Budget: Inflation and low passenger numbers could drive TfW ticket hike

The Welsh Government has indicated that rail fares in Wales are likely to increase as Transport for Wales (TfW) faces significant financial challenges.

The move comes in response to inflationary pressures and a notable decrease in passenger numbers.

In its budget published on Tuesday, the Welsh Government acknowledged the need for ‘tough choices’ with regards to rail due to increases in operational costs.

Despite additional funding provided in 2024-25 compared to initial plans set in March 2023, TfW is grappling with a substantial funding gap.

The shift towards home working has led to fewer passengers commuting by train, leaving a noticeable hole in TfW’s budget.

In October, the Welsh government announced an additional £125 million for TfW this year, a significant increase described as “massive” by finance experts.

However, this boost in funding comes against the backdrop of lower-than-expected ticket sales.

The pandemic has altered commuting patterns, with fewer commuters returning to rail travel post-pandemic than anticipated.

While there has been an increase in leisure trips, passenger revenue remains “significantly below” expectations set when the network changed hands five years ago.

In 2018, when KeolisAmey took over from Arriva Trains Wales, it was forecasted that passengers would make 57.5 million trips this year.

The revised forecast now stands at just 27.4 million.

The nationalisation of the railway in February 2021 and its subsequent management by TfW was a response to these ongoing challenges.

Without the additional funding, maintaining the operation of all rail services would have been untenable.

The Welsh Government and TfW are working together to make savings and minimise the income-cost gap.

Investments in the rail network across Wales have been made, with the expectation that these will help grow demand and increase revenue in the future.

However, the current economic climate necessitates difficult decisions, including the proposed increase in rail fares.

In addition to changes in the TfW rail budget, the Welsh Government has also had to refocus £24 million across various other transport budgets.

These adjustments reflect the broader economic challenges faced by public services in Wales and the need for sustainable solutions in the face of inflationary pressures.

In the draft budget, Rebecca Evans, Wales’ finance minister, said, “Following the action we took in October to help manage pressures related to maintaining rail operations, we have provided additional funding in 2024-25 compared to when we set our plans in March 2023.”

“As previously outlined, these pressures have been caused by the ongoing impact of the pandemic on the ambitious revenue projections from the original KeolisAmey bid in 2018 alongside inflation-related increases in some operational costs,” she added.

“Without this funding, Transport for Wales (TfW) would have been unable to maintain the continued operation of all of its rail services. We are continuing to work with TfW to make savings and to minimise the gap between income and costs,” Evans continued.

“The significant rail investments made already across Wales would have been jeopardised without the additional funding provided in the revised spending plans. The wider package of investment will also help to grow demand and increase revenue income significantly over the coming years,” she explained.

“Like all public services in Wales, tough choices will be needed to live within this settlement. In response to these inflationary pressures, TfW will also need to increase rail fares to help close the gap and ensure sustainability going forwards,” Evans concluded.