Rural Economy and Connectivity Committee

Meeting date: Wednesday, February 22, 2017

Official Report 655KB pdf

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Subordinate Legislation

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National Bus Travel Concession Scheme for Older and Disabled Persons (Scotland) Amendment Order 2017 [Draft]

Item 3 is to take evidence on the draft National Bus Travel Concession Scheme for Older and Disabled Persons (Scotland) Amendment Order 2017. The minister and Mr Carmichael are joined by Tom Davy, the head of the bus and local transport policy unit at Transport Scotland. The instrument is laid under the affirmative procedure, which means that the Parliament must approve it before the provisions can come into force. Following the evidence session, the committee will be invited under the next item to consider the motion to approve the instrument. I invite the minister to make a short opening statement.

Thank you, convener, and thank you for inviting me to discuss the draft order, which sets the reimbursement rate and capped level of funding for the national concessionary travel scheme in 2017-18. In doing so, it gives effect to an agreement that we reached in January with the Confederation of Passenger Transport, which represents the Scottish bus industry. The agreement was based on the reimbursement economic model that was developed in 2013 on the basis of independent research that the Scottish Government commissioned at that time. The research was discussed extensively at that time with the CPT and its advisers. The model and recent discussions on updating the various inputs to it, including forecasts based on national trends and agreed indices, have given us a good basis for making informed decisions to provide stability and clarity for all partners.

Using the updated model, on the basis of agreed forecasts, we have concluded that the appropriate rate of reimbursement in 2017-18 should be 56.9 per cent of the adult single fare. That rate will most closely deliver the aim set out in the legislation that established the scheme that bus operators should be no better or worse off as a result of participating in the scheme.

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As the rate is the same as last year, it also provides welcome stability and continuity for the bus industry. On the basis of that rate, and our expectations for future changes in journey numbers and fares, we forecast that the claims for reimbursement for bus operators will be capped at £196.16 million over the next year. That figure is described in the draft order as the budgetary cap.

The order is limited to the coming year. We have agreed with the CPT that the reimbursement model will be reviewed during the year to ensure that it continues to provide a fair deal for all parties and remains an appropriate mechanism for determining future payments.

The committee will also be aware that, in the coming months, we will be consulting on ways to ensure the long-term sustainability of the national concessionary travel scheme and on the implementation of our commitment to extend free bus travel to young modern apprentices and young people on a jobs grant. We know that older and disabled people greatly value the free bus travel that is provided by the scheme, which enables them to access local services, visit friends and relatives and gain the health benefits of having a more active lifestyle.

The order provides for those benefits to continue for a further year on a basis that is fair to operators and that is affordable to taxpayers. I commend the order to the committee and am happy to take any questions on the scheme.

I remind the committee that the questions must relate to the order in front of us, rather than to any future provisions.

I have a question about the business and regulatory impact assessment. It is important that I tell you the source because, when we were questioning you earlier on the draft climate change plan, I talked about a table in the plan, but in fact that table came from the Scottish Parliament information centre briefing. I apologise for that—it was not my intention to cause confusion.

My question is about the rationale for Government intervention. I will read the first two sentences of the assessment:

“The National Bus Concessionary Travel Scheme for Older and Disabled Persons provides an entitlement to free bus travel for people over 60 or meeting certain disability related criteria. This is believed to deliver social and health benefits by enabling people more easily to access services and visit friends and relatives.”

I emphasise the word “believed”. Given that we are a number of years into the scheme, I would have thought that evidence would have been gathered on the social and health benefits that the scheme brings.

As I suggested in my opening remarks, we believe that there are social and health benefits. If the member does not mind, I will write to him with some detail on the evidence that we have for that. It is generally believed that there are many benefits to the scheme; otherwise, we would not have continued to pursue it. We recognise those benefits and members will be familiar with them from speaking to their constituents.

I suggest that you write to the committee, and we will ensure that the information is passed on to Mr Finnie.

Indeed.

There is a heap of people queueing up to ask questions.

On that point, I was going to ask why there is a difference between the assessment and the policy note, which says:

“This has been shown to deliver social and health benefits”.

Could you cover that in the letter, minister?

Yes, I will be happy to do that.

The rate is staying at 56.9 per cent of the standard single fare. As there may be commercial sensitivities around this point, rather than inviting you to share information that it is not proper for the committee to have, I will ask whether you and your officials are aware of the extent to which the standard single fare has diverged from the overall basis of fares since the introduction of the scheme. There has always been an underlying worry that a little bit of gaming goes on, because there is not much incentive to reduce the standard single fare, which is probably little used beyond the bus pass scheme. Are you confident that the standard single fare is not diverging too much from the fares that are otherwise charged to those who pay money when they catch a bus?

That is a good point and one that, it is fair to say, we are aware of. In my first few months in post, I was approached by a current MSP who used to be involved in the bus industry, who suggested that I look at that issue. The reimbursement rate that we come to is, of course, a negotiated position, which involves compromise on both sides—from the Government on behalf of the Scottish taxpayer and from the bus operator as a private company. I do not think that any games are being played on the adult single fare, but we are alive to the possibility that that could be happening.

It would be fair to say that the rates are negotiated but that fares are unilaterally set, albeit that they are notified to the commissioner.

Sure.

A test is applied to fare tables when they are submitted by operators. We look at the fares to see whether they are genuine commercial fares—that is, at the level of fares that people are paying. That does not catch fares that might be creeping up under less competitive pressure, but it does—or would—catch serious cases of gaming.

We are due to review the reimbursement model over the coming year and the question of how we deal with the relationship between adult single fares and the fares that people would pay if there were not a scheme and whether the figures that we use for that hold good.

I remind everyone gently that we are looking at the scheme that is coming immediately down the line, rather than any scheme further in the future.

I would like the minister to clarify some of the evidence that he has given this morning and the evidence that is provided in his policy note. The third sentence of paragraph 7 of the policy note says:

“Bus fares and concessionary passenger journey numbers have risen by less than expected in the last two years since the ... cap was set”.

In answer to my earlier question, the minister said that the number of bus journeys was going down. What are the facts? Is the number of bus journeys rising, but to a lesser extent than you thought that it would, or is it falling?

Overall patronage on buses is declining. We are simply saying that the cap—the figure that we arrive at in negotiation with the CPT, which we will certainly not pay out more than under the scheme—is based on the forecast number of journeys and, over the past 10 years, the forecast and actual numbers of journeys have generally, although not in every year, been lower than the numbers allowed for by the budget cap, which is a good thing.

I understand that. My question is focused on the policy note that you provided. I will read it to you again:

“Bus fares and”—

this is what we are looking at—

“concessionary passenger journey numbers have risen by less than expected”.

That means that they have risen. Is that the case?

It is the case that fares have risen by less than expected. We had expected passenger numbers to rise and they rose by less than expected—in fact, they fell. You were right to say that; I apologise if there was confusion about that. We were anticipating a rise, but we have experienced a flattening out to a small fall. We are modelling on the basis of a rise into next year. That is the basis of the budget cap.

If I understand you correctly, the number of concessionary passenger journeys—the issue that we are focusing on—has flatlined. Is that what you are saying?

The number has flatlined, or it has gone slightly down.

Slightly down.

We had anticipated that there would be slight increases.

Are you anticipating a slight increase?

We are anticipating a slight increase into next year. That is on the basis of economic modelling done by the CPT.

I will move to my next question. You have cut the cap by £16 million.

Yes.

In our discussion with the minister about cutting emissions, my question was based on encouraging concessionary bus use in particular. It strikes me that, rather than saying that it is a good thing and encouraging it, as you said in the earlier answer, the policy note shows that you are not anticipating a rise. As you just said, you are reducing the funding and cutting the cap. If the Government is really encouraging concessionary fare use, as the evidence that we received this morning indicated, why are you reducing the cap?

Remember that the cap is the ceiling of payments. If we look at the 10 years from 2007, we can see that the current cap of £196 million is higher than the money that we have had to pay out every year in the past 10 years except for one year, which was 2012-13. Therefore, it still has leeway to allow for an increase, even compared with last year’s payments, which came to £189 million.

But the figure that you give in paragraph 7 for the actual reimbursement claim is £192 million and your cap is £196 million. Therefore, your cap is only £4 million more than what is being paid out this year. I want you to focus on the point that you said that you wanted to encourage concessionary travel but your policy increases the funding only by a maximum of—

It is an increase.

Yes, but it is a maximum increase of £4 million on the £192 million. If we are trying to cut emissions, that is not much, is it?

It is an increase—that is the point. Not only is it an increase, we are considering the long-term sustainability of the scheme. If the cap had been lower than the payments, I would understand your point but—

Do you not understand my point?

No, I do. I am saying that it is an increase.

I know that it is an increase. The point that I am making is that it is a tiny increase when you are saying that you want to increase the use of buses dramatically to reduce emissions.

We are saying that the bus element of the transport chapter—this relates to the previous discussion—is about reversing the decline in bus patronage across the board. A number of measures to tackle congestion and improve the passenger experience, for example—not just the national concessionary travel scheme, although that is an important part of it—will help with that. The concessionary travel scheme certainly feeds into that.

The committee might need to come back to the matter, because we will not know whether the cap has been breached until later. The point is well made.

I have a couple of questions. Do we know how many people in Scotland have the card?

Yes. I do not have the number on me, but we know how many have it.

It is 1.3 million people.

I thought that I asked the minister.

It is 1.3 million.

Am I correct in thinking that people who are entitled to use the card might not have used it? I am entitled to use it and have it, but I have seldom used it.

I do not have the figure in front of me, but it is correct that quite a few people who have the card do not use it.

I am led to believe that the scheme does not entitle the bearer of the card to free tram travel in Edinburgh, but Edinburgh residents get a reduced tram fare with another card. You might want to come back to me on that.

No, I can answer and I will ask Tom Davy to confirm. We fund the national concessionary travel scheme for buses. Any local scheme is the responsibility of the local authorities so, if the City of Edinburgh Council wishes to allow concessionary tram travel for people who reside in Edinburgh but not for anybody from outside Edinburgh because it would have to fund that, it has the right to do that. It is not a Government scheme; it would be the local authority’s responsibility.

That is correct.

Basically, your card just entitles you to go on a bus.

It is not the case that it just entitles you to go on a bus. It entitles you to go on a bus and travel anywhere in Scotland for free. That is a pretty good concession. It costs us £196 million.

I am not knocking it. It is an excellent idea.

Have you considered how the order will impact on ordinary bus fares? Will it lead to an increase, or should it have no impact at all?

It should certainly have no impact. The fundamental basis of our discussion with the CPT is that the bus industry should be no better and no worse off. If it is no better and no worse off as a result of the concessionary travel scheme, the scheme should not be the basis for increasing or decreasing fares. Any increase in fares would not be a result of the concessionary travel scheme.

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I have a small technical question about the cap. Going back to the kind of theoretical scenario outlined by Mike Rumbles, if patronage were to rise higher than we had expected or the forecasts had dictated, what would happen when we reached the cap? What would be the financial consequence of reaching the cap for the bus operators and for the public purse?

The cap is agreed through a negotiated process, and if it is breached—and there have been years when payments have been higher—that is, contractually speaking, a matter for the bus industry. It is the industry’s responsibility. However, we have to be realistic, and we would have to look at the reasons why the cap had been breached. In those years out of the past 10 in which that has happened, we have had towards the end of the year a late surge of take-up of travel on the national concessionary travel scheme. We would have a discussion with the bus industry about what was and what was not fair and whether we would have to absorb the cost as a budgetary pressure or whether the bus industry would take it on. If it looked like we were heading towards that stage, we would look at whether the cap might be breached and then reach a negotiated position. In some years, the breach has amounted to around £1 million, and there has been a discussion about who should absorb that. I think that I would look to take the same approach.

I appreciate the answer, as it highlights an element of flexibility in the system that is to be welcomed. However, as far as the public purse is concerned, it is very difficult to sign off on a maximum cap if there is—to use your own words—quite a loose set-up under which the public finances might be liable for any breach. The contractual liability in that respect is not very clear.

The legal obligation to pay is limited to the cap. If the cap is arrived at during the course of a year—and we try at the beginning of the year to set a cap at a level at which we think that that will not happen, which is why we have programmed in this increase—the liability for the Government ceases. Any free journeys that are undertaken after that point are, in legal terms, for bus operators to provide, and they have to absorb the costs. Understandably, they do not like that, and it is awkward when it happens. As a result, we try to avoid it happening by setting the cap at a certain level.

As the minister has said, we have on a couple of occasions in the past accepted claims beyond the cap. There were various reasons for that; in one case, there was a small overshoot that came up very late in forecasting and which we met in full. On another occasion, additional payments were made that were equivalent to actual claims above the cap as part of the transition to a new economic model that had quite a depressing effect on payment rates. If you like, it was a transitional relief.

Thank you.

John Mason has the final question.

It has been argued that more people might start using the bus, but I am sad to say that that has not been the case. Indeed, in Glasgow, fewer people have been using the bus. It could be argued that the £196 million is really too high, and one might ask why there should be an increase at all if we are expecting fewer people to use the bus. Although the argument has been made on one side, there is another argument to be made on the other side about being careful with public money. Do you really think that the £192 million needs to be increased to £196 million?

Yes, for a number of reasons. Our desire and ambition as a Government is to reverse the decline in bus patronage as a whole and, as I have said, the national concessionary travel scheme can no doubt play a part in that. It is important that we continue to invest in bus transport; after all, looking at the demographics of those who use the bus, we know that buses can be vital to health, educational and employment benefits.

Item 4 is formal consideration of the motion. I invite the minister to move motion S5M-03819.

Motion moved,

That the Rural Economy and Connectivity Committee recommends that the National Bus Travel Concession Scheme for Older and Disabled Persons (Scotland) Amendment Order 2017 [draft] be approved.—[Humza Yousaf]

Motion agreed to.

That concludes consideration of the affirmative instrument, and we will report the outcome to Parliament. I thank the minister and his officials for their evidence this morning.

We now move into private session.

12:35 Meeting continued in private until 12:49.