SERA Bus Briefing

Bill Eyres, Chair of SERA

Professor David Begg, 'Public Subsidy for the Bus Industry' CfIT report

Buses are the most popular form of public transport in the UK accounting, for over 70% of public transport journeys of less than 10 miles. 87% of people live within 6 minutes of a bus stop and 29% (around 16 million people) use the bus at least once a week (CPT, 2002). In terms of emissions per passenger kilometre, buses are by far the cleanest mode of transport.

(Source: OXERA, 2002)

The perception amongst the media and the public at large is that motorists are over- taxed. But in the past 20 years, bus fares have risen much faster than inflation, outstripping both motoring costs and rail fares. Since the early 1990s, local bus fares have increased by 24%, compared to an 11% rise in motoring costs in real terms (CfIT, 2002).

It is therefore hardly surprising that bus patronage has steadily fallen. Over the last decade, local bus use has declined by 11% while car ownership has soared. There are over 2 million new cars sold in the UK each year and car sales show no signs of slowing. In addition, people are travelling longer distances in their cars. The average distance travelled per person each year by car has increased by 11% since 1998 (DfT, 2001).

The car has historically dominated transport policy. Buses and other more sustainable modes of transport, such as cycling and walking, are more often viewed as alternatives to the car, rather than a complement to it. The media tend to portray any new transport policy idea as either pro- or anti-car. But providing people with greater transport choices and cutting down on car dependency will be pivotal to achieving more liveable, environmentally sustainable communities. The provision of affordable and accessible bus services will be fundamental to achieving this vision.

The Government's target to increase bus use, set out in its Ten Year Transport Plan, is woefully unambitious. It aims to increase the number of bus journeys by 10% by 2010. This compares with a target to increase rail travel by 50%. If bus journeys in London continue to rise as expected, it will be perfectly possible for the Government to meet its target whilst patronage gently declines elsewhere in the country. SERA has called for a rise in bus journeys by at least 25% by 2010, the equivalent of a billion new passenger journeys.

One of the key ways the Government can improve bus patronage is to make it easier for local authorities to adopt Quality Bus Contracts. A Quality Bus Contract offers local authorities the opportunity to:

• plan and develop a network
• set fare and frequency levels
• specify the design and accessibility of vehicles
• ensure that bus services are not just confined to busy, profitable routes, but also penetrate into socially-excluded estates or remote villages.

Currently, local authorities need to apply to the Secretary of State for Transport to approve Quality Bus Contracts and they can only be introduced as a last resort, where a partnership approach has not delivered the local authority's Bus Strategy. As a consequence, no local authority has got as far as making a formal application for a Quality Bus Contract. There are a few notable areas where informal partnerships have delivered elements of success. In Brighton, York, Oxford and Cambridge, where the local authorities have introduced tough policies that both favour bus and curb car usage, the Quality Partnerships approach has proved successful. In Brighton, bus patronage has increased by 5% over the past five years. In Oxford, around 50% of people arrive in the centre by bus. However, there is a view that in historic cities, such as Oxford, York and Cambridge, bus services will flourish within any regulatory environment. This is because of a high degree of control of car traffic and parking space, coupled with the development and extension of park and ride schemes, all of which are major drivers of bus use. In other areas, it is authorities that have had the benefit of smaller management-owned operators, less driven by short-term profitability, such as the Blazefield (Harrogate and Burnley) and Wellglade (Barton Trent) groups, where there are notable partnership successes.

Another way to promote the shift onto buses is to make bus services more reliable and flexible by encouraging the introduction of:

• Bus priority measures, such as dedicated bus lanes, to ensure that buses don't get stuck in traffic in busy, congested areas and can keep to their timetables

• Park and ride schemes so that car owners need to take the bus to travel into urban centres

Flexible demand-responsive services able to deliver cost-effectively in places and periods of relatively low demand, such as during early morning, late night and deep rural areas, can also assist in reducing car dependency by ensuring that those who would otherwise be drawn into car ownership - even where this is a not very affordable option - can continue to rely largely on public transport

Tony Grayling, 'Any More Fares' IPPR report

SERA is concerned that the Ten Year Transport Plan is heavily skewed towards modes used by high earners. The Social Exclusion Unit's (SEU) interim report on transport and social exclusion highlights that, of the public expenditure outlined in the plan, only 12% will benefit those in the lowest income groups (SEU, 2002). Yet more than 9 out of 10 journeys made by people on the lowest incomes are made by bus. For young people, the unemployed and lone parents, who often do not have access to a car, lack of good quality bus transport is a barrier to finding employment and using local services. For example, two out of five jobseekers say lack of transport is a barrier to getting a job and one in 10 people in low income areas have turned down a job in the last twelve months because of transport (SEU, 2002).

Older and disabled people already benefit from bus fare concessions, and local authorities have discretionary powers to offer concessions to children under 16 and students up to 18 in full-time education. National Travel Survey (2002) information shows that young people are walking less and using public transport less, with an increasing number of children being taken to school by car.

SERA recommends that Government extend the minimum national standard of half fare(?) local travel, introduced for elderly and disabled people in the Transport Act 2000, to cover to students in education or young people participating in New Deal or welfare to work programmes, and provide extra funds to local authorities to fund this change.

The Government has introduced a range of subsidies for supporting local bus services, totalling more than £1billion per year. The Fuel Duty Rebate (FDR) constitutes the second largest source of funding for buses. The FDR is paid directly to bus operators according to how much fuel they use. It refunds about 80% of the duty paid on fuel and is worth around £300m a year in England.

SERA agrees with the underlying principle of the FDR - to provide a direct subsidy to bus operators to help reduce costs, to make services more available and to lower fares. The FDR plays an important role in keeping bus fares low and promoting "modal shift", i.e. encouraging people to use their cars less and take the bus instead. But the FDR currently acts as a barrier to the introduction of cleaner transport fuels, such as natural gas, within bus fleets. Independent market research by the Energy Saving Trust of 100 bus companies revealed that the FDR is one of the major barriers to switching to alternative fuels. The Rebate as it currently operates also creates a perverse incentive against investment in fuel-efficient vehicles and in driver training, as the saving to operators is reduced by its impact.

(Source: EST, 2002)

Road fuel gases offer important reductions in particulates and nitrogen oxide emissions, compared with conventional fuels. The 2001 Budget reduced the duty on road fuel gases to 9 pence per kilogram and announced that the duty would not be increased until 2004 at the earliest. The FDR is therefore negating the impact of this duty differential and of other Government policy incentives that seek to promote the uptake of cleaner, more fuel-efficient fuels and technologies. A natural gas bus can reduce CO₂ emissions by 10-12%, whilst a hybrid-electric bus can reduce CO₂ emissions by 30-50%.

HM Treasury is currently conducting a review of the FDR. The Commission for Integrated Transport has advocated replacing the FDR with a per passenger subsidy. This option would give bus operators a direct incentive to increase bus patronage to secure higher levels of subsidy. SERA, however, has a number of reservations about the cost and complexity of administering a per passenger subsidy and its negative social implications. A passenger subsidy would:

• require the introduction of new technology, such as electronic ticketing or smart card arrangements, for keeping an accurate record of passenger numbers. Such technology has been widely field-tested in other countries, but it requires considerable investment. For bus operators, already running on tight profit margins, this kind of investment is unlikely to be feasible without additional funding from HM Treasury. The use of such technologies is likely to be more economically viable in the longer term.

• add to administrative complexity. The Department for Transport (DfT) collects data on behalf of HM Treasury to support the administration of the current FDR system. Bus operators are currently required to report on two factors: distance travelled (km); and litres of fuel used. If the existing FDR were to be replaced with a per passenger subsidy, the administration of the scheme would become more complex as the DfT and HM Treasury would need to also collate data on passenger numbers.

• favour urban radial bus routes with lots of passengers, rather than rural services or those to peripheral estates, that tend to have lower passenger volumes. A subsidy calculated on the basis of passenger numbers could therefore have negative implications for areas already poorly served by existing services. A per passenger subsidy could potentially serve to reinforce the social exclusion of people in rural areas.

SERA recommends that the Fuel Duty Rebate (FDR) should be reformed so it is based on a mileage subsidy - a number of other organisations, such as IPPR, also support this idea. A mileage-based subsidy would:

• continue to encourage the shift towards buses by helping bus operators to reduce costs, make services more available and lower fares

• be fuel neutral and therefore not encourage the use of diesel over less polluting alternatives (e.g. natural gas) or over greater fuel economy

• not add to administrative and enforcement costs because a mileage subsidy could be calculated from information that bus operators already report to the DfT

• be the most practical option to introduce in the short term because it would not require expensive new technologies such as electronic ticketing

• support other Government objectives that promote social inclusion by improving access to affordable and accessible bus services.