Bus Services after the Spending Review - Transport Committee Contents

Written evidence from Suffolk ACRE (Action with Communities in Rural England) (BUS 46)

The impact of the reduction in Bus Service Operator's Grant, including on community transport

Whilst the delay in implementation of this change is to be welcomed, the underlying reduction in BSOG is of serious long term concern. A previous role that this respondent has held was as owner/manager of a small PSV company (10 vehicles on bus contracts, 10 on private hire). Far from the case of 'further lining fat cat's pockets' as often reported, BSOG provided an absolutely essential income to help make ends meet on a very thin financial margin. Without BSOG, only two options exist. On contracted work, prices submitted to Local Authorities (LAs) for tenders will rise to compensate for the loss of BSOG, as currently operators take into account this additional revenue stream when submitting competitive bids. In this case, local authorities will find their costs increasing. Secondly, on commercial services, or those supported services where the operator retains on-bus revenue and is free to set their own fares, passengers are likely to face increased charges. This is a difficult judgement call, as such a move is more likely to result in reduced patronage overall amongst paying customers - not conducive to long term viability. The cost of bus use has risen considerably above the cost of private car use over the past few decades, and this is also not conducive to long term survival of the sector. The difficulty in maintaining a viable patronage base when increasing fares has potential to lead to deregistrations, further increasing the cost burden on LAs.

The effect on CT operators is very similar, except that most CT operations are dependent on LA funding. As a result, these organisations will find their alternatives are either to find increased support from LA's, to restrict any extraneous activities they engage in, or to find themselves heading into debt and possible closure. Some community bus operators run Section 22 services, staffed entirely by volunteers and run on a commercial basis. These are generally from highly rural areas, typically providing weekly links to markets, or once a month to large towns. For these, BSOG is an important and pro-rata large element of their income and any reduction would create an immediate and severe cash flow implication.

In addition, it should be borne in mind that there are strong pressures at present to renew the PSV fleet. Not only is the impact of low floor legislation very strong at present, with some vehicles becoming illegal for local bus services in four years time, but with pressure from various sources (eg Low Emission Zones) for continual upgrades to Euro 5 and beyond. Whilst these objectives are laudable, they are difficult for smaller and medium sized operators to achieve. Whereas traditionally the older vehicles in a fleet were cascaded for use on more rural services, with little or no replacement costs, recent years have seen a trend where this no longer occurs, as fleets become younger and such costs still apply - rendering such services uneconomic. Once all vehicles need to be of low floor specification, this process will intensify. Such matters only increase the need for a continuing rebate on fuel duty, which is simple to calculate, simple to apply, and bears a direct correlation to mileage incurred.

Please also see the last paragraph under the next heading.


In Suffolk this reduction is already being seen. Plans have been progressed and tenders are now out for reduced services. Some are being cut altogether and many are seeing reductions in frequency. Attractive travel options built up over many years, and especially since the introduction of the Rural Bus Grant (RBG), are being lost in a moment. On the plus side, some operators either already have, or are in the process of, converting to commercial operations, rather than lose territory. They take the view that they then have the ability themselves to take whatever action is necessary to maintain (or initially ensure) viability, but at least they can maintain some work and market share. To some extent this probably would have occurred at some point anyway, as Suffolk CC has been building bus use in recent years, but these actions have been hastened by the knowledge of imminent contract reductions. Such actions are helpful from SCC's point of view, as they represent reductions in contract revenue commitments. The non-statutory public transport provision in the county will experience budget reductions of over 50%. To some extent, it can be argued that this is more within the spirit of the Transport Act 1985, and places the onus for creating the shape of rural services primarily on the operators. However, it also justifies the principle of RBG, without which these possibilities would not now exist. It can thus be argued that a certain level of financial support is required overall in order to allow sustainable provision, and also that funding is now dropping substantially below that level.

Within this, community transport in Suffolk is expecting funding to remain relatively constant in overall terms. However, expectations are that the CT operations will expand to fill the gaps vacated by bus routes. Although this does fit with the general development policy that SCC has been following, without funding to allow this, or conventional bus routes to feed passengers in to, genuine fears are that CT services will be totally overwhelmed and unable to cope with the volume and wide variety of travel requests.

Most CT operators do not possess PSV Operator licences, and yet would be well placed to compete in this market. However, the application process is slow (often up to six months) and does not fit into the LA tendering process, which is more a matter of weeks in length. This is a shame, as CT operators could be well-positioned for running services that larger PSV companies find uneconomic, or require subsidies to assist with. However, doing so with maximum 16 seater vehicles would be impractical, as would the ability to raise funds for additional vehicles at such short notice. More and less complicated ways need to be found to enable Community Transport operators to compete on a level playing field with PSV operators. This is not stated as a way to circumvent the legislation for PSV, simply as a way to enable easier progression to such status without having to "begin again from ground zero".

Both the Bus Service Operator's Grant and the severe reduction in available local authority subsidies, have a severe effect on the ability of new entrants to join the market. Personally, having previously commenced operations as a bus company, twice in the past, and for over a year now having being in possession of a new Operator's licence, I am not inclined to commence any new operations. Not only are the increasingly stringent requirements and decreasing reimbursement for BSOG making any prospect of breaking even further removed, but the opportunities for work are almost non-existent. In a rural area such as Suffolk, the opportunities for commercial services are really very tiny.


Fundamentally this scheme has, in my opinion, had two major flaws from the beginning. It has been under-funded, and the concept of bus operators' being "no better and no-worse off" is inappropriate. Whilst bus operators have seen payments for revenue foregone that give insufficient compensation for the numbers travelling, local authorities have found their budgets do not match the demands for concessionary payments. Identifying a level of reimbursement that leaves an operator no better and worse off has proved difficult at scheme implementation, but as time progresses and any ability to accurately "benchmark" disappears into the past, all such attempts become further removed from reality. It is no wonder then that the enforcement of reduced reimbursement rates is perceived as theft. There is nothing new in this, I remember similar arguments back in the early nineties, under a "half fare for pensioners" scheme, when a Borough Council arbitrarily decided to alter the "generation factor", simply to save money. However, today the opportunities for such summary changes are vastly more widespread, and affecting as they do the entire reimbursement for travel rather than a percentage of it, the effects are more far reaching and more difficult to absorb.

Overall, the scheme has been successful - even highly impressive - in creating modal shift and allowing greater travel opportunities for the isolated or economically vulnerable. It has also, by doing this, helped to raise the profile and perceptions, of bus travel. However, to expect companies to provide a service for considerably less reimbursement than the going rate, and to make this a legal obligation, is not only of dubious financial sustainability but is also highly questionable ethically. Things are not helped when government representatives refer to the scheme as a subsidy to operators, when in fact it is a subsidy to the user made at a cost to the operator. A way needs to be found to balance the books, whilst also allowing the continuation of a highly popular scheme that has undeniably helped to increase patronage, at the same time (if possible) simplifying reimbursement processes and accurately reflecting revenue foregone. If it were possible to introduce a small flat fee per journey (say 20p?), the revenue going straight to the operator in addition to reimbursement, and a fee (say £5?) for issue of cards, that going to the relevant authorities, neither of this measures would be inappropriate, and if current funding were left unchanged (rather than further reduced), a significant step would have been made to resolve the funding difficulties.

Whilst the increase in patronage has, by and large, proved welcome to operators, footfall does not equal profit and most find themselves forced into a situation of increased turnover through sales tactics, but reduced profitability. This is not a long term option for any business.

From a CT operators' viewpoint, the national concessionary bus pass scheme has probably overall been a good thing. Being deficit funded (in Suffolk anyway) by SCC, with revenue returning to the LA, the lower income has been an issue for SCC to be concerned about rather than the individual operator. Conversely however, it has enabled the isolated and deprived to be able to afford services they may well find much more difficult. This has resulted in increased patronage and has done much to reduce rural isolation for those unable to use conventional bus services. It has also meant, for those who use non-local bus registered services on which bus passes are not valid, that there is now a legal obligation to provide a voucher alternative that is acceptable on Dial-a-Ride, Taxi or car services. Whilst this often results in a difficult choice of vouchers or pass, and the value of vouchers offered is pitifully low by comparison, the obligation to provide an alternative, and the ability to use them on many flexible services is undoubtedly a benefit.


By and large I do not believe that passengers' views are taken into account. Local Authorities are often very strident in accusing private operators of changing commercial services. However such changes are generally incremental, usually only affect a small number of journeys, and precisely because they are profit-motivated, they seek to satisfy the majority of users and address perceived needs. In their defence, passengers travel patterns are observed and such data would (normally) inform the operators' decisions. Where operators do attempt to engage with local communities, this often results in specific individuals with an axe to grind requesting unrealistic provision based on unfounded personal views. There have been notable exceptions, but such occasions do little to encourage community involvement. When the Transport Act 1985 was introduced, much was made of comparing bus routes to "supermarkets on wheels", yet it is deemed perfectly usual for ASDA or Sainsbury's to make changes to their range of goods based on sales information alone and without consultations. Local Authorities however, react to budgetary pressures in a much more sudden manner. At present, for example, sudden major changes are being implemented that are operationally motivated and cost driven, and bear no real relation to what the general populace requires. A similar event happened two years ago, when a 25% cost cutting exercise was nearly implemented, but then withdrawn at very short notice, causing a number of ramifications in the process.

In Suffolk, having said this, there has been a program of user interrogation over the past few years, as part of the roll out of a series of demand responsive services, running under Section 22 permits. In order to ensure these new schemes best match the need for the local area, a full program of stakeholder involvement, household surveys, and local focus groups has informed the LA's planning. Such a process is rare in public transport! The information gained has been invaluable, but the process does take time and has been regrettably rendered impotent by the speed of recent cuts.

Passenger Focus has not, to my knowledge, had any relevance in Suffolk.

January 2011

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Prepared 11 August 2011