Bus test case looms as Tyne & Wear seeks to wrestle back routes

Council seeking better value for public money appears on collision course with private operators such as Arriva and Stagecoach

A rainbow of buses plies the streets of Newcastle: green, purple, yellow, turquoise, blue, striped, even the odd red one for traditionalists. This is the most visible legacy of one of the Thatcher government's earliest privatisations back in 1985. Now, for the first time since public buses were deregulated, a city is trying to reassert control.

With the north-east hit hard by economic stagnation and central government funding for councils squeezed, the local authority is looking increasingly askance at a system that takes in £62m of public funding a year, while fares rise and operators reap large profits.

Powers to take buses under local control have existed since 2000, but their degree of complexity that has deterred any authority from using them. Tyne and Wear has now launched formal consultation for a quality contract scheme, in which councils can lay down the routes and fares that can be charged by private firms operating on a franchise basis. That has prompted fury from the bus operators and left transport authorities around the UK watching closely.

Three of the big four transport groups operate buses in the region, making returns their rail divisions can only dream about. Stagecoach recorded a 17.1% profit margin on its UK bus operations outside London last year, and about 20% from Tyne and Wear. Stagecoach, which operates about 40% of buses in the area, has promised to "vigorously resist" quality contracts, whether by legal challenge or closing its depots. Its chairman, Brian Souter, notoriously said he would rather "drink poison" than enter into such an agreement.

Bus fares in the region have risen each year since 1995 by an average 3% above RPI inflation. David Wood, a local councillor and chair of the Tyne and Wear integrated transport authority, said: "We're not against profits; but we think the profits are excessive and they are being taken from the public in Newcastle and given to private shareholders."

In many ways, though, bus travel in the region is thriving. Customer satisfaction measured by Passenger Focus surveys is high. In the centre of Newcastle, Eldon Square bus station is a busy, impressive facility seamlessly merged into a shopping centre, alongside John Lewis and Waitrose. Next door, Haymarket serves the larger catchment area and a constant stream of double deckers files along Blackett Street in the city centre.

But while operators queue to serve central routes and lucrative arteries at peak times, late-night services and those needed by remote communities or the elderly on certain estates are heavily subsidised with public money. The No 68 linking Queen Elizabeth Hospital in Gateshead is an hourly, taxpayer-funded "secured service", operated by Nexus, Tyne and Wear's public transport executive. A small bus winds round via quiet residential areas to Heworth interchange to connect with other bus, Metro and rail services. There are too few passengers to make a profit but it is a service valued by its mostly elderly users.

One woman heading home after leaving her husband at the hospital, said she also needed the bus to reach the shops and would be "lost without it". On the quiet Lakes Estate, passengers simply hail the bus as it passes, a boon to the less mobile: a woman boarding the bus here slips the driver a couple of toffees.

Nexus says these services would have to go if the status quo continues.

The funding it receives from local councils has been frozen, but it is underwriting the 10% of the network that private operators deem unprofitable, and has a statutory obligation to refund bus operators for concessionary travel for senior citizens, a bill that has risen to £38m a year.

It is also frustrated by slow progress in establishing a unified smartcard scheme for the public transport network, including the Metro, with bus operators refusing a capped fare on Tyne and Wear's Pop card. Nexus also believes rising fares are contributing to an increase in car usage in Newcastle, bucking the national trend.

There is some political backing across the spectrum. Transport minister Norman Baker said of the quality contracts scheme: "We're not going to promote those powers but we're not going to remove them." He said he understood both sides' view, but that what happens in the north-east will be a "test case".

Labour is less reticent. The shadow transport secretary, Maria Eagle, said: "The threats we've seen to sack staff, close depots and immediately take buses off the roads are nothing short of an attempt to blackmail councils into abandoning their efforts to get better value for taxpayers' money through reform."

Referring to Arriva, which is owned by Deutsche Bahn and runs 5-10% of bus services in the area, Eagle said: "Passengers will rightly be outraged to see an attempt by the German state transport operator to frustrate the democratic will of English councils, especially when they operate successfully in a regulated market in Germany."

Negotiations continue with the bus operators, with the possibility of an alternative voluntary "quality partnership" being discussed. Go-Ahead, which operates about half of the buses in the area, said it was "firmly committed to partnership as the best option".

Arriva said quality contracts "would require significant new investment to both set up and run in the years ahead which would cost local authorities – and in turn the taxpayer – millions of additional pounds. It will take at least three years; be controversial and disruptive. Similar benefits for passengers can be achieved far quicker through a partnership."

The bus operators claim that Nexus's funding problems stem from the costs of the Metro rail system, where passenger numbers have declined over the last two decades. Nexus denies this is a factor. The operators say their costs have risen faster than inflation, and say comparisons with London ignore such factors as a rising population and declining car usage in the capital, as well as huge public investment in buses and bus lanes.

Stagecoach said profits had paid for investment in bus services, and it had both lower fares and higher customer satisfaction scores than other operators.

The consultation on quality contracts is due to end in November. After legal scrutiny, the final decision will be made in early 2014 whether to press ahead. Some suspect the process will be so fraught that the council would rather back off.

Stagecoach warned: "We believe we're on very strong ground legally. We would take whatever steps are necessary to protect the future of a business we've invested millions in."

Tobyn Hughes, deputy director-general of Nexus, says the voluntary proposal from the private operators "doesn't come close" to meeting the transport authority's objectives. But he added: "What's important is arresting the decline in bus usership, maintaining the network and getting better value for public money. As long as that's achieved, we're happy to do it in any way possible."

Ferry troubles

The new bus war between local authority and private firms also threatens to pull in one of the region's oldest and most picturesque forms of public transport: the Shields Ferry across the Tyne.

Ferries are said to have linked the two banks of the Tyne near its mouth into the North Sea for 700 years.

In summer, tourists swell the numbers aboard the short trip that links the communities of North and South Shields, which grew up around shipyards on either side of the river.

A subsidised bus service connects passengers with the Metro station on the North side of the ferry, which is also a designated part of the National Cycle network.

But while Nexus says it is a vital transport link throughout the year, without leisure passengers it does not pay for itself. If the local authority cannot make up its funding shortfall by franchising bus operations, it warns the ferry will be axed by 2022.

Article Source : http://www.guardian.co.uk

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