Examination of Witnesses (Questions 310-319)
MR MARTIN ROBERTSON, MR JOHN HODGKINS AND MR GARTH GODDARD
WEDNESDAY 15 MAY 2002
310. Good afternoon, gentlemen. Would you be kind enough first to identify yourselves for the record?
(Mr Goddard) I am Garth Goddard. I am County Transport Co-ordinator for Cheshire.
(Mr Robertson) Good afternoon. I am Martin Robertson. My day job is Head of Passenger Transport for Hampshire County Council. I am the Chairman of the Association of Transport Co-ordinating Officers.
(Mr Hodgkins) Good afternoon. My name is John Hodgkins. I am the Passenger Transport Manager for Buckinghamshire County Council. I am also currently the External Liaison Officer for the Association of Transport Co-ordinating Officers.
311. Would one of you like to make some comments on behalf of you all?
(Mr Robertson) Perhaps I can make some brief comments. First, thank you for the opportunity to come here today. In relation to our submission, for the background, the Association of Transport Co-ordinating Officers is the organisation that represents local authority officers involved in passenger transport service procurement. It is an individual Association membership, so that the views that we are able to give are therefore our own views on passenger transport issues and are not necessarily those of the council that we work for. In terms of our submission, you will see from that that we are particularly concerned with trying to achieve the objectives of the Government's 10 Year Plan for Transport in relation to buses and we particularly majored in our submission on the issues regarding the long term subsidy issues regarding bus services and also the mechanisms that are in place and the various benefits and disbenefits of the mechanisms that are in place to allow us to get towards those objectives.
Chairman: Thank you very much for coming. I think what was very helpful about your evidence was, if I may say so without being misunderstood, that it was based in reality.
312. I would like to concentrate a little if I can on the Competition Act. I suspect that you were in the room when we had our last witnesses.
(Mr Robertson) Yes, we were.
313. I am sure will anticipate that we want to try and clarify some of the things that were said. How much competition is there between bus companies in the areas that you represent?
(Mr Hodgkins) Perhaps, Mr Stevenson, I can respond to that. In many local authority areas, and you understand that we each are employed in shire counties and not metropolitan areas, there is very little, if any, on-the-road competition. You have heard mention of the level of competition or the lack of it for tenders for supported services in certain areas. The vast majority of local authorities find themselves in a position where there is one dominant supplier of public transport services, either in all of the county or there are one or more dominant suppliers in different parts of their local authority area. There is very little evidence today of ongoing on-the-road competition.
314. When we asked the question to the OFT witnesses they made the distinction between London and shire and metropolitan areas, and that distinction, I think it is fair to say, was that there are particular issues affecting London which are not affecting other areas. Therefore competition is alive and kicking outside of London. I think your answer suggests the exact opposite.
(Mr Robertson) The fact is, from a survey we did last November, in which we had responses from 72 per cent of local authorities, we found that one quarter of all local bus service contracts only receive one tender bid and in three per cent of cases we receive no bids whatsoever. There is a significant issue here for local authorities. It varies from place to place as you would imagine but it is quite significant.
315. Just taking that a step further, I run the risk of paraphrasing somewhat, but clearly the OFT were saying to us that if there are problems of that nature in areas covered by local authorities, let them know, and authorities are not letting the OFT know. In other words, you are confronted with situations, as your evidence is describing to the Committee, and you are really blaming the OFT for it but you are not telling them about it. What is your reaction to that?
(Mr Goddard) Perhaps I can say that in many parts of my county I am not sure what the OFT could do anyway, because there are no operators to come in and compete. I can give you an example in one town. We had a school contract for two buses which was costing £21,000 a year which was handed in because the operator no longer wished to operate it. We put it out to tender. We had one bid of £55,000 to replace it. That operator, two days before he was due to operate, declined the contract.
316. Even at £55,000?
(Mr Goddard) Even at £55,000. We then rang round a number of other local operators and one agreed that he would do it for £100,000. I then had my staff ring every operator almost within 50 miles and eventually we got somebody to do it for £75,000. That is a particularly serious example from Cheshire, which occurred three years ago.
317. Could you not second the whole of your department just to drive buses, Mr Goddard? That would be a very good lesson for the ratepayer.
(Mr Goddard) We do have real problems with very low levels of competition for contracts. Can I go on to say that we heard from the last witnesses that on-the-road competition was a healthy thing. In my experience as a transport co-ordinator in a shire area, I find on-the-road competition, where it has broken out (and it has broken out sporadically) has been singularly unhelpful. It promotes enormous instability in the operation, which is the last thing the passenger wants. It has the effect of operators concentrating their efforts and resources into the competitive area, so that they are inclined to deregister from other, less successful commercial operations. That puts more cost onto the local authority. For example, again in Cheshire, that sort of competition caused an operator to divert his new buses from a quality partnership route. He also reduced the frequency on the quality partnership route so that he could compete with an on-the-road competitor elsewhere in his area. That is my view of on the road competition and it seems to be slightly different from the view you have had.
318. The OFT in the current evidence say, "Competition and choice between operators are the key forces working for passengers." What do you make of that statement?
(Mr Robertson) The key forces working for passengers are well coordinated services that offer attractive fares and frequencies to the public.
319. We have heard from the OFT, Mr Coombs, that there are some misconceptions that you may have when it comes to the OFT and its activities. Your organisation believes that the outcome of some of the OFT rulings is to lower customer satisfaction as bus users cannot understand why these practices exist and why the network cannot be coordinated for the benefit of users. I would like to focus that on the evidence we have just heard about ticketing. When questioned why it is that transferability of tickets that are available on railways, for example, cannot be made available on bus servicesand the OFT are responsible for thisthey deny it. They say it is a misconception. The block exemption and the application of that block exemption allow that to happen. The problem is that the local authorities are not applying this properly. I asked the direct question myself. What is your response to that?
(Mr Hodgkins) The draft guidance on block exemption, as I understand it, is in its second draft form at this point. There has been fairly wide consultation with the industry and with local authority representatives and other interested parties along the way. However, it still remains a very complex set of guidelines which, without doubt, is causing a great deal of confusion to the players within the passenger transport operating sector and, to a significant degree, I suspect within local authorities. There has been reference to the determination of the Leeds case. I do recall seeing in the trade press at the time a statement that paranoia exists within the industry over the competition legislation. I would not necessarily go as far as calling it paranoia, but there is still a great deal of reluctance on the part of players within the passenger transport industry to venture into areas in which they believe may fall foul of the competition legislation.