Bus Services after the Spending Review - Transport Committee Contents

Written evidence from Andrew Last of Minnerva Ltd (BUS 49)



1.  I am a Transport Planning Professional and have been a transport planning consultant for most of my career since graduating in 1972. I have predominantly worked in local public transport, mostly in connection with buses. In the last ten years my work has been dominated by concessionary travel issues. The majority of this activity has been for local authorities, most regularly for the Passenger Transport Executives, but I have occasionally worked for bus and train operators.

2.  I have advised the Welsh Assembly Government (and was responsible for a major study in Wales in 2003), and I was appointed in 2004 to act on behalf of Scottish Ministers to determine appeals by four Scottish bus operators (under very similar legislation to that which applies in England and Wales). I am one of a very few people to have had this rôle prior to 2006. I was an advisor to the recently concluded research study by the Institute for Transport Studies (ITS) at the University of Leeds, and authored two (and co-authored a third) of the research reports produced by ITS.

3.  This Evidence has been prepared on my own account and should not be regarded as reflecting the views of any other individuals or organisations. However, I am grateful to colleagues active in the concessionary travel area for their comments on drafts of this Evidence.


4.  The Committee has called for evidence on the implementation and financial implications of free off-peak travel for elderly and disabled people on local bus services in England ("concessionary travel").

5.  This submission argues that:

—  there is a need to question the equity and effectiveness of the current statutory free travel policy; and

—  the contribution of free travel to reducing social exclusion will be even further reduced by the impact of cuts in local transport arising from the Spending Review.

6.  As a consequence, there is an urgent requirement to obtain better information about who benefits from the current statutory concession, as a precursor to an informed debate about how to improve its cost-effectiveness, and to identify better ways of achieving its objectives.

7.  The arrangements for delivery of concessionary travel are complex. A background Note (at the end of this document) describes how the statutory concession is delivered, and provides a commentary (representing the author's views) on some of the difficulties created. However, it is understood that these will not be the Committee's main concern.


8.  There is no doubt that the policy of free travel has increased the number of bus trips made by older and disabled passengers, and will have improved accessibility to facilities, and reduced social exclusion for many people. It is thought that the universal free travel policy is amongst the most generous of its sort in Europe or elsewhere.[31]

9.  However, very little is known about the sorts of individuals who are making these trips, why they are making them and what benefits arise as a result.[32] This lack of evidence does not in itself prove anything, although it is surprising that DfT have not examined such a large amount of public expenditure to confirm that it is meeting policy objectives. However, a growing body of smartcard data is showing that the usage of the free travel concession is highly skewed. A very small proportion of passholders make a very substantial proportion of concessionary trips overall, and a surprisingly large proportion of passholders make virtually no use of the concession at all.

10.  Analysis by the author of smartcard data from four districts in Lancashire, undertaken as part of the ITS research work for DfT,[33] established that over a five week period, 56% of passholders made no use of the concession. In contrast, a very small percentage (2.4%) of passholders made more than 10 trips[34] per week, which in total accounted for more than 25% of all trips made. Similar patterns were found in analysis of smartcard data from Nottingham for a much longer period.

11.  Without further analysis and research, it is not possible to be sure about the implications of these figures. But one obvious conclusion is that although intended to be a universal benefit, half the supposed beneficiaries make no use of the concession. This implies that overall, the policy is having no impact on the majority of the targeted population.[35]

12.  There are a number of reasons why eligible people might not use the free travel concession, even if they possess a bus pass,[36] including:

—  being too infirm or frail to get to a bus stop or to travel independently with confidence;

—  real or perceived lack of sufficiently conveniently bus services to use;

—  continued availability and access to a car;

—  objection in principle to a free benefit; and

—  other reasons including dislike of buses, and lack of familiarity with bus use.

13.  Without further research, it is impossible to judge which of these reasons account for the largest proportions of non-users. However, it is possible to surmise something about the characteristics of the frequent users, at the other end of the spectrum, which are likely to be some combination of:

—  living in an area with relatively frequent bus services;

—  sufficiently agile to be comfortable with frequent bus use; and

—  familiarity with the local network from being a habitual bus user, although potentially, frequent use could be a result of individuals switching from car when the latter becomes too challenging.

14.  Very frequent use could also be associated with regular employment, which is available for the "younger" sections of the older age group. It may well be that these frequent users are obtaining substantial benefits from the concession. But it also seems highly likely that many of the non-users suffer from the problems of social exclusion that the free travel policy is intended to address, yet in effect will be cross-subsidising (through their tax contributions to local and central Government) those who are making frequent use of the concession.

15.  It is an open question whether one group is more-or-less affluent than the other; but the very highly skewed nature of the distribution of use of the concession raises serious doubts about whether the generosity of the policy (in terms of unlimited free travel) is either equitable or effective in terms of addressing social exclusion issues.


16.  These concerns potentially arise with any universal benefit, although the fact that bus services are not universally available everywhere must significantly increase the danger that those who are most able to make use of it are unrepresentative of the target population as a whole. However, the consequences of the reductions in expenditure being forced on local Government could be to significantly worsen this problem.

17.  Statutory free travel was unaffected by the Comprehensive Spending Review, which did not in itself change the money allocated to fund this statutory service. However, the November 2009 Pre-Budget Review of the previous Government had already planned cuts of £120 million from the funding available in 2012-13,[37] attributed to "efficiency improvements" and reductions in reimbursement levels. Moreover, the Spending Review substantially reduced funding for local government as a whole and, by implication, therefore reduced funding streams for local bus services applied by local transport authorities (including funding for non-commercial services, information and facilities for passengers).

18.  Since all funding for concessionary travel is now (for 2011-12 and beyond) bundled into Formula Grant, it is difficult for many authorities to properly identify the quantum made available to fund the statutory concession. But there is no doubt that in combination, the effect of these changes is to significantly reduce the money available to support local bus services.

19.  The Impact Assessment of the recent changes in reimbursement arrangements[38] indicated that substantial savings (for example, of between £56 million and £102 million in 2011-12) would result from the changes. However, it is misleading to classify these as "efficiency improvements". A modest proportion of these savings may be true administrative efficiencies, but the majority will arise from a reduction in financial support to operators. While the inference is that operators had previously been over-reimbursed, the DfT research study did not, and could not, come to a definitive view as to the correct level of reimbursement. Thus the end result is that support for bus services will be reduced, leading to reductions in services or increases in bus fares or, more likely, a combination of the two.

20.  The impact on services will be shared by all passengers, but the impact on fares will be experienced only by non-disabled passengers under 60. These direct impacts of reduced funding may, in themselves, have significant social exclusion effects.

21.  In this context, the fact that Travel Concession Authorities (TCAs) have legal obligations to reimburse bus operators puts a substantial part of the budget available for bus services outside local control. TCA expenditure on reimbursement is dictated by the number of concessionary journeys made, the average fare charged by bus operators, and by the "reimbursement rules" which allow for generation and additional costs.

22.  TCAs have no control over the first two of these, and in principle the reimbursement rules should be dictated by the "no better, no worse off" principle - although the uncertainties associated with putting these principles into practice provide a need for judgement in their interpretation that is potentially the source of much dispute with bus operators. The effect is that since the absolute amount of money that a TCA will need to pay to reimburse operators for the statutory concession is in effect ring-fenced, any economies required to reduce expenditure on local buses will have to come from supported services.

23.  The evidence from the smartcard analysis is that the majority of older people do not use the free concession, and a very small minority use it a great deal. But there is a sizeable proportion of passholders whose use of the concession is between these two extremes. We know nothing about the characteristics of these individuals, but we can infer that they have some access to bus services, and use them to a limited degree. It is probable that the quality of the bus service available to these individuals (in terms of route density and frequency) is not as great as for those passholders who use the bus very frequently, and it follows that these bus services are likely to be more dependent upon local bus subsidy.

24.  The Spending Review has led many local authorities to consider major cuts in supported bus services.[39] Exactly what services are cut and who will be affected will depend upon local circumstances, but it seems inevitable that there will be a disproportionate impact on the large proportion of passholders who make some use of the concession but are not its most frequent users. Although they will still be able to travel for free, there will be far fewer buses available to use. The net effect is that accessibility for this section of the elderly and disabled population will be reduced, and problems of social exclusion for them will be increased.

25.  The author's view is that while there are good arguments for maintaining a concessionary fare for older and disabled people, it is highly likely that the current statutory free concession is inequitable and delivers minimal benefits to the majority of the older and disabled population. Moreover, because reimbursement expenditure by TCAs is in effect protected by statute, the effect of Spending Review reductions will have a disproportionate impact on supported services.

26.  There is a strong danger that the consequent reductions in accessibility for the older and disabled people dependent upon these services will have a far greater impact on many more people than the benefits derived from being able to travel for free.

27.  There is therefore an urgent need to review the effectiveness of the current statutory concession and consider alternatives that satisfy its objectives more cost effectively.

28.  The first priority is to obtain a better understanding of what benefits the current concession delivers, to whom, and why so many older and disabled people make so little use of it. In particular, a key question is the extent to which low use of the concession is correlated with poor bus accessibility. It would be very easy to use existing smartcard data for this purpose at minimal cost. But more substantial research is required to identify how concessionary use is related to car ownership, income and other personal characteristics, which can then lead to a better appreciation of the contribution that free off-peak bus travel makes to reducing social exclusion amongst older and disabled people.

29.  The author's hypothesis is that a full appraisal would show that the current concession provides poor value for money. Its effectiveness in public expenditure terms might be significantly improved by changes such as the reintroduction of a small standard charge per trip, or setting a cap on use. However, such conclusions would need to be informed by research on the impact on travel patterns of such changes, and their social consequences for the individuals most affected.

30.  However, while a reduction in the generosity of the concession could reduce public expenditure and allow resources to be redirected to other areas which provide greater public benefits relative to the costs, it would do nothing to address the social exclusion objectives of the concession. Consequently a second priority is to seek to identify other ways in which local transport policy can do more to maximise accessibility to the older and disabled sections of the community.

31.  It is conceivable that greater levels of support for the non-commercial bus network would achieve that objective more cost effectively than free concessionary travel, especially if wider benefits to the community were taken into account. But since funding for local public transport is wrapped up in formula grant, delivery of such a policy is entirely a matter of local spending priorities and not subject to central Government direction. Ironically, since in other respects spending on the free concession is effectively outside the control of local authorities, there is an added incentive to reduce supported services because this will also save expenditure on concessionary travel reimbursement. This will further damage the accessibility provided by the local bus network for concessionary passengers and other passengers alike.

32.  The author is conscious that the maintenance of free concessionary travel was one of the very few areas of policy on which all three major political parties were united in the run up to the 2010 General Election. But in the author's view this provides a much stronger testament to the perceived political power of the "grey vote" than it does about the case for the policy itself. It would be very unfortunate if the consequence of the Spending Review is to significantly worsen the accessibility of a great many older and disabled people, because of cuts in supported services, leaving free concessionary travel as a flagship policy that achieves very little for the vast majority of the people at whom it is directed.

January 2011



33.  The statutory basis for concessionary travel policy and delivery is provided by the 1985 and 2000 Transport Acts, and some subsequent legislation. The 1985 Act established that the key players in the delivery of concessionary travel arrangements are:

—  Travel Concession Authorities (TCAs) - designated local authorities[40] which are responsible for local concessionary travel policy, administration of concessionary travel schemes, and issuing of passes to local residents;

—  bus operators, who are obliged to carry concessionary passengers and are reimbursed on the basis of the local schemes set up by each TCA; and

—  the Secretary of State for Transport, to whom bus operators can apply for an independent determination ("appeal") if they believe that a TCA's reimbursement arrangements are unfair.

34.  The 1985 Act enabled TCAs to offer travel concessions to residents, if they wished, but did not create a universal concession. The 2000 Act retained the previous administrative structure, but created a universal benefit in the form of a statutory right to a half-fare concession on local off-peak buses for older and disabled people. TCAs were able to offer a concession with a more generous benefit (eg free travel) but all TCAs were required to establish schemes to deliver at least the minimum statutory half-fare concession.

35.  The generosity of the statutory concession was subsequently increased,[41] and in England became free from April 2006 (on local buses, off-peak, but within the TCA area of residents), and from April 2008 allowed free off-peak bus travel anywhere in England.

36.  TCAs retain the right from the 1985 Act to enhance the statutory concession, for example by offering an earlier weekday start time, or extending the concession to wider range of residents. The exact share of TCA expenditure associated with these discretionary concessions is not known, but for buses is probably a relatively small proportion - most expenditure is associated with delivery of the statutory concession.


37.  Payments to bus operators for providing concessionary travel represent the largest single component of local public transport spending by local government. Of £2,185 million revenue spending in England in 2007-08, a third of the total was for concessionary fares.[42] This proportion is almost certain to have risen over the last couple of years and is probably higher for the UK as a whole, since reimbursement arrangements in the devolved administrations tend to be more generous than those in England.

38.  Over a third of the bus passengers currently carried by bus operators are concessionary passengers.[43] Payments for concessionary travel account for 18% of estimated bus operator revenue (including BSOG and net payment for tendered services). These proportions will vary between operators and types of route. In some areas, and with some types of service (such as coastal services in recreational areas) concessionary travel is the dominant market and these proportions are much higher.

39.  It should be noted that there is considerable variation in the scale of expenditure of TCAs, the number of bus operators that they deal with, the nature of the services operated, and the technical resources available to the TCA to administer the scheme (in terms of expertise and data). Although the move to County administration from second tier authorities will increase the average scale of individual schemes, local circumstances will still vary considerably, and may place significant strain on a TCA's ability to fairly administer reimbursement arrangements.


40.  The change from an entirely discretionary concession to a largely statutory concession has been reflected in increases in grant paid by central Government to local Government. Between 2008-9 and 2010-11, special grant was provided to reflect the increase in spending associated with the move to the national concession, but from 2011-12 funding for concessionary travel is entirely subsumed within Formula Grant. There is therefore no direct relationship between what a TCA needs to spend to deliver the statutory concession, and the amount of funding that it will receive to pay for it, nor is there any transparency that allows the adequacy of funding to be determined.[44] This is an important consideration as the minimum standard is costly, defined in statute and the methodology for operator reimbursement is fairly tightly constrained.


41.  1986 Regulations set out the principles which should be used by a TCA in calculating reimbursement to bus operators. In particular, TCAs should have the objective to reimburse operators so that both individually and in aggregate operators are financially no better off and no worse off. European legislation (in particular Regulation 1370/2007) provides an over-arching framework governing the compensation that an operator may receive for providing a public service obligation such as requiring certain groups of passengers to be carried at a concessionary fare.

42.  Reimbursement payments are typically calculated from:

—  the number of concessionary journeys made;

—  the average commercial fare charged by the operator; and

—  the reimbursement rules, which determine how the "no better off, no worse off" objective is interpreted.

43.  Of these, both the number of concessionary journeys, and the average commercial fare charged are entirely outside the control of the TCA. The TCA is responsible for setting the reimbursement rules. But in principle, these should comply with the "no better off, no worse off" objective, and in particular should not be set to enable the TCA to match expenditure with a given amount of funding.

44.  Consequently, TCAs are in the position of having to pay for a statutory service over which they have no control, and for which they will receive grant that may bear little relationship to actual expenditure. In the context of significantly reduced grant to local government, it is inevitable that operators will be suspicious that TCAs will seek to minimise reimburse payments in order to respond to wider budgetary pressures.


45.  It is impossible to know for sure whether any given quantum of reimbursement payment is "correct", and genuinely satisfies the "no better off and no worse off" objective. The best that can be done is to assemble a logical framework for calculating reimbursement on a consistent basis, drawing on evidence (from the fields of transport planning and transport economics) of how passengers and transport operators behave. The reimbursement rules actually applied to calculate reimbursement should implement this logical framework.

46.  DfT publishes Guidance which seeks to advise TCAs on the reimbursement rules. The latest, published in late November 2010 for implementation from April 2011, represents DfT's interpretation of the results from the large study carried out on its behalf by the Institute for Transport Studies at the University of Leeds.

47.  The Guidance has two functions:

—  it provides advice to TCAs on how they should satisfy their objectives; and

—  it also provides the methodology which will be used by DfT in advising the Secretary of State on appeals.

48.  This dual role provides a dilemma for TCAs which have doubts about the correctness of DfT Guidance, because of the potential vulnerability to appeals by bus operators. Variation from Guidance enhances the risk of appeal on grounds of non-compliance with DfT advice (and a presumption that the outcome will favour DfT's views as set out in the Guidance). On the other hand, the TCA will be knowingly in breach of its statutory objectives if it can be demonstrated that Guidance is not consistent with "no better off, no worse off" principles. In the author's opinion, there is at least one feature of the latest Guidance for which this is the case.[45]


49.  Since statutory free travel was introduced in England over 300 appeals have been received, on widely varying grounds. DfT have chosen to progress each appeal in isolation, using an independent adjudicator advised by DfT economists. Determinations have not been published, even in redacted form, and only the barest of summaries of outcomes have been made available to other than the interested parties in each appeal.

50.  Because of this lack of information, it is not possible to assess the effectiveness of the process, and criticism will have been muted because of a reluctance amongst interested parties to antagonise those responsible for advising on the outcomes of future appeals. Even so, dissatisfaction with the appeal process has led to a number of applications for judicial review, some of which remain outstanding.

51.  In the author's opinion, based on personal knowledge and some anecdotal evidence, there is ample room for improvement. In particular, lack of any emerging case-law or precedents, combined with apparent arbitrary decisions and inconsistencies in the judgements made, makes it impossible for interested parties to form a proper view of the likely outcomes of a potential appeal. This is bound to increase the scale and number of disputes between TCAs and bus operators rather than reduce it.


52.  The principal problems created by these various arrangements can be summarised as follows:

—  the local authorities designated as Travel Concession Authorities are very largely the agents of central government implementing central government policy (statutory free off-peak bus travel). But they have very limited control over what they have to spend, and in any case there is little direct link between the expenditure incurred and the funding that they get from central Government. There is consequently at best an arbitrary degree of over- and under-funding of the concession between authorities, and at worst the possibility of underfunding overall;

—  of the things that determine expenditure, TCAs have most influence over the reimbursement rules. But TCAs are set the objective of leaving operators no better off and no worse off (and explicitly should not constrain reimbursement to match available budgets). Independently, they should also take account of DfT Guidance, both as a source of advice, and also in the knowledge that DfT Guidance will be used by operators to argue for higher reimbursement if possible. So in deciding on arrangements, careful judgements are required about the weight to be given to DfT Guidance as opposed to other considerations. In principle, affordability should not be a consideration, but inevitably in practice will be, to some degree; and

—  there is a strong incentive for operators to appeal if there is a reasonable chance that it will increase reimbursement.[46] But uncertainties about interpretation of the Guidance, and the difficulty of predicting the likely outcomes from appeal processes, encourages parties to take divergent views and hence increases the likelihood of appeals.

53.  For practitioners, and especially TCAs faced with deciding on reimbursement arrangements for 2011-12, existing institutional arrangements have to be accepted as fixed, despite their imperfections. There is inevitable conflict between operators wanting to get paid more, and TCAs seeking both to satisfy the "no better off, no worse off" objective while managing their budgets. Explicitly or implicitly, the threat of appeal will therefore influence TCA formulation of proposed reimbursement arrangements, and the consultation/negotiation process with operators that lead to their implementation.


54.  Appeals are a necessary part of the overall delivery mechanism for free travel. But the way in which appeals are operated has a key role in magnifying, or diminishing, the tensions created by the institutional structures. In the author's view, improvement in the operation of the appeal process could significantly reduce the impact of these tensions, and hence reduce the destabilising effects of the threat of appeal. This view reflects the author's experience as an independent adjudicator appointed on behalf of Scottish Ministers to determine appeals by Scottish operators.

55.  Although grounds for appeal vary, and include challenges regarding legal and process issues, it is thought that the underlying subject of most appeals is the question of what "no better off and no worse off" reimbursement means in money terms. Despite the ITS work, many uncertainties remain about the practical interpretation of these principles, requiring judgements that are potentially subject to dispute. The appeal process should be providing a mechanism for accumulating evidence and experience about such judgements, thus reducing uncertainties and the scope for argument. But the appeal process as operated by DfT has not permitted this to happen.

56.  The fact that DfT has chosen not to publish appeal determinations has shielded them from scrutiny and means there is no possibility of an informed outside review of the appeal process. However, the author is aware of strong criticisms of the process used for individual determinations, on a variety of grounds,[47] some of which have led to joint letters of complaint from both the TCA and operators involved.

57.  An independent review of the appeal process is therefore an urgent and high priority. It should:

—  explicitly seek the views of TCAs and bus operators on their experience of the effectiveness of the process as operated by DfT;

—  have access to the Determinations made on behalf of the Secretary of State, including associated correspondence with interested parties, to provide an informed view of the practice of appeals as conducted by DfT;

—  examine the role of the appeal process within the overall arrangements for delivery of concessionary travel;

—  consider the best way in which the technical judgements implicit in reimbursement calculations should be brought into the quasi-judicial framework provided by the current Regulations; and

—  seek to identify best practice from how analogous appeal processes are dealt with in other sectors.

58.   Appeals provide the release mechanism through which the conflicts that are endemic in current arrangements for delivering concessionary travel can be resolved. With little likelihood of major change in these arrangements for the foreseeable future, the potential for conflict will be a continuing fact of life for TCAs and operators for some years to come. However, if the appeal process is used to accumulate and disseminate experience of how conflicts are resolved, then fewer potential disputes will turn into actual appeals, and negotiations between TCAs and operators will take place in a context of much greater certainty on both sides. This in turn should lead to more positive relationships between local authorities and bus operators, which is essential if they are to work in partnership to deliver better local bus services in the current economic climate.

January 2011

31   There is a free national and multi-modal concession available for those aged 66 or more in Ireland. Otherwise, although free travel is often provided by individual city authorities, it is understood that this is rarely imposed as a statutory duty by central Governments outside the UK. Back

32   This question is considered in more detail in "The Grey Escape: How and Why are Older People Using Their Free Bus Pass", Andrews, Parkhurst, Shaw and Susilo, UTSG, Open University Milton Keynes, January 2011. Back

33   Reported as Paper 4 in "Concessionary Travel: The Research Papers", University of Leeds Institute for Transport Studies, November 2010. Back

34   That is, a single bus leg from boarding stop to alighting stop without change of bus or service. So a journey involving a change of buses would count as two such trips. Back

35   Take-up rates of the pass remain less than 100%. Pass take-up in the analysis data set was about 70% of the eligible population, implying that non-users of the concession represented almost 80% of the eligible population. Back

36   There is also anecdotal evidence of bus passes being acquired as a "proof of age card" (eg to obtain discounts in shops) rather than with the intention of using it for free bus travel. Back

37   Together with £60 million associated with increasing the age of entitlement of men to match the state pension age. Back

38   DfT published new Guidance on reimbursement of bus operators for carrying concessionary passengers in late November 2010. These have the affect of significantly reducing the payments that Travel Concession Authorities should make to bus operators, if they follow the new Guidance closely.  Back

39   As reported in Local Transport Today Issue 559, 26 November 2010 ("Somerset Councillors approve swingeing cuts to transport spend"; "Herts cuts tendered bus services"). Back

40   Under the 1985 Act, Travel Concession Authorities in County areas were designated as the second tier authorities (i.e. District Councils), alongside unitary authorities and metropolitan councils. Counties take over TCA responsibilities from the second tier authorities from April 2011. Back

41   A free concession was introduced in Northern Ireland in 2002 and in Wales and Scotland in 2003. Back

42   Table 2, Local Bus Service Support - Options for Reform Consultation paper, Department for Transport, March 2008. Back

43   DfT Public Transport Statistics Table 105 October 2010. Back

44   There are indications in some data published by the Department for Communities and Local Government that appears to identify the grant that individual local authorities receive for concessionary travel, but its transparency is obscured by the floor-damping mechanism and other issues. Back

45   The most significant concern is that the Guidance currently recommends that the same allowance is made for generation irrespective of the fare charged, but with variation depending on the rate of change from 2005-6. So if two operators charge widely varying fares, but happened to have changed them at an identical rate, it will be assumed that the same proportion of passengers are generated, irrespective of whether in the absence of the free concession passengers would be charged 50 pence or £5. Back

46   DfT proposes to change Regulations to allow appeal outcomes to reduce levels of payment as well as increase them, thus reducing incentives to appeal on a purely speculative basis. However, it is not clear that current Regulations preclude this, and examples are known of Determinations which have reduced operator payments. Back

47   These include: inclusion in determinations of simple errors of fact; contradictory directions to a TCA from different determinations for different operators; ambiguities in directions that have required clarification letters which have then required further clarification. Back

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Prepared 11 August 2011