Westminster Hall debate, Bus services in rural areas, 11 September 2024

Key Messages

• Communities rely on high quality transport provision and infrastructure to get on in life. In rural areas, transport is key to helping maintain access to vital amenities and services, but local policy makers face a significant challenge of working within increasingly limited budgets to ensure our transport systems serves even those in the most remote areas.
• It is often older people, and disabled and vulnerable adults, that are disproportionately more likely to experience transport isolation. Age UK found that cuts to bus services had made it more difficult for older people in particular to get to their local doctor’s surgery and hospital, an issue compounded by the fact that residents in rural areas are already less likely to live in close proximity to health settings, and more likely to experience ‘distance decay’ where service use decreases with increasing distance. For benefits claimants living in rural areas, their barriers to employment are compounded by whether or not there is suitable public transport at the necessary times, as well as the cost of travel.
• The delivery of education and training in rural areas also needs to overcome the barrier of provision within more sparsely populated areas. In its State of the Nation report, The Social Mobility Commission highlighted many isolated rural and coastal towns across England as ‘social mobility coldspots’ where young people increasingly face a lack of access to further education and employment opportunities.
• The limited availability of public transport in these areas, as well as the difficulty providers can face achieving the economies of scale to meaningfully engage isolated areas, presents a strong case for a rethink in how we deliver skills provision and employment support in our more rural communities.
• We are pleased that the Government have been listening to councils and bus users and have set out to reform bus regulation. Alongside this it is important that funding levels are maintained at least at current levels and that disparate and overly restrictive funding pots are transformed into one fully devolved funding settlement.

Background

A recent County Councils Network study concluded that many services in rural areas were already in state of ‘managed decline’.

The study found that two-thirds of the previous government’s £1.1bn to address the decline in buses went to urban areas. These areas benefited from hundreds of millions more in investment despite witnessing the smallest declines in passenger numbers.

Over the last decade there has been a drop in bus passenger journeys outside of London of 11.9 per cent, while in London there was a drop of just 1.4 per cent. Along with this decline in patronage, the volume of bus services miles delivered has also fallen outside of London, largely driven by a halving of local authority supported service miles.

Within this general trend of decline, there is considerable variation outside of London in terms of usage, with some areas in close proximity to each other seeing large differences in ridership and mode share. This may be due to different approaches taken to local transport delivery within these areas, or from varying operating contexts.

One particular issue which has worsened in recent decades is that of rural bus network decline, with ridership falling sharply. Reductions in funding for local public transport have led to many supported services being withdrawn, as have those services which were operated commercially but which were found to be unviable. Rural routes tend to be longer and have lower demand than urban areas, costing more to operate but collecting less in revenue. The loss of public transport services in rural areas can have a particularly negative impact – when compared to in urban areas – in relation to eroding access to jobs, education and training options, as well as to key services such as healthcare.

The importance of fast and reliable digital connectivity to rural areas, enabling residents and businesses to work from home, and rely less on patchy rural transport, cannot be overstated. 

We also need to ensure that rural communities are able to contribute to our net zero goals. Transport solutions that will reduce carbon are more difficult to implement in a rural community however in order to reach net zero every part of the transport system needs to be decarbonised. The government must be mindful of this challenge in providing rural mobility.

Enhanced partnership schemes

An EP is statutory partnership between one or more LTAs and their local bus operators to work together to improve local bus services. It aims to present a clear vision for improved services (the EP plan) and set out actions to achieve this vision (the EP scheme(s)). Once made, the EP scheme(s) apply to any bus services which are run in the geographical area of the scheme, including new entrants not involved in the original partnership. 

A key challenge of the EP approach is gaining the required levels of trust and consensus. Operators have the opportunity to participate in the development of an EP and to have a formal say at several key stages. Whilst EPs rightly permit local incumbent operators with the ability to object, it remains open to question as to how far a mechanism that permits all incumbents to pursue their self-interests can simultaneously deliver the step-change required in service delivery, fares and other passenger benefits. As a result, some LTAs report that it can be a struggle to realise any ‘enhanced’ outputs from EPs, especially those not linked to funding. 

LGA View

• To support de-risking of the EP process, review the objection thresholds so that they are not used to unreasonably stop authorities and groups of operators progressing EPs. Objection thresholds should be set at levels which allow for valid objection, but do not allow for small groups of operators (particularly larger operators) to block an otherwise effective EP. 

Enhanced Partnerships and competition law 

A further constraint on enhanced outputs concerns competition law which may place limits on the ticketing and fares initiatives that can be included as part of an EP. 

The inherent limitations of EPs together with the fact that they are a novel, untested form of delivery raises concerns as to their ability to truly transform bus services in the way envisaged in the National Bus Strategy.

LGA View

• Urgently review the performance and delivery of EPs against their objectives to assess whether they are delivering the scale of improvements as set out in the National Bus Strategy. Lessons must be learnt rapidly to inform the budget and strategy required to transform bus services. Given the urgency of the task to transform the country’s bus services, a ‘wait and see’ approach is not sufficient.

Franchising

Franchising provides a means to ensure that bus services and fares are fully integrated, as envisaged in the National Bus Strategy (albeit special arrangements may be needed for services that cross the boundaries of the area). 

Franchising means networks can be planned as a whole to help ensure that bus services support wider goals for an area and integrate with other transport provision, based on the needs of local communities and the local economy. As public bodies, any surpluses generated can be reinvested in the network in support of those wider goals.

LGA View

• Review the Bus Services Act 2017, and its associated guidance on franchising, taking account of lessons learnt from Greater Manchester with a view to reducing the time and costs involved. The Bus Services Act and guidance, aside from two minor updates, is now over six years old. A great deal could be learned from the Greater Manchester experience in looking for ways to make the franchising process quicker and more affordable. This should be reflected in the provision of up-to-date guidance, models and templates (e.g. model contracts) to help simplify, streamline and minimise risks and delays.
• Make the assessment process for a proposed franchising scheme quicker, by making it less onerous. The Bus Services Act 2017 guidance11 effectively requires an authority to carry out an enhanced five case business case model (analysing the strategic, economic, financial, commercial and management case) arguably going beyond what would be required for a typical capital scheme. The process includes developing all five cases for options other than the preferred option. Any process must, of course, carefully weigh-up the merits of what is a significant policy decision. It must also properly consider the impacts on incumbent operators to avoid risks of challenge either at legislation or assessment stage. However, further simplification, templates and frameworks to support assessment would help, including a more proportionate approach depending on the scale of the proposals.
• Ensure LTAs have the information they need from operators (at the right level of detail) when they need it, backed by an enforcement regime. Whilst the information provisions in section 143A of the Transport Act 2000 allow for provision of relevant information about local bus services from operators, in Greater Manchester’s case, this took time to obtain. Data was requested from operators at the start of the assessment process (June 2017) but was not forthcoming. An appeal to the Traffic Commissioner was required and a ruling was not received until over a year later. More recent experience post-COVID suggests that operators are now becoming more accustomed to sharing data with LTAs and government, however, greater clarity as to expectations (e.g. level of detail, format, timescales) and enforcement rights within the legislation could provide helpful reassurances.

Removing restrictions to franchising

• Allow all areas to have the same automatic rights as MCAs to access the franchising process. Doing so would open up franchising to all cities, towns and rural areas and go some way towards reducing the burdens on non-MCAs wishing to pursue franchising. Under section 123A(4) of the Transport Act 2000, only MCAs are automatically franchising authorities. Other categories of LTAs can only be franchising authorities if the SoS agrees and makes the necessary regulations. In theory the SoS could take a different position and pass regulations to automatically make one or more further categories of LTAs franchising authorities (albeit including any additional protective steps, if thought necessary.). Secondary legislation could simply allow other authorities to proceed straight to assessment.

Municipal bus companies 

In England, whilst LTAs remain able to purchase an existing bus or coach company, the Bus Services Act 2017 expressly prohibits the creation of new municipal bus companies. The National Bus Strategy recognises that ‘this part of the legislation is ripe for review’. It notes that whilst there are only a handful of municipal bus companies, a number of these are strong performers.

Allowing more local authorities to establish bus companies could enable more places to replicate the success of Nottingham and other municipals and run bus services tailored to the needs of their communities. This could present an alternative to franchising for some areas. For example, it could help secure better value for money for supported bus service tenders issued by the LTA, particularly in areas where competitors are limited. Given the separation between the LTA issuing tenders, and the arms-length, council owned bus companies, all standard procurement and competition rules would be maintained (unless the municipal bus company was being used as an operator of last resort).

LGA View

• Restrictions on the establishment of new municipal bus companies by local authorities should be removed. This would require Section 22 of the Bus Services Act 2017 to be repealed. This, alongside improvements to the EP and franchising processes as set out above, will provide LTAs with the right set of practical options and resources to reinvigorate local bus markets and ensure they support wider goals for the people and places they serve.

Funding reform

The delivery of the recommended reforms explored above would enable all LTAs across England and the government to realise higher value for their investment, delivering economic, social and environmental returns. However, this requires the current myriad of funding streams to be reformed. The key to these changes should be the bringing together and devolution of disparate funding pots and subsidies, which are currently prone to frequent changes in conditions and timescales. This could unleash the true potential of bus.

Noting the complexity of the current regime of revenue support, the actual direct public subsidy into bus service provision is relatively modest. LGA analysis conducted in 2023 found that the DfT spends more than £4.50 on subsidising rail passenger services for every £1 it spends on bus subsidy.

Investing in bus arguably delivers the highest value spend of many transport investments, particularly when the wider, societal benefits of bus are fully taken into account, such as public health, air quality, social inclusion, safety and de-congestion benefits. Indeed, each £1 invested in bus is estimated to bring an economic return of £4.48.

LGA View

• Bring together currently siloed and overly restrictive funding pots into one fully devolved funding settlement. For authorities embarking on franchising, having full control and accountability for a simplified and overarching funding pot would enable them to focus on delivering the desired local outcomes of improved services and the corresponding economic and societal benefits. This would give confidence to elected decision makers locally and centrally, as well as Treasury and the DfT, that every penny spent goes directly towards delivering better services and outcomes.

Long term investment

In 2021, public revenue expenditure on bus services was over £500m per year less than in 2010/11 according to the Confederation of Passenger Transport. Falling funding to local government has left supported bus services exposed to cuts as local authorities seek to balance the funding needs of other vital services. Funding for supported bus services by local government outside of London has fallen by 43 per cent over the past decade, meaning fewer services can be supported.

Furthermore, the LGA estimates that the ‘gap’ in the funding councils receive from government for the national concessionary fares scheme compared to the actual number of journeys made last year was £452 million. One effect of the funding gap has been to force ‘councils to plug the gap from their own stretched budgets. Discretionary bus services - such as free peak travel, community transport services, reduced fares and school transport – have had to be scaled back by local authorities across the country for them to top up the statutory national scheme from their discretionary budgets.’

LGA View

• As a minimum, maintain in real terms the levels of bus investment made during the current Parliament through the next five-year term, providing certainty of funding, and help shape a broad consensus on the value of bus investment over the longer term. To genuinely create the virtuous cycle of bus patronage growth, consequent revenue growth and re-investment into strengthening networks through route development, frequency enhancements and affordable fare policies, the levels in bus investment experienced from the start of the COVID pandemic must at least be maintained, increased to meet inflationary costs and secured over the longer term. This is very much a minimum starting point to maintain current bus services and offer a degree of certainty. To deliver the transformational change envisaged by the National Bus Strategy and fully realise the potential of the bus to deliver on wider economic, social, health and environmental goals, enhanced investment is required.
• Local authorities can also find alternative local sources of funding to support local bus services. Many already use surplus income from on-street parking charges and parking fines; others use planning gain, such as S106 income and some are exploring the use of commuted sums. Nottingham City Council uses revenue generated from its Workplace Parking Levy schemes to raise significant funds which it has used to extend its tram and bus services, including zero-emission buses. However, such schemes have been difficult to implement as they require Secretary of State approval – alongside this general Government sentiment has been that these schemes are a burden to business and therefore not supported nationally. LGA would like to see national government give active backing to any councils that wants to pursue such schemes and remove the requirement for Secretary of State sign-off.

Contact

Elliot Gregory

Public Affairs and Campaigns Advisor

Phone: 020 7664 3059 

Mobile: 07766252833

Email: [email protected]