Redirect Left wrote:
Also what would be handy is if a rail company actually just refused to put up prices and stood up to the Government and went "Yeah, this isn't right. We're fleecing our customers and we get very little out of it", because the Government clearly have no plans on stopping the constant rail increases above usual wage and benefit increases year on year.
Late reply; back from Asia and got lots of forum catching up to do!
Basically, RPI+0% is currently the maximum
that train companies can put up prices, but in practice they have no other choice. This is because at the bid stage, they commit through premium payments to giving the government a certain amount of cash each year (basically all but a small cut of the profit). Of course, they could bid less than putting fares up by RPI, but this would just mean that the competitor that did bid RPI would win by default since their premium payment would be bigger.
At the end of the day, it's the government's decision. In any year, government can change what that formula is (in recent years, it's been changed a lot; it was technically meant to be RPI+3% through much of the coalition years, but it never was anything more than RPI+1%; then when it was RPI+1% it was always RPI+0%). If government wanted to nullify a 5% RPI for instance, it could be set to RPI-5% for that year.
The reason why it has to be pegged with RPI is that much of the costs of operating trains are fixed to RPI, so revenues need to rise to match that to remain stable. Freezing fares in absolute terms opens up an extremely difficult and precarious financial situation for any business, as TfL are suffering from and having to make swinging cuts and deferring investment left, right and centre.