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"Unworkable" local authority bus scheme could cost us millions

November 3, 2015 1:27 PM

A highly critical report from the Quality Contract Scheme board has slammed attempts to bring control of bus services under the control of local authorities after the scheme failed the viability tests.

Controversial Labour plans for a "Quality Contract Scheme" to take control of bus services from the bus companies have been left in tatters after inspectors agreed it did not meet key tests on value for money, consultation, and reliability of its financial projections. A great deal of time and money was spent on developing the scheme despite Liberal Democrat opposition concerns over the viability of the project and the risk to local taxpayers.

Liberal Democrat councillors are in favour of improvements to the local bus network, and we support the idea that less profitable routes and services (such as evenings and weekends) should be funded from the proceeds of profit making ones. But this has to be affordable and we expressed concerns that the Tyne and Wear scheme - the first in the country - was not based on sound figures and risked an expensive court battle with bus companies.

We think the North East Labour council leaders and transport bosses need to rethink their plans after they were roundly rejected by the independent inspectors. We think improvements to fares, routes, services, buses, bus stops, fares, and customer service can best be achieved by the councils and bus companies co-operating in a voluntary "quality partnership", instead of being on opposing sides in a courtroom where the losers will be bus passengers and local taxpayers.

The Guardian had reported : " In the culmination of a bitter, drawn-out battle between the regional authority in Newcastle upon Tyne and private bus firms, an independent board could in effect dismiss a scheme to re-regulate buses. That could leave the council liable for hundreds of millions of pounds in compensation for operators such as Stagecoach.

"After a series of hearings this year, the Quality Contract Scheme board chaired by the Traffic Commissioner for the north-east is expected to set out its conclusions as to whether Tyne and Wear's proposals to franchise services and control routes, timetables and fares pass a range of public interest and economic tests.
"The operators have argued that attempts to take control of routes would be in breach of their economic rights and be appropriation of goodwill. The panel is likely to decide that Nexus, the region's transport executive, could face large liabilities to compensate Stagecoach, Go-Ahead and Arriva for loss of business.
The decision, which is expected on Tuesday, could have huge implications for city devolution plans at the heart of the chancellor's vision of a "northern powerhouse". Manchester and other cities have agreed to changes including elected mayors in return for control over local financing and transport, with buses a focal issue.
"Deregulation of bus services outside London was brought in by the Thatcher government in the 1980s. Stagecoach and other transport firms have made the bulk of their UK profits from such bus services rather than the trains or regulated buses they also operate.
Nexus argued it was paying large subsidies to fund unprofitable routes for community benefit, while not being allowed to run public services on profitable routes under the legislation. Local authorities are also forced by law to provide concessionary bus travel to pensioners.
"The transport executive claimed re-regulation would save money and result in better services. But operators led by Stagecoach, which runs about 40% of bus services in Tyne and Wear, claimed the move would mean higher fares, worse services and higher taxes."

Responding to the QCS board announcement, Newcastle Lib Dem Cllr Greg Stone (Lib Dem group leader on Tyne & Wear Integrated Transport Authority (ITA) prior to its abolition) said:

"I welcome the QCS board's findings and feel that the concerns raised by the Opposition parties on the ITA before it was abolished and replaced by the Combined Authority have been borne out by the board's demolition of Nexus's case. We felt that Nexus and Labour politicians were determined to push forward an ideological approach to running the bus network that was not justifiable based on the business case they set out. It is striking that the concerns we expressed about passenger number projections and finances for the QCS deal were endorsed by the QCS Board. Nexus and NECA refused to heed these concerns.
Nexus and NECA now have very serious questions to answer about the robustness of their case and on the amount of money - likely to be in excess of £1m - spent on preparing what can only be described as a flawed prospectus. The process was delayed several times and Nexus had to change its numbers midway through because even they recognised that errors had been made. Worryingly, the statements from Nexus and NECA transport chief Nick Forbes appear reluctant to admit this and imply that the QCS Board has reached the wrong conclusions. This is emphatically not the case, but it would appear that they are unable to admit they themselves got it badly wrong.
Even more worryingly, it has been suggested that when it became clear that the scheme was in trouble, NECA and Nexus made legal representations to the QCS Board to suspend the process and withdraw the application rather than allow the highly critical final report to be published. This does not bode at all well for the transparency or accountability of these organisations in respect of public transport under devolution, particularly as there is now no scope for opposition representation on the Transport North East governance arrangements.
QCS was a radical and partisan agenda predicated on the idea that Nexus and NECA knew better how to run Tyne and Wear's buses than the professional bus operating companies. It was based on very ambitious plans to increase passenger numbers and seemed designed to plug a hole in public transport funding. However, given the huge holes in the strategy, the competence of Nexus and NECA on public transport matters must now be scrutinised very carefully, and Nexus and NECA officials need to be accountable for the flawed way that they have conducted this process.
Opposition members believed from the start of this process that politicians should acknowledge that the bus system works reasonably well in Tyne and Wear. Customer satisfaction is high, there is investment in the bus fleet, and there is a reasonably good network and service level. The failure of the QCS now means Nexus and NECA need to reflect very carefully on where to go next. It is difficult to see how they can now credibly take forward bus franchising plans without accepting they got the QCS plans badly wrong.
Opposition members on the ITA made it clear that we felt a voluntary partnership arrangement between Nexus / NECA and the bus operators offered significant opportunities to enhance bus provision and quality without the huge financial risks implicit in the QCS plan, which would have been borne by the region's taxpayers if as the QCS board suggests the projections were wholly unrealistic.
I hope it is not too late for Nexus and NECA to show some humility and work to rebuild the relationship with the bus operators that has been badly damaged by their approach to date. The public interest will be best served by Nexus and NECA and the bus operators working together closely and in collaboration to deliver a financially sustainable bus network. We must await the publication of the Buses Bill and potential opportunities for franchising and re-regulation under devolution, but the inescapable conclusion of the QCS Board's findings is that Nexus and NECA's credibility to deliver on plans for re-regulation is now compromised.
The board's findings show that QCS was clearly not the solution, and the sooner Nexus and NECA accept responsibility for this and move on, the better it will be for the travelling public and the taxpayer. I believe some senior officials now need to consider their positions in light of this outcome. In particular, the Combined Authority's transport lead member, Nick Forbes, who has been a leading champion of QCS, needs to take direct political accountability for the disastrous failure of his initative."