing revenue at a time of huge pressure on the public finances.
“The Treasury sees the railways as a cost . . . rather than an opportunity,” another insider said. “But unless we are prepared to innovate then ultimately the rail network is only going to become a bigger drain on the taxpayer. It is just going to run down the railways.”
A government source said Treasury reticence was the result of years of broken promises at the DfT. “Just remember HS2,” they said. “It is no wonder there is a large degree of scepticism.”
Rail Partners, which represents the industry, said: “Demand-led pricing is one of many ways operators could attract passengers. It stands to benefit the passenger, through better value fares, and taxpayers, through increased revenue . . . reducing government subsidy.”
The DfT said: “The government remains fully committed to reforming our railways.”
