Bus Industry

Debate between Graham Stringer and Mike Weatherley

Tuesday 6th September 2011 Westminster Hall

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

It is a pleasure to serve under your chairmanship again, Mr Streeter. It is now 25 years, a quarter of a century, since buses outside London were deregulated following the Transport Act 1985. We have a great deal of experience of what the implementation of the Act meant. By and large, it has been a very poor experience. It is sensible to call it a disaster for the bus-travelling public. In Greater Manchester, in the past 20 years, approximately 30% of the number of people who travelled by bus no longer do so. Bus deregulation has meant higher fares in real terms, a reduction in the networks and less reliability. It is not surprising, therefore, that the number of passengers has reduced.

I will not say that everything about bus deregulation has been awful—most of it has been. If I had to put a figure on it, it would be approximately 80%. A great deal of it has been bad. Bus deregulation has been successful on radial routes in major urban conurbations, where the service in peak times is often better than it was. The old transport authorities and county councils were guilty of having inflexible bus routes and of sending buses to where people lived 30, 40 or 50 years previously, before areas were demolished and rebuilt elsewhere. The commercial flexibility of the deregulated system has had some benefits, but overall the impact has been negative.

How does one disaggregate that from the natural trends in bus ridership in the past 25 years or so? Well, that is fairly easy because we have a precise comparison. When bus services were deregulated in the rest of England and Wales, they were not deregulated in London. Between 1986 and when the office of the Mayor of London was introduced in 1998, the regulated franchise system in London retained its passengers with very little subsidy. From the time of the election of Ken Livingstone in 1998, the number of bus passengers in London increased and the network became more extensive because a considerable increase in subsidy was put into the system. The period after 1998 does not offer an exact comparison, but the period between 1986 and 1998 offers a very good comparison. Bus passengers were retained in this city, but they were not retained elsewhere. The simple conclusion is that that is because of bus deregulation.

Behind all the statistics that I will use in my speech, there are real people. If people want to get a sense of the damage that has been done to individual lives by the loss of bus services—it affects family life and the ability to get into employment—I suggest that they read the recent Transport Committee report, “Bus Services after the Spending Review”. That report has example after example of people’s lives being blighted, their ability to obtain employment diminished and their ability to see their families reduced because bus services have disappeared.

I thank the officials at the Passenger Transport Executive Group, Sir Howard Bernstein, chief executive of Manchester city council, and his officials at Transport for Greater Manchester. They provided a lot of the statistics in this speech about transport in Manchester and transport nationally. Two thirds of all public journeys take place by bus, even after the reduction in numbers following deregulation. We are therefore talking about something that is important to many people’s lives, often the poorest people in our communities, and something that is vital to the economy.

My main point in this speech is that there will be cuts to an already reduced system. I do not want a sterile debate in which the Government say that it is all the fault of the previous Government that they are making cuts, and we on this side of the Chamber say that the cuts are too fast and too deep. Both those points have their place. What is interesting is that, because we are dealing with cuts to a deregulated system, it is possible to diminish the impact of those cuts by looking carefully at what are likely to be the recommendations of the Competition Commission, and by trying to use more effectively and directly the facilities in the Local Transport Act 2008. That is what I want to concentrate on.

To get some sense of the size of the impact of the cuts that are likely to happen, I will go through what the bus system is faced with. First, there is the 28% reduction in local authority grants, which will affect buses. Then there are changes in the formula for concessionary travel. Estimates on the impact that that will have on the bus system vary between £50 million and £100 million. The best estimate is approximately £77 million. From 1 April 2012, there will be a 20% reduction in the bus service operator grant. In passing, I say to the Minister that BSOG is not used in the most effective way. As a general grant to the bus industry it is fine—it helps. However, it would be better if it were given to transport authorities and passenger transport executives so that they could direct it to environmental improvements or particular enhancements to transport, rather than it just being given generally to bus companies.

Those are the three big areas where there will be cuts, but there is also the abolition of the rural bus grant and the 50% reduction for small and medium-sized public transport schemes from the integrated transport block. There will, therefore, be major changes and reductions in bus services in the coming years. PTEG has tried to estimate what will happen and its conclusions are pretty stark and frightening. It estimates that by 2014 fares will have gone up by 24%—nearly a quarter—in real terms, there will be a decline in service levels of 19%, which is nearly a fifth, and patronage will be down by about a fifth. That is in metropolitan areas, which is what is covered by PTEG.

According to the Transport Committee report, 70% of local authorities in non-urban areas have already cut their grants for buses and transport. My hon. Friend the Member for Hartlepool (Mr Wright) is present and I look forward to listening to his contribution later, but in Hartlepool 100% of the bus services subsidy has been removed, as is the case in Cambridgeshire, although I understand that that is currently subject to legal challenge. In Somerset, North Yorkshire, Shropshire and Northamptonshire, there have also been significant cuts, while in Luton and Peterborough there have been no cuts. The situation around the country is varied but, overall, it looks pretty bleak, given the PTEG projections for urban areas and the known cuts identified in non-urban areas by the Transport Committee.

Transport is a function devolved to local transport authorities but, I ask the Minister as the Transport Committee did, surely central Government have a responsibility, not to make local decisions but to know what is happening in every area, so that when the Government make decisions about their grants and where they spend their money, they can do so as accurately and effectively as possible, and that requires knowledge.

The Office of Fair Trading decided that it would refer the bus industry to the Competition Commission. There was already a great deal of evidence from Greater Manchester and other places that monopoly behaviour was effectively taking place. It has taken the competition authorities a long time to get around to looking into it. More than 10 years ago I wrote to the competition authorities and asked them to investigate—I was not the only person who did that—and they said, “Please produce written documentation of unlawful agreements between different bus operators.” Of course I could not do that—those documents would not be available to a Member of Parliament or anyone else, if indeed they existed—but by looking statistically at what is happening, we can see all the signs of real monopoly behaviour, and that is what the Competition Commission has found.

I will go through some statistics for Greater Manchester. In Oldham, for instance, 85% of the services are provided by First. In my own constituency the figure is about 67%, in Salford 77% and in the whole of north Manchester 70%. In south Manchester, we can see a mirror image of those figures, with Stagecoach monopolising: in Stockport it provides 82% of services, and in the whole of south Manchester about 74%.

My constituents suffer a real disadvantage in fare levels. I was told when I put my case to First that not many people buy the one-off fare, but that people buy weekly tickets. Even the weekly tickets bought from First by people in north Manchester are 47% higher—£17, compared with £11.50—than the price people pay in parts of south Manchester, where the average income is about £10,000 higher than for my constituents. So if they need to use buses, they are paying twice the percentage of their income on fares. Frankly, there is little on-road competition, which is what was originally intended to be the driver of better, more effective and more responsive services under bus deregulation.

Another indication of monopoly or anti-competitive behaviour is what in the system is called gaming the market, where bus companies use the fact that two different transport systems are in operation—the deregulated system, under which anyone can operate a bus service having given a small length of notice, and the subsidised, tendered services. In designed deregistration, the bus company is really saying, “We can make more money from this service, because it is an important service for the public, if we deregister it and then get the transport authority to tender it out.” Then, if it loses the tender, and a tendered service is running, the company reregisters the services, or parts of them, to undermine the subsidised service. An awful lot of such anti-competitive behaviour goes on.

As I said, the competition authorities were slow to get off the mark and to look at the area, but they have got off the mark, and credit to them for that. They have found that profits are much higher in the deregulated area than in London. In the past 24 hours Go-Ahead, for its out-of-London services, has just announced record profit levels of up to 10.4%.

[Mike Weatherley (Hove) (Con)]

The hon. Gentleman mentioned that anyone may enter the bus market, but does he agree that one of the faults of deregulation was that it did not create a perfect market? There are significant barriers to entry, even if one does not go through the subsidised route but sets up an independent service.

[Graham Stringer]

The hon. Gentleman makes a perfectly sound point, which I will come to in my conclusions. The large operators own the garages and can afford to subsidise competition if there are new entrants to the market—it is a long way from being perfect competition.

I was talking about the profits of Go-Ahead but the profits of Stagecoach are truly staggering, especially when the economy is flatlining and we have been in recession. They are up to £153 million from £126 million, which is an increase from 14.4% to 17.1%. In the friendly debates I have with Brian Souter of Stagecoach, he once called Gwyneth Dunwoody and me “dinosaurs” because we believe in going back to a sane system of regulated buses—he even set up little models of dinosaurs. I do not know how many people in the Chamber remember the film made of the James Clavell book, “King Rat”. When the Japanese prisoner-of-war camp in Singapore was liberated by allied forces, there was one very fat prisoner among all the other prisoners, whose ribs were showing—they were starving to death. At a time of austerity and the economy not doing well, Brian Souter and Stagecoach are the King Rats of the British economy, doing enormously well out of public subsidy when everyone else is struggling to get to work and make a living. They are, in effect, subsidy junkies.

The figures in the Transport Committee’s report show that the bus industry outside London receives from the fare pot about £1.8 billion in a total income of £3.4 billion, so 47% of the bus industry’s income comes from taxpayers. It is as simple as that. Whenever a bus leaves a depot, an average of 50% of its costs are paid by taxpayers. Given what has happened with deregulation, is that sensible use of taxpayers’ money? Are we receiving the best possible value?

Energy Efficiency Measures

Debate between Graham Stringer and Mike Weatherley

Wednesday 17th November 2010 Westminster Hall

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

It is a pleasure, Mr Sheridan, to serve under your chairmanship.

Decarbonisation policies and renewable energy policies, both nationally and internationally, may not be in crisis but they are at a turning point. The Chicago climate exchange ended carbon trading, and a year ago the Copenhagen summit was not a success. Wind farms are increasingly criticised as an environmental blight as well as extremely expensive, and it has been noted that energy companies make three times as much money from wind farms as they do from coal and oil. The debate takes place in that context.

I am rather impressed by the potential contribution that heat pumps could make to our future energy needs. However, we must have complete assurance that the installed technology will actually deliver what it says on the tin. I fear that in 30 or 40 years, many of our energy policies, including wind farms, will be seen in the same way as we now look back on deck-access housing accommodation from the 1960s and 1970s—a good idea at the time, but no more than that. Heat pumps are a big investment for both householder and taxpayer, and both deserve to be assured that they will be worth the money.

Heat pumps extract heat from the ground or the air, and redirect it for space heating and hot water. The efficiency of heat pumps is measured by their coefficient of performance, which I shall refer to as COP. It is the ratio of heat produced per unit of electricity consumed in generating that heat. A COP value of 3 means 3 kWh of heat output per kWh of electricity used to run the pump. Higher COP values represent relatively more efficient heat delivery.

COP values vary by season; the colder the ground or the air, the more work the pump has to do to raise the temperature to acceptable levels for domestic heating, and the more energy is consumed. Poor design and installation also affect the COP. In well-insulated buildings with low temperature under-floor heating of about 40° C, ground-source heat pumps can be beneficial. Conversely, in poorly insulated buildings, where the pump is required to heat high-temperature radiators and hot water to about 60° C, their performance is less impressive.

The 2009 European directive on renewable energy excludes low-performing heat pumps from making a contribution to renewable energy targets. It states that

“Only heat pumps with an output that significantly exceeds the primary energy needed to drive it should be taken into account.”

From other data, we can deduce that that the EU implicitly requires heat pumps to achieve a COP of 2.875 before their energy contributes to the renewable energy target. The logic behind the EU requirement for a minimum efficiency level is that replacing a fossil-fuel heating system with a poorly performing heat pump may result in increased CO₂ emissions. That is because the emissions costs in the extra electricity requirement of a heat pump need to be balanced against the emissions of burning a fossil fuel.

The most recent study of heat-pump performance, “Getting warmer: a field trial of heat pumps”, was published by the Energy Saving Trust on 8 September. The study reveals that the performance of heat pumps installed in the UK is surprisingly poor. It showed that only one of the 22 properties that had ground-source heat pumps achieved the implicit minimum EU directive COP, and that only nine of the 47 sites with air-source heat pumps achieved that standard. Something similar occurred during the Joseph Rowntree Foundation study in Elm Tree mews in York; a communal ground-source heat pump was installed that had a nominal design COP efficiency of between 3.2 and 3.5, but despite a number of interventions throughout the year’s monitoring, the delivered COP efficiency was 2.15. As a result, it failed the renewable test.

The risks are clear. There is the potential for consumer dissatisfaction with technology that fails to deliver on value for money after expensive and possibly disruptive installation; in some cases, it will raise carbon emissions rather than lower them; problems may arise from the EU failing to count the majority of heat pumps in the UK as a contribution to our renewables target; and there is the possibility of failing to qualify or to remain qualified for renewable heat incentive payments.

[Mike Weatherley (Hove) (Con)]

I wonder whether there are any source problems, such as in my constituency of Hove, with chalk-based land. Would that present an additional problem?

[Graham Stringer]

I understand from my A-level physics—it was a long time ago—that the real problem is the difference in temperature between the ground and the building being heated.

In response to a parliamentary question, the Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle (Gregory Barker), confirmed that

“Heat pumps that do not meet the required average seasonal performance factor, as defined in Annex VII of the use of energy from renewables sources Directive 2009/28/EC, will not count as renewable.”—[Official Report, 21 October 2010; Vol. 516, c. 865W.]

In order for heat pumps to have the correct COP, each installation needs to be inspected and monitored to ensure compliance. How will the Minister monitor that, if it does not do what it says on the tin? I would be grateful if he answered that question today.

The Energy Saving Trust report was bad news for heat pumps, but disappointing COP values are only part of the picture. The threshold for being considered renewable takes no account of the carbon footprint generated by manufacture and the emission of the heat pump’s fluorocarbon refrigerant. Fluorocarbons used as refrigerants can be highly polluting if they leak, because their global warming potential can be thousands of times that of CO₂. The refrigerant R404A, for instance, has a global warming potential 3,800 times that of carbon dioxide. In a written answer, the same Minister said:

“we would expect heat pump manufacturers to avoid using this particular gas wherever possible.”—[Official Report, 19 October 2010; Vol. 516, c. 649W.]

Unfortunately, I understand that 15% of heat pumps use that refrigerant.

A further study undertaken by Atlantic Consulting, “Fluorocarbons’ Contribution to Air-Source Heat-Pump Carbon Footprints”, showed that the contribution of fluorocarbons to the carbon footprint of heat pumps was considerable. Production and disposal of heat pumps made a negligible contribution; however, in power generation, fluorocarbons added 20% to the footprint. The annual operating leak rate was estimated at 6% of rated charge, in accordance with the current estimate of the Refrigeration, Air Conditioning and Heat Pumps Technical Options Committee of the United Nations Environment Programme. Another academic study from 1999 found leak rates as high as 8%. Those rates are significant; they are not negligible, as was claimed in a written answer of 19 October 2010, which was based on information supplied by the industry.

Further, could the Minister obtain independent confirmation of whether the leak rates are negligible or significant, as a lot could ride on that for the future of the industry? There are no current mandated standards on leak rates for heat pumps, but the problems do not end there, because much damage is done when the refrigerants are vented into air at the end of the installation’s life, as all too often happens. I also see from a recent parliamentary answer, on 19 October 2010 at column 647, that no information is held on quantities of HFCs and HCFCs recovered and recycled in the UK. So we simply do not know how much of these dangerously polluting gases, which are controlled under the Kyoto convention, are emitted into the atmosphere at the end of the life of the installation. If emissions are not measured, they cannot be managed.

UNEP’s RTOC, which I mentioned earlier, has adopted a working assumption that end-of-life emissions of refrigerants are on average over 50%. That is not “negligible”. Atlantic Consulting’s findings are supported by a similar, peer-reviewed study published by the university of Delft in the Netherlands, which found that,

“Even though heat pumps are generally considered to be sustainable heating systems because they extract heat from renewable sources rather than by burning non-renewable fossil fuels this research shows that a heat pump is actually not more environmentally friendly than a gas-fired boiler.”

A press release from Atlantic accompanying its report argued that the RHI should be re-targeted, pointing out that,

“Under the proposed RHI, homes and offices in the UK would be subsidised to displace or replace gas- or LPG-fired heating with heat pumps, even though this would, at best, cause a very minor reduction in carbon emissions, and in many cases an increase.”

Currently, the Government are considering the detail of how the RHI will operate. The potential contribution of heat pumps to our renewables target is significant, but some way has to be found of assessing and certifying each installation, so that it makes a genuine and positive, rather than negative contribution. Ideally, minimum fluorocarbon leak rate standards should be mandated for heat pumps, so that these powerful global warmers do not undermine their contribution further.

The key point is that the nominal or certified design of coefficient of performance of a heat pump can differ radically from the efficiency after installation; so radically, in fact, that it can detract from rather than add to our battle against climate change. The Department of Energy and Climate Change is to subsidise heat pumps with taxpayers’ money at 5.5p per kWh for 20 years. That is an enormous amount of money committed for a long period, and we must be absolutely certain that taxpayers’ money subsidises only that which is renewable after installation and that which is good, rather than inefficient, not renewable and bad.