APPENDIX 25
Memorandum submitted by PTEG
(representing the English Passenger
Transport Executives: Tyne & Wear PTE, Merseytravel, GMPTE,
West Yorkshire PTE, South Yorkshire PTE & West Midlands PTE)
Has deregulation worked? Are services better,
more frequent, meeting passenger need? Are bus services sufficiently
co-ordinated with other forms of public transport; are buses clean,
safe, and efficient? If not, can deregulation be made to work?
How?
In pTEGs view, the deregulation of buses has
been a failed experiment. No other developed country has followed
the UK lead over the last 20 years and the only part of the country
that has seen sustained increase in bus use has been London, with
a few notable exceptions.
London has seen sustained growth in patronage
even during the period (during most of the 1990s) that bus subsidies
were being reduced. Whilst it would be wrong to attribute all
the improvements made in London to the regulation, the presence
of a regulated framework has enabled a competitive model of private
sector procurement to be combined with a clear public sector-led
specification role to achieve effective policy delivery. In contrast,
many of the Passenger Transport Executive (PTE) areas suffer from
services being provided by a single dominant operator, who can
deter, or if necessary fight off, any "on the road"
competition and can ensure that competition for any supported
services is minimised by selectively registering services they
are able to secure any socially necessary additions with minimal
competition. A survey carried out in 2004 showed that in the 36
Metropolitan Districts covered by PTEs, a single operator provided
at least 70% of bus services in over half (ie 19) of those Districts,
and in some 12 Districts the proportion rose to 80% or more. The
level of dominance at a local level is a strong indicator of the
absence of a contestable market.
Operators providing deregulated services put
a premium on protecting their operating territories. Thus maintaining
coverage of services at times when commercial services becomes
a major consideration even if this requires a reduction in quality.
Operators have been very successful at reducing the cost base
of bus services, but, particularly in recent years, this has been
at the expense of quality and higher fares. Whilst operators understandably
complain about the impact of traffic congestion on their services,
Department for Transport (DfT) statistics show that about three
quarters of cancelled bus services outside London result from
factors within the control of operators, such as staff shortages
or mechanical breakdowns. Fares in PTE areas have risen by 44%
in real terms over 15 years, and by 9% in the past five years.
Service frequencies have generally held up relatively
well. Whilst patronage in PTE areas has declined by 34% over the
past 15 years, service mileage has dropped by only 12% over the
same period. This is partly as a result of PTE intervention to
procure supported services—PTEs now support 1% more bus
mileage than they did five years ago, despite a reduction in total
mileage of over 4% over the same period—but is also a result
of operator strategies to maintain quantity, if necessary at the
expense of quality and price.
Commercial imperatives require that meeting
passenger needs comes second to achieving an acceptable profitability.
Thus high volume corridors are served at the expense of difficult
to access, but highly socially necessary destinations. This can
leave "off centre" facilities such as major hospitals,
employment sites or shopping centres poorly served without PTE
invention to secure additional non-commercial services. There
is no incentive within the current framework for operators to
take into account the wider benefits of improved access to key
facilities. Similarly operators have no incentive to help passengers
"join up" journeys through good interchange with other
operators' services. Thus the Government's objectives of an integrated
public transport network are therefore undermined by the requirement
for a commercial approach. PTEs can only influence service patterns
at the margin as they "top up" the commercial network
with the final 15%.
Cost pressures on operators increasing incentivise
them to serve passengers with little or no alternative means of
travel. Thus quality, customer care, comfort and adequate maintenance
standards are continually under pressure. Although safety standards
are under the control of Traffic Commissioners, they tend to be
under-resourced and therefore some operators are encouraged to
take a calculated risk on maintenance and even safety standards.
This has led the Commissioners to intervene with a number of PTE-based
operators. Three recent examples are given below, the first two
of which relate to large plc operators.
Standards of maintenance at First Manchester
slipped so far that on three occasions wheels have come off buses
in service and a number of vehicles were in use despite having
expired Ministry of Transport (MoT) certificate. In addition,
a bus which was involved in a fatal accident was found to have
an expired MoT certificate.
In December 2004, following a maintenance investigation
and an exodus of staff, Arriva Yorkshire West was subject to a
check of twenty randomly chosen vehicles at two depots. Five immediate
prohibitions, five delayed prohibitions and 17 advisory notices
were issued as a consequence of defects including oil leaks, faulty
brake valves, broken seats and emergency exit defects. It transpired
that company policy was to "monitor" oil leaks rather
than repair them immediately.
During an inspection, carried out by the Vehicle
& Operator Service Agency (VOSA) in April 2003, at Merseyside
bus operator Glenvale Transport (now owned by Stagecoach) only
22 out of 48 buses were found to be without defect. A further
inspection in May 2003 found that just four out of 35 buses examined
escaped being given immediate or delayed prohibitions or inspection
notices.
Despite low standards and the significance of
cost pressures, PTEs have been able to make some quality partnerships
with operators work and have jointly delivered improvements in
services, which have resulted in increased patronage on specific
corridors or networks. Some operators, particularly smaller operators
with a strong sense of public service, have been willing to sacrifice
short-term profitability for longer-term growth through improved
quality. However, all too frequently it has proved impossible
to combine public policy and commercial objectives. This is particularly
the case with the large companies, for whom a key pressure is
to produce short-term returns on capital in line with City expectations.
In many cases and after prolonged periods of attempts to foster
partnership working on voluntary basis, PTEs have come to the
view that national and local policy objectives are best served
by seeking to operate in a more highly regulated environment.
Statutory quality partnerships (delivered through Quality Partnership
Schemes) generally offer little additional benefit as medium-term
service and fare level agreements are impossible, and therefore
PTEs are actively pursuing the use of bus Quality Contracts (QCs).
Is statutory regulation compromising the provision
of high quality bus services?
The current statutory regulation of the industry
is largely a matter for the Traffic Commissioners. In our view
the Commissioners set standards for bus operators at too low a
level, they are inadequate resourced to police the industry and
they have the wrong tools available to enforce standards.
The current model of deregulation tends to encourage
the formation of local monopolies or oligopolies and undermines
integration, stability and sensible co-ordination between operators.
Dominant commercial operators have an unacceptably strong influence
over the way the market is served, and can follow commercial strategies
that are based on the acceptance of patronage decline. In doing
so they clearly undermine the delivery of Government policy.
Quality partnerships can provide local improvement
but it is highly questionable that such partnerships raise quality
generally. Older vehicles are kept in service by the larger companies
cascading them to other parts of the network and passenger quality
indicators published by DfT show overall quality is no higher
than it was five years ago, in contrast with London, where passenger
perceptions have consistently improved.
Are priority measures having a beneficial effect?
What is best practice?
Bus priority measures are an important aspect
of improving bus service quality. PTEs have not been able to improve
bus priority measures to the degree they would have wished and
we are dependent upon local highway authorities to deliver this
aspect. Where bus priorities have been implemented journey times
are reduced and reliability is improved. Best practice has been
published by the Bus Partnership Forum, has been promoted in the
recent "Backing the Bus" publication and continues to
be a subject of conferences that we often co-sponsor. PTEG was
responsible for "Backing the Bus" and supports all these
initiatives to promote best practice. There is, however, a major
issue of political will at a local level to give bus services
higher priority in the use of limited road space.
Is financing and funding for local community services
sufficient and targeted in the right way?
Leaving aside reimbursement for concessionary
travel (which is primarily a subsidy of passengers rather services),
the main source of public funding for bus services comes from
bus service operators' grant (BSOG) (about £380 million per
annum[17])
and local authority support for socially necessary services (about
£230 million per annum). [18]In
2004-05, subsidy per passenger in London was 31p, while in PTEs
it was 11p. [19]If
bus services are to play the wider role supported by both local
and central government in reducing traffic congestion and contributing
to social inclusion, then higher levels of subsidy are likely
to be justified, though the existing deregulated environment makes
it difficult to intervene in a way that cost-effectively leverages
the best policy outcomes.
Currently PTEs have little influence over the
network provided by operators, and operators are incentivised
to maximise mileage to protect subsidy levels and deter competition.
Neither of these main sources of funding currently encourage achievement
of patronage growth targets, nor the wider objectives of local
authorities to increase local accessibility, achieve mode shift
away from car and promote social and economic regeneration. We
consider that subsidy linked to patronage, possibly with a higher
emphasis on peak passengers, together with an element linked to
quality of delivery would lead to a much closer alignment between
funding and policy delivery.
Concessionary fares—what are the problems
with the current approach? Does the Government's proposal to introduce
free local bus travel across the UK for disabled people and the
over 60s from 2008 stand up to scrutiny? Should there be a nationwide
version of London's Freedom Pass—giving free or discounted
travel on all forms of public transport?
Statutory concessionary travel for older and
disabled people has gradually improved over recent years through
a range of government initiatives and is proposed to become free
for these groups throughout England in 2008. The removal of internal
boundaries within England is welcome, although some PTEs have
already negotiated arrangements with adjoining authorities to
minimise constraints on local travel. This approach of allowing
for "extended local travel" is one which solves most
of the problems associated with access to key facilities. It also
allows local authorities to provide free travel to other modes
of local transport. Local rail and ferries are often key elements
of local transport networks as London's Freedom Card recognises.
These modes should either be included in the national scheme,
or powers and funding need to be adequate to allow such local
extensions to be included in the post-2008 approach.
We do, however, have concerns about the basis
of payment for this policy. While the "no better off, no
worse off" principle for operator reimbursement is indisputable
in theory, it has become meaningless in practice. We do not know
what fares and ticketing offers operators would choose to introduce
in the absence of a statutory scheme, but we would strongly contest
the assumption, implicit within the DfT's recent guidance, that
they would charge full adult single fares for this highly price-sensitive
group of passengers. Both PTEs and more, recently operators, market
a wide range of lower priced tickets to encourage off-peak travel
and address the needs of market segments with lower incomes.
There are two concerns about the proposals for
2008. The first is one of policy priorities and value for money.
We question the extent to which this will mainly favour better-off
individuals within the two groups who frequently travel to other
parts of the country, whilst poorer sections of the community
who depend on bus services mainly to access local facilities benefiting
little. PTEs would like to have seen a widening of the scope of
scope of concessionary travel before a deepening of the benefits
to existing users. There is also good reasons to consider a statutory
minimum fare for children and young people ahead of further improvements
for older and disabled people. This is in line with the recommendations
made by the Commission for Integrated Transport (CfIT) in 2002.
The second is a practical one of how the change
is going to be delivered with minimum disruption in less than
two years. The process of implementing the April 2006 change was
highly disruptive for some authorities, notably Nexus, where the
funding necessary to implement the change was not passed through
the RSG system to the Tyne & Wear District Councils, leaving
Nexus cutting other services to fund the change to free fares.
The adequate funding of the proposal for all concessionary travel
authorities is key to the successful management of the change.
Why are there no Quality Contracts?
There are a number of major barriers to the
introduction of QCs, and more than five years after the passing
of the legislation no applications have been lodged. This is an
interesting contrast to the policy that led to the Transport Act
2000, which stated that "initially we would expect to give
a very limited number of approvals to allow the QC approach to
be tested".[20]
The DfT has still not made the change to secondary legislation
promised in 2004 to reduce the barrier to QCs nor has it implemented
the proposed change in the Spending Review 2004 to arrangements
for BSOG, and it has continued to oppose amendment of "the
only practicable way" requirement in the 2000 Act. This presents
a major barrier. At the Public Accounts Committee hearing into
the recent joint National Audit Office/Audit Commission report
in the Bus Delivery Chain, the DfT Permanent Secretary indicated
that he expected any successful application for a QC to be tested
in the courts. It is clear that there is no longer any desire
within Government even for a few initial experiments.
PTEG has been in the forefront of efforts to
bring QCs into play, for instance through published research into
the subject, [21]and
two PTEs have more recently collaborated on a market consultation
exercise to understand how operators could best deliver value
for money through a range of measures including QCs. PTEG will
continue to lobby for changes to the 2000 Act to allow such experiments
to be brought forward. A prime issue is the need for Local Transport
Authorities to determine for themselves whether quality contracts
are the most appropriate policy instrument to employ. The choice
of best mode of delivery essentially of local services is not
an issue of which the Secretary of State need become involved.
Are the powers of the Traffic Commissioners relevant;
are they adequately deploying the powers and resources that they
currently have? Do they have enough support from Government and
local authorities?
The powers held by the Commissioners are inadequate
and the use of current powers can damage the delivery of policy.
At present, Commissioners have three sanctions at their disposal:
reduction of operating licences (effectively reducing the scale
of the business of a poorly performing operator), the levying
of fines, and, in extremis, the withdrawal of an operator's licence.
The first and third of these measures reduces the capacity of
the industry where there are often problems of lack of competition
and the second action benefits the Treasury, often at the expense
of local authorities (who have to pay more for supported services)
or bus passengers (who are charged higher fares) as a result of
the Commissioner's actions. In a regulated environment, the PTE
or local authority would have far greater power over operators
than the Commissioner, because it could reflect failure to deliver
through the tendering process in the same way that Transport for
London does, and put in place a reward/penalty regime to encourage
acceptable delivery standards.
However, in a deregulated environment the Commissioner's
role should either be taken over the local authority, with a right
of appeal to and independent tribunal, or the current arrangements
should be significantly strengthened with more resources available
to monitor service delivery both at the operating base and on
the road, and the ability to recycle any fines through grants
to local authorities suffering from poor delivery.
Is London a sound model for the rest of the UK?
London does provide a sound model, but we would
not propose it's widespread implementation elsewhere. There is
scope for a range of approaches within a regulated framework.
The emphasis should be on local solutions being appropriate for
local conditions, but within a common procurement framework to
minimise transaction costs for both promoters and bidders. PTEs
are working towards such an approach to ensure that quality contracts
deliver good value for money.
What is the future for the bus? Should metropolitan
areas outside London be able to develop their own form of regulated
competition? Would this boost passenger numbers? If not, what
would? Does the bus have a future? In addressing rural railways,
the Secretary of State has said that we "cannot be in the
business of carting fresh air around the country"; is the
same true for buses?
The future for the urban bus industry is potentially
a bright one. Despite decades of decline, there is a desire on
the part of central and local government to use bus services in
the battle to reduce traffic congestion and support social and
economic regeneration. It will require the adoption of bold and
innovative policies, including the re-allocation of road space,
and strict enforcement of parking policies, together with a much
stronger role for the public sector in the specification of a
stable and growing network that meets the needs of local people.
It will be necessary to make tough decisions about the best structure
for the local network with the needs of major corridors into cities
and towns being balanced by less well patronised secondary and
orbital routes. However the ability to be able to co-ordinate
the services of different operators, introduce simple integrated
fares and ticketing, and promote the full range of public transport
as a single network can be a powerful influence in helping bus
services move into a period of sustainable growth.
In the city regions this may involve some element
of regulated operation. In others, progressive operators willing
to plan for the long term may be willing partners in the vision
set out in the local Bus Strategies. But in each case, it is the
local authority or PTA/E that is best placed to judge how to maximise
value for money and improve services in the most cost-effective
manner. In some cases this will mean stronger integration between
different modes, through park & ride and bus/rail interchange.
In others, it may require rationalisation to avoid duplication
of services battling for similar markets.
In rural areas different solutions may apply
as passenger flows are inevitably lower. A combination of relatively
strong inter-urban routes may be best complemented by community-based
solutions, but again it will be for those communities and elected
representatives to judge how best to meet local needs.
In all situations, it will be necessary to listen
carefully to passenger requirements and design services and standards
that meet their needs. Consistently passengers tell us that service
reliability (including punctuality) and stability are vital elements
of the service with issues such as affordability of fares and
the ability to make the journeys conveniently to access key facilities.
It will be necessary to keep passenger needs to the fore in planning
services and networks. We believe that this aspect of service
delivery is best led by local authorities and PTEs drawing on
operators' expertise, but not being led totally by commercial
considerations. If bus services are to thrive it is essential
that they are planned within a long-term framework that is able
to plan fare and service levels over a number of years. We can
only see being possible either through medium-term contracts with
operators or through binding partnerships that reflect that long-term
commercial considerations centred on market growth strategies
and outweigh City investors' requirements for short-term profitability.
In summary, PTEs require:
— A more flexible and locally-determined
menu of options including quality contracts from which to serve
passenger needs.
— Significant revisions to the Quality
Partnership Scheme and Quality Contract legislation to enable
cost-effective, locally-appropriate solutions to be implemented.
— A wider recognition of the needs
for better bus priority, stronger parking policies and, where
appropriate, road pricing solutions, with possible unification
of public transport and strategic highway responsibilities, where
this is the preferred local solution.
— A funding package that encourages
and rewards all parties for adopting policies that raise the quality
of delivery and grow the market for bus travel.
24 May 2006
031FB836914C/0/Bus_Planning_Performance_Regulation_Part2.pdf
17 Department for Transport estimate 2005-06. Back
18
TAS Publications & Events, Bus Industry Monitor 2005,
quotes total "secured service" budgeted expenditure
by English local authorities (including PTEs) during 2004-05 at
£228.4 million. TfL's budgeted expenditure for the same year
was £545.0 million. Back
19
House of Commons, Committee of Public Accounts, Delivery chain
analysis for bus services in England, The Stationery Office,
London, 2006, p13. Back
20
DETR, Workhorse to Thoroughbred: a better role for bus travel,
1999, paragraph 6.8. Back
21
For instance see; Bus planning, procurement and regulation: Implementing
a Quality Contract, 2003, and Bus Quality Contracts: Frequently
Asked Questions. http://www.pteg.net/NR/rdonlyres/795A6146-FFF1-47AA-BC5F- Back
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