Public transport has a problem with money. Campaigners often argue that mass transit is a public good in its own right, and hence should be very cheap or even free.
Mainstream media and even many self-proclaimed supporters of public transport run emotional stories about fare increases, while governments offer “giveaway” fare policies that severely restrict transport revenue.
Trains and buses are widely derided as “lower-class” forms of transport, despite being one of society’s most important enablers for economic development and social engagement.
Together, these lines of thinking add up to a severe lack of funding for transport in Australian cities – both in terms of infrastructure investment and operating revenues.
Spending on public transport is routinely delayed, while urban roads are given priority. Meanwhile, the fluster over fares means that operators aren’t receiving the funds they need to deliver a good service.
Until we face up to these issues, the struggle to provide better public transport will be an uphill battle.
Learn from the successes
What do the world’s best mass transit networks have in common? They have fare structures that let them recover a large proportion (typically 75% or more) of their operating costs.
Designing a smart transport policy means accepting that there are limits to what governments can provide. So it’s best to use any available subsidy wisely. We should increasingly look to passengers to cover much of the cost of the transit services that benefit them directly.
We tend to think about fares in an illogical way. Australian media reports bemoaning expensive fares routinely cite the cost per trip, when they should quote the cost per kilometre.
For example, the much-maligned trip from the Gold Coast to Brisbane covers up to 80 km and costs A$14. Contrast that with the UK, where travelling the 71 km from London to Milton Keynes will cost you at least £18.50 (A$33.50).
I would suggest that Britain’s fares demonstrate a more realistic understanding of the limited resources available for funding rail travel.
In Australia, residents of outer suburban areas receive large subsidies for trips that would be rightly regarded as regional journeys overseas. Meanwhile, most passengers in Sydney, Brisbane or Melbourne who travel short hops of just a few kilometres get little or no subsidy.
This unbalanced approach distorts our ability to provide better services. There is little relationship between the price of tickets and the cost per kilometre of transporting those passengers.
At this point the argument becomes tangled. Self-proclaimed supporters of transit bang the table and shout that outer suburban travellers need to be given perks to stop them defecting to their cars.
But why should someone living in Broadmeadows, 16 km north of central Melbourne, receive less subsidy than someone from Frankston, 41 km southeast of the CBD? Distance from the CBD is not a proxy for disadvantage, nor for deservedness of subsidy.
Disadvantage should primarily be addressed through concession fare offerings and workable transit access, not by a crude system of frittering public resources on cheaper fares for long distances.
The real picture
It would be much better to attempt to devise a fare structure based on equality of subsidy, which reflects the reality of how much it costs to provide these services.
These are complex questions. Successful transport networks overseas treat them as such, but our state politicians continue to play immature games with ticket prices.
Recent examples include the move towards “free” CBD travel in Melbourne, where it is far from clear that a majority of users want free travel anyway.
The Independent Pricing and Regulatory Tribunal has recommended that Sydney’s train network should be paid for by passengers – largely white-collar workers who want good service rather than cheaper fares – instead of by the wider public.
But still the policy discussion focuses exclusively on “affordability”, while state governments bemoan their inability to fund transport upgrades. This shows a pretty poor grasp of basic infrastructure economics.
If we took a better approach to transport funding, we could deliver new projects much faster and more affordably. Analysis shows that asking the beneficiaries to pay for new services (“value capture”, to use the policy jargon) can cover 25-50% of project costs
Rather than throw A$9-11 billion at a single rail project in Melbourne, why not use value capture to deliver an entire suite of generational rail upgrades?
This approach has worked in mega-suites such as London’s Crossrail. In Los Angeles’ “30-10” initiative, what was previously seen as 30 years’ worth of transport infrastructure will be delivered in around a decade.
Melbourne could do a “30-12” and deliver Metro One, the airport link, and the Rowville and Doncaster rail projects in a 10-12 year program, from that same A$10 billion consolidated revenue base – with the help of alternative funding approaches.
But this can only happen if we adopt the attitude to funding seen in many places overseas, and crucially, only if there is a genuine interest to see these rails programs realised.
This is where the real difficulty starts. As a specialist observer of transit projects and their funding, I believe that institutional roadblocks are our biggest problem in Australia.
If our leaders among government, the public service, and the transport industry didn’t actually want better mass transit, then fudging around on fare structures and capital funding options would be a really effective way to delay progress.
Conversely, if better transit is the biggest game in town, it’s time we got serious about it. To fix and expand our rail systems we need to get fares right and we need to diversify the funding mix – because there’s just no other way to get where we want to go.
Chris Hale operates his own consulting business and this article is his last as an academic at the University of Melbourne. He has recently contracted to Melbourne City Council on the issue of transit funding, and in years past also contracted to the Cross River Rail and Sydney Metro projects on the same topic.
He currently receives no research funding on this topic, but between 2009 and 2011 was the recipient of grants for research into mass transit funding from the Australian CRC for Rail Innovation. Chris has been the recipient of substantial in-kind support (such as access to data and availability of senior staff time) over many years on this topic from MTR of Hong Kong.