Select Committee on Transport, Local Government and the Regions Minutes of Evidence

Examination of Witnesses (Questions 159-179)




  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 and Oxfordshire?
  (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, you say?
  (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 deliver that.

  168. In the sense that they are in constrained areas and there is a physical problem; is that what you are telling us?
  (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 peak periods.

Mr Stevenson

  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 Lockhead—as we do and explore this, because we have very good partnership with Mr Lockhead in West Yorkshire—but 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 that investment.

  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.

Chris Grayling

  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.

Mr Stevenson

  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 know that?
  (Mr Donald) Yes.

  175. Presumably that has some effect on your discussions with the companies in terms of their non commercial services?
  (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, because—I do not want to drag this out—I 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.

Mr Stevenson

  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.

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