Bus services after the Spending Review

Written evidence from the Chartered Institute of Logistics and Transport UK (BUS 30)

Introduction

1. The Chartered Institute of Logistics and Transport in the UK ("the Institute") is a professional institution embracing all transport modes whose members are engaged in the provision of transport services for both passengers and freight, the management of logistics and the supply chain, transport planning, government and administration. We have no political affiliations and do not support any particular vested interests. Our principal concerns are that transport policies and procedures should be effective and efficient and based, as far as possible, on objective analysis of the issues and practical experience and that good practice should be widely disseminated and adopted.

2. The Institute has a specialist Bus and Coach Forum, a nationwide structure of locally based groups and a Public Policies Committee which considers the broad canvass of transport policy. This submission draws on contributions from all these sources.

3. Before considering each of the four issues on which the Committee is focussing its inquiry it is appropriate to make a number of observations on the current status and performance of buses in the UK transport system:

a. Although buses are the most available and most used mode of public passenger transport, central and local government policy and public opinion all tend to neglect their contribution until, as at present, dramatic change is necessary. Rather than the steady evolution of services found in many other post-industrial economies there has been a tendency in the UK to drift (generally accompanied by slow decline in passenger numbers) punctuated only by the significant changes necessary to meet regulatory reform or budgetary restrictions. For too many people, bus travel has been allowed to become a distress purchase rather than an informed transport choice.

b. Particularly in urban areas, the role of buses is crucial in managing the twin threats of congestion and environmental pollution. Buses offer significant and flexible capacity which if properly utilised through effective traffic management, marketing and public awareness can significantly reduce congestion delays and atmospheric pollution. Conversely without effective traffic management, public awareness and marketing buses may contribute more to these problems than to the solutions.

c. Similarly in rural and inter-urban contexts bus and coach services can and do play significant roles, as lifeline services for those without access to private cars, in providing alternatives to the long car commutes that are straws breaking the congestion camel’s back in urban centres and in providing longer distance travel in parts where the rail network does not reach (and often never did!).

d. Whether in the urban or the rural context, the social and environmental contributions of buses are often as important, possibly more so, than their economic role. However, "bus" perhaps needs to be re-interpreted, not only to encompass coaches but also the demand responsive (DRT) and community transport services likely to be widely canvassed as possible solutions as the measures in the spending review take effect.

e. The Institute and its predecessors have consistently argued in front of your Committee and its predecessors that buses compete in a travel market in which private cars currently take poll position. In both national and local policy achieving a socially and environmentally sustainable passenger transport system is as important as maximising the economic efficiency of the deregulated sub-market for local bus services and it is a matter of regret that the current and previous investigations into the Local Bus Market by the Competition Authorities have steadfastly refused to recognise this.

f. As the points above suggest, bus services are not, and should not be, a matter for the commercial operators alone. They depend on effective partnership between those operators (including community transport) and local councils in their roles both as highway authorities and as guardians of the public interest able to issue contracts to secure additional "socially necessary" services (insofar as they can afford to do so!). In fact most councils go further and as well as using their highways powers to provide bus lanes and traffic signal phasing to assist bus services will also take account of bus services in their parking provision and pricing policies and play a part (sometimes the leading role) in providing bus service information and marketing. Many councils also provide and manage bus stations, bus stops and shelters.

g. One of the Institute’s predecessors published the report "Bus Routes to Success" which brought the term "Quality Partnership" (QP) to prominence followed by adoption both by the last Government and its predecessor. This is not the place to debate the merits of the several statutory variants of QPs now available nor the case for Quality Contracts based on London-style franchising advocated by some. However, in order to better manage the impact of the Spending Review cuts on bus users it is essential that there is effective partnership between local authorities and their bus and community transport operators in order to make best use of the diminished level of resource available.

h. It will be clear that the Institute advocates a consistent approach to all branches of transport policy. After all, all modes including rail, air and sea necessarily interact. In the case of cars, buses and road goods transport the infrastructure they use is largely common. We are concerned that recent "tweaks" introduced by the Coalition Government, ostensibly to reduce regulatory burdens, such as reducing constraints on parking provision in the planning process and limiting the scope for public authorities to discourage commuter parking by pricing, will weaken the links between different modal policies. Insofar as encouraging greater use of buses and coaches is concerned, the consequences of the Spending Review are likely to lead to loss of service, thereby further weakening vital policy linkages.

i. As a final point in this overview we observe that at deregulation of bus services outside London in 1986, public support (including concessionary travel) was of the order of 30%, comparable with the most admired European and North American systems of the day. A quarter of a century later it has risen to more than 40%, some of this resulting from the generosity of the English National Concessionary Travel Scheme. Within these broad generalisations there are (and were) many local instances of better performance based on partnership, sound management reflecting local needs and a willingness to innovate.

j. A "one size fits all" national approach that does not cater for regional variations and traditions is unlikely to be successful and the Institute hopes that the current Government’s "Big Society" approach will provide the freedom for local stakeholders to become involved in developing local bus networks that take full account not only of economic but social and environmental needs whilst making best use of both the public and private sector resources available.

4. Observations on the four issues on which the Committee has called for evidence follow. The Institute anticipates that other evidence will provide detailed statistical projections and has concentrated on qualitative interpretation of the impacts of the changes. The Institute will be pleased to expand on this submission orally if the Committee so wishes.

Issue 1: the impact of the reduction in Bus Service Operators' Grant,
including on community transport

1.1. Bus Service Operators’ Grant (BSOG) is a continuation of the Fuel Duty Rebate (FDR) introduced in 1965. Up to 1998 FDR was paid at the rate of 100% of the benchmark cost of fuel for all eligible services, in essence those now classified as Local Bus Services in accordance with the Transport Act 1985. In 2002 eligibility was extended to community transport services providing services for a number of groups including elderly and disabled people, unemployed people and those suffering social exclusion.

1.2. BSOG is still based on rebates of fuel duty but has been varied several times to promote the adoption of cleaner (lower carbon impact) fuels, fuel efficiency and, most recently the adoption of smart technology for ticketing, vehicle location (and, hence, real time passenger information). Base rates are now 75.6% for diesel fuel and 77.3% for "road fuel gas other than natural gas" where the buses can claim no technology or efficiency enhancements, and 100% for non-enhanced buses using Biodiesel, Bioethanol (not necessarily a lower carbon impact fuel depending on the method of production) or Natural Gas. Enhancements of 2% for Automatic Vehicle Location, 3% for a 6% improvement in fuel efficiency and 8% for ITSO compliant smartcard ticketing capability are payable. A further enhancement of 6p per kilometre is payable for low carbon buses that achieve 30% improvement over buses equipped with engines to Euro 3 standard.

1.3. Although viewed by some as a crude instrument, FDR, as first introduced, had the advantages of ease of administration (operators have to submit verified claims for payment) and equality of impact for all bus users. As amended as BSOG both advantages have been eroded, small bus companies and community transport operators in particular losing out as they tend to have older less efficient vehicles and are not able to afford investment in smart technology (such improvements where they exist typically being funded by public sector grant).

1.4. Changes that have already happened have thus harmed the fragile economic base of small bus operators, many of them based in rural areas and some offering effective competition to the local monopolistic tendencies of the major bus operating groups.

1.5. Whilst the opportunity to use FDR as an instrument of transport or environmental policy remains (for example reverting to 100% to encourage greater use of buses) the Coalition has announced its intention to make cuts of 20% between 2012 and 2014.

1.6. The impact of the changes may appear to be small – estimated at 2% of industry turnover. Fuel costs are believed typically to amount to 20 - 25% of current bus operating costs so there are bigger threats from anticipated increases in fuel prices. Again, the major transport groups are at an advantage, gaining benefits from long term bulk purchase contracts and price hedging whereas smaller operators pay at or near retail pump prices.

1.7. At the margins of both commercial and subsidised service operation there is the danger that the cut in BSOG will be a final contributory factor in decisions either by an operator to cease commercial operation or by a council to discontinue support for contracted services. Unfortunately rural services are rather more vulnerable than urban because of their generally higher cost base.

1.8. It is anticipated that most of the financial impacts of the BSOG changes will be containable both through improving operational efficiency and generating additional revenue through more effective marketing (particularly taking advantage of the higher proportional impacts of fuel duty increases for private car users). However the marginal losses of service will bear most heavily on people in more remote areas or dependent on infrequent services penetrating housing areas. These are most likely to include a high proportion of socially disadvantaged bus users.

1.9. The Institute approves of the Coalition Government’s decision to streamline the labyrinthine structure of transport support grants (which are in practice administered not only by the Department for Transport (DfT) but also by the Department of Communities and Local Government (DCLG) in respect of revenue support grants for local councils). In previous debates on governance and regulation of the bus industry we have argued that there is a strong case for consolidating BSOG, Concessionary Travel support payments and subsidised service payments into a single locally administered "pot", but with a stakeholder conference establishing the network eligible for support payments. There is still merit in this argument and the case for devolving BSOG payments may well be pursued in other submissions to you.

Issue 2: the impact of the reduction in local authority grant support to bus services and other changes to the funding of local authority bus schemes and services by the Department for Transport

2.1. The reductions in local authority support for subsidised bus and community transport services and the recent round of changes to reimbursement through local councils for concessionary bus travel will collectively have the most significant impact on bus service availability and are not wholly independent of each other.

2.2. Many subsidised services are vital for those seeking employment, for socially necessary activities such as visiting health clinics and hospitals, for further education and generally for maintaining basic levels of access and mobility. Bus services therefore can assist the economic recovery, support wider reform of the welfare system and help maintain reasonable quality of life for those most susceptible to social exclusion.

2.3. A number of recent studies applying cost benefit techniques to bus service subsidies have shown benefits significantly exceeding costs and in many cases substantially better than many transport infrastructure projects. Where the availability of services helps people to obtain and retain jobs, the Department of Work and Pensions suggests that savings to the community are in the range £7,000 - £14,000 per annum.

2.4. It is therefore disappointing that some councils have adopted "knee jerk" reactions to finding the effective 28% cut in funding for local transport accumulating as a result of the combined effect of DfT and DCLG cuts through the Transport Block grants. These have impacted both on subsidised services – for example where councils have resolved to withdraw all support for evening and weekend services – and capital funding for small schemes (such as bus priorities, bus passenger facilities and passenger information) which often represent better value for money in terms of evaluation criteria than more substantial schemes retained both locally and nationally.

2.5. Cutting subsidised services also has an adverse impact on both commercial and often on other supported services in the area. This is because many return journeys are made in one direction in the daytime when services may be commercial or a council provides support on the basis that daytime services tend to be busier and therefore of greater "value" than evening or weekend services. If the evening or weekend service is no longer available both legs of the return journey are lost. In consequence users suffer, in many cases accentuating social exclusion for low income families, bus operators suffer additional loss of income on their remaining commercial or supported services and, if sufficient trips transfer to car, there are potential adverse consequences for the environment and energy conservation.

2.6. The current arrangements for revenue support to the bus industry are complicated and will remain so regardless of the simplifications introduced by DfT and DCLG. The industry receives on average 40% or more of its turnover through public sector support payments including concessionary travel reimbursement and it must be recognised that local authorities and other stakeholders have a legitimate role in determining the network of services to be operated..

2.7. There is scope to consider alternative funding routes – for example those councils that have taken responsibility for enforcement of decriminalised parking and moving traffic offences have found that this has been cost effective. Revenue from fines exceeds costs and surpluses contribute a worthwhile fund for further traffic management or public transport improvements.

2.8. The Institute is aware that a number of councils have established Integrated Transport Units bringing together the requirements of internal clients such as social services and special educational establishments together with management of the councils’ own vehicle fleets and procurement of contracted services including subsidised bus services, community transport, taxis and social car schemes. Some significant reductions in costs and improvements in quality of service have been reported, for example by the North West Centre of Excellence in Local Government which led work on this topic.

2.9. More ambitiously, other stakeholders such as local employers, town and shopping centre managers, health service organisations and community groups might be involved both in specifying and funding services. A case in point is the successful Dales and Bowland Community Interest Company which has delivered network expansion, significant patronage growth and substantial reductions in costs per passenger journey for initially leisure and recreational Sunday and Bank Holiday services in the Yorkshire Dales. The Institute believes that the Company will submit its own evidence to the Committee.

2.10. As noted in paragraph 1.9, the Institute believes that there is a case for further review, hopefully leading to devolution and consolidation of funding streams for application at an appropriate local level. This requires consideration of governance, network specification and alternative funding arrangements and is beyond the scope of this submission.

Issue 3: the implementation and financial implications of free off-peak travel for elderly and disabled people on all local buses anywhere in England under the Concessionary Bus Travel Act 2007

3.1. Free off-peak travel for elderly people is substantially responsible for much of the increases in bus patronage that have occurred in most areas of England since 2007. The concession is much appreciated by recipients and there is some evidence that it is also responsible for increasing travel by family groups for leisure, recreational and shopping trips. Disabled people are also appreciative of the greater freedom to travel although many of them suffer an unintended consequence in that buses are often full, particularly immediately after 09:30 when there is an artificially induced peak in many areas. Seats and spaces in which priority is intended for disabled people are frequently taken up by elderly travellers or the buggies of family groups.

3.2. Some councils have mitigated the effects of the artificial peak by using their discretion to fund concessions that start before 09:30, typically at 09:00, 08:30 or occasionally earlier. This is of great value to elderly and disabled people attending hospital or clinic appointments and does not appear to have resulted in overcrowding because elderly and disabled passengers are travelling at the same time as office and shop workers. The question arises as to whether there needs to be a restriction on start time for the free concession as in most areas outside London the main peaks for bus operators are around school starting and finishing times.

3.3. Several Councils (for instance Cornwall County Council) have already announced their intention to remove the discretionary extensions to time periods in their areas in order to make savings in their budgets. In geographically large counties this may severely constrain opportunities to use the concession as distances to large towns and key facilities are long and services infrequent. We are aware that some other councils may be examining whether their interpretation of the regulations covering classes of disabled people and their companions entitled to concessions can be tightened to make further savings although except in the largest authorities these would be very small. In either case the changes will have the greatest impact on low income groups.

3.4. There is effectively a 28 per cent cut in funds from the Department of Communities and Local Government to councils in the Block Grant to fund the national concessionary "free" travel scheme. This money is paid into councils' general treasury coffers so we might expect further squeezes from financial officers trying to fund other council services as the grant is not ring-fenced. The position is further complicated as responsibility for payment of concessionary travel reimbursement will transfer from lower tier to upper tier authorities in English counties where there are two tiers of local government so that the changes in intended funding levels are far from transparent.

3.5. The unrelated change to the reimbursement rules for this scheme promulgated by the DfT also has an impact. Effectively DCLG appeared already to have taken into account the savings predicted by the research undertaken for the DfT prior to consultation on the new rules. Unfortunately, despite sophisticated analysis, the researchers appeared to have used a limited data sample collected principally in urban areas in affluent parts of England. Unfortunately, most commentators believe this data not to represent adequately the generality of bus services, particularly in rural areas and less affluent urban areas, particularly in Northern England. The new rules as first published favoured frequent urban services leaving operators out of pocket for the sort of occasional, longer distance services prevalent in most rural and inter urban operations and in many parts of England outside the South East. The fudges now introduced to overcome these limitations have the potential to complicate rather than simplify the situation.

3.6. Unfortunately, the fiction of the "no better, no worse off" principle introduced in the regulations for concessionary travel following the defeat of the then Government’s original proposals for limited concessionary travel in the Transport Bill 1985 has led to considerable expense and use of scarce management resources for both operators and local authorities. Less complex systems for determining funding and reimbursement for concessionary fares are obviously desirable to simplify administration and reduce the potential for dispute. However, a simpler system promulgated nationally will inevitably create more winners and losers within a capped level of Government funding (in itself incompatible with "no better, no worse"!). In other words greater simplicity can result in outcomes which represent poorer value for money for the taxpayer and could also have impacts on other budgets for transport authorities.

3.7. Prior to the changes in 2007 (subsequent to which the then Government published a national reimbursement calculator in response to the spate of appeals to the Secretary of State for Transport) several authorities, principally PTEs but also some unitary and county councils, effectively declared their concessionary travel budget for the coming financial year and then negotiated collectively with the operators in their areas a set of reimbursement rules consistent with that budget. Such an approach is both consistent with a commercial bus operating industry and delivering clarity for all concerned.

3.8. In paragraph 2.1 we noted the inter-relationship between local authority payments for subsidised services and concessionary travel. This is because for many supported services the majority of passengers are elderly or disabled so that withdrawing the service will leave the concessionary travellers with no public transport alternative. Some (the affluent retirees) will be able to travel by car, many will not. A high proportion of the remaining passengers may be from other disadvantaged groups so that the consequences of these reductions are both socially and environmentally damaging.

3.9. As noted in paragraphs 1.9 and 2.10, the Institute believes that there is a case for further review, hopefully leading to devolution and consolidation of funding streams for application at an appropriate local level. This requires consideration of governance, network specification and alternative funding arrangements and is beyond the scope of this submission.

Issue 4: how passengers' views are taken into account in planning bus services, and the role of Passenger Focus in this area

4.1. For many years the generally more affluent and eloquent market segment of rail passengers had statutory representation on a wide range of issues, but the far larger, but generally less vociferous, group of bus passengers had only a voluntary mechanism, the Bus Appeals Body established after the 1985 Transport Act deregulated bus services outside London. This situation was rectified when Passenger Focus took on additional responsibilities for bus services in 2008.

4.2. With the relatively small resources available to Passenger Focus it is likely that its interest in bus matters will be mainly directed to general monitoring and suggestions for improvement on an industry wide basis. It is gratifying that they have already recognised that the bus industry needs the active involvement of local highway and transport authorities and are taking a close interest in the way in which decisions are taken to allocate contracts for supported services.

4.3. Many transport authorities have consultative committees that consider public transport requirements and performance. Their effectiveness varies from information exchange and endorsement of decisions already taken to genuine innovative input into the service planning process. The major bus operating groups all use market research in various forms and with differing levels of public consultation.

4.4. The Dales & Bowland Community Interest Company has proposed a model (referred to at paragraph 2.9) in which a wide group of stakeholders are involved in specifying a rural network and is now working with bus and community transport operators and North Yorkshire County Council on a potential application for Sustainable Local Transport Fund grant that will allow the principles of a "Big Society" approach to local transport to be tested in the Yorkshire Dales.

4.5. As already noted in paragraphs 1.9, 2.10 and 3.9, the Institute believes that there is a case for further review, hopefully leading to devolution and consolidation of funding streams for application at an appropriate local level. Involving all appropriate stakeholders in service planning as proposed in the Yorkshire Dales will be an interesting trial of the principles. Application at national level requires evaluation of pilots such as this together with consideration of governance and alternative funding arrangements and is beyond the scope of this submission.

Summary

5. A recent letter in the "Yorkshire Post" provoked by the insensitive blanket cut of all evening and Sunday subsidised services by North Yorkshire County Council summarised the situation facing bus services after the spending review as a "quintuple whammy" as follows:

"First, there is the cut in contract revenue as councils and integrated transport authorities make cuts of 20 per cent or more in their transport budgets.

"Second, there is an inevitable consequent loss of income on other "commercial" services as many of the trips on the subsidised services to be cut are balanced by a return trip earlier or later in the day. If there is no return bus available, the likelihood is that both outward and return journeys will either be made by car or not at all.

"Third, there is the 20 per cent or more cut in funds from the Department of Communities and Local Government to councils to fund the national concessionary "free" travel scheme. This money is also swallowed up into councils' general treasury coffers so we can expect further squeezes from financial officers trying to fund other council services.

"Fourth, there is the unrelated change to the reimbursement rules for this scheme promulgated by the Department for Transport which has yet to be finalised but which provoked protest from many bus operators and councils when it was realised the new rules appeared to favour frequent urban services leaving operators out of pocket for the sort of occasional, longer distance services prevalent in most of North Yorkshire.

"Fifth, there is a 20 per cent cut to the bus service operators grant paid as a rebate of fuel duty. The Department for Transport has also revised the rules for this grant to favour operators who invest in greener buses and smart technology."

January 2011