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The cost of regulation
Coach and Bus Week – 27 April 2006

The coming years may see ever greater amounts of public money alllocated to bus transport but it's unlikely to come without strings attached. Mark Smulian takes a look

Fans of the classic comedy series Yes Minister will remember the episode in which Jim Hacker commits himself to an integrated transport policy.

Suave Whitehall mandarin Sir Humphrey Appleby easily swats this idea aside with the observation that it would be "courageous" – his codeword for something both difficult and politically suicidal.

But the idea has raised its head again and could affect bus industry regulation, whether the industry likes it or not.

There could be a lot of extra public investment in buses, but the money will have tight strings attached. Environmental, sustainability and local economic policies all point the same way.

The government has decided that it must try to stem the relentless growth of road traffic.

Ministers regard the London congestion charge as an unexpected success and want the model adopted in other cities.

They have grasped though that the charge cut car traffic in central London only because there was a viable public transport alternative at hand.

Transport for London was able to decree that there would be an increased number of buses on the roads because the capital alone still has a regulated system. This was noticed in Whitehall.

Another factor is that the government is fond of targets for public services and has contrived to lumber itself with a target to, by 2010, increase the use of bus and light rail in England by more than 12% compared with 2000 levels, with growth in every region.

It would be deeply embarrassing were the government to fail to hit its own target, and Department for Transport figures published last October gave little cause for comfort.

Since 2000/01 the number of bus journeys in London had risen from 1.34bn to 1.78bn, handsomely exceeding the target.

But in English metropolitan areas ridership slumped from 1.16bn to 1.08bn and in the shires from 1.24bn to 1.16bn.

With a small increase in Scotland and small decrease in Wales the increase for Great Britain from 4.32bn to 4.6bn was wholly accounted for by London's regulated buses.

There is a further strand to pressures on DfT minister to ‘do something' about buses.

Across government there is an emphasis on sustainability. This can be ill-defined, but broadly means seeking to minimise all activities' impacts on the environment.

This includes not just reduced congestion but better air quality from less traffic, and easier access to shops, jobs and amenities by public transport for both urban and rural residents.

For example, rural residents might be unable to reach shops for lack of a regular bus service, and jobless residents of remote urban council estates could be unable to take up a placement found by Job Centre Plus without public transport.

Councils are at the sharp end of delivering these policies and complain that they need more substantial powers over buses to make an impact.

Their only legal power, the quality contract, has never been used due to the legal complications surrounding its implementation.

They depend therefore on voluntary ‘quality partnerships' with operators, and on the extent to which councils can afford to subsidies non-commercial services.

Neither is a very stable foundation for a bus network, given that operators' priority is to make money, and that council budgets are under perennial pressure.

Yet with no powers beyond subsidies and persuasion, councils have been telling anyone in Whitehall who will listen that they feel they have one arm behind their backs.

Thus, ministerial enthusiasm for road charging, the ridership target and council grouses over sustainability have come together to prompt a rethink.

What has given further hope to supporters of bus regulation is a new government policy wholly unconnected to the bus industry – city regions.

The idea behind city regions is that major cities act as economic engines that drag up the performance of their hinterlands. They are, roughly, the travel-to-work areas around major cities and towns.

Somehow, the government wants to get city regions running without the costly upheaval that would be caused by a wholesale reorganisation of local government, and so is looking for powers that could be given collectively to neighbouring urban councils.

Transport is the most obvious, since good transport infrastructure underpins any area's economic performance.

While there are train services, ‘transport' in most cities means ‘bus'.

Ministers have strewn recent speeches with hints that something is in the offing.

Indeed, the DfT's annual workplan, a little noticed document, came right out with it in March.

This says the department's tasks for the coming year include: "Devise ways of giving local authorities more control over bus services through stronger partnerships with operators."

Another is to: "Review bus subsidy and propose changes which will support patronage growth."

Then there was transport minister Derek Twigg's foreword to a publication by the Passenger Transport Executive Group, which represents the metropolitan passenger transport authorities in Greater Manchester, Merseyside, South Yorkshire, Tyne and Wear, West Midlands and West Yorkshire.

Mr Twigg wrote: "We are looking at ways to improve planning and operating bus networks in our big urban areas.

"This could involve local authorities and bus operators agreeing timetables, fares, bus priority and investment by mutual agreement and to the benefit of passengers."

If two parties agree to something, the clear implication is that one or other could withhold agreement, which would be a step forward for councils that at present can merely comment on commercial network bus matters.

Transport secretary Alistair Darling told MPs on the transport select committee last winter that the quality bus partnerships system "patently is not working at the moment and does need to be looked at".

He added: "I am concerned that I think we could do far more to exploit the use of buses, particularly in the larger conurbations and busier cities, than we are doing at the moment, and I do not think we have got it quite right just yet."

His permanent secretary David Rowlands, answering a question about the usage target, said: "Faced with decline outside of London, we need to do something about it."

Mr Darling also explained why he had previously called for more council powers over buses as part of road charging:

"If you were going to do road pricing within a particular area or region, you would have to combine it with good quality public transport and you would need to be certain the public transport was actually there."

The Transport Innovation Fund, due to grow to a mind-boggling £2.5bn by 2014/15, will primarily be devoted to laying the foundation of a national road pricing scheme, a sort of giant congestion charge zone.

If Mr Darling means what he says, that points to nationwide bus regulation alongside it.

These straws in the wind have excited or alarmed, depending on their views, those with an interest in bus operations.

Leading local government academic Tony Travers, of the London School of Economics, has completed a project for the Local Government Association – the councils' representative body – on how the PTAs could be the basis of city regions.

He says cities' three priorities would be transport, crime prevention and regeneration.

"I would want to see city regions given the same powers over buses as has Transport for London, yes I would go that far," Mr Travers says.

"There is no need to renationalise buses, but it should be a regulated system.

"Quite simply, the London model appears to increase ridership and others do not.

"You cannot ignore that TfL has delivered on bus ridership and it has declined in most other places."

Mr Travers dismissed as a "red herring" industry claims that councils outside London lack the expertise to over see a bus network, and urged the industry to see increased council control as a quid pro quo for substantial public investment.

"There is the opportunity for the industry of very large investment in buses, as I would have thought that regulation would unlock Transport Innovation Fund money for buses," he says. "There would be a big increase in funding as there has been in London since 2000."

Giving the PTAs, and perhaps other major urban areas, control of buses would have multiple attractions in Whitehall.

The Office of the Deputy Prime Minister would make a start on its cherished city regions, the Treasury would get the economic growth these are expected to encourage and the DfT would have more chance to meet it target for bus use.

An LGA spokesman said: "There are hints coming, in particular through discussions on the TIF, that councils will get some more powers because there is a growing recognition that they do not have the toolbox they need on buses.

"They cannot coordinate buses, and that means they cannot deliver their transport polices.

"There is a feeling that the public sector gives operators all this money through subsidies and infrastructure and has too little influence over what we get out of that."

One complication is in the attitude of the Office of Fair Trading which "seems to value competition above service", he says, and obstructs deals between operators on joint ticketing and timetable coordination.

The loudest calls for powers over buses come from the metropolitan passenger transport authority areas, which look with envy at London.

Jonathan Bray, assistant director of the Passenger Transport Executive Group, says: "You can see from the DfT workplan and other hints from ministers that something is going on.

"Clearly the government has decided that something must be done on buses that will go beyond existing policy, but whether it will be proper regulation is unclear. They may just tinker."

Mr Bray said ministerial fear over missing the usage target outside London was one motive, as was the realisation that congestion charging could only be politically acceptable if adequate public transport were in place and "you need regulation to do that".

Another factor is pressure from backbench MPs.

Mr Bray explained: "Quite a lot of MPs get complaints from constituents about buses and then find neither they nor councils can do much about it, and start to complain to the government themselves."

Matthew Lugg, who chairs the UK Roads Board and is director of highways, transport and waste management at Leicestershire County Council, has no doubt that there is "a growing recognition that the London situation works and if local authorities are going to consider road pricing there has got to be an adequate alternative by public transport."

He says that bus patronage outside London, far from rising to meet the DfT target, "has if anything been going the wrong way, and bus companies seem to be rationalising services onto a few profitable routes, when you need a whole network".

Mr Lugg advocates, "partnerships with teeth" rather than full regulation, "the balance has to shift more to councils".

Rural areas have suffered as councils budgets have tightened, cutting the number of routes that can be supported.

While the countryside might not suffer congestion, lack of an adequate bus service "raise issues of accessibility and sustainability", Mr Lugg says, if village residents become isolated or car dependent through lack of buses.

But the key factor will be road pricing and the need to provide complementary services.

"The government has the bit between its teeth on road pricing and I think it will offer carrots to councils who take it on the shape of powers over buses," he predicts.

There are though dissenting voices.

Brighton and Hove Council is often cited as having one of the country's most effective bus partnerships, with Brighton and Hove Buses, part of operator Go Ahead.

This offers real-time information, frequent daily services and high usage.

Its public transport manager Paul Crowther says: "I don't know what the government proposes, and without wanting to boast I think the model we have got is the one that everyone should follow. "I can't see how new powers would improve the relationship."

He admits relations may work less well elsewhere and that the link with Go Ahead depends on mutual goodwill rather than a legal agreement.

"Each party understands the capabilities and limitations of the other," Mr Crowther says. "They realise that local authority budgets are fragile things and that I cannot necessarily afford the subsidised network I would like, and we realise their ability to invest depends on their profitability."

The councils' stance is supposed to be for the good of buses users, but perhaps surprisingly Caroline Cahm, president of Bus Users UK is sceptical.

She says: "If councils are putting in a lot of infrastructure then they have a right to be involved, but if not I do not see why they should be because if people are forced to do something they will make themselves awkward."

The answer to service improvement is more partnerships "where each side has obligations", she says. Ms Cahm sees problems because she believes that councils are not expert at deciding on routes and fares and that officers would probably face pressure from influential councillors to provide services to their constituencies rather than where they were most needed.

Franchising would also squeeze out all but the largest operators, she fears.

The Confederation of Passenger Transport insists that nothing has changed, despite ministers' hints.

Its spokesman said: "We still want to press for enhanced quality partnerships. As far as we are concerned the government's view is the same and it has said that at the Bus Policy Forum.

"We want to strengthen partnerships with councils at all levels."

And, indeed, councils want to strengthen links with operators. It depends on what each – and the government – turns out to mean by ‘strengthen'.



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