Bus Services after the Spending Review - Transport Committee Contents

Written evidence from the Association of Local Bus Company Managers (ALBUM) (BUS 40)


1.  This evidence is submitted by the Association of Local Bus Company Managers (ALBUM) to the Transport Committee's inquiry into the funding of bus services in England (outside of London) in the light of the outcome of the Comprehensive Spending Review. ALBUM has 150 members, representing over 50 companies in the independent, state-owned and municipal sectors, who between them operate some 6,600 buses, which is about one bus in twelve nationally. This makes ALBUM members collectively Britain's third largest bus operator and puts it in the same league as the big five multi-national plc groups.

2.  UK bus service provision is largely organised on commercial lines, with services supplied by private and a small number of public sector businesses. But, even on "commercial" services, which make up some 80% of the network, income is raised partly from public funds, for example reimbursement for free "concessionary" travel. Services which are deemed socially necessary, but are not commercially viable, are supported through local authorities. This reliance on social funding renders the bus industry susceptible to public spending cuts, in particular where these are based on arbitrary percentage reductions, rather than being objective-based. A key impact of the CSR on bus services will be that brought about by the reduction in central government support for local authorities, which transfers responsibility for the details of where spending cuts will fall from the government to councils.

3.  ALBUM's evidence relates to the four broad areas named in the Committee's invitation.


4.  Nationally, the 20% cut in the rate of Bus Service Operators' Grant from April 2012 will increase operators' total costs by some 2%. Statistics produced by the EYMS Group show that, after allowing for BSOG and taking into account the 20% cut, fuel cost per litre will have risen by 152% between 2004 and 2012, based on a conservative estimate of no underlying price rise beyond its current level. Cost of fuel as proportion of total operating costs, which in 2004 was 9.29%, was expected to more than double to 18.16% by 2012.

5.  If BSOG is to be replaced by a Per Passenger Incentive, this will have a disproportionately adverse impact on less busy bus services, including those in rural areas, on routes to and from market towns and at quieter times such as evenings and Sundays. It is essential that a methodology be devised to ensure that such socially necessary services are able to continue. Buses are fundamental to very many people for access to jobs, health facilities, education and shops, as they reach places trains do not access, especially in non-metropolitan areas; yet trains pay only a fraction of the amount of fuel duty that buses pay (and airlines pay none at all).

6.  The uncertainty of reducing and restructuring BSOG impacts negatively on new vehicle investment. This reduces the quality of travel for passengers; the ability of operators to compete effectively against the car; and the cleanliness of the environment as the introduction of new, cleaner-engined vehicles is retarded. It will also make it more difficult for operators to meet the Disability Discrimination Act deadlines for new buses, which will result in further service cuts, as non-compliant buses will have to be withdrawn, but operators will be unable to afford to replace them. Poor balance sheets will also make it much more difficult for operators to get finance for new buses. Jobs in the bus manufacturing industry will in turn be put at risk and the economic strength of the UK bus manufacturing industry will be compromised.


7.  The extent of local authority financial support for bus services has historically been strongly influenced by local policies, with each authority responsible for determining which non-commercial services it would procure as socially necessary and considered to be affordable. Whilst policies varied across the country, in each transport authority area a general consistency emerged, which was typically subject to evolution rather than revolution.

8.  The CSR will upset this status quo, by imposing draconian cuts in central government support to local authorities and forcing them drastically to re-assess what services to procure. Initial indications are that such decisions may sometimes be made in an arbitrary way, in order to achieve rapid and substantial financial savings, for example by cutting the support for most Sunday or evening services (eg in North Yorkshire). Reducing off-peak services will also curtail the ability of passengers to use buses at busy times, many "return" journeys at a quiet time of day being the return portion of an earlier outward trip; cutting evening bus journeys will thus add to peak traffic congestion. The strongest impact is expected to be felt in localities where a high proportion of services is tendered, eg in rural counties such as Lincolnshire, Norfolk and Somerset. The policies of authorities that explicitly fund a high quantity and standard of services will be severely at risk. This is not the "localism", which the Government says it supports, but a thinly veiled central diktat. Operators that have invested heavily in tendered services, many of which are SMEs, will find their livelihoods most severely under pressure.

9.  The effect of raising fares would deter people from using buses, an unwanted outcome that Norman Baker has regularly referred to compared, for example, to motoring costs. The Government has decided to stop the "war on the motorist" [a fatuous and meaningless concept] and will no longer suggest councils increase parking charges as a way of encouraging bus use. Yet it is embarking on a war on a "war on the bus passenger" in a way that is entirely contrary to its supposed friendliness towards the environment.


10.  A similarly arbitrary and substantial cut is forecast in the level of reimbursement to be paid to bus operators for carrying free concessionary passengers. The Government appears to have been more than willing to accept selectively the conclusions of a piece of disputed research, based on incomplete data, as it enables rates of reimbursement to be cut. Although the DfT claims the average reduction in support to be 8-10%, authorities are typically facing falls of between 20% and 40% in the payments they receive for carrying concessionary pass holders. A sample of eight "shire" counties have experienced falls of between 31% and 51% in their concessionary fare reimbursement settlements from the Department of Communities and Local Government (DCLG). Operators consider the Government to have reneged on its "social contract" with them that they should be left "no better and no worse off". The change renders it impossible for operators to earn a reasonable level of profit from concessionary travel, which will not meet its share of the costs of the service; or from fare-paying passengers because of the drastically reduced services.

11.  Many ALBUM members supply bus services in areas with high proportions of older people, often in locations that attract holiday visits by such people. This combination puts a heavy strain on resources, with perhaps 20% of passengers travelling without any reimbursement and with buses retained in fleets just to meet seasonal peak demand. The level of reimbursement is critical to the financial prosperity of the local bus businesses, and affects their ability to invest in new vehicles.

12.  The DfT's Reimbursement Analysis Tool model fails to take account of the issues associated with large proportions of all year-round users travelling free in combination with a significant further seasonal influx of eligible people. It is often not just a matter of filling otherwise empty capacity, but a need for more vehicle resource is created, which may trigger increased Operator's Licence Financial Standing capital and place increasing pressure on overheads (such as workshops), in turn requiring further capital expenditure. Such factors, especially the Financial Standing requirement and the capital costs of additional vehicles and maintenance facilities weigh particularly heavily on SMEs.

13.  The impact of reducing concessionary fare reimbursement needs to be assessed in combination with that of the general cut in council support for bus services. The combined effect will be particularly severe in rural areas with rising bus patronage, populations and proportions of residents over 60, where the sparse provision of services (shops, health care, etc) necessitates lengthy journeys.


14.  Bus operation is a commercial enterprise, albeit one that receives supplementary income from public sources. Passengers' views are largely identified by the use they make of the services, quality, reliability and value-for money being rewarded by high/increasing use. Operators invite passengers' views on services and monitor correspondence/complaints. A further, very direct market research opportunity is provided by regular feedback from drivers.

15.  Passenger Focus has recently been given responsibility for monitoring the quality of bus as well as rail services, which will enable it to report on trends in bus passenger satisfaction. Bus operators do not however expect this to take over from their own role. Local market knowledge and decision-making will continue to be all-important and there is a degree of scepticism regarding the broad, national base of Passenger Focus, although its input is generally welcomed and the importance of its new role is recognised.

16.  Some local authorities and, in particular, the PTEs play a role in ascertaining passenger attitudes to local bus services, as well as in their marketing, for example though the publication of maps and timetables. This role may be set to diminish as authorities rein in expenditure on such items; an "economy" that may prove false, if it results in reductions in the availability of bus service information.


17.  Buses provide essential services which are critical to getting millions of people to work, schools, shops, health facilities, etc. Their value is well appreciated by Norman Baker, Under Secretary of State for Transport, who has recently made the following supportive statements:

"Buses are vital to the economy"

"Buses and coaches are the backbone of public transport, carrying two thirds of all passengers"

The bus industry…

"… has a major part to play in tackling congestion and reducing pollution"

"… has an excellent record of job creation and one of the country's biggest employers"

"… is at the forefront of cutting the carbon footprint"

"We want to see more people on buses".

18.  Reductions in the support for buses as a result of poorly thought out cuts in funding, whether stemming directly from Government policies such as the curtailment of BSOG, or from cuts in the funding of local authorities, must not be allowed to prejudice their ability to continue the good work. The arbitrary impact of the CSR county by county appears to mean that rural shire counties will be hit worst(ie many with Liberal Democrat and Conservative MPs), with a combination of cuts in concessionary reimbursement, local authority budgets and BSOG. An example is Derbyshire, which is cutting 50% of its funding for socially necessary bus services, with concessions to be cut by 31% and the 20% cut in BSOG meaning that the remaining 50% of the tendered services and the commercial services will be very severely affected.

19.  The EYMS Group has calculated that the tax (fuel duty minus BSOG) from fuel used on local buses by East Yorkshire will more than double from £1.07 million in January 2011 to £2.15 million in April 2014 as a result of the annual rises in duty announced in October 2010 and the 20% reduction in BSOG, assuming 2% annual average inflation over the period. Since until the 1990s all fuel duty was rebated this has created an entirely new tax on local bus travel of over10p per passenger trip - a highly regressive imposition.

20.  The financial consequences of failure to provide adequate resources for bus services will be far greater increases in spending under other heads, to combat additional traffic congestion and meet the health service costs of increased road casualties; and an inability to meet the country's commitment to improving the environment.

January 2011

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Prepared 11 August 2011