Bus Services Bill [HL]

Written evidence submitted by Nexus (BSB 21)

Bus Services Bill

Introduction

1. This submission has been prepared by Nexus, the Tyne and Wear Passenger Transport Executive. Nexus has considerable knowledge and experience of the matters contained in the Bill, notably our previous work to examine whether a Quality Contracts Scheme or a Voluntary Partnership Agreement would best meet the needs of bus passengers in Tyne and Wear.

2. Nexus welcomes the Bus Services Bill, which marks an improvement on existing legislation. Improved options for bus partnerships, the introduction of Bus Franchising and the open availability of information about buses can all contribute to improving services for the benefit of passengers. We believe that each or any of the measures in the Bill has the potential to be implemented in Tyne and Wear.

3. In particular, Nexus welcomes the introduction of Bus Franchising. The Bill provides a streamlined method for Local Transport Authorities to consider Bus Franchising. It places responsibility on the Local Transport Authority alone to satisfy itself - using recognised appraisal methodologies - that its scheme is affordable, deliverable and meets policy objectives. Crucially, the legislation generally places an emphasis on delivering better bus services to passengers, rather than protecting the interests of larger incumbent bus operators.

4. Nexus’ experience in attempting to introduce a Quality Contracts Scheme for Tyne and Wear is relevant to this point. Our scheme was hampered by a number of problems with the QCS legislation:

· The ten year time limit on the Quality Contracts Scheme. This placed an arbitrary limit on the scale and longevity of improvements experienced by bus passengers and complicated the award of long term quality contracts;

· The inappropriate QCS public interest test. This test was introduced in by the 2008 Local Transport Act and represents a hurdle that must be cleared before a QCS can proceed. The test was poorly conceived and introduced new assessment criteria that were widely drawn, unprecedented in scope, not properly defined in Guidance and not based on extant appraisal methodologies. Nexus was prevented from accessing information held by operators about costs and revenues that would have allowed the forecasts underpinning our public interest test to be refined; and

· The time and effort of the QCS Board process. This took over a year to complete and concluded with a QCS Board opinion that Nexus disagreed with in a number of important areas.

5. These problems allowed bus operators and their lawyers to create uncertainty about whether the public transport test would be met, which Nexus disputed. This meant that operators were able to delay, disrupt and eventually stop Nexus from introducing a Quality Contracts Scheme that we estimated would deliver over £300 million of economic benefits to Tyne and Wear if it had proceeded.

6. Nexus believes the Bus Services Bill addresses weaknesses in the Quality Contracts Scheme legislation that we experienced and allows Local Transport Authorities to better achieve their bus strategies - be it through partnerships, franchising or maintaining current market structures. We do however have concerns about three important issues that we believe could hamper Local Transport Authorities, and Nexus in particular, from making the best use of the Bill’s provisions. These are set out below.

Access to Franchising for Non-Mayoral Combined Authorities

7. Nexus does not support the Secretary of State’s Amendment number 7, published on 6 March 2017, which would mean a Local Transport Authority wishing to prepare a formal assessment of its Bus Franchising scheme must seek consent from the Secretary of State before proceeding. Only Mayoral Combined Authorities are exempt from requiring this consent.

8. Nexus believes a Mayoral Combined Authority is not uniquely able to "automatically" provide the necessary accountability, governance and geographical features, which other Local Transport Authorities must demonstrate to the Secretary of State before gaining consent to progress an assessment of Bus Franchising.

9. In exercising its Local Transport Authority role, Nexus has strong and clear accountability arrangements in place that guide our strategic direction and monitor the day to day operations of our public transport networks. Nexus also has the governance arrangements in place to deliver a high quality public transport system. We successfully operate and maintain a rail system that carries 40 million passengers per annum, while also delivering a £350m infrastructure improvement programme. The strong accountability and governance arrangements that deliver the Metro in Tyne and Wear are transferable to a Bus Franchising model.

10. Nexus’ experience with its Quality Contracts Scheme shows it has the clear capability to prepare a sound business case for Bus Franchising, and our local democratic arrangements are capable of making an appropriate decision about the robustness of that business case.

11. Finally, Nexus is concerned that criteria the Secretary of State will use to judge whether a Bus Franchising scheme is given consent to proceed could present hurdles that Local Transport Authorities cannot clear [1] . Our concern is that the bar may be set very high for a Local Transport Authority when explaining its "high level plans" for Bus Franchising. We believe that such a barrier to Bus Franchising could be similar to the barriers that hampered implementation of our Quality Contracts Scheme, which may ultimately prevent better bus services being delivered to local people.

Creating a Municipal Bus Company

12. Nexus does not support the Secretary of State’s Amendment NC1, published on 6 March 2017, which would prevent Local Transport Authorities from creating a new municipally-owned bus company and provide local bus services. It should perhaps first be stated that Nexus has no current plans to create a municipally-owned bus operator.

13. However, we do envisage a situation where creating a new bus company is a course of action that Local Transport Authorities may need to consider. Bus ridership is falling. Bus operators appear incapable of stemming the tide. Commercial bus networks are continuing to shrink [2] while operators maintain a focus on delivering increased value to shareholders. This is our current experience in Tyne and Wear.

14. There may come a time when the logical business response of a commercial operator is to withdraw from the market it operates in, rather than continue a barely-managed decline. That day might be closer than we think in many of our towns, cities and rural areas.

15. In such circumstances, another local operator may step in and provide the withdrawn bus services. Except that operator is likely to have similar business expectations, so it is hard to see how or why it would take over services that a competitor has just ditched. And in many places there may simply not be "another operator" present locally, or an operator from outside the area willing to commit the necessary investment to establish a new operation.

16. A Local Transport Authority experiencing the collapse of part or all of the commercial bus market in its area might see the creation of its own operation to provide buses (for social benefit, rather than for profit) as a feasible way to protect bus passengers’ interests and maintaining services that would otherwise be lost [3] . The Secretary of State’s amendment would shut down that course of action.

17. It may be the case that the shareholders of a municipally-owned bus operator would have different profit expectations to a multi-national transport provider. It may only need to make enough revenue to operate its services reliably, look after its customers, pay its taxes, reward its employees and invest long-term in its fleet and infrastructure. This appears to be a situation that could benefit bus passengers, drive extra investment in bus services and increase orders with bus industry suppliers - it should be welcomed. Legislating to prevent this from happening risks placing the business requirements of the industry’s big operators over the travelling requirements of bus passengers.

Access to Bus Operators’ Data

18. Nexus welcomes the various requirements for bus operators to provide information to local transport authorities about their operations. These requirements cover:

· fares and real-time operational data on a day-to-day basis;

· revenue and ridership data when a bus service is withdrawn or reduced; and

· full details of operating revenues and costs to support a bus franchising assessment.

19. We would urge the Committee to make an amendment to the Bill such that full information about operating costs, revenues and patronage is also available to the Local Transport Authority when an Enhanced Partnership is being developed, similar to the information provided to the Local Transport Authority when it is assessing a Bus Franchising scheme.

20. An Enhanced Partnership is likely to be a major and long-term financial commitment for a Local Transport Authority that it cannot easily or unilaterally withdraw from. Furthermore, an Enhanced Partnership is likely to be a significant change to the economic context for its incumbent operators, whose long term business prospects may be affected by the commitments made. Local Transport Authorities will need assurance regarding long term longevity of their bus operations before committing an Enhanced Partnership.

21. In such circumstances a prudent Local Transport Authority such as Nexus would need a detailed business case assessment to be conducted before it proceeded, which should be based on sound and up-to-date information about bus costs and revenues from all operators. This requirement would include information from those operators who might not support the goals of the Enhanced Partnership and would not volunteer their information freely. At present, the Bill only allows for partial information to be made available when an Enhanced Partnership is being developed, we believe this is a weakness that will deter many Local Transport Authorities from taking the risk of investing in an Enhanced Partnership.

Conclusion

22. There is much to commend the Bus Services Bill, which Nexus warmly welcomes. But we believe the Bill could be improved further if the actions set out in this submission are enacted.

March 2017