8.The nature and scale of CT has developed considerably since 1985. CTOs operating under permits are now extremely diverse, including:
9.Several factors have driven developments in CTO practice. Since at least 2010, there has been a desire, at national and local government level, to increase community-based organisations’ involvement in the delivery of public services, both in pursuit of value for money and to boost community cohesion. At the same time, budgetary constraints have reduced local authority funding for subsidised road transport services of all kinds, which has in turn increased demand for CT. CTOs have been encouraged to become more self-sufficient by seeking out alternative income streams, and operating on a more business-like model, including by tendering for local authority contracts. A common strategy, particularly for the larger, transport-only CTOs has been to tender for home-to-school and adult social care transport contracts, for example.
10.CTOs reported that core CT services cannot typically be sustained by passenger fares alone. This is because of the relatively high cost, enhanced quality aspects of these services, such as the need for specially equipped vehicles, suitably trained staff and passengers’ requirements for door-to-door, rather than kerb-to-kerb, assistance. Given financial constraints in recent years, CTOs report that a level of cross-subsidisation of core CT services from income from local authority contracts has been essential. Some commercial operators claim this cross-subsidisation creates unfairness in competition for some contracts, particularly in markets that are often contested by the commercial sector, such as home-to-school transport. CTOs argue any substantial threat to contract-based income would put core CT services at risk.
11.The Community Transport Association (CTA), the recognised UK body representing CTOs of all sizes and types, argues that CTOs have developed the above operating model with the acquiescence and encouragement of local authority transport commissioners and successive national governments, in accordance with the official guidance. This has been acknowledged by the DfT.
12.Furthermore, CTOs, local authorities and the DfT all emphasised the wider social value of CT. The Minister described it as an “unbelievably diverse, interesting and socially valuable sector”. This was borne out by the comments on our online forum. The below comment is typical:
Community transport carries my 89 year old mother to Day Centres three times a week. This is an invaluable service as she would be unable to travel by public service as she suffers from dementia. The drivers and escorts are incredibly caring and compassionate and provide an invaluable service. Without their support, my mother’s quality of life would suffer immeasurably.
13.The pressure on community transport organisations to cross-subsidise core, socially valuable work from income earned from contracts such as home-to-school transport has to some extent, in some areas, been driven by a lack of available local authority grant funding in recent years. Further investigation of this may be useful, and we may choose to consider the adequacy of funding for socially valuable but commercially unviable community transport services, and the effects on local transport markets, particularly for home-to-school transport, later in this Parliament.
14.There are two main areas of contention in interpretation of UK law and guidance between some commercial operators and CTOs—the employment of paid drivers in the CT sector and CTOs tendering for contracts.
15.In relation to s19 and s22 permits, s23 of the 1985 Act requires that:
(a) The driver receives no payment for driving except—
(i) Reimbursement of any reasonable expenses incurred by him in making himself available to drive; and
(ii) An amount representing any earnings lost as a result of making himself available to drive in exceptional circumstances.
This does suggest the law intended permit-based drivers to be volunteers.
16.The CTA’s advice to its members, however, has relied on the DfT’s accompanying guidance, Section 19 and 22 permits: not-for-profit passenger transport, which sets out detailed requirements for the issue and use of permits; advice to permit holders on driver and vehicle safety; and guidance on the two areas of contention—driver licensing and pay, and permit holders tendering for contracts.
17.The guidance states that, in some circumstances, drivers can be paid to drive nine to 16 passenger vehicles under permit rules. The licensing conditions vary according to when the driver obtained a full B (car) licence. Those granted a full licence before 1 January 1997 were automatically granted an additional D1 (small bus, not for hire or reward) entitlement. The guidance states these drivers may drive a nine to 16 passenger minibus under permit, and be paid to do so.
18.Different rules apply to drivers who passed their full car driving test after 1 January 1997. These drivers did not automatically receive the D1 entitlement, and may only drive a nine to 16 passenger minibus under permit if they meet a number of conditions, including that they must have held a full B licence for at least two years and that “they receive no payment or other consideration for driving other than out-of-pocket expenses.”
19.The CTA acknowledges the restriction on permit operators employing paid drivers who do not hold a D1 entitlement, but its advice to CTOs notes:
[…] there is a legal opinion that where an employee does not have driving as part of their job description and they receive no more pay as a result of their driving duties; they could be considered to be meeting the condition […]. This opinion has not been tested in a court but has been accepted within the voluntary sector.
The Bus and Coach Association claimed this is a part of the CT sector’s attempt to “manipulate the rules” in its own favour.
20.The guidance is clear that the legislation does not allow local authorities to accept a tender to operate subsidised public bus services from holders of a s19 permit. There is no such restriction, however, on s19 permit holders providing services under contract to the categories of passenger specified for that permit. The guidance also states there is “no legal barrier” on local authorities accepting tenders from s22 permit holders, including for subsidised local bus services. It further states:
When issuing an invitation to tender it is for the local authority to specify the criteria against which bids will be considered and whether they’re prepared to accept tenders from permit holders.
There is a clear stipulation that “Contracts can’t be undertaken with a view to making a profit as this would invalidate the permit.”
21.The community transport sector has developed considerably since the Transport Act 1985 came into force. Broadly, community transport organisations have developed their operating models with the acquiescence or encouragement of local government and successive national governments. In particular, they have responded to calls for them to seek out new funding streams and become more business-like in approach. Some have achieved this very successfully at the same time as delivering considerable social benefits. Given that they have acted in good faith, and generally in line with the longstanding guidance, it would now be unjust if planned changes were to be their downfall. In these circumstances, it is incumbent on the Department to handle any necessary changes with particular care and sensitivity.
22.It was surprisingly difficult for us to assess the extent to which CTOs compete with commercial operators for the same work, or the geographical extent of the problem, due to a lack of data. Martin Allen, founder of the Bus and Coach Association (BCA), a membership organisation for commercial operators set up to campaign against what it sees as misuse of the permit system, suggested CTO competition in contestable markets was very widespread, with CTOs now competing for work “in nearly every major town and city.” The Confederation of Passenger Transport (CPT, the recognised national trade body for the commercial bus and coach sector), by contrast, told us it only had concerns about improper use of a “tiny minority” of permits.
23.Mr Allen’s assessment that competition for contracts was widespread appeared to be based on responses from local authorities to his requests under the Freedom of Information (FoI) Act 2000. He told us all but one of the local authorities that had responded under FoI confirmed they held contracts with CTOs. This, in itself, however, is unsurprising given developments in the sector over at least the last decade, as described above. Some local authorities now put all core CT services out to tender. The existence of local authority contracts with CTOs does not, on its own, prove widespread competition by CTOs in genuinely contestable markets.
24.After our evidence session on 27 November, the Association of Transport Co-ordinating Officers (ATCO, the body for local authority transport professionals) shared with us its impact assessment conducted for the DfT in October. Of 24 local authorities that responded to its survey, 21 contracted with local CTOs, which held a total of 547 contracts, the majority to deliver home-to-school and adult social care transport. The very large majority of these contracts had been contested—only 94 had been awarded to the only bidder—but the extent to which there was competition with the commercial sector remains unclear.
25.Notwithstanding the uncertainty about the scale of the issue, some commercial operators do appear to have experienced serious detrimental effects. Bearwood Coaches, a commercial operator based near Smethwick in the West Midlands, for example, claimed that, from the time a local CTO was established in 2003 to 2014, it lost 38 of its 65 local authority contracts to deliver home to school transport for disabled children. Its annual revenue nearly halved in that time from around £1 million to just over £500,000. We received similar evidence from a handful of other commercial small-to-medium-sized bus, coach, taxi and private hire businesses.
26.When we challenged local authorities on the fairness of CTOs utilising vehicles operating under the permit system to compete with commercial operators, Dominic Davidson, Senior Transport Co-ordinator at Staffordshire County Council, conceded there may be unfairness in some places, but he did not believe the scale of the problem was “anywhere near the level that has been made out.” Furthermore, a range of witnesses emphasised that relations between the CT and commercial sectors were perfectly harmonious in many places. The CTA argued the system was broadly working as intended:
In many areas community transport operators will fill gaps in the commercial and subsidised bus network through the provision of community buses and demand-responsive solutions. This is often done with the knowledge and support of commercial operators who benefit from being able to leave both marginal and specialist services to a parallel network of not-for-profit providers and volunteers.
27.This has been echoed by the Minister, Jesse Norman MP, who wrote to all MPs on 5 October, emphasising that “the system is generally working well and we have no plans to change it.”
28.Even Mr Allen, who has doggedly driven the legal challenge on behalf of affected commercial operators (discussed in chapter 3), has never intended the effects of change to be felt across the entire CT sector. He told us his focus was on the “multi-million pound businesses”, which, as he saw it, had “grown up from misuse of the permit system”; it was not his intention to “hit vital core services to the community”.
29.The Transport Act 1985 and associated guidance sets out a relatively light touch regulatory and licensing regime for the provision of community transport. For decades, the regime has provided an effective framework within which not-for-profit organisations can effectively plug gaps in commercial provision and provide community-based local transport services to people who would otherwise suffer isolation. Broadly, it still achieves this.
30.Some commercial operators appear to have suffered substantial detrimental effects from potentially unfair competition from community transport organisations in contestable markets. There is, however, a notable lack of reliable evidence against which to assess whether the practices of community transport organisations create widespread unfairness or the geographical extent of the problem. Proposals to address instances of unfairness should be considered in the forthcoming consultation but, given the acknowledged wider social benefits of community transport, the Department should proceed with caution. It must not take a sledgehammer to crack a nut.
31.The DfT noted that the current legal challenges have arisen in part because of questions about the appropriateness of two service providers, competing for the same contracts, having to meet different road safety standards. It offered no data, however, on the relative safety records of PSV operators and CT permit holders.
32.The BCA claimed CTOs utilising the permit system were operating at “a much lower safety standard” than PSV operators. However, any suggestion that the safety records of CTOs were inferior was strongly refuted by CTOs and local transport commissioners. Transport for London, for example, told us the safety records of its CTOs were “excellent”. Dominic Davidson of Staffordshire County Council said:
It could be argued that on paper there are lower levels of regulation, but in practice I see exactly the same standards of vehicle maintenance, regular safety inspections, good MOT records, good levels of driver training and excellent compliance records. The contractors we deal with in the CT sector have consistently good compliance records.
33.There is, however, a lack of data by which to assess the relative safety records. Mobility Matters noted that it is not possible to separate out and compare PSV and permit operators from official road safety data. It emphasised, however, that the accident rates of eight to 16 seater passenger vehicles, the type most commonly used by CTOs, have remained stable and low compared to larger buses and coaches for several years. While it did not suggest that larger PSV operator vehicles are driven any less safely than permit operator vehicles, it emphasised that the “statistical record simply does not support any suggestion that there is a problem with how [CT] minibuses are maintained or driven.” The DVSA accepted it would be a “wise move” to collect and publish data that enabled comparison; the Minister agreed.
34.We recommend the Department work with the relevant agencies with a view to taking proportionate measures to collect and publish data to enable comparison of the road safety records of different types of road passenger transport operators, including those operating under the section 19 and section 22 permit system.
7 Department for Transport (); Ealing Community Transport (), for example, has grown from a small CTO, established in west London in 1979, to also deliver services in Cheshire, Cornwall and Dorset. See ‘’, ECT, accessed 29 November 2017.
8 Community Transport Association (). See also, for example, Wyre Forest Dial-A-Ride (); Shencare Community Transport (); The Friendly Transport Service (); Preston Community Transport Ltd (); Croydon Accessible Transport ()
9 See, for example, Mobility Matters ()
10 ‘’, CTA, accessed 29 November 2017
11 Letter from Stephen Fidler, Head of Buses and Taxis Division, DfT, to section 19 and 22 permit issuers, 31 July 2017 [not published]
12 See, for example, CTA (); Mobility Matters (); [Anna Whitty]; [Leon Daniels]
13 [Jesse Norman]
14 Comment by Helen Owens, 17 November 2017, ‘’
15 Bus and Coach Association ()
16 Transport Act 1985,
17 ‘’, CTA, accessed 30 November 2017
18 Bus and Coach Association ()
19 ‘’, GOV.UK, accessed 30 November 2017
21 [Steven Salmon]
23 See, for example, [Peter Shelley]
24 ATCO ()
25 Bearwood Coaches ()
26 See, for example, Bus and Coach Association (); VIP Taxis Ltd (); J&C Coaches Ltd (); Impact Group Limited ()
28 See, for example, [Mr Salmon]; Westway CT ()
29 CTA ()
30 Letter from the DfT Minister, Jesse Norman MP, to all MPs, 5 October 2017 [not published]
32 Department for Transport ()
33 Bus and Coach Association ())
34 See, for example, CTA (); Mobility Matters ()
36 Mobility Matters ()
37 [Peter Hearn and Jesse Norman]
13 December 2017