Bus services after the Spending Review

Written evidence from the RMT (BUS 34)

1. Introduction

As a trade union representing thousands of bus workers, the National Union of Rail, Maritime and Transport Workers (RMT) is deeply concerned at the social, economic and environmental impact of the cuts to bus funding. As part of our ongoing campaign on this issue the Bus Minister is speaking at a seminar open to all parliamentarians hosted by the RMT Parliamentary Group in February which will also be attended by many bus workers together with representatives of user groups and local authorities. We welcome the opportunity to submit evidence to the Transport Committee Inquiry into Bus Services after the Spending Review which we hope will assist the Committee and will be happy to give oral evidence if required.

2. Executive Summary

· Two-thirds of public transport journeys are made by bus whilst 25% of households in the UK do not have access to a car [1] . Despite the vital role of buses in the day to day lives of millions of people, buses are facing massive cuts in both national and local funding which RMT has been advised by members will lead to reduced services and higher prices, loss of concessionary fares and significant redundancies.

· RMT is wo rking with Campaign for Better T ransport on producing a r eport on the impact of the cuts and although it is not yet complete, initial conclusions confirm t he cuts will disproportionately hit the most vulnerable in our society. RMT has also contacted our Branches with bus members and can share a case study of the impact of the cuts from Derbyshire Council (see page 5 of this submission). The cuts will have significant adverse consequences for a number of groups, namely

· Young people. Without affordable public transport some of the poorest and most socially excluded children will not be able to access projects and services designed for them. Older people are most dependent on bus services. A Mori poll of over 65’s for age concern has shown the concessionary bus pass is more popular than the winter fuel payment and post offices. Only the state pension and the NHS were considered more precious. People who are already isolated face additional hardship when bus services are withdrawn.

· Disabled people will also be badly hit by the cuts. They are more likely to mention transport a local concern than non disabled people. Sixty per cent of disabled people have no car in the household and they use buses around 20% more frequently than non disabled people.

· People on low incomes and jobseekers will be hit hard. The poorest half of households in the bottom income bracket do not own a car, compared to a national average of 25% (and only 10% of the top income bracket). [2] If job seekers are expected to travel by bus to find job opportunities (as exhorted to by Iain Duncan Smith) there must be affordable bus services for them to use. Cuts to bus services and fare hikes will hamper the ability of people to gain employment.

· RMT believes that bus fares which have already risen disproportionately, compared to car costs will increase further penalising the poorer section of society.

· It is unacceptable that bus companies should raise fares and make cuts whist paying significant dividends to shareholders. For the big five companies this amounts to almost two thirds the value of the Bus Service Operator Grant over the last ten years. Chief Executives are also continuing to enjoy excessive salaries, with one recently being awarded a 35% increase.

3. The impact of combined cuts on bus services and the economy

3.1. Local transport funding to local authorities is being cut by an average of 28% and many ring fences are being removed from funding sources that are supposed to be for local transport, like the previous rural bus subsidy grant. [3] This will combine with a 20% drop in the Bus Service Operators’ Grant (BSOG) from 2012 [4] , and a cut of ₤54m to the budget for reimbursing operators for the journeys taken by statutory concessionary bus pass holders.

3.2. Prior to the Comprehensive Spending Review, a joint-letter was sent from a variety of passenger groups, environmental groups, trade unions (including the RMT) and bus companies to the Government and to all MPs, which highlighted the dangers of scrapping the (BSOG). This letter highlighted the "damaging and wide-ranging consequences for local communities, public transport services, low-income groups, the UK economy and the environment" if the BSOG were scrapped. RMT believes that although the BSOG has not been removed in its entirety the combined overall reduction will cause massive damage to the industry.

3.3. RMT believes the cuts will have a disproportionately large impact on the unemployed. In fact, according to the Secretary of State for Transport, Philip Hammond:

"Social mobility and, in particular, moving people off welfare and into work, often depends on transport infrastructure. If people on isolated and deprived estates cannot get a bus or a train to the nearest city or town, they may be stranded without work and without hope" [5] .

3.4. The Department for Transports’ own equality impact assessment into the affect of the reduction on the elderly and disabled raises some serious concerns. These include:

· Recognition of the fact that there is an indication or evidence that the elderly and disabled have different needs, experiences, issues or priorities in relation to the particular policy;

· That there is potential for, or evidence that, this policy may adversely affect equality of opportunity for all and may harm good relations between the different groups, in particular the elderly and disabled;

· That there is potential for, or evidence that, any part of the proposed policy could discriminate, directly or indirectly, on the elderly and disabled;

· And that there is evidence or an indication that there may be a reduced uptake of the service by the elderly or disabled.

3.5. RMT is concerned there will be particularly severe cut in commercial buses services, especially in rural areas and on less used evening and weekend services. The problems faced by rural services in managing the reduction will be compounded by the fact that the Rural Bus Subsidy Grant will no longer be ring-fenced.

3.6. An increase in the costs of bus operations will also have a negative effect on employment in the industry, directly and through servicing, manufacturing and supply services. It will be most damaging to independent and small operators, where large monopoly operators will be in a better position to absorb the reduction. These smaller operators are also more likely to operate in rural areas and in community transport.

3.7. Moreover transport authorities and local councils, whose budgets have already been cut, will be unable to make up the funding shortfall. Local-authority-subsidised services would become increasingly unprofitable. It would also push up the costs of running a significant number of school services.

3.8. There will also be economic consequences. A previous study for the Government by the Commission for Integrated Transport found that every £1 invested in BSOG provided between £3 and £5 of wider benefits. These wider benefits will be substantially reduced as a direct consequence of the reduction in the Bus Services Operators’ Grant.

3.9. Research undertaken by the Confederation of Passenger Transport in 2010 examined the revenue generated for suppliers and retail spend by bus passengers. This showed that per year £3,630 to £4,445 is spent by the average bus user on shopping trips taken by bus.

4. The impact of combined cuts on fares and environmental implications

4.1. In response to a Parliamentary Question on 25 Nov 2010, the Bus Minister stated that he had spoken to the "Confederation of Passenger Transport UK, who represents the bus industry, following the Chancellor’s announcement on 20 October. They were hopeful that, in general, the 20% reduction in the Bus Service Operators Grant could be absorbed without fares having to rise".

4.2. This directly contradicts the comments of a number of bus operators who have made clear the negative impact which this reduction will have on their ability to provide a service. Peter Schipp, the chief executive of East Yorkshire Motor Services who operate 320 buses in Hull, Scarborough and the East Riding of Yorkshire said:

"We made a profit of £436,000 last year and if this goes through we would lose £2.25 million a year in grant from April ...our first port of call would be to increase fares, I suppose people would rather pay more to keep their services. We would also have to think about taking some services out, especially early in the morning. Also if you push fares up, people don't use buses and more services become unprofitable, so it is a vicious circle." [6]

4.3. Additionally Mark Howarth, managing director Western Greyhound, which operates 117 buses in Cornwall, argues that he faces a 40 per cent cut in the grant he receives for providing the concessionary bus travel for elderly and disabled persons.

"We will have to put up fares and cut services. It would not just be rural routes which carry the odd granny, it would be interurban routes which take people to school."

4.4. He also warned that councils, who facing spending cuts of their own, will not have the money to plug the gap and subsidise services themselves. Passengers on Western Greyhound could see fares rise by as much as 50 per cent, Mr Howarth warned, because of the cuts in subsidy to the companies. This would see a one way trip from Truro to Falmouth going up from £3 to £4.50.

4.5. The following parliamentary answer on 19th March 2009 shows that this will make a bad situation worse in respect of the relative cost of buses to motoring.

Norman Baker: To ask the Secretary of State for Transport what estimate he has made of the percentage change in real terms of the cost of travelling by (a) private car, (b) bus, (c) train and (d) aeroplane since (i) 1979 and (ii) 1997.

Paul Clark [holding answer 13 March 2009]: Between 1979 and 2008 the real cost of motoring declined by 17 per cent bus and coach fares increased by 55 per cent and rail fares increased by 49 per cent in real terms.

The costs of travelling by air are not available from the retail prices index. However, the cost of the average UK one-way air fare, including taxes and charges, covering domestic and international flights fell by 49 per cent between 1997 and 2006, the latest date for which figures are available.

4.6. Rises in the cost of bus travel and cuts in bus networks would increase car use, worsen congestion, damage the environment and lead to higher costs for businesses.

4.7. Fare rises would weaken the contribution to delivering on the Government’s CO2 reduction targets through modal shift from the car. ‘Low Carbon Transport: A Greener Future’ report published in 2009 by the Department for Transport showed that greenhouse gas emissions from domestic transport are still rising, amounting to 21% of all UK domestic emissions. Buses can make a major contribution to delivering on the Government’s CO2 reduction targets through modal shift from the car as the figures below from the 2006 Eddington Climate Change study bear out.

· The CO2 per car passenger kilometre is 130g CO2, per bus/coach passenger kilometre it is 69g CO2.

· In a city a journey by bus can result in half the CO2 emissions per passenger compared to the car. This differential would become much greater with model shift.

· If car drivers switched from car to bus or coach for just one journey in 25 it would mean one billion less car journeys on our roads and a reduction of 2 Million Tonnes of CO2.

5. Impact on Bus Company Profits

5.1. The impact of the bus cuts on the poor and vulnerable in society has been demonstrated together with the adverse effects on local economies and the environment. The impact on these cuts however will be far greater because following privatisation in the 1980’s (since which time services have declined and fares risen) the overwhelming majority of bus companies continue to put the need to pay a dividend to shareholders before saving services or keeping fares affordable. In short bus companies will not run services unless they paid to do so or it is profitable to do so.

5.2. In a 2007 RMT survey of 5000 bus workers an astonishing 69% of bus workers felt that the company they worked for was more interested in making profits than providing a service to passengers. Only 14% felt their company was more interested in passengers than profits.

5.3. Research by the RMT below shows that in the last decade the big five transport operators who own and operate most of our bus services have reported combined bus and rail dividends in excess of £2bn which is almost two thirds of the value in BSOG they have received in that time. [7] It is RMT’s firm contention that the bus industry must begin taking steps back to public ownership.

Dividends paid by big five transport operators, not disaggregated so are paid on the basis of profits made in rail/bus/light rail and international operation

5.4. It would also be interesting to note whether the cuts will have an impact on the salaries of the chief executives of the big five companies, shown below,

6. Case Study – Derby County Council

6.1. RMT has been provided with the following information. In a paper presented to the Derby County Council Cabinet meeting on 1st October (attached to this submission) the Strategic Director of Environmental Services warns

"It is apparent however that rising costs in the bus industry and the increasing difficult financial climate necessitate a more thorough review of the supported bus network.

"Some significant savings have been achieved by the review of bus services undertaken as part of the regular tendering process and by improvements in the procurement processes. The current financial position, however, cannot be sustained and further action is needed to respond to financial pressures in both the short and long term.

"It is inevitable that some passengers would be inconvenienced by the proposed changes and, in some cases, particular journeys would no longer be possible. However, the proposed changes are designed to keep the overall impact on travellers to a minimum.

"The experience gained from recent tender rounds suggests that there may be considerable scope to achieve savings while ensuring the provision of a good albeit somewhat reduced, level of service."

6.2. The paper then proposes the following areas for consultation on bus services, (to be completed by (31 January).

Non-entitled Home to School Transport

"Around 1,700 non-entitled school children pay a fare, typically 50p for a single journey, to travel to school on bus services funded by the County Council. Students using these services either live less than 3 miles from secondary school (2 miles for primary school children) or have chosen to attend a school outside their normal area. The fare income in many cases only covers 10% - 30% of the cost of the contracts, and the network requires a total subsidy of just under £1 million paid for out of the local bus revenue support budget.

The fares charged on these services are substantially below normal commercial or other County Council rates. This highlights a lack of consistency with other fare-paying students who are charged considerably more if they use local buses with a b_line discount or catch Council contracted buses to attend faith schools.

Raising fares to more consistent levels, and/or setting maximum subsidy levels at, say, 50%, would improve income and reduce expenditure. There would, however, need to be consideration given to the impact on families."

b_line

"The b-line scheme currently provides a 50% travel subsidy on buses and trains for young people between the ages of 14 and 19 who are in full time education. A possible option would be to reduce the level of travel concession on offer, while retaining other aspects of the scheme including discounts, library card and PASS (the national Proof of Age Standard Scheme).

Such a proposal would mean students over the age of 14 paying a greater proportion of any bus or train fare when using the b_line card. This could result in significant savings on the coast of the subsidy which is currently around £1.3 million per year."

Gold Card

"Free off-peak travel available on buses across England is funded by Central Government and administered by the County Council on behalf of the District and Borough Councils. On top of this national travel entitlement, the County Council funds half fare travel on local trains in and around Derbyshire, at a cost of around £220,000 a year. A further concession costing the Authority £240,000 a year gives Gold Card holders free travel on Community Transport Dial-a-Bus services.

Clearly any decision to amend either or both of these concessions could make further savings to public transport budgets."

Conclusion

The combined impact of the cuts in bus funding will have a detrimental impact on the social, environmental and economic benefits that bus travel can bring.

If there were similar cuts to rail services and travel concessions on the national rail network there would be a national media outcry yet even though far more people use buses there has been little media attention to the onslaught buses are about to experience.

Perhaps the lack of media attention can be explained by what is also the worst aspect of the cuts – namely that they will disproportionately hit the most vulnerable and powerless in society. As many users are utterly dependant on buses for work, education and leisure the cuts could literally ruin lives and have a hugely detrimental impact on whole communities.

That the cuts are taking place whilst the big bus companies are making significant profits on the back of national and local government subsidy only re-enforces the RMT’s belief that the industry should be returned to public ownership.

January 2011