France: limited competition network level Great Britain:

1
Reforming transit Why smaller public transpor
t subsidy is better Francesco Ramella, Ph.D.
francesco.ramella_at_libero.it
June 24-26, 2005 Bloomington, Minnesota
2
Why subsidize transit?

• Social purpose to provide mobility for those who
  can not afford private travel
  
• Economic and environmental reasons
• to achieve producer and user economies of scale
• to lower congestion and pollution (second-best
  pricing).

3
But is it true?An European answer

• Which benefits from subsidization of local public
  transport in some European countries (Great
  Britain, France, Germany and Italy)?
  
• and which costs?

4
Framework for local public transport

• Italy and Germany regulated, publicly owned
  monopoly. Limited competition is going to be
  adopted
  
• France limited competition (network level)
• Great Britain
• London limited competition (route level)
• outside London deregulation social services
  competitively tendered.

5
How much subsidy?
1 1,23
Expenditure on local public transport (subsidies
indebtedness) - 1998
5.000
4.000
3.000
million Euros
2.000
1.000
0
Great Britain
Germany
France
Italy
investments for infrastructures and railway
services (except those in the Paris area) are not
included
6
What happened in GB since deregulation?

• Supply (bus km) has increased 24 (-22
  between 70 and 86).
  
• Accessibility little change. of households
  within 6 minutes of a bus stop
  
• metropolitan areas 91 in 86 and 92 in 98
• rural areas 74 in 86 and 77 in 98.
• Frequency has increased of households with
• at least one service every 15 minutes 28 in 86
  and 34 in 98
  
• less frequent than one service every 60 minutes
  14 in 86 and 10 in 98

7
What happened since deregulation in GB?

• Subsidies for concessionary fares have slightly
  decreased (-13)
  
• 97 of local authorities have a concessionary
  scheme for elderly people
  
• 48 of local authorities have a concessionary
  scheme for student
  
• Discount fare schemes are also widely run on a
  commercial basis
  

8
Conclusions (1)

• The deregulated system still satisfies the
  mobility needs of captive users.
  
• The increase of frequencies (with decreasing
  costs and subsidies) shows the empirical weakness
  of the argument for subsidization of public
  transport in order to achieve user economies of
  scales and seems to confirm the theory of
  leakage from subsidy to cost.

9
Local public transport in Britain metropolitan
areas before and after deregulation
70 - 85
85 - 98

• passenger journeys - 30
• bus-km - 15
• cost per bus-km 26
• cost per passenger journey 52
• receipts per passenger journey 14
• public subsidies (78- 85) 41
• concessionary fare reimbursement 32
• public transport support 47

• - 42
• 19
• - 54
• - 5
• 65
• - 49
• 
  - 1
  
• 
  - 72
  
  

Birmingham, Manchester, Liverpool, Sheffield,
Leeds, Newcastle
10
Urban bus transport Great Britain Vs.
continental Europe

• Comparison among
• British metropolitan areas
• a sample of medium-large urban areas in Germany
  and France
  
• all Italian urban areas.
• Figures have been obtained through power parity
  exchange rates.

11
Cost per bus-km
GB (excluded London)
London
France
Italy
Germany
0
100
200
300
400
500
Index (Great Britan 100)
12
Cost per passenger-km
GB (excluded London)
London
France
Italy
Germany
0
50
100
150
200
250
Index (Great Britan 100)
13
Passenger receipts per passenger-km
GB (excluded London)
London
France
Italy
Germany
0
25
50
75
100
125
Index (Great Britain 100)
14
Subsidy ( indebtedness) per passenger-km
GB (excluded London)
London
France
Italy
Germany
0
50
100
150
200
250
300
Index (Great Britain 100)
15
Urban bus service in Europe patronage
110
France
100
Germany
90
Index
80
70
Italy
60
Great Britain
50
1986
1988
1990
1992
1994
1996
1998
data for Germany are referred to the whole
local public transport sector
16
Conclusions (2)

• Urban bus public transport in the Britain
  metropolitan areas is much more efficient (cost
  per bus km) and effective (cost per passenger km)
  than in the other selected European countries.
• Subsidy per passenger km is about 80 lower than
  in continental Europe.
  
• Subsidy doesnt seem to be worthwhile on the
  ground of producer economy of scale
  
• Is subsidy desirable as a second-best instrument?

17
Air quality a problem in the pastnot in the
future
Winter mean concentration of PM5 in Paris from
1956 to 1998
18
Air quality is getting better...
Annual mean concentration of PM10 in British
metropolitan areas
50
40
30
20
10
0
1992
1993
1994
1995
1996
1997
1998
1999
2000
Leeds
Birmingham
Liverpool
Newcastle
UE Directive 30/99 ('05)
Sheffield
Average decrease per year -7
19
Air quality is getting better...
Periods with 24 hour mean concentration of PM10
50 mg/m3 in British metropolitan areas between
1992 and 2000
70
60
50
40
30
20
10
0
1992
1993
1994
1995
1996
1997
1998
1999
2000
Birmingham
Leeds
Liverpool
Newcastle
Sheffield
UE Directive 30/99 ('05)
20
and in the city the air is better than in the
country
21
An excellent transit and rail system,
neverthelesspeople drive a lot
22
Conclusions (3)

• The leading factor in shaping the air quality has
  been (and will be) technological improvement
  
• Any realistic change of the modal split may have
  only a minimal impact
  
• It seems reasonable to draw a similar conclusion
  with reference to noise pollution
  
• A high-quality collective transport system does
  not cause any significant reduction of private
  car utilisation (and of CO2 emissions)

23
More traffic and less casualties

• Mortality rate in Europe -80 between 1970 and
  1996
  
• Mortality rate in the UK about 50 the rate in
  Germany, France and Italy
  
• Between 1986 and 1998, in the British
  metropolitan areas
  
• passenger km by private car 32 ? 78
• passenger journeys by bus - 40
• people killed per passenger km by private car
  -61 ? 72
  
• people killed -49 ? 60

24
Conclusions (4)

• Any reduction of road casualties achievable by a
  modal shift from private cars to public transport
  would be minuscule if compared to the results
  achieved as a result of technology improvement
  and road safety policy
• Benefits would be almost completely internalised
  by people changing their mode of transport

25
More congestion is better?

• The real aim not to lessen congestion but to
  reduce average journey time of people travelling
  by car and by public transport or to increase
  average speed (assuming that every person moving
  had the same value of time).
• What happened in the British urban areas with a
  population of more than 250.000 since
  deregulation?
  
• the average distance of all the journeys (except
  those longer than 10 miles) has increased from
  5.9 to 6.1 km
  
• the average door to door travel time decreased
  from 18.7 to 17.1 minutes.

26
More congestion andtravelling faster
Average time (door to door) of commuting
journeys in British urban areaswith a
population of over 250.000
40
-2,8
30
-5,6
3,6
minutes
20
10
0
'85/'86
'93/'95
except those longer than 10 miles
27
Conclusions (5)

• Subsidisation of public transport in order to
  increase the average speed of journeys through a
  modal shift from private car to public transport
  seems not to be a policy that works.
• But, since the value of time is not equal among
  different people, could subsidisation be
  justified in terms of efficiency? The answer
  depends upon cross-price elasticity between
  public and private transport.
• Hensher (1986) found the cross-price elasticity
  to be less than 0.1 or lower.
  
• Most cases clearly confirm this figure.

28
The tramway system in Sheffield (Supertram)
Persons crossing Sheffield central area cordon
thousand
Deregulation
Supertram
700
600
500
400
300

200
2
100
0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
Car
Bus
Supertram
Cost of Supertram 450 million Euro
29
The subway in Toulouse

• Cost 500 million Euro
• patronage of public transport 30 but
• the number of journeys by private cars has not
  changed by as much
  
• public transport share of motorised journeys
  20
  
• increase of patronage 6 of the journeys
• only a quarter of the passengers attracted away
  from cars
  
• road traffic reduction 1

30
Final conclusions

• Subsidisation of public transport seems not be
  justified on the ground of economic (and
  environmental) reasons.
  
• Subsidisation could be worthwhile only on social
  grounds.
  
• The aim of satisfying the mobility needs of
  people without access to a car can be fulfilled
  with much lower levels of subsidisation than the
  present ones in Germany, France and Italyand,
  probably, the US

31
Final conclusions

• Subsidisation of public transport seems not be
  justified on the ground of economic and
  environmental reasons.
  
• Subsidisation could be worthwhile only on social
  grounds.
  
• The aim of satisfying the mobility needs of
  people without access to a car can be fulfilled
  with much lower levels of subsidisation than the
  present ones in Germany, France and Italyand,
  probably, the US