Uncharted Territory

October 16, 2009

Bus Fares, the Minimum Wage, Pensioners, and the Nonsense of RPI and CPI

Filed under: Bus, Economics, Inflation, Local government, Minimum wage, Politics, Transport, Tube — Tim Joslin @ 7:40 am

BBC Radio 4 is more than usually surreal this morning. Unless my ears deceived me, they just broadcast a nursery school teacher asking her young charges: “What rhymes with ‘bucket’?”. Recipe for disaster, I’d say. Earlier they’d announced that “Google, the world’s biggest search engine” has an opinion. No, the company may have an opinion, or, better, the CEO, but, unless the internet has become self-aware overnight, search engines do not have opinions.

So I decided that, rather than slob about, I’d make a point I’ve been dwelling on overnight.

On the BBC London News, after News at 10, the reporting of the London Transport fare rises brought home to me the scale of the price rises. Bus fares are going to rise by 20p. At the moment my Oyster is charged £1, now it will be £1.20. That’s 20%. Previously I’d only skimmed a BBC report that noted that:

“Bus fares are to go up by 12.7% and Tube fares will rise by 3.9%.”

I hadn’t really taken in the rest:

“Oyster card pay-as-you-go bus journeys are to rise from £1 to £1.20. … and the price of a seven-day bus pass will also jump from £13.80 to £16.60 but London Travelcard prices will be frozen in the vast majority of cases.”

This makes me suspicious. I’ve just downloaded the PDF from the BBC’s report. Yeap. The 12.7% and the 3.9% are spin – well, they’ve been constructed somehow, but without any information as to how, they are virtually worthless.

Like RPI and CPI, these % increases mean little. They do not reflect the effect on specific individuals.

In fact, the fare rises are ludicrously unfair. Is this the start of a Tory assault on the poor?

The key point is that fare rises on buses are much greater than those on the tube. The result is that the cost of living increases fastest for the poorest. Boris may not realise this (Ken did, apparently), but he shares London with people who catch the bus because they can’t afford the tube.

Let’s consider first how the fare changes affect those struggling on the minimum wage. Let’s assume Mr Minimum catches a bus to and from work 5 days a week. That’s 10 fares now at £1.20 rather than £1 – £10/wk now but £12/wk after 2nd January – a 20% increase as already mentioned. Now, the minimum wage recently increased from £5.73 an hour to £5.80, that is by 7p an hour. If Mr Minimum works 40 hours a week, he’s better off by £2.80/wk (before tax) because of the pay rise, but worse off by £2/wk because of the bus fare rise. That’s right – the fare increase has wiped out all but 80p, or (200/280)*100 = 71% of the rise in the minimum wage.

Maybe that’s not incredibly realistic. Mr Minimum might have to take 2 buses to work and 2 back. In that case he’d reach the daily fare cap on the buses. But this has risen from £3.30 to £3.90 or by 18% (exactly where did this 12.7% come from?). More to the point Mr Minimum will have to pay 5*60p = £3 extra per week to get to work. Wiping out his entire annual pay rise plus an additional 20p.

But, of course, if he used the bus to travel to work 5 days a week, Mr Minimum will most likely have taken advantage of the weekly Bus and Tram pass. How has this increased? From £13.80 to £16.60, that is by £2.80 or just over 20%, that’s how. Unbelievable.

If Mr Minimum works a 40 hour week, the bus fare increase wipes out his entire annual pay rise.

On the other hand, fares for most tube commuters will not increase at all – some peak fares and more to the point 7 day Travelcard prices are (mostly) frozen.

Bizarrely, off-peak tube fares have risen more than peak fares. The way to use the system more efficiently is to spread the load more. I would have thought a greater differential was called for. Train fares are punitive at peak times. Maybe both could converge on a happy medium.

I was going to mention pensioners, who have just been awarded a £2.40 weekly rise. Then I realised that pensioners can travel free on the buses anyway. In fact, pensioners are now rather more than £2.40 a week better off, since they would have been entitled to no rise at all based on RPI, which is negative. In general the increase in the state pension is based on an inflation index that includes transport costs, even though they pay less for transport than the general population.

What’s actually needed are indices that reflect the cost of living rises for different segments of the population, to be used for different purposes.

But there’s a bigger issue. When are we going to start treating the low-paid fairly?

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1 Comment »

  1. Couldn’t agree more with this. It fits in neatly with a piece Peasoup Magazine did about how badly those on the minimum wage do in London when it comes to transport, when their position is compared with minimum wage earners in other OECD countries.

    Comment by Giles — June 17, 2011 @ 8:15 pm


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