Smarter Travel Programmes–Financial impacts for Transport for London

COLIN BUCHANAN Smarter Travel Programmes–Financial impacts for Transport for London www.cbuchanan.es

Structure • Introduction • Least Cost Planning • Applying it to London • Impact of ST programmes • Cost Issues • ST programme financial impacts • Conclusions

Introduction • Main aim of ST is shifting trips from car to more sustainable forms of transport: rail, bus, walking and cycling. • Economic benefits of Smarter Travel include: • Environmental benefits • Highway Congestion Relief • Operating Cost savings • Health and ambience benefits

Introduction • There are financial implications linked to mode shift – revenues and costs. In London those fall on TfL • CB asked to look into the financial impacts for TfL of Smarter Travel programmes: • School travel plans • Workplace travel plans • Area based schemes • Car clubs • Personalised travel planning • Travel awareness and marketing

Introduction Could Smarter Travel • Reduce operating subsidy? • Reduce or delay capital expenditure? `

Least Cost Planning • Means taking a holistic view of costs and revenues. Using demand management to eliminate or delay capital investment. • Businesses paying to persuade people to consume less of their product. • Can be soft (providing information on choices) or hard (paying for usage reductions). ST has elements of both.

What Drives LCP? Essentially when Marginal Cost > Marginal Revenue – applies mainly to industries where: • There is a constant increase in demand • Costs are driven by peak usage • High cost of capital investment

Average & Marginal costs

LCP and TfL? Applying LCP to TfL: • operating costs > revenues (eg London Buses) • demand growth triggers need for capital investment (eg peak period rail demand) In both cases lower demand could lead to a financial gain/saving.

LCP measures • Information/marketing • Financial incentives/subsidies • Targeting measures at specific problems (e.g: when and where demand is highest) • Improve supply efficiency instead of new infrastructure • Promote efficiency by the end-user

LCP Conclusions • Spending £ to reduce demand is a perfectly reasonable response, especially within networked industries. • Transport is not a “good” it’s a derived demand. More transport is not necessarily a good thing. • BUT transport does have important social, environmental and economic implications. Cost/subsidy minimisation not an optimal policy

Impacts of ST programmes - method • Looked at ST programmes and what their impacts on mode shift had been • Data sources: i-trace, other TfL/DfT reports and projects and CB experience • Assumptions made on differential impacts by time period ( peak and offpeak) and location (Inner and Outer London) • More data needed!

Annual impacts of ST programmes in trips(per £X spend) Trips per annum * For STP, costs include wider infrastructure investment

ST Programmes - Conclusions • All focus on reducing car use. WTP most effective at that and STP the least (half budget on engineering measures). • WTP/PTP generally transfer most people to rail/bus • Area-based schemes, STP, marketing and travel awareness have highest mode shift towards walking & cycling • Mode shift varies significantly by location and time of day • Analysis assumes (a) no change in total trip numbers – OK for STP but probably overestimates shift to other modes for other programmes (b) average distances per trip on all modes

Cost Issues • AC = TC/Demand MC = ∆TC/∆D • Marginal costs are most relevant to this study we want the financial impact of a change in demand • In general MC(bus) is close to AC(bus) whereas MC(rail) is very low until capital investment reqd. • Both average and marginal costs need to include the costs of capital investment • Revenues assumed to be constant (MR=AR) although vary by mode

Costs & Revenues in London Key conclusions: • Buses rarely cover full costs through revenues – scope for some additional demand in off peak • Rail financial performance improved by new users until further capital spend required • Peak period, peak direction demand growth may be financially negative

Structure • Introduction • Least Cost Planning • Applying it to London • Impact of ST programmes • Marginal Costs by mode • ST programme financial impacts • Conclusions

Financial Impacts Purely based on the cost/revenue analysis: • WTP could be financially viable investment, quite apart from economic benefits from congestion relief • STP negative financial impacts because children do not pay bus fares. Extra costs & no revenues • Other programmes recoup between 20% and 80% of their costs in financial gains for TfL

Structure • Introduction • Least Cost Planning • Applying it to London • Impact of ST programmes • Marginal Costs by mode • ST programme financial impacts • Conclusions

Financial conclusions • Most gains in Outer London/off peak where shift from car to rail & bus is financial gain because of spare capacity • In the peaks best to concentrate on shift to walk/cycle • Financial impacts vary widely by mode, time period and location. General conclusions will vary widely in particular case studies

Conclusions • ST programmes clearly generate significant financial returns for TfL – these should be included in the economic case for ST • Financial returns vary widely between programmes and locations – but are significant • Returns are based on existing ST programmes focussed on reducing car use. Could be much higher if overall focus changed to shifting to walk/cycle

Implications • Targeting ST programmes on specific issues could dramatically improve financial and economic case • Local ST programmes could reclaim some funds from bus/rail operators? • ST could focus on switching users to walk/cycle to avoid the need for additional buses?

Thank You Paul Buchanan Paul.buchanan@cbuchanan.co.uk Buchanan Consultores www.cbuchanan.es T 91 781 8293 M 607 94 17 33

Smarter Travel Programmes–Financial impacts for Transport for London