Select Committee on Transport, Local Government and the Regions Minutes of Evidence

Examination of Witnesses (Questions 120-139)



  120. Did you ask them what the rate of return was?
  (Mr Welch) Yes, and they said they were looking for 15 per cent in areas where they believe they have a commercial future, but they would accept less in other areas.

  121. That is fine. Did the County Council re-tender for those services?
  (Mr Welch) Yes, we did.

  122. What happened there?
  (Mr Welch) We had two tenders of which only one offered all the services that we were requiring.

  123. What was the cost of the re-tendering exercise, both in administrative time and effort, and also in terms of the subsidy required?
  (Mr Welch) In administrative time, it was basically using our own existing staff resources to do that exercise and leaving other projects to a later date. Obviously the outcome was an increased subsidy bill of £175,000 per year.


  124. That is not quite economic, is it? What you are saying, in effect, is that you lost the cost of the re-tendering?
  (Mr Welch) The costs of re-tendering really had to be absorbed by postponing other work, yes.

Mr Stevenson

  125. What I am trying to get at is the amount of, if you like, public subsidy that was provided for a given level of service, and when you re-tendered, how much more public subsidy you were faced with because of that re-tendering outcome?
  (Mr Welch) It is £175,000.

  126. It is ongoing?
  (Mr Welch) Yes.

  127. For the same level of service?
  (Mr Welch) For the same level of service, yes.

  128. Could I turn to Lincolnshire, please, because you faced a similar situation, facing significant commercial service cuts. Would you describe the situation across in Lincolnshire in similar terms to what we have heard from Mr Welch?
  (Mr Cross) Not proportionally in the same scale, but it did cost us £100,000 per year to put those services back in Lincoln.

  129. Yes. But nevertheless, you had a level of service that you knew or thought was commercial; it was withdrawn, you re-tendered, and it cost your authority £100,000 per year?
  (Mr Cross) £100,000, yes.

  130. The Government tell us they are providing an extra £3.3 billion in revenue for local authorities. Is that sufficient? Is it going to find its way into any of these services, do you think?
  (Mr Cross) The changes in Lincoln were in the urban area, and, of course, that then relies on the County Council's own revenue support. In the rural areas, we get very substantial sums from Government. We will need more if we want to fully implement our bus strategy, but at the moment, through the Rural Bus Grant, for example, we get £1.7 million, which is substantially more than the County Councils traditionally put into bus services.

  131. Very quickly and finally, are the bus operators reasonably cooperating with you?
  (Mr Cross) If I could answer for Lincolnshire, we have very good cooperation with our operators, I would say.

  Mr Stevenson: Even against the backcloth of the cuts?


  132. How much notice did they give you, for example?
  (Mr Cross) The statutory notice, plus perhaps a week, so we essentially had seven weeks' notice of the change.

Mr Stevenson

  133. It is an interesting type of cooperation when the local authority is faced with a bus service that is costing A, and then because of a unilateral decision to withdraw those commercial services, it is faced with A plus plus plus plus. That sounds an interesting cooperation to me. Much more of that cooperation, you will be out of business.
  (Mr Cross) We recognise that the operators operate within the commercial environment. They have to make their money. If they made the judgment that those services were not commercial, it is then up to the County Council to decide whether they wish to subsidise. In other areas, I have to say, that very same operator is cooperating very well with us and investing substantial sums of money in support of our InterConnect project, for instance. But that is the statutory framework in which we all have to work.
  (Mr Chorlton) We do sometimes have more notice in terms of our normal discussions with them. They will tell us when a particular route is looking a bit uncertain and if it carries on, in three months, it might be de-registered because things are going that way. Sometimes we will work with them to help promote it; other times that extra time gives us an opportunity to consider whether we want to rearrange our existing subsidised services to adjust for that. So that sort of cooperation does take place. If I could just explain in terms of withdrawals in our part of the world, of the 320 registered bus services in Devon, only 125 of those are commercial. In the last year, 12 of those have been withdrawn, and 24 have had reductions in the service, either reducing at weekends or evenings. That is the sort of rate which seems to be accelerating. During the early 1990s, 1990-97, it was stable. Those are the sorts of reductions which are taking place at present.

Mrs Ellman

  134. Mr Chorlton, at the beginning of the session you said that you all welcomed Challenge Fund initiatives. Looking to the future, would you like to see those initiatives continue in that form, or would you like them to be incorporated in local Transport Funds?
  (Mr Chorlton) The advantage of Challenge Funds is that they provoke innovation. They challenge you to actually come up with innovations. The disadvantage is that they are usually time limited, and so from day one, you are thinking about your exit strategy rather than concentrating on the innovation, so there is an issue and a problem there. I do not think they will survive, the Rural Bus Challenge in the deep rural areas, without future subsidy. So the question is how does one deal with that? One possibility would be to look at trying to link them better into local transport plans which have a five year life, of which we do an Annual Report, and perhaps the Challenge could be through the Annual Report. If we have an innovation, we could make a submission at that point and try to integrate the local transport plan and the bus challenges more greatly. The problem is, of course, local transport plans are about capital money and bus challenges are about revenue money. That should be possible to overcome, but we will need ongoing subsidy. The nature of them is that they are innovative, but they do not wash their face from a financial point of view. The subsidy will need to continue in some way.

  135. Are there any other views on that?
  (Mr Cross) Yes. We have been the most successful authority in gaining Rural Bus Challenge; we have had over £4 million in the last four years, so I would naturally support the process. Last year, the Government changed the Guidance and they also took into account the best practice and encouraging authorities to put in bids which built on previous best practice, and I think that is a good approach, because there is only so far you can go with innovation, and there comes a point when you should be starting to implement what works.
  (Mr Welch) Can I offer a slightly dissenting view in terms of the amount of time it takes to put forward a Challenge bid. We were unsuccessful for an Urban Bus Challenge bid, but so were roughly four fifths of the authorities that submitted a bid. It does take a lot of resources to put in a good bid at a time when staff resources generally within the transport sector are in short supply. So I would perhaps prefer to see a system whereby the bidding for additional funds could be linked in with the Local Transport Plan process, perhaps through the Annual Performance Review, rather than have to take a risk that we are or are not going to be successful through a bidding process.

  136. Are there any changes you would like to see in local transport plans, and perhaps combining revenue and capital streams? That was mentioned by Mr Chorlton. What would your views be on that or any other changes you would like to see that would assist innovation, but give longer term security to the proposals you have?
  (Mr Cross) The biggest problem we have is on revenue funding rather than capital, I would say. The cost of supporting rural bus services and maintaining them is considerable. We are spending something like £3 million on revenue support in the rural areas now.
  (Mr Chorlton) I think the sort of changes that you need is probably not so much in the LTP system, but rather at the margins of the legislation. For example, community bus drivers cannot be paid, and yet there is a shortage of volunteers. That is a problem. With our fare car system, we have one operator who operates a fares car system, it has been quite successful, and we occasionally get as many as 16 passengers, so he can use his mini bus. But if he does that, it should be a registered service and go daily, but this is a demand responsive one, so we had to get over it by calling it an "excursion". As we are trying to do what we are all trying to do and want to do, it is ridiculous that we should have to try to find ways around the legislation when everybody agrees that what we are trying to do is sensible. So it is at the margins of the legislation that I think would be the greater gains.

  137. What about Fuel Duty Rebate/Bus Operators Grant? What changes would you like to see there? Do you think that we all get value for money?
  (Mr Chorlton) I take the very strong view that bearing in mind it is now called Bus Operators Support Grant; if it is called that rather than Fuel Duty Rebate, we should think of it in those terms. I think it should relate to emissions; it should relate to the quality of buses; it should related to the quality of service, and it should be an incentive for that. Under the Disability Discrimination Act, we have to have all these DPTAC buses by another 12, 13 years hence. We actually need to accelerate that process, otherwise there will come a point where in 15 years hence, about half of the service will be with old buses and then prices will shoot through the roof. It could be used as an incentive to persuade bus companies to move to DPTAC specification more rapidly rather than getting whatever type bus they use. I know there is some connection with emissions but we do actually need to see the quality of buses and the service improve.
  (Mr Cross) I have one particular issue with Fuel Duty Rebate and that is that it does not apply to demand responsive type transport. Conventional bus services are eligible. From 1 May Community Transport is eligible, and this is the only form of public transport which now does not receive Fuel Duty Rebate. In Lincolnshire we are using Rural Bus Grant to support the demand responsive flexible services. It means that the Grant does not go as far because they are not eligible for fuel duty rebate.


  138. It is not in any of the definitions?
  (Mr Cross) That is right, and it has to be a fixed route. I set out in my written evidence, in terms of our demand responsive services, that it is equivalent to £1.00 per passenger, which is a very substantial amount of money we are losing.
  (Mr Chorlton) I would certainly support what Tony has just said, but if the Government's objective, rightly or wrongly, is to increase bus passengers by 10 per cent, then there perhaps is more logic in having a system of Bus Operators Grant which is focused on those objectives rather than purely running more miles, which may or may not be a good thing, but if there is a change to Bus Operators Grant to reflect that, then we need to recognise that will put even more pressure on rural areas where, by definition, fewer passengers will actually travel. If there is going to be a change in that system, then we need to look at the impacts, both in the urban medium sized town and the rural areas, and they will be different.

  139. There is not any reason why, because of the slightly different situation from one County to another, the Government should not set up a number of trial schemes, is there?
  (Mr Chorlton) Not at all, no.

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