Bus Services after the Spending Review - Transport Committee Contents

Written evidence from the Local Government Technical Advisers Group (TAG) (BUS 03)

As you may recall the Local Government Technical Advisers Group (TAG) represents chief and senior technical officers in a large number of local authorities. These include those with highway and transport responsibilities; such as Transport for London, most London boroughs, Metropolitan and Unitary Authorities and also many of the Districts in two tier authorities (where the county is responsible for Transport issues and the District is responsible for Planning including many aspects of Transport Planning and Economic Development).

With the different structures for provision of public transport in Metropolitan areas we also have strong links with officers and seconded officers in combined units in such areas including PTEs; indeed we would wish to give credit to officers in PTEG who have assisted us greatly with our evidence.

Our members in individual authorities are often responsible for multidisciplinary departments including Professional Engineers, Town Planners, Surveyors, and Architects etc.

We represent professional officers working for the authorities responsible for the transport policy in urban areas where the management of travel is most important and is fundamentally affected by the transport policies of Central Government.



In the covering letter we describe TAG's role, membership and expertise; we would particularly like to draw attention to the fact that on this subject we represent professional officers working for authorities responsible for the transport policy in urban areas and also our close working relationship with combined Transport Units in Metropolitan areas. We would also like to draw attention to other evidence we have previously submitted to The House of Commons Transport Committee.

TAG thanks the committee for the invitation to submit evidence and welcomes the opportunity to respond to the Committee's inquiry into this important topic and would be willing to appear before the Select Committee, should the Committee wish us to expand on any of the points made in this response.


While far more political and media attention is given to rail, outside London the bus is the main form of public transport. In the major urban areas the bus carries over 70% of all public transport trips. The bus is also relied upon by the poorest groups in society. 52% of households in the lowest real income quintile do not have access to a car or van.

Bus subsidy is good value for money because it contributes to a broad range of wider social, economic and environmental goals. Buses can reduce congestion, emissions and accidents. The cost to society of car use in congested urban areas has been estimated at above £1/km (figure advised by sister organisation PTEG), which, for a typical journey, is many times higher than the current level of bus subsidy per trip. Good bus services can also help stimulate job creation and GDP growth. One recent study, based on DfT guidance, showed that a 60% reduction in bus fares and 20% increase in bus frequency in South and West Yorkshire would generate £5 billion worth of GDP benefits alone. Altogether this work showed that for every £1 spent by government, such a policy would provide £3 worth of benefits to society (£1 of which through increased GDP). Improvements to bus services that benefit local economies (for example by providing access to new developments) can also be achieved more rapidly and at relatively modest cost (when compared with major investments in road or rail links).

The Government has also made the links between worklessness and bus services:

"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".

Philip Hammond, Secretary of State for Transport

Often those people out of work or on the lowest paid jobs need to travel longer distances, at unsociable hours, and often less accessible locations to get to work. They are therefore greatly dependent on bus services which are subsidised in whole or in part by the public purse.

Over the last 25 years, apart from London and a few individual other exceptions, there has been a substantial reduction in bus patronage; this is especially in the Metropolitan areas. This has normally been accompanied by increasing car use and traffic congestion. During most of this period it has been Government and Local Government's policy and intention to increase bus patronage. Further cuts in funding which result in reductions in service levels and increased fares will work against such policies and intentions with serious effects on the transport system for users of all transport networks.

These arguments demonstrate that there is a strong long term case for maintaining and increasing current levels of bus subsidy and investment. It is unclear whether government has made an assessment of the full impact of the spending review on the overall reduction in bus subsidies (not just BSOG) on accessibility to jobs and education, on highway congestion and, ultimately on wider government expenditure. Past experience (such as bus deregulation) shows that apparent savings in bus subsidy can lead to a significant increase in government spending in the future.

We also believe that there is opportunity to make better use of existing bus subsidies by more effective targeting and directing all public transport resources through local transport authorities. Such an arrangement would provide for greatly increased involvement of the local communities in the determination of their essential transport services. We would draw attention to the evidence TAG submitted to the Transport and Economy inquiry where we strongly suggested that if economies were sought for the Comprehensive Spending Review these economies should be made in the major road programme and indeed there should be an increase in investment in public transport.


The bus services that passengers will have in a few years time will depend on the cumulative impacts of changes in bus subsidy regimes (for concessionary travel, BSOG, local authority tendering budgets), the viability of the commercial network (which in turn is influenced by the state of the national and local economies) and local authority revenue and capital budgets for measures which benefit bus operations.

The key outcomes of the spending review:

—  20% cut in BSOG from 2012-13. This corresponds to a 2.2% average cut in turnover across PTE areas.

—  Rolling of £223 million Special Grant for concessionary travel and £60m Rural Bus grant into CLG formula grant.

—  28% cuts in local government funding over the period of the CSR (which in turns influences the ability of local transport authorities to support tendered services).

—  Significant reduction in Integrated Transport Block (now half what it was prior to in-year 2010-11 spending reductions) which funds small and medium-size schemes (such as bus priority, interchanges and real time information).

—  New reimbursement guidance for concessionary travel Impact of public.

—  spending on employment, patronage, and hence the viability of commercial bus networks.

The spending review implications for bus subsidy follow a period where bus subsidy has risen considerably. However these increases have resulted almost entirely as a result of the national concessionary fares scheme and the major increase in subsidy for the London bus network.

Looking forwards, our sister organisation PTEG estimates suggest that the planned 20% cut in BSOG, along with the transfer of Special Grant into CLG and the expected cut in local government funding, could lead to a reduction of more than 40% in the subsidy available to non-concessionary trips across the major urban areas, which could give rise to significant service cuts and fare rises.


At 12p per trip in the major metropolitan areas, BSOG represents very good value for money if we bear in mind all the benefits generated by attracting trips away from the private car as well as the dependence of lower income groups on the bus for access to jobs and other opportunities.

Although we strongly support the retention of BSOG we believe that better value for money could be achieved by devolving these funding streams to Transport Authorities. Transport Authorities can ensure that the subsidy flows are targeted in a way that reflects local circumstances, opportunities and aspirations. It also avoids the inevitable unintended consequences and windfall payments that result from a flat national "one-size fits all" subsidy regime. For example BSOG payments are currently being used to incentivise the fitting of smartcard readers and AVL equipment even when this equipment has already been fitted and paid for by the authorities.

If the funding were to be devolved then more sophisticated approaches could be taken. For example through investing in bus priority measures or in more comprehensive smart ticketing initiatives (which in turn will reduce operator costs and subsidy requirements in the longer term while at the same time improving the service to the end customers).

However, in our view BSOG should only be devolved where it can be ringfenced for buses. There would also need to be extensive consultation with operators to ensure that changes to BSOG were made in a planned way to ensure best possible outcomes.

We understand that DfT will consider reforms to BSOG in the context of the Competition Commission report although they have announced a 20% cut in BSOG. This would translate into a 2% cut in industry turnover. Although operators have given government reassurances that this won't lead to an increase in fares, there are other ways in which they are able to recoup this loss of revenue, for example through increases in the cost of secured and subsidised services. As set out above the reduction in BSOG cannot be treated in isolation from the cumulative impacts of wider changes to funding regimes, and that a reduction in one revenue stream to the industry will inevitably lead to an increase in costs elsewhere, either to users or the public purse.


The National Concessionary Travel Scheme (NCTS) provides older and disabled people with a valuable service, enabling them to retain independence and access key amenities and social networks. A reflection of its success is the fact that demand (and with it the cost of reimbursement) has been growing at a steady pace. Furthermore, as commercial fares have risen the amount of reimbursement required for each journey has also increased. As a result, NCTS is taking up a growing proportion of public transport budgets.

While current funding arrangements have enabled Transport Authorities to cope with the increasing cost of NCTS, a number of changes to funding arrangements coupled with wider cuts to local government budgets could have a dramatic impact on local bus networks. The direct grant, received from DfT by Transport Authorities, has offered the stability needed to be able to secure long term agreements on reimbursement with operators in some instances. These agreements have been negotiated to include additional benefits for passengers, such as arrangements to improve service stability, as well as reducing incentives for operators to raise commercial fares. The agreements also mean that it has been possible to accurately anticipate how much will need to spent on concessionary fares and set their wider budgets accordingly. Operators are happier with these arrangements too as is demonstrated by the absence of appeals where such agreements have been concluded.

However, this is all about to change with the subsuming of direct grant into CLG's opaque local government settlement. As a result, LAs with their own financial challenges, will invariably struggle to meet concessionary fares commitments. The combination of rising reimbursement costs, withdrawal of direct grant, cuts in wider local government funding along with reduced transparency make for potential difficulties. The clear danger is that NCTS will eat into the funding available for concessions to other groups and for wider bus network support. This could have dramatic consequences whereby older people end up with a free pass for a quickly vanishing network of services, whilst young people and children face their concessions being withdrawn. Public transport networks would deteriorate with less extensive, more expensive, less integrated and less accessible networks.

TAG understands the context within which funding cuts are taking place. And although we support the move towards greater local flexibility by reducing ring fences from grant funding for local authorities, the case of NCTS is clearly one exception. There is no flexibility in providing NCTS as it is a statutory entitlement. Government has firmly committed to this policy and should, therefore, both provide an adequate level of funding and ensure that funding is effectively targeted at those charged with delivering the scheme.

We believe that this can be done by retaining the direct grant element of the funding for NCTS to those charged with administering it and that this represents the best option for achieving clear and transparent funding arrangements. If the special grant is discontinued, as is proposed, then the onus is on government to make sure that it is as straight-forward as possible to deliver the funding to the appropriate body. Only by doing this can government be sure that the process is transparent and, critically, that the funding for the scheme will reach operators and the negative consequences outlined above can be avoided.


Support for non-commercial services represents 22% of bus subsidy in the major urban areas and supported services make up about 15% of such bus networks. These services fill key gaps in the commercial network - for example in the off-peak, in rural areas, to council estates and for shift workers. They also include dedicated school services, community transport and other flexible services providing greater mobility to important segments of the population.

Many subsidised services are vital for those in search of employment and therefore have much to contribute to the economic recovery and wider government reforms of the welfare system. DWP guidance puts the yearly fiscal, health and crime reduction benefits of getting somebody into employment at between £7,300 and £14,000. Taking the average subsidy per non-concessionary trip to be 37p in the metropolitan areas this would equate to an average return of between £44 and £84 for every pound spent, where it enabled somebody to become gainfully employed.

The ability of Transport Authorities to continue to support the tendered bus network will depend on their wider revenue budgets which in turn will be dictated by funding from the Local Authorities. In addition, the majority of local public transport revenue spend is non-discretionary (with concessionary travel spending making up a significant proportion of that non-discretionary spend).


Greater punctuality and reliability of bus services is key to both better services for passengers and more cost effective operation. Bus priority schemes are one way of achieving this and as stated in our evidence to the Transport and Economy inquiry such schemes do deserve higher priority. One of the key sources of funding for smaller public transport schemes (including bus priority schemes) is the Integrated Transport Block, unfortunately this will be 50% lower next year relative to what it was before in-year cuts to 2010/11 budgets.


Clearly the current arrangements for subsidising the bus industry are highly complex and involve sizeable funding flows. Injecting large sums of public subsidy into what is nominally a free market for bus provision brings with it great complexity, conflict and challenge, is resource intensive to manage and can make effective scrutiny of outcomes challenging. There is also a significant degree of national specification and administration of what is essentially a local service and little opportunity for community participation in service determination.

In general devolution of bus funding flows (where it can be ringfenced for buses and where a local transport authority is of the scale to manage it) will enable more cost effective targeting of bus subsidy.

One way of achieving both devolution and simplification is through moving to a franchising system (known as "Quality Contracts" in the bus sector). This would allow existing funding to be channelled to the franchising authority (the local transport authority) where it could be pooled alongside other local funding streams for buses, in order to buy the best possible package of services and outcomes (concessions, integrated ticketing, service quality regime) from the successful franchisee. Local communities would also be afforded an opportunity to participate in the design of essential public transport services. This is one reason why TAG strongly support the retention of the powers to introduce Quality Contracts, as set out in the Local Transport Act 2008, but we would go further and suggest that where they are proposed to be introduced, Transport Authorities should be supported.

Outside of a quality contracts regime the devolution of BSOG is perfectly practicable. There are however challenges in the pooling of bus subsidy flows to achieve greater outcomes, unless agreement with operators can be reached. This is chiefly because the national concessionary travel scheme is a national and statutory requirement which ultimately operators will expect to be reimbursed. It does not therefore easily lend itself to being merged with other funding flows for the achievement of non-statutory outcomes (such as wider packages of service provision).

Less complex systems for determining funding and reimbursement for concessionary fares also have obvious attractions in terms of ease of oversight and administration. However, a simpler system (where levels of reimbursement are less graduated and less responsive to local circumstances) will inevitably create more winners and losers, with the overall level of Government funding tilting the axis one way or the other. In other words greater simplicity can result in outcomes which represent poorer value for money for the taxpayer and/or greater impacts on wider budgets for transport authorities. Additionally, there would unlikely be any increased opportunity for local communities to have an active role in the determination of the overall bus network.


We believe that it is right that bus users have an independent watchdog to represent their interests and we supported Passenger Focus taking on that role. We do not believe however that it is practical or desirable for a national body with limited staff and resource to become involved in planning local bus networks given that the bus network is an accumulation (on a massive scale) of a numerous local bus networks that have developed over time and which in a deregulated environment change in an incremental way. The bus network is not the rail network - where given the nature of the franchising process it is practical for Passenger Focus to get involved in the limited number of franchising exercises that are undertaken every year.

Given bus networks are essentially local it is the role of locally accountable local transport authorities to take the lead role on bus networks in their areas. However, having said this we believe that Passenger Focus does have an important role to play in advising local transport authorities on good practice in consultation and public involvement, on holding local transport authorities and operators to account where they manifestly fail passengers, and where under a Quality Contract or under other large scale proposals for major changes to a bus network, the scale of the change is such that PF can usefully play a role.

We also believe that there is scope to review the inter-relationships between the various bodies with responsibilities for service monitoring and enforcement, complaints and customer satisfaction surveys.

December 2010

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