Against fare control

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Author: Patrick Crozier

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I am against fare control because:

• it involves force, which I am against
• (by the mechanism of supply and demand) it leads to overcrowding which I suspect has some very steep costs
• (by virtue of it being imposed by government) it makes the world less predictable and therefore more difficult for railway companies to invest thus discouraging investment
• things seem to have been much better when there was a lot less of it

Questions

But surely, if you abolished fare control the fares would shoot up and people wouldn't be able to get to work?

• I accept that if fare control were abolished fare control that would be the likely outcome, at least in the short run
• But, I haven't said how I would abolish fare control, merely that I am against it. That I because I don't know how best to do it.

So, what do you think would happen in the long run?

• Obviously, one can never be quite sure what is around the corner but what I suspect will happen is that peak rate fares will go up but that there will be significant reductions on the "shoulders" of the peak. I suspect this will lead to many businesses asking themselves whether they really need all of their staff to show up to work at exactly 9am. Many will find that they don't, so encouraging off-peak travel. It is perfectly possible that in the long-run abolishing fare control will lead to more people commuting rather than fewer.

Why don't you know how best to abolish fare control?

• Well, in a sense I do: abolish it overnight. The problem with that is that involves a lot of pain although it is the quickest way to see some benefit. The problem is that politicians don't like inflicting pain on the voters. But if they abolish fare control slowly the benefits take much longer to materialise and it becomes much easier for their opponents to reverse the change.

So, why is it economically best to abolish fare control quickly?

• The quick answer: price controls. For the long answer see here

What are the costs of overcrowding?

• Delay to trains. This is caused partly by longer dwell times at stations (as people fight to get on the train) and by the knock-on effects of having to run more services than the ideal
• Some people being deterred from travelling at all. Some people really do value their comfort and when faced with overcrowding will avoid travelling altogether. I suspect that that has all sorts of hidden costs for instance in the form of more people taking to the roads

How does fare control make the world less predictable and why does this discourage investment?

• Because it is done by the state. Government's are unpredictable. They do nothing for years, there is suddenly some kerfuffle in the press and they suddenly change everything. This is awful if you are trying to run a railway. Railways are capital-intensive. In other words most of the cost of running a railway is in the form of trains, tracks and stations. The decisions you make one day will have to last for maybe 30 years. It is a risky business at the best of times but when companies have to take on "political" risk as well it gets much more so. At that point some of the "marginal" projects will be junked

What makes you think things were better when there was less fare control?

• It's perhaps best to start with a brief history of fare control in the UK. It started with the introduction of the Parliamentary Train in 1844. It was extended later on with the introduction of Workman's Fares - reduced rate travel on off-peak services - on certain lines. Other than that train companies were pretty much free to set whatever passenger fares (though not freight charges) they liked. The big cut off was in 1940, when fare control was introduced across the board. After British railways were nationalised in 1948, the government kept a tight rein on fares. When rail services were contracted out in the early 1990s some (though not all) fares (mainly commuter ones) were held to the rate of inflation minus a percentage.
• The main point I would make here is that before 1940 passenger fares do not seem to have been an issue. Neither does overcrowding. Sure there were strap-hangers but that's not the same thing. In neither of his books written on the subject of nationalisation (in around 1910) does Edwin Pratt even mention the subject. (He does mention charges, by the way - and we shouldn't forget that prior to 1950 freight was a much larger part of the business than passenger services)

Ah, but fares are lower nowadays. Doesn't that prove that fare control is a good thing?

• Well, I can't confirm this but it is quite likely. But then again, in many ways costs have massively declined. One only has to spend a minute thinking of the impact that electrification and the introduction of all sorts of machines must have had. It's no wonder that operators can pass on these savings to customers. Mind you we are not necessarily comparing like with like. Trains are also a lot faster these days - especially on the long distance routes

Comments

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