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Bus Pass Update

Buspass UpdateBack in March we took a look at the new OAP bus pass scheme that was upsetting the Commissar. When he saw the first monitoring report on its operation, he referred to the scheme as a 'Sword of Damocles' hanging over him - and he threatened all manner of dire consequences in the hope of covering up his misdirected, profligate spending, and his administration's overall financial incompetence.

So we thought it was about time to have a look at what's really going on here.

We've already shown (in All Aboard) how the Commissar told huge porkies about fictitious bus-pass losses of £300,000 last year that supposedly caused the pool to close. We showed this was wholly incorrect, and how he was using selective presentation of information to make the spurious claims. Yes, spending on bus passes was going up, but he conveniently omitted to mention it was being offset by an extra Government grant of £275,000 and other savings elsewhere.

Given his track record, we were doubtful about what he's saying now, and we thought our readers would like us to have a closer look.

So how does all the funding work?

Well, in the past, the majority of the funding for bus passes has been (and still is) provided by central Government through what's known as the Revenue Support Grant (RSG). However, in this pot, it's mixed in with other central government funding that councils spend.

Many readers will find this odd, but it seems this is how Local Government likes it.

Westminster says it's at Local Government's request that the bus money in the RSG isn't ring-fenced, (because this means Councils can use it on other things if they like). They can also supplement such spending with local taxes if they wish.

In addition to the funding that comes through the RSG, the Government gave a total of £212 million extra to local authorities this year for the increased cost of the new concession giving free travel to most pensioners.

Next year (2009)'s grant for the new service will be £217 million, and the year after £223 million.

There was also an extra grant of £31 million (£4 per pass) to pay the cost of the new passes (ie the production costs for the cards) that had to be provided for this new scheme.

The grant distribution is said to reflect the likely burden of cost - and has already been designed to direct funding more towards 'hotspot' areas such as coastal towns, urban centres and other authorities likely to experience an increase in concessionary bus journeys as a result of the new concession. So according to the Government, there has already been adjustment for local circumstances.

The objective of the scheme is that the bus operator should be left no better or worse off as a result of providing the concession. This ensures that operators are fully compensated for the service they provide but they do not receive any hidden subsidy through reimbursement (which could constitute illegal state aid).

Concessionary fare reimbursement to bus operators is made up of full 'revenue foregone' for those passengers who would have travelled in the absence of a concession, and 'additional costs' to cover the marginal extra cost of carrying passengers who only travel because of the concession,

It also accounts for costs associated with implementing the concession, and costs associated with increased bus use (where that can be demonstrated as a direct consequence of the concession).

If bus operators feel they are being unfairly treated by a Travel Concession Authority, they can appeal to the Secretary of State for Transport.

You might wonder why Government isn't funding the scheme directly.....

Well, they argue that doing so would mean central government held all the financial risks but had no control of how the risks were managed. Government wants 'Travel Concession Authorities' (in our case Lancashire County Council) to the control the scheme costs, monitor and the financial risk, and have the incentive to reduce costs, so all of this is done within the same body. Government argues that without this, the overall costs of concessionary travel, and the total burden on the taxpayer, will increase beyond that which has been allowed for by Government.

Interestingly Government has reserve powers to take over the payment and administration of the scheme.

Even more interesting, given Fylde's decision to sign up to the 'Lancashire pot' scheme is the power that exits for Government to "to transfer responsibility for concessionary travel to upper-tier local authorities." (that means instead of giving the money to Fylde, it could go directly to LCC)

So how's it all going then?

Well, Blackburn Council did a review of the scheme not too long ago.

They noted that the previous scheme reimbursed bus operators for free travel at the rate of 73.9% of normal fares, but with lots more passengers expected on the new scheme, the major bus operators had accepted a new reduced rate of 65.5% which took effect from the end of June.

They also noted that bus operators had expressed concerns about this drop in the reimbursement rate for concessionary fares (which had become a significant proportion of their business since the introduction of concessionary travel). As a result the bus operators were going to review their overheads, and it was thought that might result in some changes to existing services.

The drop in the reimbursement rate was expected to cut the cost of concessionary travel in Lancashire by around £2m during 2008/09, compared with the overall estimated costs calculated using the higher reimbursement rate.

Blackburn Council noted that the increase in journeys arising from the new scheme wouldn't not become clear until later in the summer, but the £2m saving would have a major impact on the overall cost of the scheme.

They worried that some bus operators may stop running commercial services that were no longer viable because of the higher proportion of low income, and it was thought that bus operators might reduce service levels, or withdraw marginal commercial services.

Other concerns included a worry that bus operators might increase fares on commercial services to offset the fall in income on the pensioner services.

So those were the pros and cons as Blackburn saw it earlier in the year.

OK, so how much is everyone round here getting in their new grant

Blackpool got an extra £1.368 million this year, and will get £1.401m next year and £1.439m the year after

Fylde got an extra £275,000 this year, and will get £281,000 next year and £289,000 the year after

Wyre got an extra £323,000 this year, and will get £331,000 next year and £ 340,000 the year after

Preston got an extra £590,000 this year, and will get £604,000 next year and £620,000 the year after

And will Fylde have enough?

Well, Fylde signed up to the Lancashire County scheme, so all the money they get for concessionary travel is paid to a central, Lancashire-wide (including the non-county-councils of Blackpool and Blackburn) pot, from which all payments to the bus companies will be made, so there will be considerable 'smoothing' of the actual cost.

We're actually a bit unsure about this idea. We think it could work to our disadvantage if our view about transport hubs faring worst is right. In this case, Preston and Blackpool would have the highest costs so they would be winners from using a shared pot scheme, and places like Fylde with potentially less cost than could lose by sharing its funding with others.

We also had an interesting report passed on to us from a Lancashire Local meeting about the scheme. This showed that prior to introduction, the main cost concerns were :

1). That the 'Cross-boundary' journeys to/from other districts (which were previously a 50p flat single fare) and journeys that go outside the home district will become free to users but paid for by the 'dispatching' authority.

2). The take-up of NoWcards was expected to increase by up to 20% because of the greater benefits, and whilst the actual extra costs will depend on the real world additional take-up, the new cardholders were expected to use their cards to only 25-40% of the existing cardholders).

3). Existing cardholders may make more or longer journeys.

4). The administrative change where costs are attributed to the 'start of journey' authority means that tourist and shopping areas were thought most vulnerable.

5). The County Council has estimated that the additional costs for the Lancashire scheme area this year could be in the region of £5.2m.

So given all this, is the Commissar still worried?

Well yes he is. After the first monitoring meeting on 4 August he said on his blog that the "estimated funding shortfall is projected at £2.3 million, and some people are predicting a total bill to Lancashire Council tax payers of up to £7 million."

He continued "bus operator records have shown a 90% increase in free travel to the Fylde Coast, this year, through the Preston Bus Terminal. " (Confirming our concern about transport hubs like Preston)

He suggests this means that Fylde Tax payers would be expected to pay the return proportion of all these bus journeys, a sum which could be upwards of £200,000, equating to almost 5% on our Council Tax Bills.

Even if that were the case, some people will have gone on to Blackpool, and for them, Blackpool would pay the trip back to Preston.

But it isn't the case of course, there will be no separate charging, because he joined the "Lancashire pot" scheme and has put all the money into that

We may have to pay higher costs of course, but it should be in relation to our original contribution.

We asked for a copy of the report from LCC ourselves. Initially reluctant to provide it, we had to resort to the Freedom of Information Act to get a copy. Even then, it had little hard information in it.

It says a legal agreement was being prepared for all councils to sign up to by this autumn.

It also shows the total *estimated* cost of the scheme for the whole of Lancashire this year is £27.3m, and the estimated income from contributions made by all the Councils is £25m, leaving a deficit of £2.3m across all Lancashire authorities.

From 1 April to 14 June, the estimated spending was £5.61m, but because Preston hasn't sorted its buses out with proper recording equipment, they had to estimate Preston's spending as being the number of concessionary journeys that were undertaken, and multiplied this by the 'average' adult fare on all bus journeys, and because Preston was not 'smart enabled' this calculation can't be changed retrospectively.

This isn't good news, because as the Commissar said, Stagecoach has reported a 90% increase on concessionary travel from Preston, especially to the coast.

There have also been fare increases as a result of higher fuel costs. So some people might say the reduction in fares agreed by the bus companies before the start of the scheme may be 'recovered' through higher fares overall (using the oil price to justify them).

The report warns about extrapolating from such a small base of information though. It also says they have allowed for another 7% increase in bus fares in case the oil price kept going up.

Well that's somewhat changed of late.

The more astute amongst our readers will note that 7% of £27.3 million is almost £2m and at that, it is quite close to the projected deficit of £2.3 million for the scheme overall.

The report didn't go into any more detail on the finances - but we're on the trail of that information and will bring you details when we have them. We think there might be some interesting winners and losers in the 'Lancashire pot' scheme

We talked to some bus operators, and they tell us that there has been a great increase in passenger numbers, especially during the 9:30 to 10:00 am period. They said this was giving them problems because folk who would usually use the bus at this time were having difficulty getting on and they were having to put extra buses on. They also told us the dominant use they were finding was OAP's from the edge of town going into the town centre and back, not long distance or tourist related uses.

So until we get more detailed figures for you, (and as usual), we suggest you treat the Commissar's cries of 'Wolf' with a good dose of salt. According to the LSA Express this week, he now thinks the Government funding shortfall is going to be as much as £400,000. Compared with the £2.3 shortfall he expected back in August, it's actually a whole lot more palatable.

But of course, he doesn't remind you of that.

Dated:  28 October 2008


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