Written Evidence Submitted by the West Midlands Combined Authority (BSB0017)
Summary
- The West Midlands Combined Authority strongly supports the need for the Bus Services Bill, which enhances the options available for Local Authorities to deliver better bus services for passengers and that help to support wider policy objectives
- The Bill fails to address the key issues of the impacts of congestion on bus services and funding challenges faced by the industry. TfWM would support a national strategy for optimising the delivery of bus priority measures and also believes there would be significant benefits in devolving Bus Service Operators’ Grant to a local level in partnership areas so that it can be better focussed on supporting services that are less profitable, either through direct subsidy or through delivery of infrastructure schemes to support better services.
- Despite the intentions of the Bill, the ability to deliver improvements to services in partnership with operators outside of a franchising environment is likely to continue to be challenging due to concerns within the industry regarding the interpretation of any partnership schemes by the Competition and Markets Authority.
1. The Need for the Bill
1.1 The West Midlands Combined Authority (WMCA) was formed in June 2016. WMCA contains seven local councils as constituent members; Birmingham, Coventry, Dudley, Sandwell, Solihull, Walsall and Wolverhampton. WMCA replaces the West Midlands Integrated Transport Authority (WMITA) and its delivery body Centro but there is a continuation in policies. TfWM (Transport for West Midlands) is the transport arm of WMCA.
1.2 For many years we have pursued a partnership approach to delivering bus services in the West Midlands and have forged strong relationships with bus operators in the region. We have successfully utilised much of the legislation that has been made available over the years. Using powers provided under the 2000 Transport Act we provide comprehensive timetable information at all of the region’s bus stops for the benefit of passengers and recharge the cost of this to bus operators. Using powers granted under the 2008 Local Transport Act we have undertaken a programme of Bus Network Reviews, agreeing to revisions to the network and quality improvements through multi-operator partnership agreements. We have implemented a Statutory Quality Partnership Scheme (see section 3) and have previously worked with operators to integrate frequencies and provide joint ticketing products on competitive corridors through Qualifying Agreements.
1.3 In 2015, WMITA agreed a number of objectives for bus policy to help ensure that buses contribute positively towards improving connectivity and supporting economic growth. A number of options were examined for delivering these objectives and it was concluded that they could all be achieved through a strengthening of our partnership work through the formation of a Bus Alliance. WMITA requested annual reports on the progress of the Alliance, however said it would also explore other methods such as Bus Franchising.
1.4 The West Midlands Bus Alliance was formed in October 2015. This is intended to provide additional governance to support the delivery of the region’s bus objectives through partnership. The Alliance is governed by a Board which consists of influential councillors, managing directors of three of the region’s bus companies (who have been elected by their peers), senior Combined Authority officers, senior representatives from the constituent Highways Authorities, Local Enterprise Partnership representation, Safer Travel Police representation and the Confederation of Passenger Transport. The Board is chaired independently by Transport Focus and is charged with ensuring that policies and funding streams are in place to deliver the region’s bus objectives successfully.
1.5 Since the 2000 Transport Act the principle threat to operators to encourage greater partnership working and sincere attempts to grow markets rather than make increasing returns from shrinking markets has been the legislative option to deliver Quality Contracts. TfWM has observed the efforts of other Authorities to deliver Quality Contract Schemes and has reached the conclusion that the process associated with delivering such a scheme is time consuming, expensive and has ultimately proved undeliverable anywhere within the country. Therefore the Bill is essential in order to make sure that operators and local authorities have the ability to select the appropriate options for the delivery of bus services within their area. The ability to ensure a mechanism and route to franchising is available is important in areas where partnership is not delivering the desired outcomes.
1.6 There is clearly much focus on the ability and process to franchise, however it is the belief of TfWM that the varied additional powers contained within the Bill are also essential in that they aim to provide opportunities to strengthen and drive existing partnership arrangements and make it much simpler for partners to collaborate and jointly consider the requirements for providing better bus services within a local region’s communities. Bus services provide around 85% of public transport journeys for West Midlands metropolitan area residents and powers to support better collaboration without the historical reluctance of operators to fear suggestions of collusion is essential. The TA2000 and the LTA2008 both made miniscule attempts to tweak at the margins of the 1985 Transport Act which have generally proved to be helpful, but extremely limited and ensured that a fear of competition threats continues to be at the forefront of the bus market delivery rather than an acceptance that the bus market is not typical of any other market and LTAs do have a considerable understanding of what will help to deliver better bus services.
1.7 The Mayor of the WMCA, who will be elected in May 2017, has been promised powers to franchise bus services. It is very important that a Mayor has credible tools available to enable them to deliver better bus services. The Bill is an essential instrument that will enable the Mayor to evaluate options and consider a balanced mix of choices in partnership, as well as the possibility of franchising.
2. Does the Bill Address the Correct Issues?
2.1 The Bill contains the provision that Combined Authority Areas with elected Mayors can seek to franchise bus services and that is clearly essential given the assurances to Combined Authorities as part of devolution deals and also the failure of previous Quality Contract legislation. Addressing this issue is therefore correct.
2.2. As part three of this submission highlights, addressing elements of strengthened partnership working are also important to ensure every opportunity is provided to give partnership working the chance to succeed in those areas that can work to collaborate and develop the most optimal and suitable bus strategy.
2.3 The Bill however does not cover two of the biggest issues that are affecting the successful delivery of bus services today; congestion and funding. The impact of congestion can prove a huge barrier in providing attractive services for passengers and TfWM would strongly support a government strategy for optimising the delivery of bus priority measures.
2.4 The issue of funding is linked. Operators are finding it increasingly difficult to run profitable services and passengers continue to experience fare rises above inflation. This is because more and more resource is required to maintain existing levels of service due to increased congestion. The industry benefits from Bus Services Operators Grant which for commercial services is administered nationally but TfWM believe there would be significant benefits in devolving this funding to a local level so that it can be better focussed on supporting services that are less profitable, either through direct subsidy or through delivery of infrastructure schemes to support better services.
3. How Advanced and Enhanced Partnerships are likely to contribute to improving services for passengers and enabling a successful commercial sector
3.1 GENERAL
3.1.1 TfWM welcomes the proposals for Enhanced Partnerships and Advanced Quality Partnerships. These could provide effective mechanisms for delivering significant improvements to bus services.
3.1.2 Whilst TfWM has a successful track record of delivering improvements to bus services through strong partnerships with bus companies, it has not always been easy. Strong, successful partnerships cannot be determined by legislation alone and rely on full buy-in from partners both at a corporate level and from the individuals involved in delivering. A local operating environment that enables strong relationships to be developed and shared objectives to be agreed is also necessary. It is also important that adequate staffing resource and expertise exists both within bus companies and Local Authorities in order to drive effective partnerships forward and this must be recognised.
3.2 ADVANCED QUALITY PARTNERSHIPS
3.2.1 The proposals for Advanced Quality Partnerships are effectively a development of the current Statutory Quality Partnership legislation. In 2012, TfWM successfully implemented a Statutory Quality Partnership Scheme (SQPS) in Birmingham City Centre, which we believe to be the largest such scheme in the country. Our experience of such schemes is therefore significant and we are currently working to implement further schemes in other parts of the West Midlands conurbation.
3.2.2 The Birmingham SQPS has had a number of positive effects. TfWM implemented new bus shelters and passenger information systems across the city centre. Birmingham City Council agreed to implement camera enforcement on a number of bus lanes within the City Centre, which has helped to reduce the impact of traffic on bus services. In return for these measures, operators who run buses into the City Centre agreed to meet required vehicle standards, including emissions levels and also comply with a bus stop ‘slot booking’ system. This enables TfWM to control the use of bus stops in a city centre environment where kerb space is limited. This prevents over-crowding at bus stops, reduces congestion and has helped TfWM to effectively distribute departures across the City Centre.
3.2.3 The proposals within the Bill to widen the scope of measures that a Local Authority is able to provide to progress an Advanced Quality Partnership to include policy tools, is welcomed. These can often prove more effective at improving bus services than infrastructure measures and in times of reduced public sector spending these may be more deliverable.
3.2.4 It is unfortunate that the Bill as proposed retains an ‘age-limit’ on measures that an Authority can include within a scheme. Often maintaining existing facilities can be as important, or even more important than providing new facilities. If the Local Authority is already doing or providing something that is useful for bus operators, TfWM does not understand why this cannot be included within the scheme if operators were to agree to it, however old it is.
3.2.5 Despite the general success of the Birmingham City Centre SQPS in improving bus service standards, there have been instances where operators have not complied with requirements, for example using non-compliant buses, and these have been referred to the Traffic Commissioner for action. This has proved a slow process. Despite clear evidence that an operator was running vehicles that did not meet agreed standards it took several months for the Traffic Commissioner to collect admissible evidence and hold a Public Inquiry, during which time the operator in question continued to breach the scheme, carrying passengers and collecting fares on a service that did not comply with the required standards. Matters such as this undermine the credibility of the scheme.
3.2.6 TfWM therefore believes that in order to be even more effective the issue of enforcement and compliance needs addressing. Either the Traffic Commissioner needs additional resource to enable swift, decisive enforcement to be undertaken or else the power to enforce needs to be devolved to the Local Authority with the Traffic Commissioner available as an appeal body to operators. Providing the opportunity for Local Authorities to take over the service registration function from Traffic Commissioners for services that operate in Advanced Quality Partnership Areas (as the Bill already proposes for Enhanced Partnership Areas) would be a useful addition to the legislation.
3.2.7 TfWM also considers that devolving the administration of Bus Service Operators’ Grant (BSOG) to the Local Authority for commercial services operating within Advanced or Enhanced Partnership schemes would prove a useful tool to improve standards and increase compliance. This could give the Local Authority the opportunity to withhold BSOG payments to operators who did not meet agreed local standards, either in whole or in part.
3.3 ENHANCED PARTNERSHIPS
3.3.1 TfWM supports the aims of the Enhanced Partnership proposals, which appear to open up a number of possibilities to deliver service improvements that align with wider local policy objectives and reduce the risks of ‘destructive’ competition, which can undermine investment by more progressive bus operators in providing improvements for passengers.
3.3.2 We have already well developed governance overseeing our partnership work in the West Midlands through the West Midlands Bus Alliance, which we believe could be further developed in order to deliver Enhanced Partnership schemes. The requirement for an Enhanced Partnership Plan very much reflects our own proposals for ‘Network Development Plans’, which are intended to guide bus network development and service quality improvements over the coming years. Aside from the Birmingham City Centre Statutory Quality Partnership and others being developed (see 3.2.1), the Bus Alliance is currently very much reliant on voluntary commitments by Local Authorities and Bus Companies and having legislation in place to underpin this as part of an Enhanced Partnership would be welcomed.
3.3.2 However, there are a number of proposals within the Bill that concern TfWM and depending on how Secondary Legislation and Statutory Instruments are developed may impact on whether or not we pursue Enhanced Partnerships in the region.
3.3.3 TfWM recognises the need for a process that enables competition between operators to flourish for the benefit of passengers. We also believe that ‘on-the-road’ competition between operators can very often be destructive and not in the long-term interests of passengers. The additional control that Enhanced Partnerships aim to provide in managing the network, in particular ensuring that corridors are not ‘over-bussed’ and resources more aligned with demand is welcomed. TfWM believes that there are currently corridors within the West Midlands that have more buses than demand warrants – either through competition between operators or because an incumbent operator is running more buses than demand requires in order to deter other operators from competing. Enhanced Partnerships potentially provide a useful tool for addressing this.
3.3.4 TfWM is however concerned by the proposal within the Bill that if operators wish to compete on corridors that are already operating at the maximum agreed frequency then the Local Authority may be required to tender for services on that corridor and effectively suspend on-the-road competition. This could lead to a situation in which bus services are ‘franchised’ by stealth. It would be quite possible for an operator to undermine the deregulated bus market by registering services on a number of corridors, forcing the Local Authority to franchise those corridors and leading to negative impacts for passengers on the wider network.
3.3.5 We would welcome the opportunity to work with the DfT and Competition and Markets Authority (CMA) to identify an alternative, acceptable way to ensure supply meets demand whilst maintaining the benefits of a competitive market. Devolution of BSOG for commercial services would assist this, such that the amount of Grant available could be adapted based on the commerciality of a route.
3.3.4 It would be very much the intention of TfWM that any proposals for Enhanced Partnership Schemes were tested rigorously against Competition Tests. If TfWM had any doubt that a proposed scheme was not compliant it would not pursue such a scheme. Instead we would rely on further development of Advanced Partnership Schemes, Qualifying Agreements and other voluntary agreements to continue our partnership work in the region. There is a danger therefore that if guidance is not clear as to how Enhanced Partnership Schemes will be compatible with Competition Law then no such schemes will be progressed.
3.3.6 TfWM recognises that consideration around competition within the bus market is a very complex area, in particular the fact that very often the main competitor to bus companies are not other bus companies but other modes of travel, not least taxis and private cars. Therefore the development of a clear, integrated bus network is necessary to ensure bus services can compete with other modes. Whether or not competition within the market is positive or destructive is very much dependent on local circumstances, bearing in mind how responsive incumbent operators are to local needs (which itself can vary with time).
4. Limiting the Automatic Right to Introduce Franchising to Combined Authorities with Elected Mayors
4.1 The requirement for an elected Mayor with the ability to franchise the bus network was a key part of the West Midlands Devolution Deal. TfWM has no strong views on whether these powers should automatically be available to areas without Mayors as long as they are also available to other areas on application. Ensuring that an individual (e.g. a Mayor) is accountable for any decision to pursue franchising and its subsequent implementation would appear sensible, however with national policies on Mayors still developing, linking the ability to Franchise to a particular form of governance may not be ideal in the long term.
5. The Likely Effect of Franchising on Small and Medium Operators
5.1 There is a strong commercial bus market in the West Midlands; around 90% of the network is operated commercially and fares are comparatively low. Because of the low operating margins, Small and Medium Operators have therefore usually found it difficult to compete. Ensuring that franchises cater for operators of all sizes may therefore provide additional market opportunities for such companies.
5.2 However, there are examples of Small and Medium Operators who run very successful commercial routes that may be put at risk through franchising. TfWM therefore welcomes the provision of a permit mechanism which may enable operators who have innovative plans for services not covered within a franchise to put forward a case for providing such services.
5.3 If TfWM were to pursue franchising it would not be desirable to be forced into awarding contracts to Small and Medium Operators simply by virtue of their size. We would expect to award contracts on the basis of value for money and quality. We do however appreciate the need to ensure that Small and Medium size operators should not be precluded from bidding and would therefore seek to design a franchising system accordingly. The ultimate objective for any franchising proposal should be to improve services for passengers and ensure that the bus network is helping to support wider policy objectives. Any considerations around the effects on operators should be secondary.
6. The Effectiveness of the Measures Relating to Open Data
6.1 TfWM supports the measures relating to open data. We are fortunate enough within the West Midlands region to have built up strong relationships with most of our bus operators such that they have generally been very open in sharing data with us, subject to appropriate agreements being in place. Statutory support for this however is not unwelcome.
6.2 TfWM is aware however that access to data in some areas of the country has been challenging and therefore strongly welcomes this legislation. It is however of utmost important that an industry-wide approach to data provision is adopted such that when data is provided it is in a consistent, useful format that can be easily manipulated to provide information for passengers and Local Authorities.
7. The Basis for a Prohibition on New Municipal Bus Companies Delivering Bus Services
7.1 The West Midlands Combined Authority does not currently have powers to set up a Municipal Bus Company, so this proposal does not affect us directly. Constituent Local Authorities however do have this power and TfWM does not believe that there is a strong basis to remove this. If a Local Authority is able to set up a bus company, submit a high quality, low cost bid and plough any profits back into public services then that should not be discouraged. As the purpose of this Bill is to devolve decisions on how best to provide bus services locally, removing a current mechanism to deliver services would appear contrary to that aim.
7.2 TfWM further notes that some of the most successful bus companies in terms of growing patronage and achieving high passenger satisfaction scores are actually Municipal bus operators, with Lothian Buses, Reading Transport and Nottingham City Transport regularly winning industry awards. This clearly demonstrates that Municipal companies can deliver high quality bus services very competently.
8. Measures in the Bill Relating to Ticketing Schemes and New Technologies.
8.1 TfWM has a successful multi-operator ticketing product available on all of the region’s bus services (n-bus) and a multi-modal version (n-network). Over the last few years we have been working with operators to move this to an ITSO compliant smart ticketing scheme, called Swift. Over 1 million journeys a month are now made using Swift smart cards and this continues to grow rapidly. Whilst this has been achieved through partnership, reaching agreement on various aspects of the scheme has often proved challenging and so the measures proposed in the Bill are very welcome.
8.2 The Bill will enable the Local Authority to determine areas for which multi-operator tickets are available, either covering the whole Authority area or sub-areas. In the West Midlands, as well as the regional multi-operator ticket, there are also local area tickets for Coventry and the Black Country. These took many years of negotiation to get into place because commercial operators saw them as a potential threat to their own individual products. Whilst this has now been addressed these tickets could have been delivered much sooner if this legislation had been in place previously. The Bill also allows the Local Authority to determine the method of payment for such tickets, which will clearly help facilitate the roll-out of smart ticketing schemes.
8.3 Despite the positive elements of the Bill, TfWM still foresee obstacles in progressing multi-operator ticketing programmes. Whilst the Local Authority can specify ticketing areas and payment methods, within the Advanced Ticketing proposals the price of these is determined by operators. Operators are compelled to offer these products but if they do not support the initiatives then they could set prices artificially high such that they would not be attractive for customers.
8.5 TfWM is also disappointed that the legislation does not enable Local Authorities to work with operators to align single or return fares, other than through Franchising. Under existing legislation, where operators compete on a service, the Local Authority can facilitate an agreement to co-ordinate frequencies such that they will operate with even-headways to provide a better frequency of service for customers, subject to the Part 2 Competition Test. However, fares cannot legally be aligned meaning a true integration of operations is virtually impossible. Likewise, on an area-wide smartcard pay-as-you-go ticketing system, if all operators have different fares it is very difficult to promote a straightforward customer message; the Pay-as-you-go fare on our current Swift platform could have 26 different variants as there are 26 different bus operators who can each determine their own fare. There is no opportunity for us to negotiate with operators to align these.
8.6 This is another area where TfWM considers the 1985 Transport Act has failed and the Competition Authorities have failed to recognise that better integration between operators’ services would overall be in the wider interests of passengers, subject of course to the Local Authority facilitating such agreements. The fact that such a position cannot be achieved without pursuing franchising, which the CMA also appears to have reservations about given its response to the Bill in July 2016, could ultimately prove catastrophic for the industry.