Examination of Witnesses (Questions 368-379)
MR GRAHAM STEVENSON, MR MARTIN MAYER AND MR ROGER SEALEY
WEDNESDAY 15 MAY 2002
Chairman
368. Gentlemen, good afternoon. May I ask you to identify yourselves?
(Mr Stevenson) My name is Graham Stevenson. I am the national organiser for transport of the Transport and General Workers' Union. On my right is Roger Sealey, the national researcher for the transport sector of the T&G. On my left is Martin Mayer, who is the elected representative for the General Executive Council of the Transport and General Workers' Union for passenger services workers.
369. Is there something you wanted to say?
(Mr Stevenson) Essentially, our evidence suggests that we believe that as subsidy has declined so has patronage. Currently, subsidy is not effectively applied enough. Secondly, as a consequence of deregulation and of the changes that are taking place in London, instability and loss of integration are the key feature in the industry. Although it is true that London has a better set of circumstances, we are critical of the route nature and of the absence of employment conditions in contract obligations in London as being part of the factor that minimises its effectiveness. Thirdly, to achieve quality bus provision demands quality employment contracts and the present situation across the entire country shows a very poor situation with regard to pay and conditions. It is going to take years to correct that. We are in the process of beginning to do so. Secondly, massive driver shortages in huge parts of the country, particularly in bigger cities, coupled with the tremendously worsening situation with regard to assaults on drivers—we have provided some supplementary evidence with regard to that; and the nature of the tendering system—are all driving down quality and are the impediment to move forward. Finally, our view is that the introduction of a quality contract system going beyond the London franchise system specifying requirements for operators in regard to employment conditions is absolutely essential to move forwards.
370. How long do you think wages and working conditions in the local industry have been changing? How far have they slipped behind equivalent occupations on a national average figure?
(Mr Stevenson) Prior to deregulation and privatisation, bus workers were some 7 per cent above average male manual earnings. They are now 13 per cent below. We have seen, over the last two to three years, largely due to a very aggressive industrial relations policy on behalf of the union, considerable improvements in that regard. A gut feeling is that it will still take years. My colleague, Roger Sealey, has looked into this.
371. Mr Sealey, how long are the above inflation wage increases going to last?
(Mr Sealey) If we work on 5 per cent above inflation, it will take five years.
372. From this point?
(Mr Sealey) From this point, to get that back. If you take average wage increases at 4 per cent, you are talking of a 9 per cent average each year needed to restore over that five year period.
373. Have you thought about the advantages of variation of various wages within the industry: differences in shift work or size of vehicle?
(Mr Mayer) Since deregulation outside of London in 1986, the trend has been for companies to deal with the competitive pressures on them by reducing wages and conditions. It is not just wages. The trend has been to introduce new starter rates of pay for the new employees substantially lower than the existing employees. In many companies, quite a complex structure of multi-tier pay rates has come about. Over the last two or three years, we have been in a position where we have been able to challenge that and start to overcome that, but there is a long way to go. Typically in the north of England, bus rates start at as little as £5 an hour or not much above that; whereas a top rate driver might be on over £7. In some cases, new drivers have not been able to achieve the top rate, even if they drive for 10 or 15 years. In a tighter labour market, which we are experiencing today, bus companies are finding it extremely difficult to recruit at those rates of pay. Although an enormous amount of resources are going into recruitment and training, there is a serious problem about retention of staff. I would like to emphasise that it is not just pay that has been reduced in real terms. Before 1986, 95 per cent of the stage carriage bus industry was in the public sector and employees took advantage of the local government pension scheme. Although on privatisation existing employees in the main managed to retain their membership of those schemes, that has not been the case for the new employees. We have seen a much worse system of pensions, money purchase pensions in particular. Some companies have not even provided on that level. There is an employment package now which is particularly unattractive. In terms of driving hours, this is another big issue. We did have scheduling agreements which would have kept minimum spells of work before a break well below any legal requirement. The trend has been to try and push driving hours up to the legal maximum which currently is five and a half hours without a break.
Miss McIntosh
374. In your summary of the evidence that you presented to the Committee, your draw the conclusion that the support given to increase patronage of buses through subsidies should be increased. There was quite a negative article in one of the newspapers recently that suggested that by simply increasing the subsidies it could lead to potential difficulties and a bottomless pit. How would you react to that?
(Mr Stevenson) The Transport Act 2000 takes us forward a little from the on street competition model of the 1985 Act. Essentially, the 1985 Act was a mistake in many ways.
Chairman
375. I do not think the ministers introducing it thought it was a mistake, having sat for many hours on this.
(Mr Stevenson) I understand the point you are making but it is a mistake beyond the thought that they actually had. What has occurred is that the tendering regime that we have has been used by operators to cushion and subsidise their own framework. We do not have a free market, private enterprise, bus enterprise system. For many years, we have been pointing to the huge level of subsidy. There have been comments about previous ministers and previous governments about reductions in subsidy and how wonderful this is. All that has done is to push the cost to society elsewhere. We have had the situation where large numbers of bus workers have been claiming all sorts of state subsidy benefits in order to literally cope. It is not an effective system that has produced a cheaper bus transport system; the worst possible thing that could have been done, given this juncture at this century, when all of the environmental challenges that are required. What we do need is not the half hearted approach of the Transport Act 2000 which talks about joint consultative and voluntary approaches between local authorities and operators. We need something with much more teeth. If there is to be increased subsidy, we see nowhere else in the world the massive reduction in subsidy we have seen here, despite the talk by the European Commission of the need to introduce some element of competition. Still we are seeing in every other EU country levels of 70 and 80 per cent public subsidy. Public subsidy used to be a dirty word; it is not any more. What is needed is to ensure we are getting value for money. The present system simply allows local authorities to give money to operators by improving infrastructure and probably operators would already have developed things which they were developing, like new buses, and we are not getting anything back for it. We are not getting a formal, quantified approach.
Miss McIntosh
376. You also seemed to suggest earlier that as subsidies decline patronage has also declined, but there will have been circumstances where wages will have increased. Fuel prices have certainly increased. That has probably been one of the factors as to why fares have increased. You mentioned competition achieved in Europe. We now have effectively the same competition laws in the UK Competition Act here but instead of leading to more competition and buses leaving at times that would suit the customer we seem to get competition laws applied here at a disadvantage to the customer.
(Mr Stevenson) The difference between Europe and here is that the competition is in the board room. One of the best frameworks that exists is that in France, which was introduced in 1982. We have been pointing since 1988 to that framework whereby it is possible in 200 municipalities throughout the country for the operator to change over a limited period, seven year franchises or whatever. It is not on street competition. It is competition about who is the best management for the enterprise. Taking aside arguments about which we might differ over ownership questions, we still think public ownership is the right approach. Do not let's argue about that. What is critical here is how does public money go into the system. This is after all a private enterprise system. 95 per cent—only 16 small companies—are publicly owned. It is a large amount of public money that has been pouring into this industry, which has been privately owned for 10 or more years, and there is very little effective public control over what we get out of it. That has been our argument all along. It seems that lots of people are now beginning to realise we were right.
377. Does it concern you where there are monopoly operators?
(Mr Stevenson) We have always taken the view that, in a particular city, that is a natural monopoly for a bus company. We are not necessarily here saying that across the whole country it is right. When the Monopolies Commission, as it used to be called, was really interested in the developing monopoly situation—and by the way we always said a public monopoly would end up being a private monopoly and criticised the deregulation and privatisation regime for that—it tried to sometimes draw boundaries to say that 25 per cent of the market was owned by certain companies. It is artificial. Buses are a local market and it is the local situation that counts. Issues like cross-subsidy which were raised by Members of the Committee earlier are best effected by having one dominant operator. In France, they do not necessarily have a situation where, say, in Lyons, that one major company is the only company. If there is a specialist need for a particular route or some small village which has always been serviced by a particular company or school services or whatever, they have particular arrangements for that but by and large the idea of creating a network—and that is why we criticise the London system because it is still route orientated, route by route. Half of them do not make money; half of them do and that is crazy because London, if anything, is the biggest network in the country. To have it on the basis of fragmented routes is just crazy.
Mr Stevenson
378. Could I ask about the competitive pressures that Mr Mayer referred to earlier and the effect they have had on the terms and conditions of your members? I seem to recall that, when the deregulation took place and privatisation took place at the same time, there were a number of competitors who entered the routes. It is not the case today. Generally speaking, there is one company that operates 80 or 90 per cent of the routes in given areas. Is that competition pressure still there today, when all the evidence suggests that one operator is operating the vast majority and in some cases all the routes? Is not the competition really with the private car?
(Mr Mayer) Yes.
379. Operators who are dominant in the market and who are still resisting improvements in terms and conditions from a very low base in the mid-80s and cite competition or competitive pressures—there is no competitive pressure from other operators. It is with the motor car. Do you accept that the competitive pressure is from the motor car now?
(Mr Mayer) Yes. The situation is a little more complicated than the way you relay it because there are very few cities in the country where there is no competition at all, but it has been contained. In most areas, the dominant operator is in control of 85 to 90 per cent of the network, typically. The competitive pressures from other bus companies are nothing like they were in the early years since deregulation.
(Mr Sealey) The real competition is from the car. The problem is there is no proper competition in terms of pricing between the car because the costs of motoring compared with the costs of bus fares are the thing. This Committee a number of years ago made the point that until such time as the marginal cost in motoring reflects that you are not going to change that situation. The other thing is the love affair with the car. If fares go up, that gives people an excuse to use the car even more. If bus companies put prices up, they will lose passengers. The pressure on them is to keep the costs down to keep passengers.
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