Select Committee on Environment, Transport and Regional Affairs Appendices to the Minutes of Evidence

Memorandum by Plymouth City Council (IT 7)


  1. A reprint of an article from Transport Reviews of July 1998 is attached[5] It starts from the premise that the bus market (in most places) is in the post competitive phase. The White Paper does not seem to start from this position.

  2. The paper notes the major "push" and "pull" variables of bus use, all of which are mentioned in the White Paper but with little detailed or timed means of delivering changes to these variables.

  3. The FDR increase is untargeted, as there is no means of ensuring that it does not leak into extra profit. We are not anti-profit. Profit is needed to, among other things, reinvest in vehicles. However, the unregulated market which is now a series of local monopolies and comfortable duopolies can seek to maximise profit without maximising passengers. The objectives of the White Paper will not automatically be delivered by the large group operators pursuing their profit objective.

  4. The White Paper touches on the issue of public transport fares at many points. The consultation paper before the White Paper stated that there was a 22 per cent real increase in fares since deregulation.

    (4.118)  the price signals to be correct

    (5.22)  discounted fares in Green Staff Travel Plans

    (3.51)  Tickets which are easy to get, offer value for money, flexibility and make changing easy can encourage more people to use public transport

    (3.52)  no obligation on bus operators to have "through tickets". Wish to see more "travelcard" schemes

    (3.54)  Outside London fare structures complex. Time wasted at bus stops. Pay twice if change bus

    (3.55)  Local powers proposed to ensure operators participate in multi-operator tickets, but silent on timing and method

    (4.17)  Rail fares regulated to RPI minus 1 per cent but complex fares structures and no national framework

    (4.18)  "absence of controls" on rail fares regretted

    (4.81)  Social Exclusion of pensioners to be reduced by national minimum 50 per cent concession scheme. This will need legislation and local authorities will still be able to offer more generous schemes. The City Councils scheme is more generous. The scheme for over 80s is 100 per cent discount, for poorer pensioners 71.6 per cent and other pensioners 64 per cent. However the flat fare scheme for "other" pensioners on the lowest fare (shortest journeys) return and single drops below 50 per cent. It is necessary to ensure that legislation does not frustrate flat fare schemes offering over 50 per cent nett.

    (4.82)  needs of "less well off" recognised in relation to bus fares. Voluntary examples of discounted fares for people on welfare to work schemes welcomed. Local authorities urged to "negotiate" such deals. Plymouth Citybus and Western National offer child fares to people on New Deal.

    (3.53)  Local Transport Plans should consider arrangements for through ticketing, travelcards and joint operation tickets. Powers will be forthcoming to require operator participation, but how is revenue to be shared, if no agreement between operators.

  5. The White Paper clearly sees fares as a key issue. However, it fails to address a solution in detail. The two operators in Plymouth used to have the same fares and increase them at the same time each year, even after the bus war in 1988, when they stopped joint operator tickets. Between 1986 and 1988 they accepted each others tickets. Now they have different fares and one operator increases fares in July, the other December. Determining revenue sharing issues for the joint operator tickets in this scenario will be very difficult. The municipally owned operator with lower fares has the same cost environment and a modern fleet but accepts lower profits. If the dearer operator demands a pro rata higher revenue share than passenger numbers suggest, because they have higher base fares, why should the operator responding to the public interest help boost their competitors profits?

  6. The White Paper accepts regulation of rail fares but sees it as inadequate. It accepts the need for lower bus fares for pensioners, the less well off and in Green Staff Travel Plans. However, it does not discuss bus fare regulation, even against the large profits of group operators. This may frustrate the White Paper's wishes in relation to Travelcards, etc. The White Paper is silent on how revenue sharing would be managed in the Plymouth scenario described above.

  7. Buses are the workhorse (3.13) of public transport and are the main answer to improved public transport to offer cost effective choice to car drivers.

  8. Quality Partnerships (3.16) are applauded. The original Chartered Institute of Transport (CIT) version of QPs saw agreement on fares and service level (as well as quality vehicles) being traded for protection from competition. The Confederation of Passenger Transport (CPT) version includes no reference to fares or service level, neither does it seek protection from competition. Large group operators (the backbone of CPT) no longer fear competition from their local monopolies and stable duopolies and will not accept restraint on profit. The White Paper's endorsement of QPs leaves many questions unanswered.

  9. QPs are to be put on a statutory basis (3.17) but the White Paper does not state that the key determinants of the attractiveness of bus travel, fares and service level will be part of a QP.

  10. If QPs are insufficient (3.20) Quality Contracts (QCs) can be sought. These will need primary legislation but will deliver protection from competition whilst running services to a local authority's service specification and performance targets. No mention is made of fares in QCs.

  11. Funding of bus services is addressed at 4.78 to 4.80. Additional passengers delivered via QPs will produce fares revenue very helpful in funding services, new vehicles, etc. Extra passengers will then be delivered by local authority funds for bus priority, etc., and political pain of parking charges, etc. This revenue will also boost operators profit as well as fund better services.

  12. The table below shows how outside London operators have taken larger profit from a shrinking market compared to inside London where passengers and society benefit from lower costs. Local authorities need extra revenue from extra passengers to invest in further bus priority measures, etc. The "nett" line in the table represent changes to operators profit. These profits are needed to invest in bus infrastructure. Given restraint on public expenditure, the need to look for funding sources is evident.

Financial effects on operators of deregulation outside London and tendering
in London comparing 1993-94 to 1985-86 at 1987-88 prices (in £ million)

ItemLondonGB outside

Lower costs158704
Change in revenue21 -136
Cost of additional bus kms-76 -234
Change in subsidy-104 -206

Source: DoT (1994); CSO 1994.

  13. Publicly owned companies like Plymouth Citybus reinvest in the City via dividend from extra revenue generated by City Council policies and spending. Western National take larger profits and remove them from the City. Effectively Citybus dividends are helping pay Western National route subsidies and concession fares payments to supplement a profit level twice as high as Citybus. If ownership is not on the agenda, the use of profit should be.

  14. There is a general issue of lack of competition suggesting a need for some level of regulation. The Select Committee have noted increases in tender prices in London as the average number of bids has dropped from 6 to 2 per contract between 1995 and 1996. The Select Committee also noted that 92.8 per cent of contracts are now run by the six major bus groups.

  15. Section 8 of the attached sets out suggested attributes required and roles of partners in a future integrated and sustainable bus market. The Committee may care to set out its own "test template" against which to judge the White Paper on bus issues. Attached (Annex A) is our appraisal of the White Paper against the criteria set in the paper. The White Paper does not address many issues and lacks detail on others.

  16. Hopefully the Committee could be provided with he Conclusions (Section 10) of the paper. 10.1 looks at the state of the bus market and compared to the rail market finds:

    —  different approach in the passenger market on service and fare regulation;

    —  marginal cost equalisation for rail freight using positive feedback e.g., higher lorry fuel duty and targeted TAG/FFG rather than untargeted FDR.

    10.6 attempts a definition of "Integration". "Integration cannot just be a buzz word or merely co-ordination of interchange. Each element of the package has to be delivered, each element has to be compatible, each partner has to have a defined role and not be able to frustrate the overall objective. If the government deliver higher rates of FDR to operators against higher fuel duty and local government provide bus priority measures or dearer parking, these measures have to produce more bus passengers not more bus operator profit. The appropriate framework of legislation and operation has to be in place".

  On this definition of "integration" the White Paper has a number of loose ends.

5   Not printed (Transport Reviews; Vol. 18 No. 3, 199-213). Back

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