Rail fares are set to rise by another 1.6% in January, adding about £100 to the cost of many annual season tickets after an unexpected jump in inflation last month.
The passenger watchdog, campaigners and unions have all called on the UK government to abolish the policy of annual fare rises at a time when passenger numbers on the railway have plummeted because of the coronavirus.
It comes alongside the largest monthly increase in petrol prices for almost a decade and a lack of summer sales on the high street after the reopening of non-essential shops pushed up the rate of inflation.
The fare rise is set by the July retail prices index (RPI) measure of inflation, announced by the Office for National Statistics on Wednesday morning. It will apply to all regulated fares in England and Wales, and most in Scotland. It includes season tickets, anytime urban tickets and most off-peak long-distance returns.
The increase means fares will once again rise well above the more commonly used measure of inflation, the consumer price index (CPI), which is typically lower than the RPI. Fare rises have also outstripped wage rises for most of the past decade, at a time when fuel duty for motorists has been frozen.
Despite Britain’s economy struggling for momentum as the country grapples with the deepest recession since records began, the rate of inflation unexpectedly rose last month, as the global oil price jumped and retailers held back from launching their usual summer sales.
The CPI measure of inflation rose to 1% in July from 0.6% in June, confounding expectations among City economists for it to stay at the same level.
The ONS said clothing prices did not fall by as much as would be expected for the time of year, with the reopening of high street stores after lockdown having a knock-on impact on shopping patterns. Retailers would typically put more items on sale in July before the arrival of autumn product ranges. However, clothing and footwear prices fell by 0.7% between June and July, compared with a fall of 2.9% between the same months in 2019.
Prices for private dental treatment, physiotherapy and haircuts also rose as the need for protective equipment and physical-distancing measures increased the costs facing these businesses.
Following the July increase in inflation, the RMT union claimed rail fares could be cut by 5% by diverting funds paid to private operators during the coronavirus crisis, where the government has suspended franchises and underwritten losses on the railway, where passenger numbers are still less than a quarter of pre-coronavirus 19 levels.
The passenger watchdog, Transport Focus, has called for cut-price deals to incentivise the return to the railways and joined the RMT and others in calling for season tickets for part-time commuters to reflect new working patterns and make rail travel more affordable.
Its chief executive, Anthony Smith, said: “Like the government’s restaurant deal, we need a ‘head out to help out’ campaign to help get the country on the move again, boost the economy and reduce traffic on our roads.”
Campaigners said Wednesday’s inflation announcement was a “missed opportunity” to tempt people back on trains. Darren Shirley, the chief executive of Campaign for Better Transport, said the fare rise “will do nothing to restore people’s faith in the railways. The government must do more than just pay lip service to encouraging people to take public transport; it must now also provide the financial incentives to do so.”
Despite the unexpected increase for inflation in July as the economy reopened, analysts expect the inflation rate to decline in August as the government’s VAT cut for the hospitality sector and eat out to help out restaurant discount scheme drags down the cost of living.
Ian Stewart, the chief economist at the accountancy firm Deloitte, said: “Covid-19 has delivered a major deflationary shock to the economy. The inflation rate has already halved this year and is set to fall further. A recovery is under way but the economy is operating with huge amounts of spare capacity that could easily push inflation into negative territory.”