George Osborne urged to make policy U-turn as parties fear ‘tax on commuting’ will destroy support in marginal seats
George Osborne is facing a mass revolt by Tory and Liberal Democrat MPs over soaring rail fares, amid warnings that above-inflation increases will destroy remaining support for the coalition among commuters in marginal seats.
The chancellor will come under intense pressure to perform yet another policy U-turn when MPs return to parliament next month, after it was announced last week that many fares would rise in January by up to 6.2% – 3% above inflation – with some rising by up to 11%.
Conservative and Lib Dem MPs said they would lobby the chancellor and the transport secretary, Justine Greening, to cap increases at 1% above inflation at most. Rises at that level are written in to franchise agreements, but all of the extra 2% above that flows directly to the Treasury – prompting MPs and commuters to complain of a tax on commuting.
Government sources say Greening is sympathetic to MPs’ calls, but Osborne – under heavy pressure to keep to his deficit reduction targets and to pay for new investment in the railways – is said to be less so.
Several MPs in commuter seats said they had to act after they returned from holiday to find their postbags and inboxes inundated with complaints from furious constituents.
One Kent MP – Sir John Stanley, the member for Tonbridge and Malling – accused ministers of “exploiting commuters” and using rail fares as “a disguised form of taxation”.
The Conservative MP for Harlow in Essex, Robert Halfon, said: “I have already written to Justine Greening. It is a simple cost-of-living issue. Many people in my constituency are on below-average earnings and commute into London, and they cannot afford these rises.”
Tracey Crouch, the Tory MP for Chatham and Aylesford in Kent, said: “A lot of Tory MPs will be seeking meetings with ministers as soon as we return. Household living standards are already squeezed and people who have to commute are feeling very aggrieved.”
The Tory party deputy chairman, Michael Fallon, has also registered his concern, telling his local paper that rail operating companies must show restraint, while Philip Davies, the Tory MP for Shipley in Yorkshire, said big rises would choke off economic revival.
“It is absolutely essential that this decision is changed. Government should be on the side of the people – not hitting them where it hurts most. It is very difficult to see how we can get out of a recession when these kinds of increases leave people with even less money to spend.”
With Lib Dems also calling for Osborne and Greening to back down, the issue is a further headache for the chancellor, who has already performed several U-turns since the budget in March.
Stephen Joseph, executive director of the Campaign for Better Transport, said: “With so many Conservative MPs in marginal ‘commuter’ seats, it is pretty clear that if ministers do not back down, they will be hit hard in the ballot box.”
While ministers are standing firm so far, the rebel MPs remain optimistic, having succeeded in getting Osborne to cap fares at inflation plus 1% in last year’s autumn statement.
Meanwhile – apparently sensitive to suggestions that rail chiefs might walk away with big bonuses irrespective of performance while commuters are stung for higher fares – the Office of Rail Regulation (ORR) is seeking assurances from Network Rail that it will limit payouts in the event of missed targets.
In an extraordinary development, Richard Price, chief executive of the ORR, has felt it necessary to write to Graham Eccles, chairman of Network Rail’s remuneration committee, seeking assurances that “in the event of a catastrophic accident for which Network Rail was culpable, no bonuses would be paid”.
Unions and MPs have expressed concerns that it has been left to the regulator to push for such assurances as Network Rail, which receives almost £4bn a year from the taxpayer, seeks to introduce a possible £12m bonus scheme for its six top directors. As chief executive of Network Rail, Sir David Higgins already earns over £560,000 a year.
Shadow transport secretary Maria Eagle said: “It beggars belief that the rail regulator has had to explain that bonuses would be inappropriate in the event of a catastrophic accident or, as is currently the case, a failure to meet performance targets.”
In June, the regulator announced that Network Rail missed many of its punctuality targets last year, especially for long-distance services.
“Passengers facing 11% annual fare rises will be staggered that Network Rail bosses have the front to haggle over yet another round of bonuses,” Eagle added.
“There is something morally repugnant about executives of what is in effect a publicly funded company having to be told by a regulator to forgo their huge annual bonuses in the event of a fatal crash they bear responsibility for,” said Manuel Cortes of the TSSA rail union.