Should public transport fares be higher?

Fare revenue/per passenger km ($) for public transport in selected cities (data from Ian Wallis & Assocs)

The report in The Age that the Government is considering a 10% real increase in public transport fares has generated an intense negative reaction from readers.

If the Government went ahead with the touted increase, the paper calculates that combined with CPI increases, the cost of a weekly zone one myki pass would rise from the current $30.20 to $34.90 in 2013, or by $4.70 per week. The equivalent zone two pass would rise from $51.00 to $58.95.

Out of well in excess of 100 reader comments on the story, only a handful defended the proposition. The overwhelming view is the system is so broken it would be outrageous for the government to ask beleaguered users to pay more. While many say they’d be prepared to pay more if it meant the system were improved, quite a few think public transport is already too expensive at current fare levels – indeed, a number argued public transport is a “public good” and should be free.

Some warn higher fares would be self-defeating because they’d encourage further fare evasion – equivalent revenue could instead be raised by getting serious about evaders. Another objection is that recent increases in patronage have raised enough additional revenue to obviate the need for increasing fares.

There’s also a common sentiment that increasing fares would increase car use and hence be bad environmentally. A surprising number reckon the increase would make public transport more expensive than driving.

I think The Age has taken some licence here. Current policy is that fares increase in line with inflation, so some of the prospective rise is going to happen anyway. By itself, a 10% increase (i.e. a 5% increase in each of two consecutive years) would put up the cost of a zone one weekly myki pass by $3.10 per week. The corresponding increase for a zone two weekly would be $5.25 per week.

Still, I don’t think even these somewhat lower numbers would do much to assuage the vitriol spat out by most readers. However I disagree with them. As I’ve pointed out before, I support the idea of increasing fares in real terms. This is not a conservative view – the public transport advocates who undertook the Independent Public Inquiry into Sydney’s long-term public transport needs think it’s a good and necessary idea too.

The argument that fares shouldn’t be increased because the system is flawed is politically potent but counter-productive. More revenue is one of the crucial inputs needed to improve the system. Better service is a much more important driver of patronage than fare levels.

Fares aren’t in any event expensive relative to the cost of the service provided. They’re already heavily subsidised – fare box revenue in Melbourne only recovers 44% of operating costs and none of the capital cost. Moreover, fare revenue is around 12 cents per passenger kilometre – that’s around average for Australian cities but considerably lower than some major cities in New Zealand, Canada and the United States (see exhibit).

There’s a sense of perspective missing here. For all its failings (and I’m not suggesting they aren’t real), the public transport system in Melbourne is still delivering a reasonable service. In fact it’s been good enough to support spectacular jobs growth in the transit-dependent CBD over recent years – employers are prepared to bet on it.

There are good reasons for pursuing revenue foregone through fare evasion, but it isn’t a magical hollow log. Collecting the marginal dollar entails substantial and increasing costs, such as employing more inspectors (or conductors). Likewise, recent boosts in patronage have increased revenue, but they’ve also raised operating costs and required more investment in infrastructure e.g. new trains.

The argument that higher fares will increase driving isn’t convincing either. While there would undoubtedly be some drift at the margin, the great bulk of public transport users are “captive” in the sense that they either can’t drive or motoring is simply too expensive due to high parking costs and traffic congestion. Even a one-off 10% real increase isn’t going to change that equation substantially (although I expect it could well give a modest boost to cycling).

The key market for public transport is work trips to the city centre. The CBD couldn’t exist in its current size and form without transit. There’s no convincing reason – on either efficiency or equity grounds – why CBD employers should have the travel costs of their generally well-paid workers subsidised by the rest of the population by holding down fares (in an ideal world I’d favour a tax on central city employers to supplement funding of transit services but that’s another story).

Despite what some readers of The Age think, public transport is not a “public good”. It’s neither non-rivalrous nor non-excludable – it gets congested and users pay. Of course it has a social function but so do water and energy. As is usually the case with these utilities, subsidies should be directed at eligible users, not bestowed on all passengers via the fare structure irrespective of income .

Overall then, I think increasing fares in real terms is a good idea. However I don’t see fares as the only source of revenue – CBD businesses should be paying too (and Sydney’s Independent Inquiry also identified a number of other potential sources of funding). I’d also like to see attention given to the fare structure, so that among other things, it provides further incentive for travellers to shift to non-peak services.

The reaction of readers of The Age to this story is worrying. Many think public transport fares are already too expensive and virtually everyone is against the touted increase. If the presumably well-educated readers of The Age think everything comes for nothing, no wonder governments are nervous about increasing taxes and charges.

It would’ve been better if it were done decades ago, but there would be value in enhancing public understanding of a number of matters – for example: how much it costs to provide public transport services; the proportion of cost that users are actually paying; and how public transport compares with the real cost of the alternatives. One of the few readers of The Age who didn’t object to the idea of higher fares pointed out that he or she recently paid £4.00 for a 3 minute train trip in London and argued charges on Eastlink are higher than public transport fares. This reader finished by saying: “For a service that’s stress-free, the ticket price could be doubled and you’d still be getting good value”.

20 Comments on “Should public transport fares be higher?”

  1. Richard says:

    The fares should remain the same or lower. To increase revenue, simply improve the rate of compliance. The flow of passengers on trams is not designed at all. Borrow the design of a method that works overseas, which makes it almost impossible to travel without a ticket.

    My observation as a regular on the 86 tram, is that less than half the passengers validate a ticket. At Clifton Hill station there is nothing to prevent a passenger without a ticket to get on or off a train. My observation on ticket validation there is similar to the 86.

  2. Lynne says:

    Not validating is not necessarily fare evasion, most of the people not validating probably have an already validated ticket, either a periodical or from previous travel on the same day. I usually have a weekly or a monthly and once the date is printed on the ticket I never validate it on a tram, or on trains unless I am going to get off at a station with gates.

  3. dfv says:

    I catch public transport (tram and train) each day and although its crowded, it works. I have no issue with price increases in line with CPI or whatever index they choose to use. I have caught PT overseas and I feel I get good value for money here. Like torrenting movies or songs, people want whatever they can for nix, and scream murder at the hint of a tax. It’s about time we started paying for the true cost of things.

  4. I’m with the masses on this one. If I believed fare increases would lead to improvements in the network I’d be happy to pay more, unfortunately I think we’re already getting a sub-par service for our tax-dollar and I don’t see how throwing good money after bad will somehow fix that.

    Implement some big changes to improve services then talk about raising fares. As you’ve pointed out it is a political issue, and when its political appeasing the masses is generally important.

    I am surprise by the 44% figure mentioned in the report you’ve linked. I’ve never seen Melbourne reporting higher than abou 37% return from farebox revenue.

    • Alan Davies says:

      I’ve previously cited a figure of 36%, drawn from this report prepared by LEK for the Tourism and Transport Forum. I prefer the 44% figure because it’s more recent and the report it’s taken from was prepared by transport specialists. Also, I prefer to use the figure that’s least sympathetic to my position so as to avoid charges of cherry-picking. Having said that, I take the number as an approximation – it would be good if DoT released an authoratitive figure.

  5. Peter Hill says:

    Alan, I agree with your general argument about the regressive social inequity about subsidies to public transport users in toto. I also argue that the current patterns of access to public transport (PT) networks in Melbourne and more broadly across regional Australia manifest high levels of regressive social inequality. The VAMPIRE research by Dodson and Sipe focuses on financial stress due to mortgages and household travel costs. VAMPIRE results show the best economic and social benefits accruing from PT to residents, businesses and property owners in the city CBD, inner suburbs, and in middle suburbs within a kilometre of a rail station or a half kilometre of a tram route. Wealthy Toorak fares much better than Tarneit; wealthy Camberwell more than Caroline Springs.

    Fare increases can be justified. However, a problem exists generally in consumer behaviour in modal choice insofar that a large part of the benefits and the costs of transport systems are external to the consumer’s action in choosing how to travel and then traveling, i.e. acting as a consumer of a product (transport service). Obvious externalities include pollution, noise, amenity impacts, betterment of land values due to transport access, government subsidies and command decisions to allocate resources for roads and PT, etc. Thus the practically-justifiable increase in PT fares lies below the direct economic benefit to the PT traveller, as travel by car on roads is also heavily externally subsidised.

    We should look at other ways of funding the transport systems, and PT in particular, by methods that improve rather than worsen social equality, whilst not discouraging people from choosing PT by massive fare increases. Governments should consider incremental “betterment” taxes and rates increases on freehold property to capture value increases induced by access to the higher quality PT routes. Thus Toorak landowners should pay more PT betterment tax than residents in Doveton or Tarneit.

    I also have been advocating general road pricing across wide regions or areas, that is not just limited to specific tollway routes or to a level of traffic congestion, or to defined areas (cordon pricing) Think of “GWARP” (general wide-area road pricing) or “WARP” (wide area road pricing) that covers, say, the entire Melbourne metropolitan area, with the pricing rates (cents per km) variably applied both with respect to geographic location, geographic travel route, and time of day by day of the week. GWARP strategies could do two things: increase the motorists’ perception of the costs borne by their motoring choice, and also provide streams of revenue that could be transferred into people’s Myki card accounts as subsidy incentives to travel by PT.

  6. Russ says:

    Surely the easier way to tax CBD workers use of p/t is to charge a congestion fare for peak hour trips to the city? It shouldn’t be a problem to do so if commuters are using Myki, and (likewise) there are good reasons to up the cost of metcards to force people onto Myki. The government could get a cross-the-board fare increase of more than 10% with those two things with limited political cost. Though it would put the onus on them to build the promised new CBD lines.

    I’m curious about this comment?

    “A surprising number reckon the increase would make public transport more expensive than driving.”

    This depends on what costs are attached to the trip, and what are fixed. if you own a car, have a car-park to leave it, and travel a reasonable distance, the costs are relatively similar. The marginal cost of weekend public transport depends on whether you have a weekly/monthly ticket. A relatively short (1-5km) cross-town return trip (to shop, for example) with a partner is up to 20 times as expensive on p/t as in the car, once you already have the car. If you don’t have a car it is something of a moot point. A significant tax on commercial car-parking would equalise that disparity.

  7. johnsonmike says:

    One of the few readers of The Age who didn’t object to the idea of higher fares pointed out that he or she recently paid £4.00 for a 3 minute train trip in London

    Well she was a fool then.

    Yes, the cash fare for the Underground is £4 but virtually everyone uses an Oyster Card where the fare is £1.90.

    Even better is the Oyster for the buses where the fare is just £1.30, with a maximum of £4 for an entire day of unlimited travel, comparable to Melbourne fares.

    You can get Oyster cards almost anywhere, let alone at all airports and railway stations of entry to London.

    If her Tube trip was only three minutes, it would have been faster to walk the single stop that would have entailed, rather than walk down the stairs and escalators and wait for the train to come.

    I can’t imagine anyone in London taking a tube for such a short journey so I suspect she made this up.

  8. Jac says:

    @johnsonmike, I have read several studies on Londoners that use the Tube and these always conclude that users of the Tube are in a way “conditioned” to use it, regardless of the distance they are travelling. In fact, they have too many people using it for short trips, which has contributed to the vast amount of users. Many Londoners do use the Tube when, in fact, walking will be significantly quicker.

    Also, Oyster PAYGs minimum peak cap is £8.00, approx

    That being said, I do wholeheartedly agree that we need a rehaul in the entire ticketing system. Different prices for each different mode only makes sense. When I take my bus to the local shops which is less than 3kms away, I’m charged the same as someone who is travelling from the last zone 1 station in the west to the last zone 1 station in the east (eg, Albion on the Sydenham line to Mont Albert on the Belgrave/Lilydale lines). This does not add up!

    We also need to remove the ridiculous “2-hour” concept and replace it with single trip, or some form of single trip that allows for one connection.

    The introduction of off-peak would also be worthwhile as I find it ridiculous that I have to pay the same amount at midday when my trains are every 20 minutes, in comparison to someone who uses the train at 8am, when trains are every 3-10 minutes.

    I do believe that cracking down on fare evasion is incredibly important, and using ticket inspectors isn’t the right way. Conductors on every tram and gates at every train station. Gates like New York or Paris where exiting is simply opening a door, you just need the ticket to enter.

    @Lynne, I do understand that you may not feel the need to validate your ticket on every journey, and sometimes on trams it may be impossible. But, have you ever considered that perhaps validating your ticket on as many journeys as possible is simply telling the system, “yes, I am actually using you, please take that into consideration when adding services to my route”?

    • Jac says:

      It appears as though my sentence is incomplete.

      “Also, Oyster PAYGs minimum peak cap is £8.00, approx…” …$12 here.

      This is their *minimum*, and only occurs in zone 1 only, zone 1-2 and zone 2 only.. Our minimum daily is $5 as a single metcard ticket, or even less at $4.16 as a myki cap. (Both for zone 2 only, zone 1 only is $7 and $6.04, respectively). These are all significantly cheaper at its current cost, and will still remain cheaper after a 10% increase.

    • “We also need to remove the ridiculous “2-hour” concept and replace it with single trip, or some form of single trip that allows for one connection.”
      This would further unfairly penalise passengers taking complex trips that require a lot of transfers between routes, who are already penalised by the inconvenience of all that connecting. Some cities using a system of paid transfers are trying to change to a time-based fare system

      • Jac says:

        Passengers taking complex trips, and/or using many modes of transport should be paying more for this. As stated before, why am I charged the same for my < 3km bus trip as someone going from one side of the city to the other? This is more of an unfair cost than someone who is traveling on a bus, then tram, then train, then train, then bus. These people should be paying more for the number of services they use.

        Dailies should still exist, as will off-peak dailies, and thus those people wishing to travel across town, using various modes, will be using this ticket.

        • No they shouldn’t, distance should be the key, not whether there is a direct service or not.

          Requiring people to pay a higher fee to transfer just turns people off transfers even more than they already are in this city (because transfers are made so inconvenient). Turning people off transfers is exactly how to encourage people not to use the system at all.

          If I want to travel 4 kms directly West I must change buses. If I want to travel 8kms to the city I don’t have to make any transfers. By your rationale I should pay more to travel half the distance simply because the bus route isn’t direct?

          • Jac says:

            Firstly, I said that one free connection should exist. Secondly, increase the number of zones and your 8km travel will cost more than your 4km travel.

      • I agree. Although I also agree that someone travelling a very short distance should probably not have to pay a full 2 hour fare.

        Once myki has fully replaced metcards it could be possible, to introduce many smaller zones. Charging people a lower starting point, and having smaller jumps in costs between zones. 20 or 30 cents a zone for example.

  9. Oz says:

    Any discussion on adjusting the PT fare system needs to include the issue of affordability to the wider community. The percentage of government revenue to be allocated to subsidizing transportation needs to be tabled in discussion. How can the significant majority of taxpayers who never use PT express their opinion on whether PT subsidies should be more or less?

  10. Johnyboy says:

    I think that the PT should be free and paid by a cost in the rates added on. We all pay for it.
    Secondly we need to look into the PT and check the pay and salaries. We need to put it back in the public hands. Get rid of the private sector out of the public transport. We need complete transprancy in the costs of the system. So we can improve it.

    • Johnyboy says:

      Why should the costs be in plain few for everyone. Its because then we can ask why? The CEO pay for councils is wrong. I think that the CEO for public office should not be $450k a year as it is in brimbank council. The pay should be $150k if that.

  11. […] and “yes”. You can read why in his posts on Should public transport be free and Should public transport fares be higher. Share this:TwitterFacebookLike this:LikeBe the first to like this […]

  12. […] public good” argument, which contends that any increase in fares can’t be justified. As I’ve pointed out before, public transport is not a public good. It’s neither non-rivalrous nor non-excludable – it gets […]

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