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

Memorandum by the Association of Transport Co-ordinating Officers (Bus 31)



  1.1  The Association of Transport Co-ordinating Officers (ATCO) represents local authority officers who are responsible for securing passenger transport provision on behalf of Councils and Passenger Transport Executives throughout the United Kingdom. Formed in 1974, ATCO now has around 450 members whose membership is individual, as opposed to on behalf of their employing authorities, allowing the Association to make impartial professional comment on passenger transport issues.

  1.2  ATCO is pleased to make the following submission which is arranged so as to cover the five issues which the Sub-Committee wishes to consider.


  2.1  Work being carried out nationally on behalf of the Commission for Integrated Transport has confirmed that it is appropriate for subsidies to be provided to the bus industry to assist with meeting the twin objectives of reducing social exclusion and encouraging modal shift away from the private car towards public transport. Such subsidies are currently provided in the following ways:

    —  fuel duty rebate based on mileage operated

    —  local authority subsidy paid to operators as a result of a contract being awarded

    —  subsidy channelled through local authorities from rural bus subsidy grant, rural and urban bus challenge and rural transport partnership initiatives

    —  payments made to operators (by district, not county councils) as a result of accepting concessionary fare passes for pensioners and disabled people.

  2.2  In addition, operators receive indirect benefits from capital expenditure on highway related schemes including bus priorities and receive substantial funding as a result of contracts or the purchase of season tickets for scholars entitled to free home to school transport.

  2.3  Although operators receive substantial amounts of funding through the public purse, the outcome is still a situation where there is low customer satisfaction, where services change at short notice and where there is often a requirement for urgent injections of additional local authority funding to maintain services, support that has not been budgeted for. The last two years have witnessed a change in strategy by the major bus groups in terms of the service provision with a much greater emphasis now being placed on concentrating resources on what they commercially assess as their core markets at the expense of other routes and services.

  2.4  In October last year, ATCO undertook its fourth annual Price, Expenditure and Competition survey which looks at trends over the last 12 months, based on returns from the majority of authorities around the country. This survey is attached as Appendix 1. The survey shows that in the last year the average cost of retendered bus contracts was 21 per cent higher than the contracts that were replaced, the highest ever in the four years to date. In addition, authorities have had to find almost 10 million pounds to support newly withdrawn commercial services, 75 per cent more than last year. Therefore authorities are needing to find a budget increase of 10.8 per cent if they are to maintain existing service levels during the current financial year and in fact, since that sort of increase often isn't practical, the survey showed that 29 per cent of authorities were planning to make cuts in supported services by the end of 2001-02. The trends are very similar for school transport where, of course, authorities have no alternative but to find the money to maintain services for entitled children.

  2.5  The effect of all this in practical terms, is that almost 1.5 million commercial bus journeys will not run next year because they have been deregistered and authorities do not have the funds to replace them, and a further 0.5 million supported journeys will disappear because of insufficient funds (in both cases about 50 per cent worse than last year) and removes 5,000 journeys per day from the bus network. ATCO has calculated that this rate of erosion would completely negate the positive effect of the Rural Bus Subsidy Grant over the current three year period to 2004 and the total number of bus journeys will have declined during this period. As a supplement to the Price, Expenditure and Competition survey, ATCO gathered first-hand evidence of service withdrawals from authorities.

  2.6  This situation points to the need for direct help from government in recognition of this issue through the provision of higher long-term revenue funding for local authorities. Such funding needs to reflect the fact that there is every reason to suppose that the trends will continue as commercial operators wrestle with higher costs and concentrate on core networks. It has to be long-term because there needs to be the confidence to plan for the future including longer-term contracts which encourage investment. Finally, the funding needs to be revenue based, because whereas capital funding has increased, the reverse is true for revenue leaving a real danger of having an improved infrastructure with the same or even a poorer level of service.

  2.7  Overall, this is the most pressing problem for local authorities at the present time. If authorities' local transport plans are to be an effective tool for delivering the Government's strategic transport objectives, they must be accompanied by an integrated funding strategy that recognises the volatility of the bus industry and the increasing cost of providing the level and quality of service that the public expects.

  2.8  There has been an increasing emphasis on challenge funding and the resources this requires in terms of bidding. This is far from ideal. Although additional funding for public transport through the various challenge funding processes has been welcomed and some authorities have benefited considerably, the amount of time spent on making the bids is significant. Staff resources are scarce and there is concern about the amount of time being spent on abortive bids. Given that only one fifth of the bids for urban bus challenge funding were successful, questions should be asked as to whether this type of competition provides an effective use of staff resources. In addition, the insistence on "additionality" means that the winning authorities often have serious deficiencies in their core network, and yet have new services in other areas. Finally, the challenge funding is time-limited, which, given that such projects by their very nature are unlikely to become commercial is a further long-term pressure on budgets.

  2.9  In summary, rural and urban areas would benefit more from authorities having sufficient "core" funding from Central Government to allow the creation and maintenance of a substantial network. The total required would be a fraction of what has/will be spent on railways and yet would have a far greater impact on modal shift.


  3.1  There is a need to re-examine the frameworks within which local authorities can effectively engage with the commercial sector.

  3.2  Local authorities are in the process of preparing bus strategies which will set out the objectives of the network in terms of increasing social inclusion and achieving modal shift. QPs and QCs were established through the Transport Act 2000 to assist authorities with the implementation of their strategies. It is important to recognise that these two concepts are means to achieve objectives rather than objectives in themselves and hence should be seen as two amongst other potential complementary procurement strategies.

  3.3  In some markets, particularly inter-urban and large urban, the bus strategy objectives will probably be met by an operation that is wholly or mostly commercial. Here, QPs will work on the best routes and will add value to the commercial network. This is because the partners share the common objective of increasing the number of people travelling by bus. This is good for operators as it should increase their income and good for local authorities as it may lead to a reduction in congestion and possibly can reduce social exclusion. In such a situation, the operators will be keen to strengthen the network further by increasing frequencies to a level necessary to achieve modal shift and make that network a priority for the provision of new fully accessible buses. Where this happens, local authorities may be welling to re-allocate scarce road space in favour of the bus and impose potentially unpopular traffic restraint measures to further encourage modal shift and a growth in bus use. This creates a fertile ground for a QP. Many new schemes are being launched in this way and some are producing impressive growth in usage through increases in service levels, attractive fares policies, strong marketing backed up by bus priority schemes, better waiting facilities and real-time information.

  3.4  At the other extreme, in deep rural areas, none of the network is commercial and it is possible to plan and tender a wholly contracted arrangement in line with the bus strategy objectives. Here there are a range of challenge competitions, partnerships and grant schemes that can help us to try new approaches to local transport, subject to the funding drawbacks mentioned in the previous section. These features give a good chance of progress to be made in a co-ordinated way.

  3.5  But there is a real problem in the area in between these two extremes. In the middle are the routes that cannot support the QP approach in its true sense, but which do not fall into the rural category. Away from the star performers, there is a second division of services where any investment by the local authority is in danger of being matched by little more than vehicle investment, most of which was probably already due, there being no corresponding improvement in service levels, fares or marketing. Here, the local authority will find it more difficult to justify the provision of bus priorities and will be less able to introduce traffic restraint measures. Statutory QPs could be applicable here, of course, but these exclude service levels and fares, the very elements at issue, so there is no rush to reach such agreements.

  3.6  Large parts of existing networks exhibit the features of this middle ground. Typically there will be just a few marginally commercial routes, often dependent on school movements, with the majority of services being wholly or partially supported by the local authority. This issue can be referred to as the "middle-sized town" problem but that is a fairly loose definition as many diverse areas demonstrate service patterns of this nature including suburban areas and rural inter-urban corridors. What they have in common is that these are the areas that operators have been withdrawing from in the past year or so as they focus on core networks.

  3.7  A different approach is needed here to ensure investment (particularly in vehicles) and to maintain a stable network and one where there is a comprehensive service where modal shift is the objective. This is a situation where a QC for the provision for the whole network of services within a defined area might be a useful way ahead. Such a QC would specify a minimum standard with the operator/partner being given every encouragement to beat the standard. The operator would normally take the revenue risk and therefore have the incentive to grow the market by increasing ridership.

  3.8  A QC approach has to be a real option, but any application is going to take two years to achieve, will blight the network in the process, will lead to difficult relationships with operators and through the application of a test of this being "the only available way" gives the impression to authorities that there is a presumption against government approval anyway. There is also the fundamental point that in many areas there is a lack of operators who would potentially be in a position to bid for a QC, often only one, so the authority risks being faced with a monopolistic price for its specification.

  3.9  There might, therefore, be case for looking for a third option to suit the middle ground that represents a "halfway house" between QPs and QCs. The basis for this thought is that at the margins, the commercial operators have little to lose and much to gain if they work closely with the local authority. By focusing in on core routes for perfectly sound business reasons they have effectively removed the grounds that they had for wanting to maintain the status quo in those areas from which they have retreated. They normally still have a presence but it is often half-hearted, gets in the way of planning the network, isn't being marketed and the routes concerned will probably be the next to be withdrawn anyway. There is almost only one operator left running commercial services, so there is little or no competition, itself the main reason for having the current system. It may be possible, therefore, to recognise that provided that the operator still operates a few core commercial routes and is committed to the area in the long term then a positive way ahead for both parties (and the user) would be to work together to achieve network benefits, producing a Quality Network (QN). In particular, the operator has little to lose by participating and may indeed gain in terms of increased business potential.

  3.10  In such an environment the local authority and incumbent commercial bus operator(s) would work together to facilitate a clean-sheet review of the operation and funding of transport services within the QN concerned, including local bus services, school transport and social services movements, with the aim of identifying and implementing enhancements to the network, both in terms of efficiency of supply of transport and improved facilities to meet demand. Such work would fit well with the principles enshrined in the current best value regime as applied to local government.

  3.11  The bus operators would include their marginally commercial services in the analysis, supplying data for that purpose. Any strongly commercial services where real progress might be possible through the QP approach would be exempt, on the presumption that the operator would agree in principle to take such a QP forward, although (as always) the local authority might make suggestions about these services which would be pursued at the operators discretion.

  3.12  The "clean sheet" review would specify a minimum service requirement for each corridor consistent with the authority's bus strategy and identify opportunities for integration of public, education and social services transport, particularly where use of accessible vehicles can be maximised, thereby removing wasteful operation arising from duplication or lack of demand. It would aim to expand the network to better meet needs, possibly including the introduction of flexible "demand responsive" services, normally using smaller accessible vehicles. It would consider the potential for an attractive fares policy to improve affordability particularly for certain groups and for the implementation of an effective marketing campaign designed to create awareness and a positive perception of the QN.

  3.13  The result would be a network that better meets public needs, is more co-ordinated and efficient. The revised network could then be implemented across the area with the incumbent operator(s) having the first opportunity to meet the specification (or exceed it) by adjusting commercial services. The likely scenario here is that whereas any strongly commercial services might be adjusted by the operator for business reasons, more marginal commercial services would be amended with support from the local authority to reflect the overall aims of package. The financial regime in the latter case would need to be totally transparent and the local authority would need to demonstrate why it was sensible to proceed in this way rather than seek competitive tenders. Any agreement would be very likely to exceed the current Transport Act 1985 de-minimis limits. The whole package would then be marketed as an entity and promoted on a joint basis.

  3.14  This approach would stand a chance of growing ridership and improving the viability of the marginally commercial services, bringing benefits for both the local authority and the operator. It can be pursued within existing legislation and regulations, but real progress in developing stronger networks would be much enhanced by experimenting with a different approach on a number of issues, giving more freedom and flexibility within designated QN areas. These issues are discussed in more detail in Appendix 3.

  3.15  Of the issues listed in Appendix 3 the most important is that of the de-minimis limits. The best value regime provides a mechanism through which local authorities are more accountable for their decisions and the Transport Act 2000 provides for tender awards to be made on the basis of best value principles. In this climate, suspension of de-minimis limits within a QN approach would seem entirely legitimate.

  3.16  It may be desirable to try to test most or all of these ideas in a few trial areas where they could be implemented as a package to see if they make a difference to the usage and viability of services. This would be similar to the trail areas for deregulation in Hereford and Norfolk in the early 1980s, although the mechanism for creating such areas might need to be different. In seeking such a trial area, local authorities would need to show that the operators of commercial services were signed up to the QN approach and were active participants in it. Other operators could apply to register commercial services in the area, although by the very nature of the area this may be unlikely, but to have their registration accepted by the Traffic Commissioners they would have to show that they were willing to operate within the standards applying in the trial area. For example, this means that they would need to match the vehicle standards of the existing QN operators, comply with change dates/notice periods, co-ordinate their journey times.

  3.17  These ideas need further work. ATCO will be commissioning research in the next few months, which will look at some potential towns where this approach might have benefits. ATCO is also working with the LGA in taking forward the Pathfinder Council project, which is also considering these issues.


  4.1  Where the objective of a transport network in an area is to achieve modal shift, it is likely that this objective has arisen because of existing or future congestion. Consequently, it is most likely that bus priority measures will be part of an overall strategy to deliver a high quality alternative to the private car. Bus priority measures can take many forms—bus lanes, bus only streets or turns, selective vehicle detection at traffic signals, for example. The most appropriate form of bus priority will depend on local circumstances. Their primary objective is to improve the reliability and regularity of bus services so that people can rely on them when choosing to use buses rather than cars. A secondary objective may be to reduce journey times. Whatever the objective, an appropriate bus priority scheme can help achieve these objectives along with other measures to reduce boarding times, for example.

  4.2  To be effective, bus priority schemes need to be enforced. That applies equally to other traffic management measures to ensure effective use of road space, including the monitoring of on-street car parking. Evidence suggests that this can be better achieved where the local authority has taken on board powers to decriminalise parking through setting up a special parking area. The income from this can be used to fund enforcement and also other transport improvements. It would be logical for local authorities to extend these powers to include the enforcement of bus priority schemes.


  5.1  The provision of bus services is still considered as an essential public service by users and non-users alike. Since 1986, governments have taken the view that this can be best achieved by companies approaching the task from a commercial perspective. Regulations relating to the extent of the provision of services and fares were swept away and replaced by "safety net" regulations relating to notice given on how and when services could be changed. Local authorities were given powers to fill gaps in service by seeking tenders for those considered as socially necessary. Regulations relating to safety (quality licensing) were largely unchanged and have proved less controversial.

  5.2  It is still difficult for many people to accept that bus companies do not have an obligation to provide a full range of services in an area and have the freedom to "cherry pick" good routes and times of day rather than have to provide a comprehensive service. This is compounded by the fact that increasingly in most areas there exists a monopoly operator and no competition. Unlike many other service industries, customers often do not have the choice as to the company that can best meet their needs. Barriers to entry into a new area are high as the incumbent operator is able to adapt its services quickly and easily to see off a potential competitor. This state of affairs can also be very frustrating for a local authority as it is often unable to respond effectively to the legitimate concerns of its citizens about the quality of what they perceive to be a public service.

  5.3  Where this is of concern to the local authority and there is a belief that the existing mix of commercial and contracted services do not meet the needs of an area, the local authority could have greater ability to influence the situation through securing a QC for that area. The merits of this approach and of the alternative, a QN, are addressed in the previous section.

  5.4  In rural areas the potential for taxis and hire cars to provide bus services is often perceived to have been neglected. This has been largely due to the fact that most taxi operators tend to be based in towns and confine themselves to the work which rewards them best—plying for hire at ranks and on the street. Private hire car operators, on the other hand, find it easier to obtain a private hire car licence and are often more willing to provide services in rural areas, albeit only as shared hire cars. Under the Transport Act 1985, only taxi operators can apply for a special restricted PSV operators' licence which enable them to become taxi buses. Private hire cars can only do this by obtaining a restricted PSV operators' licence. Neither of these mechanisms has appeared attractive to operators, hence a review of the regulations governing private hire car operations might be worthwhile to enable new operators with vehicles with less than nine passenger seats to enter the market and provide taxi bus type services.

  5.5  An important issue is the lack of co-ordination between services where there are two or more dominant operators. Since the Competition Act 1998 came into force and the Office of Fair Trading has focused its attention on the bus industry, operators have been less unwilling to engage in dialogue regarding the future development of services. At one level, this has made it difficult to introduce QPs as operators will not commit themselves to future service levels along given corridors or the provision of new buses. At another level, service changes are no longer co-ordinated with the result that one corridor may have a large number of buses per hour while another has had its service withdrawn completely. Changes to fares are also no longer co-ordinated with the effect of fares on one operator's services being different from those on another for the same journey. The outcome is lower customer satisfaction as bus users cannot understand why these practices exist and why the network cannot be co-ordinated for the benefit of users.

  5.6  Over the past few years, clarification of the legal distinctions between services which can be operated under UK domestic drivers' hours regulations and those which fall within scope of EC regulations has resulted in the loss of a number of direct bus links between major centres that are more than 50kms apart. The additional cost burden of adherence to the EC regulations on longer routes is a deterrent to the development of sub-regional and regional services; bus operators are often reluctant to mix work that is in-scope and out of scope of EC regulations and the potential for local authorities to secure such services has therefore diminished. The resultant requirement for passengers to change buses part way through a journey (simply because the needs of the route may be 60km apart) is an obvious deterrent to the achievement of passenger growth. In a wider context, there is little doubt that the imposition of EC regulations on local bus service operations would lead to significant network reductions to meet the need for (or cost of) the additional drivers that would otherwise have to be recruited.


  6.1  Bus services are a means to an end. They are a means of enabling people to gain access to work, shops, education establishments, leisure facilities, medical facilities and friends. In fact for many people they are essential for maintaining a fulfilling life. The role of the bus in providing a link can be made in other ways-by other types of transport service, by bringing the service to the person eg home deliveries or electronically. But discussions with groups of people in villages highlight the importance to their quality of life in having the ability to leave their village or home environment from time to time and to travel elsewhere. It is very difficult to place a value on this quality of life issue.

  6.2  The number of people dependent upon bus services has declined as car ownership has increased but hey have often become more difficult to serve as the facilities people need to reach have centralised and often moved to locations easily accessible by car but remote from traditional bus routes.

  6.3  It is important to recognise that personal poverty does not necessarily mean transport poverty. Many towns and cities have several large local authority housing estates on the periphery of the urban development. Often these will have high levels of deprivation and low levels of car ownership. For those very reasons they have the most frequent bus services, the one exception often being that as evening networks have contracted those on the periphery have been excluded to such an extent that they will no longer travel as alternative services are some distance away leading to fear of crime issues or they will use taxis which are more expensive and hence will only be affordable on a less frequent basis.

  6.4  The social deprivation often occurs in middle class areas, where most households have several cars, but where there are also large numbers of (typically) elderly people who do not drive. They are not necessarily short of money, but they are short of bus services. The OFT rules on reciprocal ticket recognition most frequently hurt those on reduced incomes, for whom many journeys require the use of more than one bus.

  6.5  Similarly, social exclusion has often been seen as a rural problem. But it is now becoming increasingly a medium sized town problem as towns of 25,000-50,000 have often lost facilities eg hospitals or their traditional town centres have suffered decline as retail, leisure and office facilities have sought to relocate on edge of town sites.


  7.1  The Government's 10-Year Plan for transport set a target for a 10 per cent increase in the number of people travelling by bus. Whilst this should be readily achievable through organic and demographic growth, recent trends in the bus industry have pointed to a progressive decline in the level of service being provided in all but the largest towns and cities. This in turn is leading to a decline in the number of passenger journeys on significant parts of the country's bus network and increasing the pressures on local authorities to intervene with additional revenue support to maintain service levels.

  7.2  For local authorities the problems are evident. Rapidly increasing tender prices for both local bus services and home-to-school transport are limiting local authorities' ability to maintain existing supported services. As further commercial bus services are de-registered, authorities are continually having to re-evaluate the sustainability of their supported services in an attempt to prioritise the routes which are most vital to the achievement of their strategies. The current regulatory framework imposes constraints and a lack of flexibility on the local authority's ability to obtain best value from its revenue budget and in the absence of additional funding and greater flexibility, the spiral of decline looks set to continue.

  7.3  The financial framework, in particular, needs to be overhauled, to bring the mechanism for the disbursement of revenue funding to local authorities broadly into line with the current method of allocating capital funds. The Local Transport Plan should remain the method by which capital bids are evaluated, and revenue grants need to be determined in a similar way, using the local authority's bus strategy as the framework within which revenue funding is allocated by government. The bus strategy therefore assumes a higher profile as the bidding mechanism by which the local authority secures the necessary revenue stream from which it can sustain and develop public transport in its area.

Appendix 1

Local Authority Bus Contracts: Price, Expenditure and Competition Survey 2001


  In the last year the average cost of retendered public bus contracts was 20.9 per cent higher than the contracts they replaced.

  Authorities will need a budget increase of 10.8 per cent from April 2002 to retain existing public bus service levels.

  Around 29 per cent of local authorities will have made cuts to supported bus services by the end of the financial year to stay within budget.

  The average cost of replacing expired school bus contracts in the last year was 16 per cent higher than the cost of the contracts they replaced, up from the 11 per cent average reported last year.

  Authorities will need an 8.7 per cent increase in budget in April 2002 to retain existing levels of school bus services.

  There has been a continuing slight decrease in the overall average number of bids for tenders for bus contracts.

  One quarter of local bus tenders only received one bid and 3 per cent received no bidders at all.

  The amount which authorities have spent on replacing deregistered commercial bus services in the last year is up by 75 per cent compared with last year to over £9.4 million.

  The cost of replacing early terminated public and school bus contracts has added £5.5 million to local authority costs, a 64 per cent increase over last year.

  Almost 1.5 million commercial bus journeys (almost half as many again as were reported in 2000) will not run in the next year because they were deregistered and authorities did not have the funds to replace them.

  Local authorities withdrew half a million supported bus journeys per annum in the last year because of insufficient funds, an increase of 50 per cent compared with last year.

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