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

Memorandum by the Passenger Transport Executive Group (Bus 14)



  1.  The Passenger Transport Executive Group (PTEG) represents the seven Passenger Transport Executives (PTEs) in the major conurbations outside London—Greater Manchester, Merseyside, South Yorkshire, Strathclyde, Tyne and Wear, West Midlands and West Yorkshire.

  2.  PTEs are heavily involved in working with bus operators, local authorities and others to promote high quality bus services and facilities within the development of an integrated public transport system for their areas. PTEs and their Passenger Transport Authorities (PTAs) have a duty to promote public transport, and therefore bus usage in their areas.

  3.  Bus patronage in the English PTE areas totals almost 1.2 billion trips a year, representing 85 per cent of all public transport trips. This represents almost a third of all bus patronage in England and Wales, similar to levels of patronage in London and the rest of England and Wales.


  4.  85 per cent of bus services in PTE areas are provided commercially; the remainder is provided by private sector operators under contract to PTEs. These contracts cost about £60 million a year at the present time, excluding home-to-school transport.

  5.  Special needs bus services, often door-to-door dial-a-ride bus services for those with particular mobility difficulties, are also provided under contract to PTEs. The costs of these contracts amount to some £25 million a year at the present time.

  6.  The PTEs administer concessionary fares schemes on behalf of their PTAs. These schemes provide free or reduced fares for elderly, blind and disabled persons and children. PTA schemes for elderly persons are more generous than the Government's half fare schemes in all PTE areas, with free travel provided in Merseyside and the West Midlands.

  7.  Total PTE "revenue foregone" payments to bus operators for participation in concessionary fare schemes amount to some £195 million a year.

  8.  In total, PTE payments to bus operators therefore amount to some £280 million a year. Passenger fare income provides an estimated £500 million. PTE payments therefore represent 35 per cent of income, taking these two sources together.

  9.  In addition, operators receive income from the Government through fuel duty rebate (FDR), which nationally is a further £270 million/year subsidy to the bus industry.

  10.  Whilst the operators maintain that continuing support is effectively a subsidy to the passenger and not the operator, its role and function in operator economics is unclear. Concessionary passengers account for a substantial proportion of their patronage and the rules governing their reimbursement have not been revisited for more than 16 years.

  11.  FDR funding for bus operators is outdated. Whilst we believe the level of funding should be retained, payments should be more focused on incentivising delivery of the Government's agenda to increase bus patronage by, for example, linking them to Local Transport Plan objectives.

  12.  It is PTEG's strongly held view, therefore, that concessionary fares subsidy along with FDR and subsidised bus services represent a network subsidy to the bus operators which should be aligned with public sector objectives. PTEG believes that PTEs should be able to specify minimum levels of service and quality in return for these substantial levels of subsidy.


  13.  Challenge funding has provided very useful additional resources which have enabled the development of innovative, tailor-made solutions, particularly in delivering the Government's social inclusion objectives where the deregulated market is failing to provide the services that people need to carry out their day-to-day activities. Many of the solutions have involved setting up locally based initiative using community transport organisations, transport co-operatives, taxi buses and shared taxis. In this way funding has gone directly into the communities and not to private operators.

  14.  Much of the challenge funding is geared to providing capital, which is fine for the provision of vehicles and interchange etc. But the provision of outreach workers and the improvement of service levels demands significant amounts of revenue expenditure. Government needs to acknowledge the downstream revenue consequences of capital spend eg maintenance. Similarly, there is also a need for robust exist strategies to ensure that improvements do not disappear when the funding runs out.

  15.  There are a number of practical problems that need to be addressed if practical solutions are to be developed. These include interoperable ticketing between innovative modes and mainstream commercial services and a possible relaxation of the 1985 rules on contracting, especially when voluntary or community transport organisations are partners.

  16.  The level of resources currently available, whilst welcome, can only scratch the surface. The programmes being developed, particularly under Urban Bus Challenge, need to be replicated across large swathes of our towns and cities. In this respect PTEG is concerned about the Government's tendency to channel new money through challenge competitions requiring "innovation" rather than supporting more conventional services which may provide the best means of provision in many cases.


  17.  During the 1990s all PTEs successfully developed and implemented bus quality partnerships with local bus operators and local authorities. In almost every case it was the PTE that initiated these partnerships. Improving the quality of bus services has resulted in significant increases in bus patronage. The A61 Quality Bus Initiative in Leeds, for example, delivered a 50 per cent increase in patronage.

  18.  Similarly, the West Midlands has seen public sector capital investment of over £50 million since 1996 in "bus showcase" projects by which all aspects of bus travel have been upgraded by bringing together best practice along major bus corridors. West Yorkshire now has two examples of guided busways operating as a result of the quality partnership approach.

  19.  Over recent years, and often as part of these partnership arrangements, bus companies have invested significantly in brand new low floor buses and customer care training of their drivers. Local authorities have invested in bus priority measures and provided means of level boarding at bus stops.

  20.  The legislation governing statutory bus quality partnerships prevent PTEs from specifying frequency of service and levels of fares. Buses provide most of the everyday travel needs of those without access to a car and "quality" bus services offer a viable choice to those who do have access to a car. The level and quality of bus services and the extent to which fares are affordable is therefore hugely important to the social inclusion agenda. This agenda is clearly not deliverable through statutory bus quality partnerships. PTEs will continue to work with bus operators to help deliver the "quality" end of the bus market but we do not believe that bus operators are capable of delivering social inclusion objectives.

  21.  PTE Group believes that the public sector should be able to specify the bus services it requires in PTE areas, therefore, and that operators should compete to provide these services. This would ensure that the public sector maximises the benefits of its investments and would enable social inclusion objectives to be achieved in a cost effective manner.

  22.  This could be a achieved through a bus quality contract approach. This enables profits from commercial services to be used to fund socially necessary services, brings together in a cost effective manner the wide range of separate PTE/bus operator arrangements (eg for quality partnerships, concessionary travel, pre-paid ticketing and information), introduces real competition between bus operators and allows public funding to be focused on delivering social inclusion objectives. Centro intends to examine whether bus quality contracts might offer the most economic, efficient and effective way of delivering bus service improvements in Coventry.

  23.  One difficulty with the implementation of bus quality contracts is the time needed to introduce them. Following all the processes means that quality contracts cannot be introduced within three years. One major issue is the stipulation that there has to be a 21 month period between approval by the Secretary of State for Transport and introduction. This period is excessive and unnecessary.

  24.  Despite the significant investment by the public and private sectors in recent years, bus services in PTE areas continue to have a relatively poor image and are often regarded by motorists as a mode of last resort. In a number of PTE areas, the historic decline in bus use has been halted but there is little sign of any significant growth in bus patronage overall. This contrasts with London where the quality contract approach has contributed to a sustained increase in bus patronage.

  25.  A comparison of bus patronage levels in London and the English PTE areas between 1990-91 and 2000-01 shows a very different picture, as shown in the attached graph. Annual patronage in London has grown by 15 per cent from 1.178 to 1.359 million. Annual patronage in PTE areas has declined by 25 per cent from 1.548 million to 1.161 million. At the start of the 1990s, bus patronage in PTE areas was almost a third higher than in London. By the end of the decade, bus patronage in PTE areas was 15 per cent lower than in London. (Source: DTLR Regional Transport Statistics, November 2001).

  26.  The Institute for Public Policy Research (IPPR) examined issues relating to the provision of better buses in the UK and published a book on the subject in February 2001. IPPR could find no justification for there being one means of delivering bus services in London and a completely different approach in the major conurbations outside London. IPPR recommended the use of bus quality contracts in the latter.

  27.  PTEG is not arguing of itself that subsidy to the bus industry is too high. Indeed, in comparison with other European countries it is too low. Nor is this to say that high subsidies in other countries is necessarily "good" if this involves structural inefficiency etc. There is no doubt, however, that fares levels are too high in PTE areas to meet social inclusion objectives. What PTEG does argue is that the present means of subsidising bus services is not transparent and is not related to performance, quality of service or meeting public sector objectives. If there was greater transparency, it would be possible to have a sensible debate about the appropriate level of subsidy to the industry.


  28.  Surveys across all PTEs show that bus passengers and potential bus passengers more than anything else want to see reliable and dependable bus services. Bus operators can only be expected to provide good operational performance if bus priority measures exist to protect buses from the increasing and variable levels of traffic congestion affecting many parts of PTE areas.

  29.  Bus priority measures are, therefore, essential, although the "red route" approach applied in London whereby all traffic, including buses, is speeded up is also being examined in a number of PTE areas.

  30.  Bus priority measures and "red routes" need to be properly enforced and this requires more attention than it has had in the past. A consensus seems to be emerging that a combination of non-police resources and cameras is the most effective means of ensuring this. The forthcoming legislation that will enable local authorities or their agents, under a de-criminalised parking regime, to apprehend motorists for travelling in bus lanes is, therefore, most welcome in this regard.

  31.  An increasing difficulty in the provision of much needed bus priority measures is the political difficulties of delivering these in the face of opposition from motorists and frontagers. There is a need for an ongoing commitment from all those involved including PTEs, operators, local authorities (who have the Traffic Regulation powers in PTE areas) and police to engage with local communities to promote the benefits of bus priority measures and their enforcement.


  32.  The Competition Act is making the development of statutory bus quality partnerships very difficult. On the one hand, the Transport Act encourages joint working between bus operators to meet passenger needs. On the other hand, the Competition Act seeks to ensure that these same operators compete with each other and do not, for example, agree to charge passengers the same fare for the same journey.

  33.  In reality, there is little real on-the-road competition between bus operators despite PTE areas being "good bus territory" with relatively high volumes of bus patronage. In virtually all instances, there is one dominant operator running the vast majority of bus services. This is most apparent in the West Midlands where one operator provides 80 per cent of bus mileage. But the same picture exists in other PTE areas when the bus market is broken down to district revealing more localised monopolies. For example, while First have 55 per cent of the bus market in West Yorkshire, that figure rises to 81 per cent in Bradford and 93 per cent in Calderdale. This lack of competition between operators may explain why there is no continuous improvement to customer service that exists in some other private sector marketplaces.

  34.  A number of PTE areas have little or no competition for subsidised bus service tenders. The costs of providing subsidised services have increased by many more times the level of inflation over the past year.

  35.  This lack of competition and the virtual monopoly position enjoyed by operators in certain areas means that many companies are generating what we consider to be excessive profits. Research commissioned by PTEG (Bus Operator Financial Performance in Metropolitan Areas—The TAS Partnership 2002) reveals that pre-tax profit margins are higher in PTE areas than elsewhere in the country. In the West Midlands, West Midlands Travel Limited, which operates over 80 per cent of bus services in Centro's area, returned a pre-tax profit margin of 25 per cent during 2000. This profit level, of some £44 million, equates to the concessionary travel payments made to the company by Centro.

  36.  The Traffic Commissioners have a key role in ensuring that bus services are provided in accordance with their registered details. PTE Group continues to be of the view that the Commissioners have insufficient staff to properly "police" that role in a proactive manner.

  37.  The recent establishment of operational performance standards by the Traffic Commissioner is welcomed, as is the intention to sensibly apply these standards taking into account causes of delay, such as traffic congestion, outside the control of bus operators. However, we are concerned that the standards to not adequately distinguish between non-operational delays of five minutes or more.

  38.  Given the overriding importance of operational performance to passengers, we would like to see performance information on bus routes published as a matter of course by operators. PTEs publish this information for their financially supported bus services. PTEs in South and West Yorkshire monitor commercial bus services. Other PTEs are seeking to work with bus operators to identify levels of operational performance for commercial bus services.

  39.  PTEs believe that there would be benefits to passengers and in other ways if service changes could only take place at fixed times in the year. A regular pattern of change dates three or four times a year would seem appropriate. A number of PTEs have sought/are seeking voluntary agreement to such arrangements. A system of quarterly changes has been working well in South Yorkshire for almost three years.


  40.  Mobility is a vital element of social inclusion. Over the past two decades the growth of car ownership has led to large-scale changes in the provision of many essential services, including:

    —  The growth of out of town centre shopping, particularly food supermarkets and the loss of more local shopping;

    —  More dispersed work place locations away from traditional centres serviced by bus routes, with many of the businesses locating there involving multi-shift finishing not easily served by traditional public transport;

    —  More dispersed leisure locations including cinemas, large nightclubs, fitness centres etc, where "peak periods" of use are when most bus services have run down or finished for the evening;

    —  Greater centralisation of health and training facilities on larger sites often away from main bus routes;

    —  The growing night-time economy in many major cities.

  41.  As already stated, 85 per cent of all public transport journeys in PTE areas are made by bus. Improvements to bus services are therefore essential to improving the quality of life and well being of many members of the community, by ensuring access to essential services and opportunities. The bus is particularly important to the following:

    —  Young people, particularly those below the minimum age for car licence ownersahip;

    —  Elderly people, many of whom are forced to give up using the car because of infirmity;

    —  Students;

    —  People with mobility problems;

    —  Women, who remain the major users of bus services despite large increases in licence holding;

    —  Unemployed people and those on low incomes, many of who are forced to take lower paid local jobs because they do not have access to, or cannot rely on, bus services to get them to better paid jobs.

  42.  The above includes many people most likely to suffer from social exclusion because of their reliance on bus services. The issues that need to be overcome to provide these people with a good quality of life include:

    —  The tendency for many operators to concentrate their commercial services on main road corridors, leaving some areas such as housing estates isolated at certain times of the day and cut off from essential services;

    —  The lack of vision by operators in providing bus services to new developments offering both jobs and services;

    —  The increasing cost of providing subsidised bus services to meet social need;

    —  The increasing cost of travelling by bus which makes the cost of travel prohibitively expensive for those most in need in our society and unattractive to those who do have a choice.

  43.  With 85 per cent of all bus services in PTE areas operated commercially, the ability of PTAs/PTEs to address these barriers and to integrate their bus strategies with wider social and regeneration policies is extremely limited. Bus quality partnerships are being pursued in many areas but these are essentially agreements to co-operate to provide a major capital investments in the provision of bus services and facilities.


  44.  The main conclusions of PTE Group are set out below:

    (a)  The substantial levels of public sector funding of bus services in PTE areas should be better focused and aligned with achieving public sector objectives.

    (b)  Urban and Rural bus challenge funding is welcomed but is insufficient to meet needs, and revenue implications need to be addressed to sustain existing schemes.

    (c)  Social inclusion cannot be delivered through statutory quality partnerships because of the legal constraints on what can be included in such agreements.

    (d)  Bus patronage in PTE areas declined by 25 per cent in the 1990s compared with a 15 per cent increase in bus patronage in London over the same period.

    (e)  The Institute for Public Policy Research is correct in its view that there is no justification for there being one means of delivering bus services in London and a completely different approach in the major conurbations outside London.

    (f)  The Competition Act is making the development of statutory bus quality partnerships very difficult.

    (g)  There is little real on-the-road competition between bus companies in PTE areas, and many PTEs experience little competition for tendered bus services.

    (h)  The costs of tendered bus services has increased markedly over the last year.

    (i)  Bus quality contracts offer the opportunity to use public funding of bus services to meet public sector objectives, including the reduction of social exclusion.

    (j)  Bus quality contracts will introduce the prospect of real competition between bus companies, will be resisted by many bus companies, and are difficult and time consuming to introduce within current legislation. The 21 month time period for their introduction should be reduced.

    (k)  The only other approach within existing legislation, would be a new voluntary agreement between the public sector and bus operators to provide a specific level and quality of bus network in return for a specific level of public sector funding. Such an arrangement may not be acceptable to the competition authorities.

12 April 2002

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