Review of Transport Concession Policy
October 2004
Submission from
Action for Public Transport (NSW)
PO Box K606 Haymarket NSW 1240
www.aptnsw.org.au
Prepared by Len Regan
tp@hunterlink.net.au
Contents
Submission to Transport Concessions Review, November 1999
Submission from Action for Public Transport on
Review of Transport Concession Policy
ContextThis submission is made by Action for Public Transport (APT) in response to a call for comments on a Review of Transport Concession Policy being undertaken by the Ministry of Transport, as advertised in the Sydney Morning Herald on 25 September 2004 and confirmed by correspondence dated 5 October 2004.
The current experience with concession fares in NSW is based on the existing funding model, particularly for bus services, where operators are reimbursed for some concession fares on an individual trip basis. This is proposed to change with the new funding model to apply to metropolitan Buses from 1 January 2005 and to other buses in the State from September 2005.
Implementation of a more effective concession fares policy, as outlined in this Submission, would appear to be consistent with the new funding model. Hence, APT’s comments are made in this context.
The concession fares regime in NSW is complex, confusing, impossible to market, irrational, inconsistent and inequitable, despite being the most generous in Australia.
APT considers that, in general terms, there are two generic types of concession fares, although in some cases the distinction is blurred:
The reimbursement arrangements differ for government and private operators.
The Pensioner Excursion Ticket (PET) and the School Student Transport Scheme (SSTS) are regarded as special cases of concession fares.
In 1999, the Government stated, in the context of Objectives of Transport Concessions, that "transport concessions are the way the NSW Government ensures that low-income groups have more choices about actively participating in our community through greater access to transport".
It appears that concession policy extends beyond ‘low income groups’ and that it is directed to public transport rather than to transport in a more general sense.
APT considers that it is appropriate for the Review to reassess this stated objective and its effectiveness. This should be done in a way that enhances public transport while at the same time meeting the social and welfare objectives of the Government and the community.
Conventional concessions are ones where there is an expectation in the community that certain groups get a concession, not only in transport, but in a wider range of service provision mainly related to recreation and entertainment. Children and students are the usual examples of conventional concessions, but in more recent times, pensioners and senior citizens are also often given similar concessions.
These could be regarded as marketing concessions which are designed to attract more patronage, as well as to comply with a growing community expectation. However, the concession granted does not necessarily have to be half the full fare. For adults, the commercial concession outside the transport industry is normally a discount of up to about 20%.
It is reasonable for the Ministry of Transport to be responsible for determining targets and policies for conventional concessions.
APT considers that it is not the role of the Ministry of Transport to determine target groups or policy objectives for welfare concessions. This responsibility lies with the welfare agencies. Similarly, APT considers that it is not in a position to comment in depth on target groups for welfare concessions. However, it is appropriate to comment on how these concessions are integrated with the wider objectives applying to public transport.
There seems to be an implied objective within the community that welfare concessions on public transport are designed to assist those with financial or social difficulties.
However, welfare concessions only apply to public transport, not to other forms of transport (except perhaps for concessions on car registration for pensioners). Given that the majority of travel by many people within these target groups is made by modes other than public transport, the relevance of welfare concessions when applied only to public transport may need to be questioned and reviewed.
It could also be argued that there is no credible justification as to why these concession fares are granted to adults, and why the concession is a rigid 50% of full fare.
The inconsistency between concessions available to pensioners and beneficiaries, both groups who are deemed to be in financial need, demonstrates that there has not been an effective evaluation of how the concessions deliver consistent and equitable entitlements.
The extension of the PET to senior citizens embraces a target group where the objective may be motivated more by political interests than welfare concerns.
The role of the Ministry of Transport is to ensure, as with conventional concessions, that those groups granted welfare concessions are respected, that their travel opportunities are maximised, and that the welfare agencies pay for the revenue forgone.
The bottom line is that the Ministry of Transport is not a welfare agency, and it should not be funding welfare benefits.
The list of concessions available is so complex that State Transit publishes eligibility lists in its Ticket Guide. Entitlements vary even with ticket types. CityRail publishes a 32-page A4 book detailing concession fare entitlements, and lists 12 categories of concession fare entitlements on its website, most with complex conditions. Some private bus companies list concession eligibility on their timetables, demonstrating the complexity of the entitlements.
Transport staff (especially bus drivers) are charged with the responsibility of checking and verifying this complex eligibility. They have more important things to do, such as driving safely and keeping on time.
The confusion in the community about what concessions are available is a major deterrent to public transport usage and promotion.
There is a cultural expectation that children pay half-price for almost any event entry (but they pay full price for consumables). The problems arise with the age ranges that are eligible.
This has been standardised in recent years between government and private operators to apply to those aged 4 to 16 years. However, confusion still exists with child fares available to students aged 16 to 18 years. This could be eased by standardising the child and student concession fares.
The concessions available to tertiary students vary greatly by nature of study, travel purpose, student age and operator policy. Exclusions include:
These concession entitlements are administered by tertiary institutions, resulting in an unrealistic impost on their administration staff to explain an illogical, inconsistent policy by today’s standards.
Tertiary students are not allowed to buy quarterly or yearly concession TravelPasses. They can only buy weekly ones. This restriction is not mentioned in the State Transit or CityRail Ticket Guides. It is mentioned only in the stand-alone TravelPasses brochure, creating another source of confusion.
The logic, apparently, is that students might buy a periodical concession TravelPass at the beginning of the university year, and then drop out after Easter (as some do) but still retain their concession TravelPass. This logic is typical of the paranoia which has beset the transport administration for years, with a focus on the possible misuse of a ticket by a small minority while the overwhelming benefit for the majority is sacrificed.
With electronic ticketing, it should now be possible for the University to advise CityRail and State Transit of a student's withdrawal, and the TravelPass number could be blacklisted in the computer.
Perhaps the most damaging aspect of concession fares is the way that they are treated by economists, academics and IPART. These analysts do not include the reimbursement of welfare concession fares in patronage-generated revenue, but do include the reimbursements as part of the ‘deficit’ and ‘subsidy’ needed to prop up public transport. This creates a misleading, negative and damaging impression about the cost effectiveness of public transport both within the industry and throughout the wider community. Welfare concession reimbursements should be treated as patronage revenue.
As a reaction to this artificial ‘deficit’ in public transport, Treasury often issues edicts to cut back transport services in order to save money. This is unfair to the normal public transport user, it inhibits the development of comprehensive public transport systems, and it usually results in loss of revenue greater than the cost savings.
Much of the push towards privatisation of public transport is driven by economists who believe that the government payments will be less to private operators because less concession fares will be provided (cf. Metro Light Rail, which receives no government reimbursement for the marketing concessions that it provides).
If concessions are to remain, they have to be simple and meaningful, and beneficial to generating greater use of public transport. Public transport should not be dominated by welfare policies for target groups. Under the new funding arrangements for public transport, welfare policy concession fare ‘reimbursements’ should be identified as fare revenue, not as deficits that Treasury can constantly attack.
Whatever concession fares are available, they should comply with these criteria:
To the extent that conventional concessions are designed to encourage greater use of public transport by the target group, it is reasonable to consider these as the responsibility of the transport industry. This implies:
This principle is particularly relevant to children, students and senior citizens. The PET has amply demonstrated that an attractively priced and packaged ticket will significantly increase travel by public transport.
With this approach, the only concession fares offered by the transport industry would be those generally accepted in the business community: children, students (school, tertiary and apprentices), senior citizens and families.
The concession available to children and all students should be the same - people don’t readily understand the distinction between the ‘child’ and ‘student’, and they overlap anyway. The concession doesn’t have to be 50%, but this is the normal convention.
Students form a very dynamic group that can benefit from using public transport and contribute significantly to its efficiency. Because of their age, the costs and risks associated with them driving cars, and their economic circumstances, they are likely to respond positively to tailored concession fare packages. This would normally involve a season ticket that is attractively priced and available for unlimited travel. The current discriminatory regulations that exclude minority groups should be discarded in the interests of simplicity and marketability.
The concession for family travel should be simply that children travelling with an adult travel free - this makes public transport travel an attractive competitor to car travel. Although there may be loss of some individual fares, the overall marketability of the family fare concept will increase the number of families choosing to travel by public transport, thereby increasing total revenue. Again, in the interests of simplicity, there should be no stated restrictions on the relationship between the adult and child travelling together.
APT suspects that maximising total revenue is the financial objective of the Ministry, subject to satisfying other transport and social objectives.
A little bit of revenue sacrificed in the name of simplicity, consistency and marketability will reap greater returns through increased patronage (and therefore total revenue), as well as environmental benefits and reduced congestion on the roads.
From a transport perspective, there should be no welfare concessions on public transport. Instead, people with a genuine social or economic need for financial assistance should be given individual support. The cost would be debited to Dept of Community Services and the beneficiaries who choose public transport would pay the full fare.
This approach is now more palatable under the new funding model being introduced by Ministry of Transport for bus services. Operators will receive payments for fixed costs, operating costs and passengers carried, so the question of direct reimbursement to operators for concession fares does not apply any more.
If there were no welfare concession fares, revenue neutrality would be achieved by reducing the full fares by about 25%. This would in turn make public transport more attractive to everyone, thereby generating more patronage and increasing total revenue. This has the potential to be the most equitable and sustainable approach, provided those in genuine financial need can get support through the welfare agencies.
Such support may not be directed solely to public transport. It could be an allowance to help with transport costs of whatever mode is suitable to the recipient. Similar allowances are paid to designated welfare groups to assist with rate payments and phone bills.
There should be no restriction on eligibility based on travel outside the state of residence. If there is a genuine need for welfare support, this applies wherever the person needs to travel. The approach suggested above may help to resolve the impasse on interstate concession travel restrictions.
Eligibility for welfare concession travel is best determined by the Community Services Departments (State and Federal). This should not be a function of the Ministry of Transport.
However, being realistic, welfare concessions will probably remain in the form of a half-fare payment by the traveller. If this is the case, it is critically important from the transport perspective that the other half of the fare is also treated as revenue.
Concession fare reimbursements should not be included in public transport efficiency analyses as ‘subsidies’. They are welfare payments, which should come out of the social welfare budget, not the transport budget.
There are two exceptions to these principles: School Student Travel Scheme and Pensioner Excursion Ticket. They are so well entrenched that it may be difficult to disturb them.
If the Ministry really wanted to save money, it would remove the eligibility criteria from the SSTS, and pay on actual usage. The savings in administrative costs, and the removal of disputes over eligibility, would probably neutralise the payments for new travel by those within the minimum distance criteria. The Scheme shouldn’t be free anyway - there should be a contributory payment. The fact that this has not been achieved politically should not be used as an excuse for retaining a concession scheme that does not comply with the basic principle of Simplicity.
The PET is an excellent example of an ‘unlimited travel’ fare and ticket - the type that greatly increases use of public transport. The same ticket should be available to everyone, but priced differently for full-fare and concession travellers. This arrangement works well in other states, and would remove the resentment about the PET by the rest of the community.
The same ‘all-day’ ticket available to everyone (at different prices) would probably be the most significant stimulus to increasing public transport patronage and total revenue.
The PET has the same travel entitlement as the DayTripper ticket. It would achieve greater simplicity, consistency and marketability if the PET was discontinued and replaced by a concession DayTripper at the new price of $2.50. This price could then be more easily adjusted in line with the annual price increases of the full-fare DayTripper ticket. An extension of the DayTripper ticket to embrace the private bus areas should not create a need for a price increase. The primary benefit would be to extend the ticket availability to larger areas of Sydney on the principle of equity, rather than creating opportunities for large scale increase in the number of trips that would be made on each ticket.
The Concession Policy Review has to be realistic about bureaucratic fears related to ‘unlimited travel’ on a DayTripper ticket. Although people could technically travel from Scone to Goulburn for $2.50 (or whatever $), how many are going to do this? People have more important things to do than spend their time travelling around of the sake of getting the most out of a ticket. Most people make a trip because they need to or want to go somewhere. We should be making this as simple and as attractive as possible for them to use public transport.
The Review of Transport Concessions is being conducted at a time when the Bus Reform program provides an ideal opportunity to introduce much needed rationalisation of the transport concessions policies and procedures in NSW.
APT considers that the critical outcomes from the Review should be a concession fare regime:
APT recognises that the implementation of some of these reforms may be difficult, but they can possibly be effectively subsumed under the broader reforms which are being implemented in 2005.
APPENDIX
Submission to
NSW Public Transport Authority
Review of Public Transport Concessions
November 1999
While some of the details about concession fares in 1999 may not be relevant in 2004, the general principles still apply. Accordingly, the original submission has not been altered.
Public Transport Authority
Transport Concessions Review
Submission from
Len Regan
Managing Director
Transit Planners Pty Ltd
12 November 1999
Travel Concessions on Public Transport
The issues raised in the Discussion Paper cover the common areas of concern, and identify the inequities that exist, both in terms of the passenger fares paid, and the reimbursements given to operators.
Having undertaken this review, it is hoped that the appropriate measures will be taken to redress these inequities and simplify the situation. This will of necessity cause some changes to the current arrangements.
This submission identifies any additional aspect of tertiary student concessions, and it suggests a possible model for the handling of concession fares.
There is one aspect of the tertiary students concessions that has not been specifically mentioned in the Discussion Paper. This relates to the status of overseas full-fee paying full time students. These students are excluded from the entitlement to student concession fares. This causes a great deal of resentment and ill-feeling towards the transport administration. Although there may be have been some justification for the distinction in the past, it is probably worth reviewing in the current process with the objective of removing the distinction.
The condition that tertiary students only receive the concession if they are not in paid employment also needs to be reviewed. Almost every full-time tertiary student has some form of paid part-time work, yet this is ignored when the concession authorities are issued.
A statement on this matter can be expected from the University of Newcastle. It was not possible to arrange it prior to the closing date for the community comments on the Transport Concessions Review.
The Discussion Paper seems to imply that a new approach may need to be taken to the issue of transport concessions if the current range of inequities are to be redressed. What follows is a suggestion that may assist in this debate.
The proposition presented here is that:
The issues associated with subsidised travel are complex. They vary between modes and between government and private operators.
Subsidised travel is not the same as concession travel. Some concession fares are subsidised, others are not. Some normal fares can be subsidised. With government operations, it can be argued that all normal fares are subsidised because of the payments of Community Service Obligations to cover the differences between expenses and revenue. This aspect of ‘subsidy’ is not pursued in detail in this submission.
Normal fare refers to the base fare rate on which discounts, concessions and subsidies are based. It is often the same as the adult fare, but sometimes the adult fare is offered at a discount on the normal fare.
Concession travel relates to all travellers who pay less than the adult fare rate.
Subsidised travel relates to travellers for whom the operator receives a payment in addition to the fare paid by the traveller. This can take the form of reimbursement for revenue forgone when a concession fare is granted, or financial support to maintain services that are claimed to be not commercially viable.
Children usually receive concession travel, for which there is no subsidy. This concession is common to most service providers (not only transport). The difficulty arises, particularly in transport, as to where the ‘child’ concession finishes.
In private operations, children are required to pay the adult fare when they reach their fifteenth birthday. In government operations, this occurs when the reach their sixteenth birthday. Concession travel then becomes subsidised if they retain or acquire student status.
The age eligibility for child fares should be standardised for all transport modes throughout the State.
The issues associated with student travel to and from school are outside the terms of this review. However, it is important that in resolving the concession issues, that further anomalies with school student travel are not introduced.
Tertiary students get subsidised concession travel on government systems, but there is no subsidy for them on private buses. Some private operators grant concession travel because of market expectations.
Subsidised travel for tertiary students has become a vexed issue. With the growth of universities outside the areas served by government buses, the discontent with the lack of subsidies to private operators for tertiary student travel is growing. The inequity in this case is easy to grasp.
Full fee paying overseas students are not eligible for this concession.
Even where subsidised student travel is provided, there are still inequities with full and part time students. The assumption is that part-time students are in employment and receive a reasonable wage; full-time students are assumed not to have such a wage. This distinction has become blurred in recent years, with part-time students often on low income levels, and full-time students working part-time. The income levels of part-time students are often lower than for some categories of pensioners.
Concession travel (usually free) is granted to war servicemen, war widows, and ex-members of defence forces, presumably as a form of gratitude for former services rendered. Subsidy for these concessions is granted to government operators in NSW, but not to private operators. The numbers using this concession are relatively small, so it is not a significant issue, but it is an inequitable one. In most cases, the concession cannot be justified by need.
Blind people, and their attendant, travel free on all public transport. Again, subsidy for these concessions is granted to government operators in NSW, but not to private operators. Nobody would question the granting of free travel to blind people, but the subsidy payments should be handled more equitably.
The biggest issue associated with subsidised travel and the granting of concessions is the imputation of economic need: that the concession fare has to be granted to certain categories of people because they cannot afford to travel at the normal fare. There are several fallacies and inconsistencies in this argument.
The normal fare, on which the concession is based, is not a rational fare. It has not been derived either as a fare based on a rate needed to cover costs, nor as a price that the market will bear. Rather it is a rate that has been arbitrarily set as a result of CPI increases and political interventions over many years.
Until July 1992, the rate was different for each bus operator for travel over equivalent distances. The variations in rates could not be explained either by different costs structures or by differences in the market that each operator served.
Even after July 1992, the normal fares vary greatly on private buses and government buses.
Concessions that are granted on the premise of economic need are provided at half the normal fare rate. The government pays the operator the forgone half fare as a subsidy. A needy person in an area served by private buses is deemed to be able to pay a different amount for the same travel distance as a needy person in an area served by government buses.
The main users of these subsidised half-fare concessions are the unemployed, and tertiary students on government services.
Inequities in the application of subsidised travel are clearly evident when pensioner and senior citizen travel is considered. Pensioners and senior citizens travelling on government buses pay a concession fare of $1 a day; on a private bus they pay half the normal fare. Government operators are subsidised a nominal amount for this concession travel based on the number of tickets sold; private operators are subsidised the amount of the forgone half fare.
There may be an argument based on need for subsidised pensioner travel, but the argument is hard to justify for subsidised senior citizen travel. A senior citizen who is not a pensioner has, by this very fact, personal resources that exclude him/her from needing pensioner benefits. Hence this form of subsidised travel is a political decision based on a package of considerations for caring for the Ageing.
But any argument for subsidised travel based on need breaks down when the geographic inequities of the concession fare levels are examined. A pensioner making a return trip of 3 sections (the most common trip pattern) in western Sydney pays over 50% more than a pensioner travelling the same distance in eastern Sydney pays.
Price elasticity of demand has an impact on pensioner travel on government buses. Because of the $1 all-day ticket, pensioners make more trips than they would if they had to pay a concession fare on each boarding. This same principle of an all-day ticket (at an appropriate price) could be applied to all public transport users, thereby increasing patronage and total revenue.
Subsidised travel for pensioners applies only to public transport: they are not subsidised for travel by private car. (Concessions are granted on vehicle and licence fees). When pensioners pay for the consumables in their car, they pay the same price as anyone else.
On the basis of equity, it could be argued that concession travel to adults should be discontinued.
In its place there would be a new fare level set based on genuine cost recovery and market tolerances. This fare would be paid by all travellers, and would be the same for government and private operators. Hopefully, it would be lower than the existing normal fares, but higher than the concession fare levels. However, the freedom of an individual operator to market his services at lower fares than the maximum permissible levels would remain.
Where there are genuine cases of need, the payments can be made direct to the needy persons. They can be paid in cash or as vouchers. If they are paid as cash, the recipient can chose which mode of transport the cash is used for. If paid as vouchers, they would carry an entitlement to free travel, with the operator being subsidised for the forgone revenue.
The cash payment system is open to abuse, with the cash being used for purposes other than for those it was intended for. The voucher system would probably be more acceptable, and would have some similarities to the current concession authority card.
With such an approach, the government may then be in a better position financially to fund equitably some form of assistance to tertiary students, but again on a needs basis, irrespective of study status.
The setting of a market fare, without generic concessions, would have the benefit of stimulating greater demand for public transport by the normal fare-paying public, where demand is more elastic. Those currently on concession travel will tend to retain the same trip making patterns even if the fare goes up, because of more limited choice options.
If the concept of the all-day ticket is retained, but the price is set at a market rate, there would be very little drop in patronage because of the inelastic nature of this demand. The all-day ticket could be offered as a marketing strategy to all passengers, and as such may not need to be subsidised. The voucher scheme could be used for cases of genuine need and for government’s social policy program.
People should be able to travel with dignity, irrespective of their disabilities. Forcing handicapped people to travel in conventional buses and trains does not always respect this principle.
People with handicaps are the ones most needing subsidised travel. This can be provided in several forms:
If blind people travel free, it could be argued that this concession should be extended to all handicapped people. However, the most that they should be asked to pay is the normal bus fare, irrespective of the mode that they travel by.
If the more equitable approach to subsidised travel were adopted, then there would be ample funds to provide proper and meaningful subsidies to handicapped people.
This submission has made no attempt to study the political issues associated with subsidised travel on public transport.