Or... 2p or not 2p, that is the question. Or... tuppence for your thoughts ...
Hardly surprising really. Analysis of the Competition Commission initial report has been all over the trade press like a rash. Fortnightly Passenger Transport was ideally placed to maximise its coverage and it reminded me of newspapers at the death of Diana, princess of Wales or That Wedding. See pages 2, 3, 4, 5, 8, 10, 14, 17, 22 & 26. That kind of thing.Passenger Transport chose to lead on the cost of a perceived lack of competition. The CC had calculated that market failures were costing the passenger a whopping £70mil a year. Not each passenger individually : ) but all of them (us), together. Passenger Transport divided this £70mil by the 2.9bil journeys passengers make. The adverse effect of a so-called uncompetitive market? In crude terms, 2.4p per passenger journey. In true bingo still, not “7/6d, was she worth it?” but “2p, was it worth it?”, they asked. You could barely feed the birds for that, at tuppence (2d) a bag, even in Mary Poppins’s time. Assuming that a passenger travels by bus on five return journeys a week, for 48 weeks of the year, and this will cost each one of them (us) £9.60.
But the real mystery of the CC report is not the imperceptibly small value on market distortion but the tension we now see before as the CC grapples with exactly what to do, to give each passenger back its tuppence a trip. It’s as if the CC doesn’t quite know which way to turn. It wants to see more competition yet accepts that bus wars can be counter-productive. It wants to see a more competitive market but, where competition is said to be failing, proposes something completely anti-competitive: franchising. Is it me, or does a quality contract actually distort the free market and remove competition? The CC should make up its mind.
Oh, go on then. Argue that competition is best off-street in a race for a franchise rather than on-street in a race for the bus stop. But say cheerio to smaller operators in the process.
31 comments:
Why is there no mention of how ecologically unfriendly this race to competitiveness is going to be!
Many unnecessary buses double or triple operating routes during daytime hours, then next to nothing evenings and Sundays! If an operator wants to cream the daytime trade, then he must provide, at no expense to the local authority, an evening and Sunday service.
I call for a highly paid commission to investigate how to provide a bus system that is cost effective, comprehensive in it's route and time coverage, addresses the issue of the best use of our exspensive and dwindling oil resources and so reduce CO2 emissions.
Competition and environmental friendliness will never sit happily together.
"Oh, go on then. Argue that competition is best off-street in a race for a franchise rather than on-street in a race for the bus stop. But say cheerio to smaller operators in the process."
On the contrary. You'll notice that smaller operators tend to be far busier with Council tendered services than commercial. I see no reason why this would be different for a fully tendered service, so long as it was contracted out at an appropriately granular level.
Of course, if you contracted out an entire city's operation it'd be unlikely - but is there any specific need to do it that way? Most Councils don't, which would suggest, as they are mainly concerned with cost, that doing it that way is generally not the most cost-effective option.
"I call for a highly paid commission to investigate how to provide a bus system that is cost effective, comprehensive in it's route and time coverage, addresses the issue of the best use of our exspensive and dwindling oil resources and so reduce CO2 emissions."
No. We need a *public transport* system, not a bus system. A single, integrated one, with a single fare set and connections between modes.
"Oh, go on then. Argue that competition is best off-street in a race for a franchise rather than on-street in a race for the bus stop. But say cheerio to smaller operators in the process."
Why? Why would it not encourage them as it does with Council tenders at present, so long as the tendering is on a suitably granular level?
"Competition and environmental friendliness will never sit happily together."
Disagree. Commercial competition is a race to get the best revenue at minimum cost across enough market share to cover overheads, and carbon output / pollutants are (roughly) proportional to fuel consumption. Nobody can say the price of fuel doesn't affect them, so it controls itself.
"Disagree. Commercial competition is a race to get the best revenue at minimum cost across enough market share to cover overheads, and carbon output / pollutants are (roughly) proportional to fuel consumption."
Yes, but fuel is not the only cost for bus operation, and is probably not even the biggest one (unlike air travel).
It only takes a trip to a third-world country that has a genuine free-for-all of public transport to see that your statement is fundamentally false.
I wonder how many 2ps this silly exercise cost everyone,including the bus operators, who had to contribute piles of information to reach this conclusion ?
So now we know, to paraphrase the late great Benny Hill, next time they ask, just tell them... 2p off.
Actually, Anonymous at 07:15, CC is interested in more duplicating buses during the daytime. Frankly high frequencies are a good thing from a welfare p.o.v. as they minimise waiting times when most people are travelling.
My main concern is whether the CC can actually design a ticketing scheme that meets its criteria (i.e. rewarding companies for the passengers that *should* be travelling) and doesn't offer advantages for particular types of service (especially ones that run a minute ahead of other firms').
"My main concern is whether the CC can actually design a ticketing scheme that meets its criteria (i.e. rewarding companies for the passengers that *should* be travelling) and doesn't offer advantages for particular types of service (especially ones that run a minute ahead of other firms')."
Assuming we don't go for full regulation, regulating timetables rather than fares might help here. So, if there was an existing hourly service, any competing service must be offset from it by half an hour, so there is the option to choose which company's bus to use as well as an increase in service.
How would you control competition from free buses in all this ? In our area, one company is hiding behind the funding from superstores to lift custom from the established operators. Basically, they are using money from the stores to compete unfairly in my view.
They use a fleet of cheap old step entrance vehicles, thus flaunting DDA rules too.
The core of their business is in the same town which drew unwanted Bus Wars attention across the country when heavy-handed crushing techniques were used.
Very good point made by Anon @15.59
Now wouldn't it be good if supermarkets invested their not inconsiderable sums paid in free bus services into the council tendered bus budget to save some of the lesser used but vital links to shopping centres. These supermarket buses to their stores often duplicate (at least in part) commercial bus services and therefore are an inefficient use of resources as they rarely provide links that couldn't otherwise be made either directly or with just one change of bus.
The town in question appears to have seen an explosion of 'free' supermarket buses, no doubt as a result of supermarket wars between the local Asda and Tesco as each fight for the custom of the locals, meanwhile other bus operators see one of their primary off-peak revenue streams suffer as shoppers enjoy the bonanza of free buses.
Anon 17:27
".... no doubt as a result of supermarket wars between the local Asda and Tesco as each fight for the custom of the locals, meanwhile other bus operators see one of their primary off-peak revenue streams suffer as shoppers enjoy the bonanza of free buses."
But isn't it other local operators who operate the free services. If operators of paid services either do not tender for the free services or tender too high, it's hardly unfair of the supermarkets to give them the work.
"But isn't it other local operators who operate the free services. If operators of paid services either do not tender for the free services or tender too high, it's hardly unfair of the supermarkets to give them the work."
Not in the case of the town I an the previous commentator are refering to. One operator, provides all the free buses in the town. The other operators, providing a mix of commercial and council tendered services collecting fares on the same corridors, do not have opportunity to bid for the supermarket tendered work as this is not put out to competitive tender by the company acting as agents for the supermarket(s) involved, nothing like keeping it in the family.
Regardless of the local issues in one particular town, 'free' supermarket buses can undermine off-peak bus travel on traditional 'pay on bus' routes and frankly the supermarket money could be better spent maintaining links to their stores elsewhere rather than duplicating routes that already exist.
Who's going to do the franchising then? Find me a Council that can run its libraries and leisure centres, never mind one that i'd trust to plan, develop and invest in a bus network that MAXIMISES travel on the key coridors, as ell as poviding a safety net(work) of non commercial routes. It's cloud cuckoo land!
"Now wouldn't it be good if supermarkets invested their not inconsiderable sums paid in free bus services into the council tendered bus budget to save some of the lesser used but vital links to shopping centres."
This seems to suggest that supermarkets should voluntarily pay to subsidise services to other shops. I can't see that happening, and you couldn't reasonably expect them to do so.
Anonymous said...
"Who's going to do the franchising then? Find me a Council that can run its libraries and leisure centres, never mind one that i'd trust to plan, develop and invest in a bus network .... It's cloud cuckoo land!"
The current system for rail services in the UK is a form of franchising, and it seems to be hard to find anybody with a good word to say about it!
"This seems to suggest that supermarkets should voluntarily pay to subsidise services to other shops. I can't see that happening, and you couldn't reasonably expect them to do so."
In many cases they already do so with their free buses - in several cases the supermarket is in a town centre so nothing stopping people wandering off and using other supermarkets and shops a short walk away, and they do exactly that. However what I was actually suggesting was supermarkets financially support tendered bus services that pass the door of their store and are under risk of budget cuts, rather than paying for free services that duplicate commercial services or these tendered services, that are potentially at risk, passing the store door.
"In many cases they already do so with their free buses - in several cases the supermarket is in a town centre so nothing stopping people wandering off and using other supermarkets and shops a short walk away, and they do exactly that."
As an oldie it makes no difference, but with others' fare costs I can understand the temptation to 'misuse' the free services.
It makes no odds as far as the operator is concerned either: it bears no risk.
A solution of legislation to make all services chargeable but refundable on a spend over £x would be fair.
Not holding breath
"A solution of legislation to make all services chargeable but refundable on a spend over £x would be fair."
What's this? Bus operators like free-market competition until such time as it affects them adversely?
Tough. It's that or regulation. I prefer the latter, but if bus companies want competition, they should get it in full.
Neil
"The current system for rail services in the UK is a form of franchising, and it seems to be hard to find anybody with a good word to say about it!"
Despite being called franchising, it's not that at all - one of the core principles of franchising is a consistent look and feel (think Subway and the likes). It's a particularly poor subcontracting mechanism, that's all.
For buses, a London-style system (or one similar to the current local authority procurement scheme) would be best.
Actual franchising in buses might mean that I run a bus network but pay Stagecoach, say, to be able to use their branding.
"For buses, a London-style system (or one similar to the current local authority procurement scheme) would be best."
Great lots of mini-Boris's running buses up and down the country, changing vehicle types, routes and frequencies at a whim regardless of whether it is either efficient use of resources or not and most importantly whether it benefits the end consumer or not.
Generally giving power to local authorities and in particular politicians means greater bureaucracy, less efficiency and costing more in the long run.
The franchising system works well for plenty of businesses.
For Buses it should not be the councils doing the franchising they do not have the skills and it would be at to low a level.
I would do it at a Regional level using the EU UK regions
North East
North West
Yorkshire & Humberside
West Midland
East Midlands
South West
South East
London
East
Whilst ideally they should have a common branding that could add to costs as would creating a unique specification as TfL do
They could have a simple vinyl branding applied Which could include what ever the regional franchise company is called plus the operators name/branding
lets say
"East Of England Buses - Stagecoach
"East Of England Buses - Centre Bus
I would suggest the garages are owned or leased by the Franshising company to give the greatest flexability and to increase competition
As in London the franchising company would lay down the fares & the type of tickets etc as well as specifying bus capacity & start & finish times of routes as well as days of operation
The critical thing is to be able to get a competent organisation to run the franchise, councils & council quangos are pretty dire at these things
Re: Anon @ 13:52, above - this is complete nonsense. Just how do you expect potential franchisees to construct a business model when you are binding them all with costs and fixed routes etc that they cannot vary? If garage costs are out of the operators' control and an 'authority' is setting the fares, routes, times (and perhaps bus specs), the only things left for operators to vary to help them win (i.e. submit lower bids) is staff wages, engineering / bus maintenance costs (hmmm!) and the costs of buying vehicles, unless you want to buy those and rent them to operators too? Quite where this gives rise to any effective competition, I fail to see as all potential operators will have near identical cost bases. Not even TfL has dared go this far.
The only people who realistically have the *incentive* to devise efficient, dynamic, customer-focused timetables and route-networks are *commercial* bus operators. Other bodies be they PTAs, TfL or Councils may think they can do it but just their existence brings additional cost and bureaucracy to the bus operators.
Surely the last 25 years have proved one thing - that there are very few places that can support long-term on-street bus competition. The industry does not need to compete with itself, it's cars and trains that are the competition, not other operators - and the more tools that operators have to allow them to compete with cars and (subsidised) trains (inlcuding *less* bureaucracy), the better.
"The franchising system works well for plenty of businesses."
Yes but the franchiser is a commercial organisation itself, be it McDonalds, Subway, etc. There is nowt to stop current operators franchising out their networks and there are a few examples of this already where Joe Bloggs minibuses can run part of the wider network at lower cost.
If the franchiser isn't a commercial organisation then surely it would be part of government and suffering from the whim of politicans.
"If the franchiser isn't a commercial organisation then surely it would be part of government and suffering from the whim of politicans."
Yet at the moment it instead suffers from the financial greed of business. And worse, that that business can effectively hold public money to ransom by saying a route is uncommercial even where it actually isn't, then strangely ending up bidding for it and getting it when they should just run it commercially.
Which is worse, I wonder?
Neil
The current unregulated system is inefficient and leads to poor service levels in many areas and over bussing in many areas and services in most areas almost none existant after 7pm and on Sundays
By having a mandatory franchise system in a region much better services could be provided at lower cost
Many operators also take advantage of council; subsidies. They will drop a route they no to be faily essential and not making much of a margin knowing that when they get it under contract they will make a significant profit
It is amazing how many routes go from needing no subsidy to needing a £100K a year subsidy
Franchising when done well is very efficent and provides very good service levels. It could make much better use of existing resources
Currently with competing companies bus will frequently operate out of garages severl miles away from a route. Tickets are a nightmare for passengers because every company has its own ticket scheme and availability and in general they can only be used on that companies services
No one can say that the current system is sensible
By having a single franchise company reasponsible for providing a service network in a region you largely get ride of the problem. You can have a common ticket scheme and ticket prices. THere would be no problems with ticket interusability and a proper network of services can be built most of it would be cost neutral in that overbussing can be reduced and more efficient use can be made of resorces this would enable better off peak services and more sensible routes to be set up
"Franchising when done well is very efficent and provides very good service levels. It could make much better use of existing resources"
You make it sound as if there's evidence for this. There isn't. Nowhere outside London is there franchising so how can you conclude this?
One the one hand Anon at 0716 is suggesting operators are inefficient by competiting head to head with each other, on the other hand suggesting operators (presumably the same operators) are ripping councils off by cancelling commercial routes then picking them up on tender because there is no competition. That doesn't make sense, clearly you cannot be inefficient because of competition and inefficient because of the lack of competition, just demonstrates the nonsense of the reregulation debate.
Perhaps those complaining about operators ditching commercial routes that are subsequently tendered need to look at the reasons why, concessionary reimbursement rates are falling fairly consistently across the country making a mockery of the 'no better no worse off' claim, industry costs have risen above RPI making it difficult to claw back the increasing cost through the fare box alone because of passenger resistance, finally changes to land use can have dramatic effect on the viability of bus routes - a major traffic generator on the route closes down and you can kiss good bye to the commercial viability of the route.
Of course if those claiming operators ripping councils off is widespread could name and shame the examples they are refering to they may have some more credibility but I would guess in reality the list is fairly short. Tendered bus budgets have remained fairly static amongst most councils over the past few years, only increasing in line with inflation therefore there hasn't been the sudden ballooning of money paid from councils to operators as suggested by some.
Re Anon at 0716, just where is all this "over-bussing"? Can we have some specific examples as I can't think of any, or do you mean the small, often temporary pockets of competition that spring up occasionally?
As for "cost-neutral", I'd love to believe that. Any kind of franchising system along the lines that you dream of will give rise to an immediate increase in costs all round, not just to the operators but who will be funding the franchising authorities and their staff?
"Franchising when done well is very efficent and provides very good service levels."
You get what you pay for, anyone can suggest bumping up the council tax to provide cheap fares and London style frequencies but no one can get it past the voters outside of London.
"It could make much better use of existing resources "
Hmm, employing loads of bureaucrats to administer the franchising is hardly efficient, just look at TfL.
It also sounds like you are suggesting Peter should be robbed to pay Paul. Cross-subsidisation between routes is a nightmare and just disguises the poor performing routes where demand just doesn't justify the investment whilst at the same time strangling the better performing routes - a loose loose situation and got the municipals into terrible messes in the 70s and 80s.
"Currently with competing companies bus will frequently operate out of garages severl miles away from a route."
As they would under franchising unless you are suggesting every route should have a depot built on the route to minimise dead mileage but vastly increasing overhead cost - hardly efficient!
"Tickets are a nightmare for passengers because every company has its own ticket scheme and availability and in general they can only be used on that companies services"
Truth is most people only make repeat journeys on the same bus route, moving between routes and operators are in the minority. Yes something should be done to assit that minority but the biggest stumbling block to this has been the OFT, not the industry itself.
@ Anon 0749
You have to look beyond the headline budget though. It isn't just that the money is being spent, it is where the money is being spent.
IME what's happening is that bus companies are cutting commercial routes to obtain subsidy. That means the subsidy is no longer there for weaker bus routes. The same amount of money is being spent, but it is being spent on routes that could and should pay for themselves and not on routes that can't.
An excellent example of this is in County Durham. Durham CC have cut most bus subdisies and in a shock upturn for the books Arriva and Go-Ahead have decided that they can run a commercial evening and Sunday network after all. This, evidently, means that they could have done it before but didn't. Blatant profiteering.
Another excellent example is Stagecoach Hartlepool, who have decided to withdraw all Sunday buses from Seaton Carew because Hartlepool council have had to cut the subsidy budget. I'll bet my mortgage that if someone else tries to run a bus on a Sunday that Stagecoach will suddenly put the buses back on.
"IME what's happening is that bus companies are cutting commercial routes to obtain subsidy. That means the subsidy is no longer there for weaker bus routes. The same amount of money is being spent, but it is being spent on routes that could and should pay for themselves and not on routes that can't."
Please provide examples of where this is the case, the example you provide below doesn't fit your arguement...
"An excellent example of this is in County Durham. Durham CC have cut most bus subdisies and in a shock upturn for the books Arriva and Go-Ahead have decided that they can run a commercial evening and Sunday network after all. This, evidently, means that they could have done it before but didn't. Blatant profiteering."
But what has happened here is that the local authority has reduced its budget in real terms, not ditched weaker tendered bus routes to support other routes ditched by operators. The reasons why operators pick up bus routes that were previously tendered is more complex than suggesting the profit gravy train has run dry - if an operator suddenly faces loosing say 20% of its work overnight it cannot strip out overheads fast enough to avoid adversely affecting the commercial viability of the other 80% of routes therefore sometimes it is better to maintain volume of work by accepting the loss of tender revenue in order to maintain the viability of the entire depot.
There will be other parts of the country where it makes more economic sense not to run routes or journeys previously tendered because the operator will be financially better off by shutting up shop, either on Sundays, in the evenings or perhaps altogether.
"Another excellent example is Stagecoach Hartlepool, who have decided to withdraw all Sunday buses from Seaton Carew because Hartlepool council have had to cut the subsidy budget. I'll bet my mortgage that if someone else tries to run a bus on a Sunday that Stagecoach will suddenly put the buses back on."
You've made an assumption there so can hardly be presented as evidence for your point of view. Come back and present it as evidence if it definately happens.
Post a Comment