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Reforming bus subsidy

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The government isn’t rushing into the reform of BSOG. That’s the good news. And it has no great plans for regulatory reform either. So that’s good news too. All in all, transport secretary Norman Baker has shown sympathy with the bus industry and its concerns in a Green Paper published this week, while reaffirming that a subsidy based on fuel use is not really appropriate in these environmentally-conscious times.

The government’s BSOG plans are set out in “Green Light for Buses”. Says Baker: “The system of subsidy we have inherited is poorly targeted. It does not distinguish between profitable services and those that require local council support. It does not take into account the differing public transport needs of urban and rural areas. And it does little to incentivise fuel efficient buses.”

The key proposal is that rather than paying all BSOG directly to bus companies, the government will instead direct the money to local authorities where it relates to tendered services. This will allow decisions to be made locally on how the cash should be spent and, says the DfT, will create an opportunity for local councils to use this new money alongside existing cash to improve accessibility in their area by purchasing socially necessarily services. The money will be ring-fenced in the short term.

A similar scheme is being considered for London – paying the money currently spent on BSOG to Transport for London, rather than to the operators.

Some of what was BSOG money will be used to support Better Bus Areas where local transport authorities and bus companies work together to improve services. Where a BBA is established, the government will calculate how much BSOG is paid each year to all the bus companies operating services within the area covered by the BBA. For as long as the BBA continues, that amount will be paid to the authority – or authorities –to allow them to introduce measures to improve bus services, such as better bus stops and stations, better ticketing systems or bus priorities. The DfT says that a key consideration in the designation of a BBA will be the ambition of the local council to use its traffic management powers to help make buses more punctual.

And it says that although bus companies in BBA areas will no longer have BSOG paid directly to them, local transport authorities will have to work very closely with operators when deciding how best to spend the money. The DfT adds that a top-up fund will mean that each BBA will receive significantly more funding than the area would have been paid under the present BSOG system. To begin with, the government hopes to establish up to 12 BBAs, with the first being formed next year. The BBA would last for four years with extensions available in areas with good results.

There are no plans “at this stage” to devolve BSOG funding for commercial services to those local councils which are not in BBAs. However the government is to consult later this year on excluding certain types of service from BSOG eligibility, including rail replacement buses, tourist services and services connecting seaports and airports to their dedicated car parks.

Turning to regulation, there are no surprises in the Green Paper. In 2012/13, the government will bring forward a package of secondary legislation to implement the remedies recommended by the Competition Commission to amend the way in which local bus services in England and Wales must be registered with a traffic commissioner. This is intended to help prevent bus companies from engaging in predatory behaviour when a new entrant registers a rival service. It will include a requirement that operators give local authorities two weeks’ notice of their plans to change any service registrations.

The government is developing guidance on mandatory, competitively-priced bus-only multi-operator ticketing schemes with effective governance, access for new entrants and with appropriate, locally-determined zonal coverage. Primary legislation may be on the way if these schemes do not materialise. And it is also making £15million available to speed the introduction of smart ticketing.

CPT welcomed the government’s plans. Says chief executive Simon Posner: “We are glad that the minister has resisted calls from some quarters to devolve the payment of all of BSOG to local authorities. The minister’s proposals on how BSOG just for tendered services will be distributed appear sound. They will enable the industry to work with local authorities to deliver local bus services that meet the needs of our customers.

“We will need to look at the proposals to remove the ring fencing of this funding after the transitional period. It is vital that this funding is used for the benefit of passengers on local bus services and not ultimately to support other areas of local authority spending. Failure to do this will result in a reduction of services and increases in fares – the very thing BSOG has supported for a number of years.”

The Passenger Transport Executive Group also welcomed the proposals. Says PTEG’s David Brown: “We have been arguing long and hard that support for local bus services is best targeted locally rather than paid out on a uniform basis by Whitehall. Whilst falling short of full devolution of bus subsidies today's announcement is a breakthrough that we believe will ultimately lead to better value being achieved from every pound of taxpayer support for the bus services.

“In particular it offers the opportunity for PTEs to work with bus operators to target BSOG funding where it will have the biggest impact. This could include bus priority, smart ticketing or cleaner buses - whatever makes most sense in each area.”

And Giles Fearnley, managing director of First UK Bus, adds: “Ministers have got the balance right on the main industry subsidy, BSOG.  Devolving responsibility for BSOG to local authorities for the socially useful services they tender is sensible. They will be made more accountable for specifying these services, whilst ensuring that operators can continue to provide them.”

But over at the Campaign for Better Transport, Sophie Allain, the organisation’s public transport campaigner, played the cuts card: “The new bus policy is welcome and giving councils more powers and funding may help, but today’s announcement is just a silver lining to a big black cloud of bus cuts and doesn't deal with the cuts to services across the country.”

Labour’s shadow transport secretary, Maria Eagle, criticises every aspect of the proposals. Her view on funding is summed up when she says: “Instead of this muddled approach, the government should have brought together and devolved to transport authorities all bus funding, while requiring it to be spent on the services for which it was intended."

But what seems particularly rich is her claim that “the government’s reforms have ducked the big issue which is that bus deregulation outside London is a dogmatic Tory experiment that has failed.”

Perhaps she has forgotten that if it was such a terrible wrong, her party had 14 years to right it.

The last word goes to Baker: “Since half of all car journeys are less than five miles in length, the bus is ideally placed to help the coalition government meet its challenging carbon reduction targets. After all, 85 per cent of households in England (not including London) live within a six minute walk of a bus stop. We just need to join the dots.”

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