The local government election has seen a number of proposals relating to public transport fares – we review them
The outcome of the upcoming election for councilors and the Lord Mayor in Brisbane will have a significant impact on public transport. Both major parties have proposed major new public transport infrastructure to address inner city congestion. And both the Labor Party and the Greens have proposed changes to public transport fares, in spite of the fact that fare policy sits firmly within the remit of the State Government.That has not stopped Labor promising Fare Free Fridays – at least for 8 months, but only on Brisbane Transport bus and ferry services. The Greens, in contrast, are proposing a reduction in fares for bus, ferry and train services within the Brisbane City Council area to 2011 levels, free fares for seniors and pensioners during off-peak times and concession fares for holders of Health Care Cards.These policies come at a cost of course. Labor says its plan would cost $28.5 million while the Greens say their funding of the State to reduce fares would cost $60 million over 2 years with another $9 million per years for the pensioner and senior plan and $5.1 million over 2 years for extending concessions to Health Care Card holders.All this money translates directly into savings for public transport users (or at least those who travel in Brisbane). The Greens say that the “Back to 2011” pledge would save regular passengers between $300 and $500 a year. Labor has a similar target, saying that its plan would save commuters about $400 over the 8 months of the plan. How is it that both plans save commuters around the same amount of cash over the course of a year? Well it turns out that fares in 2011 were about 20% less than fares today and free travel on one day a week represents a 20% reduction in fares across the week for someone who travels everyday – that is, assuming that these commuters do not get any free travel under the current “nine and free” policy.Ultimately, however, both parties are positioning their fare proposals as a way of getting people back on public transport. For its part, the Greens say that their proposal will increase patronage by 17.55 million trips per year. Labor is suggesting that its policies will lead to an extra 1.7 million trips.
We modelled the impact on patronage of both policies (fare reductions and fare free Fridays) to see if we could replicate the claims made by both parties. To do so we calculated the expected reduction in fares across the five zones in Brisbane and then adjusted the total cost of making a trip to include the cost of waiting time. The patronage impact of the change between the existing cost and the new cost was then adjusted by a factor to reflect the price elasticity of demand. Key assumptions are detailed below:
- Current fares are as at 7 March 2016
- Fares in 2011 were approximately 20.8% cheaper than today in nominal terms (which we are assuming the Greens mean in their policy statement)
- We have assumed that fares under labor will remain the same but that there would be zero fares charged on Fridays
- We used a value of time of $15 per hour, which is an approximation of actual figures used in various, recent transport economics projects that we have undertaken.
- Average time was assumed to be 15 minutes (that is, half the time of a 30 minute headway between vehicles).
Based on these assumptions, the labor policy of fare free Fridays was estimated to increase patronage by around 1.69 million trips over 8 months – pretty close to the labor policy documents.
In contrast, the patronage impact of the Greens’ policy of returning to 2011 fares would only lead to an extra 8.5 million trips rather than the 17.55 million suggested in the policy document. Why the difference? Well, we don’t know for certain how the Greens calculated their patronage figures but one possibility is that they simply added up the fare increases that occurred from 2011. If you did so you would find that they add up to 40%. Applying a price elasticity of demand of -0.3 to 40% price reduction would lead to you estimating a patronage increase of around 12% or 16.3 million extra passengers based on figures from the TransLink Tracker – pretty close to the 17.55 million passenger predicted by the Greens.
There are, however, several problems with this approach. For example, it includes the fare increase that led to the 2011 fares. Take this away and the patronage increase would be 10.2 million. This approach also ignores the impact of compounding. Normally this would underestimate the impact but the last fare change was actually a 5% reduction in fares. And it was a 5% reduction on a much larger number than the earlier, larger (in percentage terms) fare increases. The end result is that, in cash terms, fares between 2011 and 2016 are only about 20.8% more expensive – not the 40% more expensive that we are assuming is being used by the Greens.
The lower patronage estimate also leads to a much larger cost than suggested by the Greens – we estimated a revenue impact of $45 million a year compared to the Greens $30 million a year (or $60 million over two years as outlined in the Greens policy statements). Having said that, if the Greens are right and 17.55 million additional trips are taken on Brisbane public transport as a result of their policy, then the cost would cost around $30 million a year.
Of course, if the numbers do reflect a future reality, the biggest challenge might not be how to pay for fare reductions but how to fit new passengers onto the system. If the Greens are right (and elected) they would have to find space for another 35,000 bus and ferry trips and 21,000 train trips a day. The modelling suggests that Labor’s policy would see around 15 percent increase in patronage or another 40,000 trips made on Fridays. This may not sound like much but assuming that each bus carries around 80 passengers and a third of all trips occur in the morning peak, then the City is going to have to provide around another 160 buses to service the morning and afternoon peak.
Who pays for these additional services? In general, the State Government, not the City, pays for the provision of both rail and bus services across all of South East Queensland with Brisbane City making a financial contribution that pays for part of the Brisbane Transport bus services that are provided. So who pays for services growth from reducing fares? We will just have to wait and see.
Note that the LNP, for its part, is leaving fares policy with the State (where it currently sits) noting that the City had made submissions to the South East Queensland Fare Review currently underway.