Local Bus Market

Graham Stringer Excerpts

Thursday 10th January 2013 Westminster Hall

[Graham Stringer (Blackley and Broughton) (Lab)]

It is now more than 25 years since buses were deregulated outside London. I do not like to use extreme language, but deregulation has certainly had a very damaging effect on public transport, especially in the metropolitan areas, other urban areas and the shire areas. I have made many speeches in favour of some sort of re-regulation of the buses; the Minister has heard many of them over the years, and, on occasion, we have agreed. I suspect that we still do agree. I disagreed with some of my party’s bus policies when it was in power, and I still maintain those views. I am pleased that the shadow team now seems to have better policies than we had when we were in government.

The focus of my speech today is on the report of the Competition Commission, which was considered by the Transport Committee. Before getting on to the specific recommendations of both the Committee and the commission, however, it is worth taking up the point made by the hon. Member for Milton Keynes South (Iain Stewart) about the segregation of the bus industry. This is a simplification, but I think that it is essentially true that the bus system in London works extremely well. It has never been deregulated; it has received significant investment; and bus companies in London take less profit out of the system than they do in the metropolitan areas. So the bus system here in London is good.

However, if we look at the metropolitan areas, whether we look at the statistics for the last year, for the period from 2005 or even go back to deregulation, we see a steady progression of fare increases above inflation. In real terms, fares have doubled over all that time and passenger numbers have dropped by 45%. In London, the direction has been the opposite. That is an indication of where public money is better spent in the support of public services.

In the shire areas—I represent a very urban constituency, so I am not an expert on the shire areas—bus services often do not exist at all. It is not a question of their not being subsidised; they do not exist. As my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman) said, when approximately £4 billion a year goes into the rail system—I am not against that—and parts of the country do not have any bus services, either commercial or subsidised, we need to take a serious look at the situation.

Parts of the bus system, in historic towns such as York, Oxford or Cambridge, are working. In those towns, the authorities have been able to restrict car access to the town centre and they have set up partnership schemes. Therefore, if one goes through the different areas, one sees that there are very poor services in many shire areas and limited amounts of competition on the road; declining bus services in metropolitan areas, with increasing fares; relatively good services in towns such as Lincoln, York and Oxford; and excellent services in London. For any Government who want to provide services to the whole country, it cannot be satisfactory to see that differentiation of service.

Before I move on to the reports by the Competition Commission and the Transport Committee, I will make one simple point about the Lib Dem “nearly policy” on concessionary fares. One of the reasons why the decline in passenger usage in metropolitan areas has not been more severe—in fact, it was even halted for a period—was the increased money that the last Labour Government put into concessionary fares. That meant that people over the age of 60 had free access to the buses and used them, which changed the usage of buses for the better.

At the moment, the leader of the Liberal Democrats, the Deputy Prime Minister, is considering whether to take concessionary passes away from people such as me, because we can afford to pay the bus fare or do other things. In a way, one cannot argue about that. However, the Liberal Democrats should also think about congestion. Most of the policy of most of the Governments during the past 30 or 40 years has been to try to get people to leave their car at home and use buses instead. The fact is that, if relatively affluent pensioners can afford buses, they will not pay the bus fare to Stagecoach or FirstGroup if their pass is removed. Instead, they will take their car out; that is what I would do if I did not use the bus or tram in the area where I live. That will lead to increased congestion. I suspect that the Minister sympathises with that view, but I ask him to say to people—within his own party and within Government—that they should think harder about the transport implications before they go too far in pulling concessionary fares.

I will move on now to the Competition Commission report itself. I think that any reading of both the written evidence and the oral evidence that was submitted to the Committee will show that the Competition Commission’s report was deeply flawed. Before I get on to that, however, I just want to say one or two words about competition. It is sometimes assumed—particularly by those from the Labour side who want to re-regulate buses and to introduce quality partnerships in parts of the country—that we are against competition. Nothing could be further from the truth. Where commercial businesses are involved, in order to ensure that we get the best-quality, most efficient and effective service, competition is a good thing. However, the fact is that in most of our big cities and in a lot of our shire areas competition does not exist. In fact, if we wanted to have competition in those areas, it would be necessary to introduce off-road competition, because the competition is not taking place on the road itself. There is no competition in many parts of this country.

If people look at the evidence that the Transport Committee received, they will see one indication of the lack of competition outside London; there is competition in London, although it is not on-road competition. That is the profit levels of companies. If people read the oral evidence that FirstGroup gave to the Committee, they will see that FirstGroup said that it is withdrawing from London because it could make twice the return on the capital outside London that it does inside London; those were not quite the words that FirstGroup used, but they are what FirstGroup meant. If competition were working, the situation would be the other way round: we would expect FirstGroup to be making less and to fight more for profits in other parts of the country. As I have said, nothing that I say in this debate should be taken as showing that I believe that, where there are commercial interests involved, there should not be competition. There certainly should be competition.

Turning to the Competition Commission report itself, I was disappointed by the quality of the evidence that the commission used. It published an interim report that hinted that it was considering pushing towards off-road competition—the quality partnership approach. However, that was changed in the final report. A couple of things happened. We know the figures for FirstGroup because its representatives told them to the Committee, and they also told the Committee that other bus companies had done the same. FirstGroup spent about £3 million lobbying, providing information and—I think that this is a direct quote from the Competition Commission—putting its case as strongly as it could. Undoubtedly, that affected the final recommendations of the report, which were that there should be more head-to-head competition on the roads, without any mechanism to produce such competition or any evidence that it was happening in all but a few places. In fact, I think the Competition Commission gave us three examples of areas where competition was happening, but they were fairly isolated places and not in our major conurbations. That was disappointing.

The Competition Commission officials said, when asked why they had shifted the emphasis in their report, that they thought that specifying the level of services would lead to less competition and higher costs. When we asked why they thought that, they cited the costs in London, but they could not really give any more information. I looked at the evidence that the Committee received before I came into Westminster Hall today. The Minister in his own oral evidence to the Committee—I think that it was in response to question 400, if he wants to look at it now—more or less demolished the commission’s argument, because he gave figures that showed the subsidy per passenger in London was 45p, whereas in the metropolitan areas it was 57p and in the shire areas it was 71p. The commission’s basis for rejecting quality partnerships—without taking evidence—was, therefore, deeply flawed. At the same time, however, the commission had evidence of huge collusion between the bus companies in the north-east. Rather than examining the real costs in London, where profits—albeit not excessive ones—were being made and there was a good service, it used a theoretical model that clashed with the London experience and with what was happening in the north-east. That was one of the flaws.

The commission identified anti-competitive practices in the north-east, and such practices clearly exist in other parts of the country as well, but it is difficult to prove that they do because, by and large, bus companies do not have written agreements not to compete with each other—they just do not do that. When the commission was asked about divestiture, which has happened in other anti-competitive areas, it said that only big bus companies would come in if, in an area such as my part of Manchester, it stopped FirstGroup. The company has been operating a near monopoly very badly in north Manchester, and the commission has said that it would just be another large company that would come in. FirstGroup has operated an appalling business when it comes to running buses in north Manchester and it is now selling its interest to Stagecoach, so there is no intermediate point at which there is on-road competition; there is just the selling of one almost monopoly to another monopolist. The fares have been high in north Manchester, and, although I do not know this for sure, I cannot imagine that Stagecoach will reduce the fares when it takes over the garages.

I believe that the Minister is sympathetic to helping with quality contracts. There is legislation, in the form of the Local Transport Act 2008, that enables such contracts to be put in place. There has, however, been no answer to the question posed by the Transport Committee, and by my hon. Friend the Member for Liverpool, Riverside today, about why the bus service operators grant cannot be used to help local authorities to introduce quality contracts. It will be difficult to bring in a first quality contract. I believe it will save money—I think that the detail of the Committee report is wrong in stating that it will be more costly—but it might be very difficult when we have Brian Souter of Stagecoach saying that he would rather drink poison than allow a quality contract to happen. He and his managers are threatening a scorched earth policy.

When the Minister came before the Committee, he made some helpful comments to the effect that bus companies should follow the law, and I am interested to know whether there is anything else he can do to support the company in west Yorkshire and Nexus, which, I understand, are both still going down the quality contracts route. I believe, as does the Minister I suspect, that the scheme will lead to a better bus service, so if there is a legal option to go down that route the Government really should provide as much support to the quality contract areas as they are prepared to provide to the better bus ones. I cannot see why the quality contract areas should be discriminated against.

This has been a long speech. The Transport Committee’s report is good, and I hope that the Government will move on and support the moves to balance up bus services. Without going through all the detailed arguments, it seems that there is much greater similarity between Greater Manchester, the west midlands and London in relation to introducing franchising operations and a regulated system, than between Greater Manchester, Oxford and Cornwall. I hope that the Government, recognising the success in London, will try to move within the 2008 Act to help the introduction of the schemes, not just in Manchester but in Leeds and Newcastle.

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[Graham Stringer]

Every minute.

[Julie Hilling]

I asked a student who lived there, “Do the buses stop in the night?” and she said, “Oh yes, they stop in the middle of the night.” I then asked, “How long do they stop for?” and she replied, “For 10 minutes, at 4 am.” There are buses every minute, 24 hours a day, apart from during those 10 minutes at 4 am.

A couple of years ago in Manchester, the situation was so bad that no other vehicles could get into the city centre. All the buses were queued far back because so many people were competing to run their buses along that corridor. We can compare that with the estate I live on. The service to Hag Fold stops in the evening, and on a Sunday it does not start until midday, so no one can use the bus to go to church on a Sunday morning, or for a day out. That is the reality of our buses, and I live in an urban area; I am not even talking about a rural district. We need, therefore, planning for services across an area that is not based just on whether a route is profitable. We need a service that goes as close to people’s doors as possible, otherwise those who can drive will.

Cost is incredibly important. My hon. Friend the Member for Liverpool, Riverside (Mrs Ellman), the excellent Chair of the Transport Committee, talked about the ever-increasing cost of bus travel, as did my hon. Friend the Member for Blackley and Broughton (Graham Stringer).

For the third time this week, I will talk about my neighbour, Leah, because she will be affected by the cuts to tax credits and other benefits. She is a mum of two who works 16 hours a week and earns £101. She pays £18 a week—£4.50 a day—for her travel card, which, of course, can be used only with one provider that stops serving the estate in the evening. Unless she gets home early enough, she has to pay another bus company to get her anywhere near home. Compare that with £2.80 a day in London for a service that can be used with any provider.

Travel cards are important for reducing costs and opening up integrated services. Look at the liberation of Oyster that we have had for nine years. Those of us who reside in London for a few days each week have been amazed by the Oyster card: people can go on any bus or tube by flashing the cost-effective card. Compare that with people in my area, who have to decide from which company they will buy a travel card on any given day, because a card can be used only on one service, such as First. They have to ask themselves whether the company will manage to take them on the whole of their journey, or whether they will have to buy separate fares because the company will take them on only part of the journey.

Transport for Greater Manchester is trying hard to get some sort of Oyster mark 2 for the conurbation, but there is no surprise that the operators are not co-operating. Fares in south Manchester are 15% to 20% cheaper than those in the north of the conurbation. Having different operators is the only answer, because it surely cannot be true that diesel costs more in Bolton than in Withington. Costs seem to be part of the reason why the operators are not co-operating. What will the Minister do to support areas such as Greater Manchester to introduce travel cards that will liberate services for so many people?

Running a big bus company is a licence to print money. Since deregulation, the companies are earning a profit of some 7% each year at no risk. If a service is uneconomic, the operators can cancel it and hope that the local authority will pay them to deliver it. Quality contracts would enable routes to be bundled so that operators would have to deliver all the routes in a bundle, both good and poor. They will still be able to make a profit, but they could not continue to hold transport authorities to ransom over the provision of a route.

People make choices about where they live and work, and about schools, based on public transport. What are they supposed to do when they lose the bus service that enables them to lead their life? We know of people who have had to give up their job because they have lost a bus service and can no longer get to their place of work. I have a group of women in Blackrod who can no longer go to their church, which they went to for many years, because the bus stopped running along that route. I ask the Government to use the better bus area fund to support all models of co-operation, including quality contracts. They should also do more to support passenger transport executives and local authorities that are considering quality contracts.

As my hon. Friend the Member for Blackley and Broughton mentioned earlier, we know operators have threatened a scorched earth effect by removing all buses if a transport authority wants to go the way of introducing quality contracts. Well, I do not think that a bus operator should be allowed to obstruct the implementation of Government legislation by making such threats. It would not be acceptable for other groups to threaten to thwart Government legislation, so why is it acceptable for a bus operator to do so?

Bus travel has zoomed up in London. Why has bus travel gone up so fast and so far? It is about cost, availability, the Oyster card and regulation, and it is very much about subsidy; it is about the state saying, “Public transport is a public service, not just a means to get around.” My constituents in Bolton West deserve the same sort of service as London residents, and I look to the Minister to address how he can help the Greater Manchester transport authority and my constituents get the service they deserve.

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[The Parliamentary Under-Secretary of State for Transport (Norman Baker)]

I thank all those who have taken part in this afternoon’s debate. I particularly thank the Committee and its Chairman for its report on competition in local bus markets. It is good to have time to debate the issue once again. The report was a welcome addition to the evidence base on this subject. It reminded us once again that, although competition is important, the ultimate prize is to improve bus services for the travelling public. That must be our primary aim. That was a key test for the Government when considering the Competition Commission’s recommendations—namely, would they result in more passengers travelling on the bus?

There is a point of uncommon purpose and agreement with my colleague the hon. Member for Nottingham South (Lilian Greenwood): Greener Journeys has made a welcome contribution to the debate on buses. We know from the work by Greener Journeys and others that bus services make a significant contribution to the economy. Sustainable growth relies in part on a good quality, affordable bus network to get people to jobs, training and education. I think that I have said so before, but if I have not, I can confirm that I am pursuing that matter and that welcome report with colleagues in different Departments across Government. Clearly, it is not simply a transport matter, but an employment and environment matter. Other benefits might flow from the recommendations being taken forward.

Although the overall picture is mixed, I am positive that we are headed in the right direction. There are many areas of the country where bus services flourish and where significant progress is being made in ticketing, infrastructure and integration. I have seen first hand in places such as Sheffield and Oxford the power of partnership working to make a real difference to bus services in city centres and beyond. There is significant investment going into new vehicles, new technology and new services by the better bus companies, both big and small. There is good innovation out there. I pay tribute to Trent Barton. It is always unfair to pick one company out, but I have been very impressed by the way that Trent Barton markets individual services, which is a testament to how a good bus network can be built through good management. We see a key example there.

I have been keen to build on investment by encouraging the bus industry to think about what more it can do to get people on to buses. That is why I am pleased that bus companies across the country have come together with two exciting offers in response to my suggestions. The first, BUSFORUS, is a website to collate information on bus services and tickets in one place for young people. The Passenger Focus survey, to which the Chairman of the Select Committee referred, showed a high level of satisfaction with bus use. Of course, it masked a slightly less high level of satisfaction among young people. That is helpful in persuading bus companies that they should perhaps give more consideration to young people in the way that they conduct their business. They are now doing so, and they have made a good start with the website.

[Graham Stringer]

The Minister makes a fair point about the survey masking dissatisfaction among young people. An even bigger point, because the survey is of bus users, is that it completely masks the dissatisfaction of the people who have abandoned bus services because of poor quality or high fares. The figures of 88% and 92% satisfaction are misleading, because they exclude the people who no longer travel by bus.

[Norman Baker]

It is true that those no longer travelling would by definition be excluded, because they would not have been on the bus to be subject to questions. I suppose the same applies to rail services. However, if bus services were being abandoned because of poor quality, I would expect that to be highlighted by the people still on the bus, but who have not yet abandoned it, so I do not think that the hon. Gentleman’s point is necessarily true, if I may say so. It might be that bus passengers are no longer on the bus because they have decided to travel by a different mode—car or train—or because the bus is no longer there in the circumstances that suit their individual needs.

The second deal was Bus for Jobs, which helps jobseekers get back to work by offering free travel for the whole of this month of January. Those are exactly the sort of leadership examples that should be demonstrated by bus companies. I will continue to work with the companies, and cajole them if necessary, to ensure that they continue to put passengers’ long-term interests directly at the heart of their businesses. Of course it is in their commercial interest to do so, and therefore they ought to be doing that for themselves, as many of them are.

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[Norman Baker]

Precisely. If it is working, and it appears to be, it would be wise commercially to see where else it might apply. Doubtless, the people at FirstGroup are listening to this debate very carefully, and they will have heard the hon. Lady’s pitch for a similar scheme for Bolton West and elsewhere, no doubt, in the conurbation.

The hon. Lady asked what we would do to roll out something like Oyster. I can assure her that we are doing a great deal of work on smart cards, or smart ticketing—it is becoming difficult to get the right form, because we talk about mobile phones and everything else, and there is no simple phrase these days to describe all that. As a Government, one of the first things that we did was give a big sum of money to the various passenger transport executives to help develop smart ticketing in their areas, and we are giving other help as well. That money is forthcoming for rail and bus.

The hon. Lady asked what we would do to help Greater Manchester. I hope that we will do a great deal. We continue to work productively with the integrated transport authority up there. I am always very happy to meet its representatives and hear any concerns that they have. We have, in fact, given a great deal of money to Manchester for transport in the past two and a half years, including the beginning of the delivery of the entire northern hub, so I hope that we are doing a good deal to help transport in that area.

I was asked about data on bus spend. I am advised that DCLG collects some of those data and they are published as part of its annual statistics—not just on supported services, but more generally. On best practice, I think it is something that has value, but it is predominantly for the local government family in this new era of localism to identify that themselves. Of course, we are interested in it, and talk regularly to our local government colleagues and to the Association of Transport Coordinating Officers, for example. However, it is broadly my view that the Local Government Association needs to do rather more to step up to the plate and identify best practice, rather than simply seeing itself as a body that lobbies Government for something. In the new era of localism, it has a different role to play, which I hope it will develop rather more than it has done. We are helping local government in many ways, including through providing guidance for local authorities on tendering.

[Graham Stringer]

I have listened carefully to what the Minister has said. I feel that he is coming to the end of his speech, and he is being very generous in giving way and covering all the issues. However, I have not heard him answer the question asked by my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman) about the deregistration of services, and whether he will legislate to ensure that, when services are registered, both ridership and fare information is made public.

[Norman Baker]

Let me muse on that matter for a moment—until I become inspired—and deal with the points made by the hon. Member for Nottingham South as part of my closing remarks. I have noted with interest her support—increased support, I might say—for quality contracts, and her proposal for bus deregulation exemption zones. The Opposition is of course entitled to produce its own policy and I look forward, with interest, to that evolving. Therefore, perhaps it would be churlish of me to point out that for 13 years, some of us were making such arguments and they were batted back and we were told that what we were proposing, which may not be terribly different from what she is now suggesting, was a load of old nonsense. It would, however, be churlish to make that point.

I do not think that it is true to say we are in a great cycle of decline. I say to the Opposition that there are issues about the bus industry that I have been happy to accept, including what some councils have done in terms of bus cuts and the real impact that has on individuals in those areas. However, I encourage her not to exaggerate the position. That “great cycle of decline”, as I mentioned yesterday, shows an increase in passenger journeys of 0.6% over the last 12 months. Even if we take out London, a decline of only 0.8% is shown. It is not a great cycle of decline, and we must not talk down the bus industry and the opportunities for users.