Evidence on Performance

Herts Smart Scheme

In 1990 on behalf of the 10 district councils of Hertfordshire, England, the County Council administered the Herts Smart Scheme, beginning with concessionary fares for the elderly and disabled. Appeals by the four major bus companies in Hertfordshire to the Minister for Transport ended with them being reimbursed for the concessionary fares scheme.

Due to the fact that the operators should not be any worse off from the scheme, it is difficult to establish a method for reimbursement. In the end, the Minister for Transport found in favour of the operators, who said they were under paid and worse off because of the new scheme, and introduced a level of reimbursement that neither operators nor authorities were happy with .

To overcome this problem the operators and local authorities opted to introduce a Smart Card. The Smart Card would be used to record the level of travel being made on concessionary fares, allowing the reimbursement to be calculated accurately. This system satisfied both operators and Councils.

In 1997 a partnership was formed between Hertfordshire County Council, PCL and Arriva.Smart. Smart card readers were placed on a fleet of Arriva buses, serving the West Hertfordshire region, and their readers at the depot were upgraded.

The first Smart Concessionary Cards on offer were SaverCards. These were issued in December 1997 to over 3,000 school pupils in over 20 secondary schools and entitled them to concessionary travel to school in the Three Rivers District, Watford and Welwyn Hatfield. In April 1998 over 4,500 elderly and disabled people were issued with SaverCards, allowing them half fare travel in the same areas.

The initial plan was to run this pilot scheme for 18 months, but it was evident that there was huge potential for the scheme and it even received two national awards, The Institute of Transport Management Award for Excellence, awarded by the transport industry for the scheme's contribution to advancing the industry's technical standards, was awarded to the Herts Smart Scheme in February 1999, and The Society of Council IT managers (SOCATIM) gave the Herts Smart Scheme their Local Government IT excellence award in 1998.  The scheme proved that by using the Smart Cards accurate levels of reimbursement could be calculated to run a successful system. The Council have continued to expand the scheme since 1999, to try and include other major operators in Hertfordshire.

The Integrated Transport SmartCard Organisation (ITSO) was set up by the Public Transport Executives of areas such as Manchester, London and Birmingham with a view to utilising the potential of Smart Cards. To do this they invited the Hertfordshire County Council to join them and to ensure that all the transport smart cards were compatible on all members' systems i.e. using a Herts Smart Scheme Card will allow travel throughout the country. This would ease travel over several member administrative boundaries with the use of just one card.

The Hertfordshire Council has now expanded its scheme to include many different concessions such as the Scholars Entitled Smart Card , Smart SaverCard , North Herts College Card , Elderly & Disabled Cards , the "Travel to Work" Card and the School Meals/Travel Combination Card .

A before and after study of actual travel patterns and public transport use took place in the Tyne and Wear region in the 90's (Balcombe & Astrop, 1995). Tyne and Wear is a large conurbation in the north-east of England and has an extensive bus, Metro and rail network. In 1990, the before study, there was a reconstructive interview designed to elicit from people how their use of public transport might have been different under various fare regimes. This involved hypothetical questions applied to real journeys. For each regime, the fares for every journey, over a seven-day trial, were calculated, and people were asked which, if any of them they would have foregone had they been required to pay these fares.

The fare regimes used in the reconstructive interviews are listed below:

A - Flat fare (10p single fare, 15p transfare – which allows transfers between public transport modes)

B - Half fare adults

C - Full adult fares, which, for most operators, approximated to those indicated by the graduated fare scale shown in the table below:

Table 8 - 1990 Journey Fares

Source: Balcombe & Astrop (1995)

The after survey took place in March/April 1993, allowing for a one year adjustment to the travel patterns. The study design was very much like its predecessor to ensure compatibility with the necessary changes made. Results were collected by use of travel diaries, and those completing the diaries were invited to take part in reconstructive interviews.

The fare regimes used in the 1993 reconstructive interviews are listed below:

A – 3-step fare scale (low):

15 p for journeys up to 5km

20p for journeys between 5km and 10km

30p for journeys over 10km

B - Flat Fare:

20p single fare

25p transfare

C - 3-step fare scale (high):

20 p for journeys up to 5km

30p for journeys between 5km and 10km

50p for journeys over 10km

D - Half adult fares

E - Full adult fares which, for most operators, approximated to those in the table below:

Table 9 - 1993 Journey Fares

Source: Balcombe & Astrop (1995)

Table 10 - Changes in trip rates for different journey purposes (mean trips per person per week)

Source: Balcombe & Astrop (1995)

Greater analysis for these results can be found in the ‘Responses to Concessionary Fare Changes in Tyne and Wear' by R J Balcombe and A J Astrop (1995).

The results showed that when the distribution of trip rates are plotted on a cumulative basis, there is a visible shift towards less frequent trip making following the removal of free concessions. Pass holders making no transport trips in the survey week rose from 15.6% to 19.0%. 51% of people made at least five trips in 1993 but in 1990 there were 55% making at least seven trips a week. The shift, measured in trips per week, was substantially greater for more frequent travellers, who would have been most affected financially by the introduction of fares, but smaller for less frequent travellers. There appears to be a stronger tendency in 1993 to follow outward with return trips.

Results suggest that when a reduced fare is imposed instead of free travel, people's use of public transport was inhibited for essential purposes less than those for optional trips. There was very little difference in trip lengths between the two years. Multi-stage journeys rose from 7% in 1990 to almost 9% in 1993.

The conclusions reached were that the research resulted in a higher estimate of the generation factor (comparing free and full fare travel) for elderly people than any other study. The value estimated for Tyne and Wear was 104% ± 20%, which is substantially more than the previous highest of 83% by Hopkin (1986). This could be due to Tyne and Wear representing the extreme end of the type of places and conditions included in Hopkin's study.

Consideration may need to be taken upon the affect of outside factors during the study other than that of introducing concessionary fares. One of these factors is that of inflation, that the 1993 values should be adjusted to 1990 prices when making forecasts.

Impacts on demand

The impact on demand depends upon the initial take up of a concessionary scheme, the amount of discount on offer, the cost of the concessionary pass and the current levels of public transport fares. In the UK the uptake of concessionary schemes varies by area and type of scheme on offer. The National Travel Survey 1999/2001 update gave an average take-up of 49% in Great Britain as a whole and in the London Boroughs 79% (DfT, 2002). The number of trips per pass holder also varies by scheme type, with for example higher trip rates for schemes which charge for passes than for passes which are free. This is because travellers are only likely to pay for a pass if they can be sure they will recoup the cost in full.

Evidence on the trip generation associated with concessionary schemes taken from Balcombe et al. (1998) has been presented earlier. As part of the same study additional data from four areas who hadn't implemented changes to their concessionary schemes was added and used to identify underlying trend in demand. The fare elasticities from the resultant models inferred fare elasticities that ranged from -0.04 to -0.27 for concessionary fares and which compared to full fare elasticities ranging from -0.27 to -1.03.

An early publication (Carulo & Roess, 1974) described 90 schemes offering reduced fares for senior citizens (old age pensioners), 54 of which furnished information on ridership and revenue and the success of the schemes was limited. Reduced fares often had little or no effect on the number of elderly passengers in 16 of the cases and in a further 2 saw ridership growth of less than 10%. The success in the other cases was hampered by the fact that the relationship was inelastic and that the reductions in fares actually led to a loss of revenue for the bus services.

When London implemented free off-peak travel to pensioners (Fairhurst, 1996), it saw an increase in patronage of between 10% and 50% depending upon economic status and sex (Table 11). This shows a very high elasticity but as you would expect produces no revenue at all and so decreases total revenue. This large increase is due to the fact that retired people have very little to spend on transport but do have plenty of spare time to take advantage of this offer.

Table 11 Estimates of the Percentage Increase in the Number of Trips as a Result of the Free Scheme in London for Buses

Source: Fairhurst (1996)

A before and after study for South Yorkshire PTE (SDG, 1991) examined the effect of an increase in the concessionary flat fare from 10p to 20p. The study found a 13% reduction in demand by pass holders, with shopping trips in particular being badly effected, reducing by 21%.

In summary, it seems that fare reductions for the elderly will not generate enough extra demand to outweigh the loss in revenue because of the inelastic nature of demand. Therefore it can be considered that this is not a wise policy to implement if the objective is to improve the financial position of the transit, unless the peak demand can be reduced to such an extent that cost saving are made. But if the objective is to provide a welfare service with little regard for the effect on revenue it can be considered to be effective.  

Table 14 - Concessionary Fares: Case Study Results

Table 15 - Concessionary Fares: Contribution to alleviation of key problems