Just over 21 years ago, in October 1988, the then West Yorkshire Passenger Transport Authority took a ground-breaking decision, and became the first of the seven UK urban transport authorities to sell its bus company to the private sector.
The company, Yorkshire Rider, was purchased by a management and employee buyout team led by managing director Bill Cotham. The company expanded subsequently, acquiring the Leeds and Bradford operations of the West Yorkshire Road Car company in July 1989, and bus operations in nearby York in July 1990.
Four years later, the management and employee team sold the company on to one of the emerging major players in the sector, Badgerline Holdings. A year later Badgerline merged with the Aberdeen-based GRT Bus Group to form FirstBus, which has since evolved into FirstGroup, one of the largest public transport operators in the world.
PTA members freely entered into the decision to sell Yorkshire Rider 21 years ago, and received a substantial sum of money in return. There were other bus operators in the county, too, such as West Riding and Yorkshire Woollen (now Arriva Yorkshire) and Keighley & District and Harrogate & District. All four of these companies had also been sold by the taxpayer (in the form of the National Bus Company) to their managers and other entrepreneurs.
Implicit in the sale contracts for the assets involved was a right to trade as a bus operator in the county, under the prevailing legislation and provided the companies continued to meet the quality licensing requirements of the Traffic Commissioners.
Under regulations put into effect by the current Government in the last few days, that very same organisation, now called West Yorkshire Integrated Transport Authority, is seeking to withdraw the rights of all these companies to run buses in West Yorkshire.
Instead, it proposes, services would be determined by the authority and its executive (Metro), and then put out to tender. Therefore the county’s existing bus operations would effectively be sequestered. And the amount of compensation the operators will receive? Zero.
In many ways, this is an astonishing proposition – which, in the old days, would be called “nationalisation without compensation”: something which was not proposed even in the heyday of Labour’s nationalisation policies in the 1940s. And yet not only has this 21st century form of licensed larceny been tabled by Metro, it was also voted for by the Conservative members of the authority.
This raises a number of questions. Firstly, will it all actually happen? Probably not. Secondly, why does the authority want to do this? One word, ultimately: power. And thirdly, what difference would it make? Answer: none whatever, except increase the cost to the taxpayer through more administration and transfer of risks currently borne by the private sector.
If there is a change of Government at the General Election, the process will be stopped, as the Conservative Party nationally is committed to repealing the legislation. Even if Labour hangs on to power, though, there are a considerable number of hoops that Metro has to go through in order get its proposals through.
The first stage is that they have to submit the proposals to an independent panel for assessment, showing that their scheme would:
- have a positive impact on the use of bus services
- will be of benefit to users of bus services by improving quality
- will contribute to the implementation of the local transport policies
- achieve all the above in an economic, efficient and effective manner.
There are of course huge amounts of room for argument on all those points. After that, affected operators have a right of appeal to the Transport Tribunal, as well as (on points of law) to the Court of Appeal. Because of the “nationalisation without compensation” argument, there is also the distinct possibility that the legality of the whole process could also be challenged in the courts, all the way to the European Court of Human Rights.
In such circumstances, the local taxpayers may well feel entitled to ask why the authority is spending scarce resources and (even scarcer) public funds proceeding with the proposal at all, let alone within weeks of a General Election.
The core of the answer lies in the opposition of all the PTEs to the implementation of bus deregulation in the late 1980s, and their oft declared determination to reverse the process, which they have pursued relentlessly for the last 25 years.
This is dressed up in weasel words about strategies and so forth. Such as “ensuring consistently high levels of customer services, securing better value for money and achieving transport integration.”
Consider this quotation from paper proposing Quality Contracts to the recent West Yorkshire ITA meeting in November:
“Whilst recent market research satisfaction scores are generally positive, other consultations reveal a number of concerns.” So the customer is happy but the bureaucrats are not, so everything has to be thrown up in the air at huge expense to the taxpayer.
The paper goes on, “Local Transport Plan targets have not been achieved as there has been a general decline in bus patronage despite investment by operators, Metro and District Councils and a wide range of partnership initiatives. Whilst operators cite the recession as the cause of the recent decline in fare paying passengers, patronage also declined whilst the economy was growing. This decline is in stark contrast to the significant growth in local rail travel.”
The paper offers no analysis whatever as to why bus patronage was declining during the years of economic boom, and even ignores the fairly obvious point that some of the decline could have resulted from the boom in rail patronage engendered by Metro's huge subsidies.
In fact, we know from other statistics that one of the reasons that bus patronage declines stems from the results of increased prosperity: the growth in car ownership. According to the latest figures published by the Department for Transport in 2008, car ownership per 1,000 population in West Yorkshire reached 424, over 66% higher than in the mid 1980s. Even in the last 10 years, the number of cars in the area has grown by over 21%.
We know from other Department for Transport statistics that when a household buys a car, all people in the household use the bus far less often: the average drops from 184 trips per person per year to 39.
Other factors that affect bus use are speed and reliability – factors which are in many instances beyond the control of bus operators, since they are determined by the volume of other traffic on the road, and the overall level of congestion. Fares play a part too, and these are determined largely by the costs and efficiencies of the operations.
TAS monitoring of bus timetables and other statistics shows that bus speeds have tended to fall over recent years – by as much as 20% in some cases, as traffic congestion worsened before the recession. DfT statistics show that traffic grew by more than 10% on the roads of Yorkshire in the ten years between 1998 and 2008.
Of course, speed and reliability affect more than the passenger perception – slower speeds mean that more buses and more drivers are needed to provide the same levels of service. Again, TAS monitoring of the bus industry shows that productivity, as measured by miles run per crew member, has fallen nationally by over 20% in the last decade.
At the same time, rising wage costs and increases in the price of other items such as pensions and fuel have meant that bus industry costs have risen by more than 19% above inflation in the last five years alone. This is the reason why fares and prices for tendered services have risen so rapidly.
Thus, even before the recession, the industry faced rising costs and falling productivity, and – in some parts of the country – still falling passenger numbers. The result has inevitably been an impact on profit levels – which have halved in the last ten years.
Profits are needed to pay interest on borrowings, to fund future investment, to put aside reserves, to make up for pension shortfalls and to deliver a fair return on assets to shareholders: our analysis shows that current profit levels nationally are now about half the levels required to deliver all those elements.
These are the realities of bus operation in the 21st century. It is tough out there, and getting tougher with the impact of the recession. Everybody expects public expenditure cuts to fall on transport budgets, which will make things even worse still.
Sadly, all these challenges are part of the economic facts of life these days. And the even sadder fact is that Metro’s proposals for a Quality Contract will not change any of these prevailing conditions by one jot or tittle. They are, at best, completely irrelevant, and at worst a total waste of scarce public resources.
For more information, please see The Economics of Bus Operation and Bus Industry Performance 2009, published by TAS Publications. Or visit the new online TAS Business Monitor service.
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and tagged with bus profits, Demand, Bus speeds, metro, Public Transport, Bus Deregulation, Quality Contracts, West Yorkshire Passenger Transport Executive, West Yorkshire Integrated Transport Authority (ITA)
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