Examination of Witnesses (Questions 159-179)|
WEDNESDAY 8 MAY 2002
159. Gentlemen, may I greet you most warmly.
I can see we are making a real attempt today amongst our witnesses
to keep the gender balance. Can I ask you to identify yourselves
from my left and your right.
(Mr Preston) Kieran Preston, Chairman, Passenger Transport
Executive Group, and I am Director General of West Yorkshire PTE.
(Mr Donald) Rob Donald, Director General of CENTRO,
the Passenger Transport Executive in the West Midlands. I also
lead on bus issues for PTE Group.
(Mr Russell) James Russell, Assistant Director, Strategy
and Planning, City of Coventry Council.
(Mr Newson) Noel Newson, Group Manager, Sustainable
Transport for Oxfordshire County Council.
160. Thank you very much. Does anybody have
any opening statement they would like to make?
(Mr Donald) Only to say how nice and warm it is in
this Committee room.
161. Yes, well, you will discover that the House
of Commons never does anything by halves: it either freezes you
to death or makes it impossible for you to breathe.
(Mr Preston) It could get hotter, Chair.
162. Surely not. Are political commitment in
strong bus priority the main factors behind the success in Oxford
(Mr Newson) I think political commitment is an important
part of delivering a successful transport network, have no doubt
about that. The balance between the bus and other motor travel
is crucially important if we are actually going to get more people
to use the bus. The pressure all the time is for more motor cars
on the road. With the tendency for people to use that, we have
to continually drive up the quality of public transport, and it
requires a lot of commitment at all levels pulling at all the
different strings to try to deliver that.
163. And you would identify the particular demonstration
of political commitment as being what?
(Mr Newson) I think Oxford City is a good example
of what has been done. There has been significant restraint on
the private car, both through the pricing mechanism of car parking
charges and the restriction on the amount of parking in the Centre,
complimented by facilities like Park and Ride. The interesting
thing is it is not just to encourage motorists to use Park and
Ride; we have seen a big increase in people using the bus from
much further out to come into Oxford.
164. Would anybody else like to comment on that?
(Mr Donald) We agree with the general point: it is
about that political will; it is about bus priority measures;
it is about complementary measures in terms of motorists and getting
them to think twice about using buses.
165. Other local authorities do not seem to
have put quite the same degree of emphasis as yours: what do you
think has been the difference?
(Mr Newson) One factor I have no doubt has helped
Oxford is that Oxford is a historic town and it is less capable
of accommodating the motor car in the first place.
166. So there has been a physical constraint,
(Mr Newson) I think that was something that was recognised
a long time ago, and the local authorities have built on that
in the years that have followed.
167. National Express said, "West Midlands
are not going to meet the target for improving bus speeds by 2006."
Why is that?
(Mr Donald) I think it is about delivery, in part
of bus priority measures. We stand full square with bus companies
in recognising the vital importance of bus priority measures,
and I think we are now getting to the ones that are actually quite
difficult politically. It takes a lot of political courage to
168. In the sense that they are in constrained
areas and there is a physical problem; is that what you are telling
(Mr Donald) Absolutely. You will certainly get a backlash
from motorists and you will get a backlash sometimes from frontages
as well. Some of that bears on the wider aspects of this inquiry
in terms of whether motorists do genuinely regard the bus as a
mode which they might choose to use in the future, and I think
that is an issue, about giving up what is scarce road space and
getting scarcer road space allocations over to buses. But we are
quite clear: if there are two lanes in each direction and the
buses are carrying around half the people, that is a proper utilisation
of road space, to move people, which, is certainly the role at
169. Could I ask all four of our witnesses,
please, what your attitude is towards cross-subsidisation by the
companies you are involved in?
(Mr Preston) I heard the debate with the operators
and I think it is extremely difficult to establish in the present
marketplace outside of London the extent to which cross-subsidy
does in fact take place.
170. So when Mr Lockhead claimed that many of
their routes are cross-subsidised, would you challenge that, or
would you not be in a position to challenge that?
(Mr Preston) It would be interesting to sit down with
Mr Lockheadas we do and explore this, because we have very
good partnership with Mr Lockhead in West Yorkshirebut
I think the present system of regulation outside London does not
actually permit anybody to demonstrate that we are getting best
value for the public, whether you call it subsidy or investment.
We simply cannot demonstrate that we are getting best value for
171. Would it be fair to summarise your responses
by saying that you are satisfied-cross-subsidisation happens,
but you are not sure where and to what degree?
(Mr Donald) I was interested in the comment made by
the bus companies on this because they played it up as a very
large factor in terms of the way they are funding commercial bus
services. I have no reason to suppose whether that is true or
false. I am sure it is true because it was stated. Then the interesting
thing is that under a competitive fairly low entry marketplace,
if that is going on, you would expect to see a lot more competition
on the commercial marketplace, because obviously people would
"cherry-pick" the profitable routes and choose not to
run the ones that are being cross-subsidised. For me, that is
just more evidence, certainly in our conurbations, which are good
bus territory, that there is very little commercial competition
going on in that marketplace.
172. When we talk about cross-subsidy, are we
practically talking about the same equivalent? For example, pub
sales between 1.00-2.00 pm on a Sunday subsidise the pub sales
between 5.00-6.00 pm on a Sunday, but you do not open your pub
from 1.00-2.00 pm only, you have it open the whole day because
your customers may come earlier or later. Is it not the same principle,
effectively: cross-subsidy from busy times of the day to less
busy times of the day, but you need to run the service all day,
otherwise it does not work?
(Mr Donald) Except in this industry you have the public
sector that is picking up the ones that really are heavily subsidised.
They are providing services that are not operated commercially.
I understand the point of the analogy, but I think the analogy
breaks down because of that.
173. When you are negotiating for services and
it involves a direct public subsidy of some shape or form, are
you aware as to whether the companies involved require the same
rate of return from the services that you are looking to subsidise
as they do from the so-called commercial ones?
(Mr Donald) We do not know the straight answer to
that because of the lack of knowledge on the commercial side,
but I would have thought there is a degree of competition for
tendered services, in most, not all, PTE areas, which would suggest
that that competition, in the normal way, would bring down the
degree of margins that can be achieved.
174. We are told that Travel West Midlands,
owned by National Express, made 25 per cent profit in 2001. You
(Mr Donald) Yes.
175. Presumably that has some effect on your
discussions with the companies in terms of their non commercial
(Mr Donald) As I say, Travel West Midlands, as I think
they say in their evidence in terms of National Express Group,
do not operate a substantial number of subsidised bus services
in the West Midlands in the ways you rightly point out. They are
very profitable on the commercial services, and indeed they run
80 per cent of the services.
176. I am a little confused, Mr Donald, becauseI
do not want to drag this outI am trying to establish some
relationship, if possible, between cross-subsidisation, which
the companies claim many of their services benefit from, and your
relationships with the operators, and how much public subsidy
is going in that may be affected by cross-subsidy that you think
is going on, but you do not know where and you do not know how
much. I am just trying to find a way through that, and I am finding
it difficult to do so.
177. Any of you. Mr Preston.
(Mr Preston) If you take PTE areas, the six English
PTE areas, we put in revenue investment
or subsidy of something like £280 million
per year. That compares to £500 million cash revenue taken
by the operators, so you can see the relationship is about 35-40
per cent. When you look at the subsidy issue, I think you have
to look at it in the context of the whole marketplace. When you
talk about the 25 per cent return in West Midlands, you maybe
have a 20 per cent return in Yorkshire, for example. When that
is twice the rate of return that is experienced, for example,
in London, I think you have to say that wherever the benchmark
is, there is a lot less cross-subsidy in metropolitan areas than
happens in the London marketplace.
178. Do you have any evidence that would justify
what you have just said?
(Mr Preston) I have those figures, yes.
179. The point is, if we are talking about quality
partnerships, as distinct from quality contracts, then is it reasonable,
from your point of view, that a partnership, when one is talking
about pretty heavy levels of public subsidy in any event, nevertheless,
the principle of public subsidy involves one of the partners,
namely yourselves, saying to the other partner, namely the operators,
"Look, we want to know how much cross-subsidy you are prepared
to put into this to help us with the public subsidy we are putting
in". That seems to me to at least be the basis of some sort
of partnership, but if the subsidy is going in and you have not
got a clue how much cross-subsidy is coming from the companies,
which I think is what you are saying, I just question, I put it
to you: what sort of partnership is that?
(Mr Donald) I think the point we were making on the
25 per cent example in the West Midlands is that given that that
is on record and accounts, that is therefore the average. It is
actually quite difficult to see a high degree of cross-subsidy
that is going on there, because that would mean obviously that
there are services getting a much greater return than 25 per cent.