Select Committee on Transport Written Evidence


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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