Examination of Witnesses (Questions 40-59)|
WEDNESDAY 8 MAY 2002
40. In that case, what I am driving at is to
try to get a sense of how many of your services truly depend,
for their viability, on the availability, directly or indirectly,
from the public sector, of some cash. If the public sector disappeared
tomorrow, the local Council decided they were going to spend no
more money whatsoever on buses, what proportion of your services
would carry on happily and what proportion would disappear?
(Mr Lockhead) It is extremely difficult to givethere
are journeys, in your context, that are supported because we have
concession travels on them. You would not want to take the journey
off even though it is not viable because it has people on theremy
point at the beginning was that 84 per cent of services are commercial
and the other 16 per cent has some support from whatever of the
categories you have talked about.
41. The reason I am pressing on the point is
that one of my local bus operators told me that the vast majority,
if not all, bus services in this country depend to a greater or
lesser degree on the public purse to exist. Was that an inaccurate
(Mr Lockhead) It is inaccurate. The subsidy that we
get supports particular elements within the market we are in,
either the discount fares or to give us relief on high fuel taxes,
or to buy back services that were there before but we do not think
are worthwhile any longer, or that have not been there, just something
new that a Council wants to do. In each case, it is either competitive
or it is transparent.
42. Briefly on this, because I do not want to
go on with it too long.
(Mr Cochrane) If I could perhaps just add to Mr Lockhead's
comments. I think it is important to understand Fuel Duty Rebate
is paid on a "mileage driven" basis. That means that
every passenger is benefiting in a sense from that Fuel Duty Rebate.
So if your question is, "What would happen if there was no
such thing as Fuel Duty Rebate?", then that would have a
very significant impact on our industry in terms of the fares
that we would have to charge to enable us to generate the returns
to support the investment that we have been putting into the industry
over the last 10 years.
43. You are giving me the impression you are
in a non-viable industry, but that cannot be right, can it, Mr
(Mr Cochrane) Not at all. We are in a viable industry,
and as part of that viability, we are committed to investment,
but the point I am making isbecause, of course, the bus
industry only recovers 80 per cent of the tax paid on fuel, whereas
other transport sources, rail and airlines recover 100 per cent
of their duty.
Chairman: We could also tell you, because they
would tell you at inordinate length, what they have to pay.
44. The other point I wanted to raise was the
issue of cross-boundary services, and it is particularly an issue
around London, but I would be interested to hear if it is an issue
in other metropolitan areas as well. The London experience is
that you have a fairly high level of public subsidy or public
monies going into the bus industry within Greater London. On a
much greater level that exists immediately outside Greater London,
would the result be that you get a disproportionate level of operators
based in London than is based outside when they come to meet in
services going across the boundaries? Can you give us a sense
of the issue from your perspective of companies that operate on
both sides of the fence, and to what degree is it a national rather
than a London and the South East issue?
(Mr Clayton) Speaking for London and the South East,
there is some tension in terms of the fares charged across the
boundary from the subsidised London area with routes that are
subsided from London operating into just outside the GLC boundary,
and you will be aware that that has led to the operators in the
Shire Counties having to withdraw services simply because the
fares levels are so low. There is no-one subsidising them in the
way that London is. The other issue is that there has also been
a halo effect caused by the labour situation in the South East
as well, which has led to the drawing in of labour into London.
The South East labour market generally is extremely buoyant, although
one has to say that in the London area itself, operators have
made significant strides to improve the position. But what it
means is that more and more people who might otherwise have been
drivers in the halo around London now drive in London rather than
drive outside of it, and that has led to the withdrawal of services
as well, not necessarily marginal services, but simply services
that the operator can no longer staff.
45. Do you get a similar effect in other metropolitan
areas with subsidy of the metropolitan areas higher than outside?
(Mr Clayton) I am not aware of it being an issue outside
46. Last question. We have large numbers of
your workforce here today making a noise about pay levels and
the issues which quite clearly are there about affordability of
housing and so forth. To what degree do you recogniseyou
alluded to it therea significant problem that is threatening
services with the financial issues of running the service and
what you can afford to pay, and the realities of the cost of living
in London and the South East?
(Mr Clayton) We are the biggest operator in London,
and what I would say is that our London wages have been improved
significantly over the last two to three years. We have become
more competitive in the marketplace and we have actually increased
the number of staff in London that we employ by 7 per cent in
the last nine months. Labour turnover in London has reduced dramatically.
In fact, our London labour turnover is now one of the lowest in
the UK. That does not mean to say that we do not need to do more
for our staff, but clearly, as a Trade Union Official said to
me once, the quickest way to fill a bath is to put the plug in
first, and you need to retain the staff you have, so that is one
of the things that we have been working on.
Chairman: I think we can move on from the homespun
philosophy. Mr Stevenson.
47. Mr Cochrane, you said that the strategy,
and I take it all three companies will agree, would be to achieve
the 10 per cent growth in passengers envisaged in the Transport
Plan. Given that that could be more than achieved in London alone,
what happens to the rest of the country?
(Mr Cochrane) Our experience has been that we can
actually achieve significant growth levels outside London as well.
In Cambridge, for example, we have achieved a 20 per cent volume
growth in the last six months on the back of a new network that
was introduced in November last year. Similarly, in the Blackwater
Valley, a 15 per cent increase. So there are lots of examples
I can demonstrate that we can deliver growth across large parts
of the UK by working in partnership with local authorities.
48. Are those figures that you have quoted outside
of London the general norm, or are they welcome exceptions?
(Mr Cochrane) Those quantums of increases are clearly
not the general norm. Our business overall outside Londonover
the last 12 months, our volumes have probably been broadly neutral.
We have seen some growth in the South and some decline in the
49. I am trying to get a handle on what is happening
throughout the rest of the country. Your good selves are the only
ones that can tell us, so "broadly neutral outside London".
Would Mr Lockhead and Mr Clayton share that view?
(Mr Lockhead) We are seeing just over 1 per cent growth,
and a lot of people tend to think that is pretty neutral; for
us it is a great success. We were seeing 3 and 4 per cent passenger
loss for the last 25 years. To turn that round in the last three
years has been fantastic. Outside of London, we can show growth
beyond the 6 per cent London have got. We have an example in Leeds
where we have had 70 per cent growth in the last five years, and
there are other parts of the country where, when the model is
implemented with the partnerships, it works.
50. I will come to the partnerships in a minute,
because, as you well know, your company and Stoke City Council
have had some difficult times recently, and, as an MP from Stoke,
I am very much aware of that.
(Mr Lockhead) I understand.
Mr Stevenson: I hope I can get away with that.
Mrs Dunwoody's eye is dropping on me.
Chairman: Speed is of the essence.
51. Nevertheless, we have a picture of considerable
and sustained growth in London, the 10 per cent target which is
achievable, and that is a strategy, but overall, neutral marginal
growth, albeit from a low base in the rest of the country; that
is the picture?
(Mr Cochrane) Absolutely.
52. Thank you. Why is it then, that your companies
object to a more regulated system outside of London that we have
inside London that is generating double-jetted performance increases
year on year?
(Mr Lockhead) Could I answer that. I think that there
is simply no correlation between regulation and passenger growth.
Economic regulation does not have any impact on punctuality, service
reliability, delivery of service information and so on. It just
does not have any impact at all, and those are the ingredients
that our model, both in London and outside of London, achieve
53. But it is a different model inside of London.
(Mr Lockhead) It is a different environment, as you
Mr Stevenson: The model is different
54. It is a completely different way. As you
know, the 1985 Bill was very precise, London is a completely different
(Mr Lockhead) I agree with you, but it is not the
regulation in London that has created growth.
55. Sorry to interject. What I am trying to
get at, your collective objection to quality contracts is that
is would reschedule commercial freedom, basically, and yet, in
London we have the authority that sets the level of fares and
routes it wants and so on, then it puts it out to tender, then
your companies tender for them. A comparatively heavily regulated
local authority involvement compared with outside of London. Certainly
a different system altogether, and yet they are achieving substantial
increases in passenger ridership which has not been achieved outside
(Mr Lockhead) Yes, but not because of the structure.
I repeat what I said: it is because in London, you have car constraints.
The alternatives do not exist. You cannot drive in London. You
either use the bus, the Underground, or the Surface Rail system.
Outside of London, there is still traffic congestion growing;
inside of London it is constrained. The structure of the industry
in London does not create the growth. Outside of London, growth
is created by us working with our partners to provide better quality
services and more reliable, dependable services. In London, what
they have done is introduce more bus lanes than they have outside
of London. That is a significant influence. We would like to see
local authorities outside of London, particularly Passenger Transport
Executives, have more influence, more direction on giving that
sort of help to public transport.
56. I will not push you on that any more because
of time. Could I go on to cross-subsidy. Mr Lockhead, you said,
I think I correctly wrote it down, in terms of cross-subsidy,
"Many routes on the network are cross-subsidised."
(Mr Lockhead) Yes.
57. How many?
(Mr Lockhead) Most routes. Most journeys off peak,
Sundays, evenings, massive-cross-subsidy, yes.
58. I am just trying to get this clear because
it is an extremely important point because, a little later on,
in answer to one of the questions put by my colleagues, I think
you said, "Generally speaking, 84 per cent of routes are
(Mr Lockhead) Yes.
59. 16 per cent, therefore, need some sort of
(Mr Lockhead) Yes.