Examination of Witnesses (Questions 320-335)
MR MARTIN ROBERTSON, MR JOHN HODGKINS AND MR GARTH GODDARD
WEDNESDAY 15 MAY 2002
320. I understand that but in the evidence the direct question was asked, "Is there anything to stop this type of transferability of ticketing that occurs in the railway industry, from the OFT's point of view, in local areas?" The direct answer we got was, "No, the block exemption allows that. There is nothing to stop this happening. If it is not happening, it is the fault of the local authorities and the operators." That seems to me to be a direct conflict of evidence and I am very interested in getting your views.
(Mr Hodgkins) It certainly is not happening on a wide scale amongst operators. Bearing in mind that across the country a very high proportion of the service is a commercially provided operation, over which local authorities have no direct influence or control, the extent to which a local authority can seek to impose ticketing schemes that require operators to cooperate one with another is limited to a large extent to those routes on which the local authority has a financial interest. As an example, most local authority contract services, the public transport services that operate with subsidy from the local authority, require the operators of those services to accept tickets issued by commercial operators elsewhere on line of route. That is fairly consistently applied across the country. However, the customer questions the local authority as to why the commercial operator is not obliged to accept the tickets issued by the subsidised operator. To me, explaining that to a customer is perhaps the most illogical argument to explain.
321. What are the benefits of quality contracts?
(Mr Robertson) There are parts of the country where quality partnerships will work and parts where they will probably not work. Quality contracts are one of the tools available in theory to make progress in terms of the transport network. We have done some work in Hampshire to try to flesh out how much of our areas might sustain a quality partnership approach. The answer is about 15 per cent. These services carry about 40 per cent of passengers and are, by definition, the best commercial routes. At the other end of the scale we have about 20 per cent of routes which are deep rural, where the solution is to take a taxi or a dial a bus sort of service. In the middle therefore, we have about 64 per cent of those services carrying about 50 per cent of our passengers, for which the quality partnership approach is not going to work and for which we have no other mechanism, apart from perhaps quality contracts. Quality contracts have the advantage that we would be able to act in those areas in the middle and they would allow us to plan the network to certain standards and to get an operator to run to the standards that we set in terms of bus strategy and the local transport plan. As it currently stands, particularly with a lead in of almost two years into the quality contract, they would be divisive with the operators in terms of putting those in place and they will blight the network during such a long lead in process. They are a bit of a mixed blessing but it is very important to have them as a tool and we would suggest sharpening that tool to reduce the lead in period so that they would be a much more realistic option.
322. We have been told that they are going to have a very high extra administrative cost. Is that going to be a problem?
(Mr Robertson) What is the evidence that that will be the case? I have not seen any suggestion of that. It is already a pretty busy job and at the moment we have to cope with a lot of change in the network and that is time consuming in terms of resources.
323. What about the funding of services? Will the increases in tender costs and the increased numbers of withdrawals of services make a very big problem for operators generally?
(Mr Robertson) In terms of our situation, in terms of tender prices, we are facing a fairly severe pressure in terms of costs on our revenue budgets. The survey we did last November shows about 21 per cent increase in prices in tenders of being relet against previous identical pieces of tendered network. We do not retender everything every year, so that 21 per cent from last year brings about a ten per cent impact on the whole budget for the local authority in terms of the following year. That is quite an impact on our budget situation. Some price rises we are getting range quite high into double figures.
324. Does the government recognise it as a problem? Does the government recognise the scale of the problem?
(Mr Robertson) As of yet, we have no further evidence that that has been recognised. We are capital rich. The local transport plan settlements provide us with very reasonable resources to get on and do something about the infrastructure side of things. The danger is that we are revenue poor. We have problems in terms of revenue in sustaining the services on those networks.
325. Can I ask you about the impacts in rural areas? You suggested that the benefits of the increases in rural bus grant will be wiped out in the fairly near term. How severe is that particular problem?
(Mr Robertson) It is severe. It is rather a difficult situation to manage on the ground because passengers see a ring fenced pot of money which has allowed enhancement of some rural services within certain boundaries. Other services are having to be cut because they are not within the guidelines for the rural bus service. We are under pressure in terms of budgets. Our big problem in terms of the deep rural areas is that where we have a decent level of funding through various challenge and transport partnership schemes they are all time limited. Where is the exit strategy out of some of those situations? We are told sometimes that the answer to that is that they will become commercial eventually.
326. Does that effectively mean that the propensity to ring fence funding is hampering service development if you receive this block of money to improve service as opposed to a specific grant for this purpose?
(Mr Robertson) Yes. We suggest what would be really useful would be to ring fence revenue funding for passenger transport services but tie that into the local authority bus strategy, so it is not just handing over a pot of money to the local authority to do with what it will but a bid must be made through the bus strategy and that is used in that way.
327. Do you believe that grant funding from central government for the revenue support of transport services is unduly skewed towards metropolitan rather than shire areas?
(Mr Robertson) For the challenge and grant schemes?
Chris Grayling: Across the board. London gets hundreds of millions of pounds. Neighbouring counties with populations that are
328. This might be a special form of pleading.
(Mr Robertson) The problem is in the middle. For deep rural, we have plenty of schemes and it is really harnessing the community effort. With the urban situation, we have strong commercial links and that works.
329. In your conclusions, you state that there has been a progressive decline in the level of service being provided in all but the largest towns and cities. Can I take it from that that the decline has been greater in rural areas than in urban areas in bus transport?
(Mr Hodgkins) In many of the deep rural areas, there has been an increase in the provision of service through the benefit of the various rural funding initiatives. What has been evidenced in many local authority areas, my own included, is that it is in the small to medium sized towns, which may fall outside the scope of the rural grant mechanisms, and yet are not sufficiently large to sustain volumes of commercial bus operation, where the impact has been felt most severely. In the last 12 months, for example, in one of the three urban areas of Buckinghamshire and High Wycombe, there has been a successive series of reductions in the scale of the network that has resulted in a very significant increase in the level of funding that has been required from the local authority's own resources. It is not funding that can be found from the rural bus service grant or rural bus challenge competition. At a stroke, the support for a network of routes within High Wycombe increased from £48,000 a year to something of the order of £171,000 per annum.
330. Do you think rural services are being particularly disadvantaged because of the structure of funding?
(Mr Hodgkins) What is concerning many authorities, I believe, is the fact that, as in the case of Buckinghamshire, such a high proportion of the funding that is available for public transport is in the form of short term grantsand this is primarily for services in rural areasthat we now have a situation where 50 per cent of the spending on public transport is in time limited grants. What is causing the greatest concern is the uncertainty of what happens at the end of that grant period.
Mr Campbell: Do I take some of your previous answers to mean that you are perfectly content with community transportation issues in rural and semi-rural areas?
331. The point you were making perhaps was that the money was there.
(Mr Robertson) We were just recognising that considerable effort has been put in to providing mechanisms by which we have got a few new ideas in deep rural areas. That was a big problem 10 years ago. It is less of a problem now, but we have the short termism issue and the middle sized town issue left out.
332. What about any overhaul that you may see the government as having to do in terms of regulations for community transport vehicles?
(Mr Hodgkins) As far as community transport vehicles are concerned, there is currently a fairly complex set of regulations under which different types of community transport vehicles are operated. The complexities extend to precluding in some cases the ability to pay the driver to drive the vehicle; whereas an identical vehicle can be driven by another organisation with a volunteer or a paid driver, depending on which disks they choose to put in the screen of the vehicle at the time. There is a great deal of confusion amongst the providers of community transport services as to what they can and cannot legitimately provide for the market and there is a case for simplification of the regulation of the non-profit making sector of the industry.
(Mr Robertson) The fuel tax rebate which is given to bus services is not available for responsive services in the deep rural situation. With the new type of service, we are trying to better meet rural needs. That is something the government is considering and maybe it will be sorted out shortly.
333. We already have quality partnerships and quality contracts. Do you want a quality network as well? Is that not making it even more complicated?
(Mr Robertson) It is recognising the situation that there is a limit to quality partnerships and therefore what they will gain. It is an attempt to see a middle way through the situation away from imposing quality contractors on operators, which does have some drawbacks, particularly with the existing timescale. In the middle ground, there is very little for the operators to lose and something to gain to work with us in a voluntary way with a more stretching network style partnership. We can gain quite a bit from that and get more for our investment into our local transport plan. The ideas put forward in the submission are something on which we are having embryonic talks with CPT and there is some willingness to explore.
334. If you really wanted to help passengers, would they not benefit by just getting quality contracts into place all over the place?
(Mr Robertson) That option is available. We are working with the existing situation with a two year lead in. We need to be acting sooner than that. Given where we are, we think that might be an alternative way through it but the quality contract tool we do see as important and we would like to see the time span reduced.
335. How many of your buses are going to have low floor facilities by 2005?
(Mr Goddard) This is a very slow process in a typical shire. At the moment, in our county, Cheshire, the percentage of buses that are over six years oldand that runs right through to 25 yearsis about 60 per cent. We only get new buses for quality partnerships. I remember a day when you got a new bus when the old bus was worn out, but now the rule is that the operators will give us new buses where we have a quality partnership. We have already explained that our progress on quality partnerships is not going to be enormously fast, and having said that there is only a part of the total sector that is available for quality partnerships. Therefore the chance of getting lots of new low floor buses in shire areas in the near future is pretty slim. It is going to be a really slow process, particularly as now we are being told by our operators that we are likely to get reconditioned buses for quality partnerships cascading out of the metropolitan areas, rather than new buses. They will probably be three or four years old and therefore will be low floor, but this does reflect the problem that we have with getting new equipment into a shire area where there is not a lot to be gained commercially for the operators from large scale investment in new buses.
Chairman: Gentlemen, you have been very helpful because your combined expertise has put some very useful and interesting ideas forward. Thank you very much.