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.
HOCTC INQUIRY—BUS
SERVICES AFTER
THE SPENDING
REVIEW
Introduction
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.
Background
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.
IMPACT OF
THE SPENDING
REVIEW ON
BUS NETWORK
FUNDING
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.
BSOG
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.
CONCESSIONARY FARES
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.
SUBSIDISED SERVICES
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).
REDUCTION IN
CAPITAL FUNDING
FOR SCHEMES
THAT BENEFIT
BUS SERVICES
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.
GETTING BETTER
VALUE FOR
BUS SUBSIDY
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.
PLANNING MORE
EFFECTIVE NETWORKS
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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