Bus Services after the Spending Review - Transport Committee Contents

3  Impact of the Spending Review

11. Three announcements in the Government's 2010 Spending Review will have an impact on bus industry funding:

  • A 28% reduction in local authority revenue spending (Formula Grant) from 2011-12, combined with the ceasing of ring-fencing for some types of bus provision such as the Rural Bus Subsidy Grant. As a result, the provision of tendered bus services must now compete with other (statutory and non-statutory) priorities for local authority funding from a single, typically reduced, pot of money. In January 2011, the TAS Partnership estimated that English local authorities outside London could, as a whole, reduce bus subsidy funding by a quarter, or £125m per annum.[14] By February local authorities had confirmed reduction in bus subsidies amounting to £44m.[15]
  • Changes in concessionary travel reimbursement arrangements from 2011-12. The Department for Transport (DfT) issues discretionary guidance for local authorities to use when deciding the level of reimbursement that bus operators receive for carrying elderly and disabled passengers. Based on research commissioned by DfT, new guidance was issued in November 2010 better to reflect levels of reimbursement required to ensure that bus operators were no better or worse off through their participation in the concessionary fares scheme. If followed, the changes set out in the guidance would result in an overall reduction in reimbursement in the range of £54m to £100m per annum, with a best estimate of £77m.[16] Alongside this change, the Government transferred responsibility for administering the reimbursement scheme from lower-tier to upper-tier authorities. Under the new arrangements all 27 counties in two-tier areas receive less formula grant for concessionary fares than the sum spent by district councils in their area in 2010-11.
  • A 20% reduction in BSOG from 2012-13. BSOG is a grant paid by the DfT to reimburse bus operators for some of the excise duty paid on fuel consumed. It represents about 9% of all income for the English bus industry outside London; the reduction could remove £60m per annum from the industry.

12. The total reduction in revenue for the English bus industry following the Spending Review is still unclear and difficult to predict, but it could be in the region of £200m to £300m per annum. The changes to formula grant and concessionary fares reimbursement both commenced at the beginning of the 2011-12 financial year, and, whilst taking evidence between November 2010 and March 2011, we began to receive details of changes being proposed by local authorities and commercial operators to local bus services. Several local authorities implemented changes to their tendered bus networks from April, although others delayed making decisions until after local elections were held in May. Some local authorities are protecting the funding of local bus services in 2011-12 but have signalled their intent to make reductions in 2012-13. A survey by the Association of Transport Co-ordinating Officers (ATCO) found that local authorities intend to make deeper cuts to bus subsidies in 2012-13 than in the current year.[17] Local authorities seem destined to make deeper cuts to their tendered bus service budgets in 2012-13 than the current year. We call on the Department for Transport and the Local Government Association (LGA) to implement the recommendations in this Report as a matter of urgency. We recognise that the scale of local authority budgetary reductions in some areas mean that cut-backs are inevitable. It must be demonstrated—not least for the benefit of bus users around the country—that lessons have been learned from the mistakes made during the current round of cuts to bus services.

13. By June 2011, over 70% of English local authorities had decided to reduce funding for supported bus services.[18] The extent of the reductions varied considerably, although, in general, rural, evening and Sunday bus services were most affected.[19] In the most extreme cases, Cambridgeshire and Hartlepool councils decided to withdraw all their subsidised bus services (saving £2.7m and £290,000 respectively)—although Cambridgeshire County Council has since agreed to review its decision following a legal challenge.[20] Other councils such as Northamptonshire,[21] Shropshire,[22] North Yorkshire, and Somerset, significantly reduced funding for subsidised bus services: in the last two cases, the councils controversially withdrew all evening, Sunday and Bank Holiday services.[23] Some authorities, such as Devon, opted to reduce the frequency of subsidised services rather than withdraw them.[24] Some local authorities, such as East Riding, Kent, Luton and Peterborough, did not reduce bus services at all.[25]

14. The LGA told us that the reduction in formula grant had been the main driver behind local authorities' decisions.[26] We heard that local authorities had to protect statutory services, such as social care, in the first instance, and provision of tendered bus services was not statutory. Devon County Council argued: "the cuts are not a reflection of the fact that the council doesn't value public transport. It is to do with the maths of what is left when you have undertaken your statutory responsibilities".[27]

15. We heard that commercial bus services had also been affected by the Spending Review. Large and smaller bus operators, such as Arriva and Norfolk Green, told us that they had been forced to make changes mainly due to a reduction in reimbursement revenue following the DfT's changes to concessionary fares guidance,[28] although the cancellation of tendered contracts[29] and fuel price increases[30] also played a part. Rural services again had borne the brunt of the impact. Arriva increased fares by 6-8% and reduced mileage by 6-7% in parts of the country.[31] Norfolk Green, a rural-based operator, reduced bus mileage by 4-5% due to a 7% reduction in its funding in 2011-12.[32] We were told that fare increases were less acute in the Passenger Transport Executive areas.[33] Bus operators argued that the cancellation of local authority tendered bus services had knock-on implications for commercial services because, for instance, people would no longer catch the morning bus to work if there was no guarantee of an evening service back home.[34]

16. A common theme in the evidence was that it was the combined impacts of the Spending Review funding changes that were proving most challenging to the bus industry: Arriva described the situation as "death by a thousand cuts".[35] Some operators and other witnesses believed that the impact of the 20% BSOG reduction in 2012-13 would be manageable,[36] but others, such as Arriva and Stagecoach, argued that this too would lead to service reductions and/or above-inflation fare increases.[37]

17. Bus users from around the country, from different sections of society, wrote to us about the impacts of local authority and commercial operator decisions. We were given direct examples of how reduced or withdrawn local bus services had made people more socially isolated,[38] in some cases removing the only bus link between their village and the nearest town.[39] Elderly people described how withdrawn services had reduced their access to hospitals and health facilities,[40] social activities,[41] and opportunities for shopping.[42] Several could not drive nor afford taxis on a regular basis.[43] People could no longer visit or assist sick relatives as frequently.[44] Commuters described the difficulties they now faced to return home from work in the evening following the curtailment of their local bus service after 7pm.[45] We were given examples of younger people changing their employment due to bus service reductions and withdrawals,[46] or no longer being able to socialise,[47] play sports[48] or access educational facilities in neighbouring towns, reducing their independence.[49] A parent told us how the proposed withdrawal of her local bus service would make it very difficult to take her young children to playgroup.[50] Bus reductions were said to impact on local tourism.[51] Witnesses complained about the impact of above-inflation fare rises.[52]

Mrs C Olley, 80, Hartlepool: "I appreciate that spending reviews were needed and accept a reduced service but to discontinue the service altogether is appalling".

Ms J Robertson, North Yorkshire: "Just imagine removing buses and tubes from London, there would be an enormous out-cry! We may be a less dense population up here, but our buses are vital to our way of life."

Ms V Boulton, North Yorkshire: "Left to North Yorkshire County Council, society would be cut in two on a Sunday—those who have a car and those who do not".

Andrew Turpin, Somerset: "The loss of the Sunday 30a bus service to Taunton means that most Sunday afternoons I have to cycle the very steep Tytherliegh hill on the busy A358 (a five mile journey and a prospect I don't relish) in order to get back to Tatworth. I am 65 and have had a quadruple heart bypass."

Miss A Raw, Hartlepool: "The bus service from Elwick to Hartlepool has been withdrawn leaving the village completely cut off from Hartlepool. I do not drive and therefore am finding it very difficult to shop for essentials, visit doctors, dentists, opticians, banks, hospital visits etc. Also I no longer visit friends, go to the theatre, or cinema, especially in the evening. In fact we are completely isolated".

Mr K Gregory, Somerset: "Recent changes to funding for bus provision mean there will be no evening services or indeed, Sunday services. My wife and I rely on bus services to make—and keep—hospital and clinic appointments; hospital visiting; family visits; and, for a number of leisure pursuits".

Mrs J Robinson, Hartlepool: "I am a carer for my 85 year old father who has just undergone an operation for bowel cancer and also has heart problems. I used to get the 516 bus service (this has now been completely withdrawn). It now costs me £11 per day by taxi so am only visiting my father three days a week which is leaving him alone four days in each week".

Mrs M Sim, Hartlepool: "I wish to bring to your attention how the loss of a bus service in our village of Elwick, Hartlepool has severely affected my life. I have no transport during the day seven days a week so therefore I am unable now to shop, visit a doctor, dentist, keep hospital appointments or socialise".

Mrs J Power, Hartlepool: "Since the removal of the bus service my daughter now has no way of getting to and from college. Is she surely not entitled to the education she deserves? My daughter works very hard and gets excellent grades and I feel appalled that her future education is being jeopardised in this way!"

18. The Passenger Transport Executive Group (pteg) argued that widespread bus service reductions could undermine other government policies:

One of the big challenges is that there is an assumption in [Government] Departments outside Transport, such as Health, Education, Business, Innovation and Skills, etc, that bus services will be there. Bus services will get people to hospital, health facilities, colleges, schools, and to work. But if those bus services are declining because of funding restraints from the Department for Transport, that will undermine policies which are basically about choice.[53]

Bus Users UK questioned whether local authorities could reconcile massive funding reductions for bus services with their duties under the 1985 Transport Act to "ensure bus services are provided where they are socially necessary and would not otherwise be provided commercially."[54]

19. The Minister accepted that local authorities had been presented with a "challenging settlement", but said that the Department had been "careful" to ensure the Spending Review did not have an undue impact on bus users. He noted a "varied picture" across the country, which was "a reflection of the new localism agenda and the ability of councils to make their own choice as to what is important for them in their areas". The Minister said that some councils, such as Surrey, had shown "imagination" in protecting bus services, and he stressed that some councils had not reduced bus services at all. However, he described it as a "major concern [...] how one or two local authorities appear to have decided to cut drastically their bus services without very much consideration of the consequences".[55] Some councils, he believed, had decided to save money "disproportionately" from bus services in order to protect other services, although the Minister emphasised that it was their right to do so:[56]

We have to accept that in the new era we are in that it is not possible for central Government, on the one hand, to give local councils freedom and then to criticise them when we do not think they are doing the right thing and just say, "We've decided you won't have the freedom after all. We will take the power back in the centre." They have to be free to make their own mistakes, if you like.

Personally, I would regard it as very regrettable if individual councils decided to withdraw all subsidised services. I think it would be a mistake if they were to do that in terms of looking after their individual populations. But, ultimately, it is their judgement to make and not mine.[57]

Central government's role, he argued, was not to specify centrally minimum levels of provision, but to "put in place the architecture to ensure that we send the right signals both to the industry [...] and local authorities".[58]

20. The combination of the reduction in local authorities' revenue expenditure and changes to the Department for Transport's concessionary fares reimbursement guidance in 2011-12, with the 20% reduction in Bus Service Operators' Grant (BSOG) due to be implemented in 2012-13, has created the greatest financial challenge for the English bus industry for a generation. The combined impact of these funding changes will, in some parts of the country, have a disproportionately adverse impact on the provision of local bus services and the level of bus fares.

21. In these circumstances, some local authorities have withdrawn services with inadequate or no consultation. The evidence we have received from bus users around the country demonstrates the anger and concern that people feel about the impact of these decisions on their everyday lives. Some of the most vulnerable people in society, including the elderly, will be most affected by these changes.

22. It is important for central government to gain a better understanding of the decisions taken by local authorities in respect of the tendered bus networks in their own areas.[59] Local authorities have faced widely varying degrees of budgetary reductions. We recommend that the Department, in conjunction with the Local Government Association, collate information about the decisions taken by local transport authorities as a consequence of these reductions in respect of tendered bus services in 2011-12 across England. The Department should seek information about the provision of alternative transport modes, such as community transport, in areas where local authorities have scaled back tendered services. The Department should identify examples of best practice of local authorities that have responded innovatively to budgetary pressures to provide a cost-effective, flexible mix of local transport services, which provide an acceptable level of public transport for people who might otherwise be isolated. The LGA should play a key role in disseminating these examples of best practice across local authorities. These findings should be made public.

23. The Minister claimed that commercial bus services were generally not "under threat" because of the way that BSOG had been restructured. Contradicting the statements given by bus operators, the Minister argued that commercial services would "continue largely without change in terms of services or even fares". The DfT's new concessionary fares guidance was "more accurate" than the previous guidance in ensuring that bus companies were no better or worse off from administering the scheme, as required legally.[60] The Competition Commission recently commended the DfT's new guidance and recommended that it be "followed to the greatest extent possible".[61] We also note that, by June, bus operators had lodged only 29 appeals against local concessionary travel authorities: a much lower figure than in most recent years.[62]

24. The Minister's assertion that commercial services would be largely unaffected by the Spending Review contradicts the evidence we have received from the bus industry giving examples of above-inflation fare increases and service reductions. The real facts need to be established for the effect of these policy changes to be accurately measured, and for future decisions to be soundly based. The Department for Transport, in conjunction with the LGA, should compile details from local authorities about the impacts of the Spending Review on commercial bus services in England, outside London, in 2011-12. A similar exercise should be conducted following the implementation of the reduction in BSOG in 2012-13.

25. BSOG helps ensure that, on average, bus fares are around 7% lower and bus service levels 7% higher than they otherwise would be outside London.[63] Prior to the Spending Review many in the bus industry feared that the Government would abolish the provision of BSOG entirely. The Minister argued that the 20% BSOG reduction in 2012-13 was, in the current context, a "good achievement" for the Department. The reduction had been mainly driven by the need to reduce costs rather than a "philosophical dispute about BSOG".[64] Several witnesses, including the Chartered Institute of Logistics and Transport (CILT), LGA, pteg, and the Local Government Technical Advisors' Group, whilst supportive of the continuation of the grant, suggested that BSOG should be devolved to a local level and merged into a single ring-fenced funding stream that could be targeted to meet local priorities.[65] The Minister accepted that there was scope to reform BSOG more substantially in the future.[66] The Government is currently reviewing the arrangements for how BSOG is distributed. It intends to complete this work by March 2012.[67] We appreciate the concerns of the bus industry that the reduction in BSOG next year may, combined with other recent funding changes, affect the viability of some commercial services. We welcome the Department of Transport's commitment to review the arrangements for BSOG more broadly. As part of its review, the Department should consider whether targeting BSOG in a different way, possibly through greater devolution to the local level, would improve the current approach.

Consultation with local communities

26. Current legislation encourages local authorities, where they deem it appropriate, to involve and consult individuals, groups, businesses or organisations likely to be affected by their actions.[68] The consultation undertaken by local authorities following the Spending Review was, according to Passenger Focus, "very patchy".[69] Whilst some local authorities such as Central Bedfordshire Council undertook detailed and comprehensive consultation processes,[70] others either held unsatisfactory consultation processes or, in some cases, did not consult local people at all.[71] Bus users from the Somerset area told us that the County Council did not properly consult local people about significant reductions to the tendered bus network.[72] North Yorkshire County Council held a 12-week consultation but only one option was offered;[73] and the outcome ignored the overwhelming majority view of the consultees.[74] Cumbria County Council reduced tendered bus services with little consultation or warning.[75]

Mr T Reese, Somerset: "The changes to bus services in Somerset this spring are devastating, and were introduced with no consultation".

Mr and Mrs Banks, Hartlepool: "What has so dismayed the village is the arbitrary way in which the local authority totally withdrew its subsidy without, it seems, any consideration of the effects such a decision would have".

Ms J Robertson, North Yorkshire: "I agree that some savings could be made but to just scrap services without a proper consultation of the users is not fair."

27. Local authority representatives denied accusations of a "knee-jerk" response to the funding announcements.[76] The Spending Review timetable, they argued, had allowed little time for consultation.[77] Consultation was "time-consuming": "when you are faced with a 28% or 29% cut in your funding, it really does mean you have to work very, very quickly, and without the luxury of having time to restructure how services can be delivered in different ways."[78] Richard Owens of North Yorkshire County Council argued that presenting a multiple consultation options was not useful because of the "very parochial" nature of bus services: "If you give people an option to take off a bus service in Skipton as opposed to a bus service in Scarborough, people in Scarborough will vote to cut the service in Skipton and vice versa".[79] The Dales & Bowland Community Interest Company said it was "rather patronising that [North Yorkshire County Council] does not trust the representative organisations and residents that they consult to consider rationally the difficult choices to be made".[80]

28. The Minister accepted that there had been good and bad examples of consultation by local authorities since the Spending Review. But he believed it was inappropriate for central government to specify how local authorities should consult with residents. [81]

29. Bus services are often an integral part of the local community. It is only right, therefore, that local people should have the opportunity to voice their opinion if the local authority or integrated transport authority proposes significant changes to bus services that it supports. Some local authorities have faced very significant reductions in their revenue budgets, but it is important that local people are properly consulted when significant changes are proposed to their bus services. Local people should have the opportunity to give their views on the relative importance of different bus services and to suggest innovative approaches.

30. Local authorities should be able to have access to authoritative guidance if and when proposing significant changes to their tendered bus network. The Department should task Passenger Focus to develop a 'consultation toolkit' within the next six months for local authorities. This should provide best practice guidance on how local authorities can hold meaningful consultation processes with local communities about bus service proposals. The LGA should disseminate this guidance to local authorities prior to budgetary preparations for the 2012-13 financial year.

31. Bus operators were also criticised for reducing commercial services with little or no consultation.[82] There are no statutory requirements on commercial bus operators to carry out consultation when introducing, amending or withdrawing services, although an operator must give 56 days' notice to the Traffic Commissioner for any changes to a service. Bus operators told us that they engaged with bus users in several ways, for instance through encouraging customer feedback (including via social media),[83] consulting local bus user groups,[84] and holding "bus surgeries" with Bus Users UK.[85] Bus operators did not support centralised specification of consultation processes because of the localised nature of bus services[86] and the increase in bureaucracy which would result, although Norfolk Green accepted that non-regulatory best practice directions or guidance could be helpful.[87] Not all bus users believed that commercial operators should consult with local people: Mr Richardson-Dawes of Devon noted that bus companies are "not charities [and] no one should be surprised when they take decisions which are commercially sound but not always popular".[88]

32. Bus operators must give 56 days' notice to the Traffic Commissioner for any changes to a commercial service. We urge bus operators to encourage customer feedback about their services and, wherever possible, to consult with users and communities prior to submitting their registration.

14   Ev 105, para 1.7.2 [TAS Partnership Ltd] Back

15   Ev 96 Back

16   Ev 64, para 29. Not including London. Back

17   Q 180 Back

18   Campaign for Better Transport, Save Our Buses Campaign, June 2011, www bettertransport.org.uk. Sourced primarily through local authority minutes and press notices. Back

19   For example, Q 112 Back

20   Cambridgeshire County Council agreed in February 2011 to phase out its subsidised bus services over a four year period. £220,000 was committed to community transport for 2011-12 and 2012-13, although it has been suggested that the Council intended to spend a total of £1m on community transport measures over the five-year period. On 5 July the Council agreed to review the decision, following a claim for Judicial Review made by a local resident which was supported by the Campaign for Better Transport. No further bus subsidy reductions will now be implemented until 2012-13. See also footnote 54. Ev 96, Ev w126. Back

21   Northamptonshire County Council has withdrawn its Rural Bus Subsidy Grant of £3.1 million. The Council has provided £1 million funding for demand-responsive transport services, which may include fixed-route bus services. Ev w148 Back

22   See Ev w146 Back

23   Q 183. Somerset County Council agreed a reduction in the bus subsidy budget from £5.2m to £2.8m. A further reduction of £1.4m is expected over the next two years. Ev w149 Back

24   Q 185 Back

25   Q 244 Back

26   Q 189 Back

27   Q 190 Back

28   Qq 107, 112, 116 Back

29   Q 118 Back

30   Qq 132, 134. Compass Travel in West Sussex said a 10% fare increase would only cover a 3p increase in fuel prices. Back

31   Qq 110, 116-17 Back

32   Q 108 Back

33   Q 117 Back

34   Ev 80, 133. See also "Tendered service cuts threaten commercial services", Local Transport Today, 570, 6-19 May 2011, p 3 Back

35   Q 144. See also Ev 135. Back

36   Ev 135, paras 2.1-2.5; Ev 147, para 19 Back

37   Ev 57, para 3.2; Ev 132, para 4 Back

38   Ev w125 [Mrs J Robertson], w138 [Mrs M E Sim], w139 [Mr and Mrs Hale; C Olley] Back

39   Ev w143 [Miss A Raw] Back

40   Ev w117, w134 [Mrs J Robinson], w135 [Mrs J Thompson], w138 [Mrs M E Sim], w139 [Mrs H Oliver], w141 [Mr K Gregory] Back

41   Ev w138 [G Wainwright] Back

42   Ev w138 [Mrs M E Sim] Back

43   Ev w134 [Mrs J Robinson], w139 [Mrs H Oliver; Mrs C Olley], w148 [Mr P Gibson] Back

44   Ev w134 Back

45   Ev w142 Back

46   Ev w119 Back

47   Ev w134, w146 Back

48   Ev w142 [G Hutchinson] Back

49   Ev w120, w122, w134, w146 Back

50   Ev w142. See also Ev w154. Back

51   Ev w50, w115, w116 Back

52   Q 235, Ew101 Back

53   Q 208 Back

54   "Bus Users UK questions legality of funding cuts for bus services", Bus Users UK Press Release, 18 March 2011. Legal action was taken against Cambridgeshire County Council in May 2011 based on failure to comply with its duties under the Transport Act 1985, Race Relations Act 1976, the Sex Discrimination Act 1975 and the Disability Discrimination Act 1995. The Council subsequently decided to review its decision to withdraw all subsidised bus funding. "Council faces legal challenge over bus cuts", Campaign for Better Transport Press Release, 11 May 2011. See also footnote 20. Back

55   Qq 243-44, 248, 285 Back

56   Qq 244-45, 285 Back

57   Q 246 Back

58   Q 246 Back

59   Q 272 Back

60   Qq 246, 255 Back

61   Competition Commission, Local Bus Services Market Investigation: Provisional Findings Report, May 2011, p 12-61 Back

62   "Bus operators show little appetite for concessionary fares appeals", Local Transport Today, LTT572, 3-16 June 2011, p 1 Back

63   Ev 64 Back

64   Q 251 Back

65   Ev w2, 80, 101, 139 Back

66   Q 251 Back

67   Department for Transport, Business Plan 2011-2015, November 2010, p 10; Q 277 Back

68   Local Government and Public Involvement in Health Act 2007, section 138. This requires authorities to take those steps they consider appropriate to involve representatives of local persons in the exercise of any of their functions, where they consider it is appropriate to do so. Back

69   Q 84 Back

70   Passenger Focus told us that Worcestershire, Surrey and Central Bedfordshire County councils provided good information as part of their consultations. Surrey, Telford & Wrekin and Norfolk made significant changes in the light of consultation responses from passengers. Ev 96, Summary Back

71   Q 84, Ev 87, 96 Back

72   Ev w123, Q 221. Somerset County Council says that information was made available "in a general sense" some months before the changes were implemented. The proposals were discussed in Cabinet and Full Council meetings which were attended by members of the public and Campaign for Better Transport and Passenger Focus representatives (Ev w149). Back

73   Q 197, Ev w33 Back

74   Q 226, Ev 72, para 1.2; Ev w33, w131 Back

75   Ev w131 Back

76   Ev 80, para 2.4 Back

77   Q 186, Ev 87, para 8.1 Back

78   Qq 188, 210 Back

79   Q 198 Back

80   Ev w33 Back

81   Q 278 Back

82   For example, Ev 61, para 4.1 Back

83   Q 169, Ev 60, para 2.3 Back

84   Q 168 Back

85   Ev w64, para 5.2 Back

86   Q 169, Ev 60, para 2.6 Back

87   Q 169 Back

88   Ev w130 Back

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Prepared 11 August 2011