Andrew Couch: The real deal with zero-fare public transport

It's madness to head in the same direction when we are getting poor results, writes Andrew Couch. Photo / 123rf

Opinion

OPINION:

There has been a lot of talk about making public transport free this year in Auckland, including a report making the case from academia and sporadic news of experimentation around the world with lower or zero fares.

This discussion is taking place in an environment where half-price public transport has been in place since April 2022 to stimulate a recovery in public transport patronage after Covid. This move also provides some potential relief to the New Zealand public, alleviating pressures from the rising cost of living (including escalating private travel costs).

I refer to zero-fare public transport as any mode of transport that is not free - but the funding mechanisms can vary. Public transport in New Zealand is of course already heavily subsidised and the actual cost of public transport is far greater than the user pays. For example, in June 2022, Auckland Transport reported a cost recovery of just 15.9 per cent for the previous 12-month period. This subsidy is ultimately paid for by Auckland ratepayers and injections from the New Zealand Government (and other forms of taxation).

The countries that have implemented zero-fare public transport in a serious way are Luxembourg (since 2014) and Estonia (since 2013), notably in its capital city Tallinn. This policy is an easier call for Luxembourg with its strong government finances (national debt to GDP is 24 per cent) and being the fourth-richest country in the world (measured by GDP per capita). However, in Estonia, the national audit office reported that Tallinn's free public transport experiment had not met its objectives – with little mode shift achieved away from private car travel. Germany is also toying with the idea of zero-fare public transport - but has so far introduced a flat Euro 9 fare. In the United States, Boston has trialled zero-fare public transport on a few routes.

For Auckland or New Zealand to implement zero-fare transport, there would have to be a compelling overseas case – but there are none. Unfortunately, we are not comparable to Luxembourg; the New Zealand Government's public finances are stretched, and we ranked 32nd in the world in terms of wealth on a GDP per capita basis.

Zero-fare public transport cost estimates for Auckland range from $175 million to $300m per annum, however in reality this figure would likely exceed estimates, perhaps $600m. Just like the experience in Tallinn, how can it be demonstrated that such a zero-fare policy would produce what Aucklanders really want? The half-price fare structure introduced in April 2022 initially stimulated demand for services but this has petered out in latter months, with public transport patronage still far below pre-Covid-19 levels (nearly half at the June 2022 run rate). The half-price structure has been extended to October 2022 and then later pushed out to January 2023 (at enormous cost) - but to date, this is not working.

Another reason used to justify zero-fare public transport is social equity (ie, that public transport should be available to everyone whatever their financial status). However, this laudable goal assumes that the level of service for public transport is there in the first place – that you can get to a bus or a train easily, and that Aucklanders actually want to ride on the system as it stands. In Auckland, we have a long way to go before this assumption is a reality. We do not lack expertise as Auckland Transport has done a fantastic job of investing in projects like Auckland Metro and the Northern Busway to produce significant growth in patronage (pre-Covid). But they have been handed a difficult job with Auckland's low population density, large geographic reach and historic lack of investment in transport infrastructure.

Auckland public transport is possibly our number one urban problem, Dr Andrew Couch writes. Image / 123rf

Further smart investment is required in public transport that must play a role in reducing transport emissions, particularly in Auckland. However, it would appear there is no evidence this is going to be achieved by lowering fares or even maintaining the current half-price fare regime – and blowing a hole in Auckland Transport's budget. This will inevitably be paid for through higher Auckland Council rates and taxation at a time when interest rates are rising and there are other enormous cost pressures on Aucklanders. In all likelihood, it will also slow down public transport development.

Auckland public transport is possibly our number one urban problem and a brake to our otherwise amazing lifestyle. I do not see any let-up in Auckland congestion and I see too many empty buses. It seems insoluble but it is madness to head in the same direction when we are getting poor results.

So what can we do? If you want social equity, means testing is a much better way of implementing subsidies – something policy-makers became proficient at during Covid-19, with means-tested subsidies introduced almost overnight in some cases.

Then you take an (initially) unpopular decision to raise public transport fares (not lower them) but offer the real prospect of reinvestment back into public transport. In my discussions with overseas local authorities and transport experts around the world, I have heard the inevitability of this scenario being discussed – but no one has bitten the bullet. Getting public transport fares on a rising trend would provide the fertile ground for further public transport investments and allow private-sector innovators to come forward on a more level playing field.

Given the state of public finances in most developed countries, public transport is going to have to pay for itself at some point, especially given the additional investment required in carbon-zero transport solutions. It just needs someone to go first.

Dr Andrew Couch is co-founder and managing director of ridepool company Kara.