First UK Bus response to

consultation on the Bus Regulation (Scotland) Bill

First Bus operations in Scotland
First UK Bus operations in Scotland are made up of three operating
businesses First Aberdeen, First Glasgow and First Scotland East. In total
they employ around 4,000 people, operate more than 1,500 buses and
provide safe and reliable services for around 155 million customers in
Scotland every year.
Introduction
People rely on bus services to access a range of activities: work, travel,
leisure, shopping and education. The importance of the bus to the UK and
Scottish economies cannot be underestimated. A recent study by Greener
Journeys, found that:
More people travel to work by bus than all other forms of public
transport combined.
In the UK there are some 2.5 million bus commuters and a further 1
million use bus as a backup, in total around 12% of the working
population.
In the UK people use the bus to make shopping and leisure trips to a
value of 22bn per annum.
Whilst First welcomes Mr Grays efforts to raise the profile of bus travel and
improve bus services for passengers, we disagree with the fundamental
premise behind this Bill that greater regulation is the best way to effect
change. Indeed, greater regulation of the bus industry was fully investigated
and rejected by a recent Competition Commission Inquiry, while legislation is
already in place which enables bus operators and transport authorities to
work together.
This response to the consultation will outline why greater regulation would be
undesirable for customers, operators and the Scottish tax payer.
We fully accept and embrace the need for operators and transport authorities
to work more closely to ensure faster, more reliable and punctual services,
better information at bus stops and a host of other factors. For example,
adding or improving bus priority measures to routes will enable bus operators
to run services faster and more reliably thereby making services more
attractive and grow patronage. It enables the operator to therefore reinvest
the growth back into the service and continue the snowball effect.
Working in partnership allows each party to do what they do best. The
operator can plan, market and sell services to benefit the majority of
potential customers and is able to take a degree of risk in developing and
improving these services. The public sector is able to fund socially necessary

services and has the technical expertise to develop and deliver innovative
infrastructure solutions to support quicker and more reliable buses.
Therefore rather than the introduction of a franchise system which is
bureaucratic, expensive and damaging to the interests of passengers,
operators and tax payers; fostering improved partnerships between bus
operators and transport authorities is the key to better bus services.
Franchising profitable and non-profitable routes
One of the central themes of the consultation is providing transport
authorities with greater control over bus services. However, it is important to
point out that local authorities currently are able to have a great deal of
influence over the provision of services through partnership. The level of this
influence is quite rightly proportionate to the commitment and investment
they bring to the arrangement.
The Bill champions the introduction of franchise packages determined by
local authorities allowing them to bundle profitable and non-profitable
routes. However, this assumes that bus operators make sufficient profit that
such cross subsidy can deliver additional benefits at low risk to the public
sector. In fact, the industry makes profits significantly below the 10-12%
benchmark identified by the recent Competition Commission inquiry this
already includes considerable cross subsidy, at least 5m per annum in Firsts
operations alone. It is this very point that makes bus networks so sensitive to
the economic climate and to changes in the overall level of public funding.
Furthermore, this lack of adequate profit has led to a backlog of investment in
some areas which will need to be rebalanced over the next few years. These
risks and the long term above inflationary cost profile of the industry would
increasingly be passed onto transport authorities and the tax payer. This was
recognised by consultants AECOM, contracted by Strathclyde Passenger
Transport (SPT), who stated that the qualitative assessment we have
undertaken suggests that there would be a high resource and funding
requirement as well as a significant timescale associated with bus
franchising.
In terms of tendering for services labeled socially necessary, the current
process is transparent and competitive. Indeed public expenditure on local
buses is estimated to have decreased by 26% between 1984 and 1988 when
the industry was deregulated. Any move back to a network based subsidy
may well see costs creep back up.
As an illustration, Strathclyde Buses received over 23m in revenue support
subsidy in 1984 at todays prices, compared with circa 12.5m for all bus
subsidies paid by SPT today.
In addition, the Bill and accompanying consultation fail to address a number
of important questions:
Who will decide what routes are profitable and non-profitable?
Who would be responsible for trialling and growing new routes?

What happens when a route becomes more or less profitable due to

external factors?
What would the design and administration of a bus network under
these proposals cost, and how would it be funded?

There is little focus in the Bill on the impact of re-regulation on employees.

Contract bidding will put a great deal of unnecessary pressure on bus
employees, especially when contracts change hands. The new regulatory
framework proposed cannot possibly guarantee the maintenance of good
pension schemes or employee share save initiatives that are offered by good
and responsible employers like First, nor can it guarantee the provision of
apprenticeships and other training that bus operators invest in.
The consultation also fails to explain how competition issues would be
overcome. Would an operator holding contracts in area A with no threat of
competition for their market and using assets funded by a government let
contract be able to launch a competitive assault in area B where the market
was still open? In short, if the Bill was implemented the Scottish bus industry
would not be operating in a way which promotes fair competition and one can
envisage potential legal challenges further adding to costs and/or removing
funds from service delivery.
In the event that franchising was introduced into the Scottish market,
operators deprived of their business are likely to seek compensation from the
transport authorities concerned. Imposing a bus contracting system would
likely be subject to a lengthy and expensive test in the European Courts. This
again adds to the demands of the Scottish taxpayer or results in lower levels
of service to Scottish bus users.
The Bill also considers the powers of the Traffic Commissioner. Again, the
proposals appear overly complex and costly, and would lead to a duplication
of function in the public sector. In the event that a franchising arrangement
was introduced, the correct mechanism for managing operators would be
through an agreed contractual framework. There would be no requirement for
the Traffic Commissioner to be involved in operational compliance issues;
instead her function would revert to one of safety regulation.
First would support the greater use of innovative means of supplying social
necessary tendered services, including the use of local authority special
needs fleets. We believe that support for flexible types of operation can form
a legitimate part of a fair and comprehensive partnership arrangement.
The impact of rising costs on services
When considering if the Bills proposals would provide better protection
against bus cuts, it is important to put into context the external factors that
have played a major part in decisions by operators to withdraw certain
services. The majority of British companies and certainly all bus operators
have been affected by the worst recession in some 80 years there is no
doubt that it has had a negative effect on demand for bus services. The

economic climate allied with the high price of fuel (the industrys highest cost
second only to the cost of labour), cuts in external funding and the ever
increasing costs of running bus services generally, put additional pressure on
the ability to cross subsidise those routes that perform poorly. Given those
hugely difficult set of circumstances operators increasingly found it hard to
sustain or justify running services that attracted a handful of customers.
The consultation makes reference to 542 registered services that were
cancelled in Scotland. It should be borne in mind that a service can range
from one trip per day to six or more buses per hour. In addition to changes to
commercial networks, these numbers include contracts being re-awarded by
local authorities to new operators, special events services and routes only
intended to operate seasonally. Without understanding the nature and
outcome of these changes together with the volumes of people impacted and
the existence or otherwise of a new or alterative bus service they tell us little
about the bus market. However, the consultation fails to make reference to
718 new service applications that were accepted, despite the challenging
trading conditions. As much as these raw numbers can be used to interpret
trends in the local bus market, it is important to look at new applications as
well as service cancellations.
As the consultation makes specific reference to First Scotland Easts
withdrawal from a number of routes from East and Mid Lothian, it is
worthwhile setting out the context for that decision. Unfortunately, after a
number of years of poor trading for the reasons outlined above, First could no
longer afford to cross subsidise poorly performing services in the area.
Furthermore 85% of passengers were on routes where other operator
provision was already in place or being maintained by First. First would have
preferred to have transferred operations to another local bus operator but
legal advice suggested that this could be seen as anti-competitive. Indeed,
of the 200 staff whose jobs were at risk, the vast majority secured
employment with another operator, who stepped up its services in the area
following Firsts withdrawal.
This demonstrates well that the market does work one operator withdraws
and is replaced with another better equipped to provide customers with the
services they want. The disruption to many bus passengers regrettably
caused by Firsts withdrawal in East and Mid Lothian wasnt caused by a lack
of regulation indeed a regulated market would have likely delivered an
outcome similar to that now in place - but of competition law which provides
no means of bilateral discussions to secure an organised transition of service,
thus reducing uncertainty, minimising any impact on employment or on
customers.
The consultation also refers to the withdrawal of services by First in Falkirk.
Again external factors here impacted significantly on the ability of the
business to continue to cross-subsidise across the network. Firsts new
network is designed to improve services for the overwhelming majority of its
passengers. As well as planning its own changes First carefully considered
the impacts on the socially necessary tendered network and provided the
transport authority with a suggested solution utilising just one bus. The local

authority instead decided to implement a solution requiring five buses, but

subsequently found that this solution was uneconomical, given the same
financial pressures First faced. This example clearly shows that, regardless of
who is controlling the bus service, the economics of operating services are
the same.
Indeed, Para 64 of the consultation notes that tendered service kilometers
provided by local transport authorities have decreased by 25% in the last five
years, compared to a 9% reduction in commercial bus kilometers. At the
moment, the risks of changes in costs and demand are borne largely by the
bus operators. Under the Bills proposals, this would transfer to the public
sector, with authorities having contractual arrangements specifying levels of
operation in place, leaving them facing increased subsidy costs or the need to
increase fares in order to balance their books.
At a time of austerity across the public sector, this will provide a challenge for
local government finances. At the present time it is difficult to see how
transport authorities will be in a position to fund the significant costs
associated with the implementation and ongoing administration of a franchise
system.
Why the current system should change
The consultation heralds London as arguably providing the best bus services
in the UK. It acknowledges the high level of subsidy which ensures that
passengers in London can enjoy a good service. Actually, spend per capita in
London was 103.43 in 2009/10. By means of contrast, SPTs current subsidy
per head of population is just 5.32. In addition private car users in London
face city centre parking charges higher than experienced in Scotland and, of
course, also incur the costs of the Congestion Charge further incentives to
use public transport. Scotlands rural geography could simply not support the
London model and in the urban towns and cities there appears little appetite
to follow Londons lead in wider transport policies.
Para 19 states that authorities hand over cash to operators to run
unprofitable services but with little say in how they are run. This is simply
not true. Local authorities can decide the level of control by the way they
agree and monitor contractual terms most choose to set at least timings,
frequency and penalties for failure. It is rare for a local authority to opt not to
decide the parameters of a tendered contract given the controls necessary
when spending public funds.
The consultation document fails to recognise the amount of cross subsidy
that the bus industry already commits to. There are countless instances of
profit making routes and trips supporting services that are loss making or
only just washing their face. It suggests providing transport authorities with
powers to secure a minimum level of service. First presumes that the levels
proposed will not be less than is currently in place which leaves the very real
chance that in areas of low financial return, the cost to the public sector will
increase as operators seek a proper financial return. In the event these

poorer performing areas are left out of the scope of contracting the reduced
ability to cross subsidise will inevitably result in cuts, closures and job losses.
The consultation refers to the findings of the Scottish Household Survey
which mentions a lack of direct routes and unreliable services. It appears to
imply that his approach will deliver more direct routes with faster journeys
without really explaining where the funding will come from to achieve this. In
terms of direct routes, the fact the market is not providing these journeys
right now suggests that the private sector considers them too great a risk
would transport authorities be prepared to risk placing a greater burden on
their tax payers?
In order to improve bus services in Scotland, First would like to see stronger
partnerships with transport authorities. It wants more people to travel by bus
and is working incredibly hard to make its services more attractive to
customers. It should not be forgotten that journey speed and reliability (as
mentioned in the household survey) are very much a function of the highway
network. First is disappointed that this Bill omits any requirement on
transport authorities to implement bus priority measures to help maintain bus
journey times, even at their current average speed. A clear factor in the
success of buses in London has been the implementation of a priority network
for buses by Transport for London.
First believes that working with transport authorities in partnership is the best
way forward for the industry. For example, if a Transport Authority was
prepared to invest in greater bus priority measures companies like First could
commit to new routes, greater frequencies, or newer buses. Similarly, in the
event that there is a social need for a particular service, transport authorities
and bus operators could work together - with the authority providing the
funding at the outset and the operator providing a commitment to reinvest
any growth back into the service.
Furthermore in terms of partnership, the consultation fails to acknowledge
the Bus Stakeholder Group, a forum consisting of representatives from the
bus industry and the Scottish Government to discuss bus service provision
and funding in Scotland.
By better utilising the existing legislation, a partnership approach will
undoubtedly improve services and increase passenger volumes.
For
example, in South Yorkshire, we have worked closely with the Integrated
Transport Authority and Passenger Transport Executive to promote a strong
partnership. As a result we have delivered passenger growth, guarantees on
annual network and fare changes, mulit-operator ticketing and better
passenger information.
Monitoring and accountability
Para 34 states that, with the exception of SPT, the punctuality of services is
not monitored. However, Bus Users Scotland is contracted to provide this
service, although there is different regulation across Scotland. First believes

there should be a single body responsible for monitoring with authorities

buying in more if they need it, rather than paying for separate resource. This
would lead to a consistent basis for benchmarking performance. It goes
without saying that most operators monitor their own services and would be
willing to allow results to be used in the Partnership planning process.
Mr Gray suggests that Patrick Harvies, Better Buses website, is a good
indicator as to the publics view on bus services. However, across Scotland
there are some 439 million passenger journeys a year. Although we welcome
any attempt to reflect passengers experience, it is difficult for the true
picture of bus users experience across the country to be reflected in its
ongoing surveys. Thus, whilst we were keen to reflect on, and respond to,
Patrick Harvie MSPs Better Buses survey, which is cited in the consultation,
it is not clear that this was anything but a self-selecting, unrepresentative
sample of passengers in a certain area. We are unsure that it is wise to be
used as a barometer of the wider passenger experience.
Further, it is worth noting that a recent publication produced by Mr Harvie,
stated that bus customers have faced continual above inflation increases to
fares." That is not the case. Firsts 2013 fares review across Scotland sought
only to cover inflation with some fares frozen or reduced. Indeed the majority
of fares at First Aberdeen were frozen or reduced.
Decline in Public Subsidy and Bus Use
The consultation rightly acknowledges that rail passengers enjoy a public
subsidy some 21 times greater than bus passengers. First believes that any
increased costs of the introduction of partnerships should be judged by an
expert panel which could include representatives from Passenger Focus and
Bus Users Scotland.
Public satisfaction
The consultation notes a high satisfaction rate with public transport services
and certainly the latest Scottish Transport Statistics indicates that bus
passengers appear satisfied:

73% of passengers feel that buses are on time

79% of passengers feel that buses are frequent
74% of passengers feel that buses run they need them.
85% of people feel that journey times are reasonable
Scottish bus fares are consistently and increasingly below the UK average.

Firsts own detailed customer surveys indicate that satisfaction has

consistently improved across its three companies. Indeed its own monitoring
shows a clear link to investment and improvements it is implementing and a
positive shift in passenger satisfaction.
First has invested significantly to
improve services, improve customer satisfaction and increase patronage. For
example:

First invested 14m in a new depot for Aberdeen in 2009. It has

ambitious plans for a brand new 20m facility at Gushetfaulds in
Glasgow to replace the current Larkfield headquarters.
These
investments follow sustained improvements at its other depots across
Scotland in recent years and have helped significantly improve
punctuality and reliability performance.
In the last 12 months First has invested around 29m in 189 new buses
- fitted with complimentary Wi-Fi, leather seats, extra room for
wheelchairs and buggies and the latest Euro V engines from Falkirk
based manufacturer, ADL.
First has introduced brand new networks in Aberdeen, Falkirk and
Glasgow which are designed to improve services for the overwhelming
majority of customers. Passenger numbers are already increasing as a
result in Aberdeen, and the early signs for Falkirk and Glasgow are
similarly encouraging.
First is increasingly adding complimentary Wi-Fi to its fleet with 300
buses in Glasgow to be fitted with Wi-Fi by the end of the year, and
more planned for Aberdeen and Scotland East.
The entire fleet in Scotland is in the middle of a refresh programme
which is improving the exterior of all buses and many of the interiors.
Recognising the need to provide customers with good value, Firsts
2013 fares review across Scotland sought only to cover inflation with
some fares frozen or reduced.
Across its operations, First offers promotions, often in conjunction with
retail outlets, providing further value for customers.
First is investing in improving the quality of the information it provides
to customers. The company has introduced customer newspapers in
Aberdeen and Glasgow, and across its network has developed a First
Bus app which provides customers with easy access to timetable
information. First now has more than 10,000 Twitter followers across
Scotland too.

It is unclear from the Bill and the consultation, how a franchise system would
sustain investment on this scale.
Service improvement
The consultation lists a number of ways in which services can be improved. It
is important to point out that some of these improvements cannot be made
by bus operators alone and need the support and co-operation of local
authorities.
However, of the items listed First is committed to making improvements on
each:

Anti-Social behavior: all Firsts new buses come fitted with CCTV and
the companys zero tolerance approach has seen instances of anti
social behavior fall markedly.
For example, ten years ago First

Glasgow recorded some 8,000 instances of graffiti or broken windows.

The figure last year was under 400.
Improvements to the physical condition of buses: all Firsts new buses
are fitted with improved lighting, more room for wheelchairs and
buggies, extra grab rails to improve safety, leather seats and
complementary Wi-Fi. Firsts entire fleet is going through a fleet
refresh programme which is improving the exteriors of its buses and
many of the interiors.
Information at Bus Stops: across its networks First has or is rolling out
improved literature which will make timetable information much easier
to comprehend.
The company is also ensuring that timetable
information is available at community centres, libraries, railway
stations and other popular public facilities. However not all timetables
are posted by bus operators with some authorities doing the job
themselves. In such cases it is vital that they maintain the same
standards but regrettably this isnt always the case.
Speed and reliability of Services: Firsts engineering performance has
improved significantly over the years which has enabled the company
to better run services to timetable. For example, at First Aberdeen
more than 95% of services leave their terminus on time reliability has
never been better. However, without comprehensive bus priority this
can only be achieved through slower running speeds with resulting
higher costs.
Fares: recognising the need to provide customers with good value,
Firsts 2013 fares review across Scotland saw the majority of tickets
either reduced in price or frozen.
The Day ticket in Glasgow, for
example, has just been reduced from 4.50 to 4.00. Indeed over the
past five years bus fares (excluding inflation) have risen by around 6%
in Scotland that compares with a rise of 10% in Britain as a whole.

The environment
The consultation rightly points out the role public transport has to play in
reducing Scotlands carbon emissions.
First has successfully introduced a range of groundbreaking initiatives to
reduce the companys carbon footprint. Our innovative DriveGreen driving
programme has reduced fuel consumption by around 5%; the volume of
waste going to landfill has reduced by 10%; and gas and electricity usage by
7%. All our new buses are fitted with the latest EURO V engines; while in
2011 First Scotland East won 'Best Large Green Company' at the Scottish
Green Awards and was a finalist in 2012.
It is unclear from the consultation how such innovation would be encouraged,
funded or implemented in a franchise system.
Bus travel is part of the solution to climate change. Greater partnership
working with local authorities will help persuade more people to consider
alternatives to the car. As indicated above, bus operators like First are
investing in their businesses and encouraging more people to use the bus.

This investment, however, works best when complemented by measures

taken by local authorities to persuade more people out of their cars. Oxford,
for example, has been widely praised for its transport policy which gives
significant priority to buses and has high central car parking charges. Years
of deterring car use in Oxford has led to successful bus services which in turn
leads to greater investment, further improvements, increases in passenger
numbers and less motorists.
Summary

First UK Bus does not support the Bus Regulation (Scotland) Bill.
Although First does acknowledge that Mr Grays underlying reasons for
attempting to introduce the Bill are to be applauded to improve bus travel
for passengers.
However, the solutions proposed in the Bill are
fundamentally flawed and if adopted its highly unlikely that the stated
objectives can be achieved at a reasonable cost to the taxpayer. Customers
would receive poorer services and tax payers would inevitably face a greater
burden.
The main issues from the consultation are as follows:

The Competition Commission recently fully investigated and rejected

greater regulation of the bus industry.
The level of profitability of the Scottish bus industry currently fails to
achieve the 10-12% margin levels outlined in the Competition
Commissions report.
Existing legislation is already in place which enables bus operators and
transport authorities to work together.
Greater regulation would result in a greater risk to Scottish tax payers
and in reality place a much heavier burden on tax payers.
It is highly unlikely that greater regulation would result in the levels of
investment currently enjoyed in the industry.
The costs of introducing a franchise system not to mention the
administration costs once implemented would be significant.
Greater regulation will not change the availability of bus priorities, the
management of roadworks or the enforcement of traffic regulations, all
of which are essential for the operation of quality reliable services
customers want.
Passenger satisfaction within the industry is already high and
investment is continuing apace. Re-regulation threatens that progress.

First UK Bus in Scotland has invested in new buses and new networks which
are showing encouraging signs of passenger growth. First has gone to
extraordinary lengths to improve its processes, change the way it operates
and continues to make its businesses sustainable and viable.
Across its
operations First is now slicker, smarter, more responsive and crucially more
customer focused than ever before.

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Whilst there is still much to do, continual debates about regulation, rather
than passengers, are a distraction. Partnership is the most effective way to
deliver better services quicker as the necessary levers are already in place.
By working with willing partners, operators will generate passenger growth,
keep people moving, support sustainable local employment and keep local
communities prospering.
Mr Grays consultation should act as a catalyst for greater partnership
working between Scottish bus operators and transport authorities using the
existing legislation. While companies like First are doing much to raise
standards for passengers, more can be achieved, not though a franchise
system, but with better and stronger partnerships with transport authorities.

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