Memorandum from Cheshire County Council
(TPT 40)
INTRODUCTION
The attached paper addresses the issues outlined
in the 8 February Press Notice, from the point of view of Cheshire
County Council. There is a strong emphasis in the paper on the
County Council's unique success in utilising relevant powers to
develop and operate a commercially interoperable smartcard-based
bus ticketing scheme, on the pioneering application of the ITSO
standard to that scheme, and on the impact of Government strategy
on the statutory concessionary fares scheme. The Cheshire concessionary
scheme also covers Halton and Warrington Unitary Councils.
INTEGRATED TICKETING
1. Is ticketing sufficiently integrated across
different modes of transport and between different geographical
areas?
1.1 No. There are only a few journeys where
passengers can use different modes by buying a single ticket.
These include the national "PlusBus" rail add-on product
(in Cheshire currently only available in Chester), and two "Ranger"
services entering Cheshire from Derbyshire and the Peak District.
1.2 On bus services, outside the Chester
area a small number of offers are made which allow a single ticket
to be used on a number of operators' services, such as the "Sunday
Adventurer". Where the County Council has tendered services,
there are a number of successfully negotiated arrangements for
the contractor to accept the tickets of the main operator on the
route.
1.3 In the Chester area, the County Council's
Chester Travelcard scheme has been operational since July 2002
and provides a unique, commercially interoperable smartcard-based
bus ticketing scheme. This allows passengers access to the services
of four main participating operators through a range of zone-based
pass products, in addition to a stored value purse. The scheme
was derived in response to a heavily sectorised bus network which
disadvantaged cross-city trips implying more than one operator,
and was established under Transport Act 2000 powers, utilising
the Public Transport Ticketing Schemes Block Exemption Order 2001
in its reconciliation basis. As it offers a stored value purse,
the scheme also holds a small e-money issuer certificate under
Financial Services and Markets Act 2000 (Regulated Activities)
Order 2001.
2. Does the Government have an adequate strategy
for developing the integration of ticketing systems?
2.1 The technology basis for the integration
of ticketing systems, including between modes via the ITSO standard,
is clearly comprehensive and capable of accommodating not only
statutory (concessionary travel) functionality, but the addition
of commercial ticketing products and related functionality (such
as the co-hosting of other transport (eg charging or tolling)
and non-transport (e.g. tourism) functions.
2.2 The available statutory basis for the
integration of ticketing systems has been shown by the Chester
Travelcard scheme to be sufficient for the purpose, and capable
of satisfying the participation requirements of major national
bus operating groups. However, in the general case outside the
established scheme, the competition implications of multi-operator
ticketing—and the penalties for non-compliance—have
on occasion been shown to reduce operator willingness to enter
into "collaborative" schemes.
2.3 Outside the concessionary case, the
strategy for developing the integration of ticketing systems suffers
from an inability of local authorities to enforce participation.
Currently, participation is voluntary and relies on a perceived
commercial benefit on the part of the participant. For this reason,
in the absence of significant grant assistance towards equipment,
software and systems, business cases are perceived as being extremely
weak and participation is conditioned accordingly. It should also
be noted that in the case of local authorities, the necessary
knowledge and resource to develop such schemes may be lacking,
or may not be justified against the potential outcomes. In Cheshire,
the justification is in pursuit of broad Local Transport Plan
policies relating to accessibility and ease of use of public transport.
2.4 The County Council's concessionary travel
scheme is under-developed compared with large conurbations such
as Greater Manchester and Merseyside. Any Government strategy
needs to take into consideration the needs of travellers from
and within rural areas.
THE USE
OF SMARTCARD
TECHNOLOGIES
3. Is the industry taking up modern smartcard
technologies adequately and appropriately?
3.1 If "The industry" is defined
in its broadest sense (ie the entire operator, regulatory and
local authority spectrum), then it is true that modern smartcard
technology is being taken up, although at different rates in different
areas.
3.2 Cheshire County Council's Travelcard
scheme was selected and part-funded by DfT (with Southampton City
Council's university travel scheme and Nottinghamshire County
Council's concessionary scheme) as a successful existing scheme
for development to the ITSO standard. To date, these three "Legacy"
schemes have undertaken extensive pioneering work into the application
of the Standard, dealing with the problems encountered in establishing
systems and practices, and the benefits of this are now available
to other local authorities. Cheshire has had its first live end-to-end
ITSO implementation phase in operation since December 2006, in
Crewe.
3.3 In addition, Cheshire is contracted
to DfT to host a research investigation into "low-cost"
transport smartcards, which is expected to provide evidence of
additional applications and distribution opportunities that would
act to promote the take-up of transport smartcards.
3.4 As well as enhanced travel and product
flexibility, the benefits of modern smartcard technologies to
all concerned in the accumulation of reliable transaction data
and the prevention of fraud (particularly in cases where travel
entitlement is given) are readily appreciated. Although there
are precedents for proprietary operator smartcard-based schemes,
we understand that general take-up by operators may present a
perceived weak business case due to the significant capital investment
required.
4. Does the ITSO system cater for the needs
of all passengers and travel providers?
4.1 Yes. Our experience with the ITSO standard
demonstrates that it provides a comprehensive basis for the establishment
of integrated ticketing solutions, which can be multi-modal. It
provides an open platform and certification system for access
by a range of suppliers, and retains a structure enabling it to
maintain the potential to evolve with the addition of ticketing
scheme equipment and systems, and card media.
4.2 Significantly, the ITSO standard presents
the broader potential and flexibility for satisfactorily accommodating
not only statutory (concessionary travel) functionality, but of
expansion into commercial ticketing products and related functionality
(such as the co-hosting of other transport (eg charging or tolling)
and non-transport (eg tourism) functions. These areas affect the
majority of public transport users (ie not only concession holders)
and open the possibility of offering products that are clearly
complementary to the underlying travel basis. For example, the
ability to provide visitor entitlements, including associated
travel and admission entitlement, in an integrated and fully reconcilable
framework, offers the ability to contribute constructively to
a variety of policy objectives, in areas such as economic development,
tourism and accessibility.
4.3 It is significant that the established
statutory basis for the Chester Travelcard scheme has been demonstrated
to possess the flexibility for geographic and functional expansion,
and to continue to provide a sound basis for the existing scheme
as well as its ITSO development.
5. What can be learned from the experiences
of areas such as London and Scotland where smartcard technology
is already in place?
5.1 In London, growth of the successful
Oyster scheme demonstrates clearly the potential for such schemes,
when promoted within a stable, regulated environment. Outside
the London regulatory framework, the volatility in particular
of the commercial bus network represents a material disincentive
to the development of integrated ticketing schemes and the ability
to ensure operator participation in them.
5.2 Oyster also clearly demonstrates the
technological capability and robustness of the requisite equipment
and card media, although it does not demonstrate the application
of the ITSO standard.
5.3 In Scotland, there is a single pilot
scheme in Shetland, and although a procurement framework exists,
smartcard technology is not yet generally in place. However, the
introduction process for the national concessionary travel card
demonstrates the potential for beginning with card procurement
and subsequently building the host scheme. The ability of local
authorities to act in unison under a national aegis provides evidence
of the effectiveness of joint procurement routes and the accommodation
of individual identities, and of the consequent effect on the
market for suppliers of items of ticketing systems and equipment.
REVENUE PROTECTION
AND THE
POWERS OF
TICKET INSPECTORS
6. Is the legal framework within which ticket
inspectors function appropriate?
6.1 The County Council's inspectors do not
exercise any powers to penalise passengers. They are instructed
to report any issues of this nature to the company. Bus companies
in Cheshire engage their own inspectors.
6.2 Under the Cheshire Districts Concessionary
Fares Scheme, County Council inspectors monitor the scheme. Any
issues discovered here are reported to the operator.
6.3 The legal framework appears to us to
be adequate to carry out our due diligence requirements.
7. What appeal mechanisms exist for passengers,
and are they adequate?
7.1 This is primarily an issue for the bus
operators.
8. Are the rights of passengers and the powers
of ticket inspectors well-balanced?
8.1 We cannot comment on this.
9. Do operators of public transport take
adequate measures to protect fares revenue?
9.1 We cannot comment on this.
CONCESSIONARY FARES—THE
RIGHT STRATEGY?
10. Is the Government's concessionary fares
strategy, including the proposed scheme for concessionary bus
travel, adequate?
10.1 In introducing the current Cheshire
scheme there have been a number of issues which raise questions
about the strategy for the introduction of the scheme:
Need for support from the Department for Transport
10.2 As administrators and brokers of the
scheme, the County Council experienced a number of major obstacles
in negotiating an agreement between the bus operators and District
Councils. The target of April 2006 was challenging but achievable.
While the target was achieved in Cheshire, it would have been
helped by more support from the DfT. For example guidance to operate
the scheme did not come out until December 2005. The published
guidance gave local authorities a methodology for working out
the reimbursement which was a source of debate rather than a point
of reference to resolve disputes in negotiation. Even after authorities
have received judgements on appeals by the bus operators they
still did not know how much to pay their operators.
10.3 Because the situation has been fast
moving, DfT have not been able to answer questions in a consistent
and unambiguous way. For example one of the basic concepts of
the legislation is that it should be an objective for the operators
to be in a position where they are "no better and no worse
off". This can be interpreted in a number of ways and some
operators may have exploited the lack of guidance.
10.4 It would have been helpful to have
support from central Government to enable local authorities to
develop a coherent negotiating position. For example in the run
up to the new scheme local authorities could have been offered
funding to employ their own technical and legal experts to help
them in the negotiations and administration of the schemes. Some
kind of information channel could then have been opened up to
enable local authorities to compare notes on the negotiating position
they are adopting. Instead the local authorities have had to resort
to phoning round, informal networks etc. Again all this adds to
the administrative overload. For the simple issue of reimbursement
there is an alarming variety of reimbursement formulae. For example:
— Fixed fee schemes such as Nottinghamshire
and Derbyshire.
— Mileage based schemes such as Surrey.
— Capped schemes such as Essex (now
declared illegal).
— Uncapped journey based schemes at
a variety of different rates (such as ours, Torbay and Staffs).
— "Pooled" schemes such as
Merseyside.
— Uncapped in-district schemes with
a different reimbursement formula for out of district concessions.
In some cases this confusion has been to the
advantage of the bus operators but in most it has served the interests
of neither side.
10.5 On the other hand the bus operators
have, after an initial hiatus, through the CPT developed a well-oiled
machine with the legal and technical resources to fight appeals
and to dictate the agenda over the benefits of the scheme as outlined
below.
Distribution of funds
10.6 The Cheshire Scheme could have given
the operators an adequate settlement had all the money been allocated
to the county tier of Government. There were legislative obstacles
to this. The DfT did not have a mechanism to distribute the funding
and gave the responsibility to the erstwhile ODPM, now the Department
of Communities and Local Government. The formula that was then
arrived at was based largely on variables such as population which
only have an indirect link to bus use and therefore the levels
of reimbursement required. As a result in most two tier areas
that we are aware of at least one district has been overprovided
for and one underprovided for. In Cheshire's case for the 2006-07
settlement:
— Chester City Council received £775,000
but need £1.5 million to meet their share of the costs. Even
with the revenue they had allocated in previous years they only
had a "kitty" of £1.25 million, £250,000 short.
— Congleton Borough Council received
£444,000 but only need £344,000 to meet their share.
They therefore have a £100,000 surplus and keep the £100,000
they contributed in previous years.
10.7 This problem is compounded by the fact
that the revenue is not ring fenced and, in spite of it being
suggested numerous times, there is no willingness by the districts
to pool the cash.
10.8 In addition the subtleties of concessionary
fares financial issues are outside the experience of many District
Treasurers. Due to the relatively small size of District Council
budgets, the variance and uncertainty on the concessionary scheme
may represent a very high proportional variance. Because of the
findings of the independent arbitrator, their preferred option
of capping the risk by offering a fixed reimbursement has been
disallowed. The fact is that there is considerable financial risk
as the level of reimbursement required is subject to changes in
the level of demand and that there is no way of capping these.
In the first years of the operation of a new scheme, this is subject
to considerable volatility, which is a challenge to District Councils
which are on fixed budgets. The scheme has of course been so successful
that bills are tending to rise. In Cheshire this is a marked contrast
to previous experience when costs of the half fare scheme have
risen only gradually over the 20 years the scheme has operated.
10.9 For 2007-08, the money to pay for concessionary
fares (with the addition of 5% for inflation) is no longer itemised
separately in the FSG settlement. This follows the pattern of
the Government revenue funding for the previous half fare scheme
where the purpose of the funding is not transparent.
Confusion over what local authorities are expected
to deliver
10.10 One of the points the bus operators
make is that there is sufficient money in the pot to deliver what
the Chancellor promised in March 2005: free in-district off-peak
travel. There seems to be a move on their part to impose this
and appeal against schemes which offer enhanced benefits. In Cheshire
if the new scheme had delivered just this, concessionaires would
have a scheme which was worse than the previous half fare scheme.
They would lose all cross boundary and cross border travel and
any peak time concessions. For the scheme to deliver something
effective, cross boundary travel is required where for a significant
minority the nearest market town, hospital or other facility is
in the next District. A hybrid of free up to the district boundary
and half fare thereafter would have left everyone involved with
an administrative nightmare. Even from the bus operators' point
of view their drivers would be faced with confusion over what
concessions to offer passengers for each journey. Our estimate
is that non-statutory concessionary travel accounts for only 16.5%
of the total. If only statutory concessionary fares were available
there would also be some transfer as passengers chose the free
alternative.
10.11 The DfT has described these additional
benefits as enhancements which should be funded locally. This
shifts the problem on to local authorities and has added to the
burden of administering and negotiating the scheme.
10.12 The introduction of the national scheme
goes some way towards ameliorating this problem but local authorities
will still have to consider maintaining any existing concessions
at peak times.
Suggested requirements for the new scheme
10.13 We are less than one year away from
the second major change in the scheme in two years. Again it looks
as though the burden for shaping the future scheme will rest with
local authorities and the support and guidance which needs to
be there may again be lacking, late or confusing. We suggest that
the following ought to be considered for the 2008-09 scheme:
10.13.1 Transferring the responsibility
and funding (including the funding for the half fare scheme) to
the higher tier of local government in two tier areas. We understand
that the Department for communities and Local Government has already
begun preliminary discussions for the national scheme based on
the current formula. A change in the responsible level of local
government is allowed for in the current Bill but urgent decisions
have to be taken if it is to happen by 2008-09.
10.13.2 Adequate funding to be made
available in this financial year to fund pass re-issue and the
development of new systems to manage the national scheme.
10.13.3 The Government to take over
the responsibility for reimbursement at a national level.
10.13.4 An agreed national rate of
reimbursement to operators to be negotiated.
10.13.5 The Government to reimburse
local authorities against verified operator claims and legitimate
costs for setting up the new scheme.
10.13.6 Discussion with local authority
representatives how part of the Government funding can go to giving
them effective legal and technical support and much better information.
11. Are concessionary fares schemes sufficiently
integrated across different modes of transport and different geographical
areas?
11.1 The maintenance of a Cheshire-wide
concessionary fares scheme for over 20 years has assisted integration
on bus travel for the people of Cheshire. The current scheme allows
for concessions for all journeys beginning or ending in the County.
11.2 However there are a number of significant
cross border and multi-modal issues:
11.2.1 The County has a long border
with Wales. The Welsh scheme is more generous than other
schemes in that it offers free travel at all times. The reimbursement
formula is also more generous than English schemes in that a higher
"generation factor" is paid and compensation is based
on single fares rather than taking into account the effects of
returns and day tickets.
11.2.2 There is considerable cross
border travel with Merseyside using both rail and bus.
In the initial transition from the half fare to the full scheme,
there was some confusion about passengers' entitlements but this
has been resolved. However post April 2008, different reimbursement
formulas could have an impact on the smooth running of the scheme.
This goes beyond the Welsh issue where the rates are different
but the basis for calculation is the same. Merseyside pay a fixed
amount for all operators and divide up the "pot" based
on survey information. The problems are exacerbated by the extent
of cross border operations by the larger operators.
11.2.3 Cross border links with other
areas outside Cheshire are more limited although there are some
issues centring on entitlements to travel. For example the Staffordshire
scheme entitles passengers to free journeys at all times. This
can lead to confusion as passengers think that their entitlement
extends beyond their County boundaries.
11.2.4 The principal multi-modal issue
is bus-rail. Cheshire has 47 stations but local journeys
are dominated by bus. Most Cheshire districts offer discounted
over-60s railcards and rail vouchers for disabled people but this
is the limit of concessionary fares activity.
March 2007
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