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Proposed Bus regulation (Scotland) Bill Iain Gray MSP East Lothian
Introduction
This document is the formal response by Stagecoach in Scotland to the consultation on the proposed
Bus Regulation (Scotland) Bill promoted by Iain Gray MSP, Member for East Lothian. In this response
Stagecoach in Scotland refers to the various Stagecoach operating companies of Highland, Bluebird,
East Scotland and West Scotland.
Stagecoach in Scotland is part of Stagecoach UK Bus Division, which in turn is part of Stagecoach
Group plc. Stagecoach Group is a leading international public transport group, with extensive
operations in the UK, United States and Canada. The Group employs around 36,000 people, and
operates bus, coach, train, and tram services.
Stagecoach is one of the UKs biggest bus and coach operators with around 8,000 buses and
coaches. Around 2.5 million passengers travel on Stagecoach's buses every day on a network
stretching from the Highlands and Islands to south-west England. The Groups business includes
major city bus operations in London, Liverpool, Newcastle, Hull, Manchester, Sheffield, Oxford,
Cambridge and Exeter, and in Scotland Inverness, Aberdeen, Dundee, Perth, Edinburgh, Glasgow and
Ayr. Low-cost coach service, megabus.com, operates between around 60 towns and cities across the
UK.
Stagecoach is a major UK rail operator, running the South West Trains, Island Line and East Midlands
Trains networks. It has a 49% shareholding in Virgin Rail Group, which operates the West Coast
intercity rail franchise. Stagecoach also operates the Supertram light rail network in Sheffield.
In North America, Stagecoach operates around 2,800 buses and coaches in the United States and
Canada. Megabus.com links around 100 key locations in North America. Stagecoach is also involved
in operating commuter and transit, contracted bus services, charters, sightseeing tours and a small
number of school bus services.
The Group business strategy is to run high quality services with well trained staff and high levels of
investment in its fleet, equipment and depots. The Group has won numerous business, innovation
and environmental awards both within and outside Scotland. The UK bus division is acknowledged as
an industry leader in its service delivery standards, and has been independently recognised as having
the highest passenger satisfaction ratings in its peer group (Passenger Focus) and the lowest fares by
as much as 20% in its peer group (TAS). It is also worth noting that the Group is a major employer in
the Scottish economy, and is a significant contributor to the exchequer through corporation tax,
employment taxes, fuel duty and business rates.
In Scotland Stagecoach currently operates 1,265 buses and coaches on local, interurban and express
services, with 3,100 staff, running some 68 million miles and carrying some 86 million passengers per
annum. In the last 5 years to 2012/13 Stagecoach in Scotland has invested over 75m in 460 new
buses and coaches, most of these from Scottish manufacturers. Stagecoach in Scotland has, in
partnership with Comfort Del-gro, pioneered and expanded its low price inter-city megabus.com
express coach services, has expanded Scottish Citylink and introduced megabus gold and megabus
sleeper coach services. Stagecoach has also developed and expanded its local bus services in all the
areas it serves with low price day and weekly tickets, is 100% smartcard equipped and almost 100%
low floor bus equipped.
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X99 Caithness-Inverness
In 2011 Stagecoach improved this service to provide better connections with both Orkney ferries
and to improve journey times between Thurso and Inverness, with 6 new wheelchair accessible
coaches. Passenger numbers have increased by 7.3%.
727 Inverness-Airport
This new service was introduced in 2010 every half hour with new high specification airport
buses. In 2012 the frequency was increased further to every 20 minutes with early morning and
late evening journeys. Passenger numbers have increased from nil to 185,000 in year 1, and to
382,000 in year 2.
X17 Aberdeen-Westhill
In 2012 Stagecoach increased this service frequency by 50% to every 10 minutes with 10 new
accessible buses. To date passenger numbers have increased by 17.5%.
X7 Dundee-Arbroath-Montrose-Aberdeen
In 2011 Stagecoach introduced this new hourly express coastal service with high specification
wheelchair accessible coaches, by linking together several shorter routes. Passenger numbers
have increased by 11.1%.
99 Dundee-St Andrews
In 2012 Stagecoach increased this frequency by 50% to every 10 minutes with 11 new accessible
buses. Passenger numbers have initially increased by 7.2%.
57 Blairgowrie-Perth
In 2012 Stagecoach doubled this frequency from hourly to every half hour with 6 new accessible
buses. Passenger numbers have initially increased by 3.9%.
X25 Cumbernauld-Glasgow
Since 2011 Stagecoach has progressively improved this service with simplified routeing, later
evening journeys and increased frequencies, now operating up to every 5 minutes at peak times,
every 15 minutes during weekdays and every 30 minutes on Sundays with newer wheelchair
accessible coaches. In 3 years passenger numbers have increased by an impressive 153%.
3 Ayr-Kincaidston-Whitlets
In 2012 Stagecoach increased this frequency by 50% to every 10 minutes with 6 new wheelchair
accessible buses as part of our Statutory Quality Partnership with SPT and South Ayrshire
Council. Despite underlying patronage decline in Ayr, the improvements have generated 24%
increased passenger numbers.
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Legal
As the proposals note, the former Scottish state owned bus companies were privatised under
the Transport Act (Scotland) 1989 for a consideration of 90m. Stagecoach in Scotland acquired
some of these companies. The proposed Bill would deprive existing operators of their businesses
leaving them with employees, vehicles, depots and pension liabilities, destroying shareholder
value and threatening employee pay, conditions and pensions. There is no legal precedent in a
liberal western economy for confiscation without compensation of the right to trade, and such
action would be subject to a lengthy and expensive test in the European Court of Human Rights.
It would be unimaginable that any Government would seek to treat any other industry in this
way.
Financial
The basic premise of the proposed Bill is that local bus service routes, timetables and fares
would be designed by local authority officers with little or no practical operating experience or
contact with passengers, and tendered under bureaucratic public procurement procedures in
bundles of profitable and unprofitable services. This would require a large number of additional
local authority staff to design, procure, monitor and manage the contracts at considerable
additional cost to the taxpayer.
The presumption is that profits on profitable services would be applied to support unprofitable
services. This is to ignore the lessons of history when 55 years of regulated monopoly from 1930
to 1985 resulted in excess fare increases and service cuts on profitable services to support
increasing numbers of loss making services with declining patronage and rising subsidies. The
proposed Bill would revert to an era when the least affluent passengers on the most profitable
routes were forced to cross-subsidise the more affluent passengers on the less well used routes
a form of regressive taxation on the poorest members of society.
The presumption is also that there are excess profits to be confiscated and applied to support
loss-making services. This was investigated in the Competition Bus Industry study in 2011, which
found a very minor excess return on capital across the UK, but using disputed methodology;
profitability has fallen since then. An independent report by TAS for CPT Scotland notes that
average Scottish bus industry operating profit margins for the 5 years 2007 to 2011 have
averaged 7%. This is insufficient to provide for interest, taxation, sustainable investment and an
adequate return on shareholder capital. It follows that in a contracted regime, operators are
likely to tender for higher returns at additional taxpayer or fare-payer cost. In addition, as
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Practical
The transition from a commercial to a contracted business model would involve an industry wide
upheaval similar in scale to that following implementation of the Transport Act 1985.
All other things being equal, we would expect tenders for contracts to be awarded to the lowest
price bidder. Labour costs form up to 60% of total bus operating costs for drivers, engineers,
cleaners, supervisors and managers. It follows that the bidder with the lowest labour cost would
have the greatest bidding advantage, and it would be very difficult and undesirable for existing
operators to cut wages, benefits and pensions. That places new bidders with cheaper labour
costs at an advantage over existing operators. In addition State owned overseas operators have
recourse to lower cost capital than commercial UK operators, and would be likely to repatriate
any profits on successful contract bids.
Current employees would be left in an uncertain state of limbo. EU TUPE Regulations do not
easily apply to the bus industry, where routes in an existing depot might transfer to a remote
location or to several different operators. Even if a form of TUPE could be applied, current
pension schemes could not be protected in law, and many employees would be left in a much
worse pension situation.
Current operators could be left with surplus vehicles and half empty or vacant depots, with no
assurance that they could realise the value of these surplus assets. Current shareholders, many
of whom are employees or pension and trust funds representing millions of people could see
their asset value and incomes reduced. There is the prospect of a significant loss of investor
confidence in the industry, which would be ironic given that two of the UKs largest passenger
transport Groups are based in Scotland.
The proposed Bill suggests that the Regional Transport Partnerships will design, procure,
monitor and manage the contracted bus networks. This would require unanimity between
neighbouring local authorities.
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Who will decide which routes are profitable and which are not, and how will it be
decided which services to bundle together?
Will local authorities agree on the design and fares of cross boundary services?
Will an authority with profitable routes be expected to cross subsidise loss making
routes in an adjacent authority area?
Will services crossing RTP boundaries be included in the service bundles and if so,
how?
Will cross boundary and cross border express coach services be included?
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Introduction
The proposed Bill correctly identifies that as car ownership rises year on year, bus patronage
falls; this has been the case for over 60 years. However, it concludes that despite being the
most common form of public transport, in many areas bus services have let people down. We
do not seek to comment on the specific circumstances of the withdrawal of services in East
Lothian, Midlothian and to a lesser extent in Falkirk, except to note that the market mechanism
has provided alternative services in most cases. However, we object to these isolated examples
being generalised across the whole of the bus industry. In the last 5 years to 2012/13 Stagecoach
has lost only 0.1% of its commercial fare paying passengers, despite the deepest economic
recession in 80 years. To seek to confiscate our business on such evidence is wholly
disproportionate and opportunistic.
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(66-80)
Transport Scotland statistics show that 84.2% of all Scottish households in 2011
were within a 6 minute walk to their nearest bus stop and 93.6% within a 13 minute walk. Even
in rural areas 75.2% were within a 13 minute walk. 46% of all households enjoyed bus service
frequencies of 3 or more buses per hour and 71% of at least 1 bus per hour. This is an
exceptionally high level of accessibility in a country with low population density outside the
urban areas. Inevitably accessibility is less in rural areas as there is considerably less demand to
support the need for services.
The consultation document notes that 542 registered services were cancelled in Scotland last
year as evidence of a contracting bus network across Scotland. However, it fails to note that over
the same period 718 new service applications were accepted. It also fails to note that about half
of all service registrations are due to changes in local authority supported services, a wholly
disproportionate number compared with the proportion of total service km run on these
services. In the two year 2010/11 to 2012/13 Stagecoach has recorded
This demonstrates a healthy commercial and tendered service market. We would also note that
the great majority of service registration variations are designed to improve service punctuality
and passenger satisfaction.
(81)
We comment below on each of the suggested improvements from the Government
Social Research survey Understanding why some people do not use buses
- Conductors on buses would increase costs and fares, and would reduce driver wages (driver
only operation incurs a 25% premium), but would also speed up buses. Stagecoach still employs
conductors on its Dundee Tayway service, but the economics do not support a return to
conductors elsewhere.
- Stagecoach in Scotland has invested 75m on 460 new buses and coaches in the 5 years
from 2008/09 to 2012/13 (36% of its fleet) at an average cost of 163,000 each. We have
continued to invest in mainly Scottish manufacturing industry throughout the recession, but
have only been able to do so by remaining sustainably profitable. All new buses are equipped to
the latest safety and comfort standards.
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- The percentage of buses in Scotland fitted with CCTV has increased from 24% in 2005/06 to
63% in 2011/12, an average annual increase of 6.5%. All new Stagecoach buses are CCTV
equipped
- The percentage of buses in Scotland fitted with Automatic Vehicle Location equipment has
increased from 22% in 2006/07 to 76% in 2011/12, an average annual increase of 11%.
Stagecoach has a national programme to achieve 100% fitment.
- 89% of buses in Scotland were fitted with smartcard readers in 2011/12. Stagecoach is 100%
equipped.
- 84% of buses in Scotland were fully DDA compliant or low floor in 2011/12. Almost all
Stagecoach buses are accessible with the exception of some school and limited services.
These statistics clearly demonstrate that the commercial sector has continued to improve
standards for passengers, even throughout the economic recession.
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Questions to Consider
The consultation on the proposed Bill asks respondents to specifically address 8 questions. We
respond to these below.
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