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Alkhanizi, Bhatnagar, Mazlan, Zhao, Zhu
ENVS 3029 Transport Policy and Planning
Fare Reduction on TfL’s Tube and Rail Services
by Mayoral Candidate: Caroline Pidgeon
Consultancy Group 6: Jannat Al-Khanizi, Shivani Bhatnagar, Aishah Mazlan, Janey Lin Zhao, Weihan Zhu
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Alkhanizi, Bhatnagar, Mazlan, Zhao, Zhu
Content
1. Introduction 1.1 Inequality of Transport Pricing on Lower-Income Workers 1.2 Overcrowding 2. Policy Context 2.1 Existing Conditions 2.2 Proposed Policy 2.2.1 Policy Objectives 2.2.2 Funding Scheme
3. Policy Assessment 3.1 Case Studies 3.1.1 Singapore 3.1.2 Melbourne 3.2 Critique- Social Purpose: Improve the Welfare of Lower-Income Workers 3.2.1 Unclear Implementation 3.2.2Benefitinggroups 3.3 Critique- Transport Purpose: Tackle overcrowding and spreading peak demand 3.3.1 Travel patterns of lower-income workers 3.3.2 Price elasticity 3.4 Funding Mechanisms
4. Conclusion (Improvements) 4.1 Social Purpose Improvement 4.1.1 Eligibility Requirements 4.2 Transport Purpose Improvements 4.2.1 Focused Implementation 4.2.2 Designated Transport Links for Implementation 4.2.3 Discount to Card Users Only 4.3 Funding Scheme Improvements 4.3.1 Long-Term Funding Mechanisms 4.3.2 Transferable Funding Mechanisms from Case Studies
5. References
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1. Introduction
In May 2016, London is looking to elect its new mayor. In this crucial time, candidates have
strategically addressed the city’s daily and chronic challenges by devising transportation
policies. A prominent theme is to address the rising costs of public transport, and the inadequate
capacity of the transportation system following the growing demand (Mayor of London, 2013).
CarolinePidgeon,theLiberalDemocratcandidate’scampaignrhetoricpromisestotacklethese
challenges albeit from a social standing. Her campaign launched with a commitment to tackle
thebarriersthat‘’make London a city that serves the few, not the many” (Webber, 2016).
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Challenges to be AddressedThisreportwillexaminethe‘HalfPricebyHalfSeven’.Thechallengesthatitattemptstosolveare: 1.1 Inequality in Transport Pricing for Lower-Income WorkersA critical problem with public transportation in London is the associated cost. A study by London Travel Watch (2015) showed the disproportionate expenditure of travel costs incurred by lower versus higher earners. Where higher earners spend 6.8% of their income on travel, low earners spend as high as 9.2% (p.3).Pidgeon’spolicyaddressesthisgapthroughafarereductionschemetargetingthelower-incomeworkers.
1.2 OvercrowdingOvercrowding in a successful and busy transport system does not only occur because of a shortage of infrastructure, but more importantly due to passenger behaviour (House of Commons, 2003). Figure 1visualises thecapacity forLondon’sbusiestOverground,UndergroundandDLR routes.Therefore,candidatePidgeon’spolicyalsoattempts to intervenewithpassengerbehaviour todistributedemandbeyond and across peak hours in order to ease congestion and minimise delays.
Figure 1: Tube and DLR Spare Capacity (Source: Mayor of London, 2013)
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2. Policy Context2.1 Existing Conditions
London’speakperiodmainlyoccursbetween6:30am-9:30am,anddespitehavingmultiplepeakhours
for different stations; no detailed statistics have been released. The number of trips occurring before and
duringpeakhour,whichthepolicyislikelytoinfluenceareasfollows:
Figure 2: Peak hour for morning period is 8am for Underground/DLR services (Source: Source: TfL, 2011)
Figure 3: Peak and Off-Peak fares for Tube, DLR and Overground (Source: TfL, 2016.)
The pricing for peak/off-peak hours fare varies according to zones in London as shown in Figure 3:
Further details of the fares are provided in section 4.2.3.
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2.2 Proposed Policy
The ‘early bird’ fare proposes half fares for TfL’s Overground, Underground, and DLR services, by
completing the journey before 7:30 am (Pidgeon, 2015).
2.2.1 Policy Objectives
Social purpose: Support low-income workers that travel in unsocial hours.
Transportation purpose: tackle overcrowding by encouraging people to begin their commute earlier in the
morning.
Whilethefirstobjectiveaspirestoachievefairnessintravel,thesecondaddressesdemanddistribution
by spreading modal usage over a wider time period. In addition, it would minimise travel delays occurring
from overcapacity.
2.3 Funding Scheme
The scheme will be funded in the first two years through a variety of methods. The main funding
mechanisms will be withdrawing funding from capital expenditure by supporting less costly infrastructural
projects. In addition to transfering funds from other operational expenditures.
Figure 4: Methods of Funding in 1st and 2nd Mayoral Years combined Source:
(Akt-uk, 2016, BBC News, 2016, Boff, 2015 and Coates, 2016)
Figure 5: Methods of Funding in annual subsequent years (Atk-uk, 2016, Boff, 2015
and Coates, 2016)
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Methods of Funding (£ Millions) Year 1&2
End TFL Nominee Travel Card
Scrapping Garden Bridge
Silvertown Bridge instead of Silvertown Tunnel
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Methods of Funding (£ Millions) Annual Funding from Year 3 onwards
End TFL Nominee Travel Card
Silvertown Bridge instead of Silvertown Tunnel (?)
?
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Objective: Spread morning peak hour crowds to pre-peak hours and ease crowding (Singapore LTA, 2013).
Figure 6: Total number of commuters exiting the 16 city centre stations on weekdays (Souce: Singapore LTA, 2013)
3. Policy Assessment3.1.1 Case Studies- Singapore
Delivery: The scheme was funded by the Government and implemented by Land Transport Authority (LTA) of Singapore (IPS Commons, 2015) and more trains were injected into the system to provide additional capacity in ridership during off peak hours. More than 50 organisations partnered with the Travel Smart Programme to encourage people to shift to off-peak travel by creating flexibility for the employees to start work before 8 am (Singapore LTA, 2015).
Policy:It began as a one year trial to provide free travel on the MRT in the core city area (16 out of total 109 stations) before 7:45 am on Weekdays (excluding public holidays). Commuters exiting at these stations between 7:45 am and 8:00 am received a discount of up to 50 cents to act as a buffer measure (adult fares vary between $0.79 to $2.67). The scheme is not applicable to people beginning their journey at any one ofthespecified16stations,butattheexitstation (Singapore LTA, 2013).
Applicability to London:1. More trains were injected during the pre-peak hours to accommodate the shift which would have added to the costs.2. Trial scheme before full implementation.3. Implemented supplementary policies and work incentives to promote the early travel scheme and encourage participation (Singapore LTA, 2015).
Outcome:1. Sustained reduction of 7-8% in number of commuters during the peak morning hours.2. Ratio of travel from morning peak (8am- 9am) to pre-peak (7am- 8am) travel fell from 2.7 to 2.1- resulting in a more evenly spread ridership pattern (on the basis of commuters exiting at the designated 18 stations).3. Allowed other travel demand management schemes to be facilitated alongside it for example- Travel Smart Programme, Travel Smart Rewards and an Off-Peak Pass.4.TheschemewasextendeduntilJune2016duetoitssuccess.Afterthefirstyear,2additionalstationswere included in the free travel zone (Singapore LTA, 2015).
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3.1.2 Case Studies- Melbourne
Objective: The policy aimed to shift demand from peak to pre-peak to relieve overcrowding effects.
Figure 7 (top) : Train overcrowding (source: Currie, 2009)Figure 8 (right): Ridership 133/94=100 (source: Currie, 2009)
Policy:An early bird ticket offers free travel to all passengers who complete their journey before 7:00 am. The discountwasonlyofferedfortherailelementsofpeople’sjourney.Furthermore,staffheldtheauthoritytopermit late exits due to late train services (Currie, 2010).
Delivery: 1. The scheme cost $6 million Australian dollars (approximately US$5.64 million). Most of this expense was the result of loss in fare revenues.2. The scheme was trialled on 2 out of the 15 lines on the MRT network for one year before being rolled out on all 15 in 2008.3.Theprogrampaysforitsrevenuedeficitbyrunning2.5-5lesspeaktrainloads.Furthermore,thelackofnew infrastructural requirements made this scheme a cheaper option than others to enable relatively quick change.
Applicability to London:1. Trial scheme before full implementation.2. Implemented supplementary policies and work incentives to promote the early travel scheme and encourage participation.3. Cost of running the scheme was recovered due to having to run less trains during the peak hours.
Outcomes:1. An estimated 23% of passengers have actively shifted their pattern of travel by around 42 minutes (2,000-2,600 passengers). 77% did not shift their time of travel: 67% travelled at this time originally and 10% were new commuters as the result of a growing market.2.Peaktimecrowdshavesubsidedby1.2-1.5%ofpreviouslevels.Thisequatestouptofiveaveragetrainloads being saved during the peak hours (3% of total peak trains). However, demand has grown to outweigh this effect and overloading has increased since the introduction of this scheme.3. Peak travel during 7:00-8:00 am has reduced however the results between the more critical time period of 8:00-9:00 am are low.
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3.2 Critique - Social Purpose: Improve the Welfare of Lower-Income Workers
This section will assess the impacts of the policy objectives and the viability of each based on available
data.
3.2.1 Unclear Implementation
Whilethepolicyspecifiesatargetgroupofcommuters,itfailstoidentifythetransportlinksthatserve
the highest proportion of low-income workers during unsocial hours (objective 1). In addition, the links
predominantly serving low-income groups (objective 1) might not overlap with the most overcrowded links
(objective 2) thus making the designation of the links ineffective (Figure 9). Contrarily, if no designation
occurs, loss in revenueswouldnotbe justifiedbecause inessential linksor commutersmightbenefit
instead of the targeted group. This perpetuates unfairness in the system.
Figure9:AverageTubeDelayscausebyOvercrowdinginComparisonwithProfessions’Income (Source: TfL, 2015 and APSCo, 2016)
Figure 9 shows average tube delays that were caused by overcrowding (second column). The darkest
coloured lines namely- Jubilee, Central, Victoria and Northern lines show the most need for intervention
as they are the most crowded. On the other hand, third column shows the professions served by these
lines the most. These were colour coded to demonstrate professions with lowest average salaries
(darkest shades) (APSCo, 2016). These were the Hammersmith and City Line, Jubilee, Central and
Districtlines.Thisshowsthatbothobjectivesdon’talwayscorrelate.Inaddition,theseresultsarelimited
due to unavailability of data for overground and DLR for complete comparison.
*Darkest to Lightest: Least to Most In Need of Policy Designation
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3.3 Critique- Transport Purpose: Tackle Overcrowding and Spread Peak Demand
3.3.1 Price Elasticity for Overcrowding
Rider sensitivity to fare changes appears to decrease with increasing city size. Since London’s
population exceeds a million, its estimated elasticity of -0.24 compares to small cities with population
of less than 500,000 with elasticity of -0.35 (McCollom, 2004).
Ridership responses are more inelastic in peak hours due to the trips typically being mostly non-
discretionary, therefore if any travel alternatives are unattractive, riders will still accept the fare changes
with few changes in the ridership frequency (Ibid, 2004). In reflection, Singapore and Melbourne have
both increased their peak time elasticity through implementing the policy along with a work scheme
programme. Off-peak trips are twice as elastic, as they are mostly discretionary and flexible as shown
in Figure 10. Therefore, if no other work programmes are being implemented along the policy, it would
be more effective to apply the lower fares in off-peak periods as it will more likely to further enhance
ridership and modal shift.
Figure 10: Fare Elasticities in London (Source: McCollom, 2004)
3.2.2 Benefiting Groups
TfL currently runs fare reduction programmes, to support vulnerable groups such as the unemployed or
disabled. However, these programmes are all operated through eligibility requirements such as special
travel cards or approved applications to access funds and levies (DfT, 2013). The early bird reduction
policy is therefore unique. Despite targeting low-income workers, it is accessible for all commuters
completing their journey before 7:30 am, something that no other reduction policy in London has tackled
before.Thisextends thebenefitofprice reduction togroupsbeyond the target,especially incaseof
unclear targeting of links.
Thecritiqueacknowledgesthebenefitpresentedforlow-incometravelersinunsocialhoursoccasionally,
however there are shortcomings attached to the simplistic nature of the goal assumption.
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3.3.2 Travel Patterns of Lower Income Workers
Approximately 9% of London residents (a projected 70,000) take slower routes to work when commuting
from outer to inner London because of lower fare prices (TfL, 2014b). The time of the commute was also
found tohaveasignificant impacton travelchoices forvery lowearners(earning less than£600per
month) as income affects travel behaviour. The impact of the policy will be discussed below.
There is a difference in economic performance of inner and outer London boroughs and within different
household salary bands. Low income workers tend to favour cheap modes of transport and make less
frequent trips into London. Outer London residents, regardless of income make 15-25% more trips by
mechanisedmodesduelongerdistancebetweenlocations.Asseenbythegraphbelow(figure11),lower
income residents travel fewer times per day, with a majority of the reasons being congestion through
overcrowding and high ticket prices (TfL, 2014a). If the policy was to be implemented, this would be
addressing the two major hindrance for low ridership and increase travel demand and mobility for lower
incomeworkers.Howeverthehindranceidentifiedisonlyforpeakhoursandnotfullyapplicabletooff-
peakhoursthatPidgeonistargeting.Thesehindrancesarenotincomespecific,thereforelow-income
workers should not be the central target of the policy as the policy attempts to address a problem that
crosses more income groups.
Figure 11: Mechanised Trip rates by income, inner and outer London (Source: TfL, 2014a.)
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3.5 Funding Mechanisms
London’stravelsystemisstillinrecoveryfromtheeconomicrecessionwhichhadasubstantialeffectona
reduction of travel as there were large changes in incomes and economic activity. Moreover, there was a
longer stagnation of income and productivity in outer London for the past 10 years, which further hinders
themobilityoflowerincomeworkerslivinginouterboroughs.Inreflectionwiththecasestudies,London
has a larger population and ridership statistics than both cities and therefore stands to lose more money
on lost fare revenues. Transit agencies cannot afford to offer large discounts such as the half price fare
without recouping the revenue loss elsewhere in the long term (Kockelmam et al., 2013), which was not
explicitlystatedinPidgeon’spolicy.
The review of the short-term funding scheme was necessary as it was one of the details the Candidate-
Caroline Pidgeon disclosed regarding the policy. Pidgeon has proposed the following methods (Figure
12)forfundingtheschemeforthefirsttwoyearsintothemayoralterm.However,itisunclearhowthe
scheme will be funded beyond the two years discussed in section 2.3. There is ambiguity on how much
funds will be allocated towards the policy beyond the second year if there were less freed funds from
projects such as SIlvertown bridge for example.
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Figure 12: Funding Mechnism Critique
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4. Conclusion (Improvements)ThispolicysubmittedbyCarolinePidgeondoesnotsuggestaspecific timeframe for implementation.With the proposed improvements, this policy has the potential to become a more viable option in the long term. Improvements provided in this section tackle the critiques that have been discussed earlier (section
3).
4.1 Social Purpose Improvement4.1.1 Eligibility Requirements
Targetingcritique3.2.2BenefitingGroups,the‘earlybird’farereductionpolicyshouldbedesignedinto
a similar scheme as the current TfL fare reduction programmes serving other groups. By operating the
program through eligibility requirements, it can be ensured that the discount will target lower paid workers
specificallyandpromotefairnessinthesystem(Newmark,2014).Currently,thepolicyonlytargetsthe
Tube,OvergroundandDLR-restrictingthesocialandmodalspreadingbenefitsfromthebusnetwork.
Introducinganeligibilitybasedprogrammewouldextendthebenefitsforthetargetedgroupofpeopleto
a wider network of transport services. Particularly, buses are the most commonly used transport mode
for lower income workers, which allows the policy to impact the intended social group directly with a lower
loss in revenue (TfL, 2012:4).
4.2 Transport Purpose Improvements
4.2.1 Focused Implementation
The case studies of Melbourne and Singapore both reinforce that this policy should be implemented
during weekdays only, excluding public holidays, to ensure less loss of gross revenue from fare reduction
(TfL, 2011). Following both case studies, London should also undergo a trial period on a smaller scale to
judge the viability and applicability of the proposal. The trial should allow for monitoring and improvement
of the scheme delivery before continuing with full implementation.
4.2.2 Designated Transport Links for Implementation
In order to tackle critique 3.2.1 Unclear Implementation, in Underground, DLR and Overground, the fare
reduction should only apply at strategic exit stations to maximise the impact of the policy-following the
example of Singapore (Singapore LTA, 2013). These stations should be selected on the basis of the most
overcrowded and wherever possible- most used by lower income professionals (previous Figure 9). This
will result in a smaller revenue loss compared to implementation in the whole of London.
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In addition, different lines have different peak hours which should be taken into account when designating
the fare reduction timeperiod.Havinga flat timeperiodwill force somepeople to change the travel
behaviour more than others, therefore staggering the time period could make the policy more equitable.
4.2.3 Discount to Card Users Only
As a possible consideration the fare reduction should apply to card-users only. This includes Oyster and
contactlesspaymentcards.This improvementcouldensure that thediscountbenefitsconstrict to the
localworkersandresidents,asonlyoneoffivevisitorshaveanoyster/contactlesscards(TfL,2010).This
would save gross revenue by only targeting the local population that requires the discount.
The table below shows the price difference between single journey tickets and Oyster/contactless cards.
In the suggested improvement, the policy will mostly target single journey tickets for adult and Oyster/
contactless cards during off peak hours. Oyster and contactless card users during peak hours will also
benefitoccasionally.
4.3 Funding Scheme Improvements
4.3.1. Long Term Funding Mechanisms
Pidgeon’sfundingmechanismssuchaswithdrawingfundingfromcapitalGardenBridgeproduceone
offsavingsandonlysustainthefirsttwoyearsofimplementation.Therefore,othermayoralcandidates’
funding mechanisms were studied for transferable knowledge. Viable mechanisms included ‘deliver major
efficiency savings within TfL by cutting waste and duplication in back office operations and £383 million
on consultants and agency staff’ suggested by Sadiq Khan (Edwards, 2016). Other suggestions include
Figure 13: Detailed Fares for Tube and DLR affected by the Policy (in red) (TfL, 2016)
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increasingthecostofanotherserviceinthesystemtocoverthedeficitcreatedbythispolicy.Examples
include an increased congestion charge or increased costs for peak users- the latter would actively deter
overcrowding and successfully fund the fare reduction scheme (Sullivan and Powley, 2016).
4.3.2 Learning from Case Studies
Additionally, as concluded from Melbourne, the government was able to make a return on their annual
expenditure by running fewer trains during the peak hours (Currie, 2009). TfL should determine whether
Melbourne’sexamplecouldbe replicatedon thebasisof twoobjectives.First,asufficientamountof
people must switch to earlier travel to run fewer trains during the peak hours. Secondly, the pre-peak
frequency of trains should accommodate the extra load from the modal spread without need for an extra
injection of trains into the system. If the pre-peak number of trains stays the same and the peak number
of trains decreases, TfL could recover money on the lost revenue through fare reduction. Additionally in
Melbourne, the fare reduction scheme induced demand, increasing the amount of fare paying customers
which also contributed to compensating for the implementation costs (Currie, 2009).
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