Opinion & Commentary

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Student Bus Subsidy Has Phantom Menace

Jennifer Buckingham | Newcastle Herald | 11 November 2008

The NSW state government’s free student transport scheme is yet again under the gun. Previous inquiries into the School Student Transport Scheme by the Public Accounts Committee in 1993 and 2002 resulted in no action, and unsurprisingly the same problems identified 15 years ago remain in the system today.

The main issue for the government is the escalating cost. Funding for the scheme has increased by more than 40% in real terms since 1990, while student numbers have increased by only about 7% over the same period. Scrutiny of government spending is always welcome, but in this case, the razor gang should proceed with caution.

Transport subsidies began as a way to make sure rural kids could get to school. In the 1960s, free travel was extended to city kids and the eligibility conditions have gradually been relaxed since then. The only criterion now is that students must live more than 1.6 km from their school to be eligible.

The main factor contributing to the cost blow-out is that more students are using free travel, and they are travelling longer distances. The inclusion of private school students in the scheme has added to the costs but the relaxing of zoning of public schools has also played a significant role. Although two thirds of students in NSW attend public schools, a large number of them do not go to the closest public school to home.

The generosity of the NSW transport subsidy has been the subject of much criticism. The president of the NSW Secondary Principals Council suggests that the costs of the scheme could be reduced by limiting it to travel to the nearest public school. The NSW Greens have had this idea as policy for several years. But it is not always about the money. According to the NSW Greens education spokesman, John Kaye, the transport subsidy is a ‘recipe for educational segregation’ because it facilitates school choice.

To the government’s credit, there has been no suggestion that the subsidy be entirely scrapped, and with good reason. Student transport subsidies underpin the government’s commitment to giving parents choice in education, not just between public and private schools, but also within the public sector.

Limiting the subsidy to the closest public school is unfair and administratively problematic. The closest public school is not always the public school that a student is zoned for, which immediately complicates matters. Furthermore, allowances would have to be made for students who go to special needs schools or selective schools. What if the closest school to home happens to be a private school? Restricting subsidies to travel to public schools which may be further away becomes more about ideology than cost-cutting. These are just the obvious exceptions to what seems like a straightforward rule.

It is also likely that there would be other flow on effects that have to be much more carefully considered. For instance, it’s hard to imagine the Greens would be pleased if restricting free student travel on mass transport resulted in more cars on the road.

Before looking at ways to exclude students from access to subsidised travel, it should be considered whether the current scheme is as efficient as possible. Both the 1993 and 2002 inquiries indicate that it is not, and that one of the biggest problems is the gap between what the government pays for and the number of students who actually use free transport on a regular basis. Each year, a large number of students apply for and receive a free travel pass but do not use it – so called ‘phantom riders’. The government pays for these passes regardless, and the 2002 report estimated that the actual usage rate of the passes could be as low as 50%. The Public Accounts Committee recommended on both occasions that better auditing and tracking would create significant savings.

Another way to address the usage problem and to benefit the bottom line is to ask parents to pay a contribution to the cost of the travel pass. The 1993 inquiry recommended a charge of $10 per child per term. Parents in Victoria pay $400 per year. Many parents in NSW would balk at that sum, but a transport levy need not be that high to have an effect on costs. Even a nominal amount would be a disincentive for parents to apply for a free travel pass for each child ‘just in case’, with no real intention of using it.

There is a good case for introducing an element of user pays into the student transport scheme, but it must be done cautiously and apply indiscriminately. The levy must be large enough to inhibit phantom riders, but small enough to allow school choice.

Jennifer Buckingham is a research fellow at The Centre for Independent Studies.