Policy instruments (4) - Transport Policy and Planning in Great Britain - page 248

inefficiency. Alternative formulations have been put forward, for example based on the
number of passengers carried (CfIT 2002b).
The Government's intention to reform BSOG was reiterated in 2006 (DfT 2006e
'Putting Passengers First'). A consultation paper has since been published setting out
options for reform of the grant in the short term linked to fuel efficiency standards with
more radical options, including possible rationalisation of BSOG and concessionary
fare payments, for consideration from 2011/12 (DfT 2008c).
The context for local authorities' support of bus services outside London changed
radically following deregulation in 1986 when they ceased to pay incumbent operators
for the maintenance of whole networks and arranged contracts for individual socially
necessary services through a competitive tendering procedure instead. Overall support
costs were almost halved between 1984/85 and 1987/88 with especially large reductions
in the metropolitan areas because of the ending of subsidised fare regimes.
During the subsequent decade the costs of bus tendering continued to fall on a
per-mile basis and in total. Since the late 1990s however the situation has become
more difficult both for the bus industry as a whole and for local authority tendering.
The main factors are increases in the costs of labour, pension provision and fuel.
Previous gains in productivity (bus miles per member of staff) have also been lost,
partly because of worsening traffic congestion and greater emphasis by operators in
scheduling services to achieve greater reliability. Profit margins in 2005/06 were only
7% on average, having fallen in seven out of the previous eight years (Cheek 2008).
Over the last decade local authorities have been faced with the double whammy of
increased demand for tendered services (arising from the de-registration of commercial
services) coupled with higher prices for maintaining existing ones. On average the cost
of contracts has risen by about 2% a year above inflation.
The rise in contract prices has been greatest in London. However the effects of this
are subsumed within the huge increase in payments made by the Mayor as part of his
policy for securing rapid growth in bus mileage and patronage within the capital in
complete contrast to the previous policy of zero support when London Transport was
controlled by Central Government (Figure 15.3).
Rising costs would have had more serious repercussions for rural areas but
for a hastily arranged initiative by the Government in response to the mass rural
demonstration in 1998. A new rural bus services grant (RBSG) was paid annually to
local transport authorities on the basis of their population in settlements of less than
10,000 people (later increased to 25,000). The grant was introduced at the level
of around £20m p.a. and for some authorities represented more than a doubling of
the amounts they were contributing to rural services previously. Although the grant
was originally confined to service enhancements, the rules were relaxed in 2001 in
response to the more difficult tendering environment, allowing up to 20% of the
grant to be used to support services operating prior to that date. General opinion of
the grant has been very favourable and the Government has continued to fund it at
increased levels since (DfT 2004a).
A Rural Bus Challenge (RBC) fund also introduced at the end of the 1990s had a
more mixed reception. It was distributed on a competitive basis in response to bids from
authorities for innovative forms of service. However several features of the grant were
criticised - the costs and uncertainty involved in the bidding process, the unnecessary
and (as some considered) inequitable requirement for 'innovation' and the three-year
limit on funding for each scheme. The last round of RBC awards was made for projects
beginning in 2004/05.