Examination of Witnesses (Questions 405-419)
MR JOHN SPELLAR MP, MR ALAN DAVIS AND MS SANDRA WEBBER
TUESDAY 21 MAY 2002
Chairman: Minister, you are most warmly welcome. We do have two bits of housekeeping first, if we may. Will members having declarations please make statements now?
Mr Stevenson: Member of the Transport and General Workers' Union.
Chairman: Member of the Rail, Maritime and Transport Union.
Mrs Ellman: Member, Transport and General Workers' Union.
Miss McIntosh: I have an interest in First Group Limited, and other interests.
405. Secondly, we have a slight problem with some of the papers today so the memoranda for this session will be available at the end and not at the beginning. This is an innovation to see that you all pay attention, and questions will be asked at the end. Minister, you have been a busy little Minister today. Would you like to identify yourself, for the record?
(Mr Spellar) John Spellar, Minister for Transport, and I have with me Sandra Webber and Alan Davis.
406. Do you have something you would like to say to us first?
(Mr Spellar) Yes, on this occasion I would like to, Madam Chairman, because I want to stress very highly the importance of buses in our overall transport strategy. They are the leading form of public transport in terms of journeys per year: 4.3 billion by bus, and normally then the comparison is to say 2.1 billion by rail, but I think it is even more impressive when one breaks that down into 970 million by London Underground, 134 million by light rail of which a sizeable percentage is the Docklands Light Railway and Croydon Tramlink, and 975 million by rail, of which of course a considerable percentage are suburban journeys in London. The reason I disaggregate those figures is to stress the overwhelming importance of buses in public transport outside the metropolis, and I think we need to bear that in mind in looking at the policy. We have set a target to increase that by 10 per cent over the next 10 years. We have also pledged to secure improvements in reliability and punctuality, and we believe this depends crucially on partnership between all the major stakeholders, and in particular between the bus operators and the local authorities. Every one of the key stakeholders wants the bus industry to flourish to attract more growth, to reduce dependence on the private car, and to provide socially useful services. Unfortunately, however, everyone sees the problems from their own perspective and there is a tendency in this industry to pin the blame on others, and you may have seen that in evidence presented to the Committee. Outside London I am trying to bring operators and local government together in a single forum to agree what are the obstacles to growth and how they can be overcome. My own view is that partnership is and should be the way forward but, where problems cannot be resolved through partnership, quality contracts provide an option. A number of successful local initiatives show what is possible in attracting new users who previously travelled by car. Growth figures of 21 per cent on routes in the West Midlands and 48 per cent in Nottingham show what is possible. Overall, taking the success stories together with the poor performers, we have seen a 1 per cent increase in patronage last year. That figure is not brilliant but we should see it in the context of years of absolute decline, and it does mean we are just about in line with our 10 per cent target but we could certainly do better than that. We are also keeping a close eye on the application of the Competition Act which both operators and local authorities think poses problems. It is not our intention that perfectly sensible arrangements to provide co-ordinated timetables and ticketing should fall foul of the law. We feel that some of the operators worries are unfounded, and if they were to talk to the Office of Fair Trading they could find a way round perceived problems. The Office of Fair Trading assure us that they are receptive to such approaches, as the Committee will be aware from the letter from the Director General which has been passed to yourselves. We are all aware of services that have been withdrawn both from commercial and subsidised routes, but pinpointing why this has happened and just how much of a problem it is, is more difficult. For example, bus operators point to the number of new registrations which they say offset withdrawals. I think we also all recognise there are a number of pressure points in the system. Driver shortages, particularly in some areas of the country, are examples that cause withdrawals but also if wages are increased to attract more drivers we have seen tender prices going up, although that may not be the only reason for increase in tender prices, and subsidising authorities are facing difficulties and hard choices. Now, the revenue support settlement this year took account of higher tender costs but more innovative solutions, such as demand responsive transport, may also hold the key. There are plenty of opportunities as well, both local authorities and the bus industry have made considerable investments in infrastructure and vehicles respectively, and government funding is at its highest for years. We would like to see local authorities take advantage of that funding to press further on bus priority measures. New technologies also would help provide better information about what services are available and real-time information at bus stops. People, as we are all aware, are far more likely to use buses if they can get accurate and up-to-date information about services. I think it is also important that, however much money we spend on the services, if people feel insecure or uncomfortable on the services because of the behaviour of other passengers, they are less likely to use them, so tackling bus security in its widest possible sense is also important in restoring public trust in bus services. One of the initiatives that is taking place there is in London and, while London is a different situation, we are fully in support of the Mayor's objectives in improving security on the buses, and particularly with Operation Seneca to tackle bus crime and some of the follow-on programmes from that. We also recognise, however, that the costs involved are high compared to other metropolitan areas. That, Chairman, is an introduction on some of the issues that we are addressing at the moment with regard to the bus industry.
407. That was a good gallop round the course, Minister. I think what would be interesting for us, since you mention the difficulties with the Competition Act, particularly because having taken evidence last week I am not sure that the Committee is convinced that the operators will get quite the clarity of direction that you seem to think if they talk to the Office of Fair Trading, is if you can tell us if you really believe that co-ordinated services are essential to provide a quality alternative to the car.
(Mr Spellar) I think in many areas they are extremely important: in some areas essential. What I think the letter from the Director General of the Office of Fair Trading does is to open up the opportunity which I think the bus operators and the local authorities should take up to engage in dialogue. I do not necessarily believe that the letter is the solution but I think it is a welcome move and it does take us somewhere along the road to being able again in this industry at least to ascertain what we are disagreeing on. That is one of the difficulties I have in this industry at the moment, and it is why I am calling the various operators together to a policy forum on 1 July, having had a lot of staff work undertaken before then. We may not agree on solutions but at the moment there is not even agreement on the problems.
408. I am sorry, that is all very useful but can I bring you back to the really important point which is the Competition Act? Whatever we say here there are lots of local authorities and bus companies who are quite convinced that they cannot co-ordinate their service frequencies. Would you be prepared to seek an exception from the Competition Act for service frequencies?
(Mr Spellar) The first thing I want them to do is approach the Office of Fair Trading on an informal basis so they are not caught with the ten thousand pounds or so cost that is involved, because what the Office of Fair Trading say to me is that, in many cases, when they are being cited as the obstacle to making a number of improvements, they have never even been approached on either an informal or formal basis. I have very real experience of correspondence with a number of Members of Parliament by a municipally owned bus company, where the chief executive of that bus company was citing the Office of Fair Trading in support of his position about not being able to cross-subsidise services, and we even got to the point where I got a clear direction from the Office of Fair Trading that this would not provide a problem, and he was still claiming that this was
409. We do not have to be coy about this, Minister. Which company was it?
(Mr Spellar) Nottingham, and I think the chief executive is no longer in the employ of the bus company. It may be, however, that it will still be the case that the competition regulations and their interpretation by the Office of Fair Trading may still provide a difficulty for bus operators and for local authorities in achieving their objectives on behalf of the passenger. At the moment my point is I am not clear that that is the case, and I really want the bus operators and the local authorities to be pressing these issues in order either to get an agreement or, indeed, to be able to say that they have not been able to resolve this.
410. I think perhaps in that case I will draw your attention to what Mr Vickers said to us last week: "Perhaps I could put that into the context of the block exemption in the Act. Under the Competition Act, which we have the duty of applying"he is talking about his own office"[the Act] has prohibitions on, among other things, anti-competitive agreements, so operators getting together to agree on a price or to agree on how much capacity to put on the market or... to agree on timings, as a general proposition would be an infringement of the law which we have the responsibility of enforcing". That is Mr Vickers. I would have thought that was quite clear, would you not?
(Mr Spellar) Well, it says "operators getting together". It does not say operators and local authorities, or passenger transport executives reaching an agreement that would maximise capacity and convenience for passengers, and it might well be that if you had operators colluding on something that was just in the interests of the bus companies rather than the interests of the passengers
411. That was not the question that was put to him. It was made clear that it was the interests of the consumers which was paramount.
(Mr Spellar) But the point I am making here is whether it is a case of operators in collusion as opposed to the public interest, the passengers' interest, being represented by the local authorities in order to be able to achieve the best combination of actions to help the travelling public.
412. Well, we were asking him at one point about frequencies and he went on to say, "... if, for example, you and I were to agree that you go on the hour and I go on the half hour, among other things that would entail an agreement that we would each supply one bus per hour and I think that is highly likely to infringe the law"timing, frequencies, the things we were raising with him which are very important and, frankly, when we asked him did he really think he would stand in the rain for half an hour to wait for a second bus, his evidence seemed to be a little specialisedin other words, rather relying on anecdote than fact.
(Mr Spellar) We want them to rely on fact and, as I said in a number of cases, the difficulty that we have come up against when we have been talking with the local authorities is that the bus operators say that they are precluded from doing this and we then talk to the Office of Fair Trading, who say, "But nobody has ever even raised this with us". If we get to the point where this is raised with the Office of Fair Trading and we then have systematic advice which we would generally agree would not be in the interests of the travelling public for the sort of reasons you are describing, then obviously that is a matter that we have to address. At the moment, in this industry we do not have a clear base case as to what is the problem, and there does seem to be a lack of communication between the various agencies
413. Well, that might be a matter you can take up with the office -
(Mr Spellar) I am not talking about your office: I am talking about the Office of Fair Trading, local authorities and, indeed, also the bus operators.
Chairman: I know exactly what you are saying.
414. Is not the blunt fact that the Office of Fair Trading has done nothing for the travelling public as far as buses are concerned that is useful, and it has done a huge amount that is not useful? The best thing is, is it not, to kick them out of this area altogether by getting a piece of legislation quickly which says it is none of their business?
(Mr Spellar) I think they would argue that you do not want a situation where bus companies are actively colluding with each other in order to look after their interests as opposed to the interests of the travelling public, and it is not inconceivable that that could happen. I think we do have to be
415. They have not stopped the industry contracting to basically four major companies, have they?
(Mr Spellar) Whether that is a natural process within the bus industry is one that I think it might be well worth examining and, indeed, whether this has been the situation going right the way back to transport in London in the 1930s.
416. The original 1985 Act is very clear and I can tell you because I suffered many hours in that Act. The original intention was to produce a great deal of competition with many companies, and not many of us would agree that that was the situation today?
(Mr Spellar) And the question that I am posing, to which I do not have the conclusive answer, is whether there is a natural evolution that takes place in bus operation which tends if not to monopoly supply at least very much to dominant supply, and I think we are seeing that in considerable numbers.
Chairman: And the big take away from the small, and the smart take away from the others.
417. So if I understand you correctly, I think I have listened quite carefully, it is the presumption of the Department of Transport that an integrated system involving a number of bus companies, if orchestrated by a passenger transport authority, would not be a breach of competition regulation but if organised independently by bus companies without any cognisance of the passenger transport authority might be?
(Mr Spellar) There is a certain danger in that. In other words, if it is being organised by the companies there is a danger of that being a collusion against the public.
418. But if orchestrated by the passenger transport authority, any passenger transport authority, your view is there would not prima facie be an objection?
(Mr Spellar) With a degree of visibility and transparency which would then ensure that it was quite clear
419. That is the view of the Department of Transport but are you assured that is also the Office of Fair Trading's view?
(Mr Spellar) No. This is precisely why I am saying that I want the bus companies and the local authorities to be pressing these issues with the Office of Fair Trading in order that we can then have a clear view as to whether there are real difficulties, or whether people are ducking before anyone throws them out.