Analysis: Labour says its proposed $20 a week cap on public transport fares would cost around $65 million a year, the Taxpayers’ Union puts it maybe three times higher and National stretches it to a full $1.6 billion.
The immediate attempts to unpick the Labour policy might suggest it is seen as a potential vote puller, and the critics have used gaps in Labour’s announcement to slam its mathematics and political ethics.
In part, Labour has itself to blame. Its announcement package and press conference did not sufficiently explain how its $65m total has been arrived at.
Transport spokesperson Tangi Utikere and leader Chris Hipkins repeatedly said they were confident in their estimate and that it was based on modelling done in 2023 by Auckland Transport, extrapolated across the country by Labour.
Utikere correctly said the AT modelling, which included a look at the $20 a week cap that Labour has settled on, predicted a 6 percent increase in patronage resulting from the capped fares. A cheaper weekly deal attracting more paying bums on seats.
But only in passing did he point out the $65m costing is a net figure: that is, there would be a gross cost to the Crown from its National Land Transport Fund that is higher than that but it would be offset by substantial sums coming into the transport operators from the greater numbers of paying passengers.
Newsroom understands Labour’s gross spend figure is thought to be around $91m a year. It expects about $26m of extra passenger revenue to be offset in the books of the Crown under the mechanisms of central government to local government/transport operator funding arrangements.
For example, that Auckland Transport modelling three years ago of a $20 weekly fare cap foresaw a gross farebox reduction of $16.4m a year but additional revenue from patronage growth of $12.9m, putting its actual cost at $3.5m.
An AT paper on the fare cap – its preferred level then was higher, at $29 a week – says its “pricing squad’s” analysis was that “the reduction in revenue that will arise from introducing the cap will be more than recovered by additional revenue from earlier, new and increased travel activity up to the cap level that would have been absent had the initiative not been introduced.”
Labour has grabbed these numbers, and the conclusion, and broadened them beyond Auckland to include Wellington and Christchurch at the $20 cap, and Dunedin and the regions at $10 a week, expecting the upside of new revenues to partially offset the Crown subsidy.
Its policy expects there to be 10 million more trips a year in the three main centres and claims that increase is in line with NZ Transport Agency analysis of the post-Covid period where half-price public transport was in place.
Its final $65m figure remains opaque, which seems to have provoked the policy’s critics to do their own maths.
The Taxpayers Union said its total cost estimate of between $141m and $182m was based on its attempt, from publicly available figures, to define the share of total public transport users who spent more than $20 weekly and how many in each region would benefit. It made no mention of any offsetting extra revenue, as Auckland Transport had done in 2023, which Labour had adopted.
National’s number, from campaign chair Simeon Brown, misinterpreted Labour’s factual note that 1.3 million Kiwis use public transport across a year to suggest the party was promising to save 1.3m people its average projected saving of $25 a week. He put 2 and 2 together, or 1.3m x 25, and bingo, had a politically unsavoury billion-plus weapon.
Labour had not said all 1.3 million people who use public transport across a given year would benefit at all, still less by the average saving amount. The total fare revenue a year for the country is $330m, less than a quarter of Brown’s total suggested cost of $1.6b.
Brown could, with a little political contortion, blame Labour’s ‘Fare Cap Q&A’ document issued on Wednesday. Under a sub-heading of ‘How many people could benefit’ it says “Everyone who uses public transport could benefit,” and then casually notes “Approximately 1.36m New Zealanders over the age of 15 use public transport every year.”
A political opponent in a hurry could well be misled, as could a casual voter.
The numbers of current and potential new passengers who would qualify for free travel after passing the $20 a week value of the cap remains unclear, but would appear to be a fraction of the total user base nationwide across the year.
Around 6900 people a week benefit from Auckland Transport’s existing $50 fare cap, so the lower $20 threshold could be expected to include many more in the City of Sails. Then other metropolitan and regional cap users would be added on top of that.
Auckland Transport says: “Since July 2024, more than 107,000 AT HOP cards have hit the $50 weekly cap threshold at least once, with an average of 6,900 Aucklanders benefiting each week and many more Aucklanders reaching the cap from time-to-time, depending on their travel patterns.”
Hipkins said on Wednesday “hundreds of thousands” would benefit from the fare cap policy.
Labour’s workings assume the gross cost of its $20 cap for Auckland, which has 56 percent of public transport boardings and 63 percent of fare revenue, would be $59m, with additional revenue of $19m, netting off to $40m.
As an example of transport funding offsets, Auckland’s new City Rail Link is expected to open within months. Auckland Council expects its total extra operating cost for a year to be $63m, with a $28m subsidy from the NZ Transport Agency, and extra ticketing revenues from rising patronage to total $9m, leaving the council to find $26m.
At the policy launch, Hipkins parried questions about the overall cost, saying it was less than 1 percent of the National Land Transport Fund and when its next three yearly review occurred at the end of this year Labour would make the fare cap a priority. “Everything else gets reassessed against that.”
He said a change “at the absolute margins, on timing” to one of National’s big-ticket Roads of National Significance could be used to make funds available for the fare cap.
Labour has not publicly issued its detailed fare cap calculations for this policy, but has set a start date of July 1, 2027, partly because technology in Wellington needs time to be implemented.
It applies to bus and train rides, and some inner city ferries but not to Waiheke in Auckland. It excludes inter-city services and the Cook Strait ferries.
While Labour has used Auckland Transport modelling, no such analysis has been done in the Christchurch market, which like Auckland has existing concession fares and a fare cap operating. Labour’s policy suggested its cap would save Cantabrian regular users around $10 each a week.
Canterbury Regional Council chair Dr Deon Swiggs tells Newsroom his organisation has not undertaken specific modelling on the impact of a $20 fare cap and cannot provide a cost estimate.
“We do not have an estimate for farebox revenue, patronage growth, or the operating cost of such a policy in Canterbury.
“In general terms, lower fares can increase public transport demand and reduce fare revenue unless that revenue is replaced through another funding source.
“The actual impact would depend on the detailed policy settings, including how the cap would apply, whether it would sit alongside existing concessions, and how any revenue shortfall or extra operating costs would be funded.”
While Hipkins and Utikere say our public transport system nationwide has sufficient capacity for growth stimulated by their fare cap, Swiggs says parts of the Metro network already experience capacity pressure at peak times.
“If a fare cap materially increased demand, additional buses, drivers and operating funding may be needed to maintain service levels.”
Labour says it will look at additional funding for more services as well as the cost-of-living relief it says its fare cap will provide.
“Look at our record in government,” Hipkins said at the launch. “We did invest heavily, alongside local government, in improving public transport’s reliability and capacity.”
