Memorandum submitted by the Passenger Transport Executive Group (pteg) (LTB01)




1. Background on pteg


1.1 pteg represents the six English Passenger Transport Executives (PTEs) which serve eleven million people in six of the largest conurbations outside London. The PTEs invest more than a billion pounds a year in improving public transport and are the locally accountable, strategic public transport planning bodies for the areas they serve.


1.2 pteg supports the principles behind the Local Transport Bill, and much of the detail. We believe that the Bill offers the prospect of more fully empowered local transport authorities better able to deliver the modern, integrated transport networks that our growing city regions require.


1. 3 The Bill covers three main areas:


reforming the bus sector;

strengthening existing PTE/As. With existing Passenger Transport Authorities re-named as Integrated Transport Authorities (ITAs) and allowing for the creation of new ITAs in areas not currently served;

enabling local road user charging schemes.


2. Reform of the bus sector


2.1 The bus is the main form of public transport yet, outside regulated London, bus use has been in decline. In the major urban areas outside London bus use has halved in the twenty years since bus services were deregulated, and fares have doubled in real terms.


2.2 Since 1986 there have been two systems for bus provision - one for London and one for the rest of Britain. In London, Transport for London (which is accountable to the Mayor) specifies in detail what services are provided (including the routes, timetables and fares). The services themselves are operated by private companies through a competitive tendering process. There is no on-road competition.


2.3 In the rest of Great Britain it's a free market - anyone (subject to minimum safety and operating standards) can start up a bus service. Bus operators are free to run whatever services they like, charge whatever fares they like, and use what vehicles they like. Monitoring and regulation of reliability and vehicle cleanliness is minimal. Although in theory it is a competitive market, in reality most bus services are provided by five large companies who rarely compete against each other. Local authorities are only allowed to fill in gaps where there is an inadequate commercial service. This means that there is little that local transport authorities can do to ensure network stability, vehicle and service quality, or fare levels.




2.4 This has contributed to:


poor integration as PTEs cannot ensure that buses connect with each other, or with other modes like rail and light rail. Nor can they easily provide competitively priced multi-modal tickets;

declining patronage with bus use halved in PTE areas since 1986;

continuing service cuts and reductions. Nearly 12% of bus services (by mileage) have disappeared in PTE areas in the last eight years alone;

the poorest are worst hit as the majority of bus users do no have access to a car and the poorest groups in society are the most dependent on the bus;

patchy service quality with around 16% of all buses spot checked by the Government's Vehicle Operator and Safety Agency issued with prohibition notices.


2.5 The Bill aims to improve bus services by:


making changes to the way in which voluntary and statutory partnerships can be introduced and operated;

bringing in a new process for franchising networks of services ('Quality Contracts');

strengthening the role of the Traffic Commissioners in enforcing better punctuality;

making provision for a new passenger watchdog.


2.6 It also aims to build on the 2000 Transport Act which allows for Statutory Quality Partnerships and Quality Contracts. However, the way that legislation was framed meant these provisions have been little used with only one Statutory Quality Partnership in place in England, and no Quality Contract applications (let alone implemented Schemes) anywhere in England.


2.7 Many of the numerous detailed changes set out in the Bill are helpful, however we believe that some of the provisions of the Bill could be strengthened to make them more effective. This strengthening mainly relates to the provisions for Statutory Quality Partnerships and on Statutory Quality Contracts.


Statutory Quality Partnership Schemes

2.8 A Quality Partnership Scheme (QPS) - often referred to as a 'statutory partnership' - differs from a voluntary partnership between operators and local transport authorities in that a voluntary partnership is negotiated whereas a QPS is a Scheme 'made' by the local transport authority after consultation with operators and other relevant organisations. Under a QPS local transport authorities put in place improved infrastructure (such as bus priority measures) and operators that wish to use the infrastructure must meet specified vehicle quality standards.

2.9 The Local Transport Bill addresses some of the weaknesses in the existing legislation on QPSs, including by making provision for local transport authorities and the traffic commissioners to prevent a new operator from introducing new 'cherry picking' services which could de-stabilise an existing and successful QPS.

2.10 It would also allow a QPS to specify frequencies, timings and maximum fares, a new feature not allowed under current legislation. However, the Bill will also give 'relevant' operators a potential veto on these provisions where they have 'admissible objections'. The definitions of 'relevant' and the nature of 'admissible objections' were set out in December 2007 draft Guidance and were very widely drawn. On 16th April the Government published revised guidance and draft regulations.

2.11 The new draft regulation tightens the definition of a 'relevant operator' to being 'one who is operating services which have one or more stopping places in the area covered by the QPS - or has registered to do so - when the local authority first gives notice of its intention to make a scheme'. This is an improvement on the previous definition, though it still allows a registration of a single journey in the affected area immediately prior to the publication of the scheme as a potential wrecking tactic.

2.12 The issue of admissibility of the objection can only be one two grounds: impracticability and commercial viability. On the latter the test would be 'could a competent and efficient operator provide services to the proposed standard in way that was commercially viable over the medium term?' These tests would be applied initially by the Local Transport Authority (ie the promoter of the Scheme) with an appeal to the Traffic Commissioner, who could appoint an assessor in helping him/her come to a judgement.

2.13 Whilst this is no longer an operator veto in quite the same way as was proposed in the Bill as it was introduced in the Lords, it relies heavily on the Traffic Commissioner to act in the role of an economic regulator - one that is new to the powers they currently exercise. It would mean the Traffic Commissioner would have to second guess the arguments the operator was putting forward about its commercial policies and practices. In reality s/he is unlikely to overrule an operator who expresses the strong view that the Scheme requires uneconomic operation as this might leave him/her open to blame should safety standards be breached or unreliable operation follow as an operator sought to cut costs.


2.14 At the Lords Committee stage Lord Bassam described the circumstances where a Local Transport Authority might attempt to pursue a QPS which set out unreasonable requirements on maximum fares, frequencies and timings as 'highly unlikely'.


2.15 This is indeed the case because it would not be in the interests of any LTA to promote a QPS which was manifestly unreasonable or unworkable because operators would not sign up to such a QPS thus defeating the whole purpose of the Scheme. Two further protections from such unreasonable behaviour also exist, the first being the fact that any QPS has to pass the statutory Competition Test set out in the Transport Act 2000. This is a test that requires the (adverse) impact on competition must be justified in terms of the benefits the QPS delivers. Secondly, as an operator always has the right to withdraw services on the network covered by a QPS, a Local Transport Authority (LTA) must act reasonably or risk the operator ceasing to provide services which will be counter productive and damaging.


2.16 The 'admissible objection' veto is therefore unnecessary, and will be a significant deterrent to the introduction of Schemes that may bring significant benefits to passengers by linking local authority funded improvements with stable and effective networks delivered to high operational standards.

Quality Contracts

2.17 'Quality Contracts' are in effect the franchising of a network of services - similar to the way in which the majority of the rest of public transport in Britain is provided (such as bus services in London and the national rail network).


2.18 Quality Contracts would allow PTEs to specify and regulate bus networks. These networks could be the whole of a PTE area, a single town, or a single route. Private sector companies would be invited to bid to operate the specified network. Once a company was appointed it would face no on-road competition and would be free to concentrate on developing the local market for bus travel, in partnership with the PTE.


2.19 As with any franchising exercise, you get what you are prepared to pay for. But a market testing exercise by PTEs has shows that even with a comparable level of public funding, franchising should provide a better service than currently exists. At a minimum, franchised networks would bring benefits through:


more stability, with less frequent changes to fares, times and frequencies;

better reliability - because services would be thoroughly monitored and good performance would be incentivised;

better integration - one brand, one family of tickets, simpler fares, improved links between different modes of travel;

being cleaner and greener - dirty old buses would be sent to the scrapyard and contracts would require bus operators to provide newer, cleaner buses and to maintain them properly.


2.20 There are considerable practical obstacles to the introduction of Quality Contracts - not least of which is that the incumbent usually has control of the garages, the staff and the buses, and if they fail to win a Quality Contract competition they are under no obligation to hand them on to the winning bidder. Indeed, operators like Stagecoach have already threatened to challenge the process if their current monopoly position is threatened by Quality Contracts. For example, Brian Souter was quoted in the Sheffield Star (30/10/06) as saying: "If franchising or Quality Contracts are brought in we will put all our depots up for sale in South Yorkshire. That is not a threat, it's just that we don't think it is the way to make the system work."


2.21 pteg believes that these practical difficulties can potentially be overcome, for example, by PTEs investing directly in new modern depots to facilitate a level playing field at the start of a franchising process.


2.22 There are three sections of the Bill on Quality Contracts that we would like to see strengthened.


The approvals process


2.23 The Bill proposes that an approvals board (chaired by a Traffic Commissioner) will determine an application. This decision can then be appealed to a Transport Tribunal. The Bill places no limits on the grounds on which an appeal to the Transport Tribunal can be made and such an appeal could be made by any consultee to the original Quality Contract application. If neither the approvals board nor Transport Tribunal decision went their way then current monopoly operators would be free to appeal the decision to the Court of Appeal. The net effect of this process would be to:


increase the already significant risks and uncertainties which PTEs would face in a transition from unregulated monopolies to a regulated market;

unnecessarily prolong the timescale for introducing a Quality Contract (which will in itself bring with it cost penalties).


2.24 It would also potentially give the approval board and the Transport Tribunal a veto over a city region's wider transport strategy. There's a stark contrast too with road user charging proposals where, under the Bill, a decision on a road user charging scheme is (and in our view rightly) devolved to local authorities, with no tiered process of external adjudication by unelected bodies.


2.25 The Traffic Commissioners and the Transport Tribunal have considerable expertise in vehicle safety and operational issues - but they have no expertise, remit or accountability to determine whether a city region's transport strategy should go ahead or not.


2.26 For example the current remit for the Transport Tribunal is:


appeals against the decisions of Traffic Commissioners in connection with HGV and PSV operators licensing systems;

decisions of the Registrar of Approved Driving Instructors;

disputes under the Postal Services Act 2000.


2.27 pteg fears that this new process could mean that the Local Transport Bill repeats the mistake of the Transport Act 2000, with the franchising legislation being similarly under-utilised, against a backdrop of continuing decline in fare paying bus usage. This would be a further wasted opportunity - with passengers the ultimate losers.


2.28 pteg believes that the challenges inherent in a transition to a regulated market are sufficient to deter any ill-conceived Quality Contract application, and that it should be for democratically accountable PTAs to decide whether a Quality Contract will best deliver the improved bus services that their city regions need. Operators would still have recourse to the Courts to challenge any unfair or unlawful decision.


Transition issues


2.29 At present the Bill does not fully address the need to protect bus workers during the transition to a first Quality Contract. The Bill proposes that TUPE will apply in so far as that if the operator of a Quality Contract wishes to take on staff from the previous incumbent then their pay and conditions will be maintained. However, TUPE will not apply in terms of a guarantee of continuity of employment as there will be no automatic application of TUPE (this is in contrast to the normal public sector position where TUPE applies as of right). This will create unacceptable uncertainty for staff and the incumbent operator. Market consultation by PTEs has clearly shown that for a Quality Contract an incoming operator will need to inherit a trained and stable workforce. The ability for a Local Transport Authority (LTA) to be able to trigger the automatic application of TUPE is important to their ability to implement a Quality Contract at all.


2.30 Similarly there is also a need to protect staff pensions - with those already under the Local Government Pension Scheme retaining membership of that scheme, and for other staff to have a pension of equivalent value to that which they already have, on transfer to the new employer.


2.31 We understand that the Government understands the nature of these concerns and may bring forward further changes. The Trade Unions may also bring forward amendments in this area.


Contract periods


2.32 The Bill proposes that Quality Contracts should be for a maximum of ten years. We suggest that a simpler solution would be to bring Quality Contracts outside London in line with bus franchising inside London. In other words once a Quality Contract Scheme is approved it remains in force unless revoked by the LTA (but subject to the additional safeguard of periodic review by the LTA). Contract lengths within a Quality Contract Scheme should be governed by the EU Regulations on public passenger transport services by rail and by road, which state that public service contracts for bus services should be a maximum of ten years, with an extension of a further 50% where a contractor makes a substantial investment in services. Experience with rail franchises indicates that a longer franchise period can significantly increase private sector investment with consequent benefits for passengers and the public finances.


3. Governance


3.1 The enhancements to existing PTA powers are strongly supported (ie wellbeing powers, a duty to have regard to the Government's environmental policies, and responsibility for more flexible Local Transport Plans).


3.2 Beyond that we believe that the governance proposals strike broadly the right balance, between strengthening the remit and the role of the PTA (to be re-named ITAs) in planning and delivering the strategic priorities for the city region, whilst allowing each city region to determine how best this might be achieved, in the light of local circumstance and aspiration.


3.3 Our main concerns are to ensure that ITAs should be party to any reviews of their governance and that representation on ITAs should be determined locally with no potential for imposition of non-elected members by the Secretary of State or any other external body.


4. Road user charging


4.1 pteg recognises that public transport improvements alone will not be sufficient to tackle traffic congestion. Given the background growth in car ownership and use, traffic restraint measures will also be needed. Road user charging is one way in which traffic growth can be restrained and we welcome the powers in the Bill which will give the city regions the practical means by which road user charging schemes could be introduced.


4.2 However, it's important to stress that firstly, it's a matter for locally accountable politicians in each individual city region to decide whether or not road user charging is a viable option for them. Secondly, there is considerable variation both within and between the city regions on the strength of their local economies, and in their levels of current and forecast traffic congestion. This explains why city regions are at very different stages in considering whether road user charging is an appropriate traffic management tool for them. Thus pteg welcomes the powers in the Bill, but believes it is for individual city regions to set out their views on the Government's wider policies on road user charging pilots.



April 2008