Memorandum by Arriva Passenger Services
Limited (Bus 40)
THE BUS INDUSTRY
Arriva is one of the largest transport services
organisations in Europe, employing over 30,000 people and providing
nearly 800 million passenger journeys a year. We operate buses,
trains, commuter coaches, taxis, waterbuses, ambulances and other
demand responsive vehicles. Arriva is one of the UK's largest
bus operators, with over 6,000 vehicles serving customers in the
North East, North West and South East of England, Yorkshire, the
Midlands, Scotland and Wales. We are the largest bus operator
in London. We welcome the opportunity to contribute to this inquiry;
our comments are arranged in line with the Sub-Committee's Terms
of Reference.
1. SUBSIDIES
IN THE
UNITED KINGDOM
BUS INDUSTRY;
"BUS CHALLENGE"
INITIATIVES IN
RURAL AND
URBAN COMMUNITIES
Viewed in general European terms, the levels
of public expenditure on the provision of bus services in the
United Kingdom are low. The commercialisation of the industry
in 1986 led to a substantial reduction in public spending on bus
services. Over 80 percent of bus services now operate without
public subsidy. A figure of £1.2 bn is often quoted as the
current annual public expenditure on buses. Some 45 percent of
this sum is paid in concessionary fares for passengers who receive
financial support to reduce their travel costs. The costs of tendered
services are also included in the figure; public spending by local
authorities to secure additional services for public policy reasons
is a legitimate call on public funds. It recognises that some
services that are necessary for social reasons would not otherwise
be provided.
1.1 Fuel Duty Rebate
Fuel duty rebate is the only form of public
support for the general provision of bus services; it is an efficient
and easily auditable mechanism. It should not be seen as a "subsidy"
as such—it is, in effect, a tax that is set at a lower level
for bus passengers than for car users.
The rebate of 80 percent of the duty on fuel
used on local bus services has a direct effect on the provision
of bus services, both to secure services that would otherwise
not be provided commercially by operators and to keep fares lower
than would otherwise be the case. The rebate was reduced from
100 per cent in 1994 and we would support a return to this figure
so as to maintain the positive effect that this policy decision
has had. There are arguments about equitable treatment of bus
passengers when compared to both rail and air passengers. There
are also general policy objectives of maintaining the competitive
position of buses in relation to cars. Motoring costs have increased
at a much slower rate than bus fares over recent years and are
predicted to drop by up to 20 per cent in the next 10 years. Bus
fares have to reflect higher wage, fuel and insurance costs.
1.2 Tendered Services
Local authorities and Passenger Transport Executives
(outside London) secure the provision for social reasons of services
that are not provided as part of operators' commercial networks.
Through this mechanism, authorities pay for services or journeys
that would not otherwise operate. This is a subsidy to the passengers
who use these services, and is public expenditure to secure a
service that the authority determines is necessary for social
reasons. The residents of the local authority area benefit from
the provision of additional services, often in the evenings, weekends
and to more rural communities.
The cost of tendered services has increased
in recent years. Increases appear when tenders are re-let at,
for example, three year intervals. New prices reflect changes
in circumstances since an earlier contract was let. Higher specifications
by local authorities (eg new buses), higher wages, fuel prices
and insurance have increased the general cost of bus services
at a level somewhat ahead of general inflation. These cost pressures
will continue. We believe that it is important that local authorities
and PTEs should:
(a) be encouraged to determine the levels
of tendered services against criteria established in their Local
Transport Plans;
(b) be allocated sufficient funds to secure
services;
(c) be encouraged to secure services on a
long-term basis, so as to maximise revised de minimis arrangement
with an increase in the limits imposed on authorities at present
and the abolition of the total limit that an authority may pay
to any one operator.
1.3 Concessionary Fares
Concessionary fare schemes operated by local
authorities provide a direct subsidy to certain groups of passengers
to reduce the fares that they would otherwise pay. This mechanism
secures the public policy objective of subsidising the travel
costs of these groups, using bus operators as the conduit by which
that subsidy is channelled. As the schemes ensure that operators
are neither advantaged nor disadvantaged ("no better and
no worse off"), concessionary fare schemes are not a subsidy
for bus services or operators; they are a subsidy to certain groups
of passengers.
Problems with revenue spending for local authorities
have led to cuts in concessionary fare schemes in some areas where
authorities were previously providing higher levels of concession
than the statutory minimum introduced by the Transport Act 2000.
In cases where authorities have been forced to reduce spending,
the increases in fares paid by passengers who are part of the
concessionary scheme have substantially exceeded the increase
in fares set by operators. This has reduced travel by these groups,
sometimes running counter to trends of growth in other passenger
numbers in the same areas.
Concessionary fare schemes target key groups
(the elderly, people with disabilities, children and those in
education) for whom social exclusion criteria strongly justify
public expenditure. We believe that local authorities should be
assured of sufficient revenue to maintain the schemes that they
believe are appropriate. We believe also that this should not
been seen as "public transport" expenditure, but should
be separately included in authorities' spending assessments so
as to ensure that the delivery of transport policy objectives,
such as bus priorities, is not jeopardised by subsidising travel
costs for defined groups.
Similarly, we are concerned that budgetary pressures
can lead local authorities to seek to reduce the amount that is
paid to operators under the "no better and no worse off"
provisions. This has the effect of passing some of the costs of
securing public policy objectives on to other groups of bus passengers.
We do not believe that this is equitable.
We also believe that there should be a review
of the concessionary fares mechanisms themselves. This could consider
what incentives might be offered to operators to encourage travel
by these key groups. The "no better and no worse off"
provision and pressure on local authority budgets tend to suppress
options for such initiatives.
1.4 Rural and Urban Bus Challenge
We support mechanisms that encourage local authorities,
in consultation where possible with local bus operators, to develop
innovative local transport solutions. The first schemes are being
introduced, and we believe that it would be appropriate to continue
the present arrangements while monitoring the success of these
early schemes. It would not be appropriate to discontinue this
approach in view of the length of time over which it is necessary
to evaluate some of the more novel approaches being developed.
2. RELATIVE MERITS
OF BUS
QUALITY PARTNERSHIPS
AND BUS
QUALITY CONTRACTS
We distinguish here between three types of delivery
mechanism:
(a) Voluntary Quality Partnerships (QPs)
(b) Statutory Quality Partnership Schemes
(QPS)
(c) Quality Contracts (QCs)
The success of the QP approach is well known.
Schemes have delivered high levels of passenger growth. The fundamental
importance of a co-operative partnership between operators and
local authorities and others cannot be over-emphasised. All the
parties to a QP should see some benefits, both from the pooling
of knowledge and expertise and from the delivery of better bus
services, carrying more passengers. Each party will contribute
according to its area of influence, expertise and activity; operators
will deal with vehicles, ticketing schemes, staff training, services
levels and frequencies (etc); local authorities will deal with
infrastructure issues; the Police will deal with enforcement;
other partners can deal with specific matters such as education
transport, environmental travel plans, etc. The complex nature
of the interaction between different factors affecting travel
choice is clear from London, where traffic congestion and the
cost and availability of parking are a significant factor in encouraging
the use of public transport.
The introduction of the QPS concept in the Transport
Act 2000 develops the QP system: operators can be excluded from
the use of new facilities provided by a local authority if they
do not meet the quality thresholds.
With both QPs and QPSs, there is an emphasis
on the whole journey, including both the vehicle and the infrastructure.
This is in marked contrast to QCs, where the emphasis is on the
times, frequencies and fares of buses in isolation. There is no
provision to ensure that QCs are linked to bus priorities. Indeed,
the transfer of decisions about services and networks to local
authorities would remove the clear relationship between operators
and passengers in favour of a structure where passengers' interests
are filtered through local authorities, whose political priorities
may not match passenger needs and interests.
Additional public expenditure would be necessary
to secure a QC regime. Local authorities do not in general have
the resources to manage the design, implementation and monitoring
of contracts; this would be a considerable additional cost. Operators'
bidding costs would inevitably be passed on to authorities over
time, since such costs are always borne by the client base in
the end. Crucially, contracts lead to downward pressures on wages,
with the inevitable consequences that this can have for service
reliability. In Gothenburg, for example, where contracts are let
for approximately one third of the network each year, the local
authority reports that approximately 20 per cent of bus drivers
choose not to transfer to a new operator when a contract changes
hands.
Operators have long-term investments in depots,
vehicles and staff. We continue to invest in our services and
have done so since the passing of the Transport Act 2000, as this
provides a settled policy framework. We believe that the disruption
that would come from the introduction of QCs would lead to a severe
reduction in the level of investment by the operating industry.
Although industry profits are reducing, investment by operators
exceeds the industry's annual profits.
We welcome working with authorities on QPs and
QPSs. We support the provisions of the Transport Act 2000 that
provide for QCs when they are the only practicable way of implementing
a Bus Strategy, and we believe that this is a realistic recognition
that QCs will not generally be an appropriate delivery mechanism.
3. THE IMPORTANCE
OF BUS
PRIORITY MEASURES
AND THEIR
ENFORCEMENT
Reliability is consistently the main priority
for bus users and for the general public. Adequate capital funds
are available to most local authorities to secure greater levels
of bus priority; these funds need to be accompanied by revenue
funding to secure planning, development and enforcement and by
the political will to take difficult decisions to re-allocate
road space in favour of bus passengers. Technology to give priority
to buses at traffic signals is a less contentious but very valuable
benefit. Bus priorities not only produce time savings for passengers
and operators alike, they also improve levels of reliability,
which is more highly rated than pure speed.
The apparently simple issue of bus priority
needs to be accompanied by a clear determination to recognise
the social and environmental benefits of giving priority to bus
passengers. Enforcing traffic regulations in general and bus priorities
in particular is a key feature of the delivery of more attractive
bus services.
As travelling by bus is much safer than travelling
by car, ensuring attractive bus services can also have road safety
and accident reduction benefits.
4. REGULATION
OF THE
BUS INDUSTRY
4.1 European Legislation
A draft regulation proposed by the European
Commission seeks to create grater levels of competition in the
bus operating industry, aimed particularly at those countries
in the Union where markets are closed. The draft Regulation would
affect the structure of contracts for the provision of all types
of public transport services (including ferries, heavy and light
rail as well as buses), including matters such as the length of
contracts and the protection from competition given to certain
large operators in Continental Europe.
Representatives of the Passenger Transport Executive
Group, Transport for London and CPT have a common position in
seeking to ensure that the Regulation, when adopted, does not
have an adverse impact on bus services in the United Kingdom.
Separate discussions at a European level have
been looking at the arrangements for working time in the transport
industry. We believe that the current arrangements for the control
of working time for urban transport are well developed in the
United Kingdom. UK regulations set clear restrictions on the length
of the working day and week. No issues relating to safety or staff
welfare are adversely affected by these regulations, nor, more
significantly, by the locally negotiated arrangements for drivers
that are in place throughout companies such as Arriva. We would
be concerned if greater restrictions on working time reduced the
period of the day for which operators could realistically provide
services.
From time to time the European Commission proposes
other measures to impose additional regulations on the operation
of public transport services in the Union. It is our general view
that such regulations need to take account of differing circumstances
in the different member states where matters such as the length
and structure of the working day put different obligations on
those seeking to provide efficient and effective transport by
bus, tram, train or metro. We work through trade associations
in the UK (CPT) and at an international level (UITP) so as to
seek to ensure that proposed regulations are appropriate in their
effect on services.
4.2 Local Authorities
The actions of local authorities are controlled
by general local government rules, the Transport Act 2000, the
Transport (Scotland) Act 2001, specific regulations in London
and regulations in Northern Ireland. In the UK, Arriva operates
in England (both in and outside London), Wales and Scotland; we
cannot comment in detail on the situation in Northern Ireland.
The Transport Act 2000 and the similar legislation
in Scotland introduced a "Competition Test" by which
the actions of local authorities in implementing some aspects
of their transport policies are subject to scrutiny by the Director
General of Fair Trading. In particular, the actions of local authorities
with regard to the letting of tenders, ticketing schemes and Quality
Partnership Schemes fall within the range of matters to be considered
under the Competition Test. We note that recent guidance from
the DG OFT may conflict with some of the duties that we would
expect local authorities to fulfil when dealing with public funds.
Some local authorities are, for example, advising operators that
they believe that putting together more than one tendered service
so as to achieve economies in operation may not be viewed favourably
by the OFT. This may lead to an unnecessary increase in public
expenditure at a time when local authority budgets need to be
directed towards achieving maximum benefit in securing improvements
in the quality of public transport in partnership with operators.
4.3 The Operating Industry
Bus operators are subject to general regulations
that are common to all companies, covering areas such as health,
safety and welfare of staff, employment law, company law, competition
law, etc. In addition, a wide range of transport specific regulation
affects the freedom with which operators can change their services
and closely controls the operation of services. Some of these
regulations are subject to interpretation by the regulatory body,
the Traffic Commissioners. On behalf of the operating industry,
CPT has drawn attention to the unrealistic nature of recent statements
of interpretation by the Traffic Commissioners about service reliability.
We believe that a rigid interpretation, failure to comply with
which can lead to substantial financial penalties, can lead to
a situation where operators will adjust their services to meet
a set of criteria drawn up by the Traffic Commissioners, which
is at odds with the expectations of our passengers.
We have drawn our concerns to the attention
of the Traffic Commissioners, and we believe that the regulatory
regime will develop to take account both of what is achievable
and, crucially, what is desirable from the point of view of the
passenger.
We look forward to receiving further guidance
form the OFT about the implementation of the Ticketing Block Exemption,
as we believe that it should be possible to ensure that there
are no artificial barriers to the creation of through ticket schemes.
Although the level of interchange between services and between
modes is comparatively small, we hope that the OFT guidance will
allow us to offer additional products to passengers in appropriate
circumstances.
5. THE CONTRIBUTION
OF BUS
SERVICES TO
REDUCING SOCIAL
EXCLUSION
There are complex interactions between social
exclusion and transport. As society has developed, with changes
in land-use patterns and an increasingly complex matrix of trips
to satisfy employment, education, health, shopping and leisure
demands, new types of social exclusion have appeared. As people
live longer, many more people find that it is harder to make trips
that were once easy.
Buses can be a vital tool in supplying transport
where there are large numbers of people travelling on a defined
corridor—delivering people to town centres for shopping,
for example (and already providing about a third of high street
turnover); buses do not necessarily provide the most cost or environmentally-effective
solution where major traffic flows do not exist along defined
corridors (eg out-of-town shopping centres, business parks, etc).
There is no presumption that essential elements
of life are provided through public expenditure (food, water,
clothing and shelter, for example, are only part of public expenditure
as a safety-net). Similarly, it would be unrealistic to expect
the Government to fund unconstrained demand for travel between
all possible origins and all possible destinations. There are
many ways in which social exclusion can be reduced with regard
to essential services; reducing the demand to travel has a major
environmental benefit. In the longer term, encouraging more people
to live in towns will also be important.
In this context, buses already make a major
contribution to the social inclusion agenda, including employment
and shopping trips and greater levels of physical accessibility
through investment in bus fleets. Arriva, for example, is working
with the RNIB on a showcase route to assist people with visual
handicaps; all our timetables match RNIB criteria and we are experimenting
with the DTLR on audible and visual announcements on buses. All
these measures will make travel by bus easier.
As is well known, poorer households tend to
make more journeys by bus than other groups and those in households
without cars use buses up to three times more than those in households
with cars. "Bus passengers" are not, however, a discrete
group as many journeys by bus are made by those who use a car
or taxi for other journeys or who will walk for shorter trips.
Buses are the predominant mode of public transport and almost
a third of the population makes at least one trip by bus each
week.
If buses are to provide adequate facilities
for jobs, education, leisure, health, etc, it is important that
proper levels of bus priority ensure that bus passengers are able
to benefit from increasing levels of reliability.
In summary, the contributions that buses make
and can make to social exclusion are:
(a) providing high levels of transport access
in many low-income areas;
(b) providing a mechanism by which public
expenditure can assist with transport costs for the elderly, people
with disabilities and the young through concessionary fare schemes;
(c) providing high levels of transport access
to town centres and to well-located shopping, leisure, education
and health facilities.
Traditional bus services cannot provide a solution
to all transport demands, and for this reason we believe that
the development of demand-responsive transport solutions in both
urban and rural areas will be increasingly important.
April 2002
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