Ramella pres

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Slide1: Who must pay for transit services? The users (mainly) Francesco Ramella, Ph.D. francesco.ramella@libero.it October 7-8 2004 Montreal

Introduction: Introduction Arguments in favour of public transport subsidization: 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).

Introduction: Introduction Aim of this paper: to assess the benefits due to subsidization of local public transport in some selected European countries (Great Britain, France, Germany and Italy); to express an evaluation about the “right” level of subsidy.

Framework for local public transport: 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.

Expenditure on local public transport (subsidies + indebtedness)* - 1998: Expenditure on local public transport (subsidies + indebtedness)* - 1998 0 1.000 2.000 3.000 4.000 5.000 [million Euros] Great Britain Germany France Italy * investments for infrastructures and railway services (except those in the Paris area) are not included

Changes in local public transport in GB since deregulation: Changes in local public transport 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

Changes in local public transport in GB since deregulation: Changes in local public transport in GB since deregulation Subsidies for concessionary fares have slightly decreased (-13%). 97% of local authorities have a concessionary scheme for elderly people and 48% for student (discount fare schemes are also widely run on a commercial basis).

Changes in local public transport in GB since deregulation: Changes in local public transport in GB since deregulation 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.

Local public transport in Britain metropolitan areas before and after deregulation*: Local public transport in Britain metropolitan areas before and after deregulation* 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% * Birmingham, Manchester, Liverpool, Sheffield, Leeds, Newcastle - 42% + 19% - 54% - 5% + 65% - 49% - 1% - 72% ‘70 - ‘85 ‘85 - ‘98

Urban bus transport in Europe: costs, receipts, subsidies and patronage: Urban bus transport in Europe: costs, receipts, subsidies and patronage Comparison among: British metropolitan areas; a sample of medium-large urban areas in Germany and France (data from ISOTOPE); all Italian urban areas. The year of reference is 1999 for GB and 1995 for the other countries. Figures have been obtained through power parity exchange rates.

Slide11: 0 100 200 300 400 500 Germany Italy France London GB (excluded London) Index (Great Britan = 100) Urban bus services in Europe: cost per bus-km indices

Slide12: 0 50 100 150 200 250 Index (Great Britan = 100) Urban bus services in Europe: cost per passenger-km indices Germany Italy France London GB (excluded London)

Slide13: Urban bus services in Europe: passenger receipts per passenger-km indices 0 25 50 75 100 125 Index (Great Britain = 100) Germany Italy France London GB (excluded London)

Slide14: Urban bus services in Europe: subsidy (+ indebtedness) per passenger-km indices 0 50 100 150 200 250 300 Index (Great Britain = 100) Germany Italy France London GB (excluded London)

Firenze Vs. Sheffield: Firenze Vs. Sheffield Similar urban areas, average speed and number of vehicle used during the peak hour In Firenze: cost per bus-km is 300% higher; cost per passenger-km is 48% higher; receipts per passenger-km are 52% lower; subsidy + (indebtedness) per passenger-km is 401% higher.

Urban* bus service in Europe: patronage: Urban* bus service in Europe: patronage 50 60 70 80 90 100 110 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Index Italy Great Britain Germany France * data for Germany are referred to the whole local public transport sector

Urban bus transport in Europe: costs, receipts, subsidies and patronage: Urban bus transport in Europe: costs, receipts, subsidies and patronage 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 doesn’t seem to be worthwhile on the ground of producer economy of scale Is subsidy desirable as a second-best instrument?

Winter mean concentration of PM5 in Paris from 1956 to 1998: Winter mean concentration of PM5 in Paris from 1956 to 1998

Annual mean concentration of PM10 in British metropolitan areas between 1992 and 2000: Annual mean concentration of PM10 in British metropolitan areas between 1992 and 2000 0 10 20 30 40 50 1992 1993 1994 1995 1996 1997 1998 1999 2000 Birmingham Leeds Liverpool Newcastle Sheffield UE Directive 30/99 ('05) Average decrease per year: -7%

Periods with 24 hour mean concentration of PM10 > 50 mg/m3 in British metropolitan areas between 1992 and 2000 : Periods with 24 hour mean concentration of PM10 > 50 mg/m3 in British metropolitan areas between 1992 and 2000 0 10 20 30 40 50 60 70 1992 1993 1994 1995 1996 1997 1998 1999 2000 Birmingham Leeds Liverpool Newcastle Sheffield UE Directive 30/99 ('05)

Air quality in the UK from 1987 to 2001: Air quality in the UK from 1987 to 2001

Average annual distance travelled in cars per inhabitant in EU 15, The Netherlands, Switzerland - 1995 : Average annual distance travelled in cars per inhabitant in EU 15, The Netherlands, Switzerland - 1995

Subsidy and air quality (noise and CO2 emissions): Subsidy and air quality (noise and CO2 emissions) 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)

Road accidents: Road accidents In Europe the mortality rate has decreased fourfold between 1970 and 1996. The mortality rate in the UK is about half the rate in Germany, France and Italy Between 1986 and 1998, in the British metropolitan areas: the number of passenger km by private car increased between 32% and 78%; the number of passenger journeys by bus decreased by an average of 40% the number of people killed per passenger km by private car decreased by a minimum of 61% and a maximum of 72%

Subsidy and road accidents: Subsidy and road accidents 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

Congestion: Congestion The real aim is 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.

Average time (“door to door”) of commuting journeys* in British urban areaswith a population of over 250.000: Average time (“door to door”) of commuting journeys* in British urban areas with a population of over 250.000 * except those longer than 10 miles 0 10 20 30 40 '85/'86 '93/'95 [minutes] + 3,6% -2,8% -5,6%

Persons crossing Sheffield central area cordon by vehicle type 1980-1998 (average weekday 0700 – 1900 hours) [thousand] : Persons crossing Sheffield central area cordon by vehicle type 1980-1998 (average weekday 0700 – 1900 hours) [thousand] 0 100 200 300 400 500 600 700 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 Car Bus Supertram

Subsidy and congestion: Subsidy and congestion 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 work. 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.

Conclusion: Conclusion 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 Italy.

Further research: Further research To better understand how the differences of taxes among countries affect the cost of services To quantify the potential role of public transport in lowering noise pollution