Bus Services after the Spending Review - Transport Committee Contents


Written evidence from Confederation of Passenger Transport (UK) (BUS 29)

1.  INTRODUCTION

1.1  The Confederation of Passenger Transport (UK) (CPT) represents the operators of bus, coach and light rail systems throughout the United Kingdom. Our members include major integrated groups such as Stagecoach and National Express, and a large number of small and medium-sized businesses. In addition, nearly all the UK's public-sector-owned bus companies are members of the Confederation.

1.2  This memorandum of evidence concentrates on England outside London. This is because the Mayor of London, the Scottish Government and the Welsh Assembly Government can use their devolved powers to moderate the effects of the Comprehensive Spending Review on bus networks.

1.3  The factors that the Committee has identified in its terms of reference are certainly relevant, but they are by no means the only ones that are likely to have an effect on the industry over the term of the CSR (up to 2015). This submission evaluates costs and revenue on an industry-wide level. The relative importance of each factor will vary between operators and the decisions that they take will be made in the light of all the challenges that present themselves. Several of our members are making submissions to the Committee on their own particular circumstances and the actions that they are taking.

1.4  We anticipate that the reduced availability of public funds, coupled with an increase in authorities' freedom to decide how to spend their money, and a diverse set of market factors, will lead to a much greater variation in the quality and quantity of bus services across the country. Operators' reactions will not be uniform. As well as differing views on the best way to build long term value in their businesses, there are wide variations in the asset bases and financial reserves of bus operators. Some are better equipped to "ride out a storm" than others.

2.  BUS INDUSTRY COSTS

Figure 1

TYPICAL BUS INDUSTRY COSTS

Source: Data supplied by CPT members

2.1  Fuel Costs are expected to increase in the next year for three reasons:

—  underlying price increases in the market;

—  increased duty from 1 January 2011; and

—  introducing new buses that are cleaner and more accessible than the ones they replace, but use more fuel.

2.2  In addition, the 20% cut in the rate of Bus Service Operators' Grant, announced as part of the CSR and taking effect in April 2012, will add approximately 2% to operators' overall costs.

2.3  Bus Depreciation Costs are expected to increase within the CSR period for two key reasons:

—  Current models of bus offer a better passenger experience and a better environmental performance than the previous generation of vehicles, but they are more expensive.

—  The "end date" for replacing step-entrance single deck buses falls on 1 January 2015. It will be illegal to operate a single deck bus on a local service after that date if it does not meet the relevant accessibility specification (which includes the ability to carry a passenger travelling in a wheelchair). The end date for double deckers falls outside the CSR period, on 1 January 2017.

2.4  Historically wage and salary costs have tended to rise at a rate of around 1% per annum in real terms. It is uncertain how costs will move over the next few years, but there is very limited scope for further efficiency gains. The industry is, and will continue to be, highly labour intensive so any additional costs imposed by new employment rights or tax changes will hit it relatively hard.

3.  BUS INDUSTRY REVENUE

Figure 2

WHOLE BUS INDUSTRY REVENUE

Source: DfT Statistics[22]

3.1  Of the three key sources of industry revenue, the amount spent by local authorities and PTEs securing non-commercial services is most likely to come under pressure as a result of the CSR and the Local Government Finance Settlement. This expenditure is, by its nature, unevenly spread across the Country and across individual networks. Tenders secure services where commercial demand is weak. Generally speaking, this tends to be in rural and suburban areas, and in busier places at less busy times of day. In some locations (such as Southend on Sea) authorities spend very little on tendered services so there is hardly any scope for reductions. In others the proportion of services that are run under tender is much higher. Somerset Council claims that 70% of services in its area are subsidised, and they have recently announced their intention to cut their budget by 50%. The make-up of individual operators' revenue does not necessarily follow the national picture. Some operators - particularly from the SME sector - have found a niche as suppliers of tendered services to local authorities and PTEs. Others are almost entirely focussed on commercial services.

3.2  There is no intrinsic reason why the industry's income from giving free travel to older and disabled people should decrease, but the CSR and Local Government Finance Settlement have coincided with the publication of new, controversial, guidance by DfT that suggests that previous norms for reimbursement were too generous to operators. Whether or not this is the case (and the research, and its interpretation by DfT are contentious) operators are typically facing a reduction of 20-40% in the payments they receive for carrying pass holders. Changes to concessionary reimbursement have an impact on virtually all local bus operators, including those working exclusively under contract to councils and PTEs, because reimbursement is typically paid in addition to the amounts due under contracts, and will have been factored into bids.

3.3  Revenue from fares has generally been holding up well through difficult times, but operators believe that our paying customers will not stand fare increases of the magnitude needed to make up for the cuts in income from the public purse.

3.4  HM Revenue and Customs has taken the unhelpful step of adopting a very rigid approach on the tax treatment bus season tickets offered to employees through green travel plans. The rules allow for employees to be provided with subsidised tickets, without giving rise to a tax liability, when their employer subsidises a bus service that serves their workplace. Some popular schemes had grown up where operators gave people the freedom of whole networks of bus services, including the one(s) subsidised by their employer, but this has been ruled inadmissible. HMRC insists that the ticket can only cover work-related journeys. As a result, a number of employers have lost interest in these plans, to the detriment of operators' income and public transport use in general.

4.  ENGAGING PASSENGERS

Although they vary in their approach, operators involved in commercial services recognise the value of keeping in touch with passengers and seeking their views when change is in prospect. This does not mean that it is always logical for operators to supply exactly the services that passengers want. Difficult commercial judgements need to be taken.

December 2010




22   We have treated Bus Service Operators Grant as an offset of costs, rather than as revenue Back


 
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