Monday Blues? Could a Low Fare Strategy Reinvigorate Commuting by Rail

Bob Geldof once sang “Tell me why I don’t like Mondays?” Well as a lover of the weekend I can think of a few reasons, but this Monday it is the once-a-year increase in the price of regulated rail fares [1] which has particularly troubled me. A 5.9% rise, whilst well below the prevailing rate of inflation, makes rail travel even less attractive at a time when the financial health of the industry is reeling from a national programme of industrial action and the ongoing disruption of the pandemic.

One of the key problems affecting rail industry finances is the failure of commuters to return to the office following the pandemic, especially those with medium and longer-distance journeys. Large numbers of people who in 2019 commuted to work four or five days per week, now make the trip to the office once or twice a week at the most. There are various reasons for this including time savings and flexibility, but as an industry are we in danger of underplaying the deterrent caused by high rail fares?

Let us consider the evidence. The graph below compares weekly incomes with ticket prices on selected routes into London, Manchester and Leeds, where rail is likely to be the dominant mode of travel for 20+ mile commuting.

There is a complex mix of fares on offer, but put very simply commuters who require flexibility to travel on a selection of trains at peak times have a choice of an anytime ticket, or a season ticket. Of these, the latter are regulated and the former, whilst unregulated, are pegged to the cost of regulated season tickets through a mixture of train operator decisions and, more latterly, government policy.

Looking at our sample routes, a commuter with a 30-40 mile journey faces a daily cost of £39 for an anytime return ticket or a weekly season ticket cost of £122. This is 4% and 14% of their typical weekly income.

The longer the journey, the higher the price. A commuter with a 50-60 mile journey will need to pay £65 a day or £142 per week, 7% and 16% of their weekly income, and a commuter travelling 60—75 miles to work will pay £79 per day or £165 per week, which is a whopping 9% and 19% of their weekly income. More than enough to deter travel at more than the margin.

Rail fares* into selected major rail terminals & approximate weekly income**

**A simplified estimate taking Office for National Statistics Median equivalised household disposable income of individuals for Financial Year 2022 (Rail Commuters tend to be in the higher income groups), increased by 5% for an assumed 2023 income increase and reduced by 35% for tax, NI and other deductions. No allowance is made for differences in incomes over distances travelled, although they may well exist.

So why doesn’t government just put the fares down? Well probably out of a belief that this would further reduce industry revenues. Certainly, industry forecasting convention would suggest so, however the guidance which underpins this is painfully out of date, harking back to a time where commuters into major city centres could not, en masse, decide to work from home as an alternative to commuting by train. The industry is working to update this guidance, but timescales are too slow and by the time post-pandemic behaviour is fully-understood the opportunity to reinvigorate commuting may be lost forever.

So to understand if radical fares cut is the answer, what we really need is a quick-to-implement and low-risk pilot study to establish this.

This brings us back to Mondays. It isn’t only Bob and I that don’t like Mondays. Rail commuters hate them. Mondays were always quieter than other weekdays, and since the pandemic Monday has seen the slowest recovery in passenger numbers with train loads (and indeed office attendance and city centre retail custom) well below other weekdays with revenues as depressingly low. That, by the way, is with national strike action generally avoiding Mondays.

Monday would therefore seem like a perfect low-risk opportunity for a major cut in fares. A genuinely large reduction that is headline-grabbing, easy to understand, and simple for passengers to book.

Some may argue that this will lose revenue by discounting fares for people already travelling on Mondays or by attracting travel that would be made on other weekdays. I would counter that: 1. Commuting is surely more price-sensitive than prior to the pandemic and there is little evidence to suggest that a heavy discount would be a loss-leader; 2. A proportion of Monday commuters probably also travel on other weekdays and may have already made the jump to a weekly ticket, so a cut to Monday fares will not affect them; 3. Abstracting travel from Tuesdays, Wednesdays, Thursdays, and possibly Fridays is a good thing because it would smooth train loads across the working week allowing more efficient planning and cost savings in the future.

Beyond the rail sector, a more even influx of commuters across the week will help the economies of major city centres and perhaps boost white-collar productivity as colleagues spend their Mondays collaborating in offices, rather than at home recovering from the weekend, putting the washing on or walking the dog.

Perhaps Mondays aren’t so bad after all.

Footnotes

[1] This means rail fares regulated by the Department for Transport (DfT). Other transport authorities regulate and/or set fares in their jurisdictions although often have similar policies to DfT. The fares rise happened yesterday.