Transport (Scotland) Act 2001 Inquiry
We move to agenda item 3. I welcome to the committee Nicol Stephen, the Minister for Transport; John Ewing, the head of the transport group in the Scottish Executive; and Tom Macdonald, the head of the bus and taxi policy branch of the Scottish Executive. I realise that the minister has a hefty schedule this afternoon, and we look forward to discussing each of the areas that we will cover with him. I invite the minister to make some introductory remarks about the committee's inquiry into the workings of the Transport (Scotland) Act 2001.
It is a great pleasure for me to be here this afternoon, and I look forward to the three sessions that lie ahead. In case they think that he is getting off lightly, I advise committee members that John Ewing, the head of the transport group, intends to stick with me throughout the afternoon. We will be joined by others as the afternoon progresses, but the two of us should remain present, all things being equal.
I will begin with the committee's inquiry into the Transport (Scotland) Act 2001, focusing on quality partnerships, quality contracts and concessionary travel. I will address the rail industry and the budget later on. I have brief opening remarks for each of those subjects, although my comments on the budget will not be quite so brief.
I am pleased to have the opportunity to discuss the implementation of the Transport (Scotland) Act 2001, especially the important issues of quality bus partnerships, quality bus contracts and concessionary travel. I often feel that we do not focus enough on the bus and that it deserves greater attention. From time to time, we take the bus network for granted, although it is the most significant form of public transport in Scotland. A great number of people depend on buses each day and each week for their work, business, community and social activities.
Despite the trend towards a significant increase in car use, 10 per cent of adult journeys are made by bus and 12 per cent of adults travel to work by bus. Buses are essential to Scotland's economy and to social inclusion. The many letters that I receive about bus services in Scotland reflect the importance to people of local services. For many decades, we witnessed a trend towards not only increased car use but declining passenger numbers on buses. I think that all members of the committee welcome the fact that we have achieved growth in bus services in recent years—indeed, that is welcome throughout Scotland.
Currently, there is an—albeit slow—upward trend in bus use. In 2002-03, the number of bus passengers was almost 8 per cent higher than it was four years earlier, when the lowest figure was recorded. Credit for the situation must be given to a range of interests; it is not simply the result of Government policy. It is clear that local transport authorities and bus operators have played an important role and that local people have chosen to use the bus because it is a more attractive option. I hope that we are starting to witness a change of culture in Scotland and that people are more willing to take the option that is more environment-friendly, safer and better for the economy and communities, by making use of public transport.
In a largely deregulated market, there is an incentive for bus operators to run services that people will use. The traffic commissioner's role is to ensure that services are provided safely and to the timetables that companies provide. Local transport authorities are responsible for ensuring that the gaps are filled so that socially necessary services are provided. The Executive and, for licensing matters, Westminster set the legislative framework. The Executive also provides substantial resources for bus services, which include some £55 million per year in bus service operator grants direct to bus companies and some £130 million on bus-related projects over the five rounds of the public transport fund. We also provide significant resources in relation to concessionary fares, to which I will return.
The powers to introduce quality partnerships and quality contracts add to the options that are available to transport authorities. Bus services are predominantly local and it is right that local transport authorities should be asked to develop local solutions to local problems with services. The committee heard evidence that there is a great deal of good partnership working between transport authorities and bus operators in many parts of the country. However, little or no use is being made of the statutory powers to set up quality partnerships and quality contracts that we provided. On the one hand, I am pleased by the level of partnership working that is taking place; on the other hand, I would very much like more use to be made of the new powers. When the committee completes its inquiry, I will be interested to receive its assessment and, of course, I will seriously consider any recommendations that the committee makes.
Members know that the current concessionary travel schemes are run by local transport authorities or groupings of authorities. A large group in the west of Scotland follows the Strathclyde Passenger Transport boundaries. The schemes are delivered under the provisions of the Transport Act 1985. We have not used or needed to use the powers in the 2001 act and I pay tribute to the Convention of Scottish Local Authorities, local transport authorities throughout Scotland and large and small bus operators for their ability to deliver concessionary schemes for elderly and disabled people on that basis. Through those bodies' efforts, the Executive's national minimum standard of free, local, off-peak bus travel for older and disabled people is being delivered across Scotland. Members know that we intend to use the Transport (Scotland) Bill to create new powers to operate a truly national scheme, and the committee might want to discuss that matter today.
We have helped to play our part in the effective delivery of the national minimum standard, not least by making record sums of money available. That has been done through the local government finance settlements, through grant-aided expenditure for the scheme and by guaranteeing to COSLA and the local authorities that the Executive would provide extra resources from the centre where there was evidence of a shortfall in funding for the regional and local schemes.
The current scheme is very popular. The number of passengers who make use of the scheme is increasing all the time and I know how valued it is by card holders. That is why the partnership agreement now commits us to a national, as distinct from a local, free bus scheme for older and disabled people, to cover journeys across Scotland. The partnership agreement also commits us to a national scheme of concessionary travel for young people. For the elderly and the disabled the scheme will be free; for young people, it will be a discounted scheme, initially for those who are still at school or are in full-time education or training.
I know that there is great interest in the details of the schemes. As part of the spending review, we recently announced that we will make £96 million of new money available for the schemes in 2006-07 and £100 million available in 2007-08. That announcement paves the way for us to make solid progress on delivering our commitments. We will produce the details of the schemes and announce our plans shortly.
I hope that those introductory comments, which have touched on quality partnerships, quality contracts and the current concessionary fare scheme, provide a helpful outline. I will be happy to take questions. If members want to ask Tom Macdonald, who is the transport group's expert on bus issues, John Ewing or me any questions, we will be happy to take them.
Thank you very much. Those are useful introductory remarks. David Mundell will ask the first question.
I am pleased to hear that the minister will look carefully at our report.
Research that was commissioned and published by the Scottish Executive claims:
"In no region or city … delivering better or exemplary practice in transport policy implementation is the local roads-based public transport system deregulated".
Do you share that view?
That in no part of Scotland—
No. It is claimed that nowhere where roads-based public transport is working effectively is it deregulated. The suggestion is that there has to be regulation to make the public transport system, in particular the bus system, work effectively. Do you share that view?
To be of assistance, minister, the report to which David Mundell refers is one that the Executive commissioned, entitled "Transferability of Best Practice in Transport Policy Delivery", which was published in 2003.
Thanks. That is helpful.
Reregulation is often spoken about. In the sense that the phrase is usually intended, reregulation is not something that I support. Clearly, there are currently levels of regulation; there is a traffic commissioner and there are rules for operating bus services in Scotland. However, the situation is generally described as being a non-regulated market—an open market. Provided that a company has safe vehicles, properly trained staff and the right business or corporate structure and that it completes the right consents and the appropriate administrative procedures with the traffic commissioner, it is entitled to run bus services in Scotland in the deregulated market.
There are opportunities within the Transport (Scotland) Act 2001 to increase the level of regulation, as the committee's inquiry has obviously investigated. Those opportunities exist through statutory quality partnerships and statutory quality contracts. The quality contract is similar to a franchising arrangement and it represents a significantly greater level of regulation than exists in the current system. Some people would not describe even that as full reregulation and would regard it as such only if the Scottish Executive were to specify the routes, network and fares or if bus companies were to be renationalised. I do not favour those options and there is no suggestion that that will happen in Scotland, but there could be a franchising arrangement in the form of a quality contract.
We have had serious discussions about such arrangements with SPT, but it decided not to proceed with the idea. West Lothian Council is still seriously considering the introduction of quality contracts, which I believe are synonymous with a franchising arrangement. That would be a way to introduce greater regulation, which the Executive would support in the right circumstances.
But you do not envisage any circumstances in which the Executive would consider the reregulation to which you refer?
What might be described as full reregulation is not covered by the Transport (Scotland) Act 2001. We do not currently have powers to introduce reregulation in Scotland and the Executive would not seek those powers through new legislation; it is not on the agenda. We can introduce significant improvements to bus services in Scotland without going back to the previous system, which dates back to the 1980s, of a fully regulated service that was often provided by in-house, local authority-owned businesses.
Let us move on to the general concept of the quality partnership and quality contract. One of the reasons for our inquiry was that no such partnerships or contracts have emerged. Have you been approached by any local authority with a view to developing such a partnership?
Yes, we have. I mentioned SPT and West Lothian Council. I am sure that Tom Macdonald will be pleased to give you more details. There has been a level of interest from local authorities and SPT, but as yet, none has decided to proceed with the arrangements. A quality contract is a major undertaking for a local authority because it would have the power to specify the route network, the frequency of services and the fares, and any such proposal would require Scottish ministers' approval because it would be a major intervention in the market.
Any local authority or organisation such as SPT would have to consider major issues before proceeding down that route. Once the desired network, services and fares had been specified, the local authority or organisation would be duty bound to put those services out to tender. The lowest tender or the best-value-for-money tender would be selected. That would mean that other companies would not be able to operate services in that defined area, which could have significant consequences for some of the smaller bus operators.
I do not know whether this is true because we have not been able to test the system for want of real-world examples, but it has often been said to me that, although the bus industry has generally spoken out against quality contracts, such contracts might be seen to favour the bigger bus companies because they would have the power and resources to bid for the service contracts. Once they had won a contract, the smaller operators would, in effect, be excluded, even from routes that they currently run.
The act is a powerful piece of legislation. It allows local authorities to be highly prescriptive about the bus services in their area, and it allows other operators to be excluded from providing such services once they have been tendered. Any authority would need to think seriously about the consequences of doing that. However, where market failure means that there are real problems with the effectiveness of the bus services in an area, Scottish Executive ministers have made clear their belief that quality contracts are an option that is worth considering and promoting.
It might be useful if Mr Macdonald could set out for us the contacts that the Executive has received. Why did those not firm up to become quality partnerships or quality contracts?
Tom Macdonald (Scottish Executive Enterprise, Transport and Lifelong Learning Department):
As the minister said, quality contracts come to Scottish ministers for approval, so we know whether people are making significant progress on them. In the past six months or so, we have had two discussions with West Lothian Council on quality contracts. If that council wants to take forward a quality contract, it will have to do more work by undertaking an options analysis. However, I know that West Lothian Council is thinking about a statutory quality partnership, which could be more agreeable to local bus operators than a quality contract. The ball is in West Lothian Council's court on that issue.
Strathclyde Passenger Transport has talked to us about possible quality contracts and quality partnerships. However, I see from SPT's written evidence to the committee that it is not pursuing quality contracts at the moment. I think that SPT has decided that the legislation is not working, so it will not take forward any quality contracts, but that is a matter for SPT. However, SPT has not tested the legislation to the extent of proposing a quality contract to the Executive.
I am aware of only one other discussion on quality contracts, which took place with Midlothian Council about two years ago. Again, for its own reasons, Midlothian Council decided not to take things any further.
On quality partnerships, I know that the committee has seen the booklet that was produced by the Association of Transport Co-ordinating Officers (Scotland), which shows that a good deal of activity is taking place on the non-statutory side. We would not necessarily hear about such activity because quality partnerships do not need ministerial approval.
Does the Executive not monitor quality partnerships?
We take a close interest in them. In part, the booklet was produced because we suggested that it would be a good idea to bring together information on what is happening. We know what is in the booklet and we have discussions with the various interests from time to time.
I want to pursue that issue a little bit further before I bring in other members who have questions on related issues.
When the original Transport (Scotland) Bill was introduced, Scottish ministers must have believed that evidence suggested that there was at least a possibility of market failure, otherwise they would not have introduced provision for quality contracts, which are a powerful tool. Given the evidence from the many communities that have expressed strong concerns about public transport provision in their area, does the minister accept that some areas are experiencing market failure? If so, would it not be a useful exercise to work with at least one local authority that has investigated the issue to try out the Executive's quality contract model? That would allow us to see whether quality contracts make a significant difference to bus patronage in an area, which we could compare with the situation in other areas in which services continue to operate in a completely deregulated framework.
I certainly agree that there are problems with bus services in certain parts of Scotland. Some areas have seen cutbacks in evening and weekend services and, over the past few years, rural areas have experienced particular difficulties. Therefore, I have no doubt that there are parts of Scotland in which quality contracts could be seriously considered. If there was a pilot proposal, the Executive would support it.
Ministers are prepared to approve a quality contract scheme—we promoted the legislation and we want it to be used appropriately. We are keen to make progress, but that depends on a local authority or SPT producing a definite proposal. It would be wrong of us to intervene from the centre to force a solution on a local authority area or any part of Scotland because, rightly, local bus services are controlled and operated locally and regionally.
Another interesting dimension is the proposed establishment in the Transport (Scotland) Bill of regional transport partnerships. We want more co-operation and partnership between local authorities at the regional level in working together to make strategic decisions about transport in their areas. It is possible that the regional transport partnerships will consider quality contracts as part of their new regional transport strategies and will encourage the formation of those contracts. I reassure people, particularly people in rural areas and areas that are more sparsely populated, that the regional transport partnerships are not simply about major infrastructure projects in congested areas. A regional partnership might give high priority to an improved bus network. Highlands and Islands strategic transport partnership gives high priority to an improved air network in the Highlands and Islands, but equally, it has the opportunity to consider an improved bus network. Given the figures that I mentioned earlier about the number of people who make use of different forms of public transport, many people obviously stand to benefit from an improved bus network in areas in which the existing network has problems.
The minister will probably be aware that the committee recently took evidence from London Buses and Transport for London. It seems to me that the model of organisation of bus services in London is similar to the franchise and quality control provisions in the Transport (Scotland) Act 2001.
That is right.
Might local authorities that are exploring the introduction of quality contracts take advantage of the expertise of London Buses in delivering quality contracts and operating the franchise? That might aid local authorities to design a system that not only improves the range of bus services but addresses the concern that you raised that small operators could be pushed out of the market.
I absolutely agree. We want to consider examples of best practice from other parts of the United Kingdom. Clearly, Scotland can learn from many aspects of London's transport delivery. We have examined the Welsh concessionary fares scheme—it has been influential in our thinking about and development of the proposals for the national concessionary fares scheme, which we hope to announce shortly. We are anxious to learn from other parts of the UK and from good examples elsewhere in Europe and the world. We must be prepared to be innovative and to introduce change.
One important issue that we should not duck is that of cost. If we are thinking of going down the quality contract route—which is the equivalent of the franchising route—we must also consider the cost of running services in London. I have no doubt that one reason why a number of local authorities have shied away from introducing such a scheme is that when they have started to consider the contractual side, they have realised that the cost associated with wanting to specify routes, determine timetables and set fares will be high, and probably higher than the current cost of running services.
Instinctively, many councillors want to step in whenever there is a cut in bus service provision in their area. Tendering powers exist, but local authorities have used even those powers sparingly. That is because, each time that the powers are used, an additional cost results for the local council tax payer. In considering the London system and the impact on small operators, we need to consider also the cost consequences. If the process is handled carefully, I have no doubt that there are opportunities to move forward on quality contracts in a cost-effective way that allows profits from one route to support routes that are not strictly commercial. Bundling the services in a quality contract could lead to cost-effective solutions. I would like to see successful pilot projects, as they would have the best chance of setting a precedent to influence other parts of Scotland. As we move forward, we need to look carefully at other examples.
You spoke about good partnership working in respect of quality contracts and quality partnerships. Obviously, good working practices are essential. We heard evidence from operators such as Stagecoach about good partnership working. The operators said that they do not want to see over-bureaucracy in the development of formal partnerships and contracts; they just want to get on with the job. The local authorities told us that they had good partnership working with the operators. However, what was missing from all the talk that we heard about good partnerships was any mention of the third essential partner—
The passengers.
Yes. Some people said that it was all well and good to have a concessionary bus pass, but what happens if they do not have a bus on which to use it? Surely that is where quality contracts and quality partnerships come in, as they can deliver in areas in which the market will not sustain certain routes. If there is a cost involved in that, is the Executive prepared to assist, or are you prepared to allow the costs—in terms of social inclusion—to continue to escalate?
We are significantly increasing our investment in the bus sector, primarily through the concessionary fares scheme. The new national concessionary fares scheme will be a significant improvement on the national minimum standard for concessionary travel in local scheme areas.
As I mentioned earlier, the associated costs are around £100 million a year, although that figure also includes funding for concessionary fares for young people. We are investing a lot more in the bus sector and we believe that that will benefit bus users who are disabled, elderly or young and strengthen the bus network across Scotland.
The question is: can we do more, and how much more can we invest? The signal that I want to give today is that the Executive is prepared to look at pilot projects. We have to be realistic in our ambitions. If we were to go down the franchising route—the quality contract route—a huge amount more could be spent on the bus network in Scotland. In the long term, however, that would not be sustainable. We have to look at increasing our commitment to bus travel and investment in public transport in a way that is deliverable and achievable.
As the committee knows, we will talk about our expanding transport budget later this afternoon. It would be misleading to suggest that all the extra investment can be focused on quality contracts. Although we could easily specify a higher level of bus provision and tender for new routes, more frequent services and lower fares, it would be expensive to do so. Reasonable and appropriate pilot projects will enable us to learn about the sort of project that we could sensibly introduce across parts of Scotland over the next decade or so.
The inherent danger is that if it is up to bus operators to maintain good partnerships with local authorities, socially excluded communities on what were described as needy routes will always be left to wither on the vine. What can we do? If the cost of implementing quality contracts and the bureaucracy involved in operating not only quality contracts but partnerships discourages the operators from operating on less profitable routes, surely there is a role for the Scottish Executive to fill the gap. Can you signal a commitment to examine filling that gap?
The concern has been expressed to us in evidence that the big operators will continue to cherry pick. They believe that they are best at running the profitable and commercially viable routes and that the slack has to be picked up elsewhere. We even had the example of Lothian Buses, which contributes money to four local authorities, describing itself as being forced to provide services on needy routes when it came close to an election. Surely we cannot have a situation in which an operator operating on behalf of local authorities that set up contracts with the private sector allows local communities to be left isolated and without the services that people need to get to their jobs. As it stands, the system allows people to be left in that situation. Is the Scottish Executive going to commit to addressing that issue in the budget?
I have two points. First, we are determined to see better bus services in Scotland. If there is market failure or evidence of bus operators behaving in the way that you describe, we are prepared to take action. On quality partnerships and quality contracts, the powers under the 2001 act are important. We do not have examples of the implementation of contracts, but they have had an influence already in encouraging operators to make informal partnership arrangements with local authorities. If we encounter further examples of the situations that you describe, we will be willing to support local authorities that wish to respond with quality contracts. There is no doubt about that.
The bus industry and private sector operators face the challenge of responding to the growing demand throughout Scotland for better public transport and more and improved services. It is fortunate that some routes into the most deprived parts of urban Scotland are well served by the bus given the low number of car owners in some of those areas. We have to remember how crucial the bus can be, not only in our cities but in some rural areas. It is often said how important the car is in rural areas, but a large number of people in rural areas do not have access to a private motor car and depend on the bus. We have to be prepared to take action.
Secondly, we have our bus route development fund, which will be new investment. We want to kick-start new services and see improvements in the frequency of existing services. We want to encourage a quicker market response to changing local circumstances. Bus networks can often be slow to change, despite different travel-to-work patterns, new industrial estates and new housing developments. We want to encourage faster change. I will ask Tom Macdonald to detail the funding for the bus route development fund, but we have asked local authorities to come forward with proposals and soon we will be in a position to announce the first tranche of new bus route improvements. That is the second aspect where there will be new investment. Tom will give more of the detail.
The bus route development scheme is a new scheme that was introduced by circular earlier this year. As the minister says, the scheme is about kick-starting new routes or routes that are not necessarily doing very well. We will spend some money on the routes over a three-year period, following which it is intended that those routes will become self-financing or that local authorities will accept them as tender services if they wish. We have £22.5 million or thereabouts to spend over the next three years and the successful schemes will run for three years.
We invited all transport authorities to submit bids and received bids from all but two, and we are very close to announcing which schemes will go ahead. It is a new initiative, with new money that is in addition to the funding that the Executive already plays a part in providing through the bus service operator grant and money spent through the local government settlement grant and supported services.
I hope, minister, that you have the opportunity to read at least some of the evidence that we have received in relation to our inquiry. In both Stranraer and Glasgow, we received powerful evidence that bus services are not meeting anything like the expectations or demand that exist. The example that Michael McMahon gave of the failure of the market-led strategy to meet need was repeated several times in Strathclyde Passenger Transport's evidence in relation to a number of routes that have been either withdrawn or changed once they became profitable, with weekend or night services being removed. Services are being cherry picked, leaving many people without a service. You seem to be telling us that you do not support a reregulation of the bus industry, nor do you support the local authority municipal bus ownership model of Lothian Buses. Does that accurately reflect your opinion?
Lothian Buses is a very good operator. However, over the past 10 to 15 years, most local authorities have decided to move away from that model. I would not force any local authority to return to that model and seek to take over bus services in their areas.
I very much support Lothian Buses. Looking out the window towards Our Dynamic Earth, I am reminded that I was recently involved in a launch of new vehicles by Lothian Buses, with which I have a very good relationship. I hope that Lothian Buses continues to invest in new vehicles and to maintain its high-quality network in Edinburgh.
As was mentioned earlier, criticisms still arise over the frequency of Lothian Buses' services or over the availability of its services in the evenings and at the weekend. It is a question of judgment how much public money should go into supporting such services. The possible routes lie in tendering, quality partnerships, quality contracts or our new initiative, the bus route development fund. If we want significant increases in the frequency of services, expansions in route networks or significant reductions in fares to help to stimulate demand, we must be conscious that that will have significant consequences for public investment.
We are investing around £100 million a year more in concessionary fares and more than £20 million in the bus route development fund over three years. If we are going to go down the quality contract route, we have to be aware of the consequences and costs. The best way to achieve quality contracts is to learn lessons from the franchising experience in London and to have a small number of pilot schemes in Scotland. I would like to encourage that over the next few years. It would be wrong to raise expectations if people do not have the ability to deliver because of a lack of Government resources. We have to respond to demands sensibly, through knowing what the costs will be.
You talked about being willing to learn from the example of London, and you have mentioned good examples elsewhere in the United Kingdom, Europe and the rest of the world. We have heard evidence to the effect that Lothian Buses is one of the good examples, with the lowest fares, the largest number of routes, the most buses, the best employee conditions and an ability regularly to generate in excess of £1 million per year to be reinvested in the service. However, you are not prepared to recommend that model as one for the rest of Scotland. Why would you not recommend that good, Scottish example in tackling the problems that exist in other parts of Scotland?
I am not denying that Lothian Buses is a good example of an effective, profitable bus company that is still publicly owned. However, I would have an equally strong opinion about some council or publicly owned bus companies that 20 years ago were not delivering a good-quality service, whose working conditions were not outstanding and whose profitability was non-existent. Those companies were a significant drain on council tax payers, or rate payers as they were at the time. The industry was in decline, passenger numbers were contracting and the quality of service was often lacking. I do not think that passengers benefited from that sort of approach. It is not as simple as turning back the clock, and I would be surprised if many local authorities wanted to do that and form new bus operating companies. Edinburgh is different because the scale of the network and the number of passengers create a critical mass and allow the company to deliver a quality service. I am not convinced that in other parts of Scotland local authorities would have the desire or the ability to create local companies like Lothian Buses.
But you would not be against the idea if it was recommended.
The SPT approach is quite regulated. It has traditionally had stronger regional public transport powers than operators in other parts of Scotland and I have made it clear that I want that model to continue through the new regional transport partnership.
SPT gave evidence that it wanted the bus industry to be reregulated.
SPT has powers to reregulate significantly the bus market through quality contracts and the franchising approach. I would be interested to know what new statutory powers SPT thinks are necessary; no doubt, that will be part of the committee's recommendations. However, in introducing greater regulation, local authorities and organisations such as SPT have to address how to fund improvements. It would be wrong to suggest that in every part of the country there is the volume of passengers necessary to deliver improvements in a cost-neutral way. In many parts of the country, delivering improvements will require a significant injection of extra resources. In SPT's case, that would be a call on the member local authorities.
In your evidence, you said that you do not have the power to reregulate bus services. Will you clarify that, because I believe that you have that power?
Tom Macdonald will address the question of our legislative power to introduce new regulation, whether under the 2001 act or more widely. He might also touch on the establishment of new local authority bus companies, because he has just passed me a note about that. It would be useful if he explained the situation.
The Executive does not have the power under the 2001 act to reregulate the bus industry in two senses. First, a proposal must stem from a local transport authority. Secondly, quality contracts are about market failure and the introduction of quality contracts in the whole of Scotland would require us to show market failure throughout the country. We need to improve bus services significantly to make the game happen under current legislation. As for the member's second point, on which I passed the minister a note, I suspect that there is no legislation that would allow a local authority to establish its own bus operating company, but I need to check that.
After further investigation, we will write to the committee about that.
I would appreciate that clarification.
We have heard nice warm words about the process, but there are hard numbers and bottom lines that I would like to reach. We all accept that a cost may be attached to franchising or quality contracts—that is the reality. However, as part of the bus network agenda, all committee members are keen for there to be considerable modal shift and for greater social inclusion, as Michael McMahon said.
We heard evidence from London Buses that its running costs are about £1.3 billion. London covers a fair chunk of that—about £800 million—but it also receives about £500 million in Government grant. I know that London and Scotland are not directly comparable, but we can compare the scale of resource there and here. Only about a tenth of what London receives—£54 million, according to the budget for 2002-03—has been available in Scotland. Even in 2007-08, the figure will be only £276 million, which is just over half what London receives. The bottom line is the lever of resources to make things happen.
I emphasise that I realise that a strict comparison cannot be made, but London receives considerable extra resources through a Government grant to make its bus service work, to provide modal shift and to meet the social inclusion agenda that the mayor of London thinks is appropriate. Do you recognise that and might additional resources be required to attain some of the achievements that the Executive wants?
Big chunks of Scotland are experiencing market failure. I do not know about the areas in which other members live, but Sylvia Jackson and I have been lobbied by people about a rural service between the Gartmore area of Stirlingshire and Edinburgh that has collapsed. I could talk about more failures: bus companies are withdrawing small local services, and to me that feels like market failure.
You describe what we have said as "warm words", but the increase to which you referred—from £54 million to £276 million—is significant.
I clarify that the figure is £176 million.
I apologise.
That is the total of the sums for bus services and concessionary fares.
Of that, £113 million is for concessionary fares.
However we add the figures together, the transport budget will experience significant increases and the bus sector will receive a significant proportion of those increases.
We are investing a great deal more in buses and concessionary fares and we expect significant improvements in bus services as a result. If any individual, MSP or political party wants to go beyond that reallocation of resources, they are fully entitled to disagree with those proposals and to come forward with their own budget and their own priorities. However, that would have a direct impact on other priorities, both in transport and more widely in other areas of Scottish Executive expenditure such as health, education and housing. Alternatively, one would be faced with having to raise additional taxation to fund those improvements. As with all aspects of politics, this is an issue of judgment and balance. We are making significant improvements to public transport in Scotland. We are investing in new rail schemes and new tram schemes and in significant bus improvements. The bus route development fund is a new initiative and the expansion of the concessionary fares scheme means that we will have a national scheme for the first time.
I want to be ambitious for the future and to ensure that we deliver significant improvements to public transport in Scotland, but we have to be realistic about what can be achieved. That is why the sensible approach is to pilot quality contracts. As Tom Macdonald said, one of the legal criteria that quality contracts must meet is that of demonstrating market failure. In some parts of Scotland we could demonstrate market failure and introduce appropriate quality contracts; however, we need to do that with our eyes wide open, and we need to know all of the consequences, including the potential impact on smaller operators. I am not arguing against members' suggestions; I am just trying to deliver what is sensible and achievable, while being aware of the costs and the full consequences of any policy decisions that we may make.
John Ewing (Scottish Executive Enterprise, Transport and Lifelong Learning Department):
The other point, again going back to what Tom Macdonald has said, is that we are very dependent on the local transport authority assessing whether the degree of market failure and the lack of services require it to intervene. At that point, as the minister has said, the Scottish Executive can work in partnership with the local transport authority. However, the local transport authority is critical, as it is the body on the ground that has regard to local needs and is able to make that assessment.
Should we not expect the bus industry sometimes to pick up the tab for market failure? We seem to be saying to the bus industry, "We are quite happy for you to cherry pick the routes and get involved in the profitable ones." However, in the same way as we deal with other industries, should we not at the same time expect the bus industry to pick up those routes that may not make the same profit? We seem to be saying to the bus industry, "Look at the most profitable routes," but we do not expect them to take the bad with the good when things get difficult. Is that fair? We are talking not about charities but about private limited companies that make significant profits. Should they not be recycling those profits, putting them back into the unprofitable routes and delivering a service at the same time?
I have a lot of sympathy with that view. In Scotland's cities, there are often good routes into the city centre, but poor orbital, connecting routes. I have often encouraged bus companies to deliver connecting routes as an improvement to the bus network in their area. There are competition rules about cross-subsidy and about the circumstances in which bus companies can do what Paul Martin suggests. I do not know whether Tom Macdonald can provide us with any more detail on that, but it is an issue that should be on the agenda when we are discussing our investment in the bus route development fund. When we are trying to encourage improvements to the route network in Scotland, we should be describing the sort of improvements that we want. It would be inappropriate for me to get involved in too much of the detailed planning, but part of my responsibility—within the terms of the competition legislation and the European Union rules that apply to this area—is to make the points that Paul Martin is making and to encourage a positive response from bus operators.
I do not think that there is any problem with a bus operator running a network in which there is some cross-subsidy among routes. The problem would arise if its actions were regarded as anti-competitive behaviour—that is, if it sought to keep somebody else out of the market. Companies already run a network that makes different contributions depending on the routes and the times of day.
But we are actually keeping the customer out of the network. We are saying that we are quite happy for the companies to run profitable routes, but where they do not want to run routes the customer is left out of the network. Can the minister give a commitment that he will interrogate the current legislation and perhaps make representations about the competition issue? The competition rules seem to suit certain operators, but they do not suit the passenger. The passenger can be left out a result of the operator saying, "I'm afraid this is an anti-competitive situation, so we don't want to get involved in this route," although the route in question might serve a hospital, for example.
I undertake to do that. I strongly agree that bus operators should provide a service rather than a network. Over the past couple of decades, all other industries have had to learn the lesson that customers—such as passengers—want improvement to services. An operator that operates a fixed network because it has always been there and which tries to improve profitability by chopping off bits of that network is taking a short-sighted approach. Bus operators must be prepared to reconfigure the network to reflect people's different demands for work and leisure. As Tom Macdonald said, they must be prepared to put in place a full network that offers a service to passengers without always looking at the bottom line for a specific individual route.
I quite like what Tom Macdonald said about the network, as at least that allows one to get an idea of the coverage in an area. It is clear, from the evidence that we have received, that there is inadequate coverage in certain areas. You said that you want to see that better. How will you ensure that the situation is better monitored in future? You mentioned the regional transport partnerships. Might they have a role in that? How can we make the position better than it is at the moment?
I very much agree that good-quality information and early feedback about what is happening with bus services are very important. The main responsibility for those rests with local authorities and it will be for them to decide whether, in establishing the new regional transport partnerships, they want to pass across some of their powers and responsibilities to the regional level. That could be effective. For example, SPT works well in the west of Scotland. Some pooling of those powers and responsibilities might be a good solution for the future, although perhaps the City of Edinburgh Council would be loth to do that. I realise that several local authorities are involved in services that run into or near to Edinburgh, and there would perhaps be reluctance to do that there.
Nevertheless, I would welcome local authorities working together through regional partnerships on the issue. It would certainly make for a quicker and more direct route of communication with the Executive if we got good-quality, early information about developments in the bus industry from the five proposed new regional transport partnerships. That would be better than our having to depend on getting the information—sometimes of variable quality and communicated at various speeds—from the 32 local authorities.
I will deal with disabilities. We have heard quite a lot of evidence from witnesses that the information coming from bus companies on low-floor buses and so on is not helpful. Do you have ideas about how we can get better information out to people? The lack of information seems to be preventing some people from using buses.
I am anxious to see improvements in the quality of bus vehicles throughout Scotland. There are requirements on bus operators relating to the introduction of new vehicles. By certain target dates vehicles must be disabled accessible. I do not know whether Tom Macdonald has the detail of some of those targets in front of him. One of the main initiatives in which local authorities, the existing voluntary regional partnerships and bus operators have been involved is about trying to fund the introduction of new low-floor vehicles for both the ordinary local bus services and the new demand-responsive transport services such as dial-a-bus and dial-a-ride, which we are keen to introduce. We are making progress. The nature and quality of buses on our roads have improved significantly over the past 10 to 15 years.
I understand the point about disability. Some bus companies are further ahead than others. The bus company that serves most of the market in Dundee has close to 100 per cent accessibility. The rules on accessibility, which are reserved to Westminster, are that all single-deck buses weighing 7.5 tonnes or less must be fully accessible by 1 January 2015; all single-deck buses weighing more than 7.5 tonnes must be fully accessible by 1 January 2016; all double-deck buses must be fully accessible by 1 January 2017; and all single and double-deck coaches must be fully accessible by 1 January 2020. The effect of the first tier is that if someone wishes to buy a new bus these days, they will buy a low-floor bus. Before long, if someone wishes to buy a new coach, they will have to buy one that is accessible. The process is slow, but we are getting there over time.
There is no doubt that that is happening. We heard good stories about fleets being completely modernised, but the point is how in the intervening time we get more information to people with disabilities about which buses are available on which routes. I accept that part of the issue is Westminster's responsibility, but how might the Executive try to work with the ministers at Westminster to get that information out to people so that they are more aware of what is happening?
Providing information is certainly the responsibility of the Scottish Executive, local authorities and the bus operators—in fact it is primarily the responsibility of the bus operators. Providing good-quality information will improve the demand for the services. There is nothing more frustrating than a particular route having low-floor buses operate on it most of the time; most of the time is not good enough in ensuring reliability and security for disabled people who make the sometimes difficult journey from their front door to the bus stop and need to be certain that the bus will be a low-floor bus. We need to impress upon operators the importance of ensuring that a full service is provided that is disabled accessible and that information on it is made widely available.
We are trying to improve our traveline and transport direct public transport information services. We are getting good support from the bus operators in relation to those services, but there is no doubt that ensuring that information is accessible by telephone and on the internet and that it is better quality is a challenge for us over the next few years. It is incredible that public transport information is so much in its infancy. This is an area in which the passenger has again been let down. Traditionally, it has been very difficult for people to understand bus networks and to get easy information about the frequency of services. It has been virtually impossible to get information in a simple, straightforward way about whether those services are disabled accessible. We need to change that. We need to change the attitude towards the passenger and to ensure that all passengers are able to get good-quality information.
As members know, ministers have set up the Mobility and Access Committee for Scotland to give advice. I believe that MACS has given evidence to the committee. MACS is interested in developing guidance for bus operators and working with traveline Scotland and transport direct to improve the quality of information.
That is fine.
Training of bus company staff is also very important in this regard.
Absolutely.
The other question that I would like to ask is about bus-related projects. Local authorities and operators are concerned about long-term funding streams for bus service development. Can you comment on that issue? A general point has been made about short-term funding. Do you have any further ideas on that?
We are providing funding for new park-and-ride initiatives, bus priority measures and bus lane-type initiatives. Many of those are capital projects. Once a greenway system is delivered, it important to ensure that the route remains green. That requires investment over time. The signing of the route must remain fresh and the route must remain high profile. There is no doubt that if we want to foster a public transport culture and to encourage more passengers to use the bus, creating a high-quality presence along a route, with good-quality bus shelters and passenger information, is very important. The same is true of park-and-ride facilities. If people park their car, they expect a certain quality and standard of facility at the park-and-ride location. All of that requires on-going investment.
The Scottish Executive has contributed a substantial amount to a significant number of projects. I would like more of them to happen more quickly. They often run into planning difficulties and difficulties across local authority borders. I hope that the regional transport partnerships will be able to take a higher profile on these issues, to drive them forward and to inject new momentum into bus priority measures. That will be important in the future.
Sometimes we can provide only limited funding and on-going subsidy. Tom Macdonald mentioned the bus route development fund of £22.5 million. We intend that projects should achieve viability over three years. If the Scottish Executive were to provide on-going subsidy for services, without going through the normal tendering or quality contract procedures, we could be in difficulty with EU legislation on state aid. We want to kick-start services and to inject funding into them over a limited period. Longer-term funding raises the quality contract and tendering issues that we discussed earlier.
I know that people have told the committee that quality contracts would be for seven years, a period that extends well beyond the annual budget cycle and the spending review period. However, there are precedents for funding over that length of time. A seven-year funding cycle would not be the key issue when we came to decide on a quality contract.
We are about to discuss rail, where we have let and franchised contracts that will run for seven years, with a possible extension to 10. If that makes sense to deal with market failure or if public intervention is needed, it can be handled within the annual budget cycle.
You raise the issues of viability and subsidy and say that long-term funding would not be needed. The witness that we had from Transport for London emphasised the point that the quality assurance, evaluation and continuous monitoring that will be needed will be important aspects of future development. Do you think that that is correct?
If we are planning to invest more public money in the bus industry—which we are—we need to encourage and see the same sort of improvements in the bus industry as with the rail franchise, under which we expect improvements in quality and standards, not simply in reliability and keeping to the timetable, but also on softer issues, such as cleanliness and the availability of toilets and catering facilities on trains.
You are right that we do not have a heavy-handed inspection regime for the bus industry. It is not an area for which the Scottish Executive currently employs staff, because we have a devolved approach and try to encourage local authorities and the SPT in the west of Scotland to take the lead on such issues. I do not envisage our taking on or centralising those responsibilities, but we will create an environment and a structure that enable us to deliver such quality improvements and ensure that bus operators take the issues ever more seriously.
That is the sort of system that I want to encourage. Some of it will be about training and some will be about Government-supported investment in new vehicles, park-and-ride facilities and bus priority measures, but the significant amount of the responsibility must rest with the local authorities and the bus operators. It makes good business sense to deliver higher quality to respond to ever higher passenger expectations. That is how we will get a modal shift and encourage people to get out of their cars and make greater use of public transport, such as our buses.
You have answered the final question that I was going to ask, which was about standards.
I encourage members to be as concise as possible, because we still have to take evidence from the minister on two other subjects and I want to protect our time to some degree.
What are your views, minister, on how effective the Bus User Complaints Tribunal has been since its birth following the 2001 act?
It is another new initiative, so it is another example of an improvement in the bus industry. I know a number of people who have taken their complaints to the tribunal, and some of them have felt satisfied by the outcome but some of them have been frustrated that the tribunal does not have more significant powers. The tribunal has made a strong case to me that its powers should extend to coach services—that is, longer-distance services—as well as local bus services, so I am certain that there are ways in which its working could be improved.
Public awareness of the tribunal could also be improved.
Indeed. That is another issue on which the tribunal wants to mount a greater awareness campaign, but it is a new tribunal and it had to walk before it could run—it had to develop its ability to handle a larger volume of cases—and I am sure that there will be expansion and improvement over time. The tribunal is a worthwhile initiative and all the proposals that I would like to make for it would be to improve it rather than cut back its powers or limit its development.
I am glad that you told us that you are considering the Welsh model for concessionary fares, because we were told that it was a good model. We will see what comes from that consideration, but we heard from many of the bus operators to whom we talked that they did not get full reimbursement of costs.
What is your view on those comments, which came from almost all the bus operators, and what is your rationale for not providing full reimbursement, particularly in light of the future additional money for concessionary fares? I acknowledge that that money is going in, although if we do not include concessionary fares, there will be a real-terms decrease in the amount going to bus services. That makes the additional money going into concessionary fares even more important.
Given that increased capacity will be produced as a result of the concessionary fares scheme, how might you lever out of the bus companies additional benefits to the overall bus network, increased capacity and improved networks? If that money is going in and is increasing capacity and so on, there is value in it for the companies.
A small point was referred to with regard to ferries. There is not much point in having a concessionary fare on a bus if the scheme does not follow through when a passenger gets on a ferry at the other end of the journey. Would you like to reflect on that issue?
I will address the last issue first. I am currently considering that matter and I intend to reflect that consideration in the announcement that we will make in due course on concessionary fares. It is clear that if someone lives on an island, the national scheme is not much of a national scheme if the only services that they can access are the current services on the island. We must consider a fair approach to that.
On your earlier question about the Welsh model and the nature of the scheme, I could give you answers based on the existing scheme, but it does not provide the level of provision that ministers now want to deliver. We want to go beyond that scheme and we will soon announce a new one. We are in good shape to deliver on that within the timescale that is set out within the partnership agreement.
The current scheme has worked effectively, despite some concerns about how we would be able to deliver it and fund it. You mentioned the concerns of the operators and local authorities also had concerns. We have made the system work across the 16 different local and regional schemes that exist in Scotland. Agreements have been struck locally; the Scottish Executive was not party to the tough negotiations. If some bus operators think that they are not making the returns that they should have achieved on the scheme, it is hardly for me to suggest that the local authorities should have been more generous in their negotiations. The deals have been struck and, on balance, I think that fair deals have been struck across Scotland.
Obviously, as SPT covers a larger area, it has a bigger scheme. The scheme is one of the benefits of living in the west of Scotland and it is one of the issues that people who do not live in the west of Scotland write to me to complain about. That scheme has tended to be more expensive, so there have been additional costs in the system there. Some other parts of Scotland have had additional costs. When they have been able to give evidence of those costs, we have funded them to the tune of around £10 million or so—in fact, Tom Macdonald advises me that it is about £20 million. We have been willing to fund substantial additional costs to keep our part of the scheme.
All of that will now move forward to the new scheme, which I think will be significantly better. The new scheme will be supported by the bus operators. We have been in negotiations with the Confederation of Passenger Transport UK and the major bus operators and there will certainly be benefits for other aspects of the network. We want to lever as much value as we can out of the new scheme. The operators and the Executive will both say that the scheme will lead to improvements in bus services throughout Scotland. I hope that those will be improvements to the quality not only of vehicles, routes and networks but of the technology that is used on buses. If we are to invest £100 million per year in a new concessionary fares scheme, it would be unfortunate if we could not encourage a smart-card initiative on buses and start to roll out new equipment that uses smart-card technology. We should consider approaches that might lead to innovative ways of ticketing and better integrated ticketing between bus operators and between modes of public transport. Such initiatives would be of real benefit to passengers in Scotland.
I am glad that you hope to lever extra benefits for the network, for example through additional capacity, but will such benefits be quantifiable? I am sure that the committee will want to revisit the matter and consider how progress will be monitored and what targets will be set. It would be useful if you could come back to the committee to quantify not just the impact of concessionary fares but the additional benefits that accrue to the network through additional capacity.
I undertake to do that. We are in complete agreement with you. We want to be able to quantify the benefits and report on them to the committee and to passengers throughout Scotland. We also want to ensure that we get good value for money, which is one of the reasons why we insisted this year that local authorities should be willing to run mystery-passenger schemes, whereby people board buses to test the system and ensure that they are charged only for the route that they travel.
We want to ensure that there is no leakage of public sector investment and we are determined to achieve good value for money from all bus operators in Scotland. We also want a close partnership with bus operators to ensure that we monitor the scheme's success. The Welsh scheme has been very successful and when our scheme is established I hope that Scotland will be regarded as a part of Europe that runs a successful free bus travel scheme for elderly and disabled people. I hope that we will give presentations and explain the scheme's benefits to other parts of the UK. Targets and monitoring will be an important part of what I hope to announce in due course.
It is fair to say that there is broad support across the political spectrum for a concessionary fares scheme of some description. However, given that we would all like the direction of transport policy to be clear, I want to demist the windscreen of Government policy by asking about the Executive's aim. Does the Executive want to deliver free bus travel for senior citizens and disabled people on all routes all the time; on some routes some of the time; on all routes some of the time; or on some routes all the time—or none of the above?
A multiple choice question is a new experience for me in giving evidence to the Local Government and Transport Committee.
You are not allowed to phone a friend.
Our partnership agreement commitment is to deliver free off-peak bus travel throughout Scotland for elderly and disabled people. Any announcements beyond that, which would be based on our discussions with the bus industry, must wait until we can make the final proposals public.
That is bad news for senior citizens and people with disabilities who want to travel at peak times.
I am not sure whether we have had a real opportunity to consider the thinking behind the concessionary scheme. One witness agreed with me that, if we are moving towards a concessionary scheme, for which there is indubitably cross-party support, it would be sensible to have a scheme that applies not to a unimodal method of transport, that is buses, but to omnimodal—if that is a word—methods: buses, trains and ferries.
Even if that meant that instead of travel being provided free of charge for certain categories, it would be provided at half price, there would be a number of benefits. In particular, there would not be an in-built disincentive for those who are entitled to free travel to leave the train behind. Buses for free and trains at full fare seems to me to be a recipe to keep people on the roads and to take people off the trains for the foreseeable future, which I know is not the minister's intention. Has the Executive considered that? Does it think that that option should be put to the Parliament at some stage before we decide on a policy?
Obviously, a number of discounted fares for the elderly and disabled are available on ferries and trains. What we are talking about is Executive-funded schemes. I have no doubt that there will be pressure for an expansion of the scheme that we are introducing for buses and strong arguments will be made in favour of extending the scheme to trains, ferries and trams—when we have trams on the streets of Edinburgh—but that is for the future. My priority is to deliver on the two partnership agreement commitments on the free national off-peak bus scheme and the concessionary scheme for young people. Those are big commitments; they will be costly and they have been difficult enough to negotiate with the industry. The scheme for young people will extend to trains and ferries. As we move forward, I will be pleased to have the argument about which scheme should apply to which category of individual, such as the elderly, the disabled or the young, but for the moment the policy is clear. The schemes are set out in the partnership agreement and my priority is to get on and deliver them effectively.
I am sure that we will be able to get into that debate in more detail during the passage of the Transport (Scotland) Bill.
I have two quick questions for you, minister. Given your comments on your study of the Welsh concessionary scheme and your desire to go better than what we have had up to now, do you agree that we would be unambitious if we did not match the Welsh scheme in relation to time restrictions? As you know, the Welsh scheme is not time restricted. Do you agree that we would show a lack of ambition if we were not prepared to match that concessionary scheme?
All that I can say to Tommy Sheridan is that I am always determined to be ambitious for transport in Scotland, but he will have to wait for the announcement on the concessionary fares proposals before he sees the full details of the scheme. I am confident that the scheme will be good and that it will deliver on the partnership agreement commitments that we made in relation to concessionary travel.
I am perhaps encouraged by that. I hope that the minister will be more ambitious than he has appeared to be up to now. I am tempted to ask when he will make the announcement, because he mentioned it several times.
My final question is whether the minister is worried that there will be a skewing of finance. A significant amount is going into the concessionary scheme, but there is a real-terms cut in bus services. Will we in Scotland end up in a situation in which concessions are available but there are no buses for people to use them on?
I do not envisage those circumstances ever arising in Scotland. The bus has a growing role to play in Scottish public transport. Bus services have sometimes been the Cinderella of public transport services in Scotland and I am determined that that should change. Passenger numbers are growing, investment is being made in new, disabled-accessible, low-floor vehicles and there are new park-and-ride initiatives, new bus lanes and new bus priority measures. All that must be positive news for the future of bus services in Scotland.
I am prepared to consider statutory measures to tackle the problems that there have been in rural areas and with evening and weekend services, but I am also determined to deliver improvements through partnership with the bus industry and with local authorities. I believe that the new concessionary travel scheme will be an excellent example of that.
Can you advise us who is primarily accountable to the voting public on the plans to have trams in Edinburgh—I believe that three lines have been proposed—given that the Executive has committed to contributing £370 million of the cost? Those proposals are causing concern to some people who support the principle of trams but who are worried that burgeoning costs could result in a mini-Holyrood situation. Will the Scottish Executive, Transport Initiatives Edinburgh Ltd or the City of Edinburgh Council be primarily responsible? If the council is to be primarily responsible, will the executive, the officials or the councillors be accountable? There is a sense that no one has a grip on the project at the moment. That is the impression of some people who have expressed concerns to me over the past few days.
It is unfortunate if that is the case. I am anxious to reassure Fergus Ewing that, as a sponsor of the project, we have lodged bills on two of the tramlines, so it will be for the Parliament to scrutinise the proposals for those lines. The Parliament will have to reach a view on value for money, the deliverability of the proposals and the transport benefits that they would bring.
The Executive has indicated that, in principle, it is willing to invest a significant amount of public resources in the tramlines. We will continue to examine the business case and the value-for-money aspect as the project develops, but we think that significant transport benefits will arise from the introduction of the right tram schemes in Edinburgh. As I think the convener mentioned, there will be ample opportunity to return to the issue as the tramline proposals progress. They will receive close parliamentary scrutiny, because the Parliament has the ultimate decision on whether the public transport projects in question go ahead; that will not be down to Scottish ministers.
That brings us to the end of the first of the three parts of the meeting involving the minister. Although we have overrun considerably, I think that we have had a useful and informative question-and-answer session, for which I thank the minister. Minister, do you want to move straight into the next part of the meeting or would you prefer a short break?
A short break would be helpful, because I have been paged a couple of times, but I have no idea what the pager messages say.
We will adjourn for three or four minutes.
That would be helpful—thank you.
Meeting suspended.
On resuming—