7-year cap on train fare rises

About 60 per cent of rail fares will be pegged to the inflation rate or below for the next seven years, Brian Mawhinney, the Transport Secretary, announced yesterday.

In a move aimed at showing that rail privatisation, which is due to start early next year, will benefit passengers, the Government will restrict rises to the rate of inflation from next January for the next three years and, on most lines, to 1 per cent below inflation for the next four.

Dr Mawhinney said: "In the last 10 years fares have risen by more than 22 per cent above inflation. Now passengers can look forward to enjoying a period of stability and then a real fall in many rail fares".

Roger Salmon, the franchising director, nominally responsible for the decision, said standard return fares, saver tickets and standard weekly- season tickets would be pegged, leaving operators control only over first- class fares and "deep discounted" tickets, such as SuperSavers.

Operators whose performance exceeds "demanding specifications" set by Mr Salmon will be allowed to raise fares by a maximum of 2 per cent above inflation. Dr Mawhinney said that the new regime ensured that the benefits of privatisation were "shared between the public and the private operators".

Passenger bodies welcomed the move. Major General Lennox Napier, chairman of CRUCC, the main passenger watchdog, said: "This announcement makes a turning point in policy. Holding fare- rises down will increase the attractiveness of the railway and stimulate greater use."

But the policy marks a U-turn on rail privatisation. In 1993, the then railways minister, Roger Freeman, said that fares would not be capped, as "that would mean the taxpayer having to provide more money for subsidies to British Rail."

Companies interested in privatisation were worried about the price controls which, according to potential bidders, will lead to extra demands for subsidies once tenders for the franchises are sought. Dr Mawhinney said extra passengers would be brought on to the railway by lower fares.

Roger Ford, technical editor of Modern Railways, who has developed a computer programme for the privatisation process, insisted an extra subsidy would be needed. He said: "Even if franchisees cut costs by 5 per cent and attract an extra 10 per cent of people on to the railways, an extra £300m annually in subsidy will still be required for companies to make an average 15 per cent rate of return."

Labour's transport spokes- man, Michael Meacher, said the announcement bore "all the signs of a last-minute political bodge ... Can passengers or train operators trust Tories to deliver on this giant U-turn ?"

Rail sale targets, page 2

Leading article, page 14