To be published as HC 1861-i

House of COMMONS



Transport Committee

Competition in the local bus market

Tuesday 28 February 2012

Stephen Morris, Richard Hebditch and David Sidebottom

John Pope, Councillor Shona Johnstone and David Brown

Dr Roger Sexton, Neil Anderson and Steve Warburton

Evidence heard in Public Questions 1 - 103



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Oral Evidence

Taken before the Transport Committee

on Tuesday 28 February 2012

Members present:

Mrs Louise Ellman (Chair)

Jim Dobbin

Mr Tom Harris

Mr John Leech

Paul Maynard

Iain Stewart

Graham Stringer

Julian Sturdy


Examination of Witnesses

Witnesses: Stephen Morris, General Manager, Bus Users UK, Richard Hebditch, Campaigns Director, Campaign for Better Transport, and David Sidebottom, Passenger Team Director, Passenger Focus, gave evidence.

Q1 Chair: Good morning, gentlemen. Welcome to the Transport Select Committee. Before we begin the proceedings I would like to pay tribute to Peter Huntley, who was killed in a walking accident on 19 February. Mr Huntley was a former Chair of the TAS Partnership and a former Managing Director of Go North East. We were intending to ask him to contribute to our inquiry. He is a very sad loss to the transport community. Our thoughts are with his family and friends.

Gentlemen, could you give us your name and the organisation you are representing for our records?

Stephen Morris: I am Stephen Morris from Bus Users UK.

Richard Hebditch: I am Richard Hebditch. I am Campaigns Director at the Campaign for Better Transport.

David Sidebottom: I am David Sidebottom, the Passenger Team Director at Passenger Focus.

Q2 Chair: Thank you. What are the things that matter most to bus passengers? Mr Sidebottom, what are the key things that passengers care about?

David Sidebottom: We undertook some research, which we published in 2010, on bus passenger priorities for improvements. That focused on a number of areas. We asked nearly 3,500 passengers across England and outside London about their priorities for improvements. The top four things were better punctuality, improved frequency of services, getting a seat on a bus, which varied in some areas between value for money and getting a seat, and the availability of a multi-operator ticket was also important, which surprised us in terms of the level of demand from passengers for that kind of service.

Q3 Chair: Does anybody else have any different points to put?

Stephen Morris: We would agree with those priorities from what bus users tell us. People want to be assured that they can turn up in the morning, get on a bus and get to work on time, and do so reliably day after day.

Q4 Chair: Mr Hebditch, do you have anything to add?

Richard Hebditch: It is also important to think about the difference between more rural areas and urban areas. Particularly for rural areas where services are less frequent, it is the reliability of those bus services and that they are turning up on time or actually turning up at all. That is often very important for passengers in those areas.

Q5 Chair: Would you say that the Competition Commission’s inquiry addressed those areas or was it looking at something else? Mr Morris, how do you view the Competition Commission’s report? Did it look at the areas of concern to passengers?

Stephen Morris: By and large I do not think it did. There are one or two areas that we thought were very useful, particularly the aspect of multi-operator ticketing. That is something that will certainly be welcomed by bus users, but competition itself is something that is quite a long way down most bus passengers’ agenda. As I say, they just want to get to work on time and where they are going reliably, and, for the most part, they do not really mind who is providing that bus service for them.

Q6 Chair: Does anyone have any other views on the Competition Commission’s report?

David Sidebottom: From our perspective they are focusing on what passengers want to see improved and what they value. The emphasis on trying to encourage more sustainable use of multi-operator ticketing was particularly welcome, and we welcomed that publicly. We are particularly interested in the differences between quality contracts and partnerships, and how passengers see that as an output and what that could deliver. The main focus from our point of view is very much on multi-operator tickets, which again is based on what passengers want. That was a welcome announcement.

Q7 Chair: The Competition Commission’s report did not focus a great deal on quality contracts and partnerships, did it? It was looking at competition issues. Why do you think that was?

Richard Hebditch: Basically, the remit of the Competition Commission and the inquiry was to look at the bus market, how it was working and any difficulties in the bus market. It was not necessarily starting from the point of view of what passengers want. There is a discussion very deep within the full report about what passengers actually want, but you do not get a sense, from reading the recommendations or the key findings of the Competition Commission, that they really addressed what passengers’ real concerns are about bus services. In particular, all of the kinds of things that passengers want are not necessarily things that bus companies in isolation can deliver. It is that thing about how bus operators work with local transport authorities, in particular, in terms of information to passengers whether at the bus stop or elsewhere, but also in terms of the punctuality of bus services and improving bus priorities. Those kinds of measures are not addressed within it. This is not a policy report about how to improve bus services. It is purely looking at the function of the market itself and how that can be improved.

Q8 Paul Maynard: As you just mentioned, this was a Competition Commission report with set terms of reference. Are there any reasons why you feel the Competition Commission should have exceeded its terms of reference to look at matters other than competition?

Richard Hebditch: A fuller discussion of what the priorities are for passengers would have been useful to make sure that simply the automatic linking of competition with meeting passengers’ needs was more fully explored. What is really important is how the Department for Transport interpret the report. As you know, the Government have waited until this Competition Commission report to decide what their policy is towards bus services as the two parties have different views on it. I am not sure that this report gives you enough of a basis for making policy. What we need to see from Government is a clearer discussion about what the role of the market is, and, in particular, what the role of local transport authorities is and what they can do to improve bus services by working in partnership with bus operators.

Q9 Paul Maynard: Would any of the witnesses disagree with the notion that, because this is the Competition Commission, the fact that it reported on aspects related to competition is hardly a surprise?

Stephen Morris: No; that is hardly a surprise. I would agree with that.

Q10 Paul Maynard: The reason I am trying to develop this line of argument is that as a Committee we have already done one inquiry into local buses. We are now doing a second. There is clearly an appetite for a greater policy direction from somebody somewhere. How do you think that can best be delivered? Are you looking to Government for more White Papers or Green Papers leading to legislation, or are you looking to outside bodies to come up with a report? Are we looking at a Royal Commission? This does seem to be an incredibly complex area of policy where there is no great consensus that I can identify. Does there not have to be a game-changing intervention from someone somewhere?

David Sidebottom: I think we all know it is very localised by delivery bus. The one thing that struck us in our work in surveying passengers and asking about passenger satisfaction, and the things that come through the strongest in some areas of the country where it works really well, is that you back it up with what you believe to be the quality of the individuals that are working within that area. It is not so much the regime or the infrastructure; it is more about the outputs of passengers. Passengers recognise that their partnerships work very well. Whether that is a quality contractor or a quality partnership, it comes through in some of the results we have had. It does not surprise us that the areas that rate very well from passengers are where there has been long-term stability in the network, operators get on with what they do very well and so does the transport authority providing the bus priority measures that Richard talked about before as well.

Q11 Mr Leech: Mr Sidebottom, you said that quality partnerships work quite well. Do they work well everywhere where they have been introduced?

David Sidebottom: It is interesting. We are going to publish some results next week. We surveyed 20,000 passengers across the country asking them about various aspects of their journey. It is passenger satisfaction work. In some areas we can see where there has been real direction put into improving punctuality and offering a multi-operator ticket. Passengers recognise that over other journeys that they undertake. It is fair to say that the picture is still patchy. Where you see some focus it is new; it is early days and it is not quite mature enough yet, but where it is well established, you certainly see passenger satisfaction increase.

Q12 Mr Leech: Where the partnerships have worked, has that been in areas where the relationship between transport authorities and bus operators has generally been pretty good anyway and the services have been better than other areas?

David Sidebottom: I would say so, yes.

Q13 Mr Leech: Is there some evidence to suggest that, where there are poor bus services and a poor relationship, the quality partnerships have not worked?

David Sidebottom: Yes. I am sure we can cut our work to illustrate that.

Q14 Mr Leech: What about quality contracts?

David Sidebottom: That is one of the sad things in all of this. We have not had the ability to benchmark where a quality partnership delivers against a quality contract. That would be a fascinating study to do. We have not seen anyone embark upon a quality contract as yet. Our work is outside London, sadly, so we are not quite in that franchise model.

Q15 Mr Leech: Do you think that they could work, though?

David Sidebottom: I am sure they could, as could competition. In terms of the things that passengers want to see-punctuality, reliability, better value for money and getting a seat-all of those things can deliver. Passengers are interested in the outputs. Again, it is down to the quality of the individuals working on it, the commitment and the endeavour to make that work between the authority and the operator.

Q16 Mr Harris: What is stopping local authorities promoting quality contracts?

Richard Hebditch: It is just the difficulties of the process.

Q17 Chair: Why haven’t quality contracts been embarked on? Mr Sidebottom was talking about the quality of individuals, but it must be something else surely.

Richard Hebditch: It is about the risks of moving to a quality contract. They are such that the incentives for doing so are not sufficient. A number of local transport authorities are looking very seriously at doing it, but the difficulty is just making that leap. I do not think there have been the incentives to do it. One of those things could have been financial incentives to make sure that it worked, to test the approach, but there simply have not been the incentives to make that leap to risk the delivery of your existing bus services by moving to a new model. Local transport authorities have not generally had the confidence to take such innovative measures throughout the post-war period of declining powers for local transport authorities. It is quite difficult to expect them to take up more innovative solutions.

Q18 Mr Harris: Ever since deregulation in 1985, local authorities, passenger transport executives and passenger groups have been campaigning for a return of some form of regulation. They were given it in 2010 and still have not done anything with it. Is this because the legislation is not good enough, it needs tightening up and needs to be improved, or is there just a problem with political will?

Stephen Morris: There is certainly a problem with political will. In many cases where quality contracts have been suggested, a partnership approach has been stepped up and has worked well. We have seen quite a lot of instances where the bus companies are obviously not keen on quality contracts. Where they have been raised as an issue, they have worked more effectively in partnership with the local authorities

Q19 Mr Harris: In London we have a franchise system. In the 10 years to 2010, passenger numbers are up by 50%. Outside London we have a completely deregulated system. If it were not for the concessionary fares scheme, passenger numbers would have gone down in the 10 years to 2010. Am I missing something here?

Stephen Morris: London is always quoted as such a fine example. The two particular aspects of London that have made it successful have been a very strong political will to ensure that it does succeed and the injection of a great deal of money into the bus service. It was £560 million last year, I understand. You have to remember that 15 years ago, London bus services were provided under the same style of regime but requiring the network to be provided at virtually nil subsidy. In those days, the bus service in London was pretty terrible. It was very poor. It has been made to work because of a very strong political will to ensure that it does work and also the political will to make the money available to ensure that it does work. Of course, the great danger with any scheme like this is that a change of political control and political will could cause the thing to disintegrate very quickly.

Q20 Graham Stringer: You make interesting points, Mr Morris, about a comparison of the London system with elsewhere. In the period before the large injection of cash with the mayoral system there was virtually no subsidy into the London system, but there was not a loss of passengers when the rest of the country lost about 40% of their passengers. That is the real comparison, is it not?

Stephen Morris: Yes, that is true. We have seen growth in some of the shire areas in that time. There has been quite a substantial loss of passengers in the other metropolitan areas in Britain and that is certainly an issue of great concern. Whether a regulated system would have been the thing to enable that to happen is impossible to say. Whether an improved relationship between the local authorities and the local bus companies during that time could have produced similar results, again, is something that is difficult to say. We were aware during that time of some adversarial relationships between some of the metropolitan authorities in the rest of England vis-à-vis the bus companies.

Q21 Iain Stewart: You mentioned the inter-operator tickets as a passenger priority for using buses more. Is that simply between bus operators or is there more of an appetite for a public transport ticket like an Oyster Card that we have in London that could equally be used on trains and trams as well as buses?

David Sidebottom: From our research in 2010, for a bus passenger it was very much about the ability to use cross-city services, though in some areas, as I am sure you are very much aware, there are very distinct borders between operators. The ability to get on the next bus is very important, and often the ability to buy that ticket from the local authority that allows you to use different operator services comes at a premium. There is also an appetite, though, for multi-modal type ticketing. It is a little bit further down the pecking order, but certainly there is an appetite.

Q22 Iain Stewart: The reason I ask is because I am interested in probing whether the Competition Commission has looked at competition simply between bus operators or where there might be competition with a tram system or a railway. I imagine that is a relatively small level of competition. From your perspective, have they analysed that adequately?

Richard Hebditch: There is some discussion about competition with other forms of public transport. It does seem to have a moderating influence on the behaviour of bus operators to create more of a market mechanism. The area where we would have some dispute with the Commission’s report is about competition between the car and buses. It is true that the Competition Commission is right to say that for a lot of people there is not competition because the bus market has declined. The core market is those who do not have a car. The potential is smart ticketing but also in terms of better information through smart phones, the internet and those kinds of things. There is the potential to grow the market more. We have got used to the idea of the bus market as being a declining market over which bus operators fight and protect their territories, but, actually, the potential for this is a growing market. Competition may start to have more of a beneficial impact where it is starting to grow and attract people away from cars.

Q23 Jim Dobbin: Do you not think that this aim to introduce competition is just a dream? If you go back to the days of deregulation, you used to see dozens and dozens of small buses running all over the place, following each other everywhere. Of course, it did not take long for the larger companies to come in and buy them out. In my own area, in Greater Manchester, there are two major bus companies. There are one or two smaller ones, but two major ones: Stagecoach and First. They split the area into two, so there is no competition, and they drag buses off routes willy-nilly as and when they want. You really need to get back to some regulation here before you can even consider getting proper competition. It is as simple as that. That is what deregulation did. It just destroyed the whole system.

Stephen Morris: If I may say, I think it is a little disingenuous to suggest that the two operators split the territory into two.

Q24 Jim Dobbin: Well, that is what they have done.

Stephen Morris: That was the way it was set up at privatisation. The big bus company that covered the whole of Greater Manchester was split into two at deregulation and sold off in two separate halves. To suggest that the two bus companies have deliberately set out to retrench to opposite ends of the conurbation is not quite an accurate reflection of the situation.

Q25 Jim Dobbin: It is my accurate view.

Richard Hebditch: There are also some important recommendations from the Commission that are about regulating the market. The recommendations about trying to mandate multi-operator ticketing is one way. That can have a really important impact directly on passengers in improving their experience and also in longer periods for notifying changes to services. It is one of the things that passengers, as I am sure you are aware, have concerns about. If we are moving to an era of more open data and having different ways of getting information about bus services, having reliable information where you know what the bus service will be and where it does not change frequently-it will change, say, twice a year-will have very important impacts for passengers as well.

Stephen Morris: We would agree that passengers value stability in the bus network as they do in any public transport network.

Q26 Chair: The Competition Commission calculates that bus users are suffering from between £110 million and £295 million a year detriment due to inadequate competition. What do you make of that and what kind of competition would improve the situation?

Richard Hebditch: It will be very difficult to have sustained competition. That is one of the challenges. The influence of competition leading to innovation will be an important part of it. I also think it is about the way that the system as a whole is regulated. One of the key things, perhaps picking up Mr Maynard’s point earlier about where policy might go next, is working out what the roles of local transport authorities are. Are they there to pick up the services that would not otherwise be provided? Are they there to regulate or co-ordinate services? The Government need to develop a clear understanding or idea about what they want local transport authorities to do. There are all these parallel measures about decentralisation and devolution, whether it is devolving powers over some rail services or devolving more of the larger local authority major scheme funding. Then there is potentially the devolving of the Bus Service Operators Grant. Bringing those things together to give local transport authorities a clear role in terms of whether they are about regulating services or delivering or co-ordinating services is where the real emphasis needs to be.

Q27 Chair: Are you saying then that you would address this issue of the detriment caused by lack of competition by looking at more partnership working rather than more competition?

Richard Hebditch: I think so. Co-operation is often what delivers for passengers. It is to deliver products like multi-operator ticketing and having zonal tickets where you clearly understand the price before you board. It is very clear from the passenger focus research that it is important to passengers or potential passengers that they know how much they are going to pay. That is going to be even more important if you are moving to a smart card system where it is not necessarily very transparent about the price that you pay and you just swipe your card. The recommendations from the Competition Commission that will have the most impact are those about the role of transport authorities in terms of changes in service frequency, longer notification periods and also multi-operator ticketing.

Q28 Chair: Mr Sidebottom, you are nodding. Does that mean you would agree, because we cannot record a nod?

David Sidebottom: Absolutely. You need stability of the network. I would agree very much with both of my colleagues on that. When there are major changes to be made to the networks, passengers have to be given prior notice and consulted as part of that. That is part of the evidence we gave at a previous hearing. The multi-operator ticketing is a big attraction for passengers, particularly when they are not paying a premium for that. There are many large conurbation areas now where, to buy that multi-operator type ticket, you will pay a premium for that. The ability to get on the next bus comes at a price rather than the one for which you have your weekly pass or your season ticket.

I agree very much with Richard that the access to information about how your route performs is critical in this day and age. In London, you can get access about how frequent and punctual your service is. That data is all in the public domain. It is very difficult to get that anywhere outside London.

Q29 Paul Maynard: In the evidence from Essex county council there was mention of the fact that VOSA had abolished its bus compliance unit. There is no explanation of what the potential impact of that would be. Before I get too obsessed about the issue, could I have your views on what the impact of that has been in terms of local bus competition? Was that a relevant observation to make?

Stephen Morris: Yes, I think that was a relevant observation to make. In order for the system to work properly, whatever the regulatory regime, it needs the regulators to be properly resourced and to have access to the right intelligence that enables them to make decisions concerning bus operators. The abolition of those bus compliance monitors is a serious retrograde step. We would certainly like to see the traffic commissioners better resourced to be able to do the job that they are supposed to be doing.

Q30 Paul Maynard: Do you have any views you wish to add?

David Sidebottom: The initial reaction from Passenger Focus to the announcement on the bus compliance officers was how to protect the right for a passenger to complain about a service through their operator to the traffic commissioner, and how that is then taken up in terms of potential hearings and enforcement action. At the moment, the jury is still out in terms of any evidence as to whether that has gone in the right direction or not. Traffic commissioners are now working much more in an educative role with operators. They are using their new resource to try and educate the operators about how they are gathering information and using their own information on punctuality to better manage their own services. However, I agree with Stephen that the backstop should always be that the regulator should regulate and have the resources to do so.

Q31 Paul Maynard: To what extent do you think bus passengers are aware of traffic commissioners and what their role is? To what extent do you think a traffic commissioner’s role can be enhanced as a guardian of local bus services and almost a consumer champion? Is that confusing their two roles?

David Sidebottom: Potentially it is. With anything to do with bus passengers, the ability to know where and how to complain is a bit foggy. He is not quite sure whether to go to the authority, the bus operator or complain to the traffic commissioner. It is about the levels of awareness. It is not often you can sit on a bus and see clearly where your lines of communication are if you want to escalate a complaint.

Q32 Paul Maynard: Finally, for clarity, is the Local Transport Act fit for purpose? Are we discussing an Act that cannot be implemented because of flaws in it, or are we discussing an Act that for other reasons local government is choosing not to implement?

Stephen Morris: I presume you are referring to the fact that quality contracts have not been invoked under the Act.

Paul Maynard: Yes.

Stephen Morris: That is just one aspect of it. In other respects, the Act seems to be working well. We particularly welcome the fact that it is not a one-size-fits-all type of Act. There are different situations that can pertain to suit local circumstances, and to that extent, I think it has been a very good Act. The quality contract provisions are perhaps a little onerous. If a quality contract were to be invoked, we would like to see it being invoked quickly so that we are not left in a situation of a whole bus network being left in limbo for about four years while everybody discusses how it should be done. Generally I would say that the Local Transport Act 2008 is fit for purpose, yes.

Q33 Julian Sturdy: On the quality contracts point, I want to go back to what was said earlier on. You were questioned about why you do not feel local authorities have been introducing quality contracts, and you talked about the risk of moving to quality contracts. You say that they are quite onerous. As a panel, what do you feel are the real risks for local authorities moving to a quality contract?

Stephen Morris: One of the perceived risks is certainly the question of judicial review by the bus companies. It is probably right and proper that they should have that review. Not all bus companies are poor. Some bus companies have done a very good job of building up services. There are plenty of examples around the country of bus services that have been built up from virtually nothing to really quite good bus services. Understandably, the operator that has taken a commercial risk to do that will want serious recompense if the ability to run or develop that service is taken away from them.

Richard Hebditch: I guess there are risks in the relationship with existing bus operators if you are hoping that there will be new entrants to the market. The Competition Commission shows the difficulties of entering a free market, but there are also difficulties entering a franchised market in having the infrastructure for a new provider to come in and deliver those services. The risks are also in the transition to quality contracts in the services that have been provided in the local area.

Q34 Mr Leech: There are some areas where competition has worked to a lesser or greater extent. In my constituency along the Wilmslow Road corridor, it is the one place where I have heard people say that there are too many buses. Frequency of buses, choice and price have all been dictated by competition. Have any of you done any work in looking at the benefits and also the drawbacks of that competition? The reason why I ask the question is because the impact of all buses migrating on to Wilmslow Road has been that some of the local services have been removed and have effectively disappeared, so everyone has to go to Wilmslow Road. Have you done any work to see whether or not that happens in most places where there is competition?

David Sidebottom: Not that specific point, no. All our work at the moment is geared around measuring passenger satisfaction and drilling down into that. We were talking about existing users of those services-the results we will be publishing next week will feature some of those services along Wilmslow Road in Manchester-but not about some of the wider impacts. Knowing those services, they have been tailored very distinctly to the market, have they not?

Q35 Chair: You cannot give us any preview of what it is going to say.

David Sidebottom: No. I can share the information next week when it is published, by all means.

Richard Hebditch: When we have done research on best practice in bus services we have not looked at competition specifically, but it tends to be the case that, in the areas where there is best practice, sometimes there is competition and sometimes there is not. It is not a clear pattern that the competition has much to do with it. Often it is about working with the local transport authority to improve the overall conditions for the market. Oxford is a good example where there is some competition, but the measures that have enabled that to happen are about growing the overall market. It is about improving the information to passengers. When you come out of a station, it is having the bus services on a screen so that you know which bus to catch. It is having good information at the bus stops and having very clear information about fares. It is about growing the market overall. That is where we think the emphasis should be. It is about how local authorities can work effectively with operators to grow the market to attract people away from cars and to provide better information and better fares.

Q36 Mr Leech: My question is more about the impact on the network of services. If you look at south Manchester, you could probably make a case to say that there are more buses on the streets than there were 10 years ago, but there are fewer routes because some of the routes that used to run no longer run. I was interested to know whether you had done any work about the impact of competition from a negative perspective as well as a positive perspective.

Richard Hebditch: No.

Stephen Morris: No.

David Sidebottom: No.

Richard Hebditch: It might show you how rare competition is.

Stephen Morris: Yes, that is true. Wilmslow Road is a very specific case. I know Wilmslow Road quite well. I am not particularly aware of areas around Wilmslow Road that have been left unserved as a result of the competition there.

Q37 Mr Leech: The 46 and 47 service ended up disappearing as a direct result of other services taking most of the customers.

Stephen Morris: Yes. There is probably quite a lot of the 47 route that still exists in some shape or form. I used to use the 47 route some years ago. I do not know that it was ever a particularly thriving bus service. The other factor on Wilmslow Road, of course, is that there are traffic regulations that prevent the operators from just running the prime part of the route between the university halls of residence and the university. They are expected to run quite some distance beyond those points by traffic regulation orders. In places like Withington, which is part of your constituency, Mr Leech, you end up with more bus services than are justified in any terms-certainly the demand for them.

Q38 Chair: Should local government be put in charge of bus services with franchised services? Does anybody think that is the right way forward?

Richard Hebditch: There are risks and dangers with that, particularly in the current financial climate. The mapping that we have done of local authority cuts to bus services has shown that the protection for bus services is fairly weak when there are so many priorities for local authority budgets. The statutory duties in terms of providing bus services are relatively weak, so funding has gone elsewhere. We would be concerned that a simplistic move to transfer responsibility to local transport or to local authorities would not necessarily deliver the results. There might be some areas of the country that would end up with a worse service and some that would end up with a better service, but we would have concerns about that.

Q39 Chair: What are the views of the other witnesses? Does anybody think that the solution to the issue of the declining number of people using buses is for local authorities to be in charge of the franchising system?

David Sidebottom: It has the potential. That is the difficulty in how you measure the evidence. At the moment it is an economic model rather than being anything we can predict in terms of what passengers think. What are the outputs that passengers want it to deliver? It has the potential, but then again so does competition. We are more geared to what comes out of that and how a passenger gets involved in any franchised mechanism. It works well in rail in measuring passenger satisfaction and outputs of rail franchises. It potentially has a benefit for bus passengers, but it is making sure, as Richard was saying, that the resourcing and infrastructure are right to deliver the things that are right for passengers.

Q40 Chair: Should central Government funding for bus services-BSOG, concessionary fares and others-be devolved to local government? Mr Morris, what is your view on that?

Stephen Morris: BSOG is a rather special case. It obviously began life as Fuel Duty Rebate. BSOG is really a means by which Government can say that it is a good thing to use bus services. It is rewarding people for using buses rather than using less sustainable modes of transport. It is giving that particular indication.

Q41 Chair: Should that be devolved to local government, together with other sources of funding for bus services?

Stephen Morris: We would prefer to see that remaining as a separate, discrete stream of funding for the bus operators. It is not going to get confused with local authority support for services and the concessionary grant. We would like the fiscal message to continue to be given that bus services are a good thing and should be encouraged.

Q42 Chair: Are there any other views on this?

Richard Hebditch: The key thing for us is about whether the funding is ring-fenced for bus services or whether it goes into general local authority budgets.

Q43 Chair: If it was ring-fenced, should all forms of funding for buses be devolved to local government?

Richard Hebditch: You would probably want to explore what the impacts would be. You would not necessarily want to devolve all of it straight away. You might look at parcelling it up in terms of the percentage of what is currently the Bus Service Operators Grant. There is a case to be made about looking at the funding that goes to local authorities and looking at whether local authorities feel they truly have a choice about the transport measures they seek to put in place. From our point of view as an environmental transport organisation, we think that much of the funding framework, both in the way that transport projects are appraised and also in what funding is available, biases local authorities towards capital schemes or road building as a solution to transport problems. If you gave local authorities real powers and capability to deliver on public transport as well, that would enable them to make a real choice about the transport projects and priorities that would make a difference to people in their area. Public transport would perhaps become part of that rather than it being something over which they feel they have no control.

Q44 Chair: What should the Government be doing to improve usage of bus services outside London? Mr Sidebottom, do you have any views on that?

David Sidebottom: It may seem like a shameless plug, but in finding out what passengers think and what they want, there should be better consultation and better measurement.

Q45 Chair: Passenger Focus has been doing work for some time now on identifying that. I am looking at what should be done. What should the Government be doing now to improve usage of bus services outside London?

David Sidebottom: Some of the conversation around BSOG, for example, if that is parcelled up, as Richard was saying there, and devolved to authorities to spend, would alter the behaviour. It is funding the right thing. If you want a better bus product, it is the things that passengers recognise, which is better punctuality, improving frequency, better value for money and smart ticketing.

Q46 Chair: You think those are the most important things.

David Sidebottom: Yes.

Q47 Chair: Does anybody else want a quick final word on what the Government should be doing now to improve bus usage outside London?

Stephen Morris: I would agree with what David Sidebottom says on the importance of ensuring that bus services are made reliable. There needs to be a greater emphasis on the role of bus services and public transport services in general in the local transport plan process. That is a process that favours the use of public transport and encourages local authorities to provide the means for public transport to be more successful.

Q48 Chair: Mr Hebditch, do you have any final comments on what should be done?

Richard Hebditch: "Don’t cut BSOG" would be a very simple, straight answer. The other side of it is about incentivising better co-operation around information and ticketing, as the Competition Commission recommends, but also in looking at the better bus areas funding that has been announced and whether that can move towards more long-term funding to incentivise partnerships and co-operation to deliver what passengers want. The two areas that could really make a difference are not cutting BSOG and providing funding to improve co-operation around what passenger priorities are.

Chair: Thank you very much to all of you.

Examination of Witnesses

Witnesses: John Pope, Head of Passenger Transport, Essex County Council, Councillor Shona Johnstone, Local Government Association, and David Brown, Director General, South Yorkshire Passenger Transport Executive Group, gave evidence.

Q49 Chair: Good morning and welcome to the Transport Select Committee. Could we please have your name and the organisation you represent for our records?

David Brown: I am David Brown. I am the Director General of South Yorkshire Passenger Transport Executive. I am here representing pteg-the passenger transport executives group.

Shona Johnstone: I am Shona Johnstone. I am a county councillor from Cambridgeshire and I am representing the Local Government Association.

John Pope: I am John Pope, Head of Passenger Transport at Essex County Council.

Q50 Chair: Did the Competition Commission get it wrong? Mr Brown, your written evidence is very critical of the Competition Commission. Where was it wrong?

David Brown: We believe it is fundamentally flawed because it just did not look at the things that were important to customers and passengers. It did not look at punctuality, reliability, affordability or integration. It concentrated on looking at a very theoretical model about competition between bus services. The second fundamental flaw is that it just did not look at the competition between bus and car. It looked at a very theoretical model, and then it just looked in a very narrow way at that element and ignored the wider aspect of the role of buses and also the different aspects that are important to passengers.

Q51 Chair: Why do you think it did that? Was it its terms of reference or something else?

David Brown: It is partly its terms of reference, but at the beginning of the process they clearly were looking at the wider perspective and so were looking at things that were important to passengers. However, as the process continued through, the remit seemed to get narrower and narrower and it seemed to focus very much on this theoretical argument about bus versus bus competition as though that would produce a better bus services, when all the evidence says that bus on bus on-street wars do not improve things in the long term for passengers.

Q52 Chair: Ms Johnstone, did the Competition Commission look at the things that matter most to passengers?

Shona Johnstone: No, I do not think they did. I would share the views of David Brown and pteg that due to its limited remit it essentially answered the wrong question. The question is how we are going to get better services for passengers using public transport and what the issues are that matter most to them. I would say the issues that matter most are reliability, frequency and good-quality information.

Q53 Chair: Mr Pope, you were not as condemnatory of the Competition Commission’s inquiries as our other witnesses but you were critical. Why do you think it was wrong?

John Pope: I looked at what I believe customers want. I listed in my submission eight things that they wanted. The chief things are reliability, stability, quality and good information. My experience in the industry since deregulation has been that increased competition does not necessarily deliver any of those improvements whatsoever. However, they were looking at it from a competition point of view, not from a passenger requirement point of view. Therefore, one can understand the point that they took in one or two areas because they were looking at it purely as a competition element rather than as a passenger transport provision.

Q54 Mr Leech: Before I move on to something else that I was going to ask, Mr Pope, you said that competition has not delivered any of those things. If competition worked in the way that it can do in some areas where competition has been effective-I mentioned earlier the Wilmslow Road corridor in Manchester-could it deliver the benefits to passengers if it was replicated across the country?

John Pope: Competition in some areas has delivered better services for passengers-of that there is no doubt. There have been places where it has grown the market, you have had quality competition and passengers have a much better offering. However, there are a lot of places, particularly towns of not large populations, where the bus business is not big enough to withstand competition. There are a couple of towns in Essex, for example, where competition has, in my view, not brought the best service for the travelling public. In one case, it has brought a degree of instability that is still going on now, and that is not what customers want, and in another area it has brought a lot of buses chasing too small a market, which means there is not the return for the quality standards to go up. You have highlighted Wilmslow Road, and this is the classic, where people have competed where the market is strong. As you have said yourself, it has left certain areas unserved as a consequence.

Q55 Mr Leech: Does your analysis show that in Essex there are certain services that have disappeared, while in areas where there is an element of competition all buses have gone on to those routes?

John Pope: If you take certain different towns in Essex, with a population typically of about 100,000 people, there is one operator whose network is largely unchallenged and where there is a degree of stability and network transfer that you can make quite easily. If you compare that with towns where there are a number of operators competing, it does create instability and in some cases a lack of adequate return for the operators to invest in the fleet. It also has an effect for the local authority. If the daytime services are more competitive and therefore the returns are less for the operators, they are less likely to provide services either in areas of lower demand or at times of lower demand because their major earning on certain corridors is being diluted.

Q56 Chair: Ms Johnstone, what is your experience from the LGA?

Shona Johnstone: I was simply going to reiterate what my colleague had said. You yourself have pointed out the unintended consequences of competition. While it is great for Wilmslow Road and extra buses there, it has been to the detriment of those on either side. That is why we would propose a system of franchising, where we can look at a whole area rather than just one specific route.

Q57 Mr Leech: Have partnerships been successful?

Shona Johnstone: Yes, they have been in a number of areas. The previous witnesses talked about political will. That can be an issue in some cases-political will both by the local authorities and also by the operators to want to make it work. Where there is that shared agenda of wanting to improve bus services it can be very effective.

Q58 Mr Leech: Are there some areas where partnerships have not worked because that relationship has not been good enough between the operators and the transport authority or the politicians? Are quality contracts the answer to that?

Shona Johnstone: I would not say that quality contracts are the answer. No authority has yet set up a quality contract.

Q59 Mr Leech: Could they be the answer, though, if they were easier to introduce?

Shona Johnstone: As they currently stand, the fact that no authority has done it speaks volumes. If they were simplified, made easier and there was less risk, less cost and less complexity, then I think they might be the answer.

Q60 Mr Leech: Does pteg have a view on that?

David Brown: We have a strong view that a lot of time and effort went into the Local Transport Act 2008 and that gave a toolkit ranging from voluntary partnership agreements through to quality contracts or franchising. In PTE areas, we are using almost all of those. There are examples of statutory quality partnerships and qualifying agreements in places like Birmingham, Sheffield and Liverpool, which are then seeing stability and growth. We think there is a role for partnerships continuing in whatever vein they come together, but we believe there is a role for quality contracts or franchising in the overall mix. Three PTEs are looking at that and doing a business case in the north-east, in west and south Yorkshire to see if that is the most appropriate answer for the issues that they face in their areas.

Clearly, the legislation has a test that has to be passed, which is quite a high test. That brings risks and costs associated to anybody that is promoting a quality contract. It may be that the quality contract is the most appropriate way and the Government can do something to encourage people to press on with a quality contract and mitigate some of those risks. We have put in our evidence that there are a number of operators that have said they would very vociferously defend and oppose a quality contract, including things like scorched earth, such as selling off depots and companies just to stop a quality contract having any possible future relevance in a certain area. Understanding those risks and putting in place a process for securing quality contracts will be one of the issues. There is clearly a role for all of those tools that the Local Transport Act provided.

Q61 Paul Maynard: Drawing on Mr Pope’s evidence regarding the Essex towns where there has been too much competition, would the panel agree that it is not so much competition that should be the goal but rather that the market should be determining the level of competition that should exist to give passengers a service that they want? In pursuing competition, are we ignoring the market, perversely?

David Brown: Urban areas are slightly different because even the Competition Commission said that about three quarters of urban bus services were either a monopoly or a duopoly. There is very little competition in the major urban areas, and where it does exist it tends to be quite short term in nature. It is quite negative because people cannot make long-term plans because services and fare levels are changing. What happens is that because there is no competition people are pursuing profit levels on key routes. Therefore, the market per se is driving people just to concentrate on core routes, like the Wilmslow Road, and other areas on the fringe of urban areas tend to get a reduced level of service. The Competition Commission did not look at this wider role of bus services, not just in making profit and responding to a market but also a social need.

Q62 Paul Maynard: You have pre-empted my second question. A lot of the debate on buses seems to focus on urban areas and the role of ITAs in particular, possibly to the detriment of rural areas. I know that examples such as Norfolk and Cornwall have shown how ridership can be increased with greater diversity for passengers, fitting what they actually want. Do either you or Ms Johnstone, and possibly even pteg, have any observations on how you can learn from the rural county councils as to how other models can be brought in that might deliver what you are trying to achieve?

David Brown: There are two observations. One is that PTEs are using all the tools in the Local Transport Act. There are voluntary agreements in the west midlands that are looking at networks, and that is driving up patronage. We have some statutory quality partnership schemes, which are driving up networks. We are using those tools in those circumstances.

The second thing for me is that in south Yorkshire, although we have an ITA, 40% of it is designated as rural. We look at the network in totality, so we do not look at a network for the Sheffields and the Doncasters. We look at the total bus network for that area, including the rural components. We look at that as local authorities in the round. The operators tend to look at that on the basis of route-by-route, profit-making or non-profit-making. That is where there is a slight disjoin between the aspirations and objectives of operators and local authorities.

Shona Johnstone: From the local government perspective, while we do not support on-street competition because we do not think it is in the best interests of passengers and users, we would like to see competition for routes, inviting operators to come in and want to run a particular route, either on just one corridor or over an area. If you did that, then you might be able to address some of the rural issues. You are right to highlight Norfolk as an example. Norfolk Green is a small operator, which has started to grow and is just growing very slowly and steadily by looking at what customers want, what they need and providing a service rather than simply running buses.

Q63 Chair: In the LGA’s written evidence you are strongly in favour of quality contracts. Do you see that as the way forward?

Shona Johnstone: No, we do not see quality contracts as the way forward because of the point that I have made. No authority has yet had a quality contract. It needs to be simplified. At the moment it is just too complex, too costly and the risks for local authorities are too high. If you got rid of those barriers, then some sort of quality contract might work.

We see a role for the local authorities as commissioners of bus services. This is moving on really. There is something like £3 billion a year that goes into the bus industry in public subsidy in one form or another. If all of that was devolved to local authorities and they then commissioned the services in the way that we use joint strategic needs assessments to commission health services in an area, if you used that sort of model, you might get better value for your money.

Q64 Chair: You would like all funding in relation to local transport to be devolved to local government.

Shona Johnstone: Yes.

Q65 Chair: Would that include the Bus Service Operators Grant?

Shona Johnstone: Yes.

Q66 Chair: Is everyone on the panel in agreement with that? Nobody disagrees.

John Pope: I have concerns about the Bus Service Operators Grant. At the end of the day this is a tax policy. If you run a bus, you pay a certain amount of tax on fuel. If you run a train or aircraft, you pay a different tax. This is not a public transport issue; this is a tax issue. We are about to see a reduction in the allowance that is given to bus operators again from the beginning of April. I believe this will have two effects. First of all, the fares will increase as a consequence. I also believe that some of the network that is now commercially sustainable may not be beyond that, which means that the local authorities will therefore have to buy in more services. At the same time, the services we do buy in are likely to cost us more when they go out to tender because fuel prices have gone up. People tinker with this at their peril. It is going to have quite a significant impact.

With so many things in the bus industry, it will manifest itself in different ways in different towns throughout the country. There will not be one major response that we will see. We will see a number of incremental changes, some of which will happen over the forthcoming years. Therefore, I think it is a high-risk strategy to start tinkering about with Bus Service Operators Grant, and it does seem to be driven not in any public terms but in pure tax terms.

Q67 Chair: Can the decline in the usage of bus services outside London be reversed?

Shona Johnstone: Yes. I would point to Cambridgeshire where we have been growing our bus services over the past 10 years. We have not seen a decline. We have had more use. Park-and-ride, for example, went up from 1 million to 5 million passengers a year. The Guided Busway, which opened last August, in its first year is already nearly 50% above what was forecast. We can certainly demonstrate in Cambridgeshire that where we have a good relationship with operators-not a quality contract but a good partnership-you can see benefits for bus users and for the operators because we have a shared agenda. Yes, it is not rocket science; it can be done.

Q68 Chair: How much money would it cost nationally?

Shona Johnstone: We have never had much money in Cambridgeshire and we have managed to do it. In terms of park-and-ride and the Guided Busway, they are commercially run services and successful services.

Q69 Julian Sturdy: We have talked a lot about competition not working in small towns and quality contracts not going to work in their current form. Councillor Johnstone, you mentioned competition on routes in rural areas as something you support. Do you think local authorities can do more to stimulate that sort of competition on those more rural routes?

Shona Johnstone: Yes, I think we can. It comes back to this notion that, if funding was devolved to local authorities, then we would be able to link together a lot of the other transport services that are provided locally. For example, there is home school transport, special school transport, hospital transport, the Dial-a-Ride service, and there are community car schemes. If you bring those all together as a local authority for a particular area, then you have the makings of being able to go out and commission the services that you want and link those services together.

Q70 Julian Sturdy: Do you think that community transport projects should be competing for those rural routes as well?

Shona Johnstone: Given that the 52-seater double-decker bus is never going to be full in some of the very rural areas, you need to look at how we can work with bus operators and local schemes to deliver the flexible services that people want.

Q71 Julian Sturdy: Does anyone else have any views on that?

David Brown: I agree with the point about bringing all the funding together. In ITA areas we are transport bodies, so it does not need ring-fencing because we are transport authorities. You then need a more formal structure, be it a quality contract or a formal partnership, to say, "This is the amount of money we have and here are the services that we want to buy", and then having the certainty that those services are going to be provided in the medium term. Taking that money and deploying it in a way where there is a chance of people walking away is quite risky. I agree with the point about pooling the resources, but I think you need a very structured way in which you buy those services through a quality contract, a franchise or a partnership.

John Pope: You mentioned competition in rural areas. One thing about the Transport Act 1985 is that it did not say, "You must compete". If any operator chooses not to compete as part of their business strategy, that is quite okay. Therefore, for us to stimulate competition is quite difficult and I am not sure what benefits we would gain. We require a large number of operators to bid for work when we put that out to tender because we need a large competitive market.

We are very fortunate in Essex that we will always get a good response to any tender invitation we put out, but there are parts of the country where there is a dominant operator. Some of my colleagues will only get one response to a tender and that is a real issue for them. We try and encourage operators to work for us and to be seen to be a good person to do business with. We are fortunate in Essex. There are about 33 operators, and we typically can get five or six responses to any tender. That is not the case everywhere in the country.

Q72 Julian Sturdy: Going back, is it not the case that this is a problem with the rural areas? Obviously you are not getting a huge amount of competition for the less attractive rural routes. That is where we should be looking at community transport projects playing a larger role in delivering those services.

John Pope: It is not that they are less attractive.

Q73 Chair: Ms Johnstone, is that the case in rural areas?

Shona Johnstone: Yes. There is one route in Cambridgeshire, for example, where the subsidy per passenger is £12 for every journey. It would be cheaper to put them in a taxi, quite frankly. We have to think of a better way of delivering those services.

David Brown: In urban areas as well, although there are big operators there, as the Competition Commission said, there is very little competition because it is very difficult for new entrants to come in and compete. If an operator is operating 90% of the bus services in an area, it is very difficult for someone to come in and compete. Therefore, even though people could compete, there is just no stimulus in the market to do so. Despite local authorities encouraging people to bid for tenders, if there are one or two dominant operators, it is a restriction on allowing people to come into the market.

Q74 Chair: Mr Brown, is there anything further local authorities could do to encourage more tenders to come through?

David Brown: We all try very hard, so we are all very open on the tenders. It depends on the structure of your industry. For us, if you have a dominant operator it is very difficult to stimulate more people to enter the market because of the structure. You need depots and vehicles. If you have a large operator dominating one place, it is very difficult, despite how we write the tenders, to encourage people to come in. Our tenders tend to be for the weekends and the evenings. Dominant operators are providing the seven in the morning to the seven at night service. It is very difficult to see how a small operator can then come in and just provide a few services in the evening on a profitable basis.

Q75 Jim Dobbin: Quality contracts do not appear to be the flavour of the month at the moment. Obviously, some bus companies would not want to know anyway. Is there any other model of regulation that you can think of that would bring satisfaction to the general public?

David Brown: There is sometimes a bit of confusion about the term "quality contracts". Everyone agrees they would like the outputs that a quality contract can give you. The difference is in the way the legislation is written for a quality contract. It is quite difficult to do. Therefore, people want the outputs. Everyone recognises that having a set of money, providing that, having a specification and then buying in those services is the right way forward. Because of the way the legislation is written, the tests and the risks associated particularly for the first people who go for a quality contract are too onerous. People all want the same outputs-reliable and affordable services-but it is just how you get from the current deregulated market to the new market.

If you look at London, which never became deregulated, they have an excellent service and ridership and so on. If you could move to that model outside London, we would all appreciate the outputs that you would get. It is just that the transitional risks from where we are into a new system are quite onerous. That is not stopping some places still looking at quality contracts, either for an area or for a route.

Q76 Jim Dobbin: Is the antidote to that more public investment?

David Brown: There are two things really. I do not think we would push for any new legislation at this stage. We would push Government to look at sharing some of the financial and legal risks associated to those first movers into a quality contract. Putting some money into areas where they can see the potential and want to encourage a local authority to go for a quality contract could be a way to push that over the line and see whether a quality contract works in practice.

Q77 Jim Dobbin: Has anybody had a look at the systems in Europe?

David Brown: We were quite disappointed with the Competition Commission. It has looked at the bus market in England, which is deregulated. The vast majority in Europe and in London are regulated, as is our rail system and so on. It is a bit odd that we have a report concentrating on quite a small part of the total market, when a regulated, franchised or quality contract system seems to work successfully in mainland Europe, London and elsewhere.

Q78 Chair: Are you saying, though, that the London model is the way to go for everywhere?

David Brown: Not everywhere. You have to make sure that the risks and the costs are proportionate. We would not say the London model works for everywhere, but I think it does work in certain circumstances.

Q79 Chair: What are those circumstances?

David Brown: Where you have a monopoly situation by operators, where you do not have the innovation and you have a bus service which just does not meet people’s expectations. That is the end point: where it is not reliable, punctual or affordable and the quality is not good. In a large area I can see how you would move to a quality contract. It is then about how you specify what you want. You pay for whatever you want to buy. The London model has had a significant amount of subsidy over the years. That does not mean to say that you cannot have a franchised or quality contract system in an urban area at a lower cost base. Our view is that, for all of the money that we were talking about that goes into the system, you could get a better service out by doing it under a controlled franchised or quality contract approach.

Q80 Chair: Mr Pope, in your written evidence, you are a little more reluctant to advocate a franchising system more generally. Can you tell us why?

John Pope: The problem is that people assume franchising equals London, which is the totally planned market. I do not think franchising needs to work in that way. Just to give you an example, there is an area of Essex where, with the exception of one commercial service, the rest is supported by the county council. When we went out to tender five years ago, rather than the traditional way of a local authority planning the network and saying, "Give us a price", I actually went out to the operators and said, "If I spend £200,000 minimum but no more than £400,000, what network would you deliver for me?" We turned it on its head and said, "We are not prescribing what we want. We want you to do your work as a bus operator and to use your professional expertise to tell us what you could provide for various prices."

Because we could look at a complete area where we had full control over what we could do, we got a very good deal and a service that matched very closely what the public wanted. It does not have to be totally planned. "These are the fares you charge; this is the service you run; this is the timetable; this is the standard you have to meet." I think it can be a far looser association to bring the best out of the market rather than being so prescriptive. I am concerned that, when people think of franchising, they think of something very bespoke. They think perhaps of the London model or the rail franchise, where the timetable decrees, "You will run this." We need a different approach.

We can do that where we have control of an area because we are buying in all the service. That is very difficult where you have commercial services. It is very interesting that I spoke to the operator who ran one commercial service through that area and said, "Would you, for the length of the time, commit to running that network as it is so that we can then build a network around it?", but during the course of that five years he changed the route.

Q81 Paul Maynard: I revert to Mr Pope and his evidence on VOSA and the bus compliance unit. Do you have any practical examples of the damaging impact of that decision on your local services?

John Pope: Not yet, because the withdrawal of bus compliance officers is a fairly recent innovation. Having said that, when we did have them, they were fairly thin on the ground around the country. One of the clear things about deregulation was that the traffic commissioner was given an enforcement role. In my view that has not been fulfilled adequately and, therefore, that is why some of the worst excesses of competition have been allowed to continue. I have at least two operators in Essex that seem to have scant regard for the control of the traffic commissioner. That does cause problems.

Q82 Paul Maynard: How can the role of the traffic commissioners be improved? I seem to keep hearing about them in these evidence sessions. They are rather like the old tooth fairy. They seem to bring good things the whole time, but no one is quite sure they exist or what they do.

John Pope: They have the regulatory role for the industry, which we would fully support. I do not think they have adequate resources in order to fulfil that role. It is as simple as that. As a consequence of that, that role is not fulfilled to our satisfaction. If we write to the traffic commissioner with an issue that we wish him to follow up, we have a polite acknowledgment. You have to bear in mind that he is an independent person who does not have to report to us on his actions, or anyone else for that matter. That is right and proper, but there is a lack of enforcement. I would not necessarily put that blame at his door. It is the resources that he has available.

I have recently met VOSA, concerned at the reduction in monitoring that will go on. We will need to do some monitoring ourselves. I just need the reassurance that the traffic commissioner will accept that evidence in traffic court, and that is a discussion that I am having with them at the moment. It is not something that I want to do, but the public, certainly in Essex, somehow have this belief that we license operators to run services anyway. They believe it is franchised. When they say, "Why don’t you take the service away from this operator?", we say, "We can’t; they are outside our jurisdiction." My local members get very frustrated that the public go to them with complaints about bus services and it is something over which we have no jurisdiction whatsoever.

Q83 Chair: What should be done now to improve the service? Councillor Johnstone, what should happen now, either in relation to the Competition Commission’s report or in any other matter that has been raised today? What should be done now to improve the service?

Shona Johnstone: The main thing the LGA would like to see is the devolution of all bus funding to local authorities to enable us to commission services across our patches and to be able to put in quality assurance standards to ensure that what is provided is what people want. I am not sure that we are always very good at addressing what people want in terms of the journeys that they want to make at a particular time. We probably need to be better in our analysis and how we commission those services. That would be our top aim. We would not go down the route of the Competition Commission in trying to increase on-road competition but competition around routes, accepting that the operators will, by and large, stick to their own areas. In my area, one operator has 80%-plus of the services. No matter how much we try to encourage other operators in, it just does not happen. I cannot see that situation changing. It is about how we work with a major operator to ensure we get better standards, reliability and information and, therefore, more people using buses.

Q84 Chair: Mr Brown, what should be done now?

David Brown: The Department for Transport should respond very positively to some of the aspects in the Competition Commission report and should put in place legislation particularly in regard to multi-operator ticketing, which is in the report, and the information provision from bus operators about deregistered services. They should get on and do that in the short term. The second thing is that they should re-emphasise that the tools in the Local Transport Act are still appropriate. The third thing is that they should encourage, possibly with additional funding and powers, those areas they wished to proceed with a quality contract or a franchise to take away some of those risks inherent in the process.

Q85 Chair: Mr Pope, what should be done now?

John Pope: I do not see any fundamental change to the legislation, but we are very nervous about moving in the direction of quality contract for all the reasons people have said. There is certainly one area of Essex that might benefit from a quality contract. If we go back to what passengers want-and I listed eight things that they want in my submission-how do we line that up? One thing particularly that the Competition Commission picked up on was the registration period and the time. Giving the local authorities 14 days’ extra notice is quite useless. What can we do with that until it is in the public domain and until the operator has registered it?

One thing we always have a problem with is what we do when an operator deregisters a service. We need to make a decision. We need some information about the number of people travelling. The first thing we can do is to ask the incumbent operator how many people are travelling. With the best will in the world, it is not his greatest priority. Out of his goodwill he will send us the information. We may well have to wait a couple of weeks for that, and we are already into a 56-day period when we have to make a decision as to whether we want to replace the service in any way, shape or form.

The other thing is the short period of notice that the traffic commissioner can apply to allow services to start in less than 56 days. We have had some problems with that whereby the operator has withdrawn a service commercially and another operator has come in and said, "I will put a replacement service on", but it has changed it somewhat so that the route has been extended, it does not do this and it does not do that. It has generally met the needs, but because that was not like-for-like it would not get the 56 days.

Q86 Chair: So these are the things.

John Pope: There are lots of things we could tinker about with that would make life a lot easier for us. The Competition Commission has picked up some of those issues, and we should grasp those issues and look at how we can implement them.

Chair: Thank you very much to all of you for coming here and answering our questions.

Examination of Witnesses

Witnesses: Dr Roger Sexton, Neil Anderson, Associate Director, Capital Traffic Management Ltd, and Steve Warburton, Operations Director, TAS Partnership, gave evidence.

Q87 Chair: Good morning, gentlemen. Welcome to the Transport Select Committee. Could you please give us your name and the organisation you represent for our records?

Steve Warburton: I am Steve Warburton. I am Operations Director from the TAS Partnership.

Dr Sexton: I am Roger Sexton, a retired university law lecturer from Nottingham Trent university. Over the last 20 years I have been very interested in the issue of regulation of bus services.

Neil Anderson: I am Neil Anderson. I am Head of Transportation Planning at Capital Traffic Management Ltd.

Q88 Chair: We have heard a great deal of criticism about the Competition Commission’s report. Do you think it has been unfairly criticised, or what do you think are its strong points?

Steve Warburton: I would say in some respects yes and in some respects no. In some respects, the Competition Commission purely reported on the remit it was given. It looks at competition, and that is what it looked at.

Q89 Chair: Was that the direct remit?

Steve Warburton: Maybe not. There are, however, somewhere in the Competition Commission’s report some very positive shifts in their attitudes from where they previously stood in the way that they are recommending multi-operated ticketing. Previously, the feeling was that both they and the OFT were very much against multi-operator tickets as being an element of co-ordination around competition.

Q90 Chair: Dr Sexton, how do you view the Competition Commission’s report?

Dr Sexton: Largely it is a waste of time, except for the point that Mr Warburton has just made. At least they have seen that one thing passengers want is integrated ticketing, which does not cost an enormous amount. I would particularly underline the point that the integrated ticketing should, where appropriate, include other modes of transport, particularly trams. That is relevant to Mr Maynard’s constituency and where I come from, which is Nottingham, and, where appropriate, local trains and ferries-for example, the Portsmouth to Gosport ferry.

Q91 Chair: Mr Anderson, what do you feel is wrong with the report?

Neil Anderson: It appears that the Transport Act 1985 endorsed a Faustian pact between the bus industry and the Competition Commission in the way that they operate. It does not seem to me that that was appropriate at the time, nor is it now. There is a tendency towards a natural monopoly in the provision of public transportation services anyway. The appropriate way to regulate that is not by competition but by some sort of franchising or contract system.

Q92 Chair: The Competition Commission calculates that bus users are suffering from between £110 million and £295 million a year of detriment because of inadequate competition. Mr Anderson, you are suggesting that the answer to that is not more competition but a different system. Am I correct in that?

Neil Anderson: The loss of that money from the bus industry would be very significant at a time when many smaller operators are under threat anyway with the BSOG changes, the reduction in reimbursement for certain free fares and the like. That would be a loss that the industry cannot afford.

Secondly, this is insignificant when divided by the number of passengers per year. It comes out to about 6p to 13p per journey, which is irrelevant as far as the mean cost of a trip by bus is concerned. The mean fare is probably of the order of £1, £1.50, £2 or something of that order.

Q93 Chair: Dr Sexton, what is your approach to dealing with the current problems we have? Are you looking to more competition or at the more regulated system?

Dr Sexton: I am very much looking towards more regulation. I have been consistent in that view in the submissions I have made in writing to this Committee in the past, particularly if you look at the submissions I made in 2006 and 2007. Certainly in 2007 this Committee very much endorsed some of my views.

I would go the whole hog and introduce a franchising system for the whole United Kingdom, or at least England outside London, very much on the basis that it works not just in London. I would stress that it is the norm in pretty well all of our European neighbours both within and outside the EU. You do not have on-the-road competition. That is something very peculiar to Britain outside London as far as western Europe goes. Instead, you have carefully integrated systems of public transport, which will also embrace trams, local trains and, where appropriate, ferries. They are integrated by some kind of public transport authority. It varies from country to country.

In Sweden, it is done by an organisation for each region called a Länstrafiken. In Germany, Austria and also in the South Tyrol, in all urban areas and some rural areas, there is an organisation called a Verkehrsverbund. That basically controls all local public transport except intercity trains and buses. In Switzerland, which is often regarded as a public transport paradise, long-distance transport is still controlled by the Federal Railways. Local public transport-and that will include the boats on the lakes and even some of the cable cars-is controlled by the cantons or groups of cantons.

Q94 Mr Leech: I have some sympathy with what you said about franchising, but why do you think that quality partnerships and quality contracts cannot offer a decent deal for the bus user?

Dr Sexton: Quality partnerships and quality contracts are two different things. We have some quality partnerships, including one in the city where I have lived for 42 years. Nottingham is one of the more fortunate British places in that we have good bus services. There is, though, a problem of lack of integration of ticketing.

The snag with the partnership approach, if we deal with that first, is that it does not solve the problem of having too many buses in certain situations. You were talking about Wilmslow Road in Manchester. The equivalent in Nottingham is Derby Road. Also, right in the city centre in Nottingham we have Parliament Street, which is the main east-west street in Nottingham. For much of the day and probably now, at about half past 11, the chances are that it is clogged up with buses. There is no doubt that a quality partnership approach, which Nottingham city has very much promoted, encourages bus operators, but you do get situations where you literally have too many buses on the road. That particularly happens in Nottingham city centre on Parliament Street. I know they have had problems in Manchester in the past. Birmingham will be holding its breath on 23 June because on that day Corporation Street, one of the main bus thoroughfares in Birmingham, closes for tram works. Where are all the buses going to go?

One of the drawbacks of a quality partnership is too many buses. It also does not solve one of the big problems of deregulation, which is that not only do people focus on main roads-you are right there, Mr Leech-but they also focus on 7.00 to 7.00 Mondays to Saturdays. You get very poor or even non-existent evening and Sunday services.

Q95 Mr Leech: Why could that not be dealt with through quality contracts?

Dr Sexton: Quite possibly, yes. What I am really advocating is quality contracts for the whole country. At the moment, there is no quality contract anywhere in this country. As people have been saying, the Local Transport Act 2008 creates very high hurdles to creating a quality contract. I believe that at the moment West Yorkshire ITA, which is Conservative-controlled, is seriously considering a quality contract and has even given some deadlines to the local bus operators to respond, which I believe run out on 23 March or something like that. It is being considered in the West Yorkshire area, but, as I have said, we have no experience yet of quality contracts. If they introduce it just in one place, there is certainly the danger of what was called earlier a "scorched earth" approach and the operators in "Xshire" will simply all up sticks and go.

Q96 Chair: What is the most important thing that should be done now to improve bus services and expand the usage?

Dr Sexton: We need radical new legislation to allow us to come into line with our European neighbours. We need to reject deregulation.

Q97 Chair: You want to move to a different system completely.

Dr Sexton: Yes. I have been consistent in that in my submissions to this Committee.

Q98 Chair: Mr Anderson, what do you think should be done now?

Neil Anderson: I would point out, Madam Chair, that to a large extent the current bus users are the old, the young and the poor. These people have no voice. They need a voice in a way that they have not under the present situation. I would argue very firmly for an Office of Bus Regulation-OFBUS-to institute a situation of country-wide franchising, which would emphasise issues of quality, stability and reliability of services, and especially the quality aspects. The evidence is before us over the last 20 years that competition has not achieved a growing market.

The opportunity for the bus industry is immense under a stable, legislative regime. That is what we ought to offer them. We ought to make incentives within the money that goes from the public purse into bus operators to increase their ridership. They can make a significant contribution to decarbonising the transportation sector, especially if they change their mainline routes into light rail, which very few have shown any interest whatsoever in doing. We can make the whole transportation sector more sustainable and reduce household transportation costs, but we need to do that in a framework that enables stability for the operating companies. They need to be profitable and they need to be sure of their market. The bus passengers themselves need a voice. I believe that in an OFBUS they would have that voice.

Q99 Chair: When you say that OFBUS should set up a system, do you mean that they should run it or that local authorities should decide what should happen in their own areas?

Neil Anderson: I am not quite sure what you mean by "local authorities". What I see as local authorities in the UK are units that are simply too small to operate adequately. I disagree with the lady from Cambridgeshire in this respect. I think we need larger units for sensible local government. I very much favour a regional approach to these things. At that level I think you can have the level of expertise that would be required to administer bus franchising in those areas. I am not sure that the local authorities have sufficient skills on board.

Q100 Chair: You are talking about appropriate groupings of local authorities.

Neil Anderson: Appropriate groupings, yes, by all means.

Q101 Chair: Should the funding for public transport be delegated to them-funding including the Bus Service Operators Grant and money for concessionary fares?

Neil Anderson: If there is a level of competence at the level of the regional operations, yes, by all means it should be devolved.

Q102 Chair: Mr Warburton, do you have any proposals on what should be done now?

Steve Warburton: I have a preference for leaving BSOG almost as it is. It has a perversity at the moment in that it rewards high fuel consumption. The measure that the Scottish Government have just taken to make it a flat rate per mile operated-or you could equally do per hour operated-seems a sensible one to me. There is then no variation between local areas and it is an across-the-board piece of funding.

I agree that the structure of local government in the UK generally is a mess. You would agree that the PTEs may have the capabilities and the strengths to handle quality contracts and franchising, but you could not see some of the smaller unitary authorities doing it. I have a worry about how you handle boundaries if some areas are in a quality contract and the next area is not. That is why some of the shires on the borders of the PTEs that are looking at them are very restive about the idea. Local government boundaries are equally as perverse as their structure.

One thing the Competition Commission did seem to acknowledge is travel-to-work patterns rather than local authority boundaries. One of the issues with some of the multi-operator tickets we have now is that they stick to local authority boundaries with some variations, but usually they do, whereas the Competition Commission acknowledged that multi-operator tickets should follow patterns of travel regardless of local authority area.

Q103 Chair: Could you tell us any more about the problems shire authorities have?

Steve Warburton: We did some work on the Commission’s input for Centro in the west Midlands. In relation to its multi-operated ticket as against the National Express own brand one, they have had very great difficulty in getting the adjoining authorities to join in so that the ticket could cover the same area. The co-operation is generally there from the operators but not from the adjoining authorities. There are issues with the operators as well, and I am looking at smaller area tickets rather than the whole of the west Midlands, but that was their main problem with the area-wide one.

Chair: Thank you very much for coming and answering our questions.

Prepared 2nd March 2012