Memorandum from Transport Investigations
Ltd (TIL) (TPT 12)
1. I am the Managing Director of Transport
Investigations Ltd (TIL), a small business providing Revenue Protection
support and consultancy services for rail operators. I have over
40 years experience in the rail industry, joining British Rail
as a graduate management trainee in 1966, and having held a variety
of posts up to privatisation, including responsibility for this
activity in the East Midlands and for the former Southern Region
and Network SouthEast. Since privatisation in 1996 I have undertaken
a variety of consultancy roles, primarily in the fares and ticketing
field. This work has included the development of the Oyster smartcard
system for use on the national rail network for TfL. TIL's current
main clients are TOCs, DLR and TfL, and we also do work in Ireland.
The company has developed unique experience in the revenue protection
field, and this covers staff training and supply, support work
to combat fare evasion, including debt recovery and prosecution,
and the conduct of fraud or ticket-less travel surveys. Although
I have expertise across the area the Committee is investigating,
I intend to focus my contribution on revenue protection in the
rail industry as this is an activity that is often not well understood
and where misconceptions can flourish. The purpose of this note
is to suggest that the legislative framework is generally adequate
for the protection of rail revenue, but that the practices deployed
by operators are often less than optimal. In particular there
is a fairly widespread failure properly to measure the extent
and understand the reasons for fare evasion, and therefore to
take appropriate action. There is, on the National Rail network,
a common belief in the benefits of closing access at stations
and installing automatic ticket gates. Such schemes are costly
and often a substitute for more creative strategies that might
improve customer service and revenue control.
2. Railways and other public transport modes
have traditionally suffered from revenue shrinkage through some
failures to collect revenue and fare evasion. The problem is as
old as the industry and most approaches to it are not novel. Customers
can be described as either motivated to pay or motivated to evade
their fares, and then in turn as active or passive in this regard.
Someone who is active and motivated to pay will always try to
do so, and the ticket sales channels must be optimised to allow
that. A passive person will not make that effort if the purchase
of a ticket is made difficult or the opportunity to pay is not
presented. Likewise a passive person motivated to evade can be
deterred by revenue protection measures, but the active fare evader
will still persist in most circumstances. Research suggests that
80% of the population believe that travelling without a ticket
is a serious offence and one for which others have to pay indirectly.
They therefore fall into the motivated to pay category. For these
people the principal need is to offer effective ticket purchase
facilities and this is the most important feature of any revenue
protection policy, with ticket checking resources aimed primarily
at engaging with the other 20%. These people tend to believe that
fare evasion is a victimless crime. Within this group, those most
readily controlled will be the passive fare evaders, and policies
need to be directed at them. Identifying and targeting of resources
at this group is essential to a cost effective revenue protection
strategy, while customer service benefits, such as ease of access
and walk-off at stations should be preserved for the 80% as far
as possible.
3. Fare evasion is nevertheless a potentially
increasing problem across the rail network. Recent strong growth
in passenger volumes means that the absolute numbers of fare evaders
will tend to increase. Although there are few systematic surveys
of ticket-less travel available and not many of these are in the
public domain, evidence across a variety of systems and operating
areas suggest levels of 3—10% of passenger volume could
be unpaid at present, varying by location, time of day and journey
type. Customer surveys suggest dissatisfaction by fare paying
passengers who see evidence of fraudulent and ticket-less travel,
sometimes believing it to be a higher than it may be in reality.
Die-hard fare evaders are sometimes associated with other anti-social
behaviour, which must be discouraged as it often detracts from
the quality of the journey for others and may depress genuine
travel demand.
4. Fare evasion is the primary form of dishonesty
to affect public transport. The fact that it is widespread is
a relevant public interest factor and must take account of the
general principles covering prosecution for all offences of dishonesty.
The Law in respect of railway fare evasion means that such offences
involve using a variety of statutory measures that date back to
the 1840's. This legal framework is nevertheless still sound and
is based on commonsense values that make it easy to understand
and apply. The Regulation of Railways Acts 1840-1873: "railway"
extends to all railways constructed under the powers of any Act
of Parliament and intended for the conveyance of passengers in
or upon carriages drawn or impelled by the power of steam or by
any other mechanical power; and the word "company" included
the proprietors for the time being of any such railway (Section
21 Railway Regulation Act 1840). References in Sections 54-57
of the British Transport Commission Act 1949 include references
to any successor of the British Railways Board.There is often
a choice between specific legislation relating to the form of
transport, and proceedings under the Theft Act 1978, or Forgery
and Counterfeiting Act 1981.
5. Section 5 of the Regulation of Railways
Act 1889 is usually used for offences of fare evasion on the railways
and for travelling/ attempting to travel on a railway without
having previously paid the fare and with intent to avoid payment
thereof; or having paid the fare for a certain distance, knowingly
and wilfully proceeding by train beyond that distance without
previously paying the additional fare for the additional distance
and with intent to avoid payment thereof; or having failed to
pay the fare, giving in reply to a request from an officer of
a railway company a false name and address. Section 103(a) Railway
Clauses Consolidation Act 1845 covers a person refusing to quit
a carriage on arrival at the point to which he has paid his fare.
Both Section 5 and Section 103(a) are summary only offences. "Intent
to avoid payment" in Section 5 does not mean a dishonest
intent, but an intent to avoid payment of the sum actually due.
There are provisions in bye-laws which cover fare evasion, but
in the vast majority of cases it will be appropriate to use the
Section 5 offence. The Theft Act 1978, especially Sections 2 and
3, can be used where there is evidence of premeditation, or persistence,
or repeat offending, or large loss by the transport authority.
Where tickets have been forged, altered or defaced resulting in
a charge under the Forgery and Counterfeiting Act 1981, the matter
would have to be referred to Crown Prosecution Service or the
Rail Company will need to engage appropriate legal representation
as these are "either or offences" for which any person
accused may elect to trial by jury.
6. TIL is an Appointed Agency for rail companies
to undertake the role of prosecuting offenders where the allegation
is only a summary matter. This practice was started by British
Rail and a number of rail companies also undertake this work in
their own right, or may employ others as agents on their behalf,
and all have the right of audience in the Magistrates Courts.
Persons undertaking these activities are obliged to consider the
Code for Crown Prosecutors and the right of individuals to bring
private prosecutions (with certain exceptions) was included under
the Prosecution of Offences Act, which set up the CPS. It will
review the case in accordance with the tests contained in the
Code for Crown Prosecutors. Should changes be made to the arrangements
for the prosecution of summary offences, it is essential that
the powers of railway prosecuting agencies are preserved. The
process is effective and much less costly than taking up the time
of police, CPS or other legal staff. Ensuring that it can continue
will ease the burden of prosecuting offences for the CPS at the
lower end of the scale and give reassurance to the honest, fare
paying public majority that steps are being taken to combat this
anti-social activity. Consideration might be given to strengthening
legislation as appropriate.
7. Transport legislation includes a series
of offences which will not be prosecuted by the CPS under Section
3(2)(a) Prosecution of Offences Act 1985. These include minor
cases of fare evasion under the Public Service Vehicle Regulations
and similar Acts and also proceedings under Part II of the Aviation
Security Act 1982, all cases of a summary offence being committed
on private property.The principal purposes of transport legislation
are to preserve the safety and comfort of passengers and staff;
to prevent acts of dishonesty by either passengers or staff. Prosecution
for contravention of transport legislation will certainly be in
the public interest: where public safety has been placed at risk;
where passengers or staff have sustained loss, damage or personal
injury; where serious or widespread disruption and inconvenience
has been caused to persons using the transport system. A prosecution
may not be required where there is a technical breach of the law
if:there has been no risk to public safety; and the offence resulted
from a genuine oversight or misunderstanding; and no injury or
loss has been sustained by either passengers or staff. A number
of such cases, initially reported for prosecution, may in practice
be settled out of court with the consequent saving of court time
and an individual's reputation. While existing legislation is
sufficient for railway inspectors to be effective, a significant
part of the loss incurred through fare evasion can be attributed
to identity theft or personation (usually giving a false name
and address). This results in much wasted time and costs coupled
with considerable inconvenience and distress to the innocent,
which could be avoided if legislation were to permit the photographing
of alleged offenders at the time of detection (beyond what is
already available on the widespread CCTV coverage). Legislation
does not, understandably, give inspectors many rights to detain
people. The ability to check the available databases to confirm
identity is also important, and the basic tool here is the Electoral
Register. Although there are many not registered to vote, and
fare evaders can be uncooperative about proving their identity,
as a means of confirming names and addresses this can often be
used to protect the innocent. At present transport agencies do
not have access to the full register for this purpose, only the
edited version offered for commercial use, despite Government
assurances to the contrary.
8. The measurement of the effectiveness
of revenue protection systems is always a difficult area. As reliable
data for most purposes is often scarce to non-existent, much comment
on revenue protection is speculative and anecdotal. Reliable evidence
available to me comes mainly from urban heavy and light rail networks
where there is some systematic study of the problem, but there
is little available on rural and intercity networks. Surveys need
to be continued on a rolling basis using proper sampling techniques,
with results weighted by revenue and fare values, so that a "true"
fare evasion rate can be estimated by routes and time periods
and trends observed. These should be conducted independently to
reflect the revenue protection situation as it is in normal operation,
rather than use the in-house staff to measure their own activity,
with the inevitable bias and diversion of resource that can result.
They can then be used as an ongoing system to prioritise the use
of resources and measure the effectiveness of the system. Monitoring
systems can provide new intelligence and some indication of performance
at least on a route or area basis. Individual staff performance
can be measured by revenue collected and other records of hand-held
device use, suitably filtered for actual staff rosters. Feedback
to staff on their performance and the results of irregularity
reports submitted are seen as essential to encourage motivation.
9. The objective for rail operators is to
secure revenue and reduce fare-evasion by all practicable means,
up to the point where the overall benefit and/or financial return
makes further action inappropriate. The integrity of premium products
needs to be protected through effective on-train ticket inspection.
The security and coherence of the rail passenger business can
be strengthened through ticket inspection and direct contact with
customers. Customers should have the feeling that their honesty
and compliance is respected and valued. Season tickets are a particularly
important product in the commuter market, as the customer pays
money up front and the revenue protection risks of daily payment
are much reduced.
10. Present revenue protection methods include:
on train inspection by conductors and other on-train staff; automatic
ticket gates in use at certain stations; intermittent station
controls by revenue protection teams; enforcement action against
fraudulent travel by revenue inspectors with follow-up processes;
application of Penalty Fares on services in the London and South
East area and certain other conurbations and on some (but not
all) of the light rail systems.
11. Effective revenue protection processes
depend upon: making ticket purchase easy and designing tickets/products
which incentivise ticket purchase through the appropriate sales
channels; expanding the range of ticket purchase channels beyond
the ticket office to ticket vending machines and off-system sales,
and especially through the internet; adopting processes which
reduce the likelihood of fraudulent activity; recognising the
differing issues associated with short and longer distance journeys;
taking actions which discourage ticket-less travel and using enforcement
action where necessary to recover revenue and deter those who
would commit fraud; monitoring revenue at risk while capturing
feedback and system intelligence to continuously improve revenue
protection arrangements. Rail operators need to take a more holistic
approach to revenue protection, employing a variety of processes,
measures and arrangements, tailored to local circumstances and
risks, but within a structured framework.
12. Differing requirements and processes
are needed for the control of long and short distance traffic,
and thus a need to harmonise and balance systems across stations
and trains to protect both customer service standards and revenue.
A complete check on all peak short distance flows may not be cost
effective or practicable, and the revenue protection regime needs
to reflect that, through the use of suitable deterrents. A Penalty
Fares scheme is a suitable deterrent measure in commuter areas
where stations are normally staffed or vending machines provided
and ticket issue is not offered on train. Customers are generally
familiar with the system and many are committed to some form of
long validity term ticket. The purpose of the Penalty is not in
fact to penalise but to set out rules and obligations about pre-travel
payment and to allow a ticket checking regime based on spot checks.
This in turn allows more flexible access arrangements than is
possible with conventional closed stations where complete ticket
checking is attempted. It further allows Light rail and Commuter
services to operate under Driver Only conditions with consequent
reliability, cost and performance benefits as there is also no
need to resource the train or stations for full ticket checking.
As an example of this, surveys conducted in 2002 showed ticket-less
travel rates of 15% among local passengers on long distance trains
in the Wolverhampton—Coventry corridor compared to 6% on
local services. The Centro area Penalty Fares scheme does not
apply to longer distance trains, and this tends to make these
services more attractive to fare evaders. This evidence suggests
that a suitably targeted Penalty Fares regime can halve the fare
evasion rate.
13. Proper processes are also required to
follow up unpaid fares, via debt collection, or for irregularities
to proceed to more serious enforcement such as prosecution under
the legislation described. This also requires inspection staff
to be trained in PACE and SPOE procedures so that they can collect
the proper evidence and it can be suitably presented. Feedback
to staff on this is important to improve their performance. All
revenue protection back-office and debt recovery/prosecution processes
and related work can be outsourced with the supplier taking some
of the risk, and thus no net additional costs. While there has
to be a formal process for appeals on Penalty Fares, derived from
the legislation, there is less consistency in the other procedures.
There is always a balance to be struck between customer service,
deterring genuine fare evasion and maximising revenue. Experience
already shows that yield managed train specific tickets generate
a large volume of unpaid fares notices when passengers use the
wrong train, with potentially adverse customer service consequences.
These must also be processed properly.
14. The re-use or re-cycling of open or
long-dated tickets is considered to be a significant revenue risk,
so the system must ensure they are cancelled. On-train staff must
be provided with suitable devices to cancel tickets which carry
some information about the individual and date (such equipment
is readily available but often not used). Misuse of this kind
is otherwise difficult to detect but some anecdotal evidence for
it gathered from informal sources suggests that it may be the
most significant risk on longer distance services. Day of travel
validity only should apply on tickets for journeys of < c50
miles with exceptions for known shorter distance stay away markets
such as airports. This is normal practice on urban systems and
throughout the London area. Rail operators can take advantage
of the "invisible" security arrangements associated
with new ticketing systems, while exploiting new technologies
such as Print at Home and Mobile Phone displays with some care.
15. Revenue protection on many longer distance
and rural services is left largely to conductors (train managers).
Evidence suggests that train conductors may develop their own
internal targets or norms for revenue collected and do not breach
them. Full ticket checks are often carried out on the first leg
of a journey, but can be spasmodic thereafter. Control of the
train doors by conductors regularly inhibits serious revenue protection
activity, particularly where station stops are frequent, and where
such staff are provided on suburban services they do little useful
revenue control or customer service work. Situations have also
been allowed to develop that are difficult for on train staff
to handle, with heavy flows for short journeys and a lot of revenue
between staffed stations is being collected on train. Where ticket
offices and other station-based ticket issue facilities are provided
no discounts should be available on train, as this otherwise encourages
a "pay-when-challenged" culture. Where Penalty Fares
are not in force the rail National Conditions of Carriage address
this and standard fares should apply, and the fact they are often
not has allowed a situation to develop that can overwhelm on train
resources, and lead to lost revenue.
16. One current issue in London is the extension
to TOCs of the TfL Oyster Pay-as-you-Go (PAYG) system. One of
the primary reasons advanced for their reluctance is a perceived
revenue protection risk in an environment with a number of open
stations, in contrast to the gated network of the Underground.
The problem starts with the TOCs own lack of understanding of
their revenue control risks because so little reliable survey
work has been undertaken as to the extent and reasons for fare
evasion. While there is some evidence from surveys in the inner
London area that fare evasion rates can be high, this can be attributed
to ticket purchase arrangements and a lax enforcement regime.
The reality, as evidence from the existing PAYG operation can
confirm, is that the system can improve rather then worsen revenue
control because ticket purchase is simplified. While the TOCs
have invested in ticket gates at busier stations in the London
area this has tended to concentrate resources at those stations
and to foster a belief that such equipment is essential to their
revenue control strategy. This approach has been encouraged by
the DfT in the franchise bidding process, where installation of
ticket gates is called for.
17. Some local station controls will assist
revenue protection on the national rail network, including the
ticket gates at a number of stations, but this will only impact
on short distance travel. Ticket gates only protect a minimum
fare and can encourage short booking to circumvent them. The technology
does not properly address time or specific train restrictions,
and does not deal with length of journey, discount entitlement
or class of travel. There is a particular need to check discount
entitlement, especially Railcards, so supplementary or on train
checks are still necessary. Gates do not address the forms of
fraud commonly found on longer distance trains such as travel
on an incorrect service, railcard misuse, transferred or re-use
of tickets, and out-of-class or over-distance travel. Claims that
ticket gates improve security and reduce crime and vandalism at
stations are unproven. They may displace such activity to outside
the paid area or to other stations, and any measured improvement
is more likely to be associated with the provision of more visible
staff or equipment such as CCTV. Modern ticket styles and time/
train restrictions, not to mention luggage etc, do not fit well
with gates, and many tickets remain outside the scope of automatic
operation, despite the replacement of on-train issues by the latest
mobile machine with magnetic stripe tickets. The magnetic ticket
technology now in use was not designed for national rail revenue
control purposes and does not necessarily conduct correct checks
on long distance tickets or visually cancel tickets. Manually
controlled gates will be much used and come to dominate and undermine
the whole control principle. This can already be observed at a
number of stations, where the manual gate facility is usually
under pressure, is often a cause of poor customer service and
provides only a cursory ticket check.
18. As there are no reliable estimates of
fare evasion or ticket-less travel, the financial justification
for these schemes is not self-evident. Where a proper survey of
the level and nature of ticket-less travel has been undertaken,
it will be possible better to assess the case for the implementation
of any automatic ticket gate schemes, as these represent a substantial
investment and have significant ongoing costs. Evidence that such
equipment is guaranteed to reduce ticket-less travel is open to
debate. It is inappropriate to extrapolate any early trends onto
all the station's revenue to show the assumed benefit from gating.
In reality revenue may not in fact change substantially in the
longer term, and in a comparison of the revenue trends at gated
and un-gated stations it can be difficult to identify significant
differences. Much of the revenue generated at these stations is
likely to be the mopping up of local fares that are not being
adequately controlled on train, and there is no benefit to the
longer distance business. Recent surveys in the London area suggest
that gates can reduce local ticket-less travel by 50% but do not
eliminate it. The near fully gated system on the London Underground
still has a residual 3% evasion rate.
19. The successful adaptation of ticket
gates to deal effectively with other ticket media such as mobile
phones or paper bar-code recognition is still unproven at this
stage, which is a cause of some concern as these are seen as essential
developments in distribution that existing and new gating schemes
introduced by a number of TOCs may not be equipped to deal with.
Alternatively the process of upgrades may prove costly or difficult
to progress. This may inhibit the use of new distribution channels
which do not create tickets that conform to current magnetic (or
proposed smartcard) standards. Any moves towards more yield management
systems that specify which train must be used are not well supported
by gate technology or common access control. Some TOCs may be
reluctant to handle more customers through manual gates because
of ticket medium compatibility problems or the ability of gate
software to make correct validity assessments on magnetic tickets.
There is likely therefore to be a better case to be made for investment
in people on train and improved staff performance than in this
sort of equipment. At present there is a tendency among heavy
rail operators to invest quite heavily in enforcement through
technology that is not necessarily appropriate to their business
while neglecting to spend money on staff and their training and
development in revenue protection work. This also results in the
not unusual spectacle of expensive ticket gates, which cannot
be used in unattended or unsupervised mode, left open for lack
of staff or inadequately manned by contract personnel.
Richard Malins
March 2007
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