Bus Services – Concessionary Fares and a Formula

The issue of bus services never really goes away, as people will know from reading my blog that I have had recent experience of this form of public transport. Only the other day a local resident contacted me complaining as to why bus companies only give single fares and not returns on concessionary tickets. It is a very valid point that was worth investigation, but I did not expect the complex answer that I got.

Currently, it costs Cornwall Council £7.5m per year to fund concessionary fares. This system was introduced by the last Government and I feel this is a good policy that has allowed people to be more mobile. It is one of the true benefits that people over a certain age receive, as it has made people who I have spoken to feel less isolated.

As to why it costs £7.5m you need to understand the reimbursement formula which is as follows (and please bare with me).

It is worked out by the number of single pass holders journeys x average fare per passenger journey x 73.5 per cent. The first element is self evident. The second element is calculated by reference to people who do pay fares as proxy for what the pass holders would have paid in the absence of a scheme. It uses the average fare per passenger journey rather than average single fare to allow for the fact that return journeys are cheaper than two singles.

So if the total of fare payers was 1000 people paying £1.00 single and 800 people paying £1.35 return, then the total fares paid amounts to £2,080 and the total passenger journeys are (1000 + 800 + 800 =) 2,600 so the average fare per passenger journey is £2,080 divided by 2,600 which is 80 pence. If we had 500 pass holders journeys, reimbursement would be 500 x 80 pence x 73.5% = £294.

The specific journey made by each pass holder doesn’t matter for reimbursement purposes, just the number of such journeys. Companies don’t issue return tickets for pass holders as it would confuse the formula and probably put the numbers wrong, as not all return portions of tickets are used so the Council might over-reimburse.

The third element (73.5%) arises from the fact that some journeys are only made because they are free – generated travel. The operators are supposed to be no better and no worse off so shouldn’t get full reimbursement for generated journeys – just those journeys that pass holders would have been made anyway. The figure of 73.5% was used as Central Government considered this correct when implementing the Welsh and Scottish Schemes.

You still with me? Sorry this is complex as you would think there would be a simpler formula, or method that could be used. Trust me, it get better when I talk about Council input, and the differently funded services we currently have in Cornwall.

Furthermore, there is no contract involvement in any of this. The reimbursement is paid in respect of all journeys on all routes whether run commercially or under contract to the Council (our contracts are “minimum subsidy” whereby operators take the revenue risk). The only element that could change is the 73.5%. The Council legally has to publish by 1st December what its reimbursement will be for the financial year ahead. Thus the Council has already declared 73.5% for the 2011/12 financial year.

In terms of commercial bus services (being about 50% of all bus mileage in the county) the Council have no powers whatsoever. The bus industry was deregulated by the 1985 Transport Act. Local authorities can not – legally must not – intervene in their operation. They are free to run where they like (subject to Traffic Orders) at the times they like at the fares they like using the vehicles they like (subject to VOSA standards of bus). In terms of secured services the Council sets the route and timetable, can set the bus standards (like Truro Park and Ride), can intervene for poor operation and in extremes could stop the contract and re-award it elsewhere after tendering. So in other words the Council has quite a lot of power with regard to secured services but none at all with regard to commercial services.

The breakdown of the routes is as follows:

Fully commercial – 17
Fully secured – 39
Daytime commercial / evenings and Sundays secured – 15 (far less than 50% secured)
A Daytime part commercial / part secured including plus evening secured – 22 (generally over 50% secured but with exceptions).

It gets me onto the final point about the complaint I had about First Devon & Cornwall (yes, I have dared to name the operator). I did manage to get hold of data from a recent Public Sitting (like a court for bus operators) in which the Traffic Commissioner conducted in November 2010. It raised concerns that First’s punctuality is quite poor. Only around 80% of journeys are within the window of 1 minute early to 5 minutes late. There are though very few actual cancellations. It seems people give up on the stop too early and confuse cancellation with lateness.

I hope that has all made sense. If you are still with me then well done and reward yourself with a stiff drink as you really deserve it!

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