Memorandum by the Passenger Transport
Executive Group (Bus 14)
THE BUS INDUSTRY
INTRODUCTION
1. The Passenger Transport Executive Group
(PTEG) represents the seven Passenger Transport Executives (PTEs)
in the major conurbations outside London—Greater Manchester,
Merseyside, South Yorkshire, Strathclyde, Tyne and Wear, West
Midlands and West Yorkshire.
2. PTEs are heavily involved in working
with bus operators, local authorities and others to promote high
quality bus services and facilities within the development of
an integrated public transport system for their areas. PTEs and
their Passenger Transport Authorities (PTAs) have a duty to promote
public transport, and therefore bus usage in their areas.
3. Bus patronage in the English PTE areas
totals almost 1.2 billion trips a year, representing 85 per cent
of all public transport trips. This represents almost a third
of all bus patronage in England and Wales, similar to levels of
patronage in London and the rest of England and Wales.
SUBSIDIES IN
THE UK BUS
INDUSTRY
4. 85 per cent of bus services in PTE areas
are provided commercially; the remainder is provided by private
sector operators under contract to PTEs. These contracts cost
about £60 million a year at the present time, excluding home-to-school
transport.
5. Special needs bus services, often door-to-door
dial-a-ride bus services for those with particular mobility difficulties,
are also provided under contract to PTEs. The costs of these contracts
amount to some £25 million a year at the present time.
6. The PTEs administer concessionary fares
schemes on behalf of their PTAs. These schemes provide free or
reduced fares for elderly, blind and disabled persons and children.
PTA schemes for elderly persons are more generous than the Government's
half fare schemes in all PTE areas, with free travel provided
in Merseyside and the West Midlands.
7. Total PTE "revenue foregone"
payments to bus operators for participation in concessionary fare
schemes amount to some £195 million a year.
8. In total, PTE payments to bus operators
therefore amount to some £280 million a year. Passenger fare
income provides an estimated £500 million. PTE payments therefore
represent 35 per cent of income, taking these two sources together.
9. In addition, operators receive income
from the Government through fuel duty rebate (FDR), which nationally
is a further £270 million/year subsidy to the bus industry.
10. Whilst the operators maintain that continuing
support is effectively a subsidy to the passenger and not the
operator, its role and function in operator economics is unclear.
Concessionary passengers account for a substantial proportion
of their patronage and the rules governing their reimbursement
have not been revisited for more than 16 years.
11. FDR funding for bus operators is outdated.
Whilst we believe the level of funding should be retained, payments
should be more focused on incentivising delivery of the Government's
agenda to increase bus patronage by, for example, linking them
to Local Transport Plan objectives.
12. It is PTEG's strongly held view, therefore,
that concessionary fares subsidy along with FDR and subsidised
bus services represent a network subsidy to the bus operators
which should be aligned with public sector objectives. PTEG believes
that PTEs should be able to specify minimum levels of service
and quality in return for these substantial levels of subsidy.
URBAN AND
RURAL BUS
CHALLENGE
13. Challenge funding has provided very
useful additional resources which have enabled the development
of innovative, tailor-made solutions, particularly in delivering
the Government's social inclusion objectives where the deregulated
market is failing to provide the services that people need to
carry out their day-to-day activities. Many of the solutions have
involved setting up locally based initiative using community transport
organisations, transport co-operatives, taxi buses and shared
taxis. In this way funding has gone directly into the communities
and not to private operators.
14. Much of the challenge funding is geared
to providing capital, which is fine for the provision of vehicles
and interchange etc. But the provision of outreach workers and
the improvement of service levels demands significant amounts
of revenue expenditure. Government needs to acknowledge the downstream
revenue consequences of capital spend eg maintenance. Similarly,
there is also a need for robust exist strategies to ensure that
improvements do not disappear when the funding runs out.
15. There are a number of practical problems
that need to be addressed if practical solutions are to be developed.
These include interoperable ticketing between innovative modes
and mainstream commercial services and a possible relaxation of
the 1985 rules on contracting, especially when voluntary or community
transport organisations are partners.
16. The level of resources currently available,
whilst welcome, can only scratch the surface. The programmes being
developed, particularly under Urban Bus Challenge, need to be
replicated across large swathes of our towns and cities. In this
respect PTEG is concerned about the Government's tendency to channel
new money through challenge competitions requiring "innovation"
rather than supporting more conventional services which may provide
the best means of provision in many cases.
BUS QUALITY
PARTNERSHIPS AND
CONTRACTS
17. During the 1990s all PTEs successfully
developed and implemented bus quality partnerships with local
bus operators and local authorities. In almost every case it was
the PTE that initiated these partnerships. Improving the quality
of bus services has resulted in significant increases in bus patronage.
The A61 Quality Bus Initiative in Leeds, for example, delivered
a 50 per cent increase in patronage.
18. Similarly, the West Midlands has seen
public sector capital investment of over £50 million since
1996 in "bus showcase" projects by which all aspects
of bus travel have been upgraded by bringing together best practice
along major bus corridors. West Yorkshire now has two examples
of guided busways operating as a result of the quality partnership
approach.
19. Over recent years, and often as part
of these partnership arrangements, bus companies have invested
significantly in brand new low floor buses and customer care training
of their drivers. Local authorities have invested in bus priority
measures and provided means of level boarding at bus stops.
20. The legislation governing statutory
bus quality partnerships prevent PTEs from specifying frequency
of service and levels of fares. Buses provide most of the everyday
travel needs of those without access to a car and "quality"
bus services offer a viable choice to those who do have access
to a car. The level and quality of bus services and the extent
to which fares are affordable is therefore hugely important to
the social inclusion agenda. This agenda is clearly not deliverable
through statutory bus quality partnerships. PTEs will continue
to work with bus operators to help deliver the "quality"
end of the bus market but we do not believe that bus operators
are capable of delivering social inclusion objectives.
21. PTE Group believes that the public sector
should be able to specify the bus services it requires in PTE
areas, therefore, and that operators should compete to provide
these services. This would ensure that the public sector maximises
the benefits of its investments and would enable social inclusion
objectives to be achieved in a cost effective manner.
22. This could be a achieved through a bus
quality contract approach. This enables profits from commercial
services to be used to fund socially necessary services, brings
together in a cost effective manner the wide range of separate
PTE/bus operator arrangements (eg for quality partnerships, concessionary
travel, pre-paid ticketing and information), introduces real competition
between bus operators and allows public funding to be focused
on delivering social inclusion objectives. Centro intends to examine
whether bus quality contracts might offer the most economic, efficient
and effective way of delivering bus service improvements in Coventry.
23. One difficulty with the implementation
of bus quality contracts is the time needed to introduce them.
Following all the processes means that quality contracts cannot
be introduced within three years. One major issue is the stipulation
that there has to be a 21 month period between approval by the
Secretary of State for Transport and introduction. This period
is excessive and unnecessary.
24. Despite the significant investment by
the public and private sectors in recent years, bus services in
PTE areas continue to have a relatively poor image and are often
regarded by motorists as a mode of last resort. In a number of
PTE areas, the historic decline in bus use has been halted but
there is little sign of any significant growth in bus patronage
overall. This contrasts with London where the quality contract
approach has contributed to a sustained increase in bus patronage.
25. A comparison of bus patronage levels
in London and the English PTE areas between 1990-91 and 2000-01
shows a very different picture, as shown in the attached graph.
Annual patronage in London has grown by 15 per cent from 1.178
to 1.359 million. Annual patronage in PTE areas has declined by
25 per cent from 1.548 million to 1.161 million. At the start
of the 1990s, bus patronage in PTE areas was almost a third higher
than in London. By the end of the decade, bus patronage in PTE
areas was 15 per cent lower than in London. (Source: DTLR Regional
Transport Statistics, November 2001).
26. The Institute for Public Policy Research
(IPPR) examined issues relating to the provision of better buses
in the UK and published a book on the subject in February 2001.
IPPR could find no justification for there being one means of
delivering bus services in London and a completely different approach
in the major conurbations outside London. IPPR recommended the
use of bus quality contracts in the latter.
27. PTEG is not arguing of itself that subsidy
to the bus industry is too high. Indeed, in comparison with other
European countries it is too low. Nor is this to say that high
subsidies in other countries is necessarily "good" if
this involves structural inefficiency etc. There is no doubt,
however, that fares levels are too high in PTE areas to meet social
inclusion objectives. What PTEG does argue is that the present
means of subsidising bus services is not transparent and is not
related to performance, quality of service or meeting public sector
objectives. If there was greater transparency, it would be possible
to have a sensible debate about the appropriate level of subsidy
to the industry.
BUS PRIORITY
MEASURES AND
THEIR ENFORCEMENT
28. Surveys across all PTEs show that bus
passengers and potential bus passengers more than anything else
want to see reliable and dependable bus services. Bus operators
can only be expected to provide good operational performance if
bus priority measures exist to protect buses from the increasing
and variable levels of traffic congestion affecting many parts
of PTE areas.
29. Bus priority measures are, therefore,
essential, although the "red route" approach applied
in London whereby all traffic, including buses, is speeded up
is also being examined in a number of PTE areas.
30. Bus priority measures and "red
routes" need to be properly enforced and this requires more
attention than it has had in the past. A consensus seems to be
emerging that a combination of non-police resources and cameras
is the most effective means of ensuring this. The forthcoming
legislation that will enable local authorities or their agents,
under a de-criminalised parking regime, to apprehend motorists
for travelling in bus lanes is, therefore, most welcome in this
regard.
31. An increasing difficulty in the provision
of much needed bus priority measures is the political difficulties
of delivering these in the face of opposition from motorists and
frontagers. There is a need for an ongoing commitment from all
those involved including PTEs, operators, local authorities (who
have the Traffic Regulation powers in PTE areas) and police to
engage with local communities to promote the benefits of bus priority
measures and their enforcement.
REGULATION OF
THE BUS
INDUSTRY
32. The Competition Act is making the development
of statutory bus quality partnerships very difficult. On the one
hand, the Transport Act encourages joint working between bus operators
to meet passenger needs. On the other hand, the Competition Act
seeks to ensure that these same operators compete with each other
and do not, for example, agree to charge passengers the same fare
for the same journey.
33. In reality, there is little real on-the-road
competition between bus operators despite PTE areas being "good
bus territory" with relatively high volumes of bus patronage.
In virtually all instances, there is one dominant operator running
the vast majority of bus services. This is most apparent in the
West Midlands where one operator provides 80 per cent of bus mileage.
But the same picture exists in other PTE areas when the bus market
is broken down to district revealing more localised monopolies.
For example, while First have 55 per cent of the bus market in
West Yorkshire, that figure rises to 81 per cent in Bradford and
93 per cent in Calderdale. This lack of competition between operators
may explain why there is no continuous improvement to customer
service that exists in some other private sector marketplaces.
34. A number of PTE areas have little or
no competition for subsidised bus service tenders. The costs of
providing subsidised services have increased by many more times
the level of inflation over the past year.
35. This lack of competition and the virtual
monopoly position enjoyed by operators in certain areas means
that many companies are generating what we consider to be excessive
profits. Research commissioned by PTEG (Bus Operator Financial
Performance in Metropolitan Areas—The TAS Partnership 2002)
reveals that pre-tax profit margins are higher in PTE areas than
elsewhere in the country. In the West Midlands, West Midlands
Travel Limited, which operates over 80 per cent of bus services
in Centro's area, returned a pre-tax profit margin of 25 per cent
during 2000. This profit level, of some £44 million, equates
to the concessionary travel payments made to the company by Centro.
36. The Traffic Commissioners have a key
role in ensuring that bus services are provided in accordance
with their registered details. PTE Group continues to be of the
view that the Commissioners have insufficient staff to properly
"police" that role in a proactive manner.
37. The recent establishment of operational
performance standards by the Traffic Commissioner is welcomed,
as is the intention to sensibly apply these standards taking into
account causes of delay, such as traffic congestion, outside the
control of bus operators. However, we are concerned that the standards
to not adequately distinguish between non-operational delays of
five minutes or more.
38. Given the overriding importance of operational
performance to passengers, we would like to see performance information
on bus routes published as a matter of course by operators. PTEs
publish this information for their financially supported bus services.
PTEs in South and West Yorkshire monitor commercial bus services.
Other PTEs are seeking to work with bus operators to identify
levels of operational performance for commercial bus services.
39. PTEs believe that there would be benefits
to passengers and in other ways if service changes could only
take place at fixed times in the year. A regular pattern of change
dates three or four times a year would seem appropriate. A number
of PTEs have sought/are seeking voluntary agreement to such arrangements.
A system of quarterly changes has been working well in South Yorkshire
for almost three years.
BUS SERVICES
AND SOCIAL
EXCLUSION
40. Mobility is a vital element of social
inclusion. Over the past two decades the growth of car ownership
has led to large-scale changes in the provision of many essential
services, including:
— The growth of out of town centre
shopping, particularly food supermarkets and the loss of more
local shopping;
— More dispersed work place locations
away from traditional centres serviced by bus routes, with many
of the businesses locating there involving multi-shift finishing
not easily served by traditional public transport;
— More dispersed leisure locations
including cinemas, large nightclubs, fitness centres etc, where
"peak periods" of use are when most bus services have
run down or finished for the evening;
— Greater centralisation of health
and training facilities on larger sites often away from main bus
routes;
— The growing night-time economy in
many major cities.
41. As already stated, 85 per cent of all
public transport journeys in PTE areas are made by bus. Improvements
to bus services are therefore essential to improving the quality
of life and well being of many members of the community, by ensuring
access to essential services and opportunities. The bus is particularly
important to the following:
— Young people, particularly those
below the minimum age for car licence ownersahip;
— Elderly people, many of whom are
forced to give up using the car because of infirmity;
— People with mobility problems;
— Women, who remain the major users
of bus services despite large increases in licence holding;
— Unemployed people and those on low
incomes, many of who are forced to take lower paid local jobs
because they do not have access to, or cannot rely on, bus services
to get them to better paid jobs.
42. The above includes many people most
likely to suffer from social exclusion because of their reliance
on bus services. The issues that need to be overcome to provide
these people with a good quality of life include:
— The tendency for many operators to
concentrate their commercial services on main road corridors,
leaving some areas such as housing estates isolated at certain
times of the day and cut off from essential services;
— The lack of vision by operators in
providing bus services to new developments offering both jobs
and services;
— The increasing cost of providing
subsidised bus services to meet social need;
— The increasing cost of travelling
by bus which makes the cost of travel prohibitively expensive
for those most in need in our society and unattractive to those
who do have a choice.
43. With 85 per cent of all bus services
in PTE areas operated commercially, the ability of PTAs/PTEs to
address these barriers and to integrate their bus strategies with
wider social and regeneration policies is extremely limited. Bus
quality partnerships are being pursued in many areas but these
are essentially agreements to co-operate to provide a major capital
investments in the provision of bus services and facilities.
CONCLUSIONS AND
RECOMMENDATIONS
44. The main conclusions of PTE Group are
set out below:
(a) The substantial levels of public sector
funding of bus services in PTE areas should be better focused
and aligned with achieving public sector objectives.
(b) Urban and Rural bus challenge funding
is welcomed but is insufficient to meet needs, and revenue implications
need to be addressed to sustain existing schemes.
(c) Social inclusion cannot be delivered
through statutory quality partnerships because of the legal constraints
on what can be included in such agreements.
(d) Bus patronage in PTE areas declined by
25 per cent in the 1990s compared with a 15 per cent increase
in bus patronage in London over the same period.
(e) The Institute for Public Policy Research
is correct in its view that there is no justification for there
being one means of delivering bus services in London and a completely
different approach in the major conurbations outside London.
(f) The Competition Act is making the development
of statutory bus quality partnerships very difficult.
(g) There is little real on-the-road competition
between bus companies in PTE areas, and many PTEs experience little
competition for tendered bus services.
(h) The costs of tendered bus services has
increased markedly over the last year.
(i) Bus quality contracts offer the opportunity
to use public funding of bus services to meet public sector objectives,
including the reduction of social exclusion.
(j) Bus quality contracts will introduce
the prospect of real competition between bus companies, will be
resisted by many bus companies, and are difficult and time consuming
to introduce within current legislation. The 21 month time period
for their introduction should be reduced.
(k) The only other approach within existing
legislation, would be a new voluntary agreement between the public
sector and bus operators to provide a specific level and quality
of bus network in return for a specific level of public sector
funding. Such an arrangement may not be acceptable to the competition
authorities.
12 April 2002
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