UK inflation rate means price hike for rail travellers

Commuters will be faced with increased rail fares of 8% after the July 2014 inflation figures were announced this morning.

The Office for National Statistics (ONS) announced that the consumer price index (CPI) rate of inflation rose from 4.2% in June to 4.4% in July, while the retail price index (RPI) inflation was unchanged at 5.0%. The inflation rate remains well above the Bank of England’s 2% target rate, for the 20^th month in a row.

There has been much concern over the rate of inflation because it is used to determine how much rail fares can increase. The Government has recently changed the annual price rise formula from RPI plus 1% to RPI plus 3%. The government’s new formula allows rail tickets to increase by 3% on top of the RPI (5%) therefore rail ticket will go up by 8%.  To add to the worries for commuters, the 8% rise can be used by rail companies as an average increase, meaning some journeys could face even larger increases.

The government and rail regulators stress that the increase in rail ticket prices are required to pay for better services. Due to the scale of the deficit these investments would not be possible without charging commuters more, since the government does not have any funding to invest in rail services.

While many MPs and Rail operators have recognised that the price rises will be unfavourable, their comments will not help commuters cope with the price hike. The announcement comes at a time when the public are already facing increased costs in their household bills, and with the commute to work being an important expense, many families will struggle with the rise. Fair Fares Now campaigners have described the price rise as “outrageous” and are protesting at London’s Waterloo station.

However, Scottish rail travellers needn’t worry as the higher annual price rise does not apply to ScotRail, which will be carrying on with the RPI plus 1% formula for regulated fares.

In the Bank of England Governer’s letter to the chancellor he blamed the high inflation rate on “the increase in the standard rate of VAT to 20%, and past increases in global energy prices and import prices“.

The Bank of England said last week that it remained confident that inflation would return to its target level in the next two years.

Will you be affected by the rising cost of rail transport? Leave your comments below.

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