RESEARCH REPORT 210 THE EFFECT OF BUS DEREGULATION IN THE METROPOLITAN AREAS

Transcription

1 TRANSPORT AND ROAD RESEARCH LABORATORY Department of Transport RESEARCH REPORT 210 THE EFFECT OF BUS DEREGULATION IN THE METROPOLITAN AREAS by K E PERREI-F, JEAN M HOPKIN, M W PICKE'I-F AND D A WALMSLEY The views expressed in this report are not necessarily those of the Department of Transport Transport Planning Division Safety and Transportation Department Transport and Road Research Laboratory Crowthorne, Berkshire, RG11 6AU 1989 ISSN

2 Ownership of the Transport Research Laboratory was transferred from the Department of Transport to a subsidiary of the Transport Research Foundation on I st April This report has been reproduced by permission of the Controller of HMSO. Extracts from the text may be reproduced, except for commercial purposes, provided the source is acknowledged.

3 CONTENTS Page Abstract 1 1. Introduction 1 2. Government objectives The problem The solutions contained in the Act The expected results 3 3. Effects of deregulation on the PTAs and PTEs The 1985 Local Government Act Changes in functions of the PTE 3 4. PTA policies Approaches to the provision of subsidised services Transport for disabled people Education transport Concessionary fares 5 5. Tendering Management of the tendering process Service planning Service specification Contract type Evaluation Scale and development of tendered services Competition for tenders Cost of tendered services Encouragement of new operators 9 6. Operator strategies The need for a strategy Tendering environments Commercial registration strategies Succuss in tendering Behaviour since deregulation Supply of bus services Measurement of vehicle miles Total mileage before deregulation Market share before deregulation Commercial registrations 7.5 Success in tendering 7.6 Situation at deregulation 7.7 National situation after eighteen months 7.8 The PTE areas after eighteen months 7.9 Impact on competition 7.10 Rate of change 8. Development of the private sector 8.1 Overview on growth 8.2 Tendered services 8.3 Development of minibus services 8.4 Developments by operators new to local services 9. Competition 9.1 Overview 9.2 Competition in Strathclyde 9.3 Manchester Minibuses 9.4 Tyne and Wear Omnibus Company 9.5 Other examples of competition 10. Passenger attitudes to deregulation 10.1 The survey 10.2 View of changes to services 10.3 Changes in bus use 10.4 Aspects of services 10.5 Summary of passenger attitudes 11. Fares and ticketing 11.1 Single fares 11.2 Child fares 11.3 Travelcards 11.4 Fares on tendered services 11.5 Fare competition 12. Patronage 12.1 The availability of data 12.2 Overall changes in patronage 12.3 Patronage in the individual metropolitan areas 12.4 Other patronage effects Page

4 Page 13. Passenger information The need for passenger information Current practice The effects of poor service information Surveys of passenger perceptions of travel information Working practices 14.1 The Transport Act 14.2 Cost savings before deregulation day 14.3 Staff agreements 14.4 Independent operators 14.5 Public sector operators 14.6 Additional costs 14.7 Further cost savings 15. PTE costs 15.1 Changes in the nature of PTE costs 15.2 Method of comparing costs 15.3 Cost headings Concessionary fares Revenue support and tendered bus services Section Pensions Debt charges PTE duties Other public transport PTA costs 15.4 Other costs 15.5 Conclusion 16. Operator costs and revenues 16.1 Operator revenues 16.2 Bus operating costs 16.3 Numbers of staff employed 16.4 Operator viability Other aspects of the Transport Act 18.1 Traffic regulation conditions 18.2 Office of Fair Trading Anti-competitive practices Restrictive practices 19. Summary of main findings Background 19.2 The bus market in the PTEs Vehicle mileage Market shares Development of the private sector Operating territories Competition Development of minibus networks 19.3 Tendered services PTA policies PTE decisions on subsidised services Subsidised mileage Competition for tenders 19.4 Operators Operators' strategies Behaviour since deregulation Working practices Operators' costs 19.5 The effects on passengers Costs Fares Acknowledgements References Patronage Passenger information Passenger reaction Operator costs and revenues Costs of tenders PTE costs Page Effects on passengers 17.1 Effects of changes in supply and fares 17.2 Reasons for differences in patronage CROWN COPYRIGHT 1989 Extracts from the text may be reproduced, except for commercial purposes, provided the source is acknowledged

5 THE EFFECT OF BUS DEREGULATION IN THE METROPOLITAN AREAS ABSTRACT This report summarises the effects of the 1985 Transport Act, commonly known as bus deregulation, in the Metropolitan Areas. Despite wide variations in the proportions of bus services registered by operators initially as commercial, all PTEs were able to afford to issue contracts for socially necessary services. Many operators encountered operational difficulties on deregulation day, 26th October 1986, as there were many changes to services. These difficulties were overcome and service levels have increased. However, services are still changing frequently as operators react to commercial opportunities. The new companies set up by the Passenger Transport Executives to take over their bus operations made major reductions in staff and operating costs. Private operators have increased their share of the market dramatically. Competition between operators has increased, both on the road and in bidding for tendered services. There has been little competition on fares. Moreover, average fare levels have risen substantially. Patronage has decreased and by more than would have been expected from the changes in fares and service levels. Passenger attitudes were less favourable to the changes than those in the shire counties. Concessionary fare schemes have been maintained and extended to children and other special groups. Travelcard schemes have generally been maintained, and new travelcards have been introduced by some operators. Laboratory in co-operation with six of the PTEs (South Yorkshire was not included). Much of the material presented has been gathered through regular monitoring meetings. Statistical information from a number of sources has also been used, including the computerised Bus Registration Index established at TRRL which contains details of all local bus services registered to operate at deregulation and up to May 1988~ These data have been used to supply the information on vehicle mileages quoted in the report. 1 INTRODUCTION The 1985 Transport Act introduced the largest change for over fifty years in the statutory framework within which local bus services are provided. It was designed to introduce a competitive, commercial system in place of the previous publicly owned and regulated one, and it changed the role of Passenger Transport Executives from one of planning to one of responding to the commercial market. This report summarises the changes to bus services which took place when the Act was implemented in the areas covered by the Passenger Transport Executives (PTEs), namely, West Midlands, Greater Manchester, Merseyside, South Yorkshire, West Yorkshire, Tyne and Wear, and Strathclyde (Figure 1). More detailed reports covering most of these PTE areas individually are available as TRRL Research Reports or Working Papers; these are listed in Section 21. Figure 1 The report is the result of joint monitoring exercises carried out by the Transport and Road Research

6 2 GOVERNMENT OBJECTIVES 2.1 THE PROBLEM The Government's objectives for the 1985 Transport Act were put forward in the White Paper 'Buses' (Department of Transport, 1984), which noted that patronage had been falling for many years and fares had increased--by 30 per cent in real terms in the decade to yet over the same period revenue support had risen nationally from 10 M to over 500 M. The Government's view was that, in some of the major cities, these subsidies had been used to maintain artificially low fares and levels of service out of step with current demands. According to the White Paper, the cost of subsidising public transport was now unacceptable, and bus services could be improved and costs reduced if the industry were organised in a different way. The White Paper identified a number of problems. Firstly, it suggested that the route licensing system made it difficult for a new operator to enter the market in the face of opposition from established operators. If Road Service Licences were abolished, operators would be encouraged to be more responsive to passenger demand. Secondly, the Government believed that the established operators were generally too large, with substantial overheads, and, since they were owned by local authorities, they were obliged to follow policies and standards which were not always wellfitted to local needs. It was believed that smaller, private operators could show cost savings of per cent. Thirdly, it was also believed that the practice of paying network revenue support gave the operator little incentive to improve performance. For its part, the local authority had little choice of operator and could not fully judge whether the services it bought were run efficiently. The introduction of a tendering process would ensure value for money, and would enable local authorities to see clearly the costs involved in supporting individual services. Fourthly, the PTEs' concessionary fare schemes, allowing cheap or free travel to various groups of the population, had originally been provided at little cost, but it was argued that in recent years the reimbursements had contained elements of hidden subsidy. Fifthly, the White Paper questioned whether the PTEs' role in promoting comprehensive, integrated transport systems justified the costs, and suggested that their role should be limited to providing those socially necessary services which the free market would not provide. 2.2 THE SOLUTIONS CONTAINED IN THE ACT In order to deal with these problems, the new legislation in the 1985 Transport Act was designed to reorganise the bus industry on commercial lines and to introduce competition. There were three main provisions: (1) Deregulation: The system of Road Service Licences was abolished, and PSV operators were free to run any services they wished (subject to safeguards on safety and congestion) provided they registered the services 42 days in advance. (2) Tendering: It was recognised that some bus services were socially necessary but would not cover their costs from revenue. The Act therefore allowed subsidies for such services, but competition would be ensured by a system of tendering for specific services. (3) Privatisation: In order to promote competition, the PTE bus operations were to be reorganised into independent companies, and NBC subsidiaries (though not Scottish Bus Group operators) were to be broken into smaller units and privatised. The deregulated services came into effect on 26 October 'Deregulation Day'. However, commercial services had to be registered eight months previously (by 28 February 1986), giving local authorities time to identify additional services and let contracts. Initially, services had to operate as registered for 3 months, but from 26 January 1987 operators could change their registrations at will (with 42 days" notice). To ensure that operators did not act together to inhibit competition, bus operators were to be subject to the Restrictive Trade Practices Act. As a result, any agreement which could restrict competition (such as agreements on fares, areas of operation, boarding/alighting restrictions, or joint operations) had to be registered with the Office of Fair Trading and could be referred to the Restrictive Practices Court. As well as the Transport Act, the Local Government Act 1985 also had important consequences for local public transport. Under this Act, the Metropolitan County Councils were abolished, and their functions as Passenger Transport Authorities, to which the Passenger Transport Executives became responsible, were established separately. The Act also gave the Secretary of State for Transport powers to set expenditure limits on the PTAs, who were therefore constrained in supporting services and promoting public transport. It is not possible to say which changes in services resulted from this expenditure control and which from deregulation. 2

7 2.3 THE EXPECTED RESULTS As a result of the changes introduced in the Act, it was expected that the following benefits would ensue: (i) Competition would be created, both between existing operators and by new operators entering the market. Even where direct competition did not materialise, the threat of competition would promote efficiency. (ii) As a result of competition, fares would be reduced, services would be improved, and there would be a wider variety of services. (iii) As operators responded more keenly to passengers' demands the number of people travelling would increase. (iv) The cost of subsidising bus services would fall because routes which were not profitable for a large operator could be run commercially by a smaller one, and because competition for tenders would ensure cost reductions on subsidised services. As a result, the ratepayer and taxpayer would achieve better value for money. (v) At the same time, it was expected that the main network of services would be maintained, because operators would provide services where the market warranted them, and the local authority would maintain socially-necessary services through the tendering process. 3 EFFECTS OF DEREGULATION ON THE PTAS AND PTES 3.1 THE 1985 LOCAL GOVERNMENT ACT The Local Government Act, which was passed in 1985, had consequences for local public transport in the metropolitan areas which were as important as those of the Transport Act. This Act took effect during the same period as bus deregulation and needs to be borne in mind when interpreting any observed changes in service provision. Under the Act, the six metropolitan County Councils were abolished with effect from 1st April 1986, i.e. during the transitional period immediately prior to deregulation. Their function as Passenger Transport Authorities passed to statutory Joint Boards consisting of members nominated by the constituent District Councils. The membership of the Joint Boards was usually completely different from the previous PTA, which consisted of County Councillors. Some Boards were operating in a 'shadow' capacity for some months before April PTAs were empowered to raise finance directly through the rating system by setting a precept. However, the Local Government Act also gave the Secretary of State for Transport the power to prescribe the maximum precepts for an initial three year period. This was more restrictive than previous constraints on expenditure, since although the Metropolitan County Councils were subject to general precept control under the 1984 Rates Act, the effects on public transport were indirect as the County Councils could allocate the available funds between expenditure heads. 3.2 CHANGES IN FUNCTIONS OF THE PTE Before April 1986, responsibility for public transport had been split between the PTEs, which dealt mostly with operational matters and network planning, and the County Transportation teams which concentrated on strategic planning issues. Some of the county responsibilities were transferred to the PTEs in the form of Policy Units (e.g. Merseyside and West Yorkshire), but most were disbanded. The PTEs were completely restructured as a result of the changes in functions. The major change was that the PTEs were required to establish separate financially independent bus companies. The task of registering commercial services was undertaken while the PTE staff were being divided between the two organisations. When the bus company staff left in April 1986, the remaining staff took on the task of interpreting the new policies, identifying gaps in services, defining contracts and introducing a tendering process. The concessionary fare schemes introduced at deregulation were essentially the same as before from the passenger point of view, but the requirements for reimbursing operators changed. In practice, this meant that new arrangements for collecting survey data were introduced and more formal methods for paying operators established. Passenger information had normally formed an integral part of the network planning operation within the PTEs. With deregulation, PTEs needed to separate the function of providing information. Travelcards which provide unlimited area-wide travel have been maintained in most of the PTE areas. However, these had been previously financed internally within the PTE operation. Following deregulation they were required to be financially independent. PTEs have generally handled the administration of these schemes, including the estimation of revenue allocation, publicity and marketing. Slightly different arrangements have been adopted in several PTEs. For example, in Tyne and Wear, a company was set up by the operators to handle the administration of the travelcard scheme, with the PTE being reimbursed for marketing and monitoring services. 3

8 There were other functions which had been encompassed within the PTE operation before deregulation which have since been more formally recognised. One such example is the Special Needs transport which has become a more significant aspect of PTA policy. 4 PTA POLICIES The PTAs are responsible for defining policy on public transport provision and expenditure. During 1986 they published policy statements on the provision of 'socially necessary' public transport, and on how they intended to provide for education transport, transport for disabled people, and concessionary travel by elderly and disabled people and schoolchildren. In general these statements continued previous policies, although some PTAs changed their approach. 4.1 APPROACHES TO THE PROVISION OF SUBSIDISED SERVICES Some PTAs defined geographically-based minimum levels of service, while others put different degrees of priority on the need to make journeys for various purposes. The need to maintain traditional links was an important feature in some areas, such as Tyne and Wear, while others such as Merseyside took the opportunity to re-evaluate the network. Integration was a major objective for all PTAs. Policy statements included requirements for maintaining bus linkswith the rail network and for area-wide ticketing on bus and rail as a means of promoting an integrated public transport system. Comprehensive information and publicity were also seen as a key element in integrated public transport, and some PTAs provided for continuing or introducing areawide information systems. Some PTAs, notably Merseyside and the West Midlands, explicitly identified the role of transport in overcoming problems of social deprivation; their policy statements included provision for ensuring that the fares on subsidised services were set at a level which people could afford. Budget limitations were expected to restrict the provision of subsidised services in all metropolitan areas. In developing and implementing policies, these expected restrictions influenced plans for subsidised services. In the event, however, all metropolitan areas were able to fund the services they required without spending all of their 1986/87 budgets. In some areas, budget restrictions became a real concern as time went on and policies were revised, introducing more specific criteria for 'socially necessary' services, during the year after deregulation. The most striking example was Strathciyde where the criteria became very restrictive. PTAs also revised their policies in the light of experience of operators' tactics in registering and de-registering commercial services. 4.2 TRANSPORT FOR DISABLED PEOPLE All PTAs identified disabled people as having particular transport needs. The policies developed immediately before deregulation included provision for subsidising various existing special transport services. Many were demand-responsive, using vehicles which had been specially adapted to carry people in wheelchairs and provided a door-to-door service. During the two years since deregulation, policies on disabled people have not changed, but transport has expanded as funds have become available. It has been found to be most cost-effective to provide a range of different types of service, rather than concentrating on demand-responsive services. Resources are now being devoted to providing dial-aride schemes in more areas, and new fixed route services for less severely disabled people are also being developed. 4.3 EDUCATION TRANSPORT There was no change in the policy on paying for school travel at deregulation, but the inclusion of children in concessionary fare schemes was an important issue, and will be discussed later in this section. The 1985 Transport Act specified that authorities should aim to integrate schools services with other public transport. Education transport is dealt with rather differently in the various authorities. In some, such as Tyne and Wear, school children qualify for concessionary fares and most children travel to school on scheduled services which are available to the general public; special services are provided only in exceptional cases where scheduled buses do not provide adequate links to schools. In this type of situation, it could be argued that integration had largely been achieved already. In contrast, Strathclyde invited tenders from bus companies to operate services to all the mainstream schools. Operators were left to decide whether scholars were to travel on commercial routes or special buses. The 1985 Transport Act provided the impetus for completing the integration process in Strathclyde, but there has been little change in the level of integration in other areas. 4

9 4.4 CONCESSIONARY FARES All metropolitan areas have operated concessionary fare schemes for elderly and disabled people for some years. Schemes have usually been more generous than elsewhere, with most offering free travel to pensioners and disabled people. Under the 1985 Act local authorities were given the power to make it compulsory for operators to participate in concessionary fare schemes, and authorities had to ensure that operators were no better or worse off than they would have been if no scheme had existed. The Act enabled local authorities to administer concessionary fare schemes for pensioners, blind people and disabled people with severe difficulty walking, as they had done for some years; specific reimbursement for children under 16 and those aged 16 to 18 in full time education could be provided for the first time. During 1987 the legislation was extended so that various additional categories of disabled people could be included. With deregulation the concessionary fare schemes in metropolitan areas did not change substantially, although the arrangements for children to travel at a reduced rate were formalised into the concessionary fares scheme in Greater Manchester, Tyne and Wear, the West Midlands and West Yorkshire. The policies in Merseyside and Strathclyde were that operators should charge children reduced fares on a commercial basis. Children and 16 to 18 year olds in full time education travelled at half fare on subsidised services in Merseyside but not all operators charged lower fares on commercial services. A year after deregulation therefore, Merseyside PTA extended the scheme to cover children. In Strathclyde, two SBG subsidiaries charged children the full fare in the morning peak, but later reverted to half fares. Six PTEs agreed concessionary fare schemes with operators, but in Strathclyde the Regional Council had to resort to compulsory participation in the case of a few small firms. During 1988, however, the Strathclyde scheme was changed and the main operators could not agree to the new value for generated travel that was included in the calculations aimed at ensuring that operators were no better or worse off than they would have been without the scheme. The major operators appealed to the Secretary of State for Scotland against compulsory participation. At the time of writing the outcome of the case is not known. During 1987 PTAs have all expanded their schemes to include some of the additional groups of disabled people; West Yorkshire was the only one to include all of these groups. 5 TENDERING The task of tendering for socially necessary bus services was managed for the PTAs by the PTEs. The way it was organised differed in the various areas, and the issues which arose were different in each one. General conclusions about factors contributing to success in the tendering process are difficult to draw because strategies and systems which worked well in some areas were found to lead to problems in others. 5.1 MANAGEMENT OF THE TENDERING PROCESS Service planning In the year before deregulation some PTEs were engaged in large scale planning, assessing public transport requirements and developing strategies which determined how they would react once the commercial services were known. In Greater Manchester, for example, the economic benefit of every bus service was calculated so that an order of priority could be established for replacing services; the assumption was that funds would not be sufficient for replacing all services that were not commercial. In contrast, other PTEs, such as West Yorkshire, waited until the commercial services were known, and then set about filling the gaps. In the event, all PTEs had sufficient funds at deregulation to provide all the services which they considered to be socially necessary. The approaches adopted by PTEs to providing socially necessary services can be divided into two groups: gap filling and planning for accessibility. The gap filling approach was typified by West Yorkshire, but was also employed in Strathclyde, Tyne and Wear and Greater Manchester. In West Yorkshire, the policy was to maintain the system of public transport which had been developed over previous years. The PTE aimed to implement this by finding the differences between the previous and the commercial networks, and putting tendered services in those gaps. Accessibility planning was used in the West Midlands and on Merseyside. In the West Midlands, minimum levels of service were defined in terms of accessibility to key locations and access of residential areas to bus stops with services of specified minimum frequencies. Where these minimum criteria were not met, the PTE provided subsidised services. This meant that some tendered services enhanced the frequency of commercial routes. On Merseyside, the important transport links were defined by reference to information on the catchment areas of local facilities and zones with different levels of public transport dependency. Subsidised services were planned to complete the links which were not served by commercial bus or rail services; some of these links had not previously been served.

10 West Yorkshire PTE waited until the commercial network was known before planning subsidised services. They encountered a difficulty with the gap filling approach in defining services in one area. The commercial services registered in Leeds were quite different from those which had been run before, and were designed to serve the entire network at a lower, commercial level of service; this had the effect of minimising the number of gaps which could practicably be filled by additional services. The PTE had to devote considerable effort to designing tendered services to supplement the commercial network and restore overall service standards to those which had been available before. The process was not completed early enough for publicity to be produced and there was consequently some initial confusion over services in Leeds. The provision of subsidised services in areas which had not been served by buses immediately before deregulation caused some difficulty in at least two areas: West Yorkshire and the West Midlands. Here, operators started new routes, often with minibuses, in areas which had not been served, at least in recent years. On the basis of comparisons with the previous network in West Yorkshire, or on the basis of providing minimum levels of service and accessibility in the West Midlands, these areas did not all 'qualify' for socially necessary services. Where these new services were later withdrawn, or where other similar areas requested equal treatment in access to such services, the PTEs came under pressure to provide subsidised services which did not always meet their specified criteria. PTEs tried to avoid planning subsidised services which were likely to compete directly with commercial routes. Abstraction of passengers could lead the operator to withdraw the commercial service, which the PTE might then have to subsidise. PTEs were also anxious to avoid the charge of unfair competition. However avoiding competition in this way did restrict the ability of some PTEs to plan socially necessary services. Merseyside PTA and PTE were accused of inhibiting competition. The policy that fares should be at a level which people could afford meant that the April 1986 fare scales were retained on subsidised services. Since fares on commercial routes had increased by 55 per cent at deregulation, subsidised services were seen by operators as competing, although the PTE had avoided providing services parallel with commercial routes where possible. Two operators sought a Judicial Review against the PrA and the PTE; the judgment and the appeal decision were in favour of the PTA and the PTE Service specification Most PTEs specified a complete service description in tender documents. In some cases, Merseyside PTE asked operators to tender for a minimum level of service over a specified set of links. By leaving operators to plan the exact route, taking account of their commercial operation, the PTE expected cost savings. Tyne and Wear PTE employed a novel form of contract which they termed 'miscellaneous workings' for schools, works and similar services. Operators were asked to make specified numbers of buses available for defined time periods. The PTE determined how the vehicles were to be used, and could therefore respond at short notice to changing requirements, without having to re-tender under a new specification Contract type Most PTEs used 'minimum subsidy' contracts for the majority of tendered services; the operator keeps the revenue and the PTE covers the expected operating deficit. The reason for using this type of contract was that the operators were risking the income and therefore had an incentive to run a reliable service. Tyne and Wear employed a mixture of 'minimum subsidy' and 'minimum cost' contracts. With 'minimum cost' contracts, the PTE pays the full cost of the service and collects all the revenue. Tyne and Wear PTE found that competition was greater and prices were lower on the minimum cost contracts, because the PTE, rather than the operator was taking the risk that revenues would be lower than expected. By November 1987 all new Tyne and Wear contracts were of this type. West Midlands PTE, in contrast, did not find these contracts successful. Operators were unwilling to bid on a minimum cost basis; those which did added an average of about 20 per cent to the cost Evaluation There has been an increasing tendency for operators to submit bids for several contracts, offered as a package. Although this makes it more difficult for PTEs to compare bids and select the cheapest option, at least one PTE (Merseyside) found it considerably cheaper to accept package bids. In Strathclyde, operators attempted to pressurise the PTE by offering to run either all or none of the tendered services in a particular area. This practice was started by one large operator, but was later adopted by others, and similar practices occurred in West Yorkshire. PTEs have found that the staff effort necessary for the tendering operation has been greater than anticipated. Commercial services have been changing frequently, and the implications of every change for subsidised services have to be examined by the PTE, even though many of these changes do not result in a requirement for a tendered service. The scale of change is discussed in more detail in Section 7 but some indication of the extent of change can be gained from the fact that the changes over the eighteen month period amounted to 200 per cent of the current vehicle miles.

11 5.2 SCALE AND DEVELOPMENT OF TENDERED SERVICES National statistics show that between October 1986 and March 1987, subsidised services in English metropolitan areas were equivalent to 61 M vehicle miles per annum. In 1987/88 this had risen by about 4 per cent to 63 M vehicle miles per annum (Department of Transport, 1988) but the commercial mileage rose more, so that as a proportion of total mileage, the subsidised element fell from 17.6 per cent to 16.5 per cent. The proportion of vehicle miles that were subsidised was almost the same as in counties outside the English metropolitan areas where absolute levels of service are considerably lower. Around the ~time of deregulation, registration documents for services attracting subsidy could be identified, and estimates of the number and proportion of vehicle miles with subsidy in each metropolitan area could be made. Figure 2 shows that the mileage operated on tendered services varied considerably, being more than twice as extensive in West Yorkshire, for example, as in Greater Manchester. Tendered services accounted for only 8 per cent of mileage in Strathclyde and 10 per cent in Greater Manchester; at the other extreme were Tyne and Wear and West Yorkshire, where the proportion was 24 per cent. Over time the data have become less precise. Registration documents have not always identified subsidised services, and operators' commercial strategies have made it difficult to separate commercial and subsidised elements of individual bus services. At the same time, the variation between PTEs in the way the tendering operation has been approached makes it more difficult to compare different areas. Between November 1986 and May 1988 tendered mileage fell slightly (by about M miles) in Strathclyde and South Yorkshire. The subsidised services in Strathclyde consist largely of school transport which is relatively stable, and this explains why the amount of mileage attracting subsidy changed less than in other areas. West Yorkshire, Tyne and Wear, Merseyside and the West Midlands had larger falls, between about 2 M miles in West Yorkshire and about 3 M in the West Midlands. In contrast the tendered mileage in Greater Manchester grew steadily by about 3 M miles over the first 18 months after deregulation. The areas where the proportion of mileage receiving subsidy was highest at deregulation saw large falls in the share of mileage which was subsidised. The distribution of tendered mileage between different times of day and days of the week has changed since deregulation, in response to developments in the commercial network. Operators have increased commercial mileage in the early mornings, in the evenings and on Sundays, and tendered mileage at these times has been reduced, as figures 3 and 4 show. During the main part of the day, operators have increased commercial mileage but tendered mileage has not reduced to the same extent. This pattern was not repeated in all PTE areas, however; in Merseyside, for example, the shift of commercial mileage to the more profitable times of day has been more pronounced and tendered Commercial/Others ~ Tendered Greater Manchester Merseyside South Yorkshire Tyne and Wear West Midlands West Yorkshire Strathclyde I t I I I I Annual vehicle miles (millions) 120 Fig. 2 Commercial and tendered mileage November 1986

12 Time Early morning-nov 86 -May 88 AM peak-nov 86 -May 88 Inter-peak-Nov 86 -May 88 PM peak-nov 86 -May 88 Evening-Nov 86 -May 88 Night-Nov 86 -May 88 Tendered Commercial Hourly vehicle miles (millions) Fig. 3 Commercial and tendered mileage: all PTEs Monday to Friday Time Saturday Early morning-nov 86 -May 88 AM peak-nov 86 -May 88 Inter-peak-Nov 86 -May 88 PM peak-nov 86 -May 88 Evening-Nov 86 -May 88 Night-Nov 86 -May 88 Sunday Morning-Nov 86 -May 88 Afternoon-Nov 86 -May 88 Evening-Nov 86 -May 88 ~////////////.Ax\\\\\\~ ~////////////~\\\\\\\~ ~///////////.~\\\\\\~ ~///////////.~\\\\\\\~ ~//////p///.a~\\\\\\\~ ~//////////.A~\\\\\\~ ~/////////////.~\\\\\~ Tendered Commercial 0 I Hourly vehicle miles (millions) I i Fig.4 Commercial and tendered mileage: all PTEs weekends 8

13 mileage at unprofitable times has increased more substantially, so that, for example, over half of the Sunday services are subsidised. 5.3 COMPETITION FOR TENDERS Competition for contracts varied substantially between the PTEs. Tyne and Wear had the least competition, with 81 per cent of the first round of tenders attracting only one bid, compared with 66 per cent in West Yorkshire, 58 per cent in the West Midlands, 43 per cent in Merseyside, 31 per cent of local services in Strathclyde and only 21 per cent of tenders in Greater Manchester. Not only was competition in Tyne and Wear low, but there was no competition between the main operators; the only cases where more than one company bid were those where a small operator bid against an established one. In Greater Manchester where competition was greatest, around a fifth of tenders attracted four or more bids, while in some areas no tenders had this many bids initially. A year after deregulation, there was less variation between areas and all had seen an increase in competition, but the average number of bids per contract remained less than three. In Tyne and Wear, the two main operators (Busways and Northern) began to compete against tendered services on the road, during Where contracts are won by small operators, one of these two companies will generally register the service commercially so there is rarely a need for a subsidised service. This situation has not occurred to the same extent elsewhere; it can be speculated that the reason why it has occurred in Tyne and Wear is that the main companies fear that small firms could thrive on the basis of a few tendered services together with the repayments from the concessionary fares scheme. 5.4 COST OF TENDERED SERVICES An assessment of variations in the cost of tendered services between areas and an examination of changes in tender prices since deregulation would provide a useful insight into the factors influencing the cost of tendered services. However the unit cost of tendered bus services is difficult to determine, and comparisons over time and between different areas cannot readily be made on a comparable basis. These difficulties arise for several reasons. As mentioned earlier, the tendered mileage operated in each area cannot be determined precisely. The amount of cross-subsidy remaining within commercial operations varies between companies and this affects the unit cost of the tendered services. Ways of packaging groups of services and operators' commercial decisions on which services are commercially viable have changed since deregulation, and differ between areas. One way to compare costs is to divide the total PTE spending on tendered services in 1987/88 by the tendered mileage operated in the year. The results are shown in Table 1. These figures suggest that there are big differences between areas, with the lowest (Tyne and Wear) being half the unit cost in the highest (Merseyside). The cost in the West Midlands is surprisingly low, given the dominance of one operator and the low level of competition. TABLE 1 Comparison of unit cost of tendered services 1987/88 PTE per mile Greater Manchester 1.06 Merseyside 1.58 Tyne and Wear 0.63 West Midlands 0.89 West Yorkshire 0.95 Strathclyde 1.08 Six PTE areas 1.14 Some PTEs have noted changes in costs over time but these do not necessarily indicate trends because other changes have occurred. In West Yorkshire, the tendered services cost about 4 per cent less a year after deregulation and in the West Midlands the reduction was 17 per cent. In Tyne and Wear prices are lower than at first, but the PTE attribute this to increased use of minimum cost contracts. Unit costs after a year were higher and more variable on Merseyside than they were initially, but after the first year or so, services at the margin tended to be operated commercially, so the nature of services with subsidies is now different. Factors which at least some PTEs consider to be important in contributing to cost reductions include the small 'package deals" mentioned earlier; the 'potential' competition which results from an increase in the number of operators running local services in the area; and the use of 'minimum cost' contracts (as in Tyne and Wear). However, as mentioned earlier, the lessons learned in one metropolitan area do not necessarily apply in another. 5.5 ENCOURAGEMENT OF NEW OPERATORS It was in the interests of PTEs to encourage small companies to bid for tendered services. The PTEs found that the additional competition kept down the size of bids by larger companies, and this helped to hold down the cost of tendered services. PTEs had provided small firms with detailed information about the implications of the 1985 Act. Despite these efforts small companies running contract hire services were initially reluctant to bid for local service contracts. After deregulation, PTEs renewed their efforts to encourage small companies.

14 On Merseyside, some small firms entered the market for tendered services after Christmas The main companies were not willing to provide services on Boxing Day. The PTE encouraged small companies and about 30 of them ran one or two routes each on Boxing Day. Having had this experience of running tendered services, some of these companies won various contracts during In Tyne and Wear and Strathclyde, personal contact, telephone calls and meetings with operators who had expressed an interest in tendering have been used by the PTE to increase the number of companies bidding for contracts. 6 OPERATOR STRATEGIES 6.1 THE NEED FOR A STRATEGY Before deregulation, most bus networks were quite stable. Changes were often of a minor nature and major changes were usually associated with planned revisions of the network based on surveys eg the NBC MAP exercises. As part of the process of deregulation, operators were required to register commercial services almost nine months in advance, without knowing what other operators would do. The likely actions of tendering authorities also had to be assessed, as the final operation would depend on the total of the commercial and tendered services. This meant that every large operator was involved in developing a strategy to approach the problem. The problems facing the large public bus operator were much more acute than those for the private operators. The existing operation had to be secured before considering expansion of the network. 6.2 TENDERING ENVIRONMENTS Shire Counties were able to develop policies well in advance for operators to take them into consideration when registering commercial services. However, in the Metropolitan Areas, the new joint boards were responsible for defining the policies. These formally took over control in April 1986 and so operators had doubts regarding the tendering policies. The major doubt concerned the amount of money which would be available for tendering. 6.3 COMMERCIAL REGISTRATION STRATEGIES A variety of approaches were adopted, with varying success. The most successful operators were those where there was little prospect of significant competition from private operators, and the actions of the major operators and the response of the PrEs could be predicted. Major operators registered services within their traditional territory and left gaps by not registering certain early morning, late evening and weekend services. Tyne and Wear and West Yorkshire are examples of this approach. In other areas, the perceived need to reduce the level of subsidy required the PTCs to curtail the operation and in these cases the commercial services formed a new network, rather than being simply a trimmed version of the original network. The task of replacing gaps was much more difficult in these areas. Greater Manchester, Merseyside and Leeds (West Yorkshire) are examples of this approach. While competition between major operators was not a factor in England, the growing hostility between major operators in Strathclyde meant that the commercial registrations were made in the certain knowledge that there would be strong competition. In the West Midlands, the PTC was able to register commercial services with some confidence that there would be few other operators able to compete. There were exceptions to these general approaches. In West Yorkshire, the PTC revised services in Leeds to provide a commercially viable network without leaving obvious gaps. As mentioned earlier, this approach created major problems for the PrE with the identification of gaps. Almost all major operators registered commercial services throughout their traditional operating territory. However, in rural parts of Strathclyde, there were areas where the incumbent operator did not register any services, based on the knowledge that the services would be put out to tender and then won back without difficulty. 6.4 SUCCESS IN TENDERING The operator strategies regarding tender bids were quite complex. Some operators appeared to aim for a particular size of operation. They assumed at the outset that the company would win sufficient tenders to match the available resources and then estimated tender bids based on average costs. This was evident in places where large operators had kept to their traditional territories, such as Tyne and Wear and West Yorkshire. In these areas, there was little (or even no) competition for tendered services between the large operators. Other operators appeared to plan resources with more emphasis on the commercial network and to price tenders on a marginal basis. Such bids could be relatively expensive, as the operator needed to schedule them in addition to the planned schedules. In a few areas of Strathclyde, incumbent operators submitted high prices where there was no competition. The PTE reissued some of these contracts. In other areas the operators submitted one bid for a batch of services at a discount as a means of excluding all other operators. 10

15 In Merseyside the PTC were required to make drastic reductions in staff before the PTE had finished issuing invitations to tender. The company then faced considerable operational difficulties having won a large share of the contracts. By 26 October 1986, the combined effect of commercial registration, competition from other operators and success in the tendering operation produced, in some areas, new patterns of operation with operational difficulties which took a while to overcome. In January 1987, many services in PTE areas were adjusted to overcome these problems and the PTEs issued further tenders for services for which needs had been identified. 6.5 BEHAVIOUR SINCE DEREGULATION Following deregulation, operators were able to introduce changes at short notice. Various types of strategy have emerged. One common feature of the strategies is that they all seem to involve a high rate of change which has been sustained since deregulation. The first and most striking strategy is that very few operators in metropolitan areas have decided to compete on fares. Fare levels were low before deregulation and have increased by an average of about 40 per cent since. The operator strategies vary according to the tendering policy of the PTA and the competitive situation. In the West Midlands, mileage has decreased as the PTC has deregistered marginal operations to increase the efficiency of the company. In Tyne and Wear, competition between the major companies and private operators has increased steadily. Initially, the PTE would immediately withdraw a tendered service if a similar service was registered commercially. Operators were quick to exploit this and more and more services identified by the PTE as being required were registered commercially, either before the tenders were issued or after an operator had won the contract. This has brought the total cost of the tendering operation down, as more services are run commercially. After a while, the PTE delayed the cancellation of contracts for a few months, to ensure that the new service met the identified need. In West Yorkshire, the PTA policy is to replace any service which is withdrawn by operators. This has led to some strategic withdrawals of isolated departures or extensions to routes. The existing operator has usually been in an ideal position to run these services and so wins them back as tendered services. As a result, about 80 per cent of services in West Yorkshire have some tendered element. The definition of socially necessary services in Strathclyde is more stringent than in the other PTE areas and results in fewer services being put out to tender by the PTE. The operators are not constrained by contractual obligations to the PTE and as a result they are more free to change services on commercial grounds. There has been a great deal of change as operators move buses from poorly used services to run new services. 7 SUPPLY OF BUS SERVICES 7.1 MEASUREMENT OF VEHICLE MILES The Laboratory has established a computerised database of all local services registered for operation from 26th October 1986 to 1st May 1988, a period of eighteen months. The database is called the Bus Registration Index (BRI). The BRI has been used to calculate the level of supply of bus services. The route length, number of journeys per week and the period of operation are used to estimate the annual vehicle miles registered for each service. The calculation is based on information contained in the registration document. The 1987/88 Statistics Bulletin (Department of Transport, 1988) has also provided valuable information. 7.2 TOTAL MILEAGE BEFORE DEREGULATION The mileage operated on local services in the six English metropolitan areas in the year before deregulation (1985/86) was 358 M miles (Figure 5). This mileage represented 28 per cent of the total operated in Great Britain. The areas contain 21 per cent of the total population of Great Britain (1981 Census). 7.3 MARKET SHARE BEFORE DEREGULATION Bus services operating in PTE areas November 1985, one year before deregulation were also coded into the Bus Registration Index. Data for six PrE areas are available, the exception being South Yorkshire. These data were used to compare service levels and market share at deregulation with those one year earlier. Prior to deregulation, the majority of the services within the PTE areas were run by the PTEs themselves. Figure 6 shows the market shares for each of the six PTE areas in the study. In both Greater Manchester and West Midlands the PTE operated in excess of 95 per cent of service mileage. The only PTEs which operated less than half the 11

16 ~85/86 ~86/87 ~]]]]]]87/ Veh miles(millions) Metropolitan Areas Shire Counties Great Britain Source: Department of Transport, 1988 trr ~' Fig. 5 Annual vehicle miles WYPTE 55% r ~ ~,~_... ~r rrrr ~ " ~,_ M dsland Red WMPTE 96% \ T~._~ ~'~'~,~ 4% Other 2% e f,~,., est Riding ""--..-'"" WY Road Car 16% ~ 23% York. Trac. 4% West Midlands West Yorkshire MPTE 7~ = SBG 5 9 % ~ t ~ ~ 3% SPTE 30% Western Crosville 11% Private 11% Merseyside Strathclyde TWPTE 40% GMPTE 97% ~ ~!Other 1% Other 1% - ~;,,,~. NBC 2% United 12% ~, Northern '""..-'/ General 47% Tyne & Wear Greater Manchester Fig.6 Market shares in November

17 $YPTE 68% ~ ~ Other 1% Private 4% ~ Other TWPTE 40% 0% Private 5% South Yorkshire NBC 27% NBC 54% Tyne & Wear GMPTE 88 k Other 2% Private 6% BC 5% Greater Manchester WYPTE 54% f'<', WMPTE 90% Other 1% Private 2% ~BC 8% Private 4% West Midlands NBC 41% West Yorkshire SBG 57% MPTE i-- Other 0% Private 11% Other 1% SPTE 31% Strathclyde Private 1% Merseyside,,,.,C, 29% Fig. 7 Commercial market in November

18 SYPTE 73% Other 0% Private 5% C 22% NBC 55% rivate 14% South Yorkshire Tyne & Wear GMPTE 59% r' r.,,% Other 5% NBC 18% Greater Manchester Private 18% WMPTE ~ r ~ ~ West Midlands Private 4% 3C 17% ~ Other NBC 52% West Yorkshire WYPTE 42% 1% Private 5% MPTE 49% SPTE 40% Other 1% Other 4%NBC 48 Private 3% Private 29% Strathclyde Merseyside Fig. 8 Tendered mileage in November

19 mileage in the area were Strathclyde PTE and Tyne and Wear PTE. 7.4 COMMERCIAL REGISTRATIONS All operators were required to register commercial services by 28th February Table 2 lists the total commercial mileages registered in each PTE area for operation from deregulation day. The proportion of the previous total mileage registered as commercial varied from 110 per cent in Strathclyde, where the network was receiving little subsidy (and was subject to intense competition), to 63 per cent in South Yorkshire where the network had previously been most heavily subsidised. TABLE 2 Commercial mileages registered for operation from deregulation day Greater Manchester Merseyside South Yorkshire Strathclyde Tyne ~ Wear West Midlands West Yorkshire Commercial veh. mls. (M) Percentage of Nov 85 total The PTCs registered 61 per cent of the total commercial mileage registered in the seven PTE areas. Ex-NBC and Scottish Bus Group (SBG) companies accounted for 33 per cent and private operators for over 5 per cent (Figure 7). There were significant differences between the PTE areas. For example, Greater Manchester Buses and West Midland Travel accounted for about 90 per cent of commercial mileage within their areas. Ex-NBC operators accounted for the largest share of commercial mileage in Tyne Et Wear with 54 per cent. Most operators registered commercial services within their established operating territory. There were very few instances of major operators encroaching on another established operator's territory. The only area where this was a significant feature was in Strathclyde, where the SBG companies had previously been excluded from the PTE operating area. 7.5 SUCCESS IN TENDERING Following the commercial registration process, PTEs had an opportunity to identify additional services for which there was a social requirement. These services were subject to competitive tendering. Operators who won contracts were then required to register the services for operation from 26th October At deregulation 64 M miles of tendered services were registered in the PTE areas. This represented 16 per cent of the total mileage. The previous PTE operations had by this time been moved to separate companies referred to as PTCs (Public Transport Companies). By deregulation, the PTCs had registered 52 per cent of the tendered mileage, ex-nbc and SBG operators had registered 37 per cent and private operators 10 per cent. The success of the operators in winning contracts for the operation of tendered services is shown in Figure 8. The largest shares were secured by South Yorkshire and West Midlands PTCs (South Yorkshire Transport and West Midlands Travel) with about three quarters of the tendered mileage. Private operators did particularly well in winning contracts to operate tendered services in Strathclyde, Greater Manchester and Tyne Er Wear. 7.6 SITUATION AT DEREGULATION At deregulation, total registered mileage in the six PTE areas (excluding South Yorkshire) was similar to that operated in November 1985, one year earlier. There were, however, many detailed changes in services and the combination of commercial and tendered services did not always provide a satisfactory service. As operators and PTEs recognised shortcomings in their networks, services were changed and additional services were registered to overcome these problems. As a result, mileages have increased. Of the total mileage registered in all seven PTE areas at deregulation, 59 per cent was operated by the PTCs, 34 per cent by the ex-nbc companies (including SBG) and 6 per cent by private operators (see Figure 9). Between November 1985 and November 1986 there was a change in the operators' market share in the six PTE areas included in the BRI. The PTCs' share decreased from 66 per cent to 58 per cent, the ex- NBC and SBG companies increased their share from 30 per cent to 35 per cent and the private operators doubled their share from 3 per cent to 6 per cent. The largest increase in private operation occurred in Greater Manchester and Tyne Et Wear where private operators increased mileages seven fold and five fold respectively. The 1985 Transport Act enabled most operators to register services outside their traditional operating territory. However, the PTCs were still required to operate within the PTE area. One PTC (Greater Manchester Buses Ltd) registered services in Burnley, which is outside the PTE area. The PTC had to withdraw the registrations when legal action was threatened. Other operators could introduce services within PTE areas and there are a number of examples where this occurred. In Greater Manchester, for example, Rossendale Transport Ltd, Blackburn Borough Transport Ltd and East Midlands Motor Services Ltd 15

20 PTC 59% = ~ PTC 59% r 1% Other 1% Private ' Other 409M miles November 1986 Ex-NBC 34% Private Ex-NBC 32% 442M miles May 1987 PTC 57% PTC 57% r r ',,, r" ~1 ~ rtr' '\ Other 1% Other 1% Private 1 Private 1 Ex-NBC 31% ~ Ex-NBC 30% 453M miles November M miles May1988 Fig. 9 Market shares PTE Areas Non-PTE Areas I 1000 Veh miles (millions) Nov 86 Feb 87 May 87 Aug 87 Nov 87 Feb 88 May 88 Fig. 10 Annual mileage registered in PTE and Non-PTE areas 16

21 all increased their service levels. Blackburn Borough Transport Ltd was subsequently awarded the tendered Sunday service which operated between Manchester Victoria and Manchester Piccadilly rail stations. 7.7 NATIONAL SITUATION AFTER EIGHTEEN MONTHS The total mileage operated on local services within Great Britain increased by 4 per cent between 1985/6 and 1986/7. In the period 1985/6 to 1987/8 mileages within the English PTE areas increased by 7.6 per cent overall to 384 M (see Figure 5). During the first eighteen months of deregulation, total mileage registered within the seven PTE areas increased by 54 M miles (13 per cent) (Figure 10). During this time, the PTCs increased the mileage registered by 22 M miles per annum to reach a level just 6 M miles less than the mileage operated before deregulation (Figure 11). The private sector experienced the largest increase in mileage, increasing by 93 per cent nationally from 108 M miles in 1985/6 to 208 M miles in 1987/ THE PTE AREAS AFTER EIGHTEEN MONTHS During the first eighteen months of deregulation the PTCs' market share of registered mileage within PTE areas decreased from 59 per cent to 57 per cent of the total PTE mileage. Ex-NBC companies (including SBG) increased their registered mileage slightly, but their market share dropped from 34 per cent to 30 per cent. The mileage registered within PTE areas by the private sector increased by 111 per cent during the first eighteen months of deregulation. Nationally, there were eight new private operators who started running local services after deregulation and increased their annual registered mileage to more than one million miles. Five of these new operators started running services within the PTE areas. By May 1988 these operators had collectively registered 18.6 M miles. The companies contributing to this large increase were Manchester Minibuses Ltd, Tyne and Wear Omnibus Co Ltd, SUT Ltd, Fareway Passenger Services Ltd and Magic Bus. Manchester Minibuses registered over 12 M annual vehicle miles. The trend in vehicle miles varies between individual PTE areas (Figure 12). Several areas showed a slow but steady increase. Greater Manchester, Strathclyde and West Midlands are areas of particular interest as they did not follow this general trend. In Greater Manchester registered mileage increased by 35 per cent during the first six months of deregulation. This was due to the introduction of two high frequency networks of minibus services into the southern part of the PTE area in January Manchester Minibuses began introducing new bus services and Greater Manchester Buses responded vigorously (Pickett and Greenshields, 1988). Service levels in Strathclyde increased by 20 per cent between November 1985 and November This overall increase was not applied uniformly, so not all areas have benefited equally from the changes. There has been a high rate of change, as operators move 600 l l 185/86 Veh miles (millions) 86/87 ~ 87/ PTCs Municipals NBC Private Source: Department of Transport, 1988 Fig. 11 Annual vehicle miles 17

22 I ~ Nov 86 ~ May 87 ]]TiT~ Nov 87 ~ May Annual veh miles (millions) 8O 6O 40 2O Greater Mersey South Tyne West West Manchester side Yorkshire & Wear Midlands Yorkshire Strathclyde Fig. 12 Mileages in PTE areas Nov 86 - May 88 buses from unprofitable routes to provide new or improved services. Total registered mileage has not increased significantly during the first eighteen months of deregulation despite the high level of change. The West Midlands is the only PTE area where there has been an overall decline in vehicle miles--albeit by only 3 per cent between November 1985 and May There has been no competition of any significance between operators. Midland Red North did initially register competitive services in Walsall. However, in Autumn 1987 the company withdrew its services, claiming that it could not compete with the maximum off-peak fare of 35p. There is a tendency for the PTC to be able to cut marginal routes to improve profitability. The PTE policy is such that services are not automatically replaced when a commercial service is withdrawn. The overall market share of operators within a PTE area does not necessarily reflect the situation in individual districts within an area. In Tyne and Wear in May 88 Busways operated 36 per cent of registered mileage and the three ex-nbc companies (Go Ahead Northern, Northumbria and United Automobile) operated 52 per cent. However, each of the major operators has a distinct territory. Despite growing competition in Tyne and Wear, the major operators have maintained these territories during the first eighteen months of deregulation. 7.9 IMPACT OF COMPETITION All PTE areas have experienced an increase in competition. This has resulted in the generation of extra mileage as the incumbent operator has invariably responded by increasing the level of services in an effort to constrain the extraction of passengers from its services. In Greater Manchester a new operator, Manchester Minibuses Ltd, commenced running high frequency minibus services around Altrincham, Wythenshawe and Stockport. The incumbent operator, Greater Manchester Buses Ltd, also increased services by overlaying a high frequency minibus network over its existing network of services. The area of competition spread as the two operators sought to identify new opportunities and to gain commercial advantage. These manoeuvres generated considerable extra vehicle miles. In Tyne ~ Wear another new operator, Tyne ~ Wear Omnibus Co Ltd, introduced services in Newcastle in direct competition with Busways. Extra mileage was produced as each operator responded to its competitor's moves. Tyne Et Wear Omnibus has now expanded into Sunderland. In most cases where competition has occurred the incumbent operator has not been able to remove the newcomer by responding with the injection of extra vehicles along the routes involved. Many of the new operators have expanded services above their original levels RATE OF CHANGE Operators may amend, terminate or introduce local services after providing the Traffic Commissioner with 42 days notice through the submission of a registration document. There has been a significant increase in the frequency of service changes 18

23 occurring on the road because of the need for operators to respond commercially. When a registration was amended, the date of the change was recorded in the BRI. It has therefore been possible to estimate the rate of change of services. One way of measuring change is to see how long services remain in operation before being changed. Figure 13 shows the vehicle miles registered in PTE areas split by the length of time for which the services remained unchanged. Non-PTE areas are shown for comparison. The total vehicle miles registered in PTE areas during the eighteen month period is about three times the mileage which was current at any time. Mileage amounting to over a third of the total registered mileage in PTE areas was associated with services which changed within 100 days. This is about twice the equivalent level for non-pte areas. Another third of the total registered PTE mileage is associated with services which did not change during the eighteen month period. 8 DEVELOPMENT OF THE PRIVATE SECTOR 8.1 OVERVIEW ON GROWTH Prior to deregulation, the private sector maintained an insignificant presence in most PTE areas. The major share of PTE mileage was operated by the PTE bus operating divisions with a lesser role played by the ex-nbc operators. An increased involvement from the private sector was seen by the government as a means of improving the overall efficiency of the public transport industry. The private operator market share has increased from 6 per cent at deregulation to 12 per cent within eighteen months. 8.2 TENDERED SERVICES The private sector operators have been particularly successful in winning contracts to run subsidised services which were previously operated by the major operators. Following this success, many private operators have identified commercial services, either as viable routes not previously served or in competition with an established operator. For example, in Greater Manchester the private sector secured 18 per cent of the tendered mileage operated at deregulation. This has since increased as further contracts have been awarded. 8.3 DEVELOPMENT OF MINIBUS SERVICES Prior to deregulation there were few cases of minibus services in the PTE areas, although elsewhere it was a developing trend among the NBC companies. Following deregulation all PTE areas have witnessed the development of minibus networks. A network of high frequency minibus services was introduced into south Manchester by Manchester Minibuses Ltd shortly after deregulation. The incumbent operator, Greater Manchester Buses Ltd, responded by also introducing a high frequency minibus network of services superimposed on its existing network of 'big bus' services. The minibus Shires ~ Mets Current services Changed services Up to days days days days days days days I I I I I I I r Annual vehicle miles (millions) II Fig. 13 Duration of services Oct 86 - May 88 19

24 networks continued to develop until Manchester Minibuses' operations was acquired by Ribble Motor Services in Autumn Some staff were made redundant and some vehicles redeployed to other areas. There are still minibus operations in the south Manchester area, though the level of competition has been reduced. Minibus services have also been introduced into West Midlands by Merryhill Minibuses. This company (which is partly owned by West Midlands Travel) operates a network of services which serves the Merryhill shopping complex. All major operators in Tyne Et Wear, Yorkshire Rider and West Riding in West Yorkshire and North Western in Merseyside now operate minibus services. Earlier research at TRRL (Pickett ~ Vickers, 1988) has indicated that whilst there was a 57 per cent increase in vehicle miles in the Greater Manchester PTE area, seat miles increased by only 25 per cent. This indicates the extent to which minibus operations have been introduced into the area. Similar analyses have been undertaken with the service networks in Tyne ~ Wear and West Yorkshire. The results obtained were in general agreement with those obtained for Greater Manchester. 9 COMPETITION 9.1 OVERVIEW The 1985 Transport Act aimed to increase the efficiency of the bus industry by introducing competition between operators on commercial routes, but although there were some major examples of competition in the PTE areas, it is probably fair to say that it did not materialise on a widespread scale. In particular, there were only a few instances of competition between established operators. Most competition took the form of a private operator introducing or expanding services in the territory of a PTE or NBC company. In most cases, this provoked a reaction from the established operator in the form of timetable changes and duplicate services in an attempt to preserve market share. But the number of major instances was quite small, and on the whole, although private operators expanded their services substantially, they remained a small proportion of the overall market. It would appear that competition in an implied or threatened form had more effect, in that the major operators adjusted or replanned their services in order to reduce the scope for new operators to come in. The following sections detail some of the major instances of competition. 8.4 DEVELOPMENTS BY OPERATORS NEW TO LOCAL SERVICES Most operators who have commenced running local services had previously been operating contract hire work. This has often involved the purchase of suitable vehicles. Other operators have obtained new PSV "O'-Licences to be able to register local services. Most of these companies were formed by exemployees from the public transport industry although some companies have been formed as business ventures by companies new to public transport operations, for example, Manchester Minibuses Ltd and Merryhill Minibuses Ltd. In a number of PTE areas the PTC (or the PTE) has closed garages and made staff redundant as a means of achieving a profitable operation. There are instances where a group of redundant staff have taken the opportunity to obtain PSV O-Licences and register local services. Some of these have proved to be very successful. Examples of where this has occurred are Merseyside where Fareway Passenger Services and Liverline have been established and in South Yorkshire where Yorkshire Terrier and Sheafline have commenced operations. Other companies, have been formed by bus operating staff. The prime example of such a company operating within a PTE area is North Eastern which was formed by ex-northern General staff. 9.2 COMPETITION IN STRATHCLYDE The one PTE area where widespread competition did occur was Strathclyde. In the Glasgow area, particularly, competition was keener than anywhere else in the country, and attracted widespread publicity because of the large increase in buses in the city centre and the resulting traffic congestion. There were, however, large rural areas of Strathclyde where services were not commercial, and any competition was confined to bidding for contracts. The Scottish Bus Group (SBG) companies increased the scale of their network in Glasgow and their penetration of the city centre, with the introduction of high frequency cross-city routes in place of less frequent radial routes terminating at the outer bus stations. Strathclyde Buses (the PTC) meanwhile expanded the operation to some of the surrounding towns which were previously dominated by SBG. The registering of 10-minute services from Darnley to the city centre and from Nitshill to Pollock by Clydeside Scottish on top of 12-minute services by Strathclyde Buses provides examples of the intense competition between the large operators. Smaller operators also started new services, both in Glasgow and in other towns in the region. One example is Stagecoach, which registered competitive services into the centre of Glasgow from East Kilbride, Castlemilk and Easterhouse. In the case of 20

25 Easterhouse, an estate on the edge of Glasgow with high dependence on public transport, both Strathclyde Buses and Kelvin Scottish registered services of 10-minute headway or less, with Stagecoach (trading as Magic Bus) services in addition. As a result of the increase in services, bus traffic in parts of the city centre rose from 180 buses/hour to 330, and the resulting congestion attracted a lot of publicity, particularly one Saturday when roadworks, a fire, a burst water main and a protest march compounded the congestion and the whole city centre came to a standstill. However, at a public inquiry the Traffic Commissioner concluded that there was no case for imposing regulation conditions, and the problems eased following the introduction of a new traffic management scheme. 9.3 MANCHESTER MINIBUSES In January 1987 a new operator, Manchester Minibuses, started a high frequency minibus service in the Altrincham and Stockport areas of Greater Manchester, with connections into the centre of Manchester. The services were operated seven days a week and advertised by high profile timetable sheets for each route. Greater Manchester Buses Ltd (GMBL), the PTC, responded by introducing its own high frequency minibus service which was overlaid on its existing network (Pickett and Greenshields, 1988). Manchester Minibuses subsequently adopted a dynamic approach to its service scheduling which resulted in a reduction in some service frequencies, rerouted services, and, more recently, the introduction of services along already heavily trafficked corridors in areas away from its original area. As a result of these services, Manchester Minibuses, which had not existed prior to deregulation, became the largest private operator in the UK. In Autumn 1988, however, the parent company decided to withdraw from bus operations and, along with the Zippy company which had been competing extensively in Preston, Manchester Minibuses was sold to the former NBC company Ribble. 9.4 TYNE AND WEAR OMNIBUS COMPANY Tyne and Wear Omnibus Company (TWOC), a new bus company in Tyne and Wear, is a subsidiary of Trimdon Motor Services, an established private operator in County Durham. In May 1987 TWOC was successful in winning contracts for a number of subsidised services. But Busways (the PTC in Tyne and Wear) and Northern General registered the routes commercially, and the contracts were withdrawn (Simpson, 1989). TWOC then registered four new commercial services in Newcastle, duplicating Busways' routes on all the main corridors into the centre of Newcastle. These services commenced in August 1987, followed by three more in October. Busways' response to these moves was to increase frequencies on the competitive routes, and to re-register them as "frequent' services, giving them the freedom to run extra services. Competition between the companies was fierce; registrations were changed frequently and many duplicate services were run as the companies tried to maintain market share. Complaints were also made about traffic congestion in Newcastle (of which the TWOC/Busways competition was not the sole cause); this was eased with all operators drawing up a Code of Practice on the use of city centre streets and bus stops. During 1988, TWOC consolidated their services in Newcastle, and also introduced some routes in Sunderland which attracted a similar response from Busways. 9.5 OTHER EXAMPLES OF COMPETITION In Merseyside, the former NBC company North Western introduced high frequency minibus services on routes in former Merseybus (the PTC) territory between Huyton and Liverpool. Merseybus registered services in North Western territory in Maghull and Bootie. Independent operator Fareway originally competed with Merseybus in Kirkby until the latter withdrew. Several other significant private operators (eg Liverline--a company formed by ex-pte and ex- Merseybus employees--and Busman Buses) have started operating on a few routes. In West Yorkshire, newcomers Black Prince and MEtT Coaches represented a significant threat to the PTC Yorkshire Rider in the Leeds-Morley corridor, which resulted in the latter responding with increased frequency services. There was further competition by Yorkshire Rider with Abbeyways in Halifax and with Ivy Coaches who had won tendered services in the Huddersfield area. In Greater Manchester, there was competition between GMBL and Ribble in the north of the county. In Tyne and Wear, independent Hylton Castle (Catch-a-Bus) introduced services in South Shields; Busways responded with increased frequencies and frequent changes of services. In West Midlands, there was competition between the PTC West Midlands Travel and the NBC company Midland Red North, which resulted in the latter withdrawing its services from the county on the grounds that it could not operate commercially at the fares charged. One operator, Smith's of Alcester, is operating a service along the Alcester Road in direct 21

26 competition with WMT. Despite retaliatory action Smith's is continuing to operate and expand its service and the size of its fleet to the extent that it is now operating some new vehicles. This is the only major example of competition within the West Midlands PTE area. In South Yorkshire, the PTC South Yorkshire's Transport experienced competition in Sheffield from West Riding (an NBC company based in West Yorkshire), from SUT Ltd, and from two new companies, Yorkshire Terrier and Sheaf Line, formed by former SYT employees and operating from a closed-down SYT garage. 10 PASSENGERS ATTITUDES TO DEREGULATION 10.1 THE SURVEY A survey to discover passengers' opinions about the changes in bus services was carried out by the MVA Consultancy for TRRL in February and March 1987, a few months after the start of deregulation. The survey covered six PTE areas (excluding Greater Manchester, where the PTE had recently done a similar survey), and asked about overall views of the bus services, views of the changes since deregulation, and changes in bus use, together with opinions about particular aspects of the services, such as frequency, fares and reliability. Questionnaires were sent by post to 4000 households in each PTE area. Full results from the survey are reported in Simpson and Walmsley (1987), Simpson (1988), and Walmsley and Simpson (1989) VIEW OF CHANGES TO SERVICES Figure 14 shows the views about the service changes. Nearly half of all bus users thought the services were worse since deregulation--three times as many as thought they were better. Merseyside had the least favourable views, with two-thirds reporting worse services, and Strathclyde (where there were frequency increases especially in Glasgow) the best, though even here there were more 'worse' than 'better'. The generally unfavourable views probably reflect the initial disruption and the fares increases; a later survey would probably be more favourable CHANGES IN BUS USE Figure 15 shows changes in bus use since deregulation. Passengers in all areas reported a decrease in bus usage, with the largest decrease on Merseyside. Strathclyde again had the largest increase, though still smaller than the proportion of decreases. This probably reflects the fact that, although there were substantially more services in Glasgow after deregulation, many of them were in areas or corridors which were already well-served, so the scope for increased bus use was small ASPECTS OF SERVICES Figure 16 illustrates opinions about particular aspects of the services. The strongest opinions were about frequencies, fares and reliability, and all these aspects were generally unfavourable, with twice as many 'worse' as 'better' opinions, reflecting the fares and service changes and initial teething problems in several PTEs. The most favourable aspects were destination choice, drivers' attitudes and use of Same 19% Better 11% Much Better 5% Worse 34% Not Noticed 19% Much Worse 12% Question: What do you think of the changes since last Autumn? Fig. 14 View of the changes to services TRRL Passenger Attitude Survey Bus passengers - all PTE areas 22

27 Same amount ~ %Less often 23%.or noticed affected lg% Question. As a result of the changes, do you use the buses - Fig. 15 Bus use since the autumn changes TRRL Passenger Attitude Survey Bus passengers - all PTE areas Service aspect Freq Weekdays Freq Evenings Freq Saturdays Freq Sundays Destination Choice Use Discount Ticks Adult Fare Child Fare Journey Time Reliability Drivers Attitude Board 1st Bus Get Seat Avail Info Timetabs Avail Info Tickets Worse Better 0% 25% 50% 75% 100% Percent I I I Much Better Better I No Opinion I Not Noticed Change ] About the same Worse Much Worse discount tickets. The last reflects the loss of bus- Metro tickets in Tyne and Wear offset by many new tickets in Strathclyde, with little change elsewhere SUMMARY OF PASSENGER A'n'ITU D ES The fuller analysis presented in Simpson (1988) shows that, while there are variations from one class of passengers and one area to another, it can be said that bus users in all PTE areas, of all ages, of all socioeconomic groups, and whether car owners or Fig. 16 Opinions of service aspects TRRL Passenger Attitude Survey Bus passengers - all PTE areas not, think bus services are generally good but are worse since deregulation, and that they use buses less. In the rest of England and Wales, by contrast, a similar survey in 1988 (Simpson and Walmsley 1988, Lee and Jones 1988) showed that even though fewer bus services than in the PTEs changed at deregulation, rather more bus users thought services had improved than deteriorated, and about the same number used buses more as used them less. 23

28 1 1 FARES AND TICKETING 11.1 SINGLE FARES In the years up to deregulation, most PTEs had adopted a policy of low fares to encourage patronage. This policy extended to all types of ticket, especially the travelcards offering unlimited travel. Although there had been pressure on the levels of subsidy which these low fares policies required, it was not until the formal introduction of precept control in April 1986 that PTEs were required to move towards more commercial fares. As a result all but one PTE introduced substantial fare increases in April In each PTE area, all operators used the same fare scale. From October 1986, operators were no longer bound by earlier agreements on coordinated fare scales and so were free to set fare levels. A number of operators increased single fares further, the most significant being those in Merseyside. In most PTE areas, however, all operators continued to charge the same fares. The changes in the average fare paid by fare paying passengers are shown in Figure 17. The increases in fares are greater than those charged in shire counties which have increased in line with inflation CHILD FARES As mentioned earlier, the 1985 Transport Act extended the eligible categories for concessionary travel to include children. Child fares in PTE areas were funded through general revenue support before deregulation. Most PTEs, with the exception of Merseyside and Strathclyde, included reimbursement for travel by children in the new concessionary scheme. Merseyside required operators to charge child fares on tendered services. Otherwise operators in these two areas were expected to offer child fares as a commercial venture. Child fares have, as a result, mainly followed the trend in adult single fares. In Merseyside, operators offered different rates for children, varying between half and two-thirds of adult fare. In Strathclyde, most operators continued to offer child concessions, but two operators charged full adult fare in the morning peak. Since deregulation, children have been included in the Merseyside concessionary scheme and the operators in Strathclyde have reintroduced child fares TRAVELCARDS Most travelcards available before deregulation have been maintained and in some areas several new travelcards have been introduced. However, some operators have withdrawn or threatened to withdraw from the PTE schemes on the grounds of poor financial return to operators. As with single fares, the PTEs increased the prices of most travelcards in April Prices of travelcards were generally low before deregulation. At deregulation, the travelcard in the West Midlands area was taken over by the PTC, West Midlands Travel, and became a single operator travelcard. Elsewhere the PTE travelcard schemes English Mets English Shires Great Britain 160 Fare index Apr Jul Oct Jan I 85 I Apr Jul Oct Jan Apr Jul Oct Jan Apr 86 I 87 I 88 I Source: Department of Transport, 1988 Fig. 17 Fare indices by area 24

29 remained more or less as before, but with further increases in prices. Since deregulation, there have been a number of new travelcards offered by particular operators. In Strathclyde all the major operators, including the PTC, have introduced competitive travelcards offering travel at cheaper rates, but limited to a single operator. In Tyne and Wear similar travelcards have been introduced by the PTC FARES ON TENDERED SERVICES PTEs specified maximum fares to be charged on tendered services. These were usually related to the previous county-wide fare scales (for example: within 20 per cent of this and within the range of nearby commercial fares in the case of West Yorkshire). Merseyside was the only area where fares on subsidised and commercial routes differed significantly, with the April 1986 fare scale having been retained on tendered services. This led to the paradoxical situation in some areas of Merseyside, where the better-off areas had subsidised services at low fares and areas of social deprivation with higher demand for public transport had services with higher, commercial fares FARE COMPETITION There has been little competition between operators on fares. In Merseyside, two significant new private operators have maintained fares at the prederegulation levels. Merseybus, the PTC, has responded by reducing fares on a selection of competing services. There are other instances of fare competition on particular routes. Elsewhere the competition has tended to be focused on special offers, such as return tickets for the price of a single, or the issue of gift stamps. 12 PATRONAGE 12.1 THE AVAILABILITY OF DATA Patronage data are much more difficult to collect than might be expected; ticket sales are a poor guide when a large number of passengers do not buy their ticket on the bus. Before deregulation most PTEs undertook regular counts or surveys of patronage for planning purposes and for calculating reimbursements for prepaid tickets and concessionary fares. In the deregulated era patronage data are less readily available, because operators are understandably reluctant to release details which could be useful to a competitor. Nevertheless, some information on how deregulation affected patronage can be gathered from the PTEs' 3-year plans prior to deregulation, from surveys and informal estimates made by the PTEs, and on a more global scale from annual returns made by the operators to the Department of Transport OVERALL CHANGES IN PATRONAGE Figure 18 shows the patronage on local bus services for the three years to March 1986, 1987 and 1988, from Government statistics (Department of Transport 1985/86 J~]]]]] 1986/ /88 Annual passenger journeys (billions)._ English Met Areas Rest of GB exc Londn Great Britain Source: Department of Transport, 1988 Fig. 18 Patronage on local services Met counties and rest of Great Britain 25

30 1988). It shows that in the English Metropolitan areas, patronage fell by 16 per cent over the twoyear period between 1985/6 and 1987/8. In the same period, over the rest of Great Britain (excluding London, where bus services were not deregulated) the number of passenger journeys fell by 4 per cent. Some of this fall occurred for reasons unconnected with deregulation; for instance, the effect of increasing car ownership is estimated to account for a loss of about 1 per cent in patronage nationally. The fall in patronage was greater on the buses operated by the former PTE companies, being 19 per cent over the two-year period. This was offset by a rise in patronage on private companies' services, which nationally rose by 87 per cent (separate figures for private operators in the Metropolitan counties are not available). As described elsewhere in this report, there were a number of changes in the Metropolitan areas which account for these differences. Following the introduction of precept control in April 1986, fares in most of the metropolitan counties rose steeply; in the period up to deregulation patronage was some 7 per cent down on the average 1985/6 level. Following deregulation, passengers and operators had to adjust to considerable reorganisation of services, and there were further modest fare rises; in the 5 months from deregulation to March 1987 patronage fell further, to a level some 19 per cent below the 1985/6 average. Patronage did recover during 1987/8 but still showed a fall of 4 per cent compared with 1986/7 as a whole PATRONAGE IN THE INDIVIDUAL METROPOLITAN AREAS As described above, precise patronage data for the PTEs are not readily available; nevertheless some indications of trends can be deduced. In West Yorkshire, surveys were not undertaken immediately following deregulation, but in the period April to September 1987 patronage was about 5 per cent less than the previous year; there were indications that it rose during the summer so that by October 1987 it had regained the pre-deregulation level, though it fell again subsequently. West Yorkshire was the one PTE area where fares did not increase substantially over the deregulation period. In Greater Manchester, patronage declined by 14 per cent, of which about a third was attributable to higher fares, another third to demographic changes, and the remainder to the bus service changes. In Tyne and Wear, bus patronage in 1986/7 was 12 per cent lower than the year before, and declined another 6 per cent the following year. In Merseyside, patronage during the first year of deregulation showed a decline of 29 per cent compared with the year before; this was in addition to a loss of about 3 per cent arising from fares increases in April About half the reduction is attributable to further fare increases and half to the instability in services following deregulation. Strathclyde, as in other aspects mentioned in this report, is the exception to the general trend of declining patronage. Although data are difficult to obtain in Strathclyde in view of the large number of operators, patronage over the Region as a whole appears to have remained steady over the deregulation period. PTE cordon counts indicated that over a twelve-month period patronage increased by 5 to 6 per cent on the main corridors into Glasgow and by up to 14 per cent in outer towns OTHER PATRONAGE EFFECTS Two other effects of deregulation on patronage are worth mentioning. One is that in Tyne and Wear ridership on the Metro remained buoyant immediately following deregulation, possibly because it benefited from the increase in congestion and general uncertainty about the bus services. There are also indications--though little positive evidence--of similar effects on rail services in other PTEs. Metro patronage declined after the first few months to a level about 9 per cent lower than the year before; this decline however was not so great as had been expected. The other effect was that in several PTEs the fall in ridership appeared to be greater among full-farepaying passengers than among concession holders. 13 PASSENGER INFORMATION 13.1 THE NEED FOR PASSENGER INFORMATION Prior to deregulation most PTEs maintained up to date comprehensive timetables which were freely available. This was made easier because the PTE was more easily able to control the number of dates upon which service changes could be introduced. With the level of service change being experienced in many of the PTE areas the need for up to date comprehensive travel information is all the more important. Some operators have produced good publicity, but these have been the exception. Most PTEs have tried to maintain comprehensive information systems and many operators have relied on this provision of timetable information, although it might have been expected that they would be keen to publicise their own services. The PTEs have found the maintenance of route number and timetable displays on bus stop flags to 26

31 be difficult. Some bus stops no longer display the numbers of any of the services calling at a stop, because of the problems of keeping them up to date CURRENT PRACTICE The level of travel information provided by the PTEs has varied from area to area. Every PTE has maintained a telephone enquiry service which intending passengers may ring for details of services, fares etc. This section details the current levels of bus timetable information provision in some of the PTE areas. West Yorkshire PTE attaches great importance to the provision of comprehensive timetable information for the whole of its area. The PTE inserts notices of service changes in newspapers and produces timetable leaflets for the routes affected. A comprehensive timetable book is produced at regular intervals. Production of timetable information by the more traditional printing methods is proving to be difficult for two main reasons. The notice given by operators allows little time for the preparation of timetables. The frequency of changes since deregulation invariably means that timetable information is soon out of date. Nevertheless despite the difficulties West Yorkshire PTE has continued to produce travel information but as a result has overspent its budget for 1988/9. West Midlands PTE does not have sufficient resources to issue up to date travel information although this is an area where extra resources may soon be committed. The PTE has relied on individual operators to disseminate information on their services. This has, in some instances, resulted in not all services along a corridor being advertised especially where tendered and commercial services are operated along the same route by different operators or where competing operators serve the same route during similar periods of the day. This deficiency together with the public's difficulty in reading standard timetables is believed to be responsible, in part, for the decline in patronage in the West Midlands. West Midlands Travel Ltd has recently commenced a trial of a system called 'Telerider'. With this system a unique telephone number is allocated to each bus stop along a route. By dialling the number relating to a specific bus stop a digitised voice facility informs callers of the time of the next bus from a particular stop and of any problems being experienced by buses along the route. Eight minibus routes in Solihull and Acocks Green are currently involved in the trial. In other areas the publication of timetable information has not been so comprehensive. In Merseyside only one operator, North Western, has produced timetables. Merseyside PTE, however, has continued to publish timetable leaflets in the same format as before deregulation. Route maps have been produced since deregulation but these have proved to be increasingly difficult to maintain in an up to date format. Tyne and Wear PTE undertook to produce comprehensive guides to all services in an area despite the publication of timetables by some of the major operators. Strathclyde PrE has not published any timetable information although it has maintained information offices which provide details of tickets and service information for all modes. Whilst different systems have evolved for informing the passengers of services none has been able to achieve the same level of coverage as prederegulation within existing budgetary constraints THE EFFECTS OF POOR SERVICE INFORMATION It has been shown that vehicle miles operated within the PTE areas has increased since deregulation but that patronage has decreased. Conventional transport modelling theory would lead one to expect that despite the fares increases that have occurred increased service provision should have resulted in increased patronage. One possible reason for this apparent anomaly could be that the passenger does not have up to date travel information upon which to plan a journey. It is conceivable, with the continual high level of service changes, that intending passengers are experiencing difficulty in finding out what services are running and when. It is reported, for instance, that 90 per cent of services in Merseyside changed within the first year of deregulation. Existing methods of information dissemination may no longer be appropriate in a commercial environment where frequent change is now being experienced. The present levels of public perception of travel information need to be determined in order that improved methods may be considered SURVEYS OF PASSENGER PERCEPTIONS OF TRAVEL INFORMATION The perception of travel information is an area that has not previously been researched in any detail. TRRL has commissioned surveys in two PTE areas to determine present levels of passenger perception. Questionnaire surveys have been commissioned on six routes in West Midlands and West Yorkshire (three in each area) to find out how soon before or after a service change passengers become aware of the new service and how they find out about it. West Midlands and West Yorkshire were selected for comparison purposes as each PTE has adopted a different method for informing the public of timetable changes in their areas. Initial results from the West Midlands indicate that two-thirds of passengers stated they were satisfied with publicity about timetable or route changes. This seems to conflict with another result which shows 27

32 that less than a half of those questioned at a bus stop one week after a change were aware that there had been any alteration to services in their area. The lack of any up to date knowledge of the services that operate from a passenger's normal bus stop is bound to have a detrimental effect on the overall levels of patronage along a corridor. During the period of the questionnaire survey few bus stops were noted with a panel with up to date details of the services provided from that stop. Many of the stops along the routes surveyed did not have timetable panels. Those with panels did not always contain up to date or comprehensive details of services from that stop. About a third of passengers learnt of changes by word of mouth whilst a further quarter found out about the changes from a notice on the bus. Little more than a quarter of the respondents found out about services from either newspapers, timetable leaflets or timetables at bus stops. 14 WORKING PRACTICES 14.1 THE TRANSPORT ACT Under the provision of the 1985 Transport Act, bus operators were encouraged to make cost savings and to improve efficiency. In a labour-intensive industry such as local bus operation, where 70 per cent of costs are associated with payment of wages and per cent with payment of platform staff, this implies that some combination of improved productivity, changes in working practices and real reductions in pay is necessary if a reduction in the unit cost of labour is to be achieved. The PTCs and newly privatised former NBC companies faced the loss of direct subsidy, except for services won under competitive tendering, and competitive pressure from numerous small independent operators who were accepted as having lower costs per mile. This has led to changes in working practices as they sought reductions in unit labour costs COST SAVINGS BEFORE DEREGULATION DAY In the lead up to deregulation day existing operators achieved significant cost savings through staff redundancy. Following the registration of commercial networks and estimation of the resources required to operate them, significant numbers of staff were identified as surplus to requirements. Staff employed by PTCs fell by 16 per cent between 1985/86 and 1986/87, far more than the 4 per cent reduction seen in the industry as a whole over the same period. Through the process of natural wastage and the PTEs' generous redundancy schemes few, if any, compulsory redundancies were necessary STAFF AGREEMENTS Historically, public sector bus operations have been strongly unionised with binding national or metropolitan agreements making changes to wage structures and working practices difficult. From 1986 these national agreements were discontinued in favour of placing responsibility for negotiating all wages and working practices in the hands of local management and local union representatives. Working practices are now negotiated on the basis of the local bus market, the local labour market and what individual companies can afford, leading to greater diversification of working practices between and within the metropolitan areas. Some operators have taken the process a stage further with district operating managers negotiating local agreements, leading in some cases, even within a single company, to differences between depots and operating districts. Some managers point to the virtual absence of company-wide strikes as evidence of the success of this local bargaining. Others suggest that the commercial pressure which companies now face is recognised by the unions, who see little to gain from industrial action. Since deregulation the only widespread strikes affecting a PTE area has been that in the Scottish Bus Group in the Summer of 1987 and more recently by staff at Central Scottish during the Winter of Otherwise, only a few isolated disputes at the depot level have taken place. The complexity of working practices in the public sector prior to deregulation--particularly those governing crew-scheduling--are described in James et al (1985). These were typified by guaranteed working days of 7 hours 48 minutes, with a wide range of premium payments being added for overtime, split shifts, weekend work, meal breaks, signing time and other allowances. The (small) independent sector, by way of contrast, had very few codified agreements, often paying staff on a simple daily basis--as is common in the coach operating side of the industry INDEPENDENT OPERATORS Those independent operators with a history of local bus (formerly stage-carriage) operation have remained largely unchanged in terms of working practices. Those operators moving into local bus work from contract hire work have tried to retain the same working practices as before, including relatively low daily flat rate payments for bus drivers, a system more associated with coach operation. However, with expanding services, most have had to introduce a higher hourly wage rate in order to recruit sufficient staff suitable for the job and have introduced extra management with local bus operation experience to carry out scheduling and provide daily operational control. The wholly new companies have simple working practices, which the 28

33 individuals concerned gained from their experience of working with, for example, the local PTE operator. There is sufficient evidence to conclude that independent operators pay lower hourly wage rates than former public sector operators, although to simplify administration, staff are usually paid from start to finish of a shift on duty, including layovers and meal breaks, thus narrowing the gap in terms of total earnings PUBLIC SECTOR OPERATORS The former public sector operators have responded by negotiating new job specifications based on a tiered wage structure. The most widely used differential is the recruitment of new staff as minibus drivers at wage rates typically around 75 per cent of that paid to conventional bus drivers. Most of the former public sector operators pay in the range of _ per hour for minibus driving compared with per hour for conventional bus drivers (rates applicable in December 1988). A few operators pay outside these ranges. These minibus rates are more comparable with wages paid by independent operators. Where operators have sought further wage reductions, an intermediate tier for newly recruited conventional bus drivers has been created, such new recruits receiving less pay than those first employed under pre-deregulation conditions. An increasing number of public sector operators have achieved agreements on consolidated hourly pay rates, removing the former plethora of overtime rates, OPO bonuses and premia for weekend work. This has enabled them to compete more effectively for tendered services. Few independent operators have overtime rates of pay, except if tenders have been won for evening, Sunday and all-night services. However, a number of independent operators supplement their hourly rates with incentive pay schemes. These are in the form of weekly lump sum bonuses awarded for turning up on time, not missing a shift, avoiding accidents or as a percentage of daily takings. All these schemes reflect the aims of these operators of offering a friendlier, safer and more reliable service than the established operator, whilst avoiding the costs of providing spare drivers, spare vehicles and accident repair bills. The concept of the guaranteed day of 7 hours 48 minutes has largely been removed, giving operators the additional flexibility of scheduling drivers, typically over a guaranteed 5 day week of 38 or 39 hours. There is usually sufficient scheduled overtime and need to cover for holidays and sickness to guarantee drivers a 6th day of work. Some of the former NBC operators increased the availability of overtime to compensate drivers for loss of earnings when the PTE supported parity payments ceased. Overtime levels do vary considerably between companies, with some independent operators guaranteeing up to 20 hours per week. These variations can reflect the activity of the company in setting up new commercial routes, temporary staff shortages and their level of success in winning tenders. Sometimes tenders are awarded at very short notice, preventing the operator from scheduling the extra work within existing rosters ADDITIONAL COSTS The additional costs of employing drivers, over and above their pay, can be considerable, depending on the conditions of service specified by the company. All the public sector operators studied have annual holiday entitlements of at least 24 days per annum which have to be covered by extra drivers, with further spare drivers to cover for daily absenteeism. Although there is no evidence of holidays being cut back, sick pay schemes are now usually only paid for basic working weeks, and some now have the first two days unpaid in an attempt to reduce the level and cost of absenteeism. Independent operators usually only offer up to 18 days paid holiday per annum and can usually call upon depot staff, management and part-time staff to cover for daily absenteeism. Public sector bus drivers had guaranteed pension rights following the transfer of companies to the private sector and as such all these companies offer contributory pension schemes to their staff. In addition the company provides uniforms and subsidised canteen facilities. To pay for all these additional costs adds up to a further 50 per cent to the wage bill of the larger companies. Independent operators, of which half had no company pension scheme in December 1988, mostly did not provide uniform or canteen facilities. They face additional costs of about 15 per cent, although information on such costs is limited FURTHER COST SAVINGS The former public sector operators claim to have reduced costs by per cent since deregulation. How much of that can be directly attributed to changes in working practices is difficult to estimate. A combination of changes in the productivity of services operated, reduction in staff earnings in both absolute and relative terms, reductions in staff numbers relative to output and faster scheduled running speeds have all contributed to this reduction (Tyson, 1988). Independent operators, as they have expanded local bus services within the metropolitan areas, claim that their costs per mile have increased, with maintenance facilities, staff employed and management structure all having to adapt to the tougher environment of intensive local bus operation. This could be evidence that supports original claims 29

34 that independent operators had lower costs per mile compared to former PTE and NBC operators because of the type of service they provided and the operating environment within which they worked. Further research is in hand to pursue these issues. 15 PTE COSTS 15.1 CHANGES IN THE NATURE OF PTE COSTS The Transport Act required PTEs to reorganise their operations. In particular, the bus operations were transferred to the new companies and new tendering departments were created. This has affected the way in which money has been spent and as a result in the definitions of costs. Comparison of PrE costs before deregulation with those after deregulation has not therefore been a straightforward task and remains a matter for debate. There are two main difficulties with any comparison of PTE costs. First, in most PTEs, revenue support was defined before deregulation as the difference between the total cost and total revenues. Following deregulation, revenue support has been more narrowly defined as the cost of tendered services. While these two are not directly comparable, it has proved difficu=t to define a more satisfactory comparison. For example, children travel for a flat fare of 10p in Tyne and Wear. Before deregulation, this was paid for from total revenue support, whereas following deregulation, it is paid through the concessionary fare scheme. Second, most of the costs of bus operation and all the revenues have been transferred to the bus company set up by the PTE. Any comparison of costs for the PTE alone before and after deregulation will therefore provide an incomplete picture of the general effect. For example, West Midlands P'rE spent 4 M more in the year following deregulation, but West Midlands,travel, the Prc, made a profit of 17 M. There is also the problem that there have been some costs associated with the transition and not all are short term METHOD OF COMPARING COSTS In order to include all the relevant costs, the P'rE spending for the full year 1985/86 has been compared with the spending for 1987/88. Spending in the year 1986/87 was split between two regimes and included one off costs, such as redundancy payments, and so has been excluded from the comparison. Most of the PTE administration costs are not itemised separately for 1985/86, so need to be compared with the other items listed for 1987/88. Six PTEs are considered. These are Greater Manchester, Merseyside, Strathclyde, Tyne and Wear, West Midlands and West Yorkshire. The costs are shown in Table COST HEADINGS Concessionary fares Four of the six PrEs being considered included children as part of the concessionary fare scheme introduced at deregulation. In Strathclyde, the PTE scheme did not include children. In Merseyside the PTE scheme included children travelling on tendered services only. In these two areas, operators were expected to offer child fares commercially. The cost of the Strathclyde concessionary fare scheme does not come within the PTE budget, so has been excluded, although the cost for 1987/88 is similar to that for 1985/86. Following deregulation, Merseyside renegotiated the concessionary fare scheme and included children, but the total cost reduced from 19.1 M to 16.2 M. The total spending on concessionary fares by the six PTEs increased from M to M. Concessionary fares now comprise a large element of PTAs' total budgets: from 27 per cent on Merseyside to 56 per cent in the West Midlands, and in most areas spending on concessionary fares exceeded spending on tendered bus services. Politically, it is difficult for PTAs to reduce spending on concessionary fares because this would mean making schemes less generous; at the same time, the size of the concessionary fares budget is restricting PTEs' flexibility in responding to operators' commercial decisions about service provision Revenue Support and Tendered bus services The main item of expenditure on bus services for 1985/86 is listed under Revenue Support. This is the difference between the total cost of all the PTE functions, including running the buses, and the income from bus (and sometimes rail) services. Following deregulation, the total spent on tendered bus services by the six PTEs was 60.2 M, compared with a revenue support total before deregulation of M. The administrative costs of the PrE functions have been separately listed for 1987/88, so the real saving is less than the difference between these two figures. However, almost all the PTEs spent less than expected on tendered services Section 20 Support for rail services has not been affected by deregulation. Where there have been changes in Section 20 payments, they have been due to changes in the basis of British Rail costing methods, or to changes in the rail equipment or services Pensions All the P,rEs, apart from West Midlands, have increased expenditure on pensions, although some of 30

35 (/ ~ ~ ~ 0 C >- O~.,:f~ ~'--OO OC ~ A "~o ~o O ",~" P~ v ~ ~ ~ 0 0 cv~ o4 (D 0 0 CO o~ CO O') A I-- "~" CO..o ~o -- ~co CO..5 ~.= --~ --.I < 0 I,,1.1,--I x_.-~ >. O CO ~ 0 ~ 0 ~ 1.0 I- --~ I/) 00 CO O OO (,O,r-- ~ CO A O ro W I-- el "O >. ~ e2 02. o.. o. ~. :o.d,-r~ o~o~ ~0 CO 0 v-- if) "0 D 0 0 0'~ a~o0 I..~ p~,._ 0 ~.~o m~ o..- o.-,, ~.>~_ ~'~.~ o ~ ~ 8._o=_Q ~=m c ~ ~ ~.o~ cr~ ~ o ~ ~ I--- c,_~ o._e o'~ ~ ~ o.._o o ~'.~ ~.- ~o ~'~. o,,, ~ o E '- oo O.)'~ 9=_o ~c=~ e ~ ~ ~'gr~ (.) ~ ~ l,j,,, r,/).,~,-, C~.) m ~ 2 I-- e- 31

36 this spending was originally within the revenue support total. PTE staff are employed under local authority conditions of employment, and are entitled to index linked pensions. Under current employment legislation, the original employer is responsible for the additional payments required to index link the pensions when an employee moves to another company. When most of the PTE staff were transferred to the bus companies, the PTE retained the responsibility for these payments. Redundancy payments are included under this heading, although most of the redundancy payments were paid in 1986/87. Spending on pensions increased from 7.0 M to 26.2 M Debt charges PTEs have over the years invested significantly in public transport infrastructure, such as bus garages, tunnels and railways. These result in capital repayments which are included in the revenue account. With deregulation, additional capital was raised to ensure the financial viability of the bus companies, as required by the Transport Act. As a result spending on debt charges has increased for 1987/88. This spending will decrease over the next few years as the PTEs pay back the existing loans. In Strathclyde the major increase in debt charges is due to the investment in rail electrification. The total increased from 6.8 M to 41.3 M PTE duties When the bus operation was split, PTE spending on administration became identified as a separate budget item. Several P'I-Es did keep separate accounts, but since the pre-deregulation figures included a large number of staff involved in the bus operation, the comparison is not particularly helpful. Staff effort on on planning and managing the bus network was replaced by staff involved in tendering operations. Spending for the six PTEs amounted to 8.7 M for 1985/86 and the total for 1987/88 is 24.5 M Other public transport PTEs still run a number of public transport facilities. These include the Underground in Glasgow, the Tyne and Wear Metro and some ferries. Spending on these facilities has changed little in total following deregulation PTA costs The main costs under this heading are the Metro financing charges and the Tyne Tunnel, which are funded by Tyne and Wear PTA. Changes in cost have not been due to bus deregulation Other costs Special needs transport has received more attention following deregulation, with most PTEs actively planning and introducing schemes for the disabled. Spending under this heading was included in revenue support before deregulation and amounted to 1.8 M for 1987/88. Passenger facilities are provided in the form of bus stations in several PTE areas. However, the facilities in West Yorkshire cost the PTE 2.8 M to provide in 1987/88 as the departure charges did not cover the full cost. The figure of 2.9 M income from Tyne and Wear consists of investment income, capital grants and repayment for Travelcard and survey administration CONCLUSION As has already been explained, comparison of PTE costs before and after deregulation is no simple matter. Some of the reduction in revenue support is simply the effect of transferring items to other budget headings. Nevertheless, the total budgets for tendered services were substantially less than had been expected. However, these are offset, at least in the short term, by the additional costs to PTEs of setting up the bus companies. It would appear that some of the bus companies are operating very profitably and this has to be considered. The total spending for the six PTEs reduced by 2 per cent in cash terms, which is about 10 per cent in real terms. Merseyside and Tyne and Wear made considerable savings, while the other four PTEs had increased expenditure. In Manchester, this increase was due to the cost of setting up the bus company. In Strathclyde the increase was mainly due to investment in rail electrification. In the West Midlands, small savings on tendered services were more than offset by increases in the concessionary fare repayments. In West Yorkshire the increase is due to increased concessionary payments, a greatly increased budget for passenger information and to the cost of providing passenger facilities. 16 OPERATOR COSTS AND REVENUES 16.1 OPERATOR REVENUES Earlier sections have described the changes in patronage and fares within the metropolitan areas. We now consider the effect of these changes on the operator revenues. It has been necessary to estimate revenue as such information is difficult to obtain from operators. The PTE area fares index published by the Department of Transport (Department of Transport, 1988) represents the average fare paid by fare paying passengers. The patronage figures are estimates of the total number of passengers. Multiplying these two indices provides an estimate of the average effect on revenues. Obviously, there will be variations between the PTE areas as the fare changes have varied in scale. 32

37 Fares index ~; Passengers I I Revenue Index Apr 85 Oct 85 Apr 86 Oct 86 Apr 87 Oct 87 Apr 88 Source: Department of Transport, 1988 Fig. 19 Revenue estimates for Met areas Figure 19 shows the changes in fares and patronage as two lines, with the combined effect of these overlaid as a bar chart. The bar chart shows the estimated effect on operator revenues. There has been an 8 per cent increase in revenue in the eighteen months fullowing deregulation (between October 1986 and April 1988). There was an increase of 19 per cent over the three years between April 1985 and April No account has been taken of inflation over the same period, but it would appear that operator revenues have increased following deregulation BUS OPERATING COSTS Figure 20 shows the change in bus operating costs for the PTCs in the English metropolitan areas compared with the other English operators. Both show a significant decrease over the period NUMBERS OF STAFF EMPLOYED It has already been shown that deregulation has brought about an increase in bus services, as measured by the annual vehicle miles. One might expect that there would be a corresponding increase in the number of staff employed. However, as figure 21 shows, the numbers of staff employed in the bus industry have decreased. The reductions have been greatest for the metropolitan PTCs which have reduced staff by 26 per cent over the three year period. Staff employed by private operators increased by 13 per cent. Most of the staff of private operators are not involved in local service operation, so this is a very significant increase OPERATOR VIABILITY It is difficult to obtain a real insight into the viability of bus operators. However, the available national statistics suggest that operators are running more bus miles using fewer staff and are doing this at lower average costs. Operators in the metropolitan areas, and particularly the PTCs, were required to make greater changes than operators in other areas. They appear to have done this quite successfully. 17 EFFECTS ON PASSENGERS 17.1 EFFECTS OF CHANGES IN SUPPLY AND FARES Changes have occurred to both the level of supply of bus services and to the fares charged in the PTE areas. The expected effect of these changes on the number of passengers can be calculated using traditional elasticities. Overall service levels in the English PTE areas, as measured by vehicle miles, increased by 7.5 per cent between 1985/86 and 1987/88. Using a service elasticity of 0.5, one would expect an increase of 3.7 per cent in the total number of passengers. 33

38 ~85/86 86/87 ~ 87/88 Pounds per Veh km = OI - - PTCs Other english ops All operators Source: Department of Transport, 1988 Fig. 20 Bus operating costs Staff (Thousands) 50-85/86 ~ 86/87 ~ 87/ O 2O 10 0 PTCs ~ m Municipals NBC Private Source: Department of Transport, 1988 Fig. 21 Number of staff employed 34

39 The average fare increased by 38 per cent over the same period, while the retail price index increased by 7.3 per cent. Using a fares elasticity of -0.4, this would be expected to result in a reduction of 9.5 per cent in the total number of passengers. Combining the two effects leads to an expected reduction of 6.2 per cent in the total number of passengers. The actual change in patronage (see Figure 18) was a reduction of 16.2 per cent. As a comparison, the same calculation was repeated for the English Shire Counties, where there has been an increase of 17.8 per cent in vehicle miles and fares have increased just marginally above the retail price index at 8.8 per cent. Using the same elasticities produced an expected increase in patronage of 7.9 per cent. Patronage actually fell by 3.8 per cent. The difference between the expected patronage and the actual patronage is about 10 per cent in both Metropolitan areas and the Shire Counties. Some explanation is required for this discrepancy REASONS FOR DIFFERENCES IN PATRONAGE Conventional theory assumes that increases to service levels are made in such a way as to maximise the benefit of the improvement to the public. However, this may not be so if operators are facing direct competition. A computer based comparison of the networks in several towns before and after deregulation has been undertaken by Hawthorne (1989). Despite an overall increase in vehicle miles registered in some areas, the distribution of the service mileage was such that the model predicted fewer passengers. Another reason for fewer passengers than expected is the high level of change which is occurring. Passengers may be unaware of improvements in services and thus slow to use the new services. On the other hand, existing passengers are directly affected by reductions. Constant change reduces confidence in the whole system. A further possible reason for fewer passengers than expected is that operators are, in general, running more efficient schedules. This means that there are fewer spare resources (time, drivers, buses) to cover for problems. The initial unreliability of many services had an adverse effect on many passengers which may take a long time to overcome. 18 OTHER ASPECTS OF THE TRANSPORT ACT 18.1 TRAFFIC REGULATION CONDITIONS Highway authorities are empowered to issue Traffic Orders, which can be used to control access by particular types of vehicle to specified streets. The vehicles are generally defined by size or weight. Traffic Orders apply to all bus operators equally. To balance the freedom which operators were given to register and operate bus services, the Transport Act introduced a new type of regulation to enable the Traffic Commissioner more specific powers in relation to bus operators. These Traffic Regulation Conditions (TRCs) are attached to the appropriate operator licence. Local authorities and bus operators can ask for Traffic Regulation Conditions to be applied. The most famous case of an application to the Traffic Commissioner was in Glasgow, where there were claims that the additional buses in the centre of Glasgow were the cause of congestion (See Section 9.2). The Traffic Commissioner decided not to issue a TRC. As there were few other situations as extreme as the Glasgow one, there were no further applications for a TRC on grounds of congestion. There have been a few other applications for TRCs elsewhere in the metropolitan areas. Most of these have been minor, such as the waiting restriction at a bus stand in Stockport town centre, so it would appear that, in general, local authorities did not need to use this safeguard OFFICE OF FAIR TRADING The Office of Fair Trading (OFT) was given new responsibilities by the Transport Act. Bus operation was no longer exempted from competition law. In particular, bus operation became subject to the restrictive trade practices legislation Anti-competitive practices There has been a number of complaints to the OFT concerning anti-competitive practices such as, for example, predatory pricing which involves charging fares below cost with the intention of eliminating competition. Each case is dealt with on its own merits, but previous decisions are used as precedents, where appropriate, in deciding future cases. After consideration of the complaint, the Director General of Fair Trading (DGFT) can decide not to take the matter further or to initiate a formal investigation under the Competition Act If the investigation finds the practice to be anti-competitive, the DGFT can seek an undertaking from the operators concerned to stop the practice. If an operator refuses to accept the undertaking, the 35

40 matter can be referred to the Monopolies and Mergers Commission (MMC). The MMC is required to establish whether there is an anti-competitive practice and, if so, whether it is against the public interest. So far, it has not proved necessary to refer any cases to the MMC Restrictive practices Before deregulation, bus operators were required by PTEs to operate a coordinated public transport system. Operators were reimbursed by means of a Section 24 agreement for any costs which this entailed. Following deregulation, bus operators became subject to the Restrictive Trade Practices Act Details of agreements between two or more operators and under which at least two parties accept certain restrictions on their commercial freedom to act must be registered with the OFT. All such agreements are covered, whether they are written, oral, or merely tacit. An agreement between an operator and a PTE will be registrable only if both the PTE and the operator accept restrictions. The DGFT has a duty to refer all agreements put on the register to the Restrictive Practices Court ex(~ept where the restrictions in them are not considered to be significant enough to call for such investigation. Agreements are deemed by the court to be against the public interest unless the parties operating the agreement can persuade it to the contrary. A large number of schemes have been registered with the OFT. Parties to agreements which contain restrictions that are significantly anti-competitive have been asked either to end or modify those restrictions or to justify their retention. The aim is to avoid taking the agreements to Court and negotiations with the OFT are continuing. Most of the travelcard schemes sent to the OFT have been found not to be registrable. 19 SUMMARY OF MAIN FINDINGS 19.1 BACKGROUND This report summarises the effects the 1985 Transport Act in the Passenger Transport Executive (PTE) areas. The Act was intended to introduce a competitive, commercial environment to the bus industry. There were three main provisions: route licensing was abolished (deregulation), subsidies were to be awarded by tender for specified services, and the publicly-owned bus companies were to be privatised (in the case of the NBC companies) or set up as separate companies (in the case of the PTE operations). The Act came into effect on 26 October It was expected that as a result of the changes, competition would be created, fares would be lower, costs would go down, patronage would increase and there would be a greater variety of services. At the same time the main network of services would continue and would better meet the needs of the traveller THE BUS MARKET IN THE PTEs Vehicle Mileage The vehicle-mileage operated in the PTEs immediately after deregulation was similar to that operated one year previously. During the following 18 months, there was a 13 per cent increase in vehiclemiles in the PTEs. There were important differences between the individual PTEs. In Greater Manchester, registered mileage increased by 35 per cent during the first 6 months because of two new high-frequency minibus networks. In Strathclyde mileage increased by 20 per cent between 1985 and 1988, with the introduction of many new services in Glasgow, although the effect was not uniform and services were withdrawn in some areas. West Midlands was the only PTE area where there was an overall decline (3 per cent) between 1985 and Market Shares At deregulation, the PTC operators experienced a decline in mileage which has since recovered to a level 6 M miles less than pre-deregulation. Their share of the market decreased from 59 per cent at deregulation to 57 per cent after 18 months. SBG and the ex-nbc companies increased their mileage slightly over the period, but their share of the market fell from 34 per cent to 30 per cent Development of the Private Sector Private operators increased in mileage by 111 per cent over the 18 months; notable newcomers were Manchester Minibuses, Tyne and Wear Omnibus, SUT and Fareway, who all registered over 1 M vehicle-miles. The market share of private operators, which was insignificant before deregulation, increased from 6 per cent at deregulation to 12 per cent within 18 months. Most of the operators who were new to local services had previously operated on contract hire, though some were entirely new, including companies formed by ex-employees of PTEs or other large bus companies. Private operators have been successful in securing subsidised services and in operating commercial routes which were not previously served or in competition with an established operator. Several of the newly-formed companies are now among the largest independent operators in the country Operating Territories There are very few instances of one of the established operators in an area extending services 36

41 into another established operator's territory. There are a number of examples of operators from outside the PTE areas registering routes within the areas. Strathclyde was an exception: the Scottish Bus Group (SBG) companies increased their services in Glasgow, while Strathclyde Buses expanded into the surrounding towns in SBG territory Competition There were only a few instances of competition between established major operators. More frequently, competition took the form of a private operator introducing or expanding services in the territory of a PTC or NBC company, but though there were several examples in each PTE area, the number of services affected was small. Strathclyde was the only PTE where there was widespread competition. In addition to competition between SBG and SBL, smaller operators also started new services, and there was an increase in services in Central Glasgow, causing congestion. Manchester Minibuses, Tyne and Wear Omnibus in Newcastle, and Fareways in Merseyside are the other prominent examples of competition. In nearly every case where a new operator has started services in competition with a PTC or NBC company, they have met opposition in the form of enhanced frequencies or duplicate services in an effort to maintain market share Development of minibus networks Following deregulation all PTE areas have witnessed the development of minibus networks. A highfrequency minibus service was introduced by Manchester Minibuses Ltd, and several PTC operators and former NBC companies have also used minibuses. No other forms of novel service, such as taxi-buses, were introduced in the PTEs TENDERED SERVICES PTA policies Some PTAs based their provision of subsidised services on a minimum level of service approach, while others put different degrees of priority on journeys for different purposes. Some PTAs aimed to preserve traditional links while others took the opportunity to re-evaluate the network. Integration was a major objective for all PTAs PTE decisions on subsidised services In deciding which services should be subsidised, some PTEs adopted a gap-filling approach, essentially restoring services that had not been registered commercially, while others used accessibility planning as an objective measure of what services were required. Most PTEs expected the available funds for subsidised services to be limited, but in the event they were able to subsidise all the services they wished Subsidised mileage Between October 1986 and March 1987, subsidised services in the English PTEs amounted to 61 M vehicle-miles per annum, or 17.6 per cent of total mileage overall; the proportion varied widely between the PTE areas. In 1987/88 the mileage had risen to 63 M vehicle-miles, but the proportion fell to 16.5 per cent. Between November 1986 and May 1988 tendered mileage fell slightly in Strathclyde and South Yorkshire, and rather more (by up to 3 M miles) in West Yorkshire, Tyne and Wear, Merseyside and West Midlands. Tendered mileage rose by 3 M miles in Greater Manchester over the same period Competition for tenders Initially, competition for tendered services varied between the PTEs, being least in Tyne and Wear (where 81 per cent of the first round of tenders were uncontested and there was no competition between the major operators) and greatest in Greater Manchester where a fifth of the tenders attracted 4 or more bids. A year after deregulation there was less variation between PTEs; all areas had seen an increase in competition, but the average number of bids per contract was less than OPERATORS Operators" Strategies Before deregulation, in areas where there was little competition expected and where the actions of the PTEs could be predicted (eg Tyne and Wear, West Midlands and most of West Yorkshire), major operators registered services in their traditional territory and left gaps where they expected to win contracts. In other areas where the PTEs expected to reduce the level of subsidy or where competition was expected (such as Leeds, Manchester, Merseyside and Strathclyde), the operators formed new networks which made it more difficult for new operators to come in and for the PTEs to fill gaps Behaviour since deregulation Following deregulation, all areas have seen a high rate of change. Operators in some areas have been able to take advantage of published PTA policies. For example, in Tyne and Wear operators would register a service commercially if another won a contract, because initially this caused the PTE to cancel the contract, and in West Yorkshire, where the policy was to replace any withdrawn service, the operators could make strategic deregistrations of commercial services in places where they were virtually certain to win the contract. 37

42 Working Practices Under the Act, bus operators were encouraged to become more efficient. In the past, the major operators have had higher costs, with a system of guaranteed working days, premium payments and allowances, than the independent sector which tended to have the simpler wage structures and lower hourly rates common in the coaching industry. Large operators also had higher overheads through the provision of holiday pay, pensions, canteen and maintenance facilities and spare drivers. Independent operators in general had fewer facilities, shorter holidays, no pensions, no overtime rates, and could draw on management and depot staff to cover for absences Operators" Costs Since deregulation, the major operators claim to have reduced their costs by an estimated per cent. This has been achieved through increases in productivity such as faster running times, and reductions in staff numbers through wastage and voluntary redundancies (PTC staff fell by 16 per cent between 1985/6 and 1986/7 compared with 4 per cent in the industry as a whole). In addition, there have been reductions in staff earnings through consolidated wage agreements and lower hourly rates for minibus drivers. Most working practices are now negotiated locally instead of having national or metropolitan agreements as previously. Independent operators, on the other hand, claim that their costs per mile have increased, as expanding local services has required them to increase their staff numbers, maintenance facilities and management structure THE EFFECTS ON PASSENGERS Fares With the imposition of precept control in April 1986, all PTEs except West Yorkshire increased fares substantially, and there were further increases by a number of operators in October, though in most PTE areas all operators continued to charge the same fares. Since deregulation, there have been further fare revisions in most areas. Child fares have mostly followed the trend in adult fares, though initially in Merseyside rates for children varied, and in Strathclyde two operators charged full fare in the peak. Most travelcard schemes have remained intact, though prices have increased. A number of new cards have been introduced; some of these are limited to one operator, and represent a perturbation in the former all-operator, county-wide schemes, which remain fragile and subject to the goodwill of participating operators. There has been very little fares competition between operators, and the concessionary fare schemes in all PTEs nave been maintained Patronage In the English Metropolitan areas, patronage fell by 16 per cent between 1985/6 and 1987/8, compared with 4 per cent over the rest of the country. Patronage on the PTC services fell more, by 19 per cent, b'jt was offset by large increases in private operators' patronage. Some of the decline can be accounted for by fare increases and the initial disruption and unreliability of services. The decline in patronage was greatest in Merseyside and Greater Manchester. In contrast, patronage in West Yorkshire (where there were no fare changes) fell only slightly and recovered to around its previous level over the following year, and in Strathclyde patronage was steady Passenger Information Several PTEs have tried to maintain their previous level of information with comprehensive timetables covering all services and enquiry points. However, budget constraints and the high frequency of service changes have meant that no PTE has been able to achieve the same level of coverage. Few operators have produced their own timetable information. PTEs have found it difficult to maintain up-to-date information at bus stops. Surveys of passengers in two PTEs have shown that less than half the passengers in one area were aware of changes a week after they had taken place, and less than a quarter of passengers found out about services from timetables or publicity Passenger Reaction Surveys of passengers' attitudes to deregulation showed that nearly half of all bus users thought the services were worse since deregulation--three times as many as thought they were better. Passengers in all areas used buses less. Passengers' opinions of frequencies, fares and reliability had declined, while opinions of destination choice, drivers' attitudes and use of discount tickets had improved COSTS Operator Costs and revenues Statistics on revenues earned by operators are difficult to collect, especially in the deregulated era where such information could be useful to a competitor. But some estimates can be made from returns made to the Department of Transport. Operator revenues in the PTEs increased following deregulation, largely due to the fares increases which took place. There was an 8 per cent increase in the 38

43 18 months following deregulation, and over the 3 years between April 1985 and April 1988 revenue increased by 19 per cent. Over the same period, operators' costs have decreased significantly. The numbers of staff employed in the bus industry have decreased; the decrease was greatest in the PTCs (26 per cent over the 3 years) while staff employed in the private sector increased by 13 per cent. Statistics therefore suggest that operators are running more bus miles than before deregulation using fewer staff and are doing this at lower average costs, while revenue has increased Costs of Tenders The unit cost of tendered services is difficult to determine, because the tendered mileage in each area cannot be determined precisely, because groups of services are packaged in different ways, and because operators' decisions on what constitutes a commercial service vary between areas and over time. Estimates indicate that the average cost per mile of tendered bus services in the 6 PTEs was 1.14 in 1987/88. Some PTEs believe costs have reduced over time, but since other changes have occurred in the nature of the tenders this conclusion cannot be definite. Factors which appear to have contributed to cost reductions include packaging of groups of contracts, actual or potential competition, and the use of minimum cost contracts in Tyne and Wear (though in other areas the latter are more expensive) PTE Costs Comparing PTE costs before and after deregulation is difficult, for two reasons. Firstly, some of the reduction in revenue support is simply the result of transferring some items such as concessionary fares to other budget headings. Secondly, bus operation has been separated from the PTEs, so PTE costs alone provide an incomplete picture, and this is further complicated by the incidence of transitional payments to the new companies. Nevertheless, the total budgets for tendered services were substantially less than had been expected. The total spending for the six PTEs reduced by about 3 per cent in cash terms, or 11 per cent in real terms, between 1985/86 and 1987/88. Total revenue support in 1985/6 was 149 M, and the cost of tendered services in 1987/8 was 60 M. Merseyside and Tyne and Wear made considerable savings, while the other four PTEs had increased expenditure. 20 ACKNOWLEDGEMENTS The authors wish to acknowledge the important contributions made by many staff in the Transport Planning Division of TRRL and by officers of the Passenger Transport Executives which participated in the study. Section 14 was written by D Silcock and P Heseltine of TORG, University of Newcastle upon Tyne. The work described in this report forms part of the research programme of the Transport Planning Division of the Safety and Transportation Group of TRRL. 21 REFERENCES BALCOMBE, R J and HAWTHORNE, I H (1988). Route-specific bus subsidies in Norfolk. Department of Transport, TRRL Report RR152. Transport and Road Research Laboratory, Crowthorne. BALCOMBE, R J, HOPKIN, J M and PERRETT, K E (1988). Bus deregulation in Great Britain: a review of the first year. Department of Transport, TRRL Report RR161. Transport and Road Research Laboratory, Crowthorne. BALCOMBE, R J, HOPKIN, J M, PERRETT, K E and CLOUGH, W S (1987). Bus deregulation in Great Britain: a review of the opening stages. Department of Transport, TRRL Report RR107. Transport and Road Research Laboratory, Crowthorne. BALCOMBE, R J and MASEY, Helen (1986). Designing the subsidised network: the approaches of local authorities. Transport Planning Division Working Paper WP(TP)17. Transport and Road Research Laboratory, Crowthorne. (Unpublished paper available on direct personal application only) BANISTER, D (1986a). Unconventional public transport services in the shire Counties. Transport Planning Division Working Paper WP(TP)27. Transport and Road Research Laboratory, Crowthorne. (Unpublished paper available on direct personal application only) BANISTER, D (1986b). The 1985 Transport Act: social criteria. Transport Planning Division Working Paper WP(TP)16. Transport and Road Research Laboratory, Crowthorne. (Unpublished paper available on direct personal application only) BELL, P and CLOKE, P (1988a). Bus deregulation in the Powys/Clwyd study area. The final report. Department of Transport TRRL Report CR104. Transport and Road Research Laboratory, Crowthorne. BELL, P and CLOKE, P (1988b). Bus deregulation in the Powys/CIwyd study area: an interim report. Department of Transport TRRL Report CR75. Transport and Road Research Laboratory, Crowthorne. 39

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45 JAMES, N, RUBRA, N and SILCOCK, D T (1985). Working practices in the British bus industry and their implications for operating costs. Research Report No. 60. Transport Operations Research Group, University of Newcastle upon Tyne. LEE, Helen and JONES, Kate (1988). Passenger attitudes to bus deregulation-- national survey. Department of Transport TRRL Report CR109. Transport and Road Research Laboratory, Crowthorne. LEWIS, K J and FLOWERDEW, D (1988a). Consequences of the 1985 Transport Act in South Nottinghamshire. Department of Transport TRRL Report CR108. Transport and Road Research Laboratory, Crowthorne. LEWIS, K J and FLOWERDEW, D (1988b). Deregulation of buses in South Nottinghamshire. Department of Transport TRRL Report CR78. Transport and Road Research Laboratory, Crowthorne. MASEY, Helen (1986). Public consultation and information. Transport Planning Division Working Paper WP(TP)24. Transport and Road Research Laboratory, Crowthorne. (Unpublished paper available on direct personal application only) MASEY, Helen (1988a). Case study of the CS minibus service in Edinburgh: interim report. Transport Planning Division Working Paper WP(TP)51. Transport and Road Research Laboratory, Crowthorne. (Unpublished paper available on direct personal application only) MASEY, Helen (1988b). Case study of the effects of deregulation in central Glasgow. Transport Planning Division Working Paper WP(TP)47. Transport and Road Research Laboratory, Crowthorne. (Unpublished paper available on direct personal application only) MASEY, Helen and HOPKIN, J M (1986). Transport for children, elderly and disabled people. Transport Planning Division Working Paper WP(TP)25. Transport and Road Research Laboratory, Crowthorne. (Unpublished paper available on direct personal application only) O'REILLY, D O (1988). Concessionary fare schemes in Great Britain Department of Transport TRRL Report RR165. Transport and Road Research Laboratory, Crowthorne. O'REILLY, D O and HOPKIN, J M (1986). Concessionary fares. Transport Planning Division Working Paper WP(TP)26. Transport and Road Research Laboratory, Crowthorne. (Unpublished paper available on direct personal application only) PERRETT, K E and HOPKIN, J M (1989). Some early effects of the 1985 Transport Act in Strathclyde. Department of Transport TRRL Report RR168. Transport and Road Research Laboratory, Crowthorne. PERRETT, K E, HOPKIN, J M and FERGUSON, D (1988). Some early effects of the 1985 Transport Act in Strathclyde. Transport Planning Division Working Paper WP(TP)40. Transport and Road Research Laboratory, Crowthorne. PERRETT, K E and VICKERS, C J (1987). Fares and ticketing in PTE areas. Transport Planning Division Working Paper WP(TP)32. Transport and Road Research Laboratory, Crowthorne. (Unpublished paper available on direct personal application only) PICKETT, M W (1989). An analysis of some trends in the private PSV operator market following deregulation. Transport Planning Division Working Paper WP(TP)65. Transport and Road Research Laboratory, Crowthorne. (Unpublished paper available on direct personal application only) PICKETT, M W and GREENSHIELDS, F J (1988). High frequency minibus services in South Manchester January to June Transport Planning Division Working Paper WP(TP)44. Transport and Road Research Laboratory, Crowthorne. (Unpublished paper available on direct personal application only) PICKETT, M W and TIBKE, D (GMPTE), (1988). Some early effects of the 1985 Transport Act in Greater Manchester. Transport Planning Division Working Paper WP(TP)52. Transport and Road Research Laboratory, Crowthorne. (Unpublished paper available on direct personal application only) PICKETT, M W and VICKERS, C J (1988). Vehicle and seat mileage provision in Greater Manchester. Transport Planning Division Working Paper WP(TP)37. Transport and Road Research Laboratory, Crowthorne. (Unpublished paper available on direct personal application only) RICE, A D and LEWIS, K H (1988). Case study of the introduction of high frequency midi-buses in the Medway towns. Department of Transport TRRL Report CR110. Transport and Road Research Laboratory, Crowthorne. RICE, A D and LEWIS, K J (1988). Consequences of the Transport Act 1985 in the Medway area. Department of Transport TRRL Report CR97. Transport and Road Research Laboratory, Crowthorne. RICE, A D and LEWIS, K J (1988). Deregulation of buses in Medway. Department of Transport TRRL Report CR77. Transport and Road Research Laboratory, Crowthorne. 41