Examination of Witnesses (Questions 180-199)|
WEDNESDAY 8 MAY 2002
180. Could I move on to quality contracts. The
operators en block are against quality contracts. Do you reject
their criticism of quality contracts entirely? Is there no basis
for their criticism?
(Mr Donald) What we would say is that we understand
where the bus companies are coming from. To be quite frank, if
we were running the levels of profit that we just talked about,
and getting these in a marketplace that does not seem to have
real competition going on, achieving near monopoly positions in
most of the PTE areas, then any suggestion that a quality contract
comes along which has the prospect of introducing competition
into that marketplace is obviously something that financially,
and I think rightly, from a commercial point of view, they would
resist. That is the first point to say. In terms of the broader
aspects and the comparison that went on in that discussion between
quality partnerships as a delivery mechanism and quality contracts
as a delivery mechanism, we see them as quite different. We recognise,
and we have worked well and often initiated the projects that
are quality partnerships' that they can deliver, as has been talked
about, very large increases in patronage. But they are corridor
based, and they are mainly about capital investment. They are
not about taking a network-wide approach that says, "let
us be clear here: and call it what you want, there is a 40 per
cent public funding of bus companies in PTE areas, are we getting
a good return for that?" The normal way of bringing public
and private sector monies together in that way would be a contract
that says, "the public sector specifies broadly what it wants",
and I want to stress that certainly in CENTRO and PTE Group, we
are not talking about route by route franchising, as in London,
we would be talking about broad specification, what we want to
see that network providing in various ways, and then allow bus
companies to compete and plan a network in bidding for that.
181. Finally, do you accept the assertion by
the bus companies that quality contracts would cost more?
(Mr Donald) No, not least because we have a myriad
of contracts in PT areas with bus companies of various sorts,
and we would wrap all of that up into one contract for the area.
182. I was intrigued that the experience leading
to an increase in bus use was the Park and Ride, bearing in mind
that the City of York also has an old history, and regrettably
has chosen to build Park and Ride sites on green belt land. Has
there been a similar experience in your City?
(Mr Newson) In terms of the location of the car parks
they have tended to be in sites that were either green belt at
the time of construction or had been previously. In terms of the
future of Park and Ride in Oxford, our anticipation is that we
would not envisage needing much more Park and Ride capacity. What
we would hopefully be able to do is intercept these trips further
away from the City so that we have perhaps more remote Park and
Rides on main corridors so that the majority of the journeys are
then undertaken by a bus service.
183. But that would then be on green field sites?
(Mr Newson) You would have to look at the locations
very carefully. I would not rule it out because it is so difficult
to find suitable large open spaces that are located close to a
main road in the perfect location to intercept traffic.
184. Could I ask each of you, do you think that
the bus subsidies are as clear, as transparent, and as easy to
administer as they might be?
(Mr Donald) No, for the reasons we have already covered
in that sense.
185. Who do you think is best placed to judge
the number of passengers currently using a particular bus service?
(Mr Donald) Can you expand on the question.
186. Would it be PTE, the PTEG, or the bus operator?
(Mr Donald) Under the current arrangements the bus
companyalthough PTEs, who have all got concessionary travel
schemes, obviously have that information for concessionary travel
purposes, but mainly for that.
187. Could I specifically ask the PTEG why you
disagree with the operators when the operators of the buses say
that concessionary bus fares are a subsidy to passengers, but
not the operators, and therefore are revenue neutral?
(Mr Preston) I think it is splitting hairs, really.
It is like saying we are going to subsidise people to buy bread
and saying the baker does not benefit. It is about investment
in the industry. In my area it is £21 million, in West Midlands
it is £60 million. I am not sure we get the bang for the
buck in relation to concessionary fares investment.
Miss McIntosh: Do you think it is fair to expect
a quality partnership to operate as successfully in rural areas
as urban areas?
188. It is not your experience, presumably,
that they do?
(Mr Donald) I think it is different situations in
rural areas than there are in the conurbations that we mainly
deal with, but perhaps Oxfordshire could pick that up.
(Mr Newson) We have no direct experience of the quality
partnership in a rural area at all.
189. Because they would all be directly subsidised
by the County?
(Mr Newson) That is true of a proportion. I think
one of the differences between myself and colleagues here is that
a very large proportion of the Oxfordshire network is commercial,
about 94 per cent, and we have healthy competition on a lot of
the networks, so there are differences in interpretation of that.
190. Finally, to the PTEG, how would you like
to see the concessionary fares regime reformed?
(Mr Preston) I would like to see it delivered in the
context of hard contracts, the bus contracts or franchising regime,
where it is part of an overall payment to reflect the level of
service. At the moment, we cannot really specify any of the characteristics
of the service in return for the substantial sums of money that
we pay over to the operators. Another issue, one that concerns
me, is the inability, really, to control the level of payout in
relation to concessionary fares. If, for example, operators increase
fares above inflation, then the local authority, whether it is
a PTE or a District Council, has no ability to manage that in
any way whatsoever. At the moment, with inflation low and increases
low, it is manageable. My own PTE was hit by an 11 per cent increase
in fares two or three years ago and it completely broke the budget,
because we have no choice but to respond to paying out the relevant
concessionary fare level.
191. Would that be helped by having a very tough
set of standards, including something on pricing?
(Mr Preston) I think it would, Chair, yes. As Mr Donald
said, what we would like to do is to be able to specify the characteristics
of the network. What we need to deliver our bus strategies. We
need to see integration with other modes. The quality partnership
approach simply does not allow that in the context of fares and
192. You did say that you did not think contracts
like the London ones would work outside; why?
(Mr Preston) Sorry, Chair, if that was the impression
I gave. I think they would work outside, and I think we would
be able to specify the kinds of service that we were looking for.
193. Because you will remember some time ago,
all the tenders, quite by accident, in London, all leapt by some
millions of pounds at the same time. Are you saying that would
give you a degree of transparency that does not exist?
(Mr Preston) It would be transparent
194. But it would also give you more control?
(Mr Preston) We would be clear about what we were
getting in return for the investment, Chair.
195. What specific problems has the Competition
(Mr Donald) Potentially, at the heart of Government,
there are two irreconcilable principles there. On the one hand,
the Competition Act, which is requiring, understandably, private
sector markets to work in a competitive manner. New power has
been given to the competition authorities under the 1998 Act,
and, indeed, interestingly, the competition authorities are applying
some of these new powers within the bus industry. On the other
side of it, you have quality partnerships and a wish for companies
to work together to integrates services who have simple ticketing
arrangements et cetera. As I say, potentially, you have two irreconcilable
principles working within that, and I think that leads back to
why we look at quality contracts. One thing the quality contracts
also does is clearly meet the competition requirements and transparently
introduces the prospect of competition into that marketplace whilst
also delivering what the passengers want to see, which is stability
of service, simple fares and ticketing arrangements, far better
information, et cetera.
196. Are there any specific examples that any
of you can give, either when you have been stopped from doing
something under the Competition Act, or where you have not gone
ahead in case you were stopped?
(Mr Preston) Moir Lockhead referred to the success
of the Leeds guided bus scheme with a 65, 70 per cent increase
in patronage. It is a very good example of local authorities,
PTEs and operators working together, because we do work well together,
and I think sometimes that point can be lost when we make these
kinds of arguments. That was a scheme where the operators, First
Group and Arriva, together with the PTE and Leeds City Council,
paid for the infrastructure something like £20 million, with
operators actually contributing to the infrastructure costs of
the guideway as well as investing in new vehicles. It was a very
good partnership, well branded, but the problem that we had because
of the OFT was that we could not together specify either frequency
or fares. That, in terms of the understanding of people that we
were trying to attract to that scheme giving lots of mobile shift
options, was a major obstacle.
197. Was there any way around that?
(Mr Preston) Not at the moment, as I see it, except
had we delivered it through a quality contract.
198. How much competition exists in reality?
(Mr Preston) If I can give an example. In West Yorkshire,
we put out something like £16 million worth of tendered services
each year and the average number of bids per tender is 1.04.
Chairman: That is a great competition, is it
not? It must worry you. How do you fight off the .04?
199. What about Challenge Initiatives? Are you
in favour of Challenge Initiatives, or would you like to see everything
incorporated in the Transport Plans?
(Mr Newson) From our perspective we are not supporters
of the Challenge Bid system, whether for bus grants or for other
things because they do tie up an awful lot of local authority
precious resource, which often proves to be abortive. As I think
was mentioned in the previous session, we see the advantage in
Government trying to secure those objectives through the local
Transport Plan and rewarding the authorities that are delivering
those objectives in that way.