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


Memorandum by Northamptonshire County Council (Bus 39)

THE BUS INDUSTRY

1.  INTRODUCTION

  1.1  Northamptonshire County Council takes pleasure in making this submission to the Transport Sub-Committee inquiry on the bus industry. The first part of the submission highlights the current problems experienced by the County Council; the second part addresses specifically the five issues the Committee wishes to consider.

2.  CURRENT PROBLEMS

  2.1  The County Council has a policy of seeking improvements in the quality of public transport as a means of reducing social exclusion and encouraging a shift from car to more sustainable forms of transport. This is a major challenge as public satisfaction with the quality of bus services and information is relatively low compared with other services for which the County Council has a responsibility. The County Council has, however, encountered a number of problems in implementing this policy. These can be summarised as follows:

    —  withdrawals of commercial bus services at short notice

    —  substantial increases in tender prices for both home to school and public bus services

    —  lack of competition for tenders

    —  lack of a national policy and strategy for bus services in medium sized towns

    —  no co-ordination between services where there are two dominant operators

    —  increasing emphasis on challenge funding and the resources this requires in terms of bidding.

Withdrawals of Commercial Bus Services

  2.2  The last two years have witnessed a change in strategy by the major bus groups in terms of the services they seek to provide. They have placed a much greater emphasis on concentrating resources on what they consider to be their core markets at the expense of other routes and services. In Northamptonshire, the major operator is progressively withdrawing services from many parts of towns leaving just a core network of inter-urban routes and maybe one or two routes in the medium sized towns. In Northampton, the major operator is also concentrating resources on nine key routes and withdrawing totally from what it considers to be less profitable areas of town and times of day.

  2.3  Two recent examples of this have also occurred in the towns of Corby and Wellingborough. In Corby, the major operator announced in July 2000 that it was withdrawing five out of the seven commercial routes in the town from October 2000. Two of these routes consist of vital links between housing areas and the industrial estates operating at peak times only. The County Council considered it was necessary to replace most of the services proposed for withdrawal but in doing so had to provide £175,000 per year in emergency funding that had not been previously budgeted for.

  2.4  A similar situation has now emerged in Wellingborough and the neighbouring small town of Higham Ferrers where the same operator is proposing to withdraw all but one town service. The withdrawals consist of two commercial services in Higham Ferrers and two in Wellingborough. Again the announcement was made after the budget for 2002-03 had been set. It is not clear yet what additional funding will be necessary to maintain essential services in these areas.

  2.5  In total, just under 1,000 commercial journeys per week were withdrawn by operators in Northamptonshire during the year October 2000 to September 2001. This is set to be exceeded this year as a result of the proposals recently announced for the Wellingborough area and also the withdrawal and curtailment of two services in Northampton from April 2002.

Increases in Tender Prices

  2.6  In common with many other authorities, Northamptonshire has experienced increases in tender prices way beyond the present level of inflation. In the year October 2000 to September 2001, prices for retendered home to school transport contracts increased by 24 per cent compared with the prices immediately prior to retendering and 33 per cent for public bus services. The effect of this on home to school transport has led the County Council to reconsider its policy of providing free home to school transport for children living below the statutory distances for which free transport is compulsory. As far as public bus services are concerned, this has led to some marginal services being withdrawn.

Lack of Competition for Tenders

  2.7  In Northamptonshire, the provision of bus services is concentrated in the hands of two major operators who, between them run about 95 per cent of all bus mileage in the County. Outside Northampton, one operator provides more than 90 per cent of all bus mileage. This monopoly of provision is reflected in the low number of tenders received for local bus services—three for non-rural bus grant contracts and four for rural bus grant contracts. This is despite the fact that there are over 40 operators on the tender list. One of the reasons often cited by smaller operators for not tendering is the difficulty they have in breaking into a market dominated by one or two major operators. Until recently, the major operators have always operated some journeys commercially on routes that have otherwise been contracted making the tenders that the County Council has been able to offer unattractive to a new operator. Even with a change in strategy which has led to whole services being withdrawn, the continuing presence of the major operator on the remaining core routes in Corby, for example, is expected to deter new entrants from coming into the town. In this situation a quality contract approach could well offer benefits (see para 3.9).

Lack of a National Policy and Strategy for Medium Sized Towns

  2.8  Most of the problems experienced in recent years have centred on services in the County's medium sized towns (population 25,000-100,000). The appropriate response to this in terms of the level of service has been made more difficult by a lack of clarity in the policies and strategies that need to be employed in such areas which are defined neither as urban nor rural.

  2.9  The strategy for rural areas, focused almost entirely on relieving social exclusion by reducing isolation, has been backed by considerable amounts of new funding through rural bus grant, rural bus challenge and rural transport partnerships. In urban areas, operators are still able to provide many services commercially at frequencies high enough to make the bus an attractive alternative to the private car. Here the strategy has been one of providing capital funding through the LTP process for bus priority schemes, light rail and other initiatives designed to encourage modal shift.

  2.10  In the medium sized towns, there is as yet no clear objective for public transport and consequently, apart from the urban bus challenge initiative, no new sources of funding to address the needs of these areas. Unless there is a major initiative in these towns, bus services within them could well face the same problems as those experienced in rural areas some 30 years ago.

No Co-ordination Between Services in Towns where there is more than one Operator

  2.11  In Northampton, town services are operated by two large companies. Although this does provide some competition for tenders, a major drawback is the lack of co-ordination between the services provided. Since the Competition Act 1998 came into force and the Office of Fair Trading has focused its attention on the bus industry, the two operators have been less willing to engage in dialogue regarding the future development of services in the town. At one level, this has made it difficult to introduce quality bus partnerships as operators will not commit themselves to future levels of service along given corridors or the provision of low floor buses. At another level, service changes are no longer co-ordinated, with the result that one part of town now has 15 buses per hour and 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 of another for the same journey. The two operators do not pursue these practices willingly but do so only to ensure that they do not come under the spotlight of the OFT. The outcome though, is lower customer satisfaction as bus users cannot understand why these practices exist and why the network cannot be better co-ordinated for the benefit of users.

Increasing Emphasis on Challenge Funding

  2.12  Although additional funding for public transport through the various challenge funding processes has been welcomed and Northamptonshire has done well from the rural bus challenge fund, 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 resources. A more effective means of allocating funds would be through the Local Transport Plan process suitably updated to take account of rapidly changing circumstances.

3.  SPECIFIC ISSUES THAT THE COMMITTEE WISHES TO CONSIDER

Subsidies in the United Kingdom Bus Industry

  3.1  Work being carried out nationally 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.

  3.2  Subsidies to the bus industry are 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 grant, rural bus challenge and rural transport partnership initiatives; and

    —  payments made to operators (by district councils) as a result of accepting concessionary fare passes for pensioners and disabled people.

  3.3  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.

  3.4  Although operators receive substantial amounts of funding through the public purse, the outcome of this funding remains one of low customer satisfaction and an environment where services change at short notice and often require urgent injections of additional local authority funding that has not been planned or budgeted for.

  3.5  The most pressing problem for local authorities at the present time is revenue funding to maintain services proposed for withdrawal by operators yet there is no direct government help being given to local authorities in recognition of this problem. If the local transport plan is to be effective as the tool for delivering the Government's strategic transport objectives, it must be accompanied by an integrated funding strategy that recognises the volatility of the industry and the increasing cost of providing the level and quality of service that the public expects.

The Relative Merits of Bus Quality Partnership and Bus Quality Contracts

  3.6  It must be recognised that these two concepts are means to an achieving objectives rather than objectives in themselves and hence should be seen as just two of the many complimentary procurement strategies that a local authority might employ to achieve a modal shift or a social exclusion objective.

  3.7  For any partnership to be successful, the partners must share at least one common objective. A common objective is to increase 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 might lead to a reduction in congestion and in certain cases can reduce social exclusion. Where the bus network for a particular area (not just one route) is strong commercially, operators will seek 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 low floor buses. Where this happens, local authorities may be willing 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 quality partnership.

  3.8  On the other hand, the conditions for engaging a local authority are unlikely to be present where the network is not strong commercially or where the operator withdraws services from other parts of town to concentrate on one or two core routes. The local authority will find it more difficult to justify the provision of bus priorities in such circumstances and also be less able to introduce traffic restraint measures. Moreover, if the local authority has to find additional revenue funding to maintain services on non-core routes, the climate of co-operation is unlikely to be such to encourage further investment to be made in bus enhancement measures.

  3.9  Experience in Northamptonshire suggests that where the local authority has a clear strategy for the development and improvement of its bus network, but this cannot be achieved commercially by an operator, then the quality contract might well be the appropriate tool for ensuring the delivery of a total network.

  3.10  A quality contract in this context would be a contract for the provision for the whole network of internal passenger transport services within a defined area excluding commercial inter-urban routes but possibly including some non-commercial rural services into the town. It would be specified to a minimum standard with the operator/partner being given every encouragement to beat the standard to increase service usage. In Northamptonshire the operator would take the revenue risk, apart from new services to areas of new development, and therefore, have the incentive to grow the market by increasing ridership.

  3.11  It has not been possible to introduce a quality contract voluntarily in Northamptonshire due to the fact that the incumbent operator wishes to continue the best services commercially. It is inevitable that this will reduce the number of operators interested in running the remaining services in a town as the continued existence of a major operator will act as a deterrent to new operators.

  3.12  Under the present legislation, it is unlikely that any quality contracts will be introduced either in Northamptonshire or elsewhere because of the minimum two-year lead-time before one can be set up and the potential for network instability during this period.

  3.13  In conclusion, a quality partnership will work where operators can deliver most of the network commercially in the area in question. On the other hand, a quality contract, as described above, might be a better alternative where the network cannot be delivered as a whole commercially.

The Importance of Bus Priority Measures and Their Enforcement

  3.14  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 necessary as 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.

  3.15  To be effective, the 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 in Northampton 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 parking in bus lanes but a change in legislation would be required to enable wardens to enforce moving traffic offences in bus lanes.

Regulation of the Bus Industry

  3.16  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 best be 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.

  3.17  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 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 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.

  3.18  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 should have greater ability to secure a quality contract for that area. Paragraphs 3.8 to 3.10 outline how this might be achieved.

  3.19  In rural areas and in some housing areas in urban areas, the potential of taxis and hire cars in providing 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.

The Contribution of Bus Services to Social Exclusion

  3.20  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 number of people dependent upon bus services has declined as car ownership has increased but they 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.

  3.21  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.

  3.22  Quantifying the link between transport and social exclusion is difficult as is the distinction between social exclusion and quality of life. In 1986 the County Council took the decision to give low priority the provision of evening and Sunday services, given that most of these services were used for leisure and social purposes. Yet 15 years later the lack of evening and Sunday services still gives rise to some of the highest levels of dissatisfaction with bus services, although changing work, shopping and leisure patterns during this period has contributed to this view.

  3.23  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.

4.  CONCLUSIONS

  4.1  The Government in its 10-Year Plan for transport has set a target for a 10 per cent increase in the number of people travelling by bus. Although this should not be an onerous target for the bus industry outside London, the indications from the last two years point to a further decline in the level of service in many areas of the country. This includes medium sized towns in Northamptonshire. This trend will lead to a reduction in the number of people travelling by bus in those areas unless the local authority intervenes to maintain services. For local authorities, the cost of intervention is high, particularly when set against the background of rising tender prices both for public bus and home to school transport services.

  4.2  Neither the current regulatory nor financial framework is appropriate for the successful delivery of the 10-Year Plan objectives. The former needs to give greater powers for local authorities to enter into quality contracts where the commercial network has clearly failed to deliver the service necessary to achieve higher levels of usage and customer satisfaction. The financial framework needs simplification with the local transport plan, suitably updated, being the prime mechanism for securing both capital and revenue funds to assist in the delivery of services. Consequently there should be less reliance on challenge type funding which is expensive in terms of bidding resources.

  4.3  These changes combined also with greater freedoms for local authorities to enter into contractual arrangements appropriate to their areas could encourage greater entry into the market for small operators currently deterred by the presence of a larger operator and the complexity of the regulatory and financial framework.

April 2002


 
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