Clause 3

Part of Concessionary Bus Travel Bill [Lords] – in a Public Bill Committee at 12:00 pm on 5th June 2007.

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Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport) 12:00 pm, 5th June 2007

I beg to move amendment No. 16, in clause 3, page 3, line 25, at end insert—

‘(2A) Two years after the commencement of this Act the Secretary of State shall conduct a review into the reimbursement of operators by travel concession authorities and shall lay before Parliament a report setting out his findings.’.

The amendment is in our opinion another entirely sensible one. It is far from clear that operators will receive the correct reimbursement. The experience of the 2006 concessionary scheme has shown considerable disagreement arising in a number of areas between local authorities and bus operators about the level of reimbursement for carrying concessionary fares. The Government have stipulated that reimbursement should be on a no better off, no worse off basis. Yet there is some dispute about what exactly that should mean. The Transport and General Workers Union, for instance, has already said that it thinks that the concessionary scheme has provided a source of subsidy for already profitable bus operators. However, the 60-odd appeals by operators to the Secretary of State over the reimbursement arrangements would suggest otherwise.

It is, of course, from the very profits that bus operators make that reinvestment is made in new upgraded vehicles. The evidence for that is clearly that the average age of buses on the street has fallen by more than a third since deregulation. Several bus companies claim that the compensation that they receive from the travel authorities for operating concessionary fare schemes does not cover the full operating cost, and takes no account of depreciation or capital costs. They argue, further, that in all too many cases their recompense is given, not negotiated. Hence the appeal procedure.

Reimbursement on a no better off, no worse off basis is in reality an extremely difficult balance to achieve. After all, the marginal cost to an operator of carrying a few extra passengers is virtually nil. One could almost make a case for saying that for carrying one extra passenger on a concessionary fare, the operator would need no reimbursement. However, when, as is likely under the Bill, numbers are likely to reach the point at which extra vehicles must be bought and extra drivers hired, the cost becomes considerable. At that point,   should not the authority be responsible for not only the operating costs but the extra capital costs?

A review of the systems put in place by travel concession authorities after two years of operation would allow the Government to establish whether costs were being borne fairly between authorities and operators. That would further enable the Government to establish best practice and to advise travel concession authorities on how to improve efficiency and to achieve savings. It would allow the Government to re-examine the no better off, no worse off approach, to consider the capital costs element, and to ensure that operators apply best practice in their delivery of their service to the concessionary passenger. It would also allow an examination of procedures, and reassessment of the concessionary fare reimbursement levels.

The 2008 scheme will involve many variables and unknowns. There is unlikely to be a perfect forecast of the levels of reimbursement necessary to operators. Therefore, a review after two years of operation is not only desirable, but essential if the Bill is to be seen as fair and equitable to both providers and operators.