UK Rail Operators Could Be Forced To Cut Fares

National Express and Stagecoach have already announced hundreds of cuts to cope with a slowing in passenger growth.

 Britain's rail operators will have to cut fares next year if inflation rates fall below zero this summer, providing a boost to passengers currently paying the highest ticket prices in Europe.

Under the terms of the operators' franchises, certain ticket prices rise annually by 1 percent above inflation, as measured by the Retail Price Index (RPI) in July of each year.

Economists predict inflation will be between minus 2 and minus 3 percent in the summer, resulting in the main five rail companies National Express, Stagecoach, First Group, Go-Ahead and Arriva, having to cut fares next January.

Rail Minister Andrew Adonis is expected to tell fellow Members of Parliament (MPs) on the cross-party Transport Select Committee on Wednesday that he will not consider changing the rules in favour of the train operators, which are already experiencing slowing passenger growth in the economic downturn.

"RPI will be significantly negative in July according to independent forecasting. Andrew Adonis will tell the Transport Select Committee that if these predictions prove accurate then the Government intends to allow regulated fares to fall," a spokesman for the Department for Transport (DfT) told Reuters.

"He will dismiss any suggestions that fares might be frozen simply to benefit the train operating companies as this would be grossly unfair to passengers," he added.

Rail trade union RMT said it wanted the cuts to be paid for by operators without resorting to further job losses. National Express and Stagecoach have already announced hundreds of cuts to cope with a slowing in passenger growth.

"A cut in regulated rail fares should be paid for by a freeze in shareholder dividends, and not by cuts in services and jobs," the union said.

Some rail operators are already struggling under the terms of franchise contracts set up during 2007, when rail growth was predicted to continue.

Operators including National Express and Stagecoach agreed to pay premiums to the government in 2010 regardless of revenue growth, potentially triggering heavy losses in a recession.

A report by Passenger Focus, a consumer watchdog, last week found that travelling by train in Britain was generally more expensive than any other European country.

Using the same pricing method, the cost of season tickets rose by around 6 percent in January due to relatively high RPI inflation last summer.