Written evidence from EYMS Group Ltd (BUS
35)
INTRODUCTION AND
BACKGROUND
EYMS Group Limited is one of the largest independent
bus operators in the UK, and one of only two former subsidiaries
of the National Bus Company which remains independent after the
NBC privatisation programme of the mid 1980s.
EYMS Group employs about 940 people, has an annual
turnover of over £39 million, owns 410 buses and coaches
and runs over 11 million miles on local bus routes each year,
carrying about 25 million passengers on those services.
The Group's subsidiaries are East Yorkshire Motor
Services Limited based in Hull, Finglands Coachways Limited based
in Manchester and Whittle Coach & Bus Limited based in Kidderminster.
For simplicity statistics quoted in this submission
refer only to East Yorkshire Motor Services which is by far the
largest subsidiary, earning around £30 million of the total
turnover referred to above and running over 9 million bus miles
per annum with 325 vehicles.
The East Yorkshire subsidiary operates in Hull, East
Riding and North Yorkshire on a wide variety of routes, ranging
from intense urban in Hull to sparse rural in East Riding, in
which local authority area EYMS is by far the largest bus service
provider.
The importance of the bus industry nationally cannot
be overstated. As recently remarked by the Minister, Norman Baker,
buses are vital to the economy, and the backbone of public transport.
This is undoubtedly true especially in many rural areas, but also
in many of the more deprived urban areas, often providing the
only means of access to jobs, health facilities, schools and shops.
Almost three times the number of trips per person
are made on buses each year than on the surface rail and underground
networks combined. In Hull, Council surveys suggest that almost
half of those who come into Hull to shop do so by bus.
Yet successive governments, whilst paying lip service
to the essential nature of road public transport, have consistently
failed to do much to support it - indeed EYMS can find little,
if anything, over the last few years in the way of government
legislation, EU legislation and actions by bodies such as the
DSA and the DVLA which have done anything other than increase
costs, bureaucracy and administration for the bus industry, and
more often a combination of all three.
The bus industry has suffered a welter of legislation
which is referred to in a later section of this submission, but
all of which has made bus operation more difficult and more expensive.
There has been much talk of a "war on motorists"
but we would submit that in practice almost the opposite could
be true since motoring costs in general have risen by only a small
amount, whilst the labour-intensive bus industry costs have risen
much more substantially. Only this week the government has announced
its wish for local authorities to reduce car parking charges which
will effectively encourage more car use, negating the previous
policy of suggesting increased car parking charges to encourage
public transport use. So yet again the bus passenger, for many
of whom the bus is a vital lifeline, is treated very much as a
second class citizen.
The impact of the reduction in Bus Service Operators'
Grant, including on community transport
The original intention of the bus service operator
grant (originally called fuel duty rebate) was to facilitate the
continued operation of local bus services in many areas where
they would otherwise be lost because they would be uneconomical
to operate commercially, especially in rural areas margins are
usually small and where often rail transport is not available
as an option. In this BSOG has largely succeeded and has been
a very simple grant to administer. In the case of East Yorkshire
there are few if any communities which had a bus service in the
sixties which do not still have some level of service now.
The freezing of the grant since 2008 has already
substantially increased the cost of fuel for bus companies over
and above the underlying cost of the product itself, and the planned
20% cut in BSOG from April 2012 will worsen this further, bringing
an estimated loss of £600,000 per annum in the payment of
BSOG to East Yorkshire Motor Services.
Looking at this another way the total tax yield (fuel
duty less BSOG) from local bus fuel used by East Yorkshire will
increase from £1,073,038 in January 2011 to £2,152,178
in April 2014 after the annual duty rises announced in October
2010 and the 20% reduction in BSOG are taken into account. This
is an increase of 101%, and assumes inflation over the period
averages 2%. Bearing in mind that until the 1990s all fuel duty
was rebated this has created an entirely new tax take of in excess
of 10p per passenger trip.
For East Yorkshire fuel price per litre net of BSOG
will have risen by no less than 152% between 2004 and 2012, assuming
that there are no increases beyond today's price in the underlying
cost of fuel, which is almost certainly unlikely, and no further
increases in duty although we understand there are more planned.
All other things being equal, in the same period the overall net
cost of road fuel will have risen from 9.29% to 18.16% of total
operating costs
The impact of the reduction in local authority
grant support to bus services and other changes to the funding
of local authority bus schemes and services by the Department
for Transport.
It is already know that in North Yorkshire the Council
is planning to cut almost all of the evening and Sunday bus services
it currently supports under contract. Hull City Council is likely
to cut out or reduce the non-statutory (schools) local bus services
it currently supports. No details have yet been given by the East
Riding of Yorkshire Council but as this is largely a sparse and
large rural area a significant number of bus routes are currently
wholly or partly supported by the local authority and indications
are that many of these will be withdrawn or curtailed. Together
with the effects of the concessionary reimbursement cuts this
is likely to deprive many of the East Riding rural communities
of any bus service and will cause severe hardship amongst the
residents of those communities who will be denied access to employment
etc.
These service reductions are unlikely to be replaced
by Community Transport operators since it is known than most in
the East Riding are already having financial difficulties and
finding volunteer drivers less willing to offer their services.
It has today been learned that for our Whittles subsidiary
based in Worcestershire the County Council now plans to cut the
majority of the contracts currently operated by our company (along
with many others in the county) and if implemented this would
cut by approximately half the current size of the bus fleet and
this would probably make the remaining operation unsustainable.
The implementation and financial implications
of free off-peak travel for elderly and disabled people on all
local buses anywhere in England under the Concessionary Bus Travel
Act 2007
We believe that the national travel concessionary
scheme has been fundamentally flawed from inception in 2008 and
the current plans to change the reimbursement formula will make
matters significantly worse.
We believe that the scheme is both morally and legally
inequitable given its underlying basis that operators should be
"no better and no worse off" as a result of its operation.
At East Yorkshire approximately 40% of passengers now travel free
under the scheme and for some operators, especially smaller ones
in rural areas, the figure is much higher. In Bridlington, served
by East Yorkshire, 70% of passengers travel free on the town route
network and we have seen figures as high as 90% for entire operator
networks in other areas.
This underlying principle therefore means that in
the case of East Yorkshire, roundly 40% of our business has profit
levels frozen at what they were before the scheme started, even
if unacceptably low, and any necessary increase in income, not
least to cover the costs of legislative changes and achieving
reasonable business margins, thus has to be borne by the 60% of
remaining fare paying passengers, which seems grossly unfair and
inequitable. The proportions are clearly even less helpful for
some other operators.
Furthermore operators are now restricted in what
they can do to market services to passengers through one of the
normal methods, which is fares promotions, since any fares reduction,
even for a short promotional period, affects the adult fares on
which the concessionary reimbursement is based in almost every
TCA area. Thus reimbursement is reduced even though no more concessionary
passengers will be carried since the fares promotion is of no
relevance to them and there will be no incentive for more of them
to travel and bring an increase in the reimbursement.
The DfT draft reimbursement guidance would, at our
best estimate, have reduced concessionary fare reimbursements
to East Yorkshire Motor Services by £2.25 million a year
for a company which in 2009 made a net profit after tax of only
£435,000. The forecast net profit for 2010 is likely to be
very similar.
The revised guidance which has now been issued to
local authorities is estimated to reduce this loss of reimbursement
to around £1 million for East Yorkshire Motor Services but
this is still a huge sum and comes on top of inevitable cuts in
contracted services by local authorities whose funding reductions
will, we know, result in many local bus service contracts being
withdrawn.
We are aware that for some operators, especially
those who have successfully increased passenger numbers in recent
years, the revised DfT reimbursement guidance will actually make
matters even worse which again appears to be hugely unfair for
those good operators who have, through marketing and other initiatives,
managed to increase the size of their business to the undoubted
benefit of the local communities they serve.
We believe that the revised guidance is still seriously
flawed and based on far from perfect research, and coupled with
local authority contract cuts and next year's reduction in BSOG
will result in significant bus service cuts especially in rural
areas, and above-average fares' increases for paying passengers
on those services which remain.
Another effect will be to stifle investment in new
buses and make it extremely difficult, if not impossible, for
some operators to achieve the final deadline of 1 January 2017,
by which time all buses used on local services, not just new ones,
have to be DDA compliant. There is therefore little or no opportunity
for operators to improve their finances by cutting back new bus
purchases. The inevitable effect of this combination of financial
factors will damage bus operators' balance sheets and this in
turn will make it much more difficult to get finance from banks,
etc. for the purchase of new buses, especially given the banks
much more cautious lending regimes which are now in place.
How passengers' views are taken into account in
planning bus services, and the role of Passenger Focus in this
area
We believe that the work of Passenger Focus since
its remit was extended to cover this local bus service and has
been generally positive and helpful. Passenger Focus appears to
be taking a realistic view and whilst acting as a "critical
friend" of the bus industry and rightly challenging operators
where they fail to provide good service, has been generally supportive
of the industry in its efforts to increase further the quality
of service offered and its efforts to increase passenger numbers
against its major competitor, the private car.
Locally a great deal of effort is put into obtaining
passenger views and it is widely known that East Yorkshire Motor
Services welcomes both positive and negative comments from passengers
and prospective passengers and carefully takes all comments and
suggestions into account. Being locally based and managed, East
Yorkshire Motor Services is at the very heart of the communities
it serves and its Chairman and other Senior Managers participate
actively in the Hull and Humber Chamber of Commerce, the East
Riding Transport Partnership, the Ryedale Transport and Access
Partnership and the Hull Quality Bus Partnership.
In addition, bus forums are regularly held to which
the public have access and can directly question company senior
executives and the company directly supports the City of Hull
Environment Forum which, based on behalf of the Hull and East
Riding authorities, undertakes regular bus passenger surgeries
through the area using a specially converted bus sponsored by
the company.
THE IMPACT
OF REGULATORY
BURDEN AS
PUBLIC FUNDING
IS REDUCED
As briefly mentioned above the bus industry has suffered
hugely under a veritable flood of regulatory burden in the last
few years. Just some examples of the most significant are:
Industry-specific:
Concessionary fares.
EU Training Directive costs.
EU Drivers' hours applicable to routes over 50km.
Digital tachograph regulations for routes over 50km.
DDA requirements incl vehicle construction.
End of life vehicle directive.
EU emissions requirements (more expensive engines
and more fuel for less emissions).
HSE level crossing risk assessments.
Trade plate tougher enforcement.
Above RPI increases in fees from VOSA, DVLA, DSA.
Tougher DVLA minimum test vehicle requirements (ABS
etc).
To come - EU passenger rights directive (less than
feared but still likely to cost in respect of passenger information
for the disabled etc).
Non-industry-specific but expensive rules:
Minimum pay regulations.
Age discrimination rules.
Control of asbestos at work regulations.
DDA employment rules.
Employment Acts (maternity pay, time off with pay
rules etc).
National Insurance increases.
Noise at work regulations.
Working time directive.
In particular the EU directive on vehicle emissions
has resulted in more expensive engines requiring more fuel to
produce reduced emissions, and still to come is Euro 6, we understand
in 2012, which we are reliably informed will mean even more expensive
engines requiring yet more fuel and possible reduced passenger
capacity since the engines are likely to be bigger. To illustrate
the point fuel consumption at East Yorkshire has worsened from
an average of 8.71mpg in 1994 to 7.35mpg in 2012 - an increase
of 18.9%. This is also partly due to increased traffic congestion
and more traffic management measures which have not helped bus
speeds but the overall effect of worse fuel consumption has to
be considered alongside the huge increases in the price of fuel
itself as described above.
The burden of maintaining a defined benefit pension
scheme, put in place at privatisation to mirror the previous NBC
scheme and to provide the best employment package for staff in
the private sector environment, has also been considerable due
to constant legislative changes which have also been almost universally
more burdensome and costly.
SUMMARY
The Chairman of EYMS Group, who was a member of the
management buy-out team in 1997 and has been the sole shareholder
since 1997, has been with EYMS for 30 years and in the bus industry
for almost 49 years, states that in his opinion the bus industry
is now facing by far its biggest challenges and threats, certainly
since the mid 1970s when severe cuts to the local bus service
network had to be made by the nationalised National Bus Company.
The combined adverse effect of local authority funding
cuts, BSOG reductions, concessionary fare reimbursement cuts and
further legislative changes still to come, is certain to have
the most serious consequences for bus passengers and the overall
effect would do nothing for the government's policies on climate
change, congestion reduction or social inclusion.
January 2011
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