A comparative financial analysis of the automobile and public transportation in London

Abstract

Automobile systems and public transportation are often organized separately within government structure inhibiting a comparative analysis between the two modes. Further complicating the comparison is that in public transportation systems, not only is infrastructure but vehicles and operators are usually provided by government or contracted private sector partners, while in the automobile system, infrastructure is normally government owned but costs of vehicle ownership and operation and parking are private. However, these private actions have enormous costs. In total in FY 2004-05 in London, private automobile spending was over 14 times greater than public automobile spending, as public spending on the automobile was about £1.4 billion while private spending on the automobile was about £20.9 billion. For public transportation, public spending was about £2.0 billion while private spending was about £2.3 billion. On a normalized basis, when not including time costs, the automobile was 3.7 times more expensive than public transportation on a per trip basis, and 2.0 times more expensive on a per passenger-kilometer basis. When including time costs and segmenting trips by travel zone, we found that public transportation enjoys an advantage for all travel zone combinations, with the advantage being the greatest for trips between outer London and inner London and for trips within inner London. At the household level, we estimated that households well-served by public transportation spend 15 to 18 percent less out-of-pocket on transportation than the average London household, although these savings are outweighed by additional time costs. From our findings in this research, we see significant opportunity for the London region to achieve a more cost-efficient transportation system. First, measures should be pursued to increase the share of variable automobile costs as a percentage of total costs. Policy such as pay-as-you-drive insurance and road pricing or policy inducing greater awareness of parking costs would help shift the burden. Second, public authorities should consider the private expenditures on automobiles and parking, as they are relatively large compared to the public spending on automobiles, when allocating resources between transportation modes.