Transport: Bus Industry

Lord Bradshaw Excerpts

Tuesday 2nd November 2010 Lords Chamber

Tabled By

[Lord Bradshaw]

To ask Her Majesty’s Government what are their proposals for the bus industry.

[Lord Bradshaw]

My Lords, I should declare two interests: I am a concessionary bus pass holder and a regular bus user—I come 13 miles each day to the station to catch my train.

The issue that currently concerns bus operators the most is receiving fair compensation for the costs of concessionary fares. Any consideration of this issue must take account of the fact that, in 2012, the bus service operator grant will start to fall. Also, the reduction in local authority bus budgets will take effect next year, at the same time as the new arrangements for concessionary fares come into effect.

The consultation document about the future funding of concessionary travel, which the Government published in September, asks for very prompt responses, by 11 November, with a view to guidance being issued to local authorities by 1 December for implementation in April. That is going some, given that guidance often takes something like a year and a half to emerge.

The research was carried out by the Institute for Transport Studies at Leeds and is extremely theoretical. Understanding the consultation document and the supporting paper is well beyond the capability of the smaller bus operator. The report is based on survey data collected in August—not the best month for a survey. I shall give your Lordships a few extracts from it, because, in my view and that of the bus industry, they are almost incredible. For example, on the impact on bus passengers, it states:

“No direct impact from changes in reimbursement guidance or regulations. Potential disbenefit from small reduction in services and/or higher fares if operators respond to lower reimbursement rates”.

Well, operators are bound to respond to lower reimbursement rates. It continues:

“The assessment of the impact of the preferred option is particularly sensitive to assumptions about how the new guidance is applied and the reaction of operators (in relation to fares and service levels)”.

Well, obviously. If you reduce the money going into the bus industry by the amount proposed, there will be a reduction in service levels.

The research talks about the ongoing effect of the reduction in bus service operator grants. I shall quote one more paragraph—there are 35 pages of it, and it is in very small type:

“As noted in the main body of the impact assessment, it has not been possible to model the impact of changes to the concessionary travel guidance on service levels and fares”.

That is in the paragraph headed “Rural proofing”. I really believe that the changes have not been rural-proofed.

If the proposals as outlined in the document go ahead, bus fares will rise and, more importantly, services will be reduced, hitting both concessionary travel and fare-paying passengers. The scope of services—the length of the day or the length of the week that they cover—will be reduced. Jobs will be lost both within and outside the bus industry.

Mr Iain Duncan Smith was reported recently as saying, “Get on a bus and get a job”. That would be all right if there was a bus to get on. In 10 years, one rural bus operator has created 280 jobs in his area of operation, which has little other local employment. There will be real and lasting job losses as services are withdrawn. How much practical consultation has taken place with smaller, independent operators? Does this really matter to the Department for Transport? One might say that the documents are considering the formula isolated, comfortingly, from the real world. However, the TPPs published for rural areas call, as we heard during the previous debate, for greener travel arrangements and less congestion. Most of the people with whom I travel on the bus, as I do regularly, would rather see a good service maintained and make a contribution themselves to the concessionary fare support—say, a flat rate of £1 a journey. They would rather do that than have a worse service or no buses at all, because if there is no bus to take you where you want to go, what is the use of a free bus pass?

The bus service operator grant has been reduced because the Treasury believes that that will lead to people buying more fuel-efficient buses. I have been involved in the operation of the bus service and I know of no operator that buys vehicles that are not fuel efficient. However, we have to bear in mind that air conditioning, disabled access and emission controls add to the weight of a bus and lead to higher fuel consumption. Soon, local authorities will have more discretion over how they disburse the reduced funds. How do we ensure that buses get their fair share of that money? There will be many other pressures on local authorities which they may consider to be more important.

I turn to the burden of regulation. The OFT and the Competition Commission are the two bodies involved with the bus industry. I ask the Minister how many inquiries each has held into the bus industry since deregulation. It will amount to tens, if not hundreds. Do those bodies appreciate the huge amount of work that they cause to the industry? The remedies that they propose are often ineffective. I cite an example where Arriva was told to sell off two of its garages in Liverpool to an outfit called Glenvale, which went bust after having run some pretty rotten buses in the mean time. The simple remedy of a traffic commissioner who is able not to accept registration of services that are predatory in nature is the obvious answer to all this interference from competition authorities.

I turn to the EC regulations. The working time directive was forced on the bus industry by the previous Government. Can the Minister give us any assurance that the United Kingdom Government will continue to resist the extension of the proposed passenger rights objective to local bus services? This matter is very active in Brussels and needs a great deal of push.

In the past five years, the bus operators have invested £1.6 billion in the bus building industry, yet orders now are scarce, as operators are not ordering buses because they believe that they will have to cut services severely—obviously, they have enough buses. The effect of this on the bus building industry is quite awful. We have to remember that this is one of the British manufacturing industries that we want to preserve.

In conclusion, I implore the Government to take serious notice of the representations of the bus industry. They still have time, particularly for those bus operators that serve rural areas, before they go ahead with the proposals for the reimbursement of concessionary fares.

--- Later in debate ---

[Earl Attlee]

My Lords, I am grateful to my noble friend Lord Bradshaw for introducing this Question for Short Debate. He made his points very well with his usual expert style, as all noble Lords would expect.

Buses provide an essential public service and improve the quality of many people’s lives, providing cost-effective gateways to work, shopping, education and leisure. The best bus networks are built on partnership. Local government needs to work closely with operators, community organisations and the travelling public to ensure a local transport network that works for everyone. Transport operators need to listen and respond to the views of their passengers.

Central government needs to provide an appropriate legislative framework that enables innovation and creativity from bus companies and provides local authorities with the flexibility to use their local knowledge to support their bus networks in a fair and logical way. The traditional bus service with a fixed timetable is not always the right answer. Flexible, demand-responsive solutions, often provided by communities themselves, can be the better, more efficient and cost-effective option.

As I am sure your Lordships will be aware, the Competition Commission is currently investigating the bus market. As an independent organisation, and thanks to its information-gathering powers, the Competition Commission is best placed to come to a decision as to whether there are features of the local bus market that prevent, restrict or distort competition. During the inquiry, the Competition Commission is looking at a wide variety of issues and evidence relevant to the assessment of competition, including the profitability of bus operators. The Government will await the outcome of that inquiry with interest and subsequently decide on whether any changes to the legislative framework for buses are needed. In answer to the question asked by the noble Lord, Lord Davies of Oldham, the Competition Commission is due to report next summer, so it is sensible to wait before deciding whether changes to legislation need to be made.

My noble friend Lord Shipley talked about the future benefits of new technology. He speaks with great authority and I will certainly study Hansard carefully tomorrow in order to pick up all his points.

One of the first things that the Government announced was an additional £15 million investment in low-carbon buses though a second round of the green bus fund. This will help bus operators and local authorities to buy around 170 new hybrid and electric vehicles. This builds on the success of the first round of the green bus fund where, in 2009, £30 million was allocated to help to buy around 350 new low-carbon buses. As a result of both rounds, by April 2012, there will be around 500 new low-carbon buses on the streets of England and we hope that this will encourage other operators to make the switch.

Contrary to some predictions, we are not calling time on the concessionary travel scheme. Instead, concessionary bus travel will remain, so that older people can continue to enjoy the greater freedom and independence that the scheme gives them. However, we are looking at ways of ensuring that we get the best value for money from the scheme. We are currently consulting on reforms that lead to simplified and more efficient reimbursement arrangements and reduce the scope for disputes between local authorities and bus operators. This will ensure that the scheme remains sustainable in the future.

The Government have consistently said that reducing the country’s deficit is our main priority. Reductions in public spending will have to form part of this. The Chancellor announced that from 2012-13 bus subsidy will be reduced by 20 per cent. While I appreciate that any cuts will be unwelcome, it is only right that bus subsidy takes a share of the cuts—and this cut is lower than for most other local transport revenue grants. However, I fully accept the point made by the noble Lord, Lord Davies, about the need for buses for the less well-off. That is precisely why we have left the BSOG in place. Following the Chancellor’s announcement of 20 October, my honourable friend Norman Baker spoke to the Confederation of Passenger Transport UK, which represents the bus industry. It was hopeful that, in general, the small reduction in BSOG could be absorbed without fares having to increase.

The Chancellor also announced that the majority of local transport resource funding will now be paid through formula grant. This will simplify funding by moving from around 26 grant streams to just four.

The noble Lord, Lord Davies, touched on the administration of funding. It is for local authorities to decide how this funding is spent according to their priorities. We have also established a Local Sustainable Transport Fund worth £560 million to help local authorities support economic growth and reduce carbon emissions. Even after the spending review, the public funding allocated to buses will remain at significant levels.

The noble Lord, Lord Davies, made important points about the importance of punctuality. He was absolutely right in his explanation. Today's passengers demand and deserve a public transport system that is efficient and modern, and that meets the challenge of using new technology. Some operators have invested in technology that can tell them the location of their buses at any given time. This gives operators a wealth of data to help deliver a good service to passengers, and sharing data brings other benefits. Sharing data with local authorities will help to identify traffic management issues that are making it difficult for buses to run to time, both on a day-to-day basis and in the long term, by benchmarking punctuality and enabling agreement on joint actions to help deliver the punctual services that passengers want. We know that real-time information can make a big difference in encouraging potential passengers to choose the bus. It certainly does for me. That is why we are supporting operators who share data with local authorities so that they can provide real-time information systems, by paying them a higher rate of bus service operators grant.

A further example of technology offering real improvements for passengers is TfL's Countdown system. This provides real-time bus arrival information for passengers throughout London, using electronic signs at bus shelters. From 2011, a new, improved Countdown will be introduced that will show bus arrival predictions for every one of London's 19,000 bus stops. As well as using electronic signs at bus shelters, it will take advantage of a range of information channels, including text messages and the web.

One of the most important technological advances towards a more joined-up transport network is smart and integrated ticketing. We want this new technology to be rolled out more widely across England, so we have provided £20 million of grant funding to the nine biggest English urban areas outside London, and have offered a higher level of bus service operators grant payment to support this. I am pleased to say that some major bus operators are in the process of rolling out smart ticketing across their fleet, but we are eager to see even more achieved, particularly in terms of integration between modes and services. The vision of my honourable friend Norman Baker is for seamless travel on one card throughout the country, whether on the bus in Bristol, the Tube in London or the Metro in Newcastle—a card that lets you hire a bike or join a car club, that can be topped up in shops, online or by phone, and that makes travel easier and cheaper.

I have several questions to answer. The noble Lord, Lord Bradshaw, asked why cuts to bus subsidies are being made. I have talked about the need to reduce the budget deficit, but the saving is 28 per cent lower than that being made from other transport revenue grants, reflecting the benefits that bus services bring to the economy and the environment, as well as the fact that many people rely on bus services to reach education and healthcare.

The noble Lord, Lord Bradshaw, also asked about consultation with small operators. Representatives of local government and the bus industry in the Reimbursement Working Group were actively consulted throughout the research process and the development of the draft DfT reimbursement guidance. The Confederation of Passenger Transport, the trade organisation for the bus industry that represents both small and large operators, was a member of the working group.

The noble Lord, Lord Bradshaw, also asked about the Competition Commission's inquiry. The commission is a public body, entirely independent of government, and all of its inquiries are undertaken following a referral by another authority, most often the Office of Fair Trading, which referred this market inquiry in January of this year. It is important to note that the commission's legal role is clearly focused on competition issues rather than on the wider public interest.

[Lord Bradshaw]

I wonder whether the Minister will pause there for a moment. The Competition Commission is very much concerned with the definition of a market in any field. The commission’s approach to the bus industry has been very narrow indeed—for example, it excludes consideration of the fact that the car is a competitor with the bus. However, I do not believe that that is logical because people often have the choice of using a car or a bus, and not bringing the two together is perverse.

[Earl Attlee]

My Lords, I think that I touched on the point that the Competition Commission is looking at the profitability of the bus industry. However, I will draw all the noble Lord’s points to the attention of my honourable friend Mr Norman Baker.

I return to my answer. On the other hand, this Government are committed to getting the best deal for bus passengers and taxpayers alike. With around £2.5 billion of taxpayers’ money spent on bus services and passengers each year, it is only right, as in every other area of public spending, that we should question whether the bus market is delivering the best service for bus passengers and the best value for the taxpayer.

The noble Lord, Lord Shipley, asked about quality contracts. He will know that the legislation is still in place and that local authorities are free to use quality contracts when they wish to do so. We are already seeing plans in west and south Yorkshire. We think that partnership is a better approach but, ultimately, it is a matter for the local authorities to make a decision based on their circumstances.

I acknowledge that there are big challenges confronting the industry. Beyond any question, these are testing times for an industry that matters and that makes a difference, but it is an industry that, with our support, can grow and flourish.