Public transport – an alternate route?

bus graphic

Public transport is the most efficient way to move people around our cities, so why is it not more widely used? In many UK cities people use their public transport unwillingly. Increased privatisation has not fixed the problem. Outside of London bus passenger numbers have been in sharp decline since 1984/85, down 37%. And privatisation continues – the (ironically delayed) 2017 Bus Services Bill introduced a wholly ideological clause to stop local authorities running their own bus services, even if that service is more cost effective than a privately run service.

Efficient public transport is vital to our environment and our economy, and I believe our overly privatised buses and trains are failing on both counts. Here I’m going to suggest a way to enable low cost public transport across the UK to improve our environment and increase passenger numbers.

Nature of the problem

UK Government figures1 show bus operators’ profits average around 11%. But bus companies receive around 40% of their revenue from the taxpayer for a) concessionary travel (free bus passes), b) from national and local government to keep unprofitable but socially necessary services running, and c) The Bus Service Operators Grant (BSOG). Outside London, bus companies received a total taxpayer subsidy of around £1.7bn in 2014/2015.

So your taxes are subsidising companies that cannot provide the minimum bus services deemed socially and economically necessary and be profitable. The simple fact is public transport will never trully be a business because it cannot exist without public subsidy.

But widespread nationalisation may not be the universal panacea, any more than continuuing privatisation. There needs to be fresh approach where services are not fueled by either limitless funding from the taxpayer, or unchecked profits for private industry.

The alternate route

This post proposes the creation of a national fund of several million (probably £100m), to allow the creation of bus and rail providers which set fares on a cost + growth basis (cost+ for the rest of this post). Instead of success being measured by profit, the success of these operators is measured by improved punctuality, increased passenger numbers and environmental performance.

I’m not suggesting a bunch of amateurs running a community bus route, or crowd funding – crowd funding will never raise the tens of millions needed to even enter the transport marketplace. The aim of the fund is to begin to level the playing field, allowing transport operators that run a cost+ model into the transport marketplace, increasing public transport usage and benefiting the environment and economy.

Before getting bogged down in the details, there is a simple assumption behind this post:

A well managed bus or train company, setting fares with a cost+ model, should always be cheaper and should therefore carry more passengers than a similarly well managed ‘for profits’ companies, required to charge its passengers more to keep delivering profits and bonuses for its shareholders.

What has been missing until now is the motivation to make that initial investment, and the defined structure to ensure the investment is used properly.

The fund outlined

A few years back I wondered if large environmental groups could use some of their resources as seed money to improve our transport infrastructure. Greenpeace International has total assets of around €225m. Could Greenpeace start the fund with £5m? This is not a gift, instead an investment of existing assets into a well-managed fund.

The remaining funding would come from other sources, bonds, ISAs, similar financial products, which individuals, pension funds, organisations like trade unions might buy into, knowing their investment is safe, and improving public transport. To the commuter frustrated with poor buses and trains such an ISA could be an attractive investment option – offering the same return as from a high street bank ISA, but at the same time the investment is helping to improve public transport throughout the country. The ISA could be provided via the banking infrastructure of ethical banks like Triodos or The Co-Operative Bank.

Find 100,000 such people to put £1000 into such ISAs and you’ve got £100m. And note, this does not mean finding £100m of new money. It is about getting people with existing savings to move say £1000 into a specific Better Transport ISA.

As high street products like ISAs are regulated by the financial services authority they carry little risk for the investor. With millions being invested it’s important the fund is properly managed and evaluates the cost+ operators’ business plans and monitors progress to ensure they succeed, so banking industry requirements become a positive force – ensuring economic discipline in the management of the fund. And of course environmental groups and trade unions have a large base of supporters who are potential customers for the ISA.

It is also important the fund is neither political nor a source of income for the groups providing the original seed money, which could negatively affect the perception of the fund. To grow it needs the support of those on all sides of the political spectrum who simply want efficient and affordable public transport network. Other than service and environmental benefits any mission outside of that would be problematic. Whatever charter the fund operates under must include that proviso.

The cost+ transport providers

Potential operators would approach the fund with workable business plans – in the case of buses the fund could buy the first 50 or 100 buses, loaned to the operators who pay back to the fund the cost of vehicle depreciation. The operators’ fares would be set based on costs of employing drivers, insurance, maintenance, depreciation, administration, plus a surplus to grow the fund and pay the interest on the ISA or whatever other high street funding was used.

Railway profit to investment ratio is lower than bus services, so railway operators would need to start small, running Open Access rail services at low cost rather than attempting to bid for a franchise.

There is one major advantage in transport compared to many other start-up businesses. Once a bus or train service is up and running it generates income from the start. Most businesses need time to build up their market share. Providing a transport operator has fair access to routes, paying customers are literally waiting at the stations and the bus stops.

Motivation, the wasted energy

A motivated workforce is key to any successful organisation, yet motivation is an energy that companies pursuing ‘the bottom line’ often waste. The short term pressure to keep wages low and have unfavourable working conditions, leads to increased sickness, unwillingness to co-operate with management and a culture where staff resent going to work. That must be reversed. My assumption is given the right conditions the majority of people want a positive atmosphere at work and take a basic pride in doing a good job.

Whether a cost+ operator’s structure is Co-Operative, a partnership or something entirely new, staff and management must be motivated, and together set fares and decide most of the working practices – within the rules of the fund. There are only so many committed environmentalists who would make good bus or train drivers, so financial incentives like salary bonuses of upto 10% of salary for all employees if the operator significantly improves on punctuality and passenger numbers compared to ‘for profits’ operators. A sense of staff ownership and responsibility for the future is vital to success.

There cannot be any adversarial gap between management and workforce, or the operator will quickly cease to exist. The fund enables cost+ operators to enter a privatised marketplace, operators which should grow with passenger numbers. Unlike a nationalised industry, the fund cannot bail out operators that don’t deliver – there will be no ‘pot of money’ available make up for poor decisions.

Even so I believe environmental and service improvements compared to ‘for profits’ operators are possible within those bounds.

Improving rolling stock

One key aim of the fund is to improve the environmental performance of buses and trains in our cities. Purchasing new vehicles is an opportunity to put better buses on our roads. Electric cars are becoming more mainstream, although carbon neutral electric busses are some way off still (although note, even Edwardian London had viable electric buses2 for a time) so hybrid and LPG are currently more realistic options. Although this still means burning some fossil fuels, the purpose of the fund is increase passenger numbers, reducing pollution overall.

Rail infrastructure usually limits rail to Diesel power only. UK rail rolling stock is 95% owned by three companies, but cost+ companies should be able to make service and environmental improvements by prioritising maintenance with both trains and buses, which often suffers with ‘for profits’ operators.

Measures of success

Lower fares and improvements in punctuality are how the fund measures the success of cost+ operators. According to government figures1 non-frequent services (less than 6 buses on a route per hour) were from 1 minute early to 6 minutes late 17% of the time. That’s nearly one in five services significantly late. I believe that’s a poor return for what we pay. That is a key area of improvement that can win passengers and increase usage. People have a right to expect reliable public transport.

I think the funds’ operators need a more ambitious target, no more than 1 minute late 95% of the time – perhaps that’s not feasible but if you don’t aim high you can only achieve mediocrity. The standard excuse from operators is that traffic is unpredictable. One thing you can predict about traffic is that it will be unpredictable! Solutions from the drivers and other staff are key in over-coming this. They are dealing with the issues day to day and are best placed to suggest solutions. With the right organisational structure it is also in their interests to fix the problem.

Essentially I’m describing a philosophical shift in how we look at our transport marketplace. The cost+ operators must run as efficient businesses to compete with ‘for profits’ companies, but the purpose of the fund is ensuring it is the passengers, workforce and the environment that benefit from efficiency, rather than a company board and its shareholders.

Blockers

Many of the UK bus and train companies make tens even hundreds of millions of pounds in profit annually. Non-profit operators threatening any of that market share will not exactly be welcomed with open arms. I would expect unfair practices, price wars, negative publicity and political influence would be employed to stop cost+ transport operators gaining any sort of foothold.

This is another reason for involving large environmental groups from the outset, as they have direct experience of fighting corporate interest in the courts. A significant part of the fund’s role is to take on these legal challenges when necessary, and lobby the industry regulators, local and national government to ensure the cost+ operators get a fair share of the market.

Probably the greatest barrier to success is poor management in the cost+ operators themselves. Poorly run companies that are too idealistic and don’t properly appreciate the need to operate within limited financial bounds, or fail to meet passenger needs on punctuality and reliability, simply won’t last. Any cost+ operator must run a measurably better service for lower cost than existing ‘for profits’ operators. As someone who works in Local Government forced to adapt to record cuts in resources, I know this is difficult but not impossible.

Surely the Government won’t allow it?

The mainstream of politics does lean towards increasing privatisation, and lobbying often ensures the interests of big business take priority over those of the average citizen. But it is lazy and simplistic to write off governments as blindly carrying out the will of their corporate paymasters. If a viable alternative model to ‘for profits’ ownership of our transport network comes along – one that proves it has a more reliable and efficient way of providing our transport services – no politician wants to be perceived as being in favour of bad services for large profits.

And remember the UK Government has other considerations; reducing emissions for climate change targets, reducing air pollution to cut cost in lost workind days and on the NHS, reducing subsidies paid to transport operators for subsidised routes, and the wider economic benefits of reducing congestion. Also 34% of bus journeys in 2014/2015 were concessionary, a cost met by the taxpayer which will only increase year-on-year with our ageing population.

Do you still believe in trickle-down?

This post is partly motivated by a wider concern than buses and trains. Since the 1980s deregulation and privatisation of public services was intended to stimulate economic growth which would then ‘trickle down’ to the wider population. Global wealth has increased overall but we have now reached the point where 1% of the world’s population control more than 50% of its wealth – world poverty continues, and most people in the developed world feel less secure in the current economic order, leading to disillusionment with mainstream politics, Brexit and the rise of populism. In fact a 2015 YouGov survey3 found the majority of the UK population now believe trickle-down economics has failed.

For many services, as with buses and trains, mass privatisation is not the most cost effective way of providing services – companies have to provide a service and make a profit – so the taxpayer is often subsidising profits that go to the already wealthy.

I’m suggesting the creation of funds as described above, backed by the resources of individuals and groups with specific aims (for example environmental groups), may afford a way to keep in check a greater concentration of wealth and power to the wealthiest – for example, how about an ISA backed network of non-profit care homes for the elderly, using the advice and support of a group like Help the Aged? This is done by enabling efficient non-profit services to enter the marketplace, attracting more customers because quality of service not short term profit is their primary aim.

Such funds can only succeed with a clear and detailed plan, good open governance, and a realistic economic model. So whoever you are, the aim of this post is to engage your imagination and expertise about how this model may come about.


endnotes:

1. Government data sets for UK bus transport.

2. The predictable consumption of energy on routes meant Edwardian electric buses swapped batteries at charging stations. Their demise was caused by a get-rich-quick scheme, rather than limitations of the technology, New Scientist

3. YouGov survey finds most people do not believe in Trickle down economics.

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