The cost of transport in London could rise by 4.8 per cent next year as it’s tied to the July Retail Price Index that was announced this morning.
The annual rise in retail prices has come in at 3.8 per cent, according to figures released by the Office for National Statistics, and there is a pre-existing condition that TfL fares will need to rise by 1 per cent above the RPI figure.
That sets the fare rises for TfL for next year to be 4.8%, if the policy is maintained as it’s currently expected to.
National Rail fare rises have not been announced, but they are usually tied to the same RPI figure.
It’s notable that this doesn’t mean TfL gets nearly 5 per cent more cash in the bank, as the fare rise reflects the rising cost of running the transport network, which is how inflation is calculated in the first place.
Travelcard prices and the associated PAYG caps will increase by the same level as National Rail fares when they are announced. TfL does however have flexibility in how it applies the changes to its own fares, so long as the overall impact comes on target, so some fares will rise by substantially more than the theoretical 4.8%, while others will rise by far less than that.
For example, last year, the fare rises were skewed so that single fares for people travelling within a single zone by tube, train and DLR were largely unchanged, while the cost of single trips rose sharply for longer multi-zone journeys.
Cash fares have also long outpaced the rate of Oyster/Contactless payments, and although TfL is committed to retaining cash payments at the moment, fare rises are making cash increasingly untenable as a payment option.
There is a theoretical possibility though that the fare rise will fall more heavily on London only trips.
That’s because a large portion of TfL’s required revenue rise is dependent on increases in travelcard fare capping, which is tied to National Rail fares. If TfL is required to raise its income by 4.8%, but National Rail is allowed to offer a lower rate of increase, then TfL will also be required to adopt the same lower rise in the travelcard cap that affects commuters into London, and that means more of the overall rise will fall on London only trips. For example, if National Rail rises are held to RPI of 3.8%, but TfL has to raise its revenue by 4.8%, then that’s a large amount of money that cannot come from raising the cost of the daily travelcard cap.
Fare rises are likely to continue beyond next year as well, as TfL is also required to put in place plans to raise future revenues by £500m-£1billion a year from 2023 – although the opening of the Elizabeth line next year will help to mitigate that to some degree.
Although the RPI is announced today, it will take TfL a few months to calculate how it can shuffle the fare rises among all its ticket prices, and the full details are typically announced in late November, to come into effect in January.