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

Memorandum by Greater Manchester Passenger Transport Authority (Bus 04)



  1.1  The Greater Manchester Passenger Transport Authority submits the following memorandum to the House of Commons Transport Select Committee's new inquiry into the bus industry with a view to providing the Committee with information relating to its experience of working to improve bus services within the current financial and regulatory environment.

  1.2  This submission complements that provided by the Passenger Transport Executive Group (PTEG) and looks specifically at the role of the public sector subsidy to the bus industry in one of the UK's largest Metropolitan areas. It is based on the work done by the Authority as part of its Best Value Review of Bus Revenue Support which was completed at the end of 2001. (A copy of the final report is available at the Committee's request). During this review the Authority has had cause to consider:

    —  The role of the public sector bus subsidy to the private sector bus industry;

    —  The dynamics of the commercial bus market including levels of competition, regulation and development of the market; and

    —  The effectiveness of bus services as a mechanism for tackling social exclusion and encouraging people to move from the private car onto public transport.

  1.3  The purpose of the review was to establish how the public sector subsidy might be used more effectively as a lever to achieve improvements to the quality and accessibility of the commercial bus network. Its conclusion was that the priorities of the public, bus users, the bus industry and the Authority would be best served by the development of a voluntary quality contract environment in Greater Manchester. Through an active partnership with local bus operators, the intention of the Authority over a period of three to five years, is to reallocate some or all of the concessionary fares payments to a central "pot" for operators to then determine how they can deliver a specified network (commercial and supported combined) determined by the Authority and the 10 metropolitan district councils.

  1.4  The Greater Manchester Passenger Transport Authority wishes to draw the Committee's attention to its proposal in the belief that it offers an effective way of delivering improved bus services for passengers more cost effectively, more quickly and, it is hoped, with more support from the bus industry than would be achieved by pursuing Quality Contracts.

  1.5  However, this cannot be achieved without some of the myriad of regulations surrounding this area, designed to prevent any public sector interference or regulation of the commercial bus companies, being relaxed by the Government.

  1.6  It is the belief of the Passenger Transport Authority of Greater Manchester that the most effective way to improve bus services in the long-run is through a balance of regulation and investment delivered through a real partnership with the industry that ensures its engagement with the priorities of the Government and the public.


  2.1  Greater Manchester has a population of over 2.5 million, covers 10 district councils and of the 214 wards 32 per cent are in the 10 per cent most deprived in the Country. Buses carry around 220 million passengers each year in the conurbation. Putting this in context, the hugely successful Metrolink tram system carries around 17 million passengers each year while the whole of the Greater Manchester rail network carries some 14 million passengers.

  2.2  While the numbers of passenger trips is large at 220 million, bus patronage has declined steadily since 1986 when it was 355 million (in the last two years patronage levels have levelled off and there is some recent evidence of growth). This trend is consistent with trends in other metropolitan areas but not with London where patronage levels have increased considerably. While some of this decline in patronage is undoubtedly due to increased car ownership, the experience of London would suggest that other market factors are playing a part. These other factors include fare levels, service punctuality and reliability, network reach and quality of buses, infrastructure at bus stations and stops and the fact that outside of London the market is totally deregulated.

  2.3  Those people who have transferred from the bus have, in the main, moved to using cars. While the introduction of the tram system has seen an increase in the number of public transport trips, evidence suggests that most people travelling on the tram have switched from the car rather than the bus. Greater Manchester has one of the highest levels of commuter journeys made by car of any metropolitan county at 73 per cent.

  2.4  Given this scenario a major policy imperative of the Authority is to achieve modal shift. It recognises that if the share of journeys made by public transport is to increase the bus must play a bigger role in meeting transport needs. The districts and the PTA/E of Greater Manchester are working to deliver the bus initiatives as outlined in the Local Transport Plan which focus, in the main, on making bus a more attractive alternative to the car. Initiatives such as quality bus corridors are an important element of the Authority's portfolio of measures aimed at improving the reliability, punctuality and public perception of the bus. Such initiatives build on the lessons learned from modes such as the Metrolink tram system where regular, reliable services have encouraged people from their cars.

  2.5  Bus priority measures are welcomed by the bus industry which has difficulty achieving regularity of services as a result of congestion. Such measures also support an overall trend in the bus industry towards a concentration on the more lucrative core radial routes. The delivery of Quality Bus Corridors has been made easier by partnership working with the bus industry and this has contributed to a level of confidence that has meant local operators have been willing to discuss arrangements for the joint monitoring of the punctuality and reliability of the network. This is a major step forward as in the past there were very limited measures in place to enable us to assess the success of such schemes.

  2.6  Such initiatives represent, however, a relatively small contribution to the overall improvement of bus services. Overall satisfaction levels for bus services in Greater Manchester are running at only 57 per cent (close to the average for metropolitan counties). Buses are not held in high regard by users and potential users. The poor image of the bus industry which does not seem to provide the quality of service across the county that people demand, combined with the extremely limited degree of public leverage in spite of significant public subsidies is an issue of major local concern. We are pleased to note that this is also now becoming a matter of national debate.


  3.1  The bus is not the preferred choice of most people as a method of transportation. This means that the regular bus user is typically someone not able to own or access a car. As the Government itself has identified (Workhorse to Thoroughbred) the bus user is usually female, often elderly or with children.

  3.2  The bus remains, however, the main form of public transport in Greater Manchester. This means that many people are reliant on it for access to work, hospitals, leisure facilities and so on. To this end, the bus is a crucial contributor to the social, economic and environmental wellbeing of the conurbation. Unfortunately the trend of the bus industry to concentrate on the core routes has to some extent been at the expense of more peripheral services and makes cross town or city journeys difficult. Recent trends have exacerbated the isolation of rural and certain urban communities. The gradual contraction of the network around core routes combined with increased incidences of anti-social behaviour has led to certain areas (housing estates) becoming areas with no bus service. These are often areas with high levels of social deprivation and the withdrawal of bus services only adds to existing problems. The Authority, through the Rural and Urban Bus Challenges and through partnership working with the police and other agencies, has been able to improve the level of transport provision in key areas of the conurbation very effectively and, thereby bridge the gap left by the commercial network.

  3.3  However, this is not a long-term or comprehensive solution. The commercial bus network is undergoing a change, partly in response to changes in people's travel patterns and lifestyles. Bus services need to respond more effectively to these trends by seeking to address travel needs of different areas in a more tailor-made way. Combining community services, demand responsive subsidised services and commercially provided minibuses is arguably better value for the public purse and likely to provide a better service to the public. This user-led approach is, therefore, one that the Authority wishes to place increased emphasis on, supported by funds switched from the currently opaque subsidy for concessionary fares.


  4.1  Bus subsidy takes the form of reimbursement to bus operators for participation in the concessionary fares scheme and the procurement of non-commercial bus services at times of the day and to parts of the conurbation that commercial services do not cover. Greater Manchester's concessionary fares scheme allows the elderly, disabled people and children to travel on buses at reduced fares and is accessed by 25 per cent of the population. Procured services account for 15 per cent of the Greater Manchester network and over 60 per cent of bus services have some subsidised element. These statistics indicate the crucial role of public sector monies in ensuring that socially excluded groups can travel and the extent to which the commercial network is supported.

  4.2  Greater Manchester, in line with other passenger transport authorities, spends a considerable part of its revenue budget on bus revenue support. Just over half of its revenue budget (excluding the rail grant), £54 million in 2001-02, is spent on bus subsidies. This expenditure has come under increasing pressure and scrutiny from the district councils that provide the PTA's levy as it:

    —  competes with other local imperatives;

    —  increases year on year often above the rate of inflation; and

    —  is non-transparent and it is, therefore, difficult to assess its effectiveness.

  The public subsidy paid to the bus industry is unusual in that it is paid with virtually no link to the performance of the service. There is little requirement on the bus industry to be fully accountable for the subsidy. Further, the Concessionary Fares Regulations 1986 require that the PTA undertake on-board patronage surveys for the purposes of the reimbursement calculations and yet have no access under law to this data. Thus, while patronage data for the industry is already available it can not be accessed.

  4.3  Greater Manchester Passenger Transport Authority, through its review of the bus subsidy that it pays to operators, has concluded that efforts need to be made to find a way to link the subsidy more closely to the performance of the bus industry and to the delivery of service improvements. Within the current legislative and regulatory environment this can only be achieved by reallocating funds from concessionary fares into support for the network in the form of procurement of socially necessary services. At least here there is an opportunity to evaluate the outputs and judge whether value for money is being achieved.

  4.4  This does not go far enough however, and we would like to reach a point where all the money paid to the bus industry is linked in some way with outputs. For us to achieve this we need the Government to re-examine the regulatory and legislative framework surrounding this area. We believe that an effective mechanism for achieving this would be for the GMPTA to be given the opportunity to enter into a Public Service Agreement where challenging targets for patronage growth and improved accessibility criteria could be agreed along with regulatory and financial freedoms.


  5.1  It is argued by the bus operators that support paid for concessionary passengers is a payment for a service and leaves them in a neutral financial position. The Greater Manchester Passenger Transport Authority, however, firmly believes that, at one-third of operators' revenues, concessionary support acts effectively as a network subsidy—if it were sharply reduced there would undoubtedly be a major reduction in service levels/increase in fares and an effect on operators' rates of return. The payment is not transparent in terms of the outputs which it delivers to the public at large. The Concessionary Travel Regulations, which govern reimbursement, have not been revisited since deregulation in 1986 and, in many ways, act as a perverse incentive to bus operators in the sense that because they are linked to average fares any sudden reduction leads directly to fares increases (driving up the average fare) or service reductions—in either event, the net effect is patronage loss and a vicious circle of decline. It is the firm view of the Passenger Transport Authority that these regulations need revision in order to improve transparency and to establish (along with other subsidies) the basis for an agreed set of outputs for the public sector and certainty of payment for the operators. Based upon such an agreement it would be possible to improve collaboration between the public and private sectors using subsidy in a manner which can encourage a "virtuous circle" of increased patronage and investment in the network. It can also, through improved transparency, show clearly whether or not there is a case for increased subsidy to meet public sector objectives.

  5.2  Lack of transparency in subsidy also makes it difficult, if not impossible, to show the role of subsidy in operator returns. It is quite clear from independent research that the rates of return to operators in metropolitan areas are high in absolute terms but, as importantly, higher than those earned in London and other non-metropolitan areas.

  5.3  At deregulation it was believed that competition in the bus market would force efficiencies which would reduce costs and, therefore, fares and drive service improvements. This has not materialised. While it is certainly the case that early inefficiencies were driven out of the industry, the expansion of bus services has not happened and over recent years the effectiveness of local bus services in providing for the travel needs of people who are dependent on bus services has been deteriorating.

  5.4  It should, however, be noted that the overall level of subsidy in the UK at 32 per cent (22 per cent for Greater Manchester) is the lowest in Europe. In some countries up to 70 per cent of operator income comes from public subsidy. This is not to say that 70 per cent is, of itself, a "good thing" and can often hide industry and structural inefficiencies. Nevertheless, to achieve improved service from the bus industry without substantially increasing the level of subsidy requires an engagement of the industry and an improved alignment of their strategies with the policy aims of local and national Government.


  6.1  Revenue funding in the bus industry compares unfavourably with the levels in many European countries. Furthermore, because of the way the public subsidy is paid to the industry, little accountability exists within the industry for the quality of the service offered in return for the public funds paid.

  6.2  The Transport Act 2000 does allow us to improve bus service performance by way of quality partnerships and, ultimately, quality contracts. However, delivery of quality contracts is a very lengthy process. It is also likely to be an expensive option and will be heavily resisted by the bus industry.

  6.3  Given this situation the PTA has attempted to find a way of achieving greater accountability and enhanced service performance from the bus industry through more effective use of the public subsidy paid in a manner that engages the industry. To be effective, this requires the full engagement of local bus operators, a relaxation of regulations and importantly Government support. Should this approach be unsuccessful, it is the intention of Greater Manchester Passenger Transport Authority, in line with other UK PTAs, to pursue quality contracts since the poor overall level of bus services can no longer be tolerated.

April 2002

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 12 September 2002