Hike in rail fares – do you provide beneficial loans to your employees?

14 December 2017

From 2 January 2018 rail fares will rise on average by 3.4 per cent. This is the largest increase since 2013 when they increased by 3.9%.

Rail fare increases after 2013 were:

  • January 2014 – 2.8 per cent
  • January 2015 – 2.2 per cent
  • January 2016 – 1.1 per cent
  • January 2017 – 2.3 per cent

And now we are seeing it rise again to 3.4%, however not all fares will increase: many will stay the same and some will reduce. Around 40 per cent of rail fares are 'regulated', including Season tickets on most commuter journeys, some Off-Peak return tickets on long distance journeys and Anytime tickets around major cities. The government uses July's Retail Prices Index (RPI) 3.6% measure of inflation to determine the increase in the price of these fares and it is just below July’s RPI measure.

Discounting by train companies has contributed to passenger numbers more than doubling in the last 20 years. There were 1.72billion journeys on our railway last year (2016-17). That's more than 4.7million journeys a day on average

Government policy affects all train fares, either through regulated fares or through the payments it receives from train companies. Train companies paid the government more than £800million net last year, helping government to support the biggest investment in our railway since Victorian times.

It has been the policy of successive governments to reduce the funding of the railways by taxpayers and increase the relative contribution of passengers.

Over 97% of money from fares does go back into improving and running the railway, underpinning the rail industry's long-term plan to work together to change and improve services for customers, the economy, communities and people who work in rail.


CIPP comment

According to the latest ONS bulletin on the UK Labour Market (December 2017) average weekly earnings for employees in Great Britain in nominal terms (not adjusted for price inflation) increased by 2.5% including bonuses and by 2.3% excluding bonuses, compared with a year earlier. And in real terms (adjusted for price inflation) fell by 0.2% including bonuses, and fell by 0.4% excluding bonuses, also compared with a year earlier.

Rail fares are yet another element of the cost of living that is rising faster than average earnings. In April 2014 the government doubled the beneficial loan annual threshold from £5k to £10k so those employers who do provide beneficial loans (which are interest-free, or at a rate below HMRC’s official interest rate), are continuing to assist employees who have to juggle their finances with this increase in commuter costs.