Bus services at risk as DfT predicts £100m concessionary fare savings

Changes to concessionary travel reimbursement could lead to bus services being cut and fare rises, the DfT has admitted.

The Department has launched an eight-week consultation exercise on changing reimbursement arrangements for concessionary travel in England (outside London). Its best estimate is that the changes will reduce the amount of reimbursement paid to operators by between £68m and £132m a year.

About £1bn a year of public money is currently spent on concessionary travel in England, of which £643m is spent outside London. The £68m-£132m savings represent a saving of 10-20% on the latter figure.

The Department acknowledges the possibility that the reduced spend  will prompt operators to increase fares or reduce services.

The new guidance adopts a more directive approach to reimbursement calculations, requiring fewer data inputs and assumptions but leaving open scope for local flexibility.

The DfT says the existing  reimbursement regime has been “showing signs of strain”.

It points out that travel concession authorities (TCAs) are required by law to reimburse bus operators so that they are left no better and no worse off than in the absence of a concessionary scheme. “However, there is limited national and local data, limited evidence of how bus operators would have behaved in the absence of the scheme and huge scope for arguments and dispute,” it says. The Department says there is also “evidence of over-reimbursement”.

The DfT says the new guidance will “simplify the current system, enable more accurate reimbursement (which could generate significant savings for Government) … and reduce the scope for dispute between TCAs and operators”.

The guidance will inform schemes from next April but TCAs have little time to get to grips with its content. The eight-week consultation closes on 11 November and TCAs have to publish their draft reimbursement schemes by the 1 December.

The guidance revises the two components of reimbursement:

• revenue forgone – the reimbursement of fares operators would have received for existing passengers now travelling free
• additional costs that operators experience as a result of passengers generated by the concession. 

The DfT outlines a new way of calculating the average fare for revenue forgone calculations and proposes two demand curves – one for PTE areas and one for non-PTE areas – to describe the relationship between fares and bus travel.

For additional costs, the DfT recommends a payment of 7.2p per generated trip to cover marginal operating costs (the cost of carrying additional passengers assuming service levels are held constant). For marginal capacity costs (costs incurred from additional capacity being introduced on a route) the onus is on operators to submit claims. A cost calculator is provided to help them do so.

The guidance has been informed by Institute for Transport Studies at the University of Leeds, with additional input from Andrew Last of consultant Minnerva and Professor Phil Goodwin of the University of the West of England.

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Concessionary Fares 2010

The new reimbursement arrangements will be discussed at LTT’s concessionary fares conference on Thursday 4 November in central London.

Confirmed speakers include: Adam Simmons, the DfT’s head of travel concessions; Chris Brown of concessionary fares consultant MCL; Peter Shipp, chairman of East Yorkshire Motor Services; and Matthew Sinclair, director of the Taxpayers’ Alliance. The conference chair will be concessionary fares expert Andrew Last of consultant Minnerva.
For more details see page 20