APPENDIX 26
Memorandum submitted by Sinclair Knight
Merz Ltd.
INTRODUCTION
1. This memorandum is submitted in response
to the Press Notice of 20 April 2006 indicating the range of issues
to be addressed in this inquiry. We do not intend to comment in
depth on all of the issues and have not commented on Community
Bus Services or concessionary fares. Also we confine our comments
to local buses and exclude express coach services. This Memorandum
was prepared with assistance from Professor Austin Smyth, Head
of Transport Studies (designate) of the University of Westminster.
TRENDS IN
BUS USE
AND PROVISION
2. The previous Transport Committee report
(Transport, Local Government and the Regions, 17th Report of Session
2001-02 on "The Bus Industry", stated that the long
term decline in bus use appeared to have been halted and expressed
cautious optimism that bus patronage growth targets expressed
in the Ten Year Transport Plan (DTLR, 2000) might be achieved
and called for a more ambitious programme of improvements and
financial support, and separate targets for London and other areas.
3. Since 1998-99 bus patronage in GB has
steadily increased from a low point of 4.2 billion to 4.6 billion
in 2004-05. This modest increase is due to growth in London of
some 41%, there is also growth in Scotland and Wales although
they represent only 12% of total British bus patronage. In Northern
Ireland, patronage in 2003-04 was 65.4 million a drop of 33% from
98.4 million in 1978-79.
4. Total bus kilometres have gradually declined
since the mid 1990s after a boost following deregulation. Therefore,
the previous report was correct about the overall trends and about
the need for ambitious action. It is very clear now that London
is driving the patronage trend and that reversing the decline
in provincial England will take strong action based on wholescale
change in policy.
Has Deregulation worked?
— it achieved cost and subsidy reductions
as expected;
— there was some innovation;
— safety was not compromised;
— the market is not fully contestable;
— real fares have continued to rise;
— services were destabilised in many
places exacerbating patronage decline;
— network integration has been reduced
or destroyed;
— some transport policy objectives
became unachievable;
— bus operators in isolation cannot
grow bus patronage significantly; and
— subsidy is increasing again.
5. Regulation was introduced in 1930 mainly
to protect established operators and prevent "wasteful competition"
between buses and trams, coaches and railways, and to provide
network stability. It also aimed to limit fares in an era of public
transport market power.
6. The 1979 government believed that regulation
had led to some bad effects such as: discouraging innovation,
thought to be a particular problem in serving rural areas, protecting
inefficient operators whose costs were out of control, and encouraging
cross-subsidy which was wrong. It was believed that private operators
would be more efficient and that fares and subsidy would fall.
Therefore, privatisation was closely linked to deregulation. So
the 1985 Act deregulated, principally through the abolition of
route licensing, and privatised. It was not concerned with sustainability
or other planning policies which have since assumed much more
importance.
7. In summary, the expected benefits of
deregulation depended on successfully establishing a contestable
market in which new operations are easy to start and the threat
of new competition continually acts to keep fares down and quality
up. However, these expected benefits were not to be delivered
in London or Northern Ireland, both of which were excluded from
the legislation.
8. A very significant feature of deregulation
is the emergence of a few large and powerful operators. By 1995,
36% of bus revenue was going to only four operators outside London.
Operations are now dominated by Firstgroup, National Express,
Stagecoach, Arriva, and Go Ahead; these five run 90% of PTE area
services. This is the "oligopolistic outcome" that many
expected and undermines the concept of market contestability.
Bus "wars" occurred in several places including Darlington
and Edinburgh as operators established their market power.
9. The effects of deregulation are shown
by Table 1 in the Appendix. This shows that, in the 17 years from
deregulation in late 1986 to 2003-04:
— The vehicle kilometres operated increased
by 19% although this is falling from a peak in 1995-96, which
reverses the trend before deregulation.
— The number of passengers fell by
36% continuing the trend before deregulation, initial falls were
more than implied by fare rises, implying bad effects of network
instability.
— Average bus occupancy fell by 50%.
— Fares rose 43% in real terms continuing
the trend prior to deregulation.
— Costs per vehicle kilometre fell
by 44% but are now increasing from a low point in 1999-2000.
— Costs per passenger carried were
constant 1985-95 but have since risen 12%.
10. It is fairly clear that the reductions
in operating cost were not reflected in fares but were used to
cut subsidy, provide profits and finance additional vehicle kilometres.
These cost cuts show that there probably was a lot of inefficiency
in the regulated market and also reflect wage reductions in the
10 years following deregulation, although wages are now increasing
in real terms again.
11. In 1985, subsidy by local authorities
and for concessionary fares was 25% of total revenue. In the years
following deregulation route subsidy fell in real terms but concessionary
fare payments increased. By 2003-04 subsidy excluding BSOG had
increased to 34% of total revenue.
Is Statutory Regulation compromising the provision
of high quality bus service?
The application of competition legislation is
blocking the provision of high quality public transport networks
and is counter to transport policy. Regulation by the Traffic
Commissioners is intended to be in the public interest and adds
to the quality of bus services. In Northern Ireland the continuation
of public monopoly operation may not be beneficial and a franchising
solution could be superior but reform was blocked by John Spellar.
12. Transport Policy objectives are to encourage
greater public transport use in the public interest which implies
co-ordination of services and through fares. The main competition
is overwhelmingly between public transport and private cars. There
is strong evidence that operators will avoid sharing revenue and
have no incentive to co-operate on ticketing while OFT acts to
restrict fare and network co-operation that may be construed as
be a barrier to entry be other operators.
13. In Northern Ireland NITHCo owns Ulsterbus
and Metro(Belfast) which have a monopoly of bus services which
they plan and operate. There is virtually no competition for stage
carriage services in NI.
Are Bus Priority Measures having a beneficial
effect?
Systematic whole route or network programmes
do boost ridership, but they have limited appeal to car users
unless there are also traffic restraint measures in a co-ordinated
policy approach. Outside London, strategic schemes can succeed
in partnership with operators but lack of control over bus services
by planning authorities poses problems for investment.
14. In London a systematic programme of
bus priorities has been implemented under the London Bus Priority
Network from 1995 and the London Bus Initiative which was announced
by John Prescott in 1999. Phase 1 of LBI started in 2000 using
a £60 million government grant and aimed to provide comprehensive
priority along the full length of 27 bus routes. Its objectives
were to increase patronage and the attractiveness of buses by
taking a "whole journey approach" from the passengers'
perspective. Three levels of priority were aimed for and the full
range of priority techniques was used, including close attention
to co-operation between local authorities, Transport for London
(TfL) and operators, and to enforceability of penalties for bus
lane enfringement. About 1,000 priority schemes were implemented
on the 27 routes.
15. The results were monitored by TfL and
show significant increases in bus speeds and reductions in delays.
Bus running times at peak periods were reduced, these matched
more closely the scheduled running times and the variability in
bus running times was also reduced. The impact on reliability,
as measured by Excess Waiting Time (the difference between the
theoretical passenger waiting time, based on the timetable and
the actual waiting time), was significant and this improved by
more than for the bus network as a whole. Patronage on the LBI
Phase 1 network increased by about 5% more than the London bus
network as a whole. The economic benefits to passengers were assessed
at £12 million per year, a high return on the cost. An LBI
Phase 2 programme is being implemented.
16. There is extensive experience of bus
priority in other British towns: Edinburgh, Glasgow, Leeds, Birmingham,
York, Brighton and many others. Most of the experience is of bus
priority at trouble spots rather than systematic or whole route
priority programmes. However, there are corridor schemes in Birmingham
(Bus Showcase) and Edinburgh (Green Routes), and, although it
is outside UK, in Dublin (Quality Bus corridors) which have achieved
good results. Run time reductions and patronage increases have
been achieved on several schemes, Bus Showcase reports up to 30%
increase in ridership. However, there is little evidence of significant
switch to bus from car unless there are traffic demand management/restraint
measures in place.
17. The DfT provides guidelines on bus priority
and promotes a toolkit approach but the vision for bus networks
is the responsibility of local authorities through Local Transport
Plans, with very mixed results. Some government vision would help.
Why are there no Quality Contracts?
Bus operators are mainly interested in profits
and will defend their commercial interests against schemes aimed
to benefit the community. Quality contracts were, therefore, unlikely
to be workable. There are other proposals, particularly ATCO's
Quality Networks but these seem complicated when the London model
can be adapted.
18. The Secretary of State now recognises
that Quality Partnerships are not working and there is clearly
no incentive for operators to make them work and no accountability
of operators to planning bodies. In some cases public investment
in bus infrastructure has been wasted. Quality Bus Partnership
Schemes and Quality Bus Contracts were introduced under the Transport
Act, 2000. The former provide for schemes where voluntary agreement
of operators is absent, but they cannot specify fares or frequency.
By 2005 no schemes had been implemented in England. Proposals
for QBCs covering networks are being planned but are permitted
only if it can be shown that no alternative is available in delivering
a bus strategy. QBCs have been strongly opposed by operators who
see them as limiting their freedom and profits.
19. ATCO and CfIT propose Quality Networks
covering wider area but with risk sharing and agreement on commercial
operation for a period of up to eight years. This could give a
secure revenue stream to operators in exchange for network integration.
The Competition Act is an obstacle.
Powers of the Traffic Commissioners
The TC have useful powers but need the resources
to enforce them. Some more direct powers would prevent predatory
practice and raise the quality of passenger information more quickly.
The TC's role needs to be co-ordinated with any revision of the
competitive context for buses.
20. The Commissioners have powers over registration
of bus operators and their fitness, over licensing and safety
of vehicles and over the reliable operation of bus services. All
bus services must be registered with them. They have powers in
Great Britain but do not cover Northern Ireland. Under the Task
Group set up by DfT, standards for local bus services were proposed
taking effect from 1/1/05. Local bus service punctuality standards
were revised. The one minute early to five minutes late remains
the compliance target for 95% of operations at termini (departure
and arrival) points and TfL's Expected Waiting Time measure is
now used to set a standard for intermediate timing. Penalties
are £550 per bus but with a sliding scale for 70%-95% compliance.
21. Although these changes are welcome they
are only as good as the detection and enforcement and it is clear
that there are not enough Bus Compliance Officers (employed by
VOSA) to carry out proper monitoring. Also the Commissioner's
powers should extend to direct enforcement of minimum standards
of bus route information to good practice now followed by TfL
and in some other areas. It also seems wrong that road works that
delay buses should not be better co-ordinated where they will
affect bus operation. The punctuality standards are welcome but
the allowance of one minute early should be dropped, early running
should not be tolerated.
Is London a sound model for the rest of the UK?
London has achieved cost reductions and patronage
growth but at the cost of high subsidy and increased fares. There
is a need for a compromise between free competition and full regulation
and London gives good pointers. Tendering has proved a successful
competitive tool in London and for subsidised routes elsewhere.
However, the London model is not the complete blueprint: London
has secured finance for major expansion of buses using powers
not available elsewhere, market conditions differ with high public
transport mode share in central London unlike other cities, achieving
mode shift elsewhere will take more effort proportionally. TfL
is a comprehensive transport authority and bus franchising body
and could serve as a model for strengthening PTE and County functions.
22. It is not entirely clear why deregulation
did not apply to London, it appeared that the government was concerned
about congestion, the need to avoid the collapse of London Buses,
part of London Transport, which then controlled a fleet of 8,000
buses, and the political pressure to sustain the London travelcard
system which was very popular. Therefore, more time was allowed
for a transition to privately owned buses and regulation through
route franchises let by Transport for London.
23. In contrast to the rest of Britain,
since 1986 bus patronage had risen by 56% to 1,782 million trips
in 2004-05 and London buses now carry 39% of total bus passengers
in GB, although London has only about 15% of the population. Vehicle
kilometres had risen by 72% but costs per vehicle km had fallen
by 36%. Fares increased in real terms by about 35% in the 10 years
to 1996 but have since been broadly constant. Key trends to 2003-04
are given in the Appendix.
24. The main issue is the patronage trend.
Research shows that better performance in London is due to a stable,
well publicised network, improvements in service frequency and
reliability, including the effects of Road user Charging in central
London, and to the travelcard system. A recent review (Prof P
White) shows that patronage trends outside London can be explained
fairly well by change in population and car ownership, fares and
bus kilometres but patronage growth in London is greater than
expected which relates to the introduction of congestion charging,
service quality enhancement, more night services and other factors,
including the lower level of car ownership than incomes would
imply. This can, it is argued, be attributed to the proportion
of income spent on housing and the restrictions on car use.
25. The key point is that costs have been
cut in London by almost as much as elsewhere in Britain while
substantial growth in patronage has been achieved, in stark contrast
to other areas.
What is the future for the bus?
In London, buses have a vital future as a key
mode in an integrated public transport network. Elsewhere, if
there is no change, they have a future only as a residual mode
on a shrinking commercial network. The bus is in danger of ceasing
to have a role in transport policy. Significant investment and
support is needed together with institutional arrangements to
sustain and enhance integrated public transport networks and to
facilitate investment in high quality provision. The cost of delivering
this will increase sharply if there is further delay.
26. There is little prospect for patronage
growth on buses without more regulation designed to restore buses
to a credible transport and environmental policy role. Controlled
competition is the basis of EU proposals for delivering adequate
consumer-oriented public transport across the Union. Failure to
solve bus service delivery and integration problems is undermining
government transport policy. The greatest problems lie in urban
areas outside London where buses could achieve much more.
27. The effective planning and delivery
of public transport should follow best European practice with
transport authorities with strong powers and adequate funds able
to take a long term view. PTEs were set up to plan and provide
public transport in the main conurbations. Initially they were
also bus operators which distracted them from their planning role.
They are now unable to perform the planning role effectively since
they have no control over commercial bus services, fares or timetables.
Reform should give this control over local public transport networks
not just buses.
28. The CfIT, ATOC and others argue for
an increase in subsidy for buses. Although there is evidence that
British bus operations are the most efficient in Europe, they
also have the lowest subsidy. CfIT has also called for the ending
of Fuel Duty Rebate and the creation of Incentive Payments per
Passenger to provide a direct incentive for ridership growth.
Such a change could have perverse effects but, whatever approach
is followed, it is essential that more subsidy is made available.
The Treasury could fear an open-ended commitment to growing subsidy
(this was a motive for deregulation). This is a real concern and
only be mitigated in the long term by a shift in land use development
policy in favour of higher densities planned in corridors that
can be served by, and will support, viable public transport, combined
with integrated transport policy. This shift would be a logical
extension of present policy (PPG13etc.) but would need much firmer
guidelines and stronger powers for planning agencies.
29. Time is not on our side. As car use
becomes more dominant outside London, research shows that it becomes
more difficult to reverse the decline in bus use and more expensive.
As transport emissions increase and social inclusion policy becomes
more important, so action to achieve a shift to public transport
becomes more urgent. Car use is overwhelmingly attractive compared
with bus, as reflected in travel "generalised cost".
Public transport needs to be much more attractive and car use
much less attractive to achieve a significant switch.
Table 1
KEY INDICES OF CHANGE BUSES IN GB OUTSIDE
LONDON SINCE DEREGULATION (1985 = 100) FARES AND COSTS AT CONSTANT
PRICES
| Year |
Vehicle kms
|
Passenger
Journeys |
Average
Occupancy per
vehicle
|
Real Fares | Cost per
vehicle km
(at constant
prices)
| Cost per
passenger
(at constant
prices)
|
| 1975 | 119.9 | 133.5
| | | |
|
| 1983 | 102.7 | 100.2
| | 103.8 | |
|
| 1985-86 | 100.0 | 100.0
| 100.0 | 100.0 | 100.0
| 100.0 |
| 1987-88 | 114.5 | 91.0
| 79.5 | 109.1 | 76.9
| 96.6 |
| 1990-91 | 118.8 | 81.8
| 68.9 | 108.3 | 66.4
| 96.6 |
| 1995-96 | 125.8 | 70.8
| 56.2 | 120.5 | 56.6
| 100.7 |
| 1997-98 | 125.8 | 67.8
| 53.9 | 121.5 | 52.7
| 97.8 |
| 2003-04 | 118.7 | 64.1
| 50.5 | 143.3 | 56.0
| 112.5 |
| Source: Transport Statistics Great Britain
| | | |
| | |
| | |
| | |
|
Table 2
KEY INDICATORS OF BUS PERFORMANCE IN LONDON (1985 = 100)
| Year |
Vehicle kms
|
Passenger
Journeys |
Average
Occupancy per
vehicle
|
Real Fares | Cost per
vehicle km
(at constant
prices)
| Cost per
passenger
(at constant
prices)
|
| 1985-86 | 100.0 | 100.0
| 100.0 | 100.0 | 100.0
| 100.0 |
| 1987-88 | 101.1 | 104.8
| 103.7 | 103.5 | 87.6
| 84.5 |
| 1990-91 | 111.4 | 102.3
| 91.8 | 111.4 | 77.5
| 84.4 |
| 1995-96 | 129.3 | 104.6
| 80.9 | 135.2 | 52.8
| 65.3 |
| 1997-98 | 132.6 | 112.3
| 84.7 | 138.4 | 53.9
| 63.6 |
| 2003-04 | 173.6 | 148.4
| | 141.9 | 64.4
| 72.9 |
| Source: Transport Statistics Great Britain
| | | |
| | |
24 May 2006
|
| | | |
| |
| 
