Bus Industry

– in the House of Commons at 12:00 am on 30th January 1976.

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4.0 p.m.

Photo of Michael Spicer Michael Spicer , Worcestershire South

We have just been debating the problems of the small business, and I am grateful for this opportunity to deal with the problems of what at present is a large business but which, I suggest, should be to a far greater extent a collection of small businesses.

I am sure the House will agree that the word "crisis" has become a thoroughly overworked cliche in our contemporary, and particularly parliamentary, jargon. Of the present state of the bus industry, as it affects rural areas, it is a description that is not difficult to support.

In an authoritative and wide-ranging book on the nationalised transport industries, Messrs. Thompson and Hunter wrote: The bus industry in Britain, after a long period of relative stability, not to say stagnancy, is now in the early 1970s going through the most severe crisis in its history. It is important to be certain that the problems facing the bus industry are not merely temporary reflections of hard times but are deep-rooted and fundamental. They owe their existence to attitudes and policies developed continuously and consistently over the past 50 years. Their solution requires more than tinkering with minor experiments and technological gimmicks. They demand a fundamental reform of the entire system.

The bare facts, particularly the financial facts about the state of the industry, speak for themselves and are well known to this House. In the financial year 197475 the National Bus Company lost £12½ million and spent its entire cash reserves of about £20 million. Even greater losses—if one is to believe a report in The Times today—are expected this year, despite the fact that many fares have risen by up to 25 per cent.

The Midland Red Company—the company I know best because it operates in my constituency—is the largest of the subsidiary companies and is requesting a subsidy from the Hereford and Worcester County Council amounting to almost £800,000 next year, against a budget allowed by the county of £400,000, which itself is far in excess of previous subsidies.

My namesake, my hon. Friend the Member for Dorset, West (Mr. Spicer), who raised this matter a year ago on the Adjournment, assures me that a comparable situation faces Dorset County Council, and it is clear that every county council faces similar problems.

That the Under-Secretary of State for the Environment recognises in some measure the nature of the problem was indicated in the closing stages of a debate on mini-buses initiated on 19th January by my hon. Friend the Member for Honiton (Mr. Emery). On that occasion the Minister offered the prospect of a Bill allowing experiments with rural transport throughout the country. However, it must be said that Ministers have been indicating awareness of the problem throughout the entire course of last year. What has been lacking, as in many other areas of Government policy, is a commitment to substantive action.

The reason for this situation in the bus industry probably lies in the fact that the only serious course of action open to the Government flies in the face of basic Labour Party philosophy and, perhaps more important, is against the trend of legislative history.

Beginning with the Road Traffic Act 1930 and ending with the Transport Act 1968, the legislative process has been one of continuous and increasingly effective stifling of competition within the bus industry through, above all, the operations of the road service licensing system.

The answer to the British bus crisis is to break the monopoly of the State operators and allow others to compete on fair terms. To justify this view it is first necessary to consider in a little more detail the precise nature of the problem. In particular, we have to consider whether buses are needed at all. There is a growing school of thought which says that buses, especially in rural areas, are out of date. It is certainly true that if present policies are maintained they may become extinct.

Anyone who believes that there is no longer a need for country buses should have a word with the nearest pensioner faced with the closure of his village sub-post office, with the housewife contemplating the triumph of the supermarket over the corner shop, the sick and disabled person facing the extinction of the country doctor, the schoolchild considering walking up to three miles to school along what are now dangerous roads, young people looking for entertainment in the towns, or the commuter.

At least three out of four of such people are unlikely to own a car. The bus is the last lifeline of village life. Without it the village will cease to be a place of normal habitat and will become the preserve of the tourist, the antique dealer and the very rich. Without the country bus our country will undergo a social transformation the like of which has not been seen since the mass exodus to the towns at the beginning of the nineteenth century.

The need for buses is there. What is missing are the right buses at the right price at the right time. It is the falling quality of the service measured against its rising costs which explains the empty buses, the losses, the subsidies, the swingeing fare rises, the bitterness and frustration—the whole crisis. Every study of our bus problem has shown that demand is essentially dependent on the quality of the service and the fare. Similar studies which reach the same conclusion have been carried out in other countries, notably France. The question is how to improve the quality of the bus service, in particular the country bus service. The answer lies—as it does in so many other sectors of our economic life, but especially in the bus industry—in encouraging many more individual operators to enter the industry whenever possible, thus loosening the stranglehold of the State monopoly.

Those with a vested interest in this will argue that I exaggerate the degree of State monopoly. they will say, as did the Minister in the debate on minibuses on 19th January, that all that a potential operator has to do is apply to the traffic commissioners for favourable consideration. In that earlier debate the Minister said that he felt there was too great a reluctance by operators to go through the necessary procedures to receive the appropriate licences.

The fact is that the present system overwhelmingly militates in favour of the nationalised bus companies, which in effect possess the power of veto. The justification for this goes back to the Road Traffic Act 1930 and to the principles of co-ordination and elimination of unnecessary services. As a result, a system of route allocation has arisen which places a high premium upon tenure. In present times the nationalised bus companies are only too willing to off-load uneconomic routes. Even if some of the routes are temporarily taken up by private operators, it must be, to say the least, questionable whether this procedure is in the long-term interests of country bussing. It may—indeed, the probability is that it will—turn out to be merely a back-door way of cutting routes out of existence for ever.

That an effective monopoly situation exists I am in no doubt. That it is the root cause of the rural bussing problem I am equally sure, for at least four reasons. First, there is the fact that historically, until the granting of almost total monopoly powers to the nationalised bus companies by means of the instrument of the 1968 Transport Act, the industry, with all its problems, was self-sufficient.

Secondly, it is a well-established characteristic of bus operating that there are what economists in their jargon call "diseconomies of scale"—that is to say, as the operating unit becomes larger, it tends to become more inefficient. Certainly there is none of the technological advantages of size which exist in capital-intensive industries, for instance; and, as the Under-Secretary will be only too well aware, in the bussing industry 70 per cent. of all costs are generated by labour.

Thirdly, it is quite clear that the problems of effective management mount with size in bussing. That is especially true in the case of country buses, where the nature of the demand may vary from village to village.

Fourthly and more specifically, there is the central question of how to overcome the problems of peak and off-peak demand. An operator who cannot meet full peak demand or who cannot find some use for his buses in off-peak hours will fail both to provide an adequate service and to balance his books.

This is undoubtedly the main case for encouraging the small, localised operators to re-enter the stage business. Only the local operator will be able to contemplate a stage fare system in peak hours and a contract hire service off-peak. In this context, it is highly significant that the one healthy area of the industry is the contract hire sector, which does not have to have interference from the traffic commissioners.

The driving force behind the legislative trend of the last 50 years has been the reasonable desire to prevent cutthroat competition and the wasteful use of resources through a duplication of routes, combined, of course, with the desire to provide a suitable service both in areas where it was economically possible to do so and in areas where it was economically difficult to do so.

From these understandable motives arose the road service licensing system and also the concept of cross-subsidisation which has dominated the granting of licences. The search for stability and the idea that an economic route must pay for an uneconomic route have inevitably resulted in the compression of the industry into very few hands, and most recently, as with other areas of policy, the process has been hidden behind a smokescreen of jargon involving the use of such words as "co-ordination" I believe it is now possible to say that where co-ordination has been synonymous with cross-subsidisation it has been disastrous. It is an irony that a policy which set out to provide stability when carried to its logical conclusion has created chaos.

There is an obligation now to develop a policy which will provide a reasonable element of stability with the minimum of needless duplication but which will allow the maximum flexibility. The search must be not for co-ordination but for customer satisfaction within the constraints of the available resources, which include independent operators.

The first requirement, therefore, is totally to abolish the present system of road service licensing and with it the principle of cross-subsidisation. The present licensing system should be replaced with a totally new procedure whereby all routes would be subject to free tendering for contracts. Contracts would be fixed for a three-year period, as the present licensing system is meant to be. The tendering would be completely open to anyone who wished to tender, including, naturally, the nationalised bus companies themselves. As in the normal contracting system, the main criteria for successful tendering would be price, reliability and the quality of service promised. Above all, tenderers would not be judged on the basis of whether they would be threatening existing nationalised industry routes.

Of course, for some routes there will be few or no bidders. These routes will immediately have been identified as uneconomic, and it should then be a matter for elected representatives in local or national government to decide how much of the public purse should be devoted to subsidies. As least we would know where we stood. At that stage we could have a second round of tendering for the uneconomic routes, which would involve some subsidy. We would be assured that even on these routes the best man in terms of prices and subsidies would win.

However the Minister replies to this debate, I hope he will indicate an awareness that this is not a temporary local difficulty on the buses. These problems seriously affect millions of lives and will become totally unmanageable unless radical action is taken. Unless the entire system is changed, merely tinkering with dial-a-bus, post-bus or other technological wheezes will be as fruitless as were, for instance, the one-man buses which were meant to herald the new millennium 10 years ago.

In this area of national policy, as in so many others, the real difficulty lies in reversing the flood of history which has been sweeping with ever-increasing pace towards a total system of Socialist monopoly, and it is that flood which will be extremely difficult to reverse.

4.16 p.m.

Photo of Mr Kenneth Marks Mr Kenneth Marks , Manchester, Gorton

I am grateful to the hon. Member for Worcestershire, South (Mr. Spicer) for raising for discussion this afternoon some aspects of transport policy referred to in our long debate on Friday. I replied to a number of these points in our debate on the previous Monday and I am sure that the House would not expect me to reiterate the points that I made during the course of that debate on the progress of our wide-ranging policy review and the consultations upon which we shall be embarking. Let me rather confine myself to the affairs of the bus industry and of the National Bus Company to which the hon. Member has drawn attention.

Let me first remind the House of the the position of the bus industry today. It had its heyday in the years immediately after the war with numbers of passengers at record levels. But more and more people began to own cars and the numbers of bus travellers have since fallen away sharply. In the two decades following 1950 the number of cars on the road increased from about 2 million to 11–1 million, almost a sixfold increase in those 20 years. Over the same period the number of passenger journeys by bus fell from some 16 billion to around 9 billio—not far short of being halved.

Thus bus operators have found it increasingly difficult to maintain their services in the face of this severe decline in demand. Of course their difficulties have been especially great in the rural areas where load factors had always been low but where at one time services could expect to be subsidised by the more profitable urban services. Nowadays, urban services can no longer subsidise the rural services as they have in the past.

The bus industry's financial base has also deteriorated in the last year or two. To the extent that there is a crisis as far as the bus service is concerned, it is a crisis which has been deepened by what was happening before. Increases in costs have hit bus operators as much or more than any other industry. They have to be met, if bus services are to continue. through increases in fares, unless local authorities choose to support local services.

We are all concerned—certainly Ministers are—with the hardship which this is likely to create for some of those who are dependent on buses for getting to work, sending their children to school and going about their daily business. Though I have noticed from listening to debates on transport and education that many of the people who complain about the decline of the village shop, school or bus service are often those who do not use the shop, who drive a car and who do not send their children to the village school. This hardship is just one facet of the consequences of inflation, and we must bear this in mind even though we are considering a long-term review.

In urban areas the actual operating conditions in which buses are expected to run are often difficult because of traffic congestion. This inevitably affects regularity and reliability. The hon. Member mentioned Midland Red. It operates largely on the periphery of major urban areas without a central core of urban operation but with a weight of unremunerative services which offer little chance of cross-subsidisation.

Like other parts of the bus industry, Midland Red's operations have been affected by difficulties in the supply of spare parts and new buses largely stemming from some of the troubles of 1974 and since. It is therefore against this difficult background that we should look at the operations of the National Bus Company and of Midland Red in particular.

The hon. Member referred to the need for subsidies and we accept that there will be a long-term requirement for public transport subsidies. At present British Rail's passenger transport operation is supported by more than £300 million of Exchequer grant. In the bus and coach industry profits are likely to be made only on excursions, tours and contract work—and the publicly-owned sector can make a profit on those as well as the privately-owned concerns—by those private operators who do not have to run the type of scheduled bus services operated by the NBC in largely rural areas.

Until the last couple of years, the National Bus Company has broken even in every year except one. It also expects to return to a break-even position, although it has been blown off course by the effects of inflation in the last 12 months or so. NBC has also increased productivity through the wide extension of one-man buses. Its record here is impressive. The Midland Red Company now has 73 per cent. of its vehicles converted to one-man operation—among the highest figures of any bus company.

We must recognise that the NBC, and particularly Midland Red, has shown a readiness to adapt to the changing market of passenger demand. Projects such as the Norfolk community minibus experiment and the Stevenage experiment, which have been carried out in consultation with the local authorities and the NBC, may make the headlines. Perhaps, however, I may refer to some of the important changes being implemented by Midland Red.

It has recently introduced an improved urban service in Kidderminster. In mid-February there will be a complete revision of the services in Worcester's cross-town links. These are urban routes, but they are used by rural travellers. The company is also experimenting with an increase in off-peak frequencies in Stafford. All of these experiments have been warmly welcomed by the local authorities.

The hon. Member, I know, is concerned about the need for a more flexible bus service to meet the needs of those living in remote areas. He referred to the self-help scheme, and we are doing all we can about this but it is not as simple as he suggested. He mentioned the situation concerning Worcester and Midland Red. I must tell him, however, that Hereford and Worcester did not take advantage of the increased Government grant which was available. They would not increase their estimate for transport supplementary grant even though that was suggested to them.

If a county decides not to support loss-making services with help from the Government, it must be assumed that those services will be cut. It is for the counties and the bus operators together to assess how loss-making services might help to meet the needs in their area. The Midland Red Bus Company has begun an examination of services to certain villages to try to decide the best way of tackling the problem. The hon. Gentleman will have an opportunity to discuss these matters with the bus company.

Photo of Michael Spicer Michael Spicer , Worcestershire South

The Minister constantly refers to consultations with the bus company. My whole point is that in any decision about changing the structure the bus company should be one of the agents and we should not have to consult it.

Photo of Mr Kenneth Marks Mr Kenneth Marks , Manchester, Gorton

I understand that no demands for legislation should be made in an Adjournment debate, so I am in some difficulty about replying. I have to think what else is in the hon. Gentleman's mind, apart from a demand for legislation, which is not permissible in an Adjournment debate. I hope that the hon. Gentleman will meet the bus company to consider in detail its problems and his criticisms. I am surprised that he should say that he cannot meet the company until April, and I hope that he will bring that date forward.

The hon. Gentleman referred to an article in this morning's issue of The Times in which the author was kind enough to refer to this debate and to quote certain remarks attributed to the hon. Gentleman, in particular that to the effect that the swift deterioration and theoretical financial collapse of the nation's bus services are one of the great unsung crises of our time. I had not been aware of any lack of singing about bus services or the bus industry either at national or local level in the Press and elsewhere. Certainly my hon. and right hon. Friends are very concerned about the impact which inflation has had on bus costs and operators. We have given county councils an opportunity to increase the grants they receive from the Government.

The article in The Times also mentioned the scope of the independent operators already operating school and works services to take over more of the stage carriage services now operated by NBC services, especially in rural areas. The county councils, which are responsible for both school transport and the co-ordination of public transport, should look at transport for schools particularly keenly.

The hon. Member referred to the possibility of abolishing road service licensing and putting bus routes out to tender. As I said in an Adjournment debate recently, we cannot discuss this seriously. Whatever attractions the abolition of road service licensing might appear to have, the effect of changes of this kind could be disastrous for our system of bus services. Assuming cost cutting to be the object of the exercise, we must remember that cheaper does not invariably mean better. We should be contemplating a free-for-all situation.

Surely someone must stipulate what route shall be run. There will be plenty of people to tender for the ripe plums, but not so many for the fruit at the back of the stall. One cannot make up a coordinated network of public transport to serve the needs of an area from plum routes only. If the goods are put up for auction in mixed lots, how does one find the right permutation to sell the whole crop at the best price?

Without some degree of regulation and protection, we cannot hope for stability in bus services. The present system can provide these elements and it is by no means as rigid as it is sometimes made out to be. The wording of the Act provides scope for great flexibility within certain broad fixed bounds—the public interest, the needs of the area, the position of existing operators and the safety and convenience of the public.

Within those bounds the traffic commissioners have complete discretion, but their task is to adjudicate, not to initiate That is the role of the operators and of the county councils with their new responsibilities. Some of the non-metropolitan counties are not used to having this power, but it is one of their more important powers for the future.

The aim of the system must be to assist people as far as possible to move from where they are to where they want to be at convenient times and at not unreasonable cost. We hope in the policy review debate to see whether changes are needed.

I said last week that there had been no major transport debate for more than eight months. I have the feeling that in the next eight months there will be a great many transport debates. Under the present system the counties have to view public transport as part of a total transport and traffic package. Policies must embrace bus operators, their employees, the local authorities, local employers, schools and the travelling public. The role of the Government in this field is largely financial—

The Question having been proposed at Four o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at half-past Four o'clock.