Evaluating the long term impacts of transport policy: The case of passenger rail privatisation

Britain's national rail system was ‘privatised’ as a result of the 1993 Railways Act, with most of the organisational and ownership changes implemented by 1997. This paper examines the long term impacts of these changes. A key issue when examining long term changes is that of the counterfactual – what would have happened if the changes had not occurred? A simple econometric model of the demand for passenger rail services was developed and used in conjunction with extrapolative methods for key variables such as fares and train km to determine demand-side counterfactuals. Extrapolative methods were also used to determine counterfactual infrastructure and train operation costs. Although our results are sensitive to the assumptions we have made concerning the counterfactual they suggest a number of impacts. Since privatisation, rail demand has grown strongly but our analysis indicates that transitional disruptions suppressed demand by around 9% over a prolonged period (1992/3 to 2005/6), whilst the Hatfield accident reduced demand by about 5%, albeit over a shorter period (2000/1 to 2006/7). A welfare analysis suggests that although consumers seem to have gained as a result of privatisation, for most years this has been offset by increases in costs. An exception is provided by the two years immediately before the Hatfield accident. Overall the loss in welfare since the reforms were introduced far exceeds the net receipts from the sale of rail businesses. Thus although the reforms have had advantages in terms of lower fares and better service levels than otherwise would have been the case, this appears to have been offset by increased infrastructure and train operations costs. The source of these high costs remains an area of speculation but appear to be related to aspects of both market and regulatory failure.     

The conflict between competition policy and the wider role of the local bus industry in Britain

Since the Transport Act of 1985, the local bus industry in Britain (outside London and Northern Ireland) has been subject to deregulation, removing previous restrictions on routes, service levels and fares. This also marked a reversal of the previous emphasis on co-ordination of services provided by different operators, and introduced competition law as applying to other industries to the local bus sector. This has been in conflict with other policy objectives aimed at stimulating greater use of public transport, such as harmonisation of ticketing systems. The underlying issues are examined, and recent changes in policy. The Local Transport Act of 2008 offers an opportunity to resolve some of these problems, and its application in Oxford is discussed as the first substantial example to date. However, a strong conflict remains between the role of competition agencies and other aspects of policy.     

Local public transport on the basis of social economic criteria

Applying the welfare economic approach it is demonstrated what the effects of certain supply changes in the local public transport will be and the potential of innovative demand management measures are examined. Straighter bus routes would reduce the average travel time from door to door. The travel time on the buses decreases and the frequency increases, which reduces waiting times at bus stops. Using smaller buses and more of them would also increase the net benefit, but increase the need for subsidisation. The peak within the peak in the morning is hard to handle by price policy alone. Introducing a small variation of the start of the school-day for high-school pupils would make investment- and operation cost savings possible, and the inconvenience costs for the pupils could be limited. It is only during peak hours in the main direction of peak travel and in the critical section of the line that optimal price becomes high relative to the present level. Zero fares in off-peak will be social profitable, but an increase in subsidy is needed. An introduction of these policy changes would give rise to a net social benefit of 30 million SEK per year in Linköping.     

New Zealand public transport procurement strategies in a new legislative environment

In 2003 and 2004 there were major changes to the legislative environment in New Zealand, with the enactment of the Land Transport Management Act, 2003 which formed the New Zealand Transport Agency. The Transport Agency has a statutory role of assisting and advising approved organisations (usually local government) and approving procurement procedures. Following the introduction of the Land Transport Management Act a review of existing public transport legislation took place leading to the introduction of the Public Transport Management Act early in 2009. This paper discusses the role of procurement strategies in obtaining value for money objectives for public transport services within the new legislative environment. A case study of Greater Wellington Regional Council’s Procurement Strategy for bus and ferry services is presented to demonstrate the usefulness of strategic thinking.     

Ten years after bus deregulation in Japan: An analysis of institutional changes and cost efficiency

The local bus market in Japan was deregulated in 2002. This study examines the impact of this deregulation on the market structure and the operators' cost efficiency over the last ten years. First, we perform a qualitative before-and-after-deregulation analysis of Japan's bus market, finding that there has been little change in the structure of the Japanese bus market so far. Second, we investigate the effectiveness of the deregulation and internal organisational factors by using a dataset of publicly owned (municipal) bus companies. We estimate the total cost frontier functions in order to examine their effects, showing that it is the internal organisational factors (i.e. governance structure) that affect the operator's efficiency, not deregulation. In fact, the coefficient of subsidies to companies is positive, with statistical significance, thereby suggesting that cost efficiency decreases as the subsidy ratio increases. The coefficient of the contracting-out (MCGL) dummy also obtains statistically significant results; thus, we provide an account of how contracting out clearly improves operators' cost efficiency. The deregulation variable did not show significant results.     

The 2008 New Zealand public transport management act: Rationale, key provisions, and parallels with the United Kingdom

In January 2009, following a lengthy industry review and consultation process, the New Zealand Public Transport Management Act (PTMA) came into force. The Act allows Regional Transport Authorities, as the primary procurers of public transport services, to place either a control or a contracting requirement upon services that are registered as commercial requiring no subsidy. The imposition of either the control or the contracting requirement is designed to facilitate greater system integration, improve service continuity and enhance services to the customer, andallow the Authority to invest in key strategic projects, such as integrated fares and ticketing, so as to grow patronage.The PTMA’s other objective is to ensure improved value for public subsidies. Recent years have seen significant subsidy inflation for seemingly little commensurate benefits. The Act will allow the Regional Transport Authority to achieve greater value for money through improved farebox, a shift to longer, larger contracts to increase competition in the market, a more appropriate allocation of risk, and the removal of the ability of operators to ‘game’ the current system by using strategically placed commercial services as barriers to competition.Similar concerns have also stimulated new legislation in the UK and this paper illustrates the parallels in the environment and proposed response.     

What’s so funny about peace, love and transport integration?

The 1998 White Paper proposed integration as the solution to Great Britain’s land transport problems. Most commentators agree that this much vaunted New Deal for Transport has been a failure. Yet some ten years later policy papers from bodies such as the Institution of Civil Engineers and the Centre for Cities are still proposing integration as a possible panacea.There are a number of reasons for the failure of integrated transport over the last decade. The first is the failure to define the concept. The second is the failure to operationalise the concept. The third is the lack of an evidence base on the success of integrated transport policies. Evidence is now emerging in Britain on the benefits (and indeed the costs) of some aspects of integrated transport policies. The fourth, and perhaps the most crucial, is the lack of will in terms of politicians, civil servants and the public at large, to adopt the behavioural changes necessary for an integrated transport policy to be successful. A series of organisational and funding changes are proposed that could advance the prospects for integration.     

A simulation of the simple Mohring model to predict patronage and value of resources consumed for enhanced bus services

Choosing between the competing approaches to providing enhanced bus services requires the ability to predict the effects on patronage and overall benefits to society in terms of Value of Resources Consumed (VRC) of any proposed change. One common approach uses the Mohring model of 1972 and its successors to optimise one or more aspects of the supply of transit services given various level of demand. This paper simulates the operation of a simple circular bus route using the equations of a basic Mohring type model and a Decision Support System (DSS) to endogenise demand under the assumption that there is a fixed demand for travel but commuters can choose between the bus and private vehicle. The selected approach recognises that demand for a particular mode of travel is predicated on the speed of the vehicle in service which is itself determined by the demand for that vehicle (in this model or boarding and alighting time) rather than being determined exogenously. This creates an iterative feedback mechanism whereby changes to the attributes of the bus and car alter mode choice and the speed in service of the bus which, in turn, alters mode choice. The simulation is used to predict changes to patronage and VRC under scenarios regarding changes to the transport network (in terms of fares and running costs, frequency and spacing of bus stops) using parameters from both a Multinomial Logit (MNL) and a Mixed Multinomial Logit (MMNL). The results demonstrate that there are large differences in the size and, in some cases, direction of predicted changes to patronage, VRC and revenue, depending on whether the parameters of the MNL or MMNL model are used.     

The impact of the Merchant Marine Act of 1970 on subsidized US ship construction

The United States Congress reasserted the desire for continued financial support to domestic merchant-ship construction when in 1970 it amended the Merchant Marine Act of 1936 [1]. With regard to the shipbuilding industry, the most significant changes contained in the Merchant Marine Act of 1970 [2] are those designed to reduce the construction differential subsidy and to increase the variety of vessels that might be subsidized. Sections 501(a), 502(a), and 502(b) of the 1936 Act were amended to facilitate the reduction in subsidies; Section 905(a) was modified to encourage the subsidized construction of liquid and dry bulk cargo vessels. After a cursory review of the 1970 amendments to the 1936 Act, this paper is directed to ascertaining the results, in general, of the changes and whether they have generated increased domestic shipyard productivity and lower subsidy rates.     

Rail infrastructure charging EU-directive,Swedish concerns and theory

The first railway package is being recast by the legislative bodies of the European Union. One point of departure in this paper is how Swedish agencies treat issues concerning marginal cost based charges, financing charges and allocation of scarce capacity and it discusses these issues from a welfare point of view, partly by use of theoretical modelling. It is seen here that the Swedish infrastructure manager (the Swedish Transport Administration) so far has no method for calculation of marginal costs as a base for charging, especially for costs of scarce capacity, and that the infrastructure manager is applying or discussing various methods for allocations of scarce track capacity. The EU-recast gives no guidance on principles for calculation of charges for scarce capacity, so we recommend the Swedish Transport Administration to develop such charges. The Administration seems to ignore important externalities that should be taken into consideration from a welfare point of view, with respect both to efficient charging and to allocation of scarce capacity. The analytical modelling part of the paper aims to derive these charges in principle, taking these externalities into account. If financing charges exceeding social marginal costs are applied, the model shows how to minimise the welfare loss of these increases. It also shows that financing charges should primarily be applied to market segments that cause large external costs from the operation of the train, where its customers have low valuation of wait time and delay time, where customers of other segments have high valuations of delay and where increased profits for other operators are induced.     

Competition in transit markets

Despite regulatory reforms in a number of countries, competition in transit markets is still relatively rare. Moreover, where it does occur it tends to be small group in nature and the outcomes are difficult to predict. In this paper, simulation models of competition in inter-urban rail markets and urban bus markets are developed and applied in studies of Great Britain and Sweden. It is found that on busy routes head-on competition is commercially feasible (although for rail this assumes low access charges) but is not socially desirable. For routes with thin demand (or high access costs), competition may be limited to cream skimming. In most competed cases, there appears to be a tendency for the provision of too much service, at too high price and (at least for bus) at too low quality. Rather than classical Bertrand-Cournot oligopoly models, transit markets may be best described by models of oligopolistic competition based on horizontal product differentiation.     

Promoting social inclusion in a deregulated environment: Extending accessibility using collective taxi-based services

Bus based public transport has enjoyed revitalisation in many urban areas but outside large towns and cities its provision and quality remains erratic. Many rural settlements have infrequent services giving rise to social exclusion through transport disadvantage.The UK Government highlighted a need in Towards a Sustainable Transport System (2007) for radical new thinking on rural accessibility to help meet goals of quality of life and accessibility for all and to help meet the challenge in finding carbon friendly ways of meeting rural transport needs. This paper reports work undertaken for the Commission for Integrated Transport, an advisory body to UK Government, on how shared taxi-schemes could be developed within a deregulated environment to meet rural accessibility needs. This is based on an analysis of institutional barriers and comparison between successful mainland European schemes and UK schemes. The paper considers economic viability and the levels of subsidy currently used to provide accessibility in rural areas to show the potential for making current expenditure on rural transport in the UK ‘work harder’ to deliver a collective taxi-based service as part of the public transport mix so as to increase rural accessibility.     

Paradoxes of rationality in road safety policy

Rationality is an ideal for transport safety policy. As developed within normative welfare economics, rationality denotes the efficient use of safety measures based on cost–benefit analyses that include all relevant impacts of the measures. Efficiency in the technical sense of the term provides a perfectly clear and precise guideline for policy priorities. Nevertheless, some choices that are guided by cost–benefit analysis may strike us as paradoxical or counterintuitive. A paradox of rationality refers to any situation in which conflicting choices can both be defended as rational. This paper discusses a number of choices that may seem paradoxical. The first involves the choice between options that have identical impacts on safety, but in which these impacts are valued differently. The second deals with the tendency for preference reversals to occur when preferences for the provision of safety are aggregated. The third discusses the inability of conventional measures of willingness-to-pay to reflect the intensity of preferences. The fourth concerns the tendency for policy choice to favour the rich at the expense of the poor when willingness-to-pay is not adjusted for the marginal utility of money. A fifth situation refers to the fact that a policy option that looks attractive ex ante may fail an ex post compensation test because utility functions depend on health state. There is a potential conflict between individual and collective rationality with respect to the costs and benefits of some road safety measures. When developing a road safety programme, a set of road safety measures whose benefits exceed the costs when considered as stand-alone measures could have benefits smaller than cost when combined in a programme consisting of all the measures. Finally, there is a potential conflict between efficiency and negotiated consensus as mechanisms of resource allocation in the public sector. The sources of the paradoxes and ways of avoiding them are discussed. Some of the paradoxes can be avoided if changes in risk are valued in terms of a fixed price per unit of risk rather than according to a non-linear demand function.     

Recent developments in Flexible Transport Services

This paper focuses on recent experiences in the evolution of Flexible Transport Services (FTS). It describes how previous manifestations of FTS provided dedicated solutions for special groups, often in parallel to the conventional public transport network, but highlights that in numerous countries across Europe there is now a discernable trend towards open access FTS providing services for the whole community and often feeding the conventional public transport network to provide wider access and opportunities. This is as a result of policies intended to mainstream services for people with disabilities and moves to tackle social exclusion amongst other groups while at the same time reducing the very high costs per trip associated with STS.To meet these policies, and the higher expectations and different travel behaviours of citizens to-day, it is suggested that FTS will need to radically reposition itself in terms of scale, so that there is mass coverage and ability to function as a full transport mode. This will require breakthroughs in concepts; business models; organisational and operational models; and in supporting technologies. A proposed solution to this is the Flexible Agency for Collective Mobility Services (FAMS) which provides an organisational structure and business model for FTS that incorporates the required supporting technologies.     

‘Regulated deregulation’ of local bus services—An appraisal of international developments

The deregulation of the British bus sector (outside London) in 1986 was the start of a debate on the merits of ‘deregulation’ and ‘competitive tendering’. The period that followed was rich in lessons. New Zealand was at the time the only other country engaging in a reform based upon market initiative (implemented in 1991). Other countries chose for a less extreme and more consensual way to introduce competitive incentives, choosing the fundamentally different competitive tendering (CT) path. As a result, the so-called ‘Scandinavian model’ developed, based upon the London example of route tendering. Later the Netherlands adopted a network tendering approach, resembling the French practice of network tendering though with more operator freedom.     

Maritime economics in a Post-Expansion Panama Canal Era

Government recently introduced the Transport Law Reform Bill, which if passed by Parliament, will allow foreign vessels to uplift and discharge cargoes and passengers along the coast of New Zealand. Coastal shipping is part of the domestic transport industry, which has benefitted from deregulation and considerable restructuring over the last decade. This paper provides a brief review of the coastal shipping industry in New Zealand and an overview of international cabotage laws. An alternative open coast shipping policy proposed by the New Zealand Shipping Federation, which is based on ‘level playing fields’ principles, is presented. The scope of cost benefit analysis is outlined and the potential costs and the potential costs and benefits of the Government's open coast shipping policy are summarized. Despite the potential costs to New Zealand of an open coast policy appearing to be considerably greater than the potential benefits. Government officials have not undertaken an empirical cost benefit analysis. The paperr concludes that hte clauses of the Transport Law Reform Bill relating to an open coast policy should be withdrawn and a full empirical cost benefit analysis should be undertaken to determine the best coastal shipping policy for New Zealand.     

Transport for older people: Characteristics and solutions

Entering the 21st century, one of the most significant demographic changes in developed countries is the aging of the population. Travel is an important aspect of older people's economic well-being, so with the aging of the population, improving transport for older people is increasingly important. This article presents the results of a study of older people's travel behaviour based largely but not exclusively on LATS (London Area Travel Survey) 2001 data. The focus is on older people's trip chaining behaviour, including trip chain complexity, trip purpose sequence and mode choice in a chain. After identifying the policy implications it looks at the role of Special Transport Services in improving the supply of transport for older people, taking the London Borough of Camden as a case study.     

The efficiency of congestion charging: Some lessons from cost–benefit analyses

This paper addresses methodological issues in cost–benefit analysis (CBA) regarding congestion charging schemes. Despite suspicion on the reality of travel time savings, it is argued that these savings are a conservative value of surplus gained from a congestion scheme. The methodology of measurement of travel time reliability is not yet stabilised, but the literature review suggests that it may take a growing share of benefits in the future. Sensitivity tests performed on the London and Stockholm case studies with a simulation model underline the need to accurately measure speeds, while the value of travel time appears less critical. Finally, the impact of costs of public funds on public accounts is greatly significant and may increase in the future.     

Utilization of passenger transport subsidy in Kolkata: A case study of Calcutta State Transport Corporation

The present study tries to see whether the subsidy given to CSTC, which is the oldest and the largest state transport corporation operating in and around Kolkata, is really being used to cover the losses they make over the years or to merely cover-up an inefficient performance. The state owned buses are required to serve, not only non-profitable routes in off-peak hours, but also to give social security or employment to a large section of society. The burden of carrying a huge staff structure and serving at an administered and less than competitive price for welfare reasons, makes CSTC liable to an operating loss. Therefore, it makes a case for subsidy. However, the regular commuters experience regarding the condition of and the services provided by these raises a question about the justification of subsidy. In the study it is seen that the subsidy given is not based on any of the components on which it should, economically.     

Long-term development of express coach services in Britain

Express coach services compete for longer distance market with car and rail, and largely cater for the leisure, tourism, and visiting friends and relatives. markets. Britain deregulated its express coach system in 1980, and it is now opportune to examine long-term impacts of that change. The initial impacts were reviewed by the authors in 1986 (Robbins & White, 1986) but such impacts do not necessarily match long-term outcomes. Monitoring of the British system has been conducted by examining service changes and data on ridership, together with financial performance of the main operator groups and technical press coverage. It can be shown that a dominant position has been retained by the major operator (National Express), with a continued decline in the role of smaller independent operators in the all-year-round daily network. However, new competition has emerged from other large groups (most notably Stagecoach ‘Megabus’ in 2003). The paper analyses the operating and marketing strategies of the new operator and contrasts these strategies with those adopted in the 1980s. Implications for the future development of the network in Britain are outlined.