London Councils’ Transport and
Environment Committee
Freedom Pass – 5 Year Deal:
Addendum Report (Revised)
Report by:
Nick Lester
Date:
12 February 2009
Contact
Officer:
Nick Lester
Telephone:
020 7934 9905
Item no: 6
Job title:
Corporate Director of Services
Email:
[email protected]
Summary
This report updates TEC members on two further issues concerning the
proposed 5 year deal with TfL over Freedom Pass
Recommendations
That Members note this report.
Background
Since despatch of the main committee report two further developments have taken place which
Members need to take into account in reaching any conclusions on the proposed 5 year deal on
Freedom Pass.
First, TfL have agreed to reduce their assumptions on inflation for option 2 by ¼%. This has the
effect of reducing the cap in option 2, but has no impact on option 1. The revised cap figures
are shown below:
2010/11
Previous cap figure (£m)
Revised cap figure (£m)
251.6
251.0
2011/12
263.0
261.7
2012/13
277.5
275.5
2013/14
292.8
290.0
Addendum to Freedom Pass Report 5 Year Deal (Revised)
Agenda Item 6, Page 1
London Council’s TEC - 12 February 2009
2014/15
309.1
305.3
This revised cap moves the ‘crossover’ point, where option 2 becomes cheaper than option 1 to
a combination of average annual usage growth of 1.5% and average inflation of 2.88%, or
average annual usage growth of 2.5% and average inflation of 1.88%.
Second, London Councils commissioned Steer Davis Gleave (SDG) to give a brief view on TfL’s
assumptions as part of the proposals. In view of the time short time available SDG were asked
to look at two issues in particular:


Inflation assumptions
Usage assumptions
In addition, SDG looked at

Effect of opening up the AM peak
Their report is attached as an appendix to this report.
On inflation, SDG considered a median option of 1.5% for 2010/11 and 2.5% thereafter. TfL
has now assumed 1.75% for 2010/11 and 2.75% thereafter. These assumptions are close. It
is, in any case, for reasons spelled out in the main report, very difficult to make reliable inflation
predictions over the medium term at present.
On usage, SDG’s median forecast is for 2.5% in 2010/11 and 2011/12 and 1.5% thereafter.
TfL’s assumptions built into option 2 are for a 1.5% growth in every year. This compares with
current annual usage growth of 4.7%. Officers believe that the SDG assumptions on growth are
cautious, but, even if not, their conclusions, if anything, make option 2 more attractive as the cap
would be reached sooner.
On the AM peak, SDG estimate that £6m of travel annually would transfer from post-9am to pre9am, compared to TfL’s estimate of £2m. This change is sufficient to make option 1 more
attractive than option 2 over 5 years, because it reduces the cost of both core schemes by £4m
annually and makes it less likely to hit the option 2 cap. SDG has come to this conclusion
based solely on experience in Greater Manchester which has allowed elderly people to travel
free during the morning peak for many years. Officers have questioned just how transferable
this experience is on the following grounds:



People’s travel habits change relatively slowly and nobody would expect a big change
from post-9am to pre-9am very quickly
The level of overcrowding on London’s public transport during the morning peak is
considerably greater than in Manchester and this would act as a deterrence to those
voluntarily changing from post-9am to pre-9am
Where Freedom Pass holders currently need to travel pre-9am, very many will already
pay a fare for this
Officers have asked SDG to clarify their views and SDG have responded as follows:
“We used the GMPTE figure of the use pre-0900 to consider the reliability of TfL’s
estimate of the cost of the scheme. This concluded that with 4.5% of total demand in the
period, the figure of ~£10m was reasonable (para 3.2).
Addendum to Freedom Pass Report 5 Year Deal (Revised)
Agenda Item 6, Page 2
London Council’s TEC - 12 February 2009
With regard to the time transfer, we used historic TfL/ALG assumptions about the level of
time displacement, which was 2.5% of total concessionary demand. This was a factor in
looking at “additional costs” – including offsetting savings to TfL from having lower peak
demand. In their latest calculations TfL assume that time displacement represents 0.430.87% of demand.
There is evidence from Manchester which relates to effectively imposing a restriction –
free travel became available after 0930, with the (then) 50p flat fare concession retained
for trips before this time. The level of time displacement was less than initially expected,
being estimated at 4% of AM peak trips and 0.3% of total elderly concession trips. There
is clearly a larger financial incentive to delay the time of travel in London, so TfL’s figures
would not be unreasonable in similar circumstances.
However, we are considering the lifting of a restriction, so users will now be indifferent to
the time. I seem to recall “twirlees” as being around in significant numbers when
acceptance was at the discretion of the driver rather than a smartcard reader! There may
be a gradual time shift, as pass holders become more aware of the option, but I suspect
that the level of use amongst this demographic could be high – particularly 0830 to 0900
(after secondary schools start)”.
Although this response says that SDG’s conclusions are not based solely on Greater
Manchester experience, these remain the only figures (other than TfL figures) quoted.
Officers do, therefore, have some doubts about SDG’s forecasts in this area.
Recommendations
Members are invited to take these issues into account when considering their views on the
proposals for a 5 year deal.
Addendum to Freedom Pass Report 5 Year Deal (Revised)
Agenda Item 6, Page 3
London Council’s TEC - 12 February 2009