Infrastructure and Capital Investment Committee

Meeting date: Wednesday, March 20, 2013

Official Report 586KB pdf

---

Subordinate Legislation

---

National Bus Travel Concession Scheme for Older and Disabled Persons (Scotland) Amendment Order 2013 [Draft]

Good morning, everyone. Welcome to the eighth meeting in 2013 of the Infrastructure and Capital Investment Committee. I remind everyone to switch off mobile phones and BlackBerrys, as they affect the broadcasting system.

Agenda item 1 is subordinate legislation. We will hear evidence from the Minister for Transport and Veterans on the draft National Bus Travel Concession Scheme for Older and Disabled Persons (Scotland) Amendment Order 2013. I welcome Keith Brown and his officials, who are Tom Davy, who is team leader for bus and local transport policy, and Gordon Hanning, who is head of the concessionary travel and integrated ticketing unit.

The order has been laid under affirmative procedure, which means that Parliament must approve it before its provisions can come into force. Following the evidence session, the committee will be invited to consider a motion to approve the instrument, under agenda item 2.

Minister, I invite you to make some opening remarks.

Thank you for the invitation to discuss the draft National Bus Travel Concession Scheme for Older and Disabled Persons (Scotland) Amendment Order 2013. The order sets out the reimbursement rate and capped level of funding for the Scottish national concessionary travel scheme in 2013-14 and 2014-15.

For my part, I am pleased that we have reached agreement with the bus sector on reimbursement arrangements for the next two years. The agreement is based on detailed independent economic research that was commissioned by the Scottish Government. The research, which was extensively discussed with the Confederation of Passenger Transport and its consultants, gives us a very good basis for informed decisions.

The research suggested that the reimbursement rates for 2013-14 and 2014-15 should be 58.6 per cent and 58.1 per cent, respectively, of the average adult single fare. That is the level at which we would most precisely meet the legal requirement to ensure that bus operators are no better and no worse off as a result of participating in the scheme. That is a fundamental principle, to which we must adhere.

We recognise that, nonetheless, that is a significant reduction from the current reimbursement rate of 67 per cent. To avoid destabilising the sector, we are managing the transition over more than one financial year. This year, we have provided an additional £10 million of transitional relief. Next year, we are setting the reimbursement rate at 60 per cent rather than at 58.6 per cent. In 2014-15, we will have the full reduction to 58.1 per cent in place. We expect the rate for next year to be affordable within the current £187 million budget. However, we have recognised that the 2014-15 rate will imply an increase in budget of £5 million on top of the existing £187 million.

For my part, I am committed to continuing to work with the bus sector on an economic model that is based on economic analysis that can be used in future years to simplify reimbursement rate and budget calculations. That will reduce uncertainty for all parties. In all this, I have been keen to ensure that we have a fair deal by phasing in the changes and by providing extra funding to ensure that the scheme remains sustainable for operators and taxpayers and continues to bring all the benefits of free travel to our over-60s and to people with disabilities.

You said that you have the agreement of the bus service operators—or, at least, of the Confederation of Passenger Transport, which represents them. However, several operators seem to be not content with the proposed reduction, which they say will cause fares to go up. In a letter to The Herald, Ralph Roberts of McGill’s Bus Service Ltd warned that the proposed reduction would lead to service cuts, which we already seem to be seeing in some parts of the country. On Saturday, a constituent tweeted me a photograph of a poster on a Stagecoach bus that says that fares will go up on 1 April, which Stagecoach blames on “reduced government investment” in buses. How much discussion has there been with the confederation about the consequences for other bus users of the cut in support for the concessionary bus scheme?

I am not aware that anyone within Parliament has advocated that we should spend more than we currently spend on the scheme. Certainly, that did not come up during the budget discussions.

We have had a substantial number of discussions with CPT over a prolonged period. As I said in my statement, we are making the changes on the basis of independent research, which we discussed with CPT and its consultants and on which there is a level of agreement. It will always be the case that bus operators would like to have more, but I think that they recognised in the discussions that the Scottish Government has sustained our investment in buses, whereas that investment has been substantially reduced in many other parts of the UK.

In our view, the proposal is a fair settlement under the scheme, which is designed to ensure that operators are no better off and no worse off. I maintain that that is what will happen as a result of our decisions, which are based on economic research about the right level of reimbursement. However, we have gone beyond that by providing for a higher level in the first year, for which we introduced £10 million of transitional support. That was welcomed by one of the operators that has been mentioned. Our proposal is a fair settlement that should not offend the principles of the scheme, which was set up to ensure that operators are no better off and no worse off. We agree that that is what the proposed change will do.

We have not just insisted on the proposed change; we have discussed it at length, and not just with the CPT. Because about 20 per cent of bus services are provided by smaller operators, we had for the first time substantial discussions with the smaller operators, as well. I think that we have reached the right decision on the right basis.

I may just be a bit stupid, but I cannot understand how, when bus operators are getting less money per passenger, people will not be worse off. I do not understand that argument.

What was the scope of the review that was carried out? Did the consultants look just at the repayment per passenger? Was that the entire scope of the review, or did it look further than that, at other issues?

That was the basis of the decision on the rate of reimbursement, which is the key decision that must be taken.

Dr Murray says that she does not understand. It is quite difficult to go into the detail of the process, so one of my officials can talk about the economic modelling and can say more about the scope of the review and how it was carried out. Where we have to end up is that the operators are no better off and no worse off. We are confident that we have achieved that, and CPT agrees that we have done that. The figure is not based just on what we say; we do not just pluck a figure out of the air.

As the minister said, the research looked at the evidence on what should be the rate of reimbursement, as a percentage of the adult single fare, that would on average leave operators no better off and no worse off as a result of the scheme. There are three main factors in that, none of which is particularly easy to calculate.

I will rewind a bit. There are basically two types of concessionary passenger: those who are travelling only because they can do so for free, who are extra passengers who have been generated by the scheme, and those who would have been travelling anyway and would have been willing to pay a fare but, because of the scheme, are now able to travel without paying a fare. For the operator, the difference is that there is an extra cost—the cost of fuel and so on—for carrying the travellers who are extra, and they lose the fares of travellers who would have travelled anyway and paid a fare.

The economic calculations need to try to work out what the relative proportions of those passengers are—how many concessionary passengers are extra and how many would have travelled anyway—as well as what the cost of carrying each extra passenger is and what fares the passengers would have paid if they were paying. The calculation as to how common the different types of passenger are is basically a function of the fares: the higher the fare is, the more likely it is that people would not travel unless it was free. Working out the fares that people would otherwise pay is not a straightforward calculation, because not everyone pays the full adult single fare; some people have season tickets and some people buy return tickets. A calculation is needed to try to work that out.

None of that is easy to calculate from the figures, because they are not things that would usually be observed directly. In an ideal world, we would have had no concessionary travel scheme back in 2005-06, we would have introduced the concessionary travel scheme cold and then we would have had an experiment in which we would have been able to see what had changed. In practice, there were concessionary travel schemes already in place, so the picture is very complicated. That is why our consultants and CPT’s consultants spent the best part of half a year debating the figures before arriving at a set of numbers that they could agree on.

Those discussions suggested that the 67 per cent figure was, arguably, overcompensating in the present circumstances. It may have been right when it was set, but it is overcompensating in the market as it is now. The correct figure is more like the 58 per cent figure that the minister referred to. That is mainly driven by the level of fares, which have gone up over three years since the rate of 67 per cent was set.

Thank you for that explanation. I am quite surprised by that because operators have told me that they have been losing money on the concessionary travel scheme, particularly because of the cap and the period when they were no longer being reimbursed. Some of them argue that they are already losing money on the scheme, and I cannot see how reducing it will resolve that issue.

There are two things to say about that. First, the scheme is based on averages, which makes the scheme simpler but is, arguably, a weakness. Some operators have different cost structures from other operators; therefore, in a scheme that, on average, compensates operators correctly, the odds are that some operators are over and some are under. It is not entirely surprising that some operators feel that they are doing less well than others.

Secondly, are they better or worse off overall as a result of the changes? There is interaction between the rate and the cap. In the year that we are just coming to the end of, we had a cap of £187 million, which was breached as a result of payments. Earlier in the year, payments were being made at 67 per cent, but that had to stop because the cap was reached. However, as the minister said, we injected an extra £10 million in March to partly offset that.

Next year, payments will be made at the rate of 60 per cent—so, more slowly—but we think that that will result in the cap being used up by the end of the year. The cap is still £187 million, so the industry will get the same amount of money as it would have got this year; it is just that it will be phased out throughout the year and a rate will be established that the economics tells us is closer to average compensation than the 67 per cent was.

Let us return to the review. At another committee, I have heard evidence regarding the number of people aged 60 who are using their bus passes to go to work. I have raised the matter before and it has been depicted as my trying to take pensioners’ bus passes from them. I am not talking about pensioners, though; I am talking about people who use their bus passes to go to work because the retirement age is now different from when the scheme came in. Have you given that any consideration? It seems to me to be unfair that somebody travels to work free while others who are under 60, possibly on the minimum wage or who are travelling to find work, may have to pay an increased fare to do so. Have you given any consideration to that?

If Elaine Murray is questioning whether somebody should be able to travel free at the age of 60 if they are still in work, I do not think that it is unreasonable to assume that you are saying that those people should not have that bus pass. I disagree with that. I think that the scheme, as it is currently constituted, and which existed under the previous Administration, is the right way to go about it.

On Elaine Murray’s substantive point, we consider all the different aspects of eligibility. That is part of having to look at the budgets. The rate of reimbursement, the cap, the discussions that we have had and the extra £10 million that we have invested are all aimed at ensuring that the scheme is sustainable, which is a key priority for me. The cap, in particular, is relevant because we have to be able to say, “That is the budget and no more.” Otherwise it could, being a demand-led budget, go well beyond that. If we had a system in which patronage was static and fares were going up, it would be open to every operator to increase their fares substantially and to use up the cap. We need the cap because there must be a legal process by which the Government says, “That’s as much as we can spend on this.”

Yes—we look at issues of eligibility. The question has been raised in Parliament not just by Elaine Murray, but by others. However, we remain committed to the scheme as it is currently constituted.

I have been approached by a small bus operator who believes that her company is in a fair degree of trouble. Last year, to keep her company going, she had to raise money against her own home and she is worried about the future of her company. She told me—in rather more graphic terms than I will use—that people with addiction problems and their companions are eligible for concessionary fares. How widespread is that? Is that happening just in her area or more generally? To give people with addiction problems free bus passes does not seem to be the best way of supporting them.

There are passes for disabled people with a companion.

10:15

There are issues, but that is a local part of the scheme and not so much what the Government does. I do not know whether Gordon Hanning can give you more detail on that. I have spoken with that small bus operator, if it is the person to whom I think Elaine Murray referred. She has been unable to discuss those concerns directly with the Government in the past; one change this year has been that we have had discussions with smaller operators.

The large operators account for approximately 80 per cent of all the bus journeys that are undertaken in Scotland, and they constitute the CPT, which tends to concentrate on those operators alone. They have raised particular issues such as the phasing of the scheme. When the cap is applied, there will suddenly be no revenue coming in for the last month, so we have agreed to flatten the introduction so that there is revenue. However, we have, as I said, held discussions with small operators for the first time.

On the point about eligibility for people with addiction issues, Gordon Hanning can perhaps underline the extent to which that is a local authority issue.

The eligibility for the scheme has not changed all that much in the full seven years for which the Scottish Government has been running it. It is a bit of a myth that someone who has a casual drugs habit gets free travel; all sorts of people with disabilities get admission to the scheme.

We have to have pretty strong evidence of a long-standing problem, and we are ultimately in the hands of doctors and the medical profession in that regard. I am not qualified to comment on whether an individual is eligible, but we have to trust the medical profession to provide the evidence that triggers provision of concessionary travel. However, there must be evidence of illness rather than just a casual problem.

I am sure that you can understand why an operator who is struggling feels resentful when they see people with addiction problems getting a free bus pass to go down to the offy, or whatever.

I do not understand why an operator would feel resentful about someone who is using the bus and accessing the scheme. I am not saying that the operator did not express that feeling to you, but I am not sure why they would feel resentful about that, to be honest.

I want to ask about the reimbursement calculation. Most bus companies in Scotland provide some form of saver ticket—such as a return, day or weekly ticket, a 10-journey ticket or a monthly season pass—and yet none of those tickets is openly reflected in the formula. The calculation involves taking journey times and other factors into account, but it is based on a single adult fare although the majority of adult passengers do not use that type of fare.

The local bus company in Edinburgh recently announced that it is putting up its single adult fare, but not the price of its bus passes. I am curious about why your calculation is based on a narrow section of passengers and therefore does not reflect fares for regular passengers, as the people who use adult single fares tend to be visitors to a city or people who usually use their car rather than the bus. People who travel regularly tend to use some form of saver ticket, so your reimbursement rate therefore generates a higher value than the value to the bus company, because the income per journey on a normal bus service is lower than the single adult fare.

That is a good point, which has been raised before. We apply fare tests, so that situation is not simply accepted. If an operator simply puts up their single adult fare because they know that they will be reimbursed at a higher rate, that is not the end of the story. We are aware of the issue, and the deal that we have just struck with the industry includes constraints on fare increases, so we acknowledge that point.

To return to Elaine Murray’s point about dissatisfaction among some operators, that arises in large part because the costs that they are having to pay are going up so much. The cost of fuel is one of the key determinants for their cost base, and that can have an impact on fares. We accept that, but the fares should reflect the actual cost, so one fare should not be less reflective of the cost than another. We are dealing with that in a number of ways. Perhaps Tom Davy can add more on the subject.

I mentioned that there are several variables in setting the reimbursement rate, none of which is easy. One of the non-easy ones is called the discount factor. I looked through the consultants’ report to remind myself about the issues, so I know that there are about 10 pages on the issue. I will not talk through them all for the committee, but in essence the discount factor attempts to model the extent to which the fares that concessionary passengers would pay if they had to pay would be different from the adult single fare.

I remember some of the discussion about that. It was a non-trivial discussion, not least because the assumption is that concessionary passengers differ from passengers in general in their behaviour, partly because they tend to be older and less likely to be in regular work, and therefore less likely to buy weekly season tickets. However, we think that that is allowed for in the calculations. There is, however, still an element of rough justice, because the whole thing is done on averages.

The consultants point to that as an area of uncertainty and, potentially, abuse. I am not saying that this happens but, as the minister said, an abusive operator could jack up the adult single fare and have all their paying passengers travelling on something else, while we pay them for the adult single fare. I do not think that that happens very often, but Gordon Hanning’s team keeps an eye open for it.

Thank you for that reassurance. When the scheme was introduced in 2006-07, the total pot was £159 million and by 2014-15 it will have increased by £33 million, or roughly 20 per cent. How does that compare with the consumer price index? Is the cost keeping pace with inflation?

That is a good question. I do not think that I have that figure.

We will have to get an exact comparison of the increase in the CPI compared to the increase in the cost of the scheme. However, members can see how the cost has increased over the years. We keep an eye on patronage levels, and we are much happier to see an increase in the cost if patronage levels increase. However, during that time we have had a double-dip recession and substantial increases in fuel duty and fuel costs, so costs have been rising, which is perhaps one reason why the cost of the scheme has increased.

That begs the question why the subsidy rate is reducing rather than increasing, given that there is a rise in costs. Can you explain why the subsidy rate has decreased from 67 per cent to 58 per cent?

I cannot do that in one sentence and without going through some of the formulas. Tom Davy hinted at the complexity of the issue. One factor is price elasticity of demand and another issue is to do with people who travel but who would not otherwise have travelled. That tends to produce benefits the more it happens. As we have heard, the issue is complex; Tom Davy will say more about it.

My only comment is to go back to the principle of the scheme, which is reimbursement of costs. We use the term “subsidy” loosely—when I say “we” I include myself and my colleagues—but the concessionary travel scheme is not intended to be a subsidy; it is intended to be a payment to operators for the costs of carrying concessionary passengers for free. European Union state-aid rules govern how generous we can be in such schemes, which is why we try not to overpay.

There is a wider and separate question, which I will not go into, about levels of overall public support for bus transport. There are other public funding streams for bus travel, such as the bus service operators grant and local authority support for specific routes. There is a totality of funding for bus transport, some of which is a subsidy. The concessionary travel scheme is not supposed to be a subsidy, although I accept that for an individual bus operator it is all income that has to offset costs.

The other element is the bus service operators grant, which is a subsidy to try to protect against price increases and to safeguard routes. As has been mentioned, the route development funding—the previous funding for local authorities to maintain routes in their areas—is still there, but it is wrapped up in the overall grant to local authorities. If more groups are eligible for concessionary travel—for example, we have introduced eligibility for certain categories of veterans—and more people use the scheme, that should affect the levels and therefore the level of subsidy. There is no doubt that some local authorities spend more than others do on local bus services and on protecting services that they feel are the most important. We also have the green bus fund, which helps operators to buy much more efficient buses, which drives down costs. There is a substantial level of subsidy.

In all this, it is worth bearing in mind the benefits that the scheme brings. I have used this anecdote before, and my auntie and uncle probably do not like it, but their children bought them a trip to Edinburgh for their 50th wedding anniversary. They came from Brora, which is 240 miles away, and stayed in a hotel overlooking Princes Street, as they had done many years ago. Their children paid for the hotel, but to get them down on the bus cost a 50p booking fee both ways. There are real social benefits from the extent to which pensioners can move around the country. That is why we continue to operate the scheme with the current eligibility criteria that we have fixed on.

I have a further point on the tweet about Stagecoach that Elaine Murray mentioned. I can confirm that the situation is the same in my area, with Stagecoach notices informing the public that a reduction in Scottish Government investment is causing the fares to rise. How do you respond to that?

The same notice mentions increasing fuel prices. Another operator has put up notices saying that it has increased fares simply because it wanted to increase the wage settlement for its staff. Different operators have different reasons. Tom Davy mentioned that the suite of subsidies and fare support that we provide affects operators in different ways. We had a number of discussions with Stagecoach; I am not sure that those notices necessarily reflect its senior management’s view on the support that the company gets.

Stagecoach operates across the United Kingdom. In some cases, the BSOG has been wiped out completely or concessionary schemes have been reduced substantially, but we have done neither of those things in Scotland. I am more than happy to defend the level of support that we provide for the industry, which compares well with the support across the rest of the UK. If Stagecoach has concerns, it can get back to us on that, but those were not expressed to us during the discussions that we have had.

I want to ask about the overall support, which we have moved on to in the past few minutes. Setting aside local authority support for bus travel, am I correct that the Government’s contribution to supporting bus travel is the concessionary fares scheme, the green bus fund and the bus service operators grant? Is there anything else that I am not aware of that is rolled up into the budget for supporting bus travel?

We provide assistance in relation to biofuels, which some operators use. We are trying to encourage wider use of biofuels. Off the top of my head, I cannot think of any other support.

The biofuels support is part of BSOG, although this year I think that it was additional to the £50 million for that. Bus services obviously benefit from other funding streams for things such as maintenance of roads and funding for capital investment in things such as bus stations. While the committee was talking, I found the figures for public funding for bus in “Bus and Coach Statistics”, which focuses on concessionary travel and BSOG payments and so does not include the green bus fund. Including local authority support, the real-terms figure at 2011 prices for all government support for bus in Scotland in 2006-07 was £294 million, and for 2011-12 it was £299 million, so there was a small real increase. If we strip out local authorities, there is an even smaller real increase. Central Government funding remained constant in real terms up to 2011-12.

That gets me to where I wanted to go on the issue. The character of BSOG has changed in recent years. As I have said in the Parliament, I support the change that has happened. However, I am concerned that, within an overall fixed budget with an increase—although I concede that it is slight—there has been a shift in priority away from BSOG towards the concessionary fares scheme. Increases in the cost of the concessionary fares scheme have been accompanied by reductions in the overall bus service operators grant. Will the increase in the order result in further squeezing of that grant?

10:30

It is hard to give commitments on future spending when there is a level of uncertainty, which Alex Johnstone will be aware of. We wait to hear what the budget today produces, for example.

The bus service operators grant had its substantial reduction of around £10 million last year, from £60 million to £50 million or thereabouts. However, that has essentially been reinstated by the £10 million that I mentioned, which was fed through to the bus industry via the BSOG route and provided quick and effective assistance to the industry at that time. Until now, I do not think there has been much difference in the level of support through BSOG and the concessionary scheme. If we accept that there has been a slight real-terms increase in the overall budget, there has not been that much difference in the ratio that operators receive from the concessionary scheme and from the BSOG scheme—which, by my calculation, is about the same as it was before, at around £60 million. Do you agree, Tom? I hope so.

The £10 million was a payment in this financial year, so next year BSOG will be about £50 million, as things stand at the moment. If we take the £50 million as a base figure, this year the figures would have been £50 million BSOG funding and £187 million concessionary travel funding. Next year, barring the unexpected, the figures will be £50 million and £187 million—the proportion is the same, in terms of the budget. The minister declined to offer a prediction on the BSOG budget for 2014-15, but we expect the concessionary travel budget to go up to £192 million. Obviously if BSOG funding does not go up at the same time, the proportion of the budget that goes on BSOG will be slightly reduced, but we do not know that figure.

The minister made it clear, I think in his answer to Elaine Murray’s first question, how the figures of 60 per cent and subsequently 58.1 per cent were arrived at and I am happy to accept that explanation. In my opinion it was mathematically sound.

The problem that I have is that as the proportion of support moves gradually away from BSOG towards concessionary fares, that in itself will have a distorting effect in the bus industry and services will be designed to cater for what provides the resource. As a result of squeezing BSOG, we are seeing above-inflation fare increases and, in some cases, the removal of services that are relatively well used, because of the costs involved, particularly with the change in the rules on urban and suburban bus services. Does the minister accept that?

I do not accept that—in previous years, we have seen above-inflation increases when the ratio was more as Alex Johnstone would like to see it. Above-inflation increases are not necessarily an indication of a widening of the difference in support between BSOG and concessionary travel, which I stress again is not seen as a support or subsidy; rather it is the reimbursing of costs or revenue forgone. I do not think that the evidence over a number of years will bear that out.

It is worth thinking again about why we have changed BSOG. I concede Alex Johnstone’s point that the industry does not want to see radical and sudden changes to BSOG, because that causes it issues. We have listened to that and taken it on board. Who knows what future public spending rounds will bring, but I do not foresee any radical or drastic changes to BSOG. We think that it serves its own function.

Before we made the changes, people were rewarded for buses that were moving along with no passengers. Given our climate change targets, that situation cannot be sustainable. There was also less emphasis than there should have been in urban areas, as Alex Johnstone mentioned. The changes that we have made are having a beneficial impact and should not have a distorting effect, because the concessionary travel scheme is to reimburse for revenue forgone. I do not see why that should distort bus services.

Support is given to continue services that might not otherwise continue, by BSOG and by local authority support. I do not see why that should be affected by what we pay for concessionary travel.

Thank you.

The minister said in earlier comments that there was a requirement for the scheme to be sustainable for bus operators and for taxpayers. When the business and regulatory impact assessment was done, did it look at the significant projected increase in the number of people in Scotland of retirement age—in the years up to 2020 and beyond—in relation to the affordability and sustainability of the scheme in the medium to long term?

With regard to the longer term, we have looked at the forward projections for two years in the course of some of the considerations that the minister mentioned with regard to changes in eligibility—a policy that we are not pursuing. In the context of these discussions, we have looked at the budget for the next two years, on the basis of some expectations about likely changes in take-up and usage of cards. We do not expect the demography to have a significant impact.

Given the significant social and health benefits for older people, disabled people and veterans that arise from access to the scheme, has an assessment been made of what the increase in demands on the scheme will be due to the increase in the older population? That exercise has either been done or it has not been done. I would like clarification on that point, please.

Yes, if you look at the general increase and the projection for what the likely increase will be. However, to be frank, those are not necessarily the main determinants of whether there will be an increase in demand. Things such as the availability of services can have a bigger impact. Do you want to add anything, Gordon?

It is difficult to comment about what will happen in the future. The number of people who are eligible to utilise the scheme across Scotland has been increasing for some time; it probably increases by between 1 and 1.5 per cent a year. It is interesting that since we got the smart technology—which has been extremely effective—properly in place, the pattern of claims is absolutely flat. In other words, going back over the past three years, the total number of passenger journeys within the scheme has stayed absolutely flat in real terms. If anything, it has probably gone down slightly this year compared with last year.

In contrast, the average adult single fare, which is the other main component of the demand-led bit of the scheme, has always gone up by something between 6 and 8 per cent for the seven years that I have been running the scheme. It is clear what is driving the increased cost; it is not increased eligibility or increased passenger activity. Another point is that with the smart technology and the skills that we now have to manipulate and analyse the data, we are continually finding more effective ways to manage the scheme. We are managing fraud out of the scheme more and more with every passing year. That in itself goes a long way towards offsetting the concerns that we all have about eligibility increasing in the long run.

Jim Eadie’s point is about the future proofing of the scheme—perhaps to ensure that potential future demands can be accommodated and the scheme will still be sustainable. That is one of the reasons why each deal runs over the course of just a few years; this deal is for two years and the previous one was for three years. If things were fixed for 10 or 15 years, a detailed assessment would have to be made of that.

Gordon Hanning’s point was about the extent to which, even seven years in, the scheme is still settling down. Not least through the huge amount of work that has been done on fraudulent or mistaken claims, which has drawn positive comment from elsewhere in the UK, we have been given a much truer indication of baseline demand. Getting those figures is helpful. In the meantime, the deal is set for two years out not just because it is difficult to project that much further into the future in terms of demand. It is difficult to project much beyond that in terms of what money we will have, to be perfectly honest—in future spending reviews—so that is the right way to go about it. That means that the scheme is future proofed as far as we can future proof it just now.

I take all that on board. I am well aware of the difficulties around forecasting, particularly when it comes to projections that are made by organisations such as the Office for Budget Responsibility.

You rightly say that the intention behind my question was to understand whether the scheme is affordable and sustainable over the longer term. There are clear benefits to having the scheme, and I was asking whether—notwithstanding the fact that there are problems involved in medium to long-term projections—the forecasting has been done to understand what future increase in demand for the scheme there may be.

Our forecasting is based on our past experience—although it may seem a bit odd to be looking back to see how we should look into the future. We need to have a pretty good idea of the baseline demand for the scheme, and we are getting closer to that as the scheme is refined over time. We must ensure that the deal that we strike takes into account the forecasting and all the variables that I have mentioned, including price variability, the price of fuel and demand throughout the economy. Even as recently as seven years ago, the projection for the population of Scotland was different from what it is now. If we are not able to say with any certainty how things will change demographically in 10 or 15 years’ time, we should not set a budget for 10 or 15 years’ time. I think that the forecasting that has been done is sufficient for the purposes of the scheme, although that is not to say that we will not want to undertake further forecasting and look at other variables in the future.

Mr Hanning said that the single adult fare has gone up by about 6 per cent per annum. Have the bus companies seen a reduction in the number of people travelling on that fare? In my view, the companies sometimes price themselves out of the market. If they reduced the fare, more people might travel on their buses—it is economics. Is that the case?

As you know, the UK bus industry is deregulated, so we do not have any automatic right to the detail. We get some high-level figures and those statistics were published not long ago, but it is difficult for us to drill down into what might be happening from bus company to bus company. I have my own thoughts on the relationship between the fares that are charged and the extent to which services are used, but in a deregulated market we have no automatic right to that level of detail. All that we can go on is the statistics that are collected, which tend to look backwards a bit too much to be useful in drawing meaningful conclusions. Tom Davy might have something to add on that.

I am just looking at the bus and coach statistics that were published in February, although they run only to 2011-12 so there is a lag, as Gordon Hanning said.

The figure for passenger journeys on local bus services in Scotland was up by 2 per cent over the year, but down by 8 per cent over five years; so, there is a slight downward trend in the long term. The number of concessionary journeys—which are not sensitive to fares, as they involve people travelling free—has declined by 6 per cent over four years. There is obviously something going on there. One would expect the fares rising above inflation to have a depressing effect on bus patronage, but there seems equally to have been a reduction in bus travel even among people who are not paying, who are not influenced by fare levels. The trend is at best static but probably slightly downward at the moment, and that is allied with a tendency for fares to increase above retail prices index inflation. That is not a particularly healthy long-term situation, but I do not know what the answer to that is.

Do you have a figure for the proportion of bus journeys that involve concessionary travel?

We do, but I do not know whether I have it written down in my notes. Without having to do quick mental arithmetic and possibly misleading the committee, I am not sure.

The figures that have just been produced show that it is a lower proportion. If there has been an increase in the overall number of passenger journeys of 2 per cent in the past year but there has been a decrease in the number of concessionary journeys, the proportion would be less.

I would just like to get an idea of how many of the journeys involve concessionary travel. If the figure is 50 per cent, quite a big part of the bus operators’ income is coming from the concessionary travel scheme.

As the minister has demonstrated, the mental arithmetic is easier than I feared that it would be. The figure is about a third. In 2011-12, there were 150 million concessionary passenger journeys out of 439 million journeys in total. That is about a third. It is some way off a majority, but it is a significant fraction of passenger journeys.

The scheme is quite a part of the bus operators’ income and, if it did not exist, many of those journeys and routes might be completely uneconomic.

10:45

For the reasons given earlier, some passengers will choose to travel because of the concessionary scheme but it is hard to drill down into those figures.

It is important to mention that, as the operators will always say, the scheme is not designed to overcompensate or undercompensate; it is meant just to compensate such that they are no better off and no worse off. However, there is no doubt that it comprises a substantial element of their fare box.

Do you have any idea of the reasons for the decline in bus journeys? Is it just that, because of the recession, people are not going to the shops? Do you have any way of knowing what it is?

For some time, we have been keen to do some meaningful customer research. We have commissioned that work and I think that the surveys have been completed now. The next step is that we will receive some meaningful feedback from the market research company, which spoke to 3,000 or 6,000—I cannot remember now—cardholders.

Part of what we want to find out is the answers to questions such as the ones that you ask. That will be quite revealing. We recognise that, as you pointed out, the scheme is a big proportion of the overall bus industry. It is a big proportion of what we fund. Therefore, it makes sense to find out what the consumers think of the service that is being provided. We hope to get that feedback sometime in the not-too-distant future.

What we need is a Scotland-wide travel card scheme. Then, we would be able to analyse the figures.

You have put me off my train of thought, Alex.

A couple of the witnesses mentioned fraud. Are passengers still contacting whoever is the contact in relation to that? Is the number of complaints going up, is it static or is it going down?

We are certainly still getting representations. We most frequently receive them about overstaging, whereby what is claimed for does not reflect the length of journey that has been undertaken. People can inform us about fraud through a number of routes, such as Transport Scotland. Many people do it through their MSP—I get correspondence on it as well.

I do not know how the figures have varied over time. Perhaps Gordon Hanning knows.

We deliberately set out to give the issue quite a profile to encourage people to complain to us and we set up a 24-hour hotline—the hotline existed anyway, but we just tagged on fraud as an extra activity, so we were able to do it cheaply.

We probably get about 3,000 allegations of overstaging in a year out of 147 million journeys, so it does not keep me awake at night. We drill down into every one of those 3,000 complaints and we tend to find that about half of them are valid complaints and half of them are passengers misunderstanding the slight misalignment between the exact stop at which they boarded and alighted and the way that operators run fare stages, which is a much broader definition of where people board and alight.

Even more recently, using smart technology, we have introduced what is known as hotlisting. If cards that have been lost are sold down the pub for a tenner, for example, we can now hotlist them. That means that, the next time that such a card is presented to a ticket machine, a message comes up to the driver that it is not valid any more.

We keep developing our techniques to eat into the fraud, and I am pretty pleased that we are doing a good job on that.

I still hope that bus passengers would be vigilant about that.

They are. That is one of the reasons why your mailbox and, therefore, much of the stuff with which we have to deal has a continual flow of such complaints. The evidence that we get is that people who participate in the scheme appreciate the benefits that they get and are concerned about those benefits being eroded. Quite a lot of them respond to the posters that we put on buses and elsewhere and bring to our attention things that they think are not right. We investigate every one of them. We have quite a good self-sustaining system.

The system does not only rely on passengers: inspections and mystery shopper-type exercises are carried out as well. However, there are far more passengers than there are likely to be people who are able to inspect, so we rely on passengers coming forward.

Do the 1,500 or so complaints that are valid tend to involve the usual suspects?

That is a difficult question to answer. A larger proportion come from the big companies simply because they run more services, and some of the valid complaints may involve only 20p or so. We also look for proportionality. If a small bus operator receives a disproportionate number of complaints, that might trigger a more intensive discussion with that operator. However, 1,500 complaints spread over the number of services that we have shows that there is not too much going on that gives us cause for concern. However, we never like to get complacent.

I have a question on the dropping off in the number of concessionary passengers. I wonder how much of that was weather related, bearing in mind the minister’s example of his aunt and uncle coming down from Brora. I am aware that other people use the concessionary scheme for regular trips to Dundee, Glasgow or wherever once a week or once a month. Given the bad weather that we had last summer and the bad winter that we had previously, how much of the dropping off in the number of concessionary passengers was weather related rather than a general dropping off?

It is hard to say. I am not sure that we have any figures on that. However, if the dropping off in concessionary journeys was weather related, that would mean that those were discretionary journeys, which would argue against the idea that a lot of such journeys are being made for commuting to work. I imagine that the biggest impact would have been caused by the severe winter two years ago, which prevented buses from getting around the country. I am not sure that bad summer weather would have done that, although there is a corresponding dropping off in tourism during bad weather. I do not know whether we have that information.

We do not have information on the reason for the drop-off. According to the time series, the big drop came between 2008-09 and 2009-10. I am trying to remember what the weather was like then.

I assure you that that was nothing to do with the weather.

There was another fairly significant drop in 2010-11 before things started to pick up again. The Great Britain figure rose slowly over those two years but by less than the year before. Maybe there was something about Scotland that was different from the rest of Great Britain.

There was something different about Scotland—we managed to introduce smart ticketing technology. I do not have the exact figures in front of me, but my recollection is that, in the first two or three years of the scheme, the long-term trend of increasing eligibility that you talked about was matched by the increased passenger numbers that operators were claiming. When we introduced the new technology progressively between 2006 and 2010—it really kicked in in 2008-09—we noticed a significant drop in the number of passenger journeys claimed. It fell by something like 10 million or 11 million. Tom Davy would not necessarily be aware of that, but it goes a long way towards explaining some of the statistics. Within the scheme, the passenger numbers claimed fell in two years from around 157 million to 146 million. I cannot prove this, but I believe that the bulk of that was not down to weather, the recession or anything else—it was down to the introduction of the smart technology.

The fraud is not just in relation to what could be called overstaging. There have been instances of people putting one card repeatedly through the system to gain an awful lot of money from the system. We have taken a very robust approach to that and have referred such cases to the fiscal, although that has not always resulted in prosecution. We have taken a robust approach that has drawn substantial interest from elsewhere in the UK.

In an answer to Adam Ingram, you mentioned an issue to do with state aid. It was always intended that an operator should be neither better off nor worse off as a result of the scheme. What is the issue to do with state aid, since it is available to any operator in Scotland?

I mentioned that briefly. The origins of the no-better and no-worse-off test are in language in an EU instrument on—sorry, I forget the exact terminology—transport services that provide a public benefit. The instrument discusses what payments are allowable for those services. Obviously, the main purpose of the instrument is to prevent overcompensation as a disguised form of state aid to transport operators.

However, some EU countries heavily subsidise public transport.

I do not pretend to understand the ways in which they do that. Obviously, there may be all sorts of different subsidies.

We regard the concessionary travel scheme as an instance in which commercial transport operators are required to provide something for public benefit and receive compensation for doing so. Those compensation arrangements are governed by EU state aid rules, which allow a reasonable rate of profit—or some such terminology.

Okay, that is all our questions. I thank the witnesses for answering a fair number of questions.

Agenda item 2 is formal consideration of motion S4M-05911, in the name of Keith Brown, which calls on the committee to recommend approval of the order.

Motion moved,

That the Infrastructure and Capital Investment Committee recommends that the National Bus Travel Concession Scheme for Older and Disabled Persons (Scotland) Amendment Order 2013 be approved.—[Keith Brown.]

If members have no further comments to make on the motion, I will put the question.

The question is, that motion S4M-05911, in the name of Keith Brown, be agreed to. Are we agreed?

Members: No.

There will be a division.

For

Eadie, Jim (Edinburgh Southern) (SNP)

Ingram, Adam (Carrick, Cumnock and Doon Valley) (SNP)

Johnstone, Alex (North East Scotland) (Con)

MacDonald, Gordon (Edinburgh Pentlands) (SNP)

Watt, Maureen (Aberdeen South and North Kincardine) (SNP)

Abstentions

Murray, Elaine (Dumfriesshire) (Lab)

McCulloch, Margaret (Central Scotland) (Lab)

The result of the division is: For 5, Against 0, Abstentions 2.

Motion agreed to.

I suspend the meeting briefly to allow the officials supporting the minister to change over.

10:57 Meeting suspended.

11:00 On resuming—

---

Public Transport Users’ Committee for Scotland (Removal of Functions) Order 2013 (SSI 2013/79)

We move on to agenda item 3, which is evidence from the minister on a negative instrument. The order removes from the Public Transport Users Committee for Scotland all the functions that it currently has. As witnesses we again have Keith Brown, Minister for Transport and Veterans, and Tom Davy, team leader for bus and local transport policy; and we are joined by Jill Mulholland, unit head for transport accessibility and road safety at Transport Scotland. I welcome you all and invite the minister to make opening remarks.

Thank you, convener. The Passengers’ View Scotland review paper, which acknowledged the work, knowledge and experience of PVS members, concluded that it was difficult to identify many tangible outputs or outcomes from the body and that its continuation therefore did not represent good value for money.

The main recommendation of the independent review was that PVS should only continue with the functions of the subcommittee, bus passengers’ platform—BPP—which deals with second-tier bus complaints in Scotland. The review also highlighted the fact that that bus complaints process should itself be subject to a review.

Before making any decision on the review, I asked officials to provide an overview of the landscape of passenger representation across all modes of public transport and for a proposal on a way forward that would reinvigorate and repackage advice and complaints handling for bus users in Scotland. Our overall review of passenger representation in Scotland highlighted that rail was dealt with by Passenger Focus, ferries by the regional transport partnerships and air by the Civil Aviation Authority. That left a gap for bus user representation and complaints handling, which was partly being addressed by a small amount of funding to Bus Users UK, to part fund a Scottish representative on national groups.

Alternatives were investigated for bus representation and complaints handling, but the most straightforward and value-for-money approach and the best case scenario for bus users in Scotland is to grant fund an independent organisation, based in Scotland, to carry out the functions. Through grant funding we can enable an organisation to develop its ability to represent bus users and to extend the range of activities it carries out. A grant offer letter sets out the agreed activities, processes and appropriate standards that should be used. A monitoring and reporting process will ensure value for money and, as with any agreements, if there is a need to change anything, that can be accomplished without recourse to legislation.

Finally, Bus Users UK is keen to expand its existing Scottish representation for buses. It proposes forming a distinct Scottish branch to be entitled Bus Users Scotland, which provides a very convenient acronym. That branch will have an office and staff based in Scotland. The Government proposes to grant fund BUS to enable it to develop the range of activities it provides in Scotland to match similar representation in England and Wales. Those activities include bus complaint handling and bus service compliance monitoring, which will deliver real benefits for the Scottish Government, the traffic commissioner and bus users.

BUS will also provide a function relating to bus compliance monitoring that the Vehicle and Operator Services Agency is no longer willing to provide on a regular basis, and thus it will help us to implement the bus regulatory regime.

Thank you. At our last committee meeting with PVS, it highlighted its problems to almost all committee members. Elaine Murray was not on the committee then, so I presume that she has some questions.

I apologise, minister—it is actually my fault that we are having to speak about a negative instrument. I did not intend to move a motion against it; I just wanted to ask some questions about the successor arrangements—and you have answered some of them already.

How will the members of Bus Users Scotland—or BUS, as it will presumably be known—be appointed? You say that it is part of Bus Users UK. Will BUS have any separate accountability to you?

We will not be appointing members to BUS. I know that you have asked a written question about the issue, and I have responded to it, although it might not have come to you yet.

BUS is not of the same type as PVS, for which there was an appointments process. PVS will now be taken off the relevant list of public bodies, and the appointments process for BUS will not be the same. The new group is to be funded through the grant scheme whereby we say that we want certain things done and it is up to the organisation to make provision and to provide information to the required standards.

We are asking BUS to do a bit more than before because, as I said, VOSA has taken away its inspection regime for vehicles and we are adding that into the BUS process. We feel that we will get more for the money that we spend and more control over what is done. Perhaps Jill Mulholland wants to add to that.

That is exactly what we are trying to do in the proposal. We have a Scottish representative in Bus Users UK, whom we fund, and the proposal is to enlarge that and to bring in the compliance function that is now not being done by VOSA. It was a question of timing that through the new organisation we could prepare a whole package for bus users in Scotland and put bus users advice, policy guidance, complaints and compliance in that one package.

Despite Passengers’ View Scotland’s name—although I know that that was not its formal title—it only really looked at buses, so there will be no loss of service to ferry service passengers or rail service passengers.

That is correct: they are dealt with by different organisations.

Is the review, which we have a copy of with our papers, to be published on the Transport Scotland website? I have not yet seen it on there.

Yes, the review has been published and should be on the website.

I looked for it yesterday and did not see it on the website.

I will check that but it should be published by now.

Thank you.

On page 30 of the review that Elaine Murray mentioned, under section 9.2 there is a recommendation that:

“the bus complaints process should be subject to a ‘root and branch’ review with consideration being given to the development of a ‘one stop shop’ for bus passenger complaints.”

Is that something that the Government intends to progress? What do you see as the advantages of that approach?

No, what we have decided is not quite a one-stop shop because we have the traffic commissioner who will also have responsibilities for complaints. The traffic commissioner also has other important functions and we do not intend to change them. We considered whether it was possible to give all the complaints function to the traffic commissioner, but we decided that that was not the best approach and that we should use the expertise of Bus Users UK.

Our decision was based in some part on the representations that we had from members, both in debates in the chamber and from the previous committee in the last session of the Parliament. It was felt that there was a need for a specific organisation with the requisite expertise to take things forward, and we think that BUS is the best outcome—but it is not quite a one-stop shop.

Are you confident that the proposals will allow for members of the public to make complaints that will be investigated fully?

Yes. There are still some things that operators are statutorily obliged to do that the traffic commissioner will be responsible for. For example, if they give adequate notice for starting up a new route or deregistering a route, that has to be done through the traffic commissioner—that is set out in statute. However, I think that BUS is the best way forward for other things.

More importantly, having come to an agreement with Bus Users UK over how exactly everything is to be achieved, we retain an element of control. If we think that one part of the group is not working as well as it should, through the grant process we are able to change things much more quickly than would have been the case if, for example, we had had to set up another body in statute and think of all the different things that we would want it to do. BUS gives us a better prospect for investigating complaints by bus users and also the ability to change the service if we think that that is necessary.

In relation to the existing PVS committee, page (i) of the review states:

“there is evidence that its activities are more reactive than proactive.”

The review also states that there is little evidence in the annual reports that those documents have driven forward the work plan of the committee.

What steps will you take to ensure that the new organisation achieves the standards that you are looking for? The previous organisation produced four annual reports, yet no intervention took place and no work was done with the organisation to bring it up to an acceptable standard. What sort of key performance indicators will you put in place to ensure that that does not happen with the new organisation?

A great deal of work was done, although perhaps not in the public way that is suggested, to try to make the previous organisation more proactive and evidence based. Its annual reports were the subject of substantial discussion between Government and the organisation. It was not the case that it was left to wither on the vine. A lot of work was done, but it just did not seem possible to get to where we wanted to be with that organisation.

How can we ensure that we have the right level of service from the new organisation? Well, we know a great deal about what it does already and, of course, it has a Scottish representative. We have said that there are certain things that we want to do. We have chosen the things to ask it to do; I have mentioned compliance inspection of vehicles, which VOSA has drawn back from. We are the ones who will say in the grant letter exactly what level of service we want, and we will retain that control. If the body does not provide that service, we can of course change things.

Jill Mulholland might want to speak about the specific things that we want the body to do.

We will specify in the grant letter what we want the organisation to do and we will have performance indicators to make sure that it meets those specifications. There will also be quarterly reporting and an annual report to Transport Scotland to evidence what the organisation has done during the year.

A couple of my civil servants carry out the bulk of the complaints on behalf of the bus passengers’ platform on an on-going basis. The majority of complaints should go to bus operators. One of the main things that we have asked the new organisation to achieve is to ensure that the public are aware that their first recourse for complaint is to the bus operators, because they are most appropriately placed to deal with complaints. Bus Users Scotland will be the second tier, which will be able to deal with complaints that the customer believes have not been resolved by the bus company.

Looking at it in that way, therefore, there should be more of a one-stop customer complaints shop. The complaints process should be much more integrated and Bus Users Scotland will have much more involvement with the bus companies to ensure that that takes place.

As there are no more questions, I thank the witnesses for their evidence.

The committee appears to have no issues to raise in relation to the order. Members should note that no motions to annul the order have been received. Does the committee therefore agree that it does not wish to make any recommendation in relation to the order?

Members indicated agreement.

11:13 Meeting suspended.

11:18 On resuming—