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


Memorandum by Graham Stringer Esq, MP (IT 179)

BUSES AND THE TRANSPORT WHITE PAPER

  It is worth summarising the characteristics of what is left of the bus industry in this country after deregulation in 1985 and privatisation before coming to any conclusions.

  1. Ninety-five per cent of buses( and similar amount of depots, etc.) are owned privately. There are three substantial bus companies in public ownership, Lothian, Nottingham and Cardiff plus 14 smaller ones.

  2. Since deregulation in 1985 national subsidy has reduced by approximately 70 per cent (90 per cent in London).

  3. Passenger journeys have dropped by one-fifth nationally (increased by nearly 10 per cent in London).

  4. British Bus Body Building industry almost wiped out in early 1990s. Only Alexanders (supplier to Stagecoach) and Northern Counties (public subsidy) survived.

  5. London has a regulated system where routes are franchised.

  6. PTA/PTEs exist in the six metropolitan county areas in England—the Government intends to keep them.

  7. Many rural areas had no bus service or next to no service until the recent Rural Transport Grant was introduced.

  8. Fares have risen by a quarter in real terms across the country and by over a half in metropolitan areas.

  9. Bus miles have increased by 30 per cent.

  10. Large groups grew up on the back of buying out smaller operators (usually ex NBC or municipal) asset stripping, reducing wages and conditions, etc. They are now having to raise wages because of acute driver shortages—this translates into higher fares.

  11. These groups are now investing in new vehicles—but this is only beginning to work off the backlog of the 1986-94 period.

  12. Major groups have diversified into rail operation—creating potential inter-modal monopolies.

  13. Creation of stability in the market has led to investment but the monopolies being created lead to:

    (i)  Marginal services run to keep competition at bay withdrawn throwing more onto public subsidy where available.

    (ii)  Price of subsidised service rises (over the last two years by about a fifth).

    (iii)  Fares increases still surpassing inflation in 1997.

  14. Through-ticketing in many areas more apparent than real. Individual operators price to undercut multi-modal ticket to increase market share.

  15. Large companies grown up on the back of continually purchasing other companies. In many cases ratio of loan debt to equity is serious although decreasing as they use monopoly position to bolster profits. Bus companies looking to buy airports and rail companies. Inherently unstable situation. City confidence might not last.

  16. In some Cities the situation has gone so far that on the basis of emissions per passenger kilometre, car is dirtier than bus, except for carbon monoxide.

  17. Other points which need to be made:

    (i)  White Paper is creating a policy climate in which bus patronage will increase. This extra revenue will go straight to the "bottom line" of the operators. Because competition has been all but eliminated there will be no pressure on operators to plough this back into more services on higher fares.

    (ii)  Increase in fuel duty rebate goes straight to profit, no public transport or fare benefit.

    (iii)  At the same time increasing market power of the groups means that costs of providing subsidised services to the public sector is increasing rapidly. Decline in the number of bidders and increase in cost is circumstantial evidence of cartels operating.

    (iv)  In these circumstances an economic regulator to control the actions of bus operators is needed to ensure:

  —  that there is an equitable return to the public sector from its investment in bus priority, infrastructure, etc.;

  —  that the rate of return to bus company shareholders is related to investment by the companies in assets and services;

  —  that fares do not rise faster than inflation;

  —  that competition can be restricted equitably where a Quality Partnership exists.

  18. It is clear from the above that the bus industry is in the grip of private sector monopolies who are not accountable to the public sector but who attract major public subsidy to Metropolitan areas.

  19. One solution to the problem would be to take the majority of buses back into public ownership; municipal and/or national. The argument that John Prescott put to the Labour Party Conference about why we should not re-nationalise the railways apply; large expenditure small benefit. This can then be ruled out although public money will have to be increased if buses are to play their part in an integrated transport system.

  20. The bus operator trade association, the Confederation of Passenger Transport (CPT), are wholly opposed to re-regulation. They prefer "quality partnerships" with the local authority to provide high-quality buses, bus priority schemes, electronic information indictors, guided bus, etc. These can be good where they operate but not whole solution. They are voluntary, raise competition issues and do not, under current legislation, stop cowboy operators using facilities and downgrading quality routes.

  21. White Paper advocates restraint measures particularly in Cities i.e., congestion charging and non-domestic parking charging and car prohibitions. Again, could be useful if local circumstances are right. But in cases where there is major competition to City Centres from out-of-town shopping centres people with cars will choose to drive to out-of-town locations, pollution increases and economy declines.

  The White Paper also leaves this power to individual local authorities—in Greater Manchester for example, not likely to be attractive to all of the Authorities unless all of them participate. Even if they do have a problem with developments in adjacent shires—Cheshire, Lancashire, etc. Imperative there is a strong lead from Government.

  22. The most successful bus system over the last ten years has been London. Can this be replicated? This would be difficult but not impossible. London was never deregulated. In most parts of the country particularly with the Cities monopolies control not only the buses but the infrastructure engineering departments, etc.

  This would make competition for routes less likely in a franchised system. Franchising is also initially expensive to administer. It could also be done on an area basis.

  Benefits from re-regulation likely to be large if London system replicated.

  23. One way of bringing some stability into the system is to change the period of registration. At present any service can be started or withdrawn by giving 42 days notice to the Traffic Commissioner.

  Regulations could be changed that meant registration could only be made and withdrawn twice a year. This would achieve service stability and stop larger operators forcing small bus operators into bankruptcy or off the road by predatory pricing over short time spans.

CONCLUSIONS

  24. The chaos left behind by the Tories is not going to be sorted out overnight. Three strategies:

    (i)  encourage high quality partnerships that improve information, waiting environment, bus quality and priority, and through-ticketing;

    (ii)  use powers that Secretary of State has to stabilise services by synchronising and lengthening periods of registration to six months;

    (iii)  Competition Act empowers the Government to grant block exemptions to competition legislation where deemed in the public interest. Aim to introduce pilot projects of regulated system on London or other regulated system basis. Create a regulator to control monopoly activities on competition and pricing—must have power to intervene on through-ticketing otherwise White Paper meaningless.

  25. It should be recognised that there is some evidence that people will only come back to public transport if comparatively expensive LRT systems are introduced. Even without LRT there is unlikely to be much real improvement without more money possibly by dedicating increased fuel levy into public transport. It would be a mistake to increase fuel dutiy rebate to bus companies unlikely to result in direct and commensurate benefits given to their financial situation. System of concessionary fares needs to be examined as it operates as network subsidy and gives perverse incentive to increase fares.

January 1999


 
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