Written evidence from the Association
of Local Bus Company Managers (ALBUM) (BUS 40)
INTRODUCTION
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.
THE IMPACT
OF THE
REDUCTION IN
BUS SERVICE
OPERATORS' GRANT,
INCLUDING ON
COMMUNITY TRANSPORT
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.
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
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.
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
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.
HOW PASSENGERS'
VIEWS ARE
TAKEN INTO
ACCOUNT IN
PLANNING BUS
SERVICES, AND
THE ROLE
OF PASSENGER
FOCUS IN
THIS AREA.
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.
CONCLUSION
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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