Rail Fares

Question 1

How much have rail fares increased by in the last 10 years?

Nominal and real terms

Answer 1

37% in nominal terms and 18.5% in real terms

Question 2

Since privatisation long-distance operators have increased fares by…

Answer 2

40% (until 2016) (real terms)

Question 3

Regional and London operators have increased fares by…. since privatisation (real terms)

Answer 3

15%

Question 4

Infrastructure Monopoly which charges for using train tracks

Answer 4

Network Rail

Question 5

How a potential operator can win a franchise

Answer 5

Meet quality requirement, offer highest payment to government or ask for the lowest subsidy

Question 6

How much did Network Rail’s debt increase by from 2002 to 2011?

Answer 6

From £9bn to 20£bn

Question 7

How much does Network Rail pay in interest on top of its debt each year?

Answer 7

£1.7bn

Question 8

Direct subsidies make up what percentage of Network Rail and of train companies’ income?

Answer 8

50% and 25%

Question 9

How much less efficient are British railways than European railways?

Answer 9

30-50%

Question 10

Reasons for the failure of privatisation (3)

Answer 10

Unrealistic expectation that private sector would be automatically more efficient

Greater government control through increased subsidies

Unrealistic expectation that substantial competition could be introduced into the market; most routes are loss making so they have to be cross-subsidised by a few highly profitable companies

Question 11

Reasons for the railways costing so much (6)

Answer 11

New urban links, Crossrail and Thames Link

Huge new systems of the railway to be electrified

Separation of ownership of trains and tracks (too many interactions)

Reduced economies of scale and increased costs through fragmentation of companies

Passengers carried since privatisation increased 95%

New safety measures

Question 12

Costs of increased safety measures

Answer 12

Proportion of spending on safety measures in rail industry far greater than other transport industries. Hart field rail crash fatal to Railtrack which lost its confidence of investors after massively increasing spending after the incident, all its activities then passed onto Network Rail.

Question 13

1st Degree Price Discrimination

Answer 13

A ‘unique target strategy’, evaluate each consumer as an individual and charge how much they’re willing to pay (more efficient but more difficult).

Question 14

2nd Degree Price Discrimination

Answer 14

Different prices for different levels of output consumed. E.g bulk buying, season tickets…

Question 15

3rd Degree Price Discrimination

Answer 15

The ‘group target strategy’, offers different prices to members of different groups (with differing PEDs) (less efficient but easier). E.g. student railcard, peak times…

Question 16

Economists arguing against privatisation (2)

Answer 16

Kwarteng and Dupont

Question 17

What % of stations are responsible for 50% of passengers?

Answer 17

3%

Question 18

In 1994 government subsidy made up what % of British Rail’s revenue (making it the least subsidised railway system in Europe)

Answer 18

15%