Bus services after the Spending Review

Written evidence from Devon County Council (BUS 31)

Summary of Main Points

1. Local authority (LA) local transport spending is relatively low priority compared to other local authority spending responsibilities, and will therefore inevitably take a much greater hit from CSR.

2. The relatively good transport capital CSR settlement announced by government is not reflected in local authority revenue transport budgets. It is suggested that this needs to be reconsidered by government as a matter of high priority if maximum future benefit is to be gained from capital investment.

3. The greater LA flexibility from reduced ring-fencing does not mitigate against this due to greater statutory responsibilities of other LA services spending relative to support for local bus services.

4. In rural areas the proportionate cut in bus services will be larger than the budget cut as:

(i) rural commercial services are at best marginal and more sensitive to increased costs or reduced income;

(ii) the tension between low cost/ passenger and high cost/ passenger rural services will make it difficult not to disproportionately cut the less well used higher cost rural services.

5. Localism, and the role of community transport, is most unlikely to step in as bus services are withdrawn:

(i) at best there will be a time lag of several years before they will step in,

(ii) its coverage will be very limited at best,

(iii) it will require a broadly similar level of support to operate a similar level of service.

6. Reduced budgets due to CSR coincide with a "perfect storm" of increased costs and reduced revenue from:

· BSOG reductions from 2012;

· Reduced Concessionary travel scheme reimbursement;

· Higher ongoing transport inflation (for many years and likely in the future);

- when combined with reduced LA revenue support, the prospects for local bus transport are bad; the prospects for rural bus services are far worse.

7. The proportional reduction in rural services is likely to be even greater due to the above factors, and the effect on rural lives and communities will be significant and in many cases irreversible.

8. DCC believes that there is a real lost opportunity, as the potential contribution of bus services towards key agendas - economic recovery, achieving a step change in travel behaviour towards greener modes and health improvement – will be significantly undermined by cuts to bus services, which will also set back, possibly irretrievably, the sustainability of rural communities and rural living for many people.

9. The prospect of a much greater spend on the national concessionary travel scheme than on supporting bus services makes little sense; government needs to rethink the relative worth from financing (a) the scheme, and (b) local bus service support in areas where commercial services do not operate.

10. DCC is concerned that the national concessionary travel scheme will be underfunded due to CLG’s formula approach rather than transferring known scheme costs from Districts to Counties in 2011/12.

11. Service changes need to be from the start of the new financial year to minimise impact, and the CSR timetable allows no time for consultation – which would be of dubious value. In the context of CSR local authorities need to make decisions across the context of all services, and to invite a "single issue perspective" around a single service is not helpful in this context.

1. Background

1.1. Devon County Council (DCC) is very concerned at the effect of the Comprehensive Spending Review (CSR) on its ability to continue the current level of local bus service support. As a rural county, DCC is committed to supporting rural areas and to the sustainability of rural communities and the rural way of life.

1.2. DCC has pioneered a fully integrated approach to passenger transport since 1986, when it brought together the co-ordination and management of home-to-school and college transport, social care transport, public transport and community transport within a single integrated transport unit working corporately across all county council requirements. More recently DCC’s approach has been recognised in the National Transport Awards as Local Transport Authority of the Year in 2006 and 2009, and was Highly Commended in 2010 for its wide-ranging work to improve Accessibility across Devon. DCC continues to develop integration and further economies through pursuing a wider approach across the public sector.

1.3. While accepting the reasons behind CSR, a combination of the extent of the cuts and the nature of continuing government statutory priorities of other Local Authority (LA) spending means that DCC is faced with an almost impossible "choice" of not being able to continue to support rural services in a way which will not reduce rural sustainability and the opportunities and life chances of people living in rural Devon.

1.4. DCC is therefore not able to both fulfil its responsibilities on other statutory service areas and maintain the level of rural bus services which it would like in order to maintain the sustainability of rural communities.

1.5. As a result, DCC is aware that cuts in rural transport will have a significant negative effect on many people living in rural areas, with a resultant loss in Accessibility whether in relation to employment, learning, health or fulfilling basic needs such as shopping. Health benefits from bus services relate to:

· access to health appointments, and as an enabler to help early intervention for serious illnesses,

· more general health benefits – both physical and mental – from the ability to "get out and about".

- closely aligned to new local authority health improvement roles under new "Liberating the NHS" policy aims.

1.6. In addition, the need to reduce revenue support for bus services post-CSR coincides with a number of factors reducing bus operating income and increasing costs as a result of reductions in government funding.

2. Local Authority Spending Limitations

2.1. The priority of local authority spending on local transport is relatively low compared to other statutory services such as Social Care, where recent high profile court cases mitigate against cutting these services. It’s not just that local authorities have some very difficult decisions to take, it’s that the decisions they are having to take, due to other government-defined statutory responsibilities, are in effect made for them; transport in this context is not statutory - and therefore with reduced budgets is a lower spending priority.

2.2. Greater local government funding flexibility from reduced ring-fencing does not mitigate against this when there is insufficient funding to provide adequately for all responsibilities and for an adequate level of local bus services.

3. Other Negative Influences

3.1. At the same time as we are considering reductions to public transport services to meet the demands set by CSR, a number of other significant drivers are working to reduce operator income and increase costs:

3.2. Bus Services Operator Grants (BSOG)

3.2.1. Government plans for a 20% reduction in BSOG planned from April 2012 will increase bus operating costs by 1.5 – 2%, or will result in a reduction of commercial services by a similar amount. In isolation one can envisage operators trying to minimise the effects of this; taken with other reductions in grants and higher costs DCC believes that the effect of this reduction in BSOG is unlikely to be contained and that it will result in a direct reduction in services.

3.2.2. Even if passed on as a fare increase, due to elasticity of demand, fares would have to rise by perhaps 5% to compensate. Fares in Devon are already seen to be amongst the highest in the country, and further fare increases would damage the policy aim of achieving step change in travel behaviour.

3.2.3. The effect of a 20% rise in BSOG on community transport would be similar, but as the sector may be reluctant to reduce their services or significantly raise fares due to their community ethos, it is more likely to result in greater difficulties and greater financial pressures for the community transport sector generally.

3.3. Concessionary Travel

3.3.1. Government proposals to reduce operator reimbursement for the English National Concessionary Travel Scheme (ENCTS) from 2011/12 will have a major effect on operator income and therefore net costs.

3.3.2. In Devon 56% of all bus journeys after 0930 are free journeys by ENCTS passholders. This equates to up to 30% of all operator income; a reduction of reimbursement to operators of 15% will therefore reduce income by 4-5%. However, modelling the recent government draft guidance onto different operators has shown potential reductions in reimbursement of around 30% for some more rural operators.

3.3.3. Given the other factors working against bus operators outlined in this paper, reductions in income of these levels would have a severe negative effect on operators’ ability to continue to operate (a) commercial services at current service levels, and (b) supported contracted services at the current tendered rates.

3.3.4. A further great concern is the cost of ENCTS. DCC estimates ENCTS costs in 2012/13 of £12.35m to administer the scheme, against expenditure on supporting bus services in the current year of £7.5m. With declining budgets due to CSR there is the unfortunate prospect of local authorities generally spending far less on providing public transport than they will spend on the concessionary travel scheme.

3.3.5. DCC therefore believes that the government needs to review the balance and relative merits of a declining number of people able to travel for free (as councils can no longer sustain current levels of bus service support) with the need to travel locally even if paying a fare. I.e. is the ability for some people to travel free more important than the ability to travel at all for many people of all ages?

3.5.6. The scheme appears to be underfunded from 2011/12 due to the CLG formula-based approach, whereas it would have been sensible to transfer the known scheme costs from Districts to Counties. There is also a link between declining ENCTS operator reimbursement (and reduced profitability) and therefore reduced bus service levels; it may be more cost-effective to retain current reimbursement levels to avoid further commercial service withdrawals and further pressure on bus support budgets.

3.5.7. DCC has received many comments from passholders indicating a preference to a half-fare scheme on an improving network rather than free fares on services under pressure and at risk of declining.

3.4. Passenger Transport Inflation

3.4.1. Passenger transport inflation is continuing (as it has for many years) to run at a higher level than Retail Price Index (RPI) inflation. Comparisons of increases in bus fares with RPI over recent years are therefore not entirely helpful.

3.4.2. Transport inflation has increased due to a number of factors including:

· increased insurance premiums;

· increase staff costs with legislation on part-time workers, increased training requirements for PCV drivers, and (for the community transport sector) changes to minibus driver licensing in 1997;

· more expensive vehicles to meet legislation on low emissions and low floor easy access buses;

· EU legislation to reduce emissions which has resulted in increasing fuel consumption and fuel costs;

· higher fuel prices.

4. Sensitivity of Rural Services

4.1. We believe that the proportionate cut in rural services will be even larger for a number of reasons:

4.2. Rural bus services are more marginal by nature; with rural commercial services having low margins, they are more sensitive to increased costs and therefore more susceptible to being uneconomic or cut.

4.3. Commercial Services

4.3.1. Rural commercial bus services are at risk from the 20% reduction to BSOG planned from 2012, and the government target to reduce concessionary travel scheme reimbursement.

4.3.2. With very low margins, it is expected that there will be significant commercial service withdrawals in rural areas, which of course cannot be replaced by supported services if the revenue support budget is also under pressure. I.e. rural bus services are more susceptible to cost increases with lower margins.

4.4. Supported Services

4.4.1. When budgets are limited, there is a tension between well used low cost/passenger services which tend to be urban or inter-urban, and less well used high cost/passenger services typical of rural bus services.

4.4.2. The notion that many rural services are running around largely empty is a common perception; in practice in Devon while there are times when many rural buses may be lightly loaded (there are also times when many roads are empty without being their usefulness being challenged) across the day each bus working is well used at key times; the cost then of operating in deep rural areas off peak is relatively low and is better use of the vehicle than if it was only used in the busy peak times.

5. The Community Sector

5.1. DCC has a history of working closely in partnership with the voluntary transport sector (community transport) since 1986, to use any opportunities to provide services or generally to capacity-build the community transport sector to the benefit of the travelling public, wherever possible.

5.2. DCC experience is that while the community transport sector in Devon provides a range of services of enormous benefit to those communities, to a high standard and aligned to some specific local community needs, the sector is mostly unable to replace a large number of supported bus services in 2011/12.

5.3. The extent of community transport activity required to replace supported services that may be withdrawn is at a level many times higher than current community sector activity in Devon.

5.4. Community transport services tend to have grown up to meet the acute needs of certain sections of the local population only – typically those travelling to health appointments, the disabled and the frail elderly. As, or if, community transport expands to provide services for the general public (i.e. if it replaces some supported bus services cut by CSR) it is less likely to be able to fund-raise a significant element of the service costs, or rely on voluntary unpaid drivers for a large number of regular services.

5.5. As driver costs make up more than 50% of bus industry costs, and as much of the other community transport operational costs are similar to commercial services (i.e. insurance, buses, maintenance), the scope for these services to operate at a significantly lower cost than the current supported bus services is limited. It is most likely that supported bus services if replaced by community transport will continue to require a broadly similar level of support to continue.

5.6. Therefore, whether or not, in time, the community sector will be able to step in to widely replace withdrawn services, is as yet not known - but is considered doubtful.

5.7. As community transport services are not ready to take up a high level of activity to replace the likely reduction in bus services, at best there will be a time lag of several years before this will take place, if at all.

6. Aiming for "More for Less": Other Alternative Provision

6.1. DCC has pioneered Demand Responsive Transport (DRT) including Fare Cars – a pre-booked rural taxi-bus type service at bus fares, currently operating 12 schemes. Compared to conventional bus services, DRT almost always has a higher cost per passenger – it is able to cover a wider area than a conventional bus service however. With its high cost per passenger, DRT does not provide a general low cost alternative to deep rural bus services; costs reduce when more people are using each journey, which in turn are the conditions which make a conventional bus more likely to be cost-effective. In recent years many DRT schemes across the country have been replaced by conventional buses again, and DCC does not see DRT generally as a universal cost-effective panacea to the rural transport problem.

6.2. DCC is currently assessing the concept of Area Integration – i.e. the cost-effectiveness of integrating all local authority funded services operating in an area, e.g.: home-to-school transport, adult social care transport, Fare Cars, local rural buses and Ring & Ride DRT services for the frail elderly and disabled.

6.3. Early initial results do not demonstrate large savings from this approach, possibly perhaps as the market is already well co-ordinated by DCC in terms of obtaining value for money on different services from the commercial and community sector market. However DCC is also considering how, or whether, this approach can be further refined to produce savings from variations to this approach.

6.4. Any new Area Integration network is bound to result in a different type of service and different journey possibilities from current established patterns – which in turn risks disrupting the journeys that people currently make by replacing them with different travel possibilities that they may not want to make.

6.5. The Area Integration concept may be further limited as, out of a DCC total annual public transport spend on supported bus services of £7.5m, only around £1m is spent on the local or deep rural services which are those which may be considered under these locally-based schemes. The rest of the expenditure is mainly on more strategic interurban routes or urban services.

7. Summary of Likely Effect of Reduced Bus Support

7.1. As outlined above, any cut in LA funding on supported bus services, due to increased costs and reduced income for bus companies from other sources, is likely to result in a proportionally larger reduction to supported services. The proportionate reductions in rural services are likely to be even greater due to the combination of factors outlined in this report.

7.2. While the cost per passenger of rural services tends to be significantly higher, these services are still well used, and many rural residents rely on them. 14% of rural households in Devon have no access to a car – 55,000 people. In addition, many other rural households have only one car used by the "breadwinner", with others in the household heavily reliant on public transport. The Joseph Rowntree Foundation recently identified that rural transport is the greatest rural deprivation factor, more than rural fuel poverty (A Minimum Income Standard for Rural Areas, 22/11/10).

7.3. From DCC surveys it is estimated that around 18% of passengers are travelling to work – equating to around 3,000 people a day relying on bus services supported by DCC.

7.4. Significant reductions to supported bus services will result in:

· many people no longer able to work;

· many people no longer able to get out and about to meet their basic needs;

· reduced opportunities for the most vulnerable and poor in rural areas;

· reduced ability of rural communities to be sustainable;

· an adverse effect on economic regeneration and the rural economy;

· undermining efforts to achieve a step change in travel behaviour towards green alternatives.

8. Consultation

8.1. If DCC is to reduce expenditure on supported bus services for 2011/12, to avoid greater cuts than necessary this will require cuts to be in place from April 2012. The alternative, to achieve the same cost reduction later in the year, would require more services to be reduced – which could have been avoided had the changes been planned to come into place in April. It is therefore preferable to start the cuts at the start of the budget year rather than part-way through. Therefore the CSR timetable allows no time for consultation.

8.2. However, if cuts are to be made, it is not entirely clear what real value there would be on consultation, given that the results would be surely inevitable (to retain services) – and therefore of dubious value.

8.3. In the context of CSR local authorities need to make decisions across the context of all services, and to invite a "single issue perspective" around a single service is not helpful in this context.

8.4. 76% of bus journeys are on commercial services in Devon; DCC is unable to consult on commercial changes. Recently there have been 200-300 service changes each year; with 56 days notice required to register services with the Traffic Commissioner there is little time to consult in a meaningful way.

January 2011