law on subsidised services

[northwichcat]

Generally if theres a commercial hourly service or better you wouldn't put a subsidised service on it but you might subsidise early morning or evening service times that the commercial operator has chosen not to operate.

In the case of Cheshire East Council a 2 commercial hourly service increasing to every 90 minutes at peak times doesn't need any council intervention even when it provides a service to the nearest hospital.

 

[TheGrandWazoo]

There are no hard and fast rules but any company isn't a position to run a few commercial journeys and thereby remove the potential for council funded augmentation if that LA believes there is a need. In this instance, the 701 covers a huge distance twice a day and the LAs in the area believe that it doesn't sufficiently meet all needs.

In the case of the X12, perhaps the introduction and running identified a need (i.e. People used it) but not in sufficient numbers to be commercial? However, in these straitened times, I agree it's a curious move.

 

[Teflon Lettuce]

There are no hard and fast rules but any company isn't a position to run a few commercial journeys and thereby remove the potential for council funded augmentation if that LA believes there is a need. In this instance, the 701 covers a huge distance twice a day and the LAs in the area believe that it doesn't sufficiently meet all needs.

In the case of the X12, perhaps the introduction and running identified a need (i.e. People used it) but not in sufficient numbers to be commercial? However, in these straitened times, I agree it's a curious move.

what's even stranger is that, apart from the mid morning journey from Swansea I've never seen more than 3 or 4 people on the X12.... so I'd hate to know what the subsidy per passenger must be!

 

[Statto]

I think the rule is if it's socially necessary.

Merseyside have a couple of subsidised routes that compete with commercial routes, Evening & Sunday routes 130-210-250 soon to be replaced by 30-30A still operated by Merseytravel compete with commercial Arriva 300 although there is no evening service, & part of the Stagecoach commercial routes 20-21.

Also Merseytravel routes 118-119 compete with part of the commercial 423, operated by the same company, also part of 41-42-471-472.

 

[Bletchleyite]

I think the rule is if it's socially necessary.

And it can be felt it is socially necessary to serve a very small section of route. The situation in MK concerned this service:

https://www.milton-keynes.gov.uk/assets/attach/21551/Route 21 Nov 02 2014.pdf

which had a competing commercial registration put in place which did not extend to Lavendon, only going as far as Olney (the more financially viable part of the route) - this was Britannia Bus (Meridian Bus) 321. The commercial operator wanted the Council to withdraw their service or run only a shuttle (or pay them to run the extra bit), but they declined to do so as they felt a shuttle would not satisfy the social need (due to I think a large number of elderly users) and I guess didn't want their hand forced on who to pay. In the end the commercial operator threw their toys out of the pram[1] and withdrew, to the benefit of the Council who now get more fares revenue as a result.

Wonderfully political, and just "one of those things" where you have a messy hybrid system rather than full commercial or full tendered operation.

[1] The owner of the company concerned is very vocal, and I think that is a fair statement - it was very much *not* a quiet withdrawal, and I believe it also included a breach of their registration as they did a short notice withdrawal without requesting permission to do so (or, fading memory, such permission may have been requested but was denied).

 

[Teflon Lettuce]

And it can be felt it is socially necessary to serve a very small section of route. The situation in MK concerned this service:

https://www.milton-keynes.gov.uk/assets/attach/21551/Route 21 Nov 02 2014.pdf

which had a competing commercial registration put in place which did not extend to Lavendon, only going as far as Olney (the more financially viable part of the route) - this was Britannia Bus (Meridian Bus) 321. The commercial operator wanted the Council to withdraw their service or run only a shuttle (or pay them to run the extra bit), but they declined to do so as they felt a shuttle would not satisfy the social need (due to I think a large number of elderly users) and I guess didn't want their hand forced on who to pay. In the end the commercial operator threw their toys out of the pram[1] and withdrew, to the benefit of the Council who now get more fares revenue as a result.

Wonderfully political, and just "one of those things" where you have a messy hybrid system rather than full commercial or full tendered operation.

[1] The owner of the company concerned is very vocal, and I think that is a fair statement - it was very much *not* a quiet withdrawal, and I believe it also included a breach of their registration as they did a short notice withdrawal without requesting permission to do so (or, fading memory, such permission may have been requested but was denied).

I remember when it was MK Metro Julian Peddle was very good at forcing the council's hand without them realising... he would register the 1st couple of timing points of the route and the last couple as commercial... and leave the council to tender the rest of the run... of course there was only one company they could sensibly award the contract to....

 

[Bletchleyite]

I remember when it was MK Metro Julian Peddle was very good at forcing the council's hand without them realising... he would register the 1st couple of timing points of the route and the last couple as commercial... and leave the council to tender the rest of the run... of course there was only one company they could sensibly award the contract to....

He'd also, it appeared, only ever register services from about 7am to 6pm (2 shifts, I guess) and anything after that was tendered because he knew he'd get paid to run it. Whereas the main routes are now commercial in the evenings and Sunday daytimes as well under Arriva. I think he was taking the mick in that way as well. Quite amusing in a way that when Arriva bought them and rebranded, many people thought they were taking over from the Council - quite the opposite!

Peddle also did some re-tendering. The evening 3E ("Western Wanderbus" as I used to know it due to its grinding slowness) on a weekday was tendered to Metro who tendered it on to Z&S and Red Rose. I only found this out when I made a complaint about route-cutting and early running (which was endemic on that route) and the Council advised me of the rather complicated route the complaint had to follow and why. I don't think I ever got a response, and the problems continued until the Arriva takeover led to a rejig removing the route entirely in favour of evening services on the 7 and 8.

 

[Teflon Lettuce]

He'd also, it appeared, only ever register services from about 7am to 6pm (2 shifts, I guess) and anything after that was tendered because he knew he'd get paid to run it. Whereas the main routes are now commercial in the evenings and Sunday daytimes as well under Arriva. I think he was taking the mick in that way as well. Quite amusing in a way that when Arriva bought them and rebranded, many people thought they were taking over from the Council - quite the opposite!

Peddle also did some re-tendering. The evening 3E ("Western Wanderbus" as I used to know it due to its grinding slowness) on a weekday was tendered to Metro who tendered it on to Z&S and Red Rose. I only found this out when I made a complaint about route-cutting and early running (which was endemic on that route) and the Council advised me of the rather complicated route the complaint had to follow and why. I don't think I ever got a response, and the problems continued until the Arriva takeover led to a rejig removing the route entirely in favour of evening services on the 7 and 8.

I always did wonder why MK Metro was happy to allow the 3E to be run by another company under tender when it always looked busy enough to be commercial... now I know why.

Of course (and this is a bit off topic) there probably was a much more complex relationship between MK Metro and Z&S than meets the eye. There were persistent rumours that Z&S was bankrolled by Arriva... and of course Arriva grew out of Drawlane, a major shareholder of which was no other than Julian Peddle in the early days after deregulation....

However, whatever the pros and cons of Julian's approach to registration/ tendering one can only praise the comprehensive network by one operator that was MK Metro. Certainly the Arriva/ Marie Antoinette approach to non commercial services is a poor substitute

 

[Bletchleyite]

I always did wonder why MK Metro was happy to allow the 3E to be run by another company under tender when it always looked busy enough to be commercial... now I know why.

I'm not sure if the double tender persisted into the few years when the service went half-hourly, it might have just been the original hourly service. But as the half hourly service was laid on top of what was there (originally by Stansted Transit, but when they pulled out replaced by Z&S) it wouldn't overly surprise me if it did. The 8pm-ish working from Westcroft, notably, was the same vehicle and the same driver (Red Rose) for years. Was worth going for that one as he could be trusted, many of the others couldn't and cut bits of the route with irritating regularity.

However, whatever the pros and cons of Julian's approach to registration/ tendering one can only praise the comprehensive network by one operator that was MK Metro. Certainly the Arriva/ Marie Antoinette approach to non commercial services is a poor substitute

Very true, from a passenger's perspective it did work, and there was some interesting innovation like the contact-type smartcards (the main benefit of which appeared to be the anti-passback feature). I believe the cards had an e-wallet capability but it was never used, sadly.

 

[TheGrandWazoo]

Of course (and this is a bit off topic) there probably was a much more complex relationship between MK Metro and Z&S than meets the eye. There were persistent rumours that Z&S was bankrolled by Arriva... and of course Arriva grew out of Drawlane, a major shareholder of which was no other than Julian Peddle in the early days after deregulation....

**PEDANT ALERT** Not quite. Arriva was borne of Cowie Group which was a major car dealership and owned Grey Green and some other bus companies and then happened to buy British Bus which was the forerunner of Drawlane.

JP has been very canny in the firms that he has invested into but the real story into what he owned/had an interest in etc will only be known by him

As I think we've discussed before, one of my close friends was Scheduling Manager at MK Metro at Winterhill back in the day. Saw JP down there occasionally and enjoyed working with him!

 

[Mark62]

I actually had a major piece of research published in Scotland about bus deregulation. One of the people who appeared alongside me at the public launch was the then Councillor David Begg. He went on to be Professor Begg and personal adviser to Tony Blair etc.
A partial tender can be operated on a bus route. So only part of the route carries a subsidy. The original act actually prohibited any form of cooperation between bus companies and cross subsidy was illegal at the time. The act was unreasonably strict but did allow people like the Souters to flourish and legally decimate local bus services.
I predicted many years ago that over time the number of bus companies would reduce and that competition would be stifled.
The act itself was a provided a major contraction. The intention(publicly) was to create and encourage completion between operators. Bus as we have seen this never really materialised as we now have a centralisation of service providers. So in reality was have a private monopoly of operators now rather than the public monopoly it replaced. From that perspective deregulation has failed.

 

[RT4038]

I actually had a major piece of research published in Scotland about bus deregulation. One of the people who appeared alongside me at the public launch was the then Councillor David Begg. He went on to be Professor Begg and personal adviser to Tony Blair etc.
A partial tender can be operated on a bus route. So only part of the route carries a subsidy. The original act actually prohibited any form of cooperation between bus companies and cross subsidy was illegal at the time.

I am sorry, but cross subsidy has never been illegal! If a private company wishes to take excess profits gained on one route to subsidise the operation of another route, there is nothing legally to stop them (and why would there be?) and quite possibly good reasons to do so in some circumstances. BUT.... excess profits on one route are likely to attract competitors, so better to have more frequent service and/or lower fares making normal profits and ditching the unprofitable service to be funded (or not) by the local authority. Or bank the excess profits until a competitor comes along? However, if there is only one or two unprofitable services in an area [which may go out to tender and help establish a competitor in the area, who may then start competing on your profitable routes], you may wish to cross subsidise and try to keep the effective monopoly?

 

[Teflon Lettuce]

I am sorry, but cross subsidy has never been illegal! If a private company wishes to take excess profits gained on one route to subsidise the operation of another route, there is nothing legally to stop them (and why would there be?) and quite possibly good reasons to do so in some circumstances. BUT.... excess profits on one route are likely to attract competitors, so better to have more frequent service and/or lower fares making normal profits and ditching the unprofitable service to be funded (or not) by the local authority. Or bank the excess profits until a competitor comes along? However, if there is only one or two unprofitable services in an area [which may go out to tender and help establish a competitor in the area, who may then start competing on your profitable routes], you may wish to cross subsidise and try to keep the effective monopoly?

sorry to correct your correction but the 1985 Transport Act that gave us deregulation specifically forebade cross-subsidy in order to stop a dominant operator from unfairly gaining a monopoly... probably with the scenario you quoted in mind...

 

[Mark62]

There is actually much more to it than this. There was a political agenda at the time and many transport directors/ managers blamed the introduction of deregulation on what had been going on politically in South Yorkshire with the PTE/ county counci and local councils. Deregulation essentially took all control of transport away from them and devolved power away from what many considered to be socialist power blocks. I actually was living in Sheffield at the time and there was a lot of things going on that clearly angered the government and especial the prime minister. There were massive redistributions of power and wealth taking place and it was essential to remove local government from the area of transport planning, finding and provision in order to maintain that process. I'm sure that anyone will remember the absolute mess that deregulation caused at the time. And sadly many local communities have never recovered since. This is no exaggeration as huge parts of the UK only have a bare minimum of services(if they are lucky) I live in an area where some communities gets only one bus per week and they are now under threat.

 

[Busaholic]

I am sorry, but cross subsidy has never been illegal! If a private company wishes to take excess profits gained on one route to subsidise the operation of another route, there is nothing legally to stop them (and why would there be?) and quite possibly good reasons to do so in some circumstances. BUT.... excess profits on one route are likely to attract competitors, so better to have more frequent service and/or lower fares making normal profits and ditching the unprofitable service to be funded (or not) by the local authority. Or bank the excess profits until a competitor comes along? However, if there is only one or two unprofitable services in an area [which may go out to tender and help establish a competitor in the area, who may then start competing on your profitable routes], you may wish to cross subsidise and try to keep the effective monopoly?

Not being a lawyer, I don't know all the ramifications but in practical terms I would agree with you that there is nothing stopping a bus operator running a service at a loss, over a prolonged period of time if they so wish. You could say that by running another service at a profit that cross-subsidises the loss-making one, but I would think any QC worth his/her salt could demolish that argument. The bus company could, in theory, run each and every route at a loss: don't forget Starbucks UK managed their huge expansion while never making a taxable profit, and this position was accepted by HMRC!

 

[Statto]

Thinking about it, Merseyside have a different number system for tendered services, mainly due to different fares being charged, got me does thinking any other area have a different number system for tendered routes, Merseyside it's normally 100-250 but there are exceptions, & there are some commercial routes are numbered between 100-250, not sure if Bristol still has different numbers for tendered services, was/is in the 6xx series?

 

[Busaholic]

Thinking about it, Merseyside have a different number system for tendered services, mainly due to different fares being charged, got me does thinking any other area have a different number system for tendered routes, Merseyside it's normally 100-250 but there are exceptions, & there are some commercial routes are numbered between 100-250, not sure if Bristol still has different numbers for tendered services, was/is in the 6xx series?

Many areas have or have had separate numbers for tendered routes, but the reason why many have stopped the practice is because with so many routes the tenders are for part day ( e.g. evenings or school times) or one or two days of the week, like Sunday, and it leads to confusion among passengers who don't, in the main, recognise the difference or care less about it. The situation is compounded when, as sometimes happens, every other journey is tendered (e.g. on a route serving a hospital where what would otherwise be a two-hourly service becomes an hourly one.)

 

[RT4038]

sorry to correct your correction but the 1985 Transport Act that gave us deregulation specifically forebade cross-subsidy in order to stop a dominant operator from unfairly gaining a monopoly... probably with the scenario you quoted in mind...

Specifically which part of the 1985 Transport Act is this contained?

 

[W-on-Sea]

Thinking about it, Merseyside have a different number system for tendered services, mainly due to different fares being charged, got me does thinking any other area have a different number system for tendered routes, Merseyside it's normally 100-250 but there are exceptions, & there are some commercial routes are numbered between 100-250, not sure if Bristol still has different numbers for tendered services, was/is in the 6xx series?

In the first years of deregulation, Surrey had all its tendered routes in the 5xx series, but I think this is no longer the case.

 

[Bletchleyite]

Is there a reason Merseytravel don't reflect the main operator's fare structure? Elsewhere the tendered service often just duplicates it.

MK used to use the E suffix (from "evening", but it wasn't only evening services) for tenders but that too has been dropped in favour of just running the mainstream network, which I think is better as it's less confusing.

 

[CatfordCat]

Not being a lawyer, I don't know all the ramifications but in practical terms I would agree with you that there is nothing stopping a bus operator running a service at a loss, over a prolonged period of time if they so wish. You could say that by running another service at a profit that cross-subsidises the loss-making one, but I would think any QC worth his/her salt could demolish that argument. The bus company could, in theory, run each and every route at a loss: don't forget Starbucks UK managed their huge expansion while never making a taxable profit, and this position was accepted by HMRC!

There are a number of angles to this.

Firstly, while it's perhaps better to by-pass the Starbucks thing, why would any company want to provide goods or services at a long term loss? Companies have a duty to their shareholders, and even if those shareholders are accepting a 'break even' position, some operating surplus is needed to renew the fleet and cover for unexpected situations.

The remaining council owned bus companies are in a slightly different position - they are not allowed to be bailed out on a regular basis by their 'arms length' owning councils. I don't think any council has yet had the book thrown at them, and I think it's accepted if they make a small loss one year (which is an occupational risk of aiming at 'break even' - some municipals had aimed at break even and had a loss when the economic you-know-what hit the fan a few years back.)

You can drive yourself mad trying to analyse the profit / loss of every single mile of route. While there's little commercial point in running journeys that are regularly completely empty, there are the peak / off peak journey angles to consider (is a 'loss making' journey in the off peak direction that carries a few passengers really loss making if the same vehicle's peak direction journey makes enough profit to cover the out and return?)

The way the whole thing is costed is open to many variables. Since you won't ever run all your buses 24/7, most operators seek to cover the standing costs (e.g. garaging, purchase, finance / depreciation) of their vehicles over the times they can be sure the bus will be operating - say 0800 to 1800 Monday to Saturday - if the vehicle runs outside those times and covers its basic operating costs, it's probably worth doing.

(obviously the sums are different if the vehicle's primary thing is school bus runs or wedding hires)

There is also an increasing realisation that having early morning / evening journeys does encourage more people to buy weekly tickets etc, and that if a shift worker can't get to work on early turn / home on late turn because buses only run 0800 to 1800, that person probably won't make the other journey by bus.

The idea of intentional loss making is more rooted in competition law / regulations rather than transport act - broadly speaking, any business that indulges in 'predatory pricing' - intentionally selling very cheap (at a loss) to drive a competitor out of business, stands to be investigated by competition authorities. (the most blatant example was in Darlington where a certain plc blew the municipal owned operator out of the water by running free buses for a while.)

 

[TheGrandWazoo]

Thinking about it, Merseyside have a different number system for tendered services, mainly due to different fares being charged, got me does thinking any other area have a different number system for tendered routes, Merseyside it's normally 100-250 but there are exceptions, & there are some commercial routes are numbered between 100-250, not sure if Bristol still has different numbers for tendered services, was/is in the 6xx series?

It was Avon County Council that had services numbered in the 500 - 899 series for tendered services (as did Cleveland). However, it caused confusion with tendered journeys gaining different numbers for the same service (e.g. 126 being 826 on Sunday/evening). Hence, most have been dropped though some wholly tendered services still retain them in Bristol and in BANES.

 

[Bletchleyite]

You can drive yourself mad trying to analyse the profit / loss of every single mile of route. While there's little commercial point in running journeys that are regularly completely empty, there are the peak / off peak journey angles to consider (is a 'loss making' journey in the off peak direction that carries a few passengers really loss making if the same vehicle's peak direction journey makes enough profit to cover the out and return?)

Not only that, but the presence of an evening service, even if lightly loaded, can make people more likely to do a daytime commute. If the last bus home is 1745 and you finish at 1730 and sometimes have to work overtime, you might well rule it out if a taxi is unaffordable and so drive daily instead. Whereas if there is an 1845 and a 1945, you might well use the bus all week even if you use those actual buses once a month or so.

 

[CatfordCat]

Thinking about it, Merseyside have a different number system for tendered services, mainly due to different fares being charged, got me does thinking any other area have a different number system for tendered routes, Merseyside it's normally 100-250 but there are exceptions, & there are some commercial routes are numbered between 100-250, not sure if Bristol still has different numbers for tendered services, was/is in the 6xx series?

Surrey's the only one I can think of, and I think they did away with the idea some years ago.

A few places have / had evening / Sunday services numbered in a different sequence to daytime routes, but that's because they didn't follow the daytime routes - in some cases trying to cover (say) 3 daytime routes with 2 evening routes. Generally speaking, this sort of thing tends to confuse passengers more than it helps...

 

[Busaholic]

It's a long, long time ago and I came a cropper for producing figures that were politically unacceptable, but not too long after the Greater London Council took over London Transport some mug in the Bus Traffic Office, namely me, was given the task of working out how to charge neighbouring counties for L.T. buses entering those counties, like the 21A to Swanley in Kent and the 250 to Epping in Essex and I produced some figures given the data I was supplied with, which frankly wasn't much. As my conclusions did not support the idea of Kent coughing up to meet the costs of the 21A all the way to Eltham, Well Hall Station and suchlike they fell on stony ground, the cynical view being that the results had been decided in advance and what was really wanted were the figures to back them up, however skewed they might be. So I always have to smile inwardly when talk of cross-subsidy comes up, especially from those who say it can't or shouldn't happen. It has happened, does happen and will continue to happen, for the simple reason that no two people can agree what it is. Proving Higgs- Boson is simple by comparison!

 

[Kuyoyo]

It was Avon County Council that had services numbered in the 500 - 899 series for tendered services (as did Cleveland). However, it caused confusion with tendered journeys gaining different numbers for the same service (e.g. 126 being 826 on Sunday/evening). Hence, most have been dropped though some wholly tendered services still retain them in Bristol and in BANES.

5xx were routes funded by Stockton or Hartlepool Borough Councils
6xx were routes funded by Middlsbrough Borough Council
7xx were routes funded by Redcar & Cleveland Borough Council
8xx were school contracts
9xx were works services

 

[TheGrandWazoo]

5xx were routes funded by Stockton or Hartlepool Borough Councils
6xx were routes funded by Middlsbrough Borough Council
7xx were routes funded by Redcar & Cleveland Borough Council
8xx were school contracts
9xx were works services

The 800/900 services were actually United/Tees school/work service numbers as used elsewhere in the North East e.g. Richmond schools had 823/832/837/838 and Durham Johnston School had 855/856. Durham had a 943 works service IIRC.

The 500-799 series were Cleveland CC but were grouped geographically, so when the split came in 1994, that was the general grouping to the Unitaries and explaining why Stockton and Hartlepool had 5** services.

North Yorkshire also had a habit for a while of giving regular services that ran via a school a separate number. Hence, you'd have a service down Swaledale in the morning which was numbered 202 but in the holidays would be numbered 30 as per all other journeys!!