must fares go up?
Regulated fares usually rise at the start of January, and the Government decides how much the rise ought to be. Until 2020 it will be the RPI for the previous July.
But must train operating companies put their fares up?
Must train operating companies put their fares up?
Operators can choose how much to charge for non-regulated journeys, within reason. But they are expected to increase their regulated fares according to the current formula. What happens if they don’t?
The Department for Transport would want to know what was going on if any operator did not apply the increases.
Each franchise contract includes a business plan, with forecasts of likely revenues. If revenues fell below a certain level in contracts let before 2013, the DfT had to help out with some additional cash – known as revenue support (usually from year 4). This still applies to the older franchises.
Since 2013, the premiums or subsidies in recently-let franchises now change in line with variations in Gross Domestic Product and also (in appropriate cases) according to fluctuations in central London employment rates.
If, on the other hand, revenues are higher than forecast, at some point the DfT starts to take part of the extra income. If it is high enough, the DfT's share of the top ‘slice’ can be 100%.
So you can see that the DfT would take a dim view of any operator not applying the official increases, because that could take the operator closer to revenue support, or further away from having to pay that extra slice.