Rail fares to rise as Treasury cuts subsidies

Train passengers are facing another set of fare increases after the Government intensified its financial squeeze on the rail industry, reports the Daily Telegraph.

Weeks after ministers said that passengers would pick up a still bigger share of the bill for improvements to the network, the keys to the profitable East Coast Main Line were handed over to National Express.

Its bid will see unregulated fares – such as walk on off peak tickets – rise by 2.1% above inflation over the period of the franchise up until March 2015.

According to Passenger Focus, the consumer watchdog group, this could see fares increase by 45% over the next eight years with, for example, a York to London open return rising from £179 to £259.

"We are extremely concerned about this," said Anthony Smith, the group's chief executive.

"The fact is that this figure is just an average and they will play around with fares to manage capacity. I think there will be some eye-watering rises on walk on fares."

Underpinning passenger fears is the willingness of National Express to pay £1.4 billion to the Treasury over the next eight years – compared to the £1.3 billion GNER, which was forced to surrender the franchise, was prepared to pay over a decade.

The bid reflected a recent trend in franchises where the Government has been keen to cut subsidies to the industry.

In some cases grants to operators are gradually being replaced by premiums which have to be handed over to the Treasury.

This has already led to some startling fare rises under the new batch of franchises, with South West Trains hiking up some tickets by around 20% and Arriva imposing increases of 30% on some of its cheapest fares.

According to the Department for Transport the new franchise will include provision for new services such as a train every half an hour to Leeds.

Other enhancements outlined by the Government included 14,000 extra carriages from 2010.

But Mr Smith questioned whether this was a firm commitment or merely an "aspiration".

Gerry Doherty, general secretary of the white collar rail union, TSSA, questioned how the new company could raise the cash.

"This is the economics of the madhouse and it seems to us that passengers are being fleeced for the duel purpose of filling the coffers of the government and lining the pockets of shareholders.

"Are they really saying that companies have the right to charge what they like, how will that get people out of their cars and off planes?"