Plans for train companies to offer cheaper tickets as part of an alternative pricing plan are facing opposition from the Treasury, according to reports.
The Department for Transport (DfT) wants to introduce dynamic budget airline-style pricing as a means to lower fares and help restore passenger numbers.
Treasury officials are understood to be blocking the plan amid fears it could increase the approximate £11 billion annual cost to the taxpayer of subsidising the rail network.
They want to cut rail network costs instead, but critics say this would cause a spiral of lower passenger numbers and revenues, The Times reports.
How would the pricing system work?
The proposals which the DfT are backing are under demand-led pricing, which businesses such as hotels and budget airlines utilise.
It means a significant discount would be offered on routes and at times when demand was low, in an effort to fill more seats.
Prices at peak times or on busy routes could rise, but it is hoped it would increase people using the rail service overall.
A source said to The Times: “Even if you sold an empty seat for a pound, that is still a pound you would not have got it if no one is in it.”
Figures published this month show that rail usage in the first quarter of the year was 88% of that in the same period before the Covid pandemic.
Meanwhile, passenger revenue was £2.2 billion, 70% of the £3.2 billion four years ago.
Treasury seemingly opposed to plans
The new proposals have won the backing of the Transport Secretary, Mark Harper, but Whitehall sources said they were being blocked by Treasury officials.
The Times reports they "have told the DfT that they are not prepared to take the risk of losing existing revenue at a time of huge pressure on the public finances."
A government source said Treasury reticence was the result of years of broken promises at the DfT. “Just remember HS2,” they said. “It is no wonder there is a large degree of scepticism.”
Another insider told the newspaper: “The Treasury sees the railways as a cost . . . rather than an opportunity."
They added: “But unless we are prepared to innovate then ultimately the rail network is only going to become a bigger drain on the taxpayer. It is just going to run down the railways.”
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