Transport and prices

Page Last modified 19 Apr 2016

6 min read

Indicator 14 (and 18): Transport price

Current prices encourage the use of the private car rather than public transport. Car transport is much cheaper relative to disposable income and public transport than it was 20 years ago.

Figure 5.2: Real changes in the price of transport, Denmark and Finland

Sources: Statistics Denmark; Department of the Environment, Statistics Finland; Eurostat

Objective
Fair and efficient pricing across modes

Definition
Real change in the price of public transport fares and the private costs of car use in comparison with the growth in real personal disposable income.

The costs of car use include all those that the motorist bears directly (i.e. purchase, maintenance, petrol, oil, tax, and insurance).

Policy and targets

Pricing is a key policy tool for promoting an environment-friendly balance between transport modes and for managing transport demand. Because the environmental effects of transport vary across modes for example, air and road generally have greater environmental impacts than rail and shipping (EEA, 1995) prices should be differentiated accordingly.

Community legislation provides for differentiated motor fuel and freight road-use prices. Tax differentials on motor fuels aim at promoting cleaner fuels, and variable annual road charges (through the Eurovignette Directive (CEC, 1998b)) are higher for the heaviest and most polluting lorries. Some Member States (Austria, Denmark, Germany and Sweden) have different tax levels for motor vehicles depending on fuel consumption or air pollution performance (ECMT, 1999 draft).

However, price changes are only one factor affecting the growth in road traffic: convenience, comfort and security also have a strong influence on individual decisions on whether and how to travel.

Findings

Data is only available for Denmark, the United Kingdom and Finland. Changes in relative prices for these countries are shown in Figures 5.1 and 5.2.

In both the UK and Denmark, the costs of private car transport have remained stable in real terms whilst bus and rail fares have increased. In the UK, bus and rail fares have risen by less than disposable income, whereas in Denmark, bus fares have risen by more than, and rail fares by about the same as, disposable income. In both countries price incentives have shifted markedly towards car use.

The situation in Finland is rather different to that in the United Kingdom and Denmark, and probably in other EU countries. General tax increases in transport as well as the yearly vehicle tax (planned as an interim measure) were introduced in the early 1990s to cover a state budget deficit resulting from the recession. This affected private transport (but not public fares), thereby increasing its price. This, together with the privatisation of public transport in the largest cities, has increased the competitiveness of public transport prices. However, even here the rise in the price of car use has remained below that of public transport since 1986, so again incentives have shifted towards car use.

Box 5.1: Expenditure for personal mobility

The proportion of household expenditure on transport reflects changes in income and consequent changes in lifestyle, as well as price increases. Household expenditure on transport is dominated by the purchase and operation of private cars, and amounted to about 12 % of total expenditure in 1996 (EU average). Such expenditure increased in the 1980s, but declined again in the 1990s. Household expenditure on public transport was less than 3 % in 1996 and has been more or less constant since the 1980s.

In Belgium there has been little change in the proportion of total household income devoted to transport. In Denmark, Germany and the United Kingdom, the proportion has risen, but in France, Ireland and the Netherlands it has fallen. Greece and Portugal have also seen increases in the share of expenditure on transport because of increased vehicle purchase. Car ownership has the fastest EU growth rate in these two countries.

It is the intention in future to develop this sub-indicator into a TERM indicator. This will however require the breakdown of expenditure according to various income groups. This data is currently lacking.

Figure 5.3: Household expenditure on transport as share of total expenditure

Source: Eurostat

Future work

Since 1995 Eurostat has collected harmonised monthly consumer price indices (CPIs) for passenger transport, and it is planned that EU-wide CPIs comparable to the UK and Denmark examples will be available from Eurostat in the mid-term.
Similar data showing absolute rather than relative price levels would help to present overall EU figures for changes in transport price. There will however, be problems of aggregation, relating to differences in purchasing power and transport demand between Member States.

Data Real changes in the price of passenger transport (United Kingdom) Unit: index (base year 1980)
Year	Bus fares	Rail fares	Private car	Disposable income
1980	100.0	100.0	100.0	100.0
1981	98.9	102.2	101.1	99.5
1982	105.0	108.0	98.3	99.2
1983	106.1	109.5	100.4	101.7
1984	103.2	104.8	98.0	105.3
1985	101.5	105.0	96.7	108.9
1986	106.5	108.4	92.1	113.6
1987	108.2	109.5	93.7	117.5
1988	110.3	111.6	93.3	123.7
1989	110.4	113.0	91.4	129.1
1990	106.4	112.2	88.5	133.9
1991	114.6	117.1	89.8	135.9
1992	118.3	121.1	92.4	140.9
1993	121.5	127.6	95.0	145.1
1994	121.7	130.1	95.8	147.0
1995	122.0	131.3	94.4	150.9
1996	123.5	133.0	94.9	154.1
1997	124.1	132.0	96.9	160.0
1998	124.0	133.0	96.7	160.1
Source: Department of the Environment, Transport and the Regions (United Kingdom)

Data Real changes in the price of passenger transport (Denmark) Unit: index (base year 1980)
Year	Bus fares	Rail fares	Private car	Disposable income
1980	100.0	100	100.0	100.0
1981	114.6	105.7	97.5	97.1
1982	120.3	111	99.7	99.2
1983	136.1	115.3	97.5	101.9
1984	148.1	121.1	95.5	106.8
1985	143.4	126.6	94.3	110.9
1986	145.0	129.5	94.2	115.2
1987	145.1	132.3	96.8	115.0
1988	155.8	134.2	96.7	118.9
1989	152.1	138.3	96.6	117.7
1990	150.5	147.8	94.3	118.5
1991	154.7	155.3	97.4	119.3
1992	159.0	160.2	97.9	121.3
1993	161.9	162.7	98.4	124.1
1994	163.9	165.3	100.3	130.3
1995	163.1	168.6	100.6	136.2
1996	163.2	172.3	100.8	140.6
1997	161.2	176	100.4	-
1998	150.1	182.7	100.4	-
Source: Statistics Denmark (transport prices), Eurostat (disposable income)

Data Real changes in the price of passenger transport (Finland) Unit: index (base year 1980)
	Bus fare	Rail fares	Private car	Disposable income
1980	100	100	100	100
1981	104.7	105.7	106.1	103.9
1982	108.5	111	109.2	108.4
1983	113.5	115.3	114.2	113.8
1984	117.1	121.1	117.6	118.8
1985	123.4	126.6	120.1	124.3
1986	124.1	129.5	115.7	129.2
1987	127.9	132.3	119.5	133.6
1988	132.6	134.2	123.8	138.3
1989	140.7	138.3	128.2	144.8
1990	149.7	147.8	135.5	151.8
1991	154.6	155.3	140.3	157.3
1992	152.8	160.2	142	159
1993	157.5	162.7	150.7	159.6
1994	158.9	165.3	149.8	161.6
1995	162.4	168.6	155.2	166
1996	164.8	172.3	163.4	170.2
1997	168.2	176	164	172.7
1998	173	182.7	164.1	176.7
Source: Statistics Finland