Rail fares and season tickets are set to soar at their fastest rate for four years in a move likely to prompt fury among commuters and other train travellers.
Regulated rail fares are pegged to the Retail Prices Index of inflation for July. Official figures out on Tuesday are expected to show this rising at a rate of 3.5 per cent a year. The rate will be applied to rail fares from January 1, adding nearly £200 to the cost of some annual tickets.
While enraging rail travellers the figures are also likely to fuel a row over the Retail Prices Index, or RPI – a measure widely considered to exaggerate rises in the cost of living. The Office for National Statistics itself no longer regards it as an official measure of inflation.
A spokesman for The Campaign for Better Transport said: ‘RPI overestimates real inflation so consistently that the Office for National Statistics stopped using it as an official measure in 2013, and the Government has already switched to the Consumer Prices Index, or CPI, for most other things.
‘Just last month, the Office for National Statistics warned that the RPI rate has “serious shortcomings” and should not be used.’
Campaigners want the Department for Transport to freeze fares. The spokesman said: ‘The Government has frozen fuel duty for the past seven years. We think rail passengers should deserve the same.’
Rail fares rise on January 1 by the previous July’s RPI figure, which will be released on Tuesday.
A 3.5 per cent rise would see season tickets for commuters travelling from Southampton Central to London rise by £193, and by £183 for commuters from Canterbury, according to the campaign group.
Calculations by us show rail fares would be more than 6 per cent lower if the CPI figure rather than the RPI figure had been used since 2011. That would wipe almost £250 off the average annual season ticket from the home counties to London.
The expected rise of a £4,494 season ticket from Tunbridge Wells to London could be £116 if CPI was used instead of £157 with RPI
The reason RPI is nearly a percentage point higher than CPI is because it is calculated differently. With RPI, statisticians add up all the rises to calculate a simple average, known as the arithmetic mean. With CPI the rises are multiplied and the ‘nth’ root is taken, where n is the number of items in the hypothetical shopping basket. This is known as the geometric mean.
In practical terms, this means the CPI figure allows for the fact that if the price of a certain item in the basket shoots up, you are less likely to buy it and will instead pick something whose price has risen less.
The RPI figure also leads to quirks, suggesting for instance that women’s vests and strappy dresses have risen by 400 per cent since 2010, while the CPI figures suggest a more realistic 20 per cent rise.
The Office for National Statistics, which produces both figures, is deeply critical of the RPI data. Jonathan Athow, the office’s deputy national statistician for economic statistics, said last month: ‘RPI is not a good measure of inflation and we discourage its use.
Official figures due Tuesday are expected to show train fare prices rising by 3.5 per cent
‘But we do not have the authority to stop the use of the RPI or to tell particular users which index they should use in any given circumstance.’
Any change to the way RPI is calculated requires legislation because the return on gilts – bonds issued by the Government to raise money – are often linked to the RPI figure. Any change would also have a big effect on those with inflation-linked pensions, who benefit if these are tied to the higher RPI figure.
The Department for Transport will make a decision later this year on whether to restrict fare rises or press on with a steep increase.
A spokesman said: ‘The Government carefully monitors how rail fares and average earnings change, and keeps under review the way fare levels are calculated. We are investing in the biggest rail modernisation programme for over a century to improve services for passengers – providing faster and better trains with more seats.’
While bad news for commuters, next week’s inflation figures will provide some relief generally, as they will show a pause in the surge in prices.
The RPI figure for June was 3.5 per cent, down from 3.7 per cent in May, while forecasters expect a rise in the CPI of 2.6 per cent, the same increase as in June.
Paul Hollingsworth, UK economist at Capital Economics, said: ‘Petrol prices fell back, but a key question is to what extent the slowdown in consumer spending has caused clothing retailers to make summer sales more generous than last year. We expect clothing inflation to fall back a touch, but food price inflation could pick up.’
Inflation is expected to rise later this year as the full impact of the Brexit collapse in sterling is felt.
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