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34% is an upper boundary. If there was 100% take up of the railcard from existing travellers then there would be a 34% loss of income on the railcard eligible travel of existing customers. To be at less than 34% you have to be assuming that some existing travellers do not buy the railcard .
It's pretty obvious that a lot of travellers either won't buy the new railcard, or will already have one so won't represent a loss in revenue. Any loss (if there is one at all) in revenue will therefore inevitably be considerably less than 34%.
This actually works against your proposal. It makes for a bigger loss of income from existing travellers and leaves a far smaller proportion of the population who are not rail users and could be attracted onto the railway by the railcard offer.
Not at all. Those occasional users who already use the train a few times a year, or even a few times a month are precisely those who are likely to be amenable to more leisure travel. Those are your best chance for increasing discretionary revenue.
Again, there are various ways one could make the railway more affordable to passengers. If you wanted to make commuting more affordable, you would implement something like the Scottish Governments abolition of peak fares. There could even be good socio-economic reasons for doing that.
Personally, I err on the side that commuting demands premium resources, therefore to an extent it's natural that there should be peak fares (although there's nothing to stop employers subsidising peak travel for their employees if they have a compelling reason to).
Either way, there's no absolute reason why we have to continue with the current approach of fleecing passengers for as much as possible in all circumstances.
And I'm sure that even if we were arguing for cheaper peak as opposed to off-peak travel, there would still be those on here arguing for the same discredited status quo. I wonder how many of those benefit from discounted travel !
That applies to gas too, but the government is holding the price of that down through the energy price cap. Are you advocating increasing the price of gas too?
There are also problems with using fossil fuel such as methane gas. One problem that we have in this country is that the structure of the energy market makes electricity so much more expensive than methane gas, however there are increasing calls for this to change, which would lead to less need to subsidise gas.
Interest payments are a product of outstanding debt and interest rate. France, Italy and Spain are all in the Euro area and have lower bond yields, 10 year bonds yield just over 3% in France and Spain and a bit higher in Italy. Japan is a special case with huge investment in government bonds by households, their 10 year bond yields about 1.5%.
If UK households were prepared to lend £billions to the government at 1.5% interest, then the UK government could have Japan's level of debt.
It's pretty obvious that a lot of travellers either won't buy the new railcard, or will already have one so won't represent a loss in revenue. Any loss (if there is one at all) in revenue will therefore inevitably be considerably less than 34%.
The critical factor is the price elasticity of rail travel demand. If it's totally inelastic and every rail passenger took up the railcard, there'd be no change in passenger behaviour and farebox revenue would drop 34%. If it was perfectly elastic (an elasticity of -1, for mathematical reasons) there'd be a 34% increase in passenger numbers, and revenue would be down 11.6%.
The BR figure seems to have been an elasticity of -0.65, so you'd be thinking a 22% increase in passenger numbers and a 19.4% drop in farebox revenue - if every passenger bought a railcard. You'd have to add the railcard revenue to the above figures, of course, which would offset the loss of revenue.
The universe that matters is the revenue that would be eligible for the new railcard. For existing travellers this will fall by near to 34%, because most of them will get the proposed new railcard.
Those occasional users who already use the train a few times a year, or even a few times a month are precisely those who are likely to be amenable to more leisure travel. Those are your best chance for increasing discretionary revenue.
You are right, but they don't generate enough new revenue to offset the revenue losses from existing travellers.
And the more existing travellers there are, getting travel more cheaply, the bigger the revenue loss from existing travellers, and the more new travellers you need, from a smaller pool, to make up the deficit.
The critical factor is the price elasticity of rail travel demand. If it's totally inelastic and every rail passenger took up the railcard, there'd be no change in passenger behaviour and farebox revenue would drop 34%. If it was perfectly elastic (an elasticity of -1, for mathematical reasons) there'd be a 34% increase in passenger numbers, and revenue would be down 11.6%.
The BR figure seems to have been an elasticity of -0.65, so you'd be thinking a 22% increase in passenger numbers and a 19.4% drop in farebox revenue - if every passenger bought a railcard. You'd have to add the railcard revenue to the above figures, of course, which would offset the loss of revenue.
You are right, but a National Railcard is a spectacularly bad way of doing it, because nearly all of the benefit goes to existing high frequency travellers. There are other more targeted discount offers that achieve the same objective at much lower cost.
But through ISAs, the tax system encourages lending other financial institutions instead, particularly to banks and building societies. UK savers have more than 3 times as much invested in ISAs (about £725bn) as they have in National Savings (about £220bn). It says a lot about UK savers that more than half of National Savings is in Premium Bonds. UK domestic savers only fund about 10% of UK public sector debt.
Either way, there's no absolute reason why we have to continue with the current approach of fleecing passengers for as much as possible in all circumstances.
The critical factor is the price elasticity of rail travel demand. If it's totally inelastic and every rail passenger took up the railcard, there'd be no change in passenger behaviour and farebox revenue would drop 34%. If it was perfectly elastic (an elasticity of -1, for mathematical reasons) there'd be a 34% increase in passenger numbers, and revenue would be down 11.6%.
The BR figure seems to have been an elasticity of -0.65, so you'd be thinking a 22% increase in passenger numbers and a 19.4% drop in farebox revenue - if every passenger bought a railcard. You'd have to add the railcard revenue to the above figures, of course, which would offset the loss of revenue.
Of course, I reiterate my point made before that in no scenario would anywhere near all passengers buy a "new" railcard, so presumably the drop in revenue wouldn't be as great.
Some cigarette packet calcs - say:
-35% of passengers already use a railcard, so wouldn't represent a loss of revenue.
-25% of journeys are peak time, so the railcard likely wouldn't cover these.
-5% may be very infrequent travellers who might not bother with a railcard.
The top two figures are scraped off of google and the bottom one is off the top of my head for illustration, however even with that, that's 65% of revenue theoretically unaffected. Taking BR's elasticity amount of 22%, I take the outcome to be roughly a 7% increase in usage and a 6.3% drop in revenue (that's before you take into account increased revenue from railcard sales).
So realistically, while it does appear that a national railcard might contribute to a gap in revenue, that gap would likely be small and possibly be politically neutralised by enabling everyone access to affordable travel.
Of course rail travel has grown since BR days, so there may be more propensity towards leisure travel, therefore more elasticity these days.
I realise that these are rough figures - railcard holders might be a smaller proportion of existing revenue, peak journeys a larger one etc, but you see what I'm getting at.
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No it's not, some people might only use the train for commuting, some might be infrequent travellers, and most importantly some might buy it, but a large proportion of their journeys might not be eligible (for example peak time commuters) [/QUOTE]
The universe that matters is the revenue that would be eligible for the new railcard. For existing travellers this will fall by near to 34%, because most of them will get the proposed new railcard.
You are right, but they don't generate enough new revenue to offset the revenue losses from existing travellers.
And the more existing travellers there are, getting travel more cheaply, the bigger the revenue loss from existing travellers, and the more new travellers you need, from a smaller pool, to make up the deficit.
You are right, but a National Railcard is a spectacularly bad way of doing it, because nearly all of the benefit goes to existing high frequency travellers. There are other more targeted discount offers that achieve the same objective at much lower cost.
For "more targeted" read "more opportunity to catch people out".
People are increasingly frustrated at having to book ages in advance for this train or that train with lots of annoying restrictions - that's why "fares simplification" at least in theory resonates with lots of people.
By contrast, a railcard is a simple device to generate travel at off peak times through a sunk cost that people can use easily.
But through ISAs, the tax system encourages lending other financial institutions instead, particularly to banks and building societies. UK savers have more than 3 times as much invested in ISAs (about £725bn) as they have in National Savings (about £220bn). It says a lot about UK savers that more than half of National Savings is in Premium Bonds. UK domestic savers only fund about 10% of UK public sector debt.
The German discount ticket is a lot more generous than our railcards are, and whilst they've had some overcrowding as a result, the sky clearly hadn't fallen in.
At least in part because in the urban areas where a significant increase in ridership would lead to overcrowding season tickets were by UK standards cheap anyway, so most people whom the ticket would have encouraged to mode shift quickly (significant point - mode shift happens over decades, not years and certainly not months) were already using public transport in the peaks. It’s the leisure travel patterns that will switch first (and they are…) - but they are less predictable.
At least in part because in the urban areas where a significant increase in ridership would lead to overcrowding season tickets were by UK standards cheap anyway, so most people whom the ticket would have encouraged to mode shift quickly (significant point - mode shift happens over decades, not years and certainly not months) were already using public transport in the peaks. It’s the leisure travel patterns that will switch first (and they are…) - but they are less predictable.
I don't have recent experience of Scotrail, but it suggests to me that the amount of peak travel is relatively small, probably almost non-existent outside of Glasgow and Edinburgh. The Scottish Government is aiming for the social good of helping to "put money back into people's pockets" by reducing travel to work costs. Doing that in England really would blow a hole in railway finances.
With apologies to Aberdeen, Dundee, Perth and the like, Glasgow and Edinburgh and their respective commuter belts account for a sizeable proportion of the network (a guesstimate of over 75% of journeys?).
-35% of passengers already use a railcard, so wouldn't represent a loss of revenue.
-25% of journeys are peak time, so the railcard likely wouldn't cover these.
With a National Railcard for off peak journeys, it is only off peak journeys that change, they are the universe. The loss of revenue from the railcard is only on off peak journeys, the new journeys are only on off peak journeys.
What we are debating is the loss of revenue on existing off peak journeys, versus the increase in revenue from new off peak journeys. Peak journeys and existing railcard journeys don't enter into it, they are the same both before and after.
So that means, for 95% of existing off peak journeys, there will be a 34% loss of revenue. That's a loss of more than 32% of existing off peak revenue on journeys eligible for the new railcard.
Revenue on off peak journeys eligible for the new railcard is now about 68% of what it was before the new railcard was introduced.
In order to get back to the same amount of revenue, then new eligible journeys have to increase by 32/68%, that is 47%.
Remember that the new railcard is only generating new off peak journeys, it doesn't increase peak travel or travel on existing railcards.
So off peak journeys have to be 147% of what they were before for the railcard to be revenue neutral. That isn't going to happen. And if it did, most of them would be standing up not sitting down.
It may be a hot topic with the people you mix with, but the level of rail usage, and the amount of overcrowding, suggest that lots of people are not deterred from travelling. In my experience, a far hotter topic is the price of a cup of coffee in local cafes, not rail fares.
This gets us back to the original discussion, why the Network Railcard boundary is where it is. The Network Card boundary is at the edge of the area where an off peak railcard does avoid the worst overcrowding, because, in the Network Railcard area, there are lots of long trains with off peak spare capacity.
Outside the Network Railcard area there are few long trains with spare off peak capacity. There are only short trains already well loaded with existing passengers paying existing fares.
The top two figures are scraped off of google and the bottom one is off the top of my head for illustration, however even with that, that's 65% of revenue theoretically unaffected. Taking BR's elasticity amount of 22%, I take the outcome to be roughly a 7% increase in usage and a 6.3% drop in revenue (that's before you take into account increased revenue from railcard sales).
If you were doing a serious study, you'd look at whether there were differing elasticities for different markets (I suspect so - leisure travel will be highly elastic, commuting will be highly inelastic), and also look at the effect of different prices for the railcard.
There might exist a combination of discount and card price that is revenue-positive, in which case a National Railcard would be worthwhile on its own account.
It may be a hot topic with the people you mix with, but the level of rail usage, and the amount of overcrowding, suggest that lots of people are not deterred from travelling.
Just so. While targeted reductions on certain routes might increase rail usage, in practice the constraint is capacity. Any subsidy applied to reducing fares (whether through a Railcard, or more generally) would be better directed towards running more and/or longer trains.
Likewise, should such a scheme actually turn out to be revenue-positive, the most sensible use of the increased income would be to find somewhere to put all the extra passengers.
Outside the Network Railcard area there are few long trains with spare off peak capacity. There are only short trains already well loaded with existing passengers paying existing fares.
Well, in some areas there are short trains which are lightly loaded at peak times... lower fares might help there, but only if the train is a useful means of getting somewhere.
It may be a hot topic with the people you mix with, but the level of rail usage, and the amount of overcrowding, suggest that lots of people are not deterred from travelling. In my experience, a far hotter topic is the price of a cup of coffee in local cafes, not rail fares.
Sorry, but a cup of coffee in a cafe is not a necessity. Rail travel (especially local) is a necessity if it provides the only means of public transport in a certain area.
A better comparison would be the price of a bag of pasta in your local supermarket.
Reducing the price of necessities is the best way to improve the wellbeing for the society.
Is there a problem with that? More expensive gas and cheaper electricity sounds like a sensible policy objective to me. It also fits with the likely future ban on any new natural gas connections to residential properties.
I was pleasantly surprised to find that a bus journey from York to Haxby was available for only £2.50 single this week. There is a common misconception among opponents to the new cap that all £2 journeys have now become £3 journeys. They seem not to understand exactly what a cap is.
The trouble with cynicism like this is that there is always some operator or other who really does act that way.
For example National Express West Midlands made a big fuss about not charging the government cap in January, as they were still charging £2.90 they were technically correct. Of course, here we are in June and they're putting it up by 10p. No wonder people feel justified in their cynicism that this was their plan all along. I personally don't see it quite that way and I have, like you, made use of a number of £2.50 fares. I understand why a section of the general public may feel this way though.
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They've suggested actively in the past charging about 3-5 times as much so I wouldn't say that. Of course, as you say, Yorksrob may well have been thinking on this occasion of one that costs £35?
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I think the key point here is that peak capacity can usually not be expanded without vast extra costs. Off peak capacity sometimes can be, though of course not always. Either way capacity is so poor on nearly all routes that aren't to or from London it doesn't really matter. With such laughably low capacity we can't hope to make a dent in the market, railcards won't affect any of that.
Those journeys are irrelevant, nothing changes for those journeys.
With a National Railcard for off peak journeys, it is only off peak journeys that change, they are the universe. The loss of revenue from the railcard is only on off peak journeys, the new journeys are only on off peak journeys.
What we are debating is the loss of revenue on existing off peak journeys, versus the increase in revenue from new off peak journeys. Peak journeys and existing railcard journeys don't enter into it, they are the same both before and after.
The argument that you make is how the taxpayer supposedly will not countenance a potentially increased subsidy of the railway compared to now.
That potential difference in subsidy is based on revenue lost or generated by a national railcard in comparison to overall revenue, therefore all fare revenue is part of the calculation.
So that means, for 95% of existing off peak journeys, there will be a 34% loss of revenue. That's a loss of more than 32% of existing off peak revenue on journeys eligible for the new railcard.
Revenue on off peak journeys eligible for the new railcard is now about 68% of what it was before the new railcard was introduced.
No, there's pretty much zero chance of a 34% loss of revenue on 95% of off peak fares. A sizable percent of existing off peak fares will already have a discount, so there won't be a further loss of revenue on them. A far larger proportion than five percent won't bother to buy a railcard.
In order to get back to the same amount of revenue, then new eligible journeys have to increase by 32/68%, that is 47%.
Remember that the new railcard is only generating new off peak journeys, it doesn't increase peak travel or travel on existing railcards.
So off peak journeys have to be 147% of what they were before for the railcard to be revenue neutral. That isn't going to happen. And if it did, most of them would be standing up not sitting down.
No, I don't recognise where those figures would come from. Against the entirety of passenger revenue, a large proportion of which wouldn't attract an additional discount, any change in revenue would be a lot more limited, as would any gap in revenue.
It may be a hot topic with the people you mix with, but the level of rail usage, and the amount of overcrowding, suggest that lots of people are not deterred from travelling. In my experience, a far hotter topic is the price of a cup of coffee in local cafes, not rail fares.
This gets us back to the original discussion, why the Network Railcard boundary is where it is. The Network Card boundary is at the edge of the area where an off peak railcard does avoid the worst overcrowding, because, in the Network Railcard area, there are lots of long trains with off peak spare capacity.
Outside the Network Railcard area there are few long trains with spare off peak capacity. There are only short trains already well loaded with existing passengers paying existing fares.
If you were doing a serious study, you'd look at whether there were differing elasticities for different markets (I suspect so - leisure travel will be highly elastic, commuting will be highly inelastic), and also look at the effect of different prices for the railcard.
There might exist a combination of discount and card price that is revenue-positive, in which case a National Railcard would be worthwhile on its own account.
The overall amount of subsidy for the railway is a matter for the spending review, to be agreed between HM Treasury and the Department for Transport. It will be announced on 11 June. That's how the taxpayer countenances the level of subsidy. The railway then has to operate within the financial constraint that is set out in the spending review, starting with the fare structure that it has now. Within that constraint, it can't implement fare discounts that would be likely to lead to a net loss of revenue, it can only look at changes that are likely to yield a net increase in revenue.
It isn't for the railway to make up economic policy or social policy, it is for the railway to deliver what is agreed with the Department for Transport. Now that combined authority mayors have some economic policy responsibility they can also make local initiatives, a bit like what is happening in Scotland. But the boundaries of those initiatives are likely to be the combined authority boundaries, they won't be national.
That potential difference in subsidy is based on revenue lost or generated by a national railcard in comparison to overall revenue, therefore all fare revenue is part of the calculation.
This is incorrect. The potential difference in subsidy is the net revenue gained or lost by the new railcard, that is new fare income less losses from existing revenue, because tickets that were sold at full price would instead sold at a 34% discount. The revenue lost on selling tickets at 34% discount, instead of at full price, has to be calculated, in order to derive the net revenue gained or lost. All fare income is not part of this calculation. Season ticket income is not part of this calculation. Fare income from existing railcard sales is not part of this calculation. Only fare income that used to be undiscounted, and with the new railcard gets a 34% discount, is part of this calculation. It is the amount that new sales has to raise in order to get to the proposed railcard yielding a net gain in revenue.
On your assumption of 5% not bothering with the new railcard, the remaining 95% of off peak fares, not purchased with an existing railcard, will have a 34% loss of revenue.
The overall amount of subsidy for the railway is a matter for the spending review, which will be announced on 11 June. That's how the taxpayer countenances the level of subsidy. The railway then has to operate within the financial constraint that is set out in the spending review, starting with the fare structure that it has now. Within that constraint, it can't implement fare discounts that would be likely to lead to a net loss of revenue, it can only look at changes that are likely to yield a net increase in revenue .
Again, that's a political choice. If the revenue gap is small enough compared to the political benefit, it might go ahead. See the £3 bus fare as an example of this.
This is incorrect. The potential difference in subsidy is the net revenue gained or lost by the new railcard, that is new fare income less losses from existing revenue. because tickets that were sold at full price would instead sold at a 34% discount. The revenue lost on selling tickets at 34% discount, instead of at full price, has to be calculated, in order to derive the net revenue gained or lost. All fare income is not part of this calculation. Season ticket income is not part of this calculation. Fare income from existing railcard sales is not part of this calculation. Only fare income that used to be undiscounted, and with the new railcard gets a 34% discount, is part of this calculation. It is the amount that new sales has to raise in order to get to the proposed railcard yielding a net gain in revenue.
When we're looking at net fare revenue, it's obvious that the size of the proportion of existing journeys receiving the discount will affect it. It's nonsense to argue otherwise.
You seem to be making very unrealistic assumptions of the proportion of existing journeys that are likely to receive a new discount from a national railcard
On your assumption of 5% not bothering with the new railcard, the remaining 95% of off peak fares, not purchased with an existing railcard, will have a 34% loss of revenue.
- the 5% is completely made up by me - it might be larger. Perhaps if someone has figures for the percentage of passengers eligible for existing railcards who don't buy them, that might be a good ball park.
- will there be a minimum fare as with the Network card ? That will have an effect
- will AP tickets attract the discount that will have an effect.
Whichever way you cut it, the gap in overall revenue will be substantially less than 34%.
I have never suggested that the gap in overall revenue will be 34%, but what matters is the size of the net revenue loss in £ money terms. What I have said is that there will be a net revenue loss, that it matters how big it is, and that, in order to measure that gap, it is necessary to measure the loss of revenue from existing ticket income going from being undiscounted to getting a discount of 34%.
Whatever the assumptions, it will be a net loss, and a big one. It doesn't matter what that is as a proportion of total revenue, what matters is £ money. I can't envisage any assumptions about National Railcard cost, percentage take up by existing travellers, and new business generated, that would be net positive for ticket revenue. Various calculations above have demonstrated this.
It is possible that the sums could add up in regions with particular circumstances, especially where there are particular reasons to anticipate very large amounts of new travel. But that would mean boundaries.
The size of the loss matters because of this. You are right that it is a political choice. The railway doesn't make up economic or social policy. Any politician making that choice is going to want to know the amount of the net cost, because they have to find the funds to pay for it, and justify spending taxpayers money on a railcard discount instead of something else. No policy that costs money is made in a vacuum. A Department for Transport Minister has to make that case to HM Treasury, a combined authority mayor has to make the case directly to voters.
Your case has no justification until you can estimate the size of the loss of revenue from existing ticket income going from being undiscounted to getting a discount of 34%, explain how it will be filled by income from some other source, and demonstrate why that is a better use of that money than other policies competing for the same funds.
You are not going to get a hearing with the politicians holding the purse strings if all you can say is "the gap in overall revenue will be substantially less than 34%".
FWIW, a 2003 study carried out on behalf of RailFuture reckoned that a National Railcard could be a net positive to railway finances, with a maximum benefit of £70 million achieved from a 50% discount on off-peak fares and a £30 charge for the railcard. Notably, this would take the form of reducing the farebox by £10 million, but charging £80 million for 2.7 million railcards.
Obviously that study was funded by an organisation with an angle, as well as being more than two decades old. Its findings shouldn't be taken as directly applicable to today's railway. But it does suggest that the economics could work out - provided the railway was able to accommodate the additional passengers.
FWIW, a 2003 study carried out on behalf of RailFuture reckoned that a National Railcard could be a net positive to railway finances, with a maximum benefit of £70 million achieved from a 50% discount on off-peak fares and a £30 charge for the railcard. Notably, this would take the form of reducing the farebox by £10 million, but charging £80 million for 2.7 million railcards.
Obviously that study was funded by an organisation with an angle, as well as being more than two decades old. Its findings shouldn't be taken as directly applicable to today's railway. But it does suggest that the economics could work out - provided the railway was able to accommodate the additional passengers.
Thanks for digging out the data. I'd say this is not worth much, mainly because it is more than 20 years old, and the demography has changed a lot since then.
In 2025, compared with 2003, there will be a lot more people who are existing rail travellers who would buy the railcard, get discounted tickets instead of full price tickets, and reduce farebox income. The other side of this coin is fewer potential new customers to buy the National Railcard and raise new revenue.
Furthermore, in 2025 there are more people than in 2003 who won't be buying the National Railcard because they already qualify for other railcards. This further reduces the potential for the National Railcard to raise new revenue. This is due to demographic change, and particularly applies to the senior railcard. Unfortunately I can't find data on the number of senior railcards in issue. A railcard where we actually have data is the Disabled Railcard: ORR data says that number in issue has increased from 145k in 2013 to over 330k in the most recent period.
The assumptions about the balance between how many railcards are existing customers, who result in net loss of revenue, and how many are new customers, who result in net gain of revenue, is critical to the size of the net loss of revenue.
FWIW, a 2003 study carried out on behalf of RailFuture reckoned that a National Railcard could be a net positive to railway finances, with a maximum benefit of £70 million achieved from a 50% discount on off-peak fares and a £30 charge for the railcard. Notably, this would take the form of reducing the farebox by £10 million, but charging £80 million for 2.7 million railcards.
Obviously that study was funded by an organisation with an angle, as well as being more than two decades old. Its findings shouldn't be taken as directly applicable to today's railway. But it does suggest that the economics could work out - provided the railway was able to accommodate the additional passengers.
It is stretching credibility somewhat to suggest that a railcard that costing less than most long distance fares (even then) offering a substantial off peak discount would reduce a £10bn farebox by just £10m.
A substantial number of people would just swap out of the Network Railcard, so even the railcard revenue looks highly unlikely.
If the new railcard gives discount to flexible, but not advance fares, it may be able to attract frequent travellers who find the current long distance flexible fares too expensive, which will be a revenue positive move.
Reducing the flexible fare itself will cause a fare cap also be applied on occasional travellers as well, so a railcard can be an incentive for discretionary rail travellers to take more journeys in long distance off-peak tickets (or even long distance flexible peak fares if the railcard is valid in peak with minimum fare, let's say £50 minimum fare for a single or £100 for a return, which is well beyond the commuter limit but still has an effect on the like of Edinburgh - London).
If the new railcard gives discount to flexible, but not advance fares, it may be able to attract frequent travellers who find the current long distance flexible fares too expensive, which will be a revenue positive move.
Reducing the flexible fare itself will cause a fare cap also be applied on occasional travellers as well, so a railcard can be an incentive for discretionary rail travellers to take more journeys in long distance off-peak tickets (or even long distance flexible peak fares if the railcard is valid in peak with minimum fare, let's say £50 minimum fare for a single or £100 for a return, which is well beyond the commuter limit but still has an effect on the like of Edinburgh - London).
All of which events may be true, but rely on an assumption that a reduction in price per ticket will be offset by more purchases.
Just taking a really simple set of numbers, focusing only on the income from ticket sales:
Fare is £30, and a railcard discount is 1/3. If 100 people purchase it, that means income of £3000 falls to £2000. To be income neutral, that requires you to sell an extra 50 tickets at the reduced price.
The moment you spend more money (staffing, extend the train), you increase the number of tickets you need to sell to stay at the starting point.
Those are the hard realities that need to be confronted if we're going to discuss reducing fares, by railcard or any other means. Any discussion of "but more people will travel" needs to be backed up with analysis of how many people that is, and what that means in terms of income unless, like @yorksrob, the argument is actually based on public policy.
I have never suggested that the gap in overall revenue will be 34%, but what matters is the size of the net revenue loss in £ money terms. What I have said is that there will be a net revenue loss, that it matters how big it is, and that, in order to measure that gap, it is necessary to measure the loss of revenue from existing ticket income going from being undiscounted to getting a discount of 34%.
Whatever the assumptions, it will be a net loss, and a big one. It doesn't matter what that is as a proportion of total revenue, what matters is £ money. I can't envisage any assumptions about National Railcard cost, percentage take up by existing travellers, and new business generated, that would be net positive for ticket revenue. Various calculations above have demonstrated this.
It is possible that the sums could add up in regions with particular circumstances, especially where there are particular reasons to anticipate very large amounts of new travel. But that would mean boundaries.
The size of the loss matters because of this. You are right that it is a political choice. The railway doesn't make up economic or social policy. Any politician making that choice is going to want to know the amount of the net cost, because they have to find the funds to pay for it, and justify spending taxpayers money on a railcard discount instead of something else. No policy that costs money is made in a vacuum. A Department for Transport Minister has to make that case to HM Treasury, a combined authority mayor has to make the case directly to voters.
Your case has no justification until you can estimate the size of the loss of revenue from existing ticket income going from being undiscounted to getting a discount of 34%, explain how it will be filled by income from some other source, and demonstrate why that is a better use of that money than other policies competing for the same funds.
You are not going to get a hearing with the politicians holding the purse strings if all you can say is "the gap in overall revenue will be substantially less than 34%".
Oh, I agree that the size of any potential loss (or indeed, gain) is important. I talk in proportions of revenue because we have a revenue status quo and any change will be evaluated in light of that status quo.
However, as the £3 bus fare scheme and the abolition of peak fares in Scotland has shown, some sizes of revenue loss can be tolerated if the political benefit is great enough. The crux of my argument is that any change in revenue will likely be of a level tolerable.
There's also the point that if any additional subsidy is small in comparison to that already being provided, the political bonus of making a railway system that seems of limited value for money and exclusionary for many people, better value and less exclusionary, the political benefit may significantly outway that increase in subsidy.
There's also the point that if any additional subsidy is small in comparison to that already being provided, the political bonus of making a railway system that seems of limited value for money and exclusionary for many people, better value and less exclusionary, the political benefit may significantly outway that increase in subsidy.
If that is the outcome desired then the subsidy needs to be targeted at people with a low income, and they may want to spend that money on something else other than travel. Indeed, there may be more political benefit in targeting the funds in a different way.
Thanks for digging out the data. I'd say this is not worth much, mainly because it is more than 20 years old, and the demography has changed a lot since then.
In 2025, compared with 2003, there will be a lot more people who are existing rail travellers who would buy the railcard, get discounted tickets instead of full price tickets, and reduce farebox income. The other side of this coin is fewer potential new customers to buy the National Railcard and raise new revenue.
Furthermore, in 2025 there are more people than in 2003 who won't be buying the National Railcard because they already qualify for other railcards. This further reduces the potential for the National Railcard to raise new revenue. This is due to demographic change, and particularly applies to the senior railcard. Unfortunately I can't find data on the number of senior railcards in issue. A railcard where we actually have data is the Disabled Railcard: ORR data says that number in issue has increased from 145k in 2013 to over 330k in the most recent period.
The assumptions about the balance between how many railcards are existing customers, who result in net loss of revenue, and how many are new customers, who result in net gain of revenue, is critical to the size of the net loss of revenue.
This was the study I was alluding to earlier on (thanks @Indigo Soup for digging it out).
I don't think the demography will have changed that much, other than there are probably a greater proportion of elderly and disabled residents already eligible for railcards, therefore they may already be getting a discount. I don't understand your argument that "this reduces the potential to raise more revenue" as you have previously been arguing that more people buying the railcard will absolutely decrease revenue.
If we're now agreed that railcards do raise new revenue, surely this is the same for everyone. For those that have already bought a railcard, the railway has already won that new revenue, so it makes sense to fill the gap and raise more new revenue from the rest of the population.
It's true that there may be more existing travellers, but that also means that there are more people already inclined towards rail travel who can be nudged towards buying more discretionary travel. I think that a railcard is likely to generate more discretionary travel amongst these occasional passengers, than amongst completely new people who would never think of getting a train anyway. And don't forget, the more people buying railcards, the more money from the sale of railcards themselves.
Your assumption that any existing customer who buys a new railcard will represent a loss in revenue is wide of the mark.
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If that is the outcome desired then the subsidy needs to be targeted at people with a low income, and they may want to spend that money on something else other than travel. Indeed, there may be more political benefit in targeting the funds in a different way.
If the new railcard gives discount to flexible, but not advance fares, it may be able to attract frequent travellers who find the current long distance flexible fares too expensive, which will be a revenue positive move.
Reducing the flexible fare itself will cause a fare cap also be applied on occasional travellers as well, so a railcard can be an incentive for discretionary rail travellers to take more journeys in long distance off-peak tickets (or even long distance flexible peak fares if the railcard is valid in peak with minimum fare, let's say £50 minimum fare for a single or £100 for a return, which is well beyond the commuter limit but still has an effect on the like of Edinburgh - London).
This is a very good point. For long distance travel I'm of the income bracket that relies a lot on advanced purchase, however in the right circumstances I can be persuaded to pay a bit more for flexibility. That's a source of revenue that the railway seems to want to throw away at the moment.
This was the study I was alluding to earlier on (thanks @Indigo Soup for digging it out).
I don't think the demography will have changed that much, other than there are probably a greater proportion of elderly and disabled residents already eligible for railcards, therefore they may already be getting a discount. I don't understand your argument that "this reduces the potential to raise more revenue" as you have previously been arguing that more people buying the railcard will absolutely decrease revenue.
If we're now agreed that railcards do raise new revenue, surely this is the same for everyone. For those that have already bought a railcard, the railway has already won that new revenue, so it makes sense to fill the gap and raise more new revenue from the rest of the population.
It's true that there may be more existing travellers, but that also means that there are more people already inclined towards rail travel who can be nudged towards buying more discretionary travel. I think that a railcard is likely to generate more discretionary travel amongst these occasional passengers, than amongst completely new people who would never think of getting a train anyway. And don't forget, the more people buying railcards, the more money from the sale of railcards themselves.
Your assumption that any existing customer who buys a new railcard will represent a loss in revenue is wide of the mark.
Indeed. But that also requires a realistic analysis of what are private or public gains, and whether the availability of government funding can be relied upon to keep pace with needs. The national museums provide an indication of where this can go.
This is a very good point. For long distance travel I'm of the income bracket that relies a lot on advanced purchase, however in the right circumstances I can be persuaded to pay a bit more for flexibility. That's a source of revenue that the railway seems to want to throw away at the moment.
IF it is a source of additional revenue. It's fashionable on here to knock the LNER pricing strategy, but the inconvenient fact for those of us who aren't fans is that it appears to be generating more revenue for LNER.
Is it - we need to understand the elasticity, and the evidence is ambiguous at best for fare reductions.
Indeed. But that also requires a realistic analysis of what are private or public gains, and whether the availability of government funding can be relied upon to keep pace with needs. The national museums provide an indication of where this can go.
IF it is a source of additional revenue. It's fashionable on here to knock the LNER pricing strategy, but the inconvenient fact for those of us who aren't fans is that it appears to be generating more revenue for LNER.
I'm sure that there are other people better placed to do the analysis than me.
But as I have said, railway reorganisation is a flagship policy for the government, therefore they will not want it to be seen as a damp squib. Unless something is done about fares, I fear it will be.
It's not surprising that if the crooked LNER trail is increasing revenue - anyone can do that with a fares hike on a popular route.
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