The great HS2 fares conundrum

On Friday (16 February) I made what must be one of the world’s cheapest inter-city train journeys, when I travelled the 111 miles from London to Birmingham for a fare of just £5.50 (without using any railcard). Later that day I returned from Birmingham, again in the comfort of a spacious Mark III carriage and a loco-hauled train, for just £5.50.

London to Birmingham is by far the cheapest long-distance rail journey in the UK because it is pretty much the only one on the franchised railway where there is genuine on-rail competition between operators.

After more than 20 years of privatised railway, the only other significant point-to-point journeys where passengers have benefited from competition are on the East Coast Main Line, where presence of the two “Open Access” operators – Grand Central and Hull Trains – has led to fares competition from York and Doncaster to London.

My journey was with Chiltern Railways from Marylebone to Birmingham Moor Street, but had I wanted to travel at roughly the same times from Euston (departing around 10.00 and returning at around 16.00) my choices (booking three weeks in advance) were a £6.00 single fare with West Midlands Trains (journey time: two hours 13 minutes) or £21.00 for a faster Virgin Trains service (journey time: one hour 23 minutes).

Both operators also had these fares available for an afternoon return journey from Birmingham.

Take away the competitive element, and it’s a very different story, of course. Had I wanted to travel only half way to Birmingham, in order to visit Bicester Village, then my cheapest option would have been well over double the price of that £11.00 return to Birmingham, with an off-peak London-Bicester day return costing £26.60.

So, with the prospect of High Speed Two (HS2) offering a third route between the capital and our second city in 2026, what can travellers expect to pay for the pleasure of that supersonic and semi-subterranean 48-minute journey?

When HS1 revolutionised travel from East Kent to London, fares were set at a premium of around 35% to those on existing routes, because the operator had monopoly control of all rail services in the South East, so could get away with charging a premium for speed.

However, the huge amount of spare capacity at off-peak times on the London-Birmingham routes – to judge from the current fare bargains – suggests that such premium fares will not wash with most people travelling on this busy, but highly-competitive, route.

The franchisee chosen to operate HS2 will admittedly also control much of the West Coast Main Line (WCML) through the new West Coast Partnership franchise, so will certainly have some degree of pricing power, by virtue of being monopoly provider of the fastest trains between London and Birmingham.

But as long as Chiltern Railways (or its successor) keeps offering high-quality fast trains that only take around one hour 45 minutes, and continues to have cheap-as-chips ticket prices – with none of the airline-style check-in delays promised by HS2 – then the economics of our new high speed line look distinctly questionable.

Not forgetting, of course, that an inevitable reduction in fast WCML services to the West Midlands when HS2 opens will leave an opportunity for West Midlands Trains to potentially speed up and increase the frequency of its competing services on the WCML.

So, after the Government’s £2 billion bail-out of Stagecoach on the East Coast Main Line, there now seems every chance that Phase One of HS2 will become as big a black hole in revenue terms, as it promises to be in capital cost terms.

Watch out for yet more eye-watering premium payment promises by bidders for the West Coast Partnership which, in the light of the ECML fiasco, will deserve to be taken with a large pinch of salt.