AUGUST is traditionally a slow month, and rises in railway fares, usually announced around now, can reliably be counted on to generate a little controversy. Many fares are regulated by the government; train companies may raise them only according to a set formula that limits fare hikes to one percentage point above the rate of inflation measured by July's increase in the retail-prices index (RPI). This year, though, the news looks genuinely dramatic. Rail passengers could be hit by some of the biggest fare rises in decades. The need for spending cuts may change the way the railways are funded for good.

The RPI figure released on August 17th was bad enough: at 4.8%, it implied a rise in rail fares of almost 6%, at a time when wage increases are averaging just 1.3%. But worse is no doubt to come. The Department for Transport (DfT), like all government departments except health and foreign aid, will have to find spending cuts of 25% or more over the coming five years. Rumours are swirling that the “RPI+1” formula may be changed. Philip Hammond, the Conservative transport secretary, has refused to be drawn. But his observations that “this is not a normal year” and that he “cannot guarantee” the survival of the existing formula look ominous for those who depend on trains. Rail-industry insiders talk of fare increases of 8%, 10% or even more. A final decision will be revealed with the Comprehensive Spending Review, which is scheduled for publication on October 20th.

Is this the right way to raise revenue? Railways have enjoyed a renaissance over the past decade. Passenger numbers have surged and are now at their highest since the second world war. There have been steady improvements in reliability and punctuality since the Hatfield rail crash in 2000, which led to safety checks that caused disruption across the entire network while tracks and points were fixed or upgraded. But that improvement has been bought with great gobs of public money (see chart). At £5.2 billion last year, government spending on rail travel cost around £87 for every person in the country.

Yet rail travel is a niche interest. It accounts for just 7% of all journeys (cars and vans, in contrast, make up 84%). Those trips are made mainly by the relatively well-off: households with income of £35,000 or more (the top three-sevenths) account for 46% of all rail users, and households with income of up to £17,500 (the bottom three-sevenths) for just 24%. Almost four-fifths of passengers were commuters and business passengers in 2008, and three-fifths of all trips were made in London and the south-east, the two richest parts of the country. Figures from the RAC Foundation, a motoring lobby, suggest that only a fifth of the population use trains more than once or twice a week. Almost half use them once a year at most.

Aware of the peculiarities of having taxpayers subsidise a form of transport favoured by the well-off, and worried by the ballooning subsidies, the previous Labour government tried in its second and third terms to shift more of the burden of paying for the railways from taxpayers to farepayers. Green ambitions blunted the shift: trains full of passengers pump out less carbon dioxide than cars, and if they cost much more they risk being less used.

Sharply rising fares pose political problems for the coalition government too, though they are slightly different ones. The Tories must hesitate because fare increases will hit their core supporters the hardest. The Liberal Democrats, for their part, promised during the election campaign to limit fare increases to “RPI-1”—ie, to lower fares in real terms. But the eye-wateringly tough public-spending cuts the Treasury is seeking will probably force their hand. And given the railways' relatively well-heeled customer base, whacking up fares is in line with the inclination to reduce middle-class benefits. Expect more big rises in the coming years.