Summary, Conclusion and Recommendation
This outline business case for the permanent removal of peak fares from the ScotRail network has been undertaken in line with HMT Green Book and business case guidance and Scottish Transport Appraisal Guidance (STAG).
This OBC builds on the published evaluation of the pilot introduced as a Pathfinder as part of the Fair Fares Review that ran from September 23 to October 24. Whilst this work remains the best evidence available for assessing the impact of the removal of peak fares it has been updated to reflect data to end April 2025. The original evaluation found that whilst the pilot offered value for money in broad terms, it was not targeted to those most in need and had a minimal impact on car based CO2 emissions. These findings alongside affordability constraints meant that the decision was taken not to implement the policy permanently until budget cover was available. In the Programme for Government in May 2025, it was announced that from 1 September 2025 peak fares would be removed from the ScotRail network and this OBC provides the evidence base for that decision and an assessment of delivery options.
This OBC uses the standard 5 Dimension model of Strategic, Socio-Economic, Managerial and Financial cases before providing a Value for Money assessment of the option based on this information. The Managerial and Commercial cases are minimal based on the team put in place to manage and evaluate the pilot (Managerial case) and the fact that the movement of ScotRail (in the structure of ScotRail Holdings and ScotRail trains (Commercial Case) into public ownership was a major factor in enabling the intervention in a practical sense.
The Strategic Case recaps on the findings of the original evaluation of the pilot and provides detail on the current situation in terms of both rail demand and the wider economic situation in Scotland. It is striking that rail demand continued to rise after the end of pilot albeit at a slower rate and it is important to note that the people of Scotland still face economic challenges from the wider global economy.
Consideration of the Strategic context has led to a revision of the objectives of the pilot:
- Improve awareness of rail as a viable travel choice
- Improve access to rail by reducing the cost of travel at peak times, enabling more people to travel more often
- Reduction in private car travel as more people choose to travel by rail
Revised objectives for the permanent removal of peak fares which align well with the 4 First Minister priorities:
- Improve access to rail by permanently reducing the cost of travel at peak times, enabling more people to travel more often and make long-term choices with certainty
- Reduction in private car travel as more people choose to travel by rail
- Simplify the range of ticketing options available in order to make the system easier to use and simpler to run
Consideration of the issues raised by making the previous trial permanent led to the consideration of 6 options for implementation against a Do-Nothing of retaining the current position:
- Option 1 - Core change - remove peak fares and leave other fares/restrictions in place in line with pilot
- Option 2 - Add seasons/flexis discount of 5% to Option 1
- Option 3 - Add removal of Railcard/Concessions restrictions to Option 1
- Option 4 – Full removal - Add Option 2 and 3 to Option 1
- Option 5 - Increase Core fares by various blanket %ages.
- Option 6 – Reinstate Super-Off Peak Fares in combination with Option 1-5
Options 3 and 4 were eliminated at Shortlist stage due to the terms of some National Railcards being outwith our control, creating implementation difficulties – those who would have benefited will still benefit from reduced fares and can choose to travel at other times of the day if they wish further discounts.
The Socio-Economic case reran the analysis undertaken for the pilot evaluation and suggested that Option 1 would impact on rail demand, in a prudent range of Scenarios as follows:
|
Number of passenger journeys (Demand) |
Total Change (Core Scenario) |
Average Daily Change (Core Scenario) |
Percentage Change (Core Scenario) |
Total Change (Alternative Scenario) |
Average Daily Change (Alternative Scenario) |
Percentage Change (Alternative Scenario) |
|
|
Impact of Pilot |
4,333,800 |
11,900 |
5.59% |
2,140,100 |
5,900 |
2.67% |
|
|
Post Pilot |
Not applicable |
7,200 |
3.22% |
Not applicable |
6,500 |
2.90% |
|
The additional options are assessed as not having significant impacts on demand but impact differently on the wider critical success factors. In terms of the Socio-Economic case, all options have overall positive outcomes. Looking at the benefits alone, Option 4 – the full removal of time based restrictions scores highest. An assessment of the areas covered under standard Impact Assessments (Equality impact assessment, Fairer Scotland Duty, Consumer Duty, Business and Regulatory Impact Assessment (BRIA) and Environment found no major concerns.
In line with the pilot evaluation, the projected impacts on CO2 emissions are small at a fraction of 1% of total car emissions. This is in line with the mode share of rail compared with alternatives and the estimated increase in rail demand.
An issue worth mentioning within the BRIA material is the potential impact on bus operators. Within the trial there was some shifting from bus but discussions with bus operators suggested that this was not significant and was more than outweighed by growing demand from the U22 concessionary scheme. The modelled scale of abstraction from bus was small (around 1 million bus journeys which represents around less than 0.25% of bus journeys) and was overshadowed in reality by an ongoing increase in patronage from the U22 concessionary scheme.
The extent of bus demand has been monitored during the trial overall bus patronage grew at a rate broadly equivalent to the impact on rail. In addition, the growth in Concessionary travel, directly supported by the Scottish Government grew at a rate significantly in excess of the impact on rail demand (and continues to do so). There was a fall in bus demand in January and February 25 but this was after the peak fares trial had finished. More generally the bus industry is supported by the range of concessionary schemes and wider interventions and the impact of the permanent removal of peak fares will be monitored.
The Financial case assessed that a prudent range of costs for the Core option are between £19.5 million and £38.6 million per annum for the first full year of the project. This does not include any additional operating costs (or marketing budget) incurred by ScotRail. Alongside additional evaluation costs these are estimated to be around £5 million.
The additional costs of Option 2 – adjust Season Flexi/Prices to 5% below main fares are estimated to be £1.5 million per year
The calculation of the impact of Option 5 – raising core fares to reduce the overall cost of removing peak fares is more complicated to analyse but each 1% increase in the Core fare reduces overall journeys by 650,000 and increases revenue by around £0.9 million.
| Options | Low demand Impact | Estimated demand impact | Scot Rail Estimate |
|---|---|---|---|
| Option 1 | £38.6m+£5m = £43.6m | £19.5m +£5m = £24.5m | £28.3m +£5m = £33.3 |
| Option 2 | +£1.5m = £45.1m | +£1.5m = £26.0m | +£1.5m = £34.8m |
| Option 5 | See table above | See table above | See table above |
| Option 6 | No additional cost | No additional cost | No additional cost |
This results in a range of total costs of between £26 million and £45 million.
In terms of Value for Money, the Benefit Cost Ratio of the core scenario is estimated to be 1.34 and under the alternative scenario is 1.19. This is somewhat lower than the prudent range from the trial due to the lower estimated impact on demand. However, that was based on the trial and the permanent nature of the proposal is likely to further stimulate demand. Using the ScotRail estimates of costs gives a benefit cost ratio of 1.29.
In terms of the options, there is no impact on the benefit cost ratio for options 2 and 6 because it is assumed that demand is impacted to an insignificant level. Whilst there are small variations in costs between these options, any increase in cost to government is perfectly offset by a benefit to the public and so there is no impact on the BCR.
Based on the core scenario, it would take an increase in demand of 9.75% to make the project self-financing. This represents around a 1.75 times bigger impact than has been found in this analysis. Academic literature suggests that in the long term there may be the potential for long-run impacts to achieve this. It should be noted however that this would still not have tangible benefits in terms of CO2 reductions as the impact would still represent a small fraction of overall car use.
Whilst affordability remains a concern, the recommendation of this OBC is that Option 2 be taken forward at a cost of up to around £45 million for the first full year (September 25 to end August 26). Whilst there remains significant uncertainty around the cost there is a strong likelihood that it will fall in subsequent years due to longer term changes in behaviour and hence demand. This option represents a removal of all time of day based restrictions on the ScotRail, is simple to implement and crucially provides a simplified fare structure that has the greatest potential for significantly higher long term impacts from the intervention.
There remains significant uncertainty over the costs and benefits which will require the development of a comprehensive benefits realisation and evaluation strategy. This will be developed over Summer 2025 as the project moves towards implementation but is likely to involve significant work in year 1 and 3 of the scheme.