Select Committee on Transport, Local Government and the Regions Seventeenth Report

Increasing Tender Costs

  1. The cost to local authorities and passenger transport executives of providing supported bus services is rising well above the rate of inflation. The Association of Transport Co-ordinating Officers found that, on average, tender costs for supported bus services were rising at a rate of 7 per cent per year.[116] The principal reasons behind the rises were increases in fuel and insurance costs, and rising staff costs due to driver shortages.[117] The Transport and General Workers Union pointed out that bus workers salaries are 13 per cent below average male earnings and that above-inflation wage increases are likely to continue for at least five years.[118] Cost increases also impact on the commercial viability of some services and may be contributing to the increase in service withdrawals.
  2. A lack of competition for tendered services contributes significantly to the higher costs of these services. 25 per cent of local bus and 9 per cent of school bus service tenders receive only one bid.[119] Mr Preston, chairman of the Passenger Transport Executive Group, told us "In West Yorkshire, we put out something like 16 million worth of tendered services each year and the average number of bids per tender is 1.04".[120] Mr Goddard, county transport co-ordinator for Cheshire County Council, gave one example of significantly greater rises in tender costs:
  3. "We had a school contract for two buses which was costing 20,000 a year 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. 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 was three years ago."[121]

  4. It may be more cost-effective for local authorities to purchase buses and run some services themselves in a few instances. Basingstoke and Deane Council believe that purchasing buses, which were then let to an operator to run, would be the most cost-effective way of procuring the service they required. However, the Department was reluctant to consider providing the council with the necessary Section 71 agreement to allow this to happen.[122] Devon County Council believe that purchasing buses using the local transport plan settlements would help support bus services that are on the margins of commercial viability. It requested greater guidance from the Department on this.[123] The Minister told the Sub-Committee "One of the difficulties is that there are very few authorities now who have the in-house competence required to run the service, and therefore the cost of setting that up might well be considerable".[124] It is not being suggested that large-scale local authority owned bus companies be developed. However, there appears to be a case for local authorities to purchase and lease vehicles where this is more cost-effective than contracting for the whole service. The issue of local authority run services is considered further in Chapter IV.
  5. The rise in tender costs for existing supported services and the increase in the number of services requiring support is placing severe pressure on local authority revenue budgets. The Minister told us that "the revenue support settlement this year took account of higher tender costs".[125] Mr Robertson, chairman of ATCO, disagreed saying he had seen no evidence of this: "The danger is we are revenue poor. We have problems in terms of revenue in sustaining the services on those networks".[126]
  6. Where commercial bus services are withdrawn, replacement public transport services must be provided. Other, more cost effective, forms of public transport than a traditional bus service may be more appropriate.[127] These services are discussed further in the section on Challenge Fund initiatives. However, such services will require an on going commitment to revenue support for running costs and significant resource for their design and monitoring. The Department must provide more revenue support to ensure that increasing service withdrawals and rising tender costs do not leave areas with inadequate public transport provision. More cost-effective public transport solutions should be sought to improve non-commercial services. It may prove more cost-effective for local authorities to run some non-commercial services. The Department should support the purchase of buses with local transport plan funds where local authorities demonstrate the value in doing so.

    Social Exclusion


  8. In Spring 2001, the Prime Minister requested the Social Exclusion Unit to investigate the links between transport and social exclusion.[128] An interim report was published by the Unit on 20 May 2002.[129] The Unit's study focussed largely on buses as they are the main means of public transport for people from low income groups who make nine out of ten public transport journeys by bus.[130] The report highlighted the problems people faced in accessing health, education, employment and leisure opportunities. For example:

  • 2 out of 5 jobseekers say lack of transport is a barrier to getting a job.
  • 6 per cent of 16 to 24 year olds turn down training or further education because of problems with transport.
  • 7 per cent of people without access to a car say that they have missed, turned down or chosen not to seek medical help over the last 12 months because of transport problems.[131]

Financial Support

  1. Spending on support for bus services (fuel duty rebate, concessionary fares and subsidising unprofitable services) has fallen by a third since 1985 (despite recent increases), while spending on subsidising unprofitable routes has fallen by two-thirds.[132] Nearly half of 16 to 18 year old students find their transport costs hard to meet. The Social Exclusion Unit highlighted other problems such as the cost of changing buses, which requires an extra fare to be paid, and the cost of taxis that are often used where poor public transport exists. Despite the high cost of taxi fares, people in the lowest income group make a third more taxi trips than any other income group.[133] The Unit believes that money is required to assess transport needs, to support greater concessionary travel and to provide a wider variety of transport services to connect people to work, leisure and healthcare activities.[134] A study into transport and social inclusion in South Yorkshire also concluded that "many of the issues could only be addressed through increased revenue funding, for instance to support conventional public transport services, community transport and less conventional initiatives".[135]
  2. Equity in the use of public spending

  3. The Social Exclusion Unit agreed with this Committee's conclusion in our report into the 10 Year Plan for Transport[136] that the current Plan was regressive in benefiting people in proportion to the distance that they travel.[137] More must be done to help those with low levels of access to key facilities. The balance of spending could be redressed somewhat with greater expenditure on buses, which benefits lower income groups more.[138] It also identified the rising costs of public transport compared with the recent and forecast future falls in the costs of motoring as a further barrier to access for the poorest.[139] The Government must face up to the need for greater revenue support for local public transport. This will benefit both low and high income groups.
  4. Current Solutions

  5. There are many different solutions to reducing social exclusion resulting from poor transport provision. The Social Exclusion Unit identified the following key factors to be addressed:

  • network coverage,
  • frequency,
  • reliability and
  • cost.

Over 80 per cent of bus kilometres run are commercial services.[140] Therefore, with the exception of improvements to reliability through bus priority and local authorities' influence on concessionary fares, the main factors are the responsibility of the operators. The core network that bus operators provide is an important part of the solution to social exclusion. However, they are profit making companies and will only provide some of the marginal services required to meet wider needs.[141] The sections above on service withdrawals and rising tender costs show that local authorities do not have sufficient revenue to maintain current network service levels. The Social Exclusion Unit identified a number of ways in which supported bus services and other forms of public transport could be used more cost-effectively to provide a transport service:

  • Demand responsive transport services in Lincolnshire (where bus use rose by 112 per cent) led to unmet travel need falling by 14 per cent. Similar, but more advanced, schemes were also found to work well in Sweden.
  • The Wheels to Work scheme in Shropshire where people are given reduced price moped hire, free push-bike hire and subsidised driving lessons.
  • Car Share Clubs in Switzerland.
  • A taxi voucher scheme in Tandridge for people with no access to public transport.[142]

  1. A key problem is the lack of expertise in local authorities in identifying transport needs and the provision of sufficient revenue resources for the people and surveys to undertake such work. The Social Exclusion Unit told us "It is not anyone's job to do a needs analysis to understand where are the places people need to get to, where are the job vacancies, where are the unemployed, how far do the routes actually meet up to need".[143]
  2. Barriers

  3. The Social Exclusion Unit note that whilst deregulation of the bus industry had some benefits, "it ended the ability of local authorities to set bus fares, thereby preventing them from rising faster than motoring costs. Privatisation also created a less stable bus network subject to many small route changes and inhibited integrated ticketing policies".[144] This, it believes has reduced people's trust and familiarity with bus services and their travel horizons. The inability of local authorities to co-ordinate services and influence fare levels were also highlighted as problems.[145]
  4. The Social Exclusion Unit criticised the fragmentation of funding for bus-based public transport services. The Department for Transport spends 1 billion on bus revenue support. A further 900 million is spent on school, patient and social services transport by a variety of different departments. Cheshire County Council already organise health, social work and ordinary bus services from a co-ordinated centre.[146] Such an integrated approach, the Unit believed, was the best way forward. Greater integration between school, social care and health care transport was also recently recommended by the Audit Commission.[147]
  5. Summary

  6. The Social Exclusion Unit will identify a number of key issues that the Department must act on following its final report later this year. However, we believe that a number of issues are clear now and require action. The failure to provide adequate public transport has significant hidden costs to the public purse. In particular, we believe the Department should:

  • support the integration of health, social care, school and subsidised transport services through more co-ordinated centres such as that in Cheshire. Greater revenue support will be needed to establish these centres. However, the savings are likely to far outweigh these costs and provide a much better service, achieving better value for money.
  • Commission research into what the costs of failing to provide adequate public transport are to other Government Departments and the economy.
  • Ensure that local transport plans include social exclusion targets such as reducing the number of people whose transport needs are not met and determine whether wider minimum concessionary fares standards can reduce social exclusion.


116   BUS31. The ATCO survey of 72 local authorities found that contracts were typically costing 21 per cent more than the contracts they replace. Contracts are usually let for three year periods. Back

117   Q348. Back

118   Q370. Back

119   BUS 31. Back

120   Q198. Back

121   Q316. Back

122   BUS 51. Back

123   BUS 47. Back

124   Q448. Back

125   Q402. Back

126   Q324. Back

127   Q349. Back

128   Q497. Back

129   Making the Connections: Transport and Social Exclusion, Social Exclusion Unit, May 2002. Back

130   Q501. Back

131   IbidBack

132   BUS 52. Back

133   Making the Connections: Transport and Social ExclusionBack

134   BUS 52. Back

135   Transport and social inclusion, South Yorkshire PTE, Sheffield City Council and Barnsley, Rotherham and Doncaster Metropolitan Borough Councils. Back

136   Eight Report of the Transport, Local Government and the Regions Committee, 10 Year Plan for Transport, HC(2001-02) 655-I. Back

137   BUS 52. Back

138   IbidBack

139   Q521. Back

140   From Workhorse to Thoroughbred: A better role for bus travelBack

141   Q5. Back

142   Making the Connections: Transport and Social Exclusion, Chapter 3. Back

143   Q534. Back

144   Making the Connections: Transport and Social Exclusion, Summary. Back

145   Q513. Back

146   Annex to report. Back

147   Going Places: Taking people to and from education, social services and healthcare, Audit Commission, November 2001. Back

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