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

Examination of Witnesses (Questions 180-199)



  180. Could I move on to quality contracts. The operators en block are against quality contracts. Do you reject their criticism of quality contracts entirely? Is there no basis for their criticism?
  (Mr Donald) What we would say is that we understand where the bus companies are coming from. To be quite frank, if we were running the levels of profit that we just talked about, and getting these in a marketplace that does not seem to have real competition going on, achieving near monopoly positions in most of the PTE areas, then any suggestion that a quality contract comes along which has the prospect of introducing competition into that marketplace is obviously something that financially, and I think rightly, from a commercial point of view, they would resist. That is the first point to say. In terms of the broader aspects and the comparison that went on in that discussion between quality partnerships as a delivery mechanism and quality contracts as a delivery mechanism, we see them as quite different. We recognise, and we have worked well and often initiated the projects that are quality partnerships' that they can deliver, as has been talked about, very large increases in patronage. But they are corridor based, and they are mainly about capital investment. They are not about taking a network-wide approach that says, "let us be clear here: and call it what you want, there is a 40 per cent public funding of bus companies in PTE areas, are we getting a good return for that?" The normal way of bringing public and private sector monies together in that way would be a contract that says, "the public sector specifies broadly what it wants", and I want to stress that certainly in CENTRO and PTE Group, we are not talking about route by route franchising, as in London, we would be talking about broad specification, what we want to see that network providing in various ways, and then allow bus companies to compete and plan a network in bidding for that.

  181. Finally, do you accept the assertion by the bus companies that quality contracts would cost more?
  (Mr Donald) No, not least because we have a myriad of contracts in PT areas with bus companies of various sorts, and we would wrap all of that up into one contract for the area.

Miss McIntosh

  182. I was intrigued that the experience leading to an increase in bus use was the Park and Ride, bearing in mind that the City of York also has an old history, and regrettably has chosen to build Park and Ride sites on green belt land. Has there been a similar experience in your City?
  (Mr Newson) In terms of the location of the car parks they have tended to be in sites that were either green belt at the time of construction or had been previously. In terms of the future of Park and Ride in Oxford, our anticipation is that we would not envisage needing much more Park and Ride capacity. What we would hopefully be able to do is intercept these trips further away from the City so that we have perhaps more remote Park and Rides on main corridors so that the majority of the journeys are then undertaken by a bus service.

  183. But that would then be on green field sites?
  (Mr Newson) You would have to look at the locations very carefully. I would not rule it out because it is so difficult to find suitable large open spaces that are located close to a main road in the perfect location to intercept traffic.

  184. Could I ask each of you, do you think that the bus subsidies are as clear, as transparent, and as easy to administer as they might be?
  (Mr Donald) No, for the reasons we have already covered in that sense.

  185. Who do you think is best placed to judge the number of passengers currently using a particular bus service?
  (Mr Donald) Can you expand on the question.

  186. Would it be PTE, the PTEG, or the bus operator?
  (Mr Donald) Under the current arrangements the bus company—although PTEs, who have all got concessionary travel schemes, obviously have that information for concessionary travel purposes, but mainly for that.

  187. Could I specifically ask the PTEG why you disagree with the operators when the operators of the buses say that concessionary bus fares are a subsidy to passengers, but not the operators, and therefore are revenue neutral?
  (Mr Preston) I think it is splitting hairs, really. It is like saying we are going to subsidise people to buy bread and saying the baker does not benefit. It is about investment in the industry. In my area it is £21 million, in West Midlands it is £60 million. I am not sure we get the bang for the buck in relation to concessionary fares investment.

  Miss McIntosh: Do you think it is fair to expect a quality partnership to operate as successfully in rural areas as urban areas?


  188. It is not your experience, presumably, that they do?
  (Mr Donald) I think it is different situations in rural areas than there are in the conurbations that we mainly deal with, but perhaps Oxfordshire could pick that up.
  (Mr Newson) We have no direct experience of the quality partnership in a rural area at all.

  189. Because they would all be directly subsidised by the County?
  (Mr Newson) That is true of a proportion. I think one of the differences between myself and colleagues here is that a very large proportion of the Oxfordshire network is commercial, about 94 per cent, and we have healthy competition on a lot of the networks, so there are differences in interpretation of that.

Miss McIntosh

  190. Finally, to the PTEG, how would you like to see the concessionary fares regime reformed?
  (Mr Preston) I would like to see it delivered in the context of hard contracts, the bus contracts or franchising regime, where it is part of an overall payment to reflect the level of service. At the moment, we cannot really specify any of the characteristics of the service in return for the substantial sums of money that we pay over to the operators. Another issue, one that concerns me, is the inability, really, to control the level of payout in relation to concessionary fares. If, for example, operators increase fares above inflation, then the local authority, whether it is a PTE or a District Council, has no ability to manage that in any way whatsoever. At the moment, with inflation low and increases low, it is manageable. My own PTE was hit by an 11 per cent increase in fares two or three years ago and it completely broke the budget, because we have no choice but to respond to paying out the relevant concessionary fare level.


  191. Would that be helped by having a very tough set of standards, including something on pricing?
  (Mr Preston) I think it would, Chair, yes. As Mr Donald said, what we would like to do is to be able to specify the characteristics of the network. What we need to deliver our bus strategies. We need to see integration with other modes. The quality partnership approach simply does not allow that in the context of fares and frequencies.

  192. You did say that you did not think contracts like the London ones would work outside; why?
  (Mr Preston) Sorry, Chair, if that was the impression I gave. I think they would work outside, and I think we would be able to specify the kinds of service that we were looking for.

  193. Because you will remember some time ago, all the tenders, quite by accident, in London, all leapt by some millions of pounds at the same time. Are you saying that would give you a degree of transparency that does not exist?
  (Mr Preston) It would be transparent—

  194. But it would also give you more control?
  (Mr Preston) We would be clear about what we were getting in return for the investment, Chair.

Mrs Ellman

  195. What specific problems has the Competition Act caused?
  (Mr Donald) Potentially, at the heart of Government, there are two irreconcilable principles there. On the one hand, the Competition Act, which is requiring, understandably, private sector markets to work in a competitive manner. New power has been given to the competition authorities under the 1998 Act, and, indeed, interestingly, the competition authorities are applying some of these new powers within the bus industry. On the other side of it, you have quality partnerships and a wish for companies to work together to integrates services who have simple ticketing arrangements et cetera. As I say, potentially, you have two irreconcilable principles working within that, and I think that leads back to why we look at quality contracts. One thing the quality contracts also does is clearly meet the competition requirements and transparently introduces the prospect of competition into that marketplace whilst also delivering what the passengers want to see, which is stability of service, simple fares and ticketing arrangements, far better information, et cetera.

  196. Are there any specific examples that any of you can give, either when you have been stopped from doing something under the Competition Act, or where you have not gone ahead in case you were stopped?
  (Mr Preston) Moir Lockhead referred to the success of the Leeds guided bus scheme with a 65, 70 per cent increase in patronage. It is a very good example of local authorities, PTEs and operators working together, because we do work well together, and I think sometimes that point can be lost when we make these kinds of arguments. That was a scheme where the operators, First Group and Arriva, together with the PTE and Leeds City Council, paid for the infrastructure something like £20 million, with operators actually contributing to the infrastructure costs of the guideway as well as investing in new vehicles. It was a very good partnership, well branded, but the problem that we had because of the OFT was that we could not together specify either frequency or fares. That, in terms of the understanding of people that we were trying to attract to that scheme giving lots of mobile shift options, was a major obstacle.

  197. Was there any way around that?
  (Mr Preston) Not at the moment, as I see it, except had we delivered it through a quality contract.

  198. How much competition exists in reality?
  (Mr Preston) If I can give an example. In West Yorkshire, we put out something like £16 million worth of tendered services each year and the average number of bids per tender is 1.04.

  Chairman: That is a great competition, is it not? It must worry you. How do you fight off the .04?

Mrs Ellman

  199. What about Challenge Initiatives? Are you in favour of Challenge Initiatives, or would you like to see everything incorporated in the Transport Plans?
  (Mr Newson) From our perspective we are not supporters of the Challenge Bid system, whether for bus grants or for other things because they do tie up an awful lot of local authority precious resource, which often proves to be abortive. As I think was mentioned in the previous session, we see the advantage in Government trying to secure those objectives through the local Transport Plan and rewarding the authorities that are delivering those objectives in that way.

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