There is a mean spiritedness in contemporary culture which masquerades as economics. One good example is the public debate over free fares on public transport for pensioner or senior citizens. Bus companies have been complaining that the revenue that they get from the government is an inadequate return for transporting all these pensioners. They claim it is the cost of transporting all these extra people for minimal return that is hitting their profits. There is at present a dispute going on between pensioners in Barnsley and the South Yorkshire Passenger Transport Executive (SYPTE). The executive wants to end free travel to the Meadowhall, (the great shopping mall) in Sheffield and impose a charge to help fund the cost of providing the service. What from a common sense point of view seems to be reasonable, is in fact poor economics. Unfortunately the UK suffers from a surfeit of poor economic decision making.
Listening to the SYPTE its seems reasonable to suggest that the pensioners from Barnsley should make a contribution to the increase in costs consequent on the large number of pensioners travelling to the Meadowhall shopping centre. However there is no extra cost imposed on the train company through having to transport large numbers of pensioners to their favoured destination. The company is already running running a regular train service from Barnsley to Meadowhall and it is not putting on any extra trains to accommodate these pensioners. The real cost of transporting these extra passengers is zero as the company is already running these trains. Only if they provided more trains would there be an additional cost. There are also no extra staff employed either to man the stations or run the trains, so no additional costs there either. In fact the subsidy paid by the central government and local authorities for transporting pensioners adds to their revenue.
What has hit companies most is the cut in government subsidies for the running of train and bus services. This has really impacted on their revenues and free travel for pensioners has little or nothing to do with this loss. Already fares on trains and buses in the UK are the highest in Europe, so the public transport companies are already doing their best to squeeze every last penny out of the travelling public. Obviously they feel frustrated that government policy exempts one group, the pensioners or senior citizens from this policy.
Any service that is free at the point of use has attracted the ire of big business. They will claim that without the discipline of price, people will wastefully use free services as it costs them nothing. Yet there is little evidence of public transport companies having to put on extra bus or train services to accommodate these free loading oldies. However it does make it more difficult for them to reduce bus and train services, as they are denied the excuse that these services are not needed as the demand for them from pensioners is high. Yet this has not stopped bus companies in Yorkshire cutting services, its only made it a little harder for them to make this decision, as their under used service excuse has been removed.
While it is impossible to obtain accurate figure for the cost of a bus, the new double decker buses bought for London will cost £300,000 each. Given that many of these buses will be purchased by central or local government and then hired out to the various bus companies, it is a great waste of tax payers money if they are under used. In London alone £180 million was spent by Transport for London on new buses. If bus companies cut services and leave these buses in the garage for increasingly long periods of time, it represents a very poor return on tax payers’ money. If the extra demand created by pensioners really did mean these buses undertook more journeys it would be much better investment of tax payers’ money.
The companies claim that if these pensioners paid the full fare their finances would be transformed. This ignores the fact that most pensioners that use public transport are on low incomes and any increase in bus fares would reduce their demand for bus travel. The rich ‘baby boomers’ who could pay the higher fares will be using their cars rather than using uncomfortable public transport. The basic state pension is £113 per week and any additional benefits pensioners get will be spent on housing or energy costs. For me to travel to the centre of Leeds on the bus costs £2.00 or £4.00 for the return journey, which is a small but significant part of the basic state pension. Looking at the off peak buses I use, I estimate that each contains between 10 and 30 pensioners, a number which would would be considerably reduced if they had to pay the full fare. Now if the number of pensioners using these buses fell to 2 or 3 there would be little financial gain for the bus company, possibly even a loss as the pension subsidy for 20 passengers would probably exceed the revenue from 2 to 3 passengers paying full fare. While I can only speculate as to the reduction in passenger numbers, it is unlikely that by ending free fares for pensioners the public transport companies would gain much in extra revenue as low income pensioners would probably cut the number of journeys they made to the detriment of the bus companies wallet. There has been no research into the real loss or gain in revenue due to providing free pensioner fares, all there has been is speculation.
If public transport companies are really losing money, there are better ways of increasing their revenues than by ending the free senior travel passes. The much more effective way would be through reforming the structure of the large dysfunctional inefficient multinational companies that run public transport services. They are structured to provide the maximise the financial return to their owners not to provide a good transport service. My example of the inefficiency of these companies is a personal one. When I came to Leeds in 1970 the bus I travelled on then is very little different from that on which I travel today as a senior citizen. Forty years in which there has been minimal technological advance demonstrates the inefficiency and technical backwardness of these companies.