TUESDAY 21 MAY 2002

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Members present:

Mrs Gwyneth Dunwoody, in the Chair
Andrew Bennett
Mr Gregory Campbell
Mrs Louise Ellman
Helen Jackson
Miss Anne McIntosh
Mr Bill O'Brien
Dr John Pugh
Mr George Stevenson

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Examination of Witnesses

MR JOHN SPELLAR, a Member of the House, Minister for Transport; MR ALAN DAVIS, Director, Integrated and Local Transport Directorate; and MS SANDRA WEBBER, Head of Buses and Taxis Division, Department for Transport, Local Government and the Regions, examined.

Chairman: Minister, you are most warmly welcome. We do have two bits of housekeeping first, if we may. Will members having declarations please make statements now?

Mr Stevenson: Member of the Transport and General Workers' Union.

Chairman: Member of the Rail, Maritime and Transport Union.

Mrs Ellman: Member, Transport and General Workers' Union.

Miss McIntosh: I have an interest in First Group Limited, and other interests.

Chairman

Secondly, we have a slight problem with some of the papers today so the memoranda for this session will be available at the end and not at the beginning. This is an innovation to see that you all pay attention, and questions will be asked at the end. Minister, you have been a busy little Minister today. Would you like to identify yourself, for the record?

(Mr Spellar) John Spellar, Minister for Transport, and I have with me Sandra Webber and Alan Davis.

Do you have something you would like to say to us first?

(Mr Spellar) Yes, on this occasion I would like to, Madam Chairman, because I want to stress very highly the importance of buses in our overall transport strategy. They are the leading form of public transport in terms of journeys per year: 4.3 billion by bus, and normally then the comparison is to say 2.1 billion by rail, but I think it is even more impressive when one breaks that down into 970 million by London Underground, 134 machine by light rail of which a sizeable percentage is the Docklands Light Railway and Croydon Tramlink, and 975 million by rail, of which of course a considerable percentage are suburban journeys in London. The reason I disaggregate those figures is to stress the overwhelming importance of buses in public transport outside the metropolis, and I think we need to bear that in mind in looking at the policy. We have set a target to increase that by 10 per cent over the next ten years. We have also pledged to secure improvements in reliability and punctuality, and we believe this depends crucially on partnership between all the major stakeholders, and in particular between the bus operators and the local authorities. Every one of the key stakeholders wants the bus industry to flourish to attract more growth, to reduce dependence on the private car, and to provide socially useful services. Unfortunately, however, everyone sees the problems from their own perspective and there is a tendency in this industry to pin the blame on others, and you may have seen that in evidence presented to the Committee. Outside London I am trying to bring operators and local government together in a single forum to agree what are the obstacles to growth and how they can be overcome. My own view is that partnership is and should be the way forward but, where problems cannot be resolved through partnership, quality contracts provide an option. A number of successful local initiatives show what is possible in attracting new users who previously travelled by car. Growth figures of 21 per cent on routes in the West Midlands and 48 per cent in Nottingham show what is possible. Overall, taking the success stories together with the poor performers, we have seen a 1 per cent increase in patronage last year. That figure is not brilliant but we should see it in the context of years of absolute decline, and it does mean we are just about in line with our 10 per cent target but we could certainly do better than that. We are also keeping a close eye on the application of the Competition Act which both operators and local authorities think poses problems. It is not our intention that perfectly sensible arrangements to provide co-ordinated timetables and ticketing should fall foul of the law. We feel that some of the operators worries are unfounded, and if they were to talk to the Office of Fair Trading they could find a way round perceived problems. The Office of Fair Trading assure us that they are receptive to such approaches, as the Committee will be aware from the letter from the Director General which has been passed to yourselves. We are all aware of services that have been withdrawn both from commercial and subsidised routes, but pinpointing why this has happened and just how much of a problem it is, is more difficult. For example, bus operators point to the number of new registrations which they say offset withdrawals. I think we also all recognise there are a number of pressure points in the system. Driver shortages, particularly in some areas of the country, are examples that cause withdrawals but also if wages are increased to attract more drivers we have seen tender prices going up, although that may not be the only reason for increase in tender prices, and subsidising authorities are facing difficulties and hard choices. Now, the revenue support settlement this year took account of higher tender costs but more innovative solutions, such as demand responsive transport, may also hold the key. There are plenty of opportunities as well, both local authorities and the bus industry have made considerable investments in infrastructure and vehicles respectively, and government funding is at its highest for years. We would like to see local authorities take advantage of that funding to press further on bus priority measures. New technologies also would help provide better information about what services are available and real-time information at bus stops. People, as we are all aware, are far more likely to use buses if they can get accurate and up-to-date information about services. I think it is also important that, however much money we spend on the services, if people feel insecure or uncomfortable on the services because of the behaviour of other passengers, they are less likely to use them, so tackling bus security in its widest possible sense is also important in restoring public trust in bus services. One of the initiatives that is taking place there is in London and, while London is a different situation, we are fully in support of the Mayor's objectives in improving security on the buses, and particularly with Operation Seneca to tackle bus crime and some of the follow-on programmes from that. We also recognise, however, that the costs involved are high compared to other metropolitan areas. That, Chairman, is an introduction on some of the issues that we are addressing at the moment with regard to the bus industry.

That was a good gallop round the course, Minister. I think what would be interesting for us, since you mention the difficulties with the Competition Act, particularly because having taken evidence last week I am not sure that the Committee is convinced that the operators will get quite the clarity of direction that you seem to think if they talk to the Office of Fair Trading, is if you can tell us if you really believe that co-ordinated services are essential to provide a quality alternative to the car.

(Mr Spellar) I think in many areas they are extremely important: in some areas essential. What I think the letter from the Director General of the Office of Fair Trading does is to open up the opportunity which I think the bus operators and the local authorities should take up to engage in dialogue. I do not necessarily believe that the letter is the solution but I think it is a welcome move and it does take us somewhere along the road to being able again in this industry at least to ascertain what we are disagreeing on. That is one of the difficulties I have in this industry at the moment, and it is why I am calling the various operators together to a policy forum on 1 July, having had a lot of staff work undertaken before then. We may not agree on solutions but at the moment there is not even agreement on the problems.

I am sorry, that is all very useful but can I bring you back to the really important point which is the Competition Act? Whatever we say here there are lots of local authorities and bus companies who are quite convinced that they cannot co-ordinate their service frequencies. Would you be prepared to seek an exception from the Competition Act for service frequencies?

(Mr Spellar) The first thing I want them to do is approach the Office of Fair Trading on an informal basis so they are not caught with the ten thousand pounds or so cost that is involved, because what the Office of Fair Trading say to me is that, in many cases, when they are being cited as the obstacle to making a number of improvements, they have never even been approached on either an informal or formal basis. I have very real experience of correspondence with a number of Members of Parliament by a municipally owned bus company, where the chief executive of that bus company was citing the Office of Fair Trading in support of his position about not being able to cross-subsidise services, and we even got to the point where I got a clear direction from the Office of Fair Trading that this would not provide a problem, and he was still claiming that this was --

We do not have to be coy about this, Minister. Which company was it?

(Mr Spellar) Nottingham, and I think the chief executive is no longer in the employ of the bus company. It may be, however, that it will still be the case that the competition regulations and their interpretation by the Office of Fair Trading may still provide a difficulty for bus operators and for local authorities in achieving their objectives on behalf of the passenger. At the moment my point is I am not clear that that is the case, and I really want the bus operators and the local authorities to be pressing these issues in order either to get an agreement or, indeed, to be able to say that they have not been able to resolve this.

I think perhaps in that case I will draw your attention to what Mr Vickers said to us last week: "Perhaps I could put that into the context of the block exemption in the Act. Under the Competition Act, which we have the duty of applying" - he is talking about his own office - "[the Act] has prohibitions on, among other things, anti-competitive agreements, so operators getting together to agree on a price or to agree on how much capacity to put on the market or... to agree on timings, as a general proposition would be an infringement of the law which we have the responsibility of enforcing". That is Mr Vickers. I would have thought that was quite clear, would you not?

(Mr Spellar) Well, it says "operators getting together". It does not say operators and local authorities, or passenger transport executives reaching an agreement that would maximise capacity and convenience for passengers, and it might well be that if you had operators colluding on something that was just in the interests of the bus companies rather than the interests of the passengers --

That was not the question that was put to him. It was made clear that it was the interests of the consumers which was paramount.

(Mr Spellar) But the point I am making here is whether it is a case of operators in collusion as opposed to the public interest, the passengers' interest, being represented by the local authorities in order to be able to achieve the best combination of actions to help the travelling public.

Well, we were asking him at one point about frequencies and he went on to say, "... if, for example, you and I were to agree that you go on the hour and I go on the half hour, among other things that would entail an agreement that we would each supply one bus per hour and I think that is highly likely to infringe the law" -- timing, frequencies, the things we were raising with him which are very important and, frankly, when we asked him did he really think he would stand in the rain for half an hour to wait for a second bus, his evidence seemed to be a little specialised - in other words, rather relying on anecdote than fact.

(Mr Spellar) We want them to rely on fact and, as I said in a number of cases, the difficulty that we have come up against when we have been talking with the local authorities is that the bus operators say that they are precluded from doing this and we then talk to the Office of Fair Trading, who say, "But nobody has ever even raised this with us". If we get to the point where this is raised with the Office of Fair Trading and we then have systematic advice which we would generally agree would not be in the interests of the travelling public for the sort of reasons you are describing, then obviously that is a matter that we have to address. At the moment, in this industry we do not have a clear base case as to what is the problem, and there does seem to be a lack of communication between the various agencies --

Well, that might be a matter you can take up with the office -

(Mr Spellar) I am not talking about your office: I am talking about the Office of Fair Trading, local authorities and, indeed, also the bus operators.

Chairman: I know exactly what you are saying.

Andrew Bennett

Is not the blunt fact that the Office of Fair Trading has done nothing for the travelling public as far as buses are concerned that is useful, and it has done a huge amount that is not useful? The best thing is, is it not, to kick them out of this area altogether by getting a piece of legislation quickly which says it is none of their business?

(Mr Spellar) I think they would argue that you do not want a situation where bus companies are actively colluding with each other in order to look after their interests as opposed to the interests of the travelling public, and it is not inconceivable that that could happen. I think we do have to be --

They have not stopped the industry contracting to basically four major companies, have they?

(Mr Spellar) Whether that is a natural process within the bus industry is one that I think it might be well worth examining and, indeed, whether this has been the situation going right the way back to transport in London in the 1930s.

Chairman

The original 1985 Act is very clear and I can tell you because I suffered many hours in that Act. The original intention was to produce a great deal of competition with many companies, and not many of us would agree that that was the situation today?

(Mr Spellar) And the question that I am posing, to which I do not have the conclusive answer, is whether there is a natural evolution that takes place in bus operation which tends if not to monopoly supply at least very much to dominant supply, and I think we are seeing that in considerable numbers.

Chairman: And the big take away from the small, and the smart take away from the others.

Dr Pugh

So if I understand you correctly, I think I have listened quite carefully, it is the presumption of the Department of Transport that an integrated system involving a number of bus companies, if orchestrated by a passenger transport authority, would not be a breach of competition regulation but if organised independently by bus companies without any cognisance of the passenger transport authority might be?

(Mr Spellar) There is a certain danger in that. In other words, if it is being organised by the companies there is a danger of that being a collusion against the public.

But if orchestrated by the passenger transport authority, any passenger transport authority, your view is there would not prima facie be an objection?

(Mr Spellar) With a degree of visibility and transparency which would then ensure that it was quite clear --

That is the view of the Department of Transport but are you assured that is also the Office of Fair Trading's view?

(Mr Spellar) No. This is precisely why I am saying that I want the bus companies and the local authorities to be pressing these issues with the Office of Fair Trading in order that we can then have a clear view as to whether there are real difficulties, or whether people are ducking before anyone throws them out.

So there may be a difference between what the Department of Transport's view is and the Office of Fair Trading's view?

(Mr Spellar) What we need to do is test this against real cases and this is the difficulty that we have had up till now with both the operators and the local authorities saying that they have these difficulties and then getting hard cases in order to substantiate a broader argument. It is a very frustrating part of this process.

Chairman

I want to move you on to what Cheshire county said, because they said very specifically there was very little on-the-road competition, and when it existed it caused enormous disruption to the services. We got evidence from Cheshire, who are suffering enormously on this basis. Is this a surprise to you?

(Mr Spellar) I was not aware of the experience of Cheshire. I will certainly have a look at the evidence.

But it is not one county: it is many shire counties, is it not?

(Mr Spellar) I do not know.

But evidence must have been given to you because of the standard spending assessment?

(Mr Spellar) But, on the other hand, for example with Nottingham when I was having these arguments put to me, when I tested them with the Office of Fair Trading I then got a ruling from them that, indeed, the company were not precluded from the actions that they were wanting to --

Mr Stevenson

Very quickly on this issue because it does seem to me to be crucial to our considerations, is not the reality, Minister, of what we are facing in this regard that on-the-road competition has failed? In fact, the evidence is overwhelming that it has been damaging - not just a failure. The Office of Fair Trading has studiously ignored this situation. Even though you would argue that they have not had a referral made to them they have known what the situation is, and should we not now, moving as quickly as we can to competition if that is necessary, be involved in a tendering process for services rather than on-the-road competition?

(Mr Spellar) That is one option that is, of course, open under the current provisions and local authorities are able to move through the various stages. We can argue about the timescale of those stages as to whether they want to undertake quality partnerships with the bus operators or, indeed, whether they want to apply to introduce quality contracts. Even tendering processes are not without difficulties and you will know, for example, that the Transport and General argue that the tendering process tends to drive down driver's wages although natural market forces are operating in the opposite direction. So there are a number of options open to them at the moment.

Miss McIntosh

Minister, I think you can detect from the Committee that the evidence we took from the Office of Fair Trading was anything but clear. Now, you used the word "collusion" and I put it to you that what you or the Office of Fair Trading might think was collusion was actually a very good thing for passengers, such as co-ordinating timetables and co-ordinating frequencies, so rather than having two buses come on the hour you could have one on the hour and one on the half hour. Are you saying that is collusion?

(Mr Spellar) No, I was not saying that at all. Indeed, sensible co-ordination in order to provide the most effective and the most frequent service for passengers may well have considerable advantages, and that would be sensible co-operation. In most cases it would probably be helpful if that also had an involvement of the relevant local authority. What I want, therefore, is, where sensible arrangements are being arrived at locally, for those to be run past the Office of Fair Trading and if there is then a pattern of difficulty emerging then I think we need to look at that. At the moment I am unclear, from what the operators, the local authorities and the Office of Fair Trading are saying to me, where the balance of argument lies and where the balance of fact lies in this. I fully understand the Committee's frustration - probably even with my replies. That mirrors my frustration with the very unclear picture, and partly that reflects very varied practice across the country.

Might you amend the Competition Act, if that was necessary?

(Mr Spellar) I have to look at what testing the system would throw up, and then at possible remedies --

Chairman: We will give you some very clear recommendations, Minister. That will help!

Mr O'Brien

Following that and that fact that you made the bus service a flagship in the 10 Year Plan, congestion charging is not working as it was planned in the original stages and obviously the main competition to buses is the car. What is your Department doing to encourage local authorities to take up the congestion charging programme as set out by your department?

(Mr Spellar) The legislation that enables local authorities to introduce congestion charging, slightly different legislation between London and the rest of the country but let us put the London scheme on one side at the moment, provides an option for local authorities to introduce congestion charging if they believe, after consultation with their businesses and residents, that that is an effective tool for traffic management in their area, and also obviously there is an income generated which could be used towards transport. That is very much for local authorities to examine and very much for them to evaluate their local circumstances and then to put a scheme to the government. Now, they are not necessarily looking in the same way. Bristol, as far as I can recall, is looking at a entry toll coming in on the main highway or highways into the city. On the other hand, Nottingham is looking at a workplace charging scheme of charging for car parking space. There has been a fairly active dialogue, I think it is fair to say, with them and some local industry, including one major employer, three quarters of whose car park is in the city of Nottingham and a quarter of whose car park is in an adjoining borough, and there are differing views between Nottingham and adjoining boroughs on that, and I am awaiting the outcome, at the moment, of those debates.

One of the concerns expressed by local authorities is that, before they could introduce a scheme, they would expect to see improvements in bus services and in the frequency of buses. The bus companies are saying that that would be uneconomic and that they would be running those buses without the benefit of car drivers taking part in that exercise. How do you intend to help local authorities over that difficulty?

(Mr Spellar) It would be open to them to make a bid on that in their application for local transport plans in order to be able to synchronise rather than have one following another, because I very much take your point that in order to introduce such schemes you cannot have too long a delay between the improvements in public transport that will be necessary in order to carry the numbers of people --

Have there been applications for grants from the Transport Department?

(Mr Spellar) Not that I am aware of from any of those authorities.

(Mr Davis) The provision for local transport capital spending has been doubled following the introduction of the 10 Year Plan, and all local authorities have to draw up bus strategies which set out the measures they intend to take to encourage bus use in their areas, and the government would expect a good deal of the funding that has been provided to be used to fund those measures to give priority to buses in a way that does not cause undue interference to car drivers and that sort of thing.

Are we addressing the right point here? What the Minister is referring to with the transport grant is capital funding; what local authorities are looking at is revenue funding so they could help to overcome the void between introducing any congestion charges and the transport charges. I think we are not addressing the right point. Have you any comment to make on the fact that it is a revenue-based problem that is facing local authorities on this issue?

(Mr Spellar) Local authorities do also shape their bids in a way which can help in moving expenditure from revenue to capital and looking at how they can operate that. Also, with a number of these schemes, in order for them to be effective even within the current regime bus priority measures and expenditure on those are very significant. As you know, this is one of the causes of complaints from the bus operators as to some of the delays in increasing patronage.

Finally, can I put it to you that you said in your opening that quality contracts are a significant factor in introducing bus services or additional bus services. Do you agree that the way out of this impasse would be quality contracts so that commercial operators would co-operate but local authorities would have to become involved, and the only way forward would be quality contracts?

(Mr Spellar) I think we want to see local authorities pressing further on quality partnerships and, in the event that that route does not work, then to look towards quality contracts. I am not in any way rejecting the quality contracts route but we really do think that the debate and the discussion needs to be taken a bit further at local level. As I said, it is back to this dilemma I have that I think many of these things need to be tested more rigorously before we are clear as to what the next step is.

Mrs Ellman

You said to us at the beginning of this session that you recognised the major form of transport outside the metropolis was by bus.

(Mr Spellar) Public transport.

Yes. Yet the targets you have for increased bus usage could all be met by London itself. What are you doing to change those targets?

(Mr Spellar) While you are absolutely right and there has been a significant increase in bus usage in London and most of that increase, or nearly all of it, has been within London, what we are also looking at is, firstly, arresting the decline in other areas. To some extent that has been part of a natural process as car ownership levels in some areas, the north east springs to mind, has started to come closer to the national average and, therefore, matters have levelled out. But we are not satisfied with that and that is why we are looking at bus priority routes, for example, and I gave a couple of examples but there are others; also guided busways. In Leeds we have seen something like a 50 per cent increase in utilisation; in Bradford we opened back in January, as I recall, so it is too soon to get the figures but I think the early indications are encouraging. We want to be looking right the way across and I think we want to be accelerating that process of looking at where we can usefully get in bus priority measures in order that we are seeing right the way across the country and not just at the peculiar situation in the metropolis with an increase in the population of half a million in the last ten years and a big increase in employment. We have to look at this in a much wider context.

That is rather vague, is it not? When Mr Rickett gave evidence to us on the Ten Year Review he said the government needed to review the bus target and he said the Department was improving its model. What did he mean by that? What you have just said to us is creditable but very vague.

(Mr Spellar) We have the measures which will enable us to meet the targets but we want to go further than that, and I have to say that looking at the bus operators outside London they are not just saying they can tread water and London will make up the increase and hit the government's targets; I think they are being more ambitious than that. In a number of cases they are trying to grow the market and, indeed, are pressing us as to whether local authorities can speed up the process of bus priority measures. We are also putting money through a whole number of local transport plans into much better interchanges of buses. I opened a £5 million project in West Bromwich a month or so ago, which is partly about making it more convenient for using buses and with information systems, but also about making it more comfortable - that you are in the dry and you have other facilities - and really working to change the image of the bus as well. There is a lot of work still to be done but there has been quite a bit done already.

What about being more precise? The Social Exclusion Unit says we should look at accessibility to key facilities like employment, health care and leisure activities for people who we might regard as socially excluded. Are you going to look at any of those targets?

(Mr Spellar) I think that is a slightly different area. If we are looking at volume then obviously it is particularly the key showcase routes into the city centres which are handling that, but there is a second issue which is also extremely important which is about the question of peripheral routes in peripheral areas. Part of what I was mentioning with regard to security on buses is enormously important in that regard.

What about the things I have mentioned? Do you accept those objectives? Accessibility of people to get to work, to health care?

(Mr Spellar) I was coming on to those because with health care, particularly as we have seen consolidation of health facilities both in hospitals and even in primary health care facilities, access to those is important. One of the issues we are pressing with the Department of Health is that access to transport should be a significant consideration in the location of these facilities, so it is not just at our stage about providing these facilities; it is where there are existing routes.

How are you going to measure whether that is achieved?

(Mr Spellar) I think that is partly, obviously, about numbers but it is also very much about response from local authorities who are particularly concerned about these areas, and this is why I mentioned in my opening statement the number of routes that are cut back each year. We are trying to get to the bottom of that data. I think it is a very mixed picture across the country as to whether some of those routes are no longer viable and whether a bus is the most appropriate mechanism, or whether some form of shared taxi service would be more effective. We need to be clear on that and on whether there should be re-allocation of routes in order, for example, to cater for the fact that health facilities have moved or that one supermarket has closed, or local shops have closed and people need access to a new supermarket.

How are you going to measure whether this is achieved? These are all things we want to see happen but have you got any way of measuring whether they are achieved?

(Mr Spellar) It is not so much having a global measure of that which I think would be fairly difficult: it is very much the interaction with the local authorities and the representations that they are making through the Local Government Association as to whether the system is working or not. That then goes back to the point that I made earlier on the need to get an agreed database or an agreed information base concerning the situation in the industry, with the bus operators and with the local authorities --

Chairman

Surely your Department has a model which it uses? You are not telling me, Minister, that you do not have an agreed sensible model already on matters like bus usage? After all, you yourself made it very clear that you are increasingly negotiating with local authorities for extra money to provide those services, so you are not telling us you have not really got in the Department a model that gives you some information on which you can take these assessments and then answer Mrs Ellman?

(Mr Spellar) No, but, on the question of numbers and volume, then you can have a model on that.

You can have or you do have?

(Mr Spellar) We do have, but on the question of many of these which are about areas with low levels of usage but extremely important access to all the facilities that Mrs Ellman was identifying, it is very much a case-by-case issue at local level, and indeed these are the areas we are exploring with local authorities on the extent to which these services are the most appropriate - for example, whether it is better to have a ring-and-ride service in some of these areas or to have a scheduled route.

And that decision would be based on what? Your negotiations with a local authority?

(Mr Spellar) It is also about the --

It would not be on numbers, because you made that quite clear.

(Mr Spellar) Sorry, it might be based on discussions as to whether a particular bus route is viable in the first instance and then whether it is worth retaining, because in a number of areas I think there would be agreement that a bus route may not be in any way still viable.

But the point Mrs Ellman was making is the very opposite. She was referring you to the Social Exclusion Unit's evidence and the fact that they have given us very specific evidence that the failure to take into account the cost to the Health Service and to employment of a lack of decent transport system is absolutely fundamental, so you are not looking at which ones you can take away, but how you can expand.

(Mr Spellar) You may also be looking at how you can reallocate, because employment patterns have changed enormously over the last ten years. A considerable number of enterprises have closed down: in other cases new centres have opened up. I mentioned retail and it is the same with health facilities; there is a changing pattern. One of the questions is the extent to which the industry responds, and one of the industry's concerns with regard to too rigid a pattern is the extent to which they can then respond to the changing pattern of demand.

Mrs Ellman

Can I bring this back to the people - people who might find they have a job but have difficulty getting there? Are you trying to evaluate how much that system is being improved? Is that built into your assessment?

(Mr Spellar) Yes, we are certainly looking at that and are very keen that that should be looked at. All I am saying is that it is a question of whether a scheduled bus service is necessarily the most appropriate mechanism.

I am not asking you about the means to do it; what I am trying to find out is whether these things are part of your evaluation and whether you are going to be assessing how many of these issues will be addressed. The question of the needs by which they will be addressed is a matter for local authorities.

(Mr Spellar) Yes, very much so, and for this reason: along with by-passes, and probably exceeding by-passes, the cutting-back or the trimming of peripheral bus routes is probably the greatest source of complaint from Members of Parliament to me as a Minister of Transport and has been ever since we took over in June. This is precisely why I have been pressing both the bus operators and the local authorities in order to try and get them to argue out and clarify the underlying situation that they are dealing with. I do have to say there is not as yet an agreed view as to what is happening. I think one of the reasons as expressed to me by a senior member in local government is that there is a very mixed pattern across the country between different local authorities and different bus companies. It may be that the evidence that you have taken will clarify that and, as you rightly say, there has been the work of the Social Exclusion Unit which we are incorporating into our thinking.

Chairman: I do not think we want to go round and round the same point.

Mrs Ellman

About 30 per cent of bus operators' income comes from public funds. Do you think the public get value for money?

(Mr Spellar) Again, this is variable, and an issue that the local authorities are pressing on us is the general nature of some of the subsidies on the fuel duty rebate or the concessionary fares and whether, if those were more specifically targeted in order to achieve certain route coverage, they would be more effective. To some extent that slightly implies that there are routes that are highly profitable and from which therefore there is money within the system which, if re-directed, would enable some of these other routes to be profitable.

Chairman

Not cross-subsidisation?

(Mr Spellar) Cross-subsidisation within the system, as long as it is not predatory, is in accordance with the regulations of the Office of Fair Trading which is exactly how we got back to Nottingham and the problems they had.

Mrs Ellman

Is there a case for local authorities purchasing buses and running the services where tenders are very expensive and where there is not any competition?

(Mr Spellar) It is an issue that I think they have been looking at. 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. There are, as you know, a number of existing authorities that still have arm's length bus companies but I think there is a serious question as to whether the start-up costs for that might be prohibitive, or indeed as to whether in a number of those areas there may be alternative operators. You remember I said that it is not necessarily a case of monopoly but there may well be a dominant supplier with other suppliers operating who might then step in.

Is the Government idealogically opposed to local authorities running public services in those circumstances?

(Mr Spellar) No; we look at what works. I have merely posed some of the obstacles on the way given the situation we are in.

Miss McIntosh

Minister, do you think it is confusing that concessionary fares are so diverse between the different local authorities?

(Mr Spellar) I think there is some scope for confusion but I think also we come up against a fundamental dilemma that local residents are able to vote for the sort of pattern of provision. We have a national minimum but, if local government is to have proper focus and meaning, then there are considerable advantages in local authorities, if they have the agreement and the support of their local communities, being able to make different provision for different residents, depending on their local services and the priorities they want to allocate according to different services.

On the question of accessibility and stability of services in rural areas, particularly for the very old and very young, are you concerned at the cost of changing buses leading to payment of an extra ticket and the additional charge of taking a taxi as part of a journey?

(Mr Spellar) We are concerned generally about a number of the issues in rural areas which is not necessarily, by the way, just maybe the sort of traditional image of rural areas. Many, for example, of the pit village areas qualify for the rural bus challenge precisely because their problems are very similar to those maybe of some of the more traditionally viewed rural areas, and that is precisely why we have quite significant sums of money in the rural bus challenge. We are looking all the time at evaluating what sort of service best achieves the objective. The objective is mobility: access to services and broadening people's opportunities and mobility. The mechanism by which we achieve that may be scheduled bus services; it may be provision of other services.

Chairman: It is always very helpful to have these enormously broadbrush expositions of views but I wonder if I could ask Members of the Committee - and perhaps even you - if we could have a little short and sharp concentration on the question that is being put.

Miss McIntosh

You mentioned in your introductory remarks the withdrawal of services, and you now mention some new schemes that have come in through the challenge scheme. Would you agree that there are two issues: one is bus services within an urban areas - for example, York - and one is the rural service from York to another city like Wetherby, and that the danger of the challenge scheme you have introduced is that, while it might lead to new services being introduced, it has led to the withdrawal of some very good services which have been discontinued?

(Mr Spellar) Yes. There is always a difficulty that an advance in one area may set up sometimes some perverse results. For example, I think that the Member for Epsom has previously raised issues about the competitive nature of the London bus service as it borders on his constituency and the impact that has had on other services, so I accept that. That is precisely why we have to look at what we were intending to achieve, what has been the outcome, whether it actually achieved the objective as opposed to the mechanism, because the mechanism is not the key issue - it is the objective we are trying to achieve, and therefore whether we need to refine the service so we are giving the right signals and the right support in order to achieve that outcome. I do not believe, firstly, that you ever achieve that in one go. What you do is you evaluate the evidence and then move on to improving the scheme.

One of the objectives must surely have been stability of service - that you do need a certain level of stability in rural areas?

(Mr Spellar) That can certainly be desirable as long as that service is meeting the needs of the residents in that area, and we do see on some routes increasing numbers and in some we see decreasing numbers for a whole number of reasons, be they car ownership or changing attractions in the points people are wanting to go to.

Mr Stevenson

Coming back to quality partnerships, we are told that something like 20 per cent of all routes, mainly in major conurbations and urban routes, are subject to partnerships and we are also told by ATCO that they commissioned a study suggesting that about 20 per cent of the remaining 80 per cent could be suitable for quality partnerships. If that evidence is credible and near the mark, what do you think is going to happen to the other 60 per cent?

(Mr Spellar) I think those are areas where the local authorities and bus companies may decide that the service is being appropriately delivered by the commercial companies, and they may believe that there is not a requirement to have that further level of agreement, but again this is where the local authorities will be looking at the needs of their communities.

Is there not sufficient evidence developing to suggest, as evidence we have taken suggests, that there are a number of what might be termed star performers in quality partnerships but that there is a really large second division of services that are benefiting from no more than new buses here and there, which probably would need replacing anyway?

(Mr Spellar) I would not necessarily dismiss those; new buses are welcome. What we are encouraging is the development of those partnerships on both sides - with the operators looking at how they can grow the business but with the co-operation of the local authorities, particularly in terms of bus priority routes. I think there is sufficient evidence that in a number of areas local councils have been reluctant because of opposition from either householders or frontage business frontages along the routes, but there are ways we can look at where this has been successful and where there has been sufficient benefit for the residents, for example in provision of additional bus stops to provide a better service for those residents who will be affected by the bus priority route, or at how parking can be provided for shops, or at a degree of flexibility on the parking. Those are important elements in moving that along and that is certainly what we are trying to encourage local authorities to do.

We are told by bus companies that quality partnerships have led to increases of between 20 and 30 per cent in ridership in some instances. If that is the case yet we have seen no overall increase in bus passenger ridership outside London, does that not mean that quality partnerships outside London, of course, have massed a considerable deline in overall bus ridership?

(Mr Spellar) I think what we have to look at is, up until last year, there had been a steady decline taking place anyway, and quite a bit of that running parallel to increased levels of car ownership. Also, there are changing travel patterns - you do not have 30,000 odd people now going into the Austin works at Longbridge; there is a much more dispersed pattern of travel which inclines more towards car use, and I think there have been a number of successes which we are hoping will arrest that trend. As I said earlier, a one per cent increase would enable us to get the 10 per cent over ten years but we are not satisfied with that and are not complacent. That is precisely why we are looking at developing the bus service further.

You would accept that outside London there has been a significant decrease according to latest statistics for 2001 in bus ridership overall?

(Mr Spellar) Yes. Equally though, outside London there have been very wide variations. I think the north east has shown a decline; West Yorkshire showed something like a 5 per cent increase over the last year; and West Midlands is either stable or has a 1 per cent increase. What we need to do is look at the factors underlying these variations to see what is working and what is not.

Do you think that quality contract is a last resort?

(Mr Spellar) I think we would want to see quality partnerships tested before we wanted to move further on quality contracts.

A last resort?

(Mr Spellar) A further stage.

Quickly, on challenge fund initiatives, it has been suggested to us that the rural bus challenge and the urban bus challenge are dominated by two characteristics. One is that they are short term so what happens, particularly in terms of the rural bus challenge, after three years and, secondly, an enormous amount of local authorities' time is spent putting these bids together and four out of five are not successful anyway. Would it not be better for government to get rid of these challenges and the enormous amount of expensive time that is being wasted in putting them together by local authorities, and incorporate this resource into the local transport plan bid?

(Mr Spellar) I always have a concern about time spent in putting together bids - not just here but elsewhere - and am certainly prepared to look at that aspect of it. On the other hand, I think we have to say that both urban and rural bus challenges very much focus on these particular areas of difficulty that have been rightly identified by the Committee and others, but equally I think that, while schemes should not necessarily be completely cut off, you do have to build in time limits so that you evaluate what is working and what is not, because one of the objectives in some areas must be to try and move up to the critical mass which makes projects self-sustaining. You do need to re-evaluate. If you are still running well under your estimated capacity and not achieving the numbers you hope to achieve, you do have to question whether that is the appropriate service, and then you should look at the other issues that Mrs Ellman was rightly drawing attention to about ensuring access to a wide range of facilities and, also, the broader costs to the public purse of people failing to get access to those facilities.

Dr Pugh

Can I briefly take you through four distinct areas, starting with customer service withdrawals in certain parts of the country? It has cost £100,000 to £200,000 just to replace buses being dropped by companies and reinstated. Does the Department of Transport keep figures for the whole country on the cost of replacing routes that get dropped, and are these figures built into the 10 Year Plan?

(Mr Davis) We do not keep figures ourselves but we rely on a survey carried out annually by ATCO which has that information on increasing tender costs and also on service withdrawals, so we draw the information from ATCO and we would hope to draw it increasingly from the bus strategies and the annual progress reports we get on the transport plans.

Moving to tax exemptions in the budget for employers who encourage their work force to use public transport and buses specifically, these do not apply to park-and-ride schemes which are a hybrid journey for many people. Does the Department of Transport favour exemptions for park-and-ride schemes as well as bus services?

(Mr Spellar) I require notice of that question. I shall look into that one for you.

No policy on that then.

(Mr Spellar) I did not say we did not have a policy; I just said I will need to look into it.

Please do. On bus priority lanes, do you have a notional target for success for these? It cannot be in terms of the amount of red tarmac about; it must be in terms of the people transferring from car to bus. In some areas like Nottingham where there is a lot of red tarmac, what has happened essentially is that cars have been reduced to lesser areas to drive in. Is there a target for success for a bus lane scheme, and how is it evaluated?

(Mr Spellar) We look at the increase in the numbers using the scheme. As I indicated, Nottingham is something like 48 per cent, Birmingham 21 per cent, and other routes are in the high teens.

Are these the kind of figures you are looking for?

(Mr Spellar) Yes. Some of these bus priorities do not have to be for great lengths. Quite often it is to do with particular junctions and mechanisms for getting past and through those junctions, and they can have a considerable effect. Ipswich was an example of achieving very good figures as a result of that. We are slightly concerned at the delays in introducing a number of these schemes, and we are looking at how we can speed that up.

When will you bring forward regulations for decriminalising bus lanes outside London?

(Mr Davis) Very shortly is the answer - though Committees hate that sort of answer! We were hoping to do it in May; it may slip into June.

Is it essential that parked cars are banned from bus lanes, bearing in mind the Minister's remark that if someone stopped in a bus lane to pick up a paper there is no problem?

(Mr Spellar) I did not say that but I did say a lot of it is to do with time of day and with some degree of sense on that. The reason I put that was precisely the issue I raised earlier, which is there was considerable resistance from frontages, whether householders or businesses, to the introduction of bus priority. If that is handled sensitively and properly then I think that can be overcome. If, however, it is handled bureaucratically and insensitively then I think it merely fuels the opposition, and I think we have to look at the outcome, and how we are going to achieve a better system of bus priority.

Finally taxi buses, which are a norm in some countries. Is there any future for them in this country on registered local services?

(Mr Spellar) I think I have indicated on a number of times, sometimes to the frustration of the Chairman, that there are a number of flexible responses that we ought to be looking at in some areas which may fit the needs of those areas better and will achieve our objectives of mobility within those areas, which may be scheduled bus services but need not necessarily be according to local circumstances. It is not that I am looking for a cop-out on this at all; I am looking at what will most cost effectively achieve the desired mobility of communities in these areas.

Helen Jackson

Moving to bus priority lanes, if bus priority lanes are one of the ways that the bus operators believe we will increase bus passenger numbers, what action are you taking with local authorities or passenger transport executives who are not moving fast enough, particularly in urban areas, to get on with bus priority measures?

(Mr Spellar) We are pressing them on this.

What does "pressing" mean?

(Mr Spellar) It means putting to the local authorities that there is concern at the delays that are taking place, and we need to be pressing them harder on this.

When government presses local authorities it tends to use either a carrot or a stick or both, so what proposals are there, if any, either in terms of penalties for urban areas where there is no satisfactory progress on bus priority, or in terms of rewards if good proposals come forward?

(Mr Spellar) The rewards are, of course, that these are included in local transport plans and therefore the funding becomes available to them through the local transport plans. The detrimental side from their point of view is that their residents are not getting the service that they need and deserve, and are therefore being considerably affected by them.

One problem about bus priority lanes that you will be aware of is the enforcement of them and we have touched on the question of decriminalisation in London, but what proposals do you feel are being brought forward, perhaps in terms of camera enforcement, that would make enforcement of bus priority lanes easier for local authorities?

(Mr Spellar) Where there is still police enforcement of these provisions is quite interesting. I was in a town two or three months ago where the bus company had great difficulty in getting the police to take action until they persuaded them to undertake a pilot on that and found that many of the people who they were picking up for breaching the bus priority lanes were actually people they wanted for other matters because they had an overall disregard of the law and the police had become much more enthusiastic about it. Where it is not police enforcement but camera technology is available we do need to make sure that we are seeing the picture in context. I will give one example. If a vehicle is turning right and there is a queue behind it and the bus lane is clear then it would be a perfectly sensible and proper driving manoeuvre to go into the bus lane to get past the vehicle.

Chairman: If we can avoid all the circumstances in which people can use bus lanes it would be helpful.

Helen Jackson

My final point on that is that there is evidence, certainly in our city, that bus priority is becoming increasingly popular contrary to popular belief that it is the private motor car that is always the most popular. If that is the case and bus use is increased beyond your targets, can I ask whether the targets will follow the increased bus use or whether there will be a revision of targets before increased bus use takes place?

(Mr Spellar) I will be happy to deal with the problems of success in order then to be looking at more challenging targets if we are able to achieve the levels.

Andrew Bennett

Smart cards, you would like to swipe the Committee's card, would you not, can you tell us anything about them?

(Mr Spellar) Smart cards, at the moment probably the most advanced scheme is the Prestige Scheme in London. There are, as you are probably aware, some slight difficulties about questions of inter-operability between the London scheme which got off the starting blocks quite a bit earlier and the national standards. There is quite a bit of work going on to see how those can be made compatible along with a number of other particularly urban areas where we are very keen on the use of smart cards. Particularly where we are looking at the interchange between various modes of transport it just makes that so much easier.

Is the Office of Fair Trading or the banks causing you any problems?

(Mr Spellar) I am aware from Willy Rickets that there is some concern that there may be some objections from the banks. I have to say we are not aware currently of that, therefore we are going to have to dig further into this. I do not know if the Committee have any information, of which I am not privy on this matter.

Perhaps I ought to move you on to the Bus Service Operators' Grant. The flexible services, they do not actually get this rebate. Is it not sensible in some of the rural areas to have a flexible dial up service for which they could get a grant?

(Ms Webber) We are preparing a consultation document just at the moment which will go out shortly on precisely the registration of flexibly routed services and the accompanying eligibility for what was fuel duty rebate. We are aware of the problem and we are planning to address it as soon as we can.

Lastly, you said you relied on the data which was coming back from the withdrawal of services. You did not give us an indication of how much that is going to cost public funds if we are losing commercial services and having to replace them with services which are subsidised.

(Mr Davis) some of the services which are being withdrawn are services which have been subsidised. Local authorities are deciding not to continue subsidising them. ATOC quote figures of something like 20 per cent. We have a research project at the moment to try and get a figure for the increase in tender costs which local authorities are facing.

There is increased tender costs but in some places there is a saving because the subsidy means the service does not go at all.

(Mr Davis) Some local authorities are deciding to stop subsidising services they have subsidised in the past.

Have you got a clear picture of the finances of this?

(Mr Davis) We are trying to get a clearer picture but we have a picture from ATOC and from the operators which we are trying to clarify.

Chairman

Are you prepared to look at a trial of a number of Quality Contract schemes?

(Mr Spellar) Certainly in the event that they have been looking at Quality Partnerships and wish to approach us and say that they wish to go down this route.

You would not initiate pilot schemes to see whether they work or not?

(Mr Spellar) It should be for the local authorities to look at what they think best serves their local communities and then to approach us if they believe this would be the mechanism which would best serve their local area.

Do you think there are any lessons that we can learn from the situation in London?

(Mr Spellar) I think the situation in London is fairly unusual, not least because of the high concentration of population, the high concentration of work and a very high percentage of people relatively travelling by public transport anyway. Some of the increase on the buses in London has come from transference from tube not from car. I think, also, we have to look at the relative costs of the provision of transport in London, provision of the bus service in London, compared with other parts of the country. It is very necessary and very important for the commercial life of London. It is, however, more expensive per passenger than the services outside of London.

What is the real dilemma, Minister? Is it that you want to give more money to bus services but you cannot think of a way of doing it which ties it into the demand for improvements for the passengers, is that the difficulty?

(Mr Spellar) I think that one of the dilemmas is a very mixed picture across the country between operators and local authorities of good services, average services ---

Given that, what is your view of it?

(Mr Spellar) Even given that, I think we have not fully disaggregated that information, as yet, in order to get a clear view as to why what is working is working and therefore the extent to which that could then be replicated in order to bring the average up.

In each year you enter into negotiations with the local authorities but you are doing it on the basis of a series of figures which are not quite clear and the policy is not clear even to you, as far as you are concerned, because there are so many different models which could be followed?

(Mr Spellar) I suppose it could be described as different models but it is a very varied picture and I think this would be very familiar to the work of local authority representatives who see a very different pattern across the country, partly relating sometimes just to local geography and demographics but also to differing performance of local authorities and differing performance of bus companies.

All the different forms of public transport we have are governed by different laws, including taxis, which really goes back to the Hansom cab. Has the Department got any intention either of looking at ways of standardising those laws or trying to put into operation new and innovative schemes which would justify the expense that all these things cost?

(Mr Spellar) There are two issues there. One is the regulation of taxis with the local authority as a regulator.

That is another thing we are thinking about.

(Mr Spellar) No, not just thinking about. We have been looking at proposals. There are some concerns from the taxi trade about some aspects of that and anyone who represents a major metropolitan area knows some of the difficulties between ---

Yes. You have specifically mentioned taxis as a possible alternative.

(Mr Spellar) A very big source now, particularly in urban areas, particularly in deprived urban areas, a very significant source of transport.

Yes, and the second question?

(Mr Spellar) Which was the second question?

You said there were two different issues which concerned you.

(Mr Spellar) Sorry, the second issue on taxis then quite apart from the question of the council as a regulator is with regard to whether in regard to a number of areas taxis, shared taxis or other forms of community demand led transport, are a more appropriate mechanism for moving people, particularly at less social hours. Some of that relates to the question of security on transport, I fully accept, whether demand led transport is more appropriate than schedule led transport.

Would I be misrepresenting you, Minister, if I said in summary that your views are that you are not sure whether you want either increasing volume or you want to get a complete network?

(Mr Spellar) I think these are not necessarily incompatible but there is an element of dynamic tension between the extent of the network and the concentration on higher volume routes in order to achieve modal shift.

So your policy could be vaguely summed up as "we are not clear"?

(Mr Spellar) No, it can be summed up as these are the elements which local authorities have to take into account every day in looking at what is appropriate for their areas and, indeed, the bus operators as well.

Yes, but it is the Department's views that I am interested in at the moment, the local authorities have been kind enough to give evidence.

(Mr Spellar) I do not think that is just because at a local level there is no universal blueprint you could lay down and, therefore, ----

No, but if we could have a few vague hints of policy somewhere in there.

(Mr Spellar) Not a vague hint, a clear objective within the 10 Year Plan, which is to grow the bus market and to have a ten per cent increase along with the objectives outlined and endorsed by us from the Social Exclusion Unit in order to try and ensure that public transport is available so that people are not excluded from either employment or facilities.

So at some point we expect to be able to resolve the tension between those two objectives?

(Mr Spellar) No, I am not sure you will ever resolve it, I think it is inherent within the system and I think achieving the best balance is exactly what local authorities with their local knowledge, along with the bus operators with their knowledge of the network, have to be engaged in on a regular basis.

Chairman: Thank you, Minister, you have helped us pass an afternoon and we are very grateful.