Government got advice on hiking bus and train fares and reducing subsidy

Transport Minister Simeon Brown. Photo / Mark Mitchell

Transport Minister Simeon Brown received very early advice on hiking the contribution passengers make to public transport costs to 50% from about 10-30% now, meaning higher fares. He’s also looking at increasing the amount of money that can be raised from advertising on public transport.

The advice was received by Brown as he put together the Government Policy Statement (GPS) on Land Transport, which is effectively a long-term transport budget.

Currently, passenger fares on public transport are subsidised by central government and local government through money mainly raised by fuel taxes and rates. The remainder, paid by passengers in fares, is known as “farebox recovery”

Under the last Government, passengers paid for less and less of the total cost of public transport, mainly thanks to central government picking up more and more of the tab. This was partly in response to needing to underwrite public transport through the pandemic and partly through a deliberate policy of trying to encourage greater patronage.

A briefing from officials to Brown noted that the National Land Transport Fund, which spends money mainly raised by fuel taxes and road user charges, would save “between $10 and $20 million per annum” if the amount of farebox recovery was hiked by 10%.

Officials gave Brown an option for saving even more money which would “require NZTA to reinstate the 50% farebox recovery ratio policy”.

This policy was established in 2010 and asked councils who ran public transport services to hit a target of 50% farebox recovery over six years (two National Land Transport Programme cycles).

“While limited policy work has been undertaken and we have not engaged with either NZTA or PTAs [councils] on reinstating the policy, we consider that regions would again need at least two NLTP cycles to build towards the target, as most regions are well below 30% farebox revenue”.

Officials said it would not be possible to bring back the 50% target for this year’s transport plan.

Asked about the advice, Brown noted that “farebox recovery from public transport fares was able to fund 40% of public transport in 2016/17.

“Yet in 2022/23 it funded closer to 10% of the total cost,” he said.

Brown described that change as “unsustainable”.

“It is the Government’s expectations that the private share of funding for public transport increases as outlined in the Government Policy Statement on land transport,” Brown said.

He said NZTA was working on policy for improving farebox recovery - including ideas that did not involve hiking fares. Brown said ideas included “increased use of advertising and other commercial arrangements within the public transport network”.

Green Party Transport Spokeswoman Julie Anne Genter told the Herald the policy was “self-defeating”.

“If you make public transport more affordable, more people will use it and that is better for the whole public transport network.”

She said raising fares risked triggering a “public transport death spiral” by discouraging patronage and therefore further investment.

“If you target raising fares you end up with fewer people using the service,” Genter said.

Councils are already feeling the pinch from the plan. Earlier this year, Auckland Council’s Transport and Infrastructure committee warned fares would likely rise as a result of the plan, while earlier this month Greater Wellington Regional Council released an estimate warning the Government’s plan would lead to a $134m shortfall in the council’s transport plans over the next three years.

Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.