(reading time: 8 mins)
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%.
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
For commuters who own a car, congestion and lack of parking are often the only reasons to use public transport at all. Passengers resent having their time wasted as much as their money. Who wants to allow extra time for their journey because they cannot rely on public transport to stick to the schedules? Where passengers have alternatives they will take them, reducing passenger numbers to those who have little choice, and so increasing fares.
UK Government figures2 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 not only are you paying a higher ticket price than you should, 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.
The alternate route
Set up a national fund of several million (probably £100m) to enable 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.
This isn’t just crowd funding. The fund is there to level the playing field, allowing transport operators that run at cost into the transport marketplace, increasing public transport usage and benefiting the environment and economy. (I will call the operators cost+ for the rest of this post).
Before getting bogged down in the details, there is a simple assumption behind this post:
A reasonably 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’ company, 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.
Who pays into the fund?
Funding could come from a combination of environmental groups, pension funds, trades unions and individuals who want better public transport. Bonds, ISAs specifically for this fund could be provided by ethical banks like Triodoes and The Co-Operative Bank. For frustrated commuters these personal investments could be an attractive option – get returns on a par with a high street bank and help improve public transport, and lower fares, throughout the country. Find 100,000 such people to put £1000 into such ISAs and you’ve got £100m. And note, this does not mean £100m of new money. It is about attracting people with existing savings to move say £1000 into a Better Transport ISA.
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 various operators who are paying 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 an amount 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.
Financing the cost+ operators is the main hurdle. They cannot be financed in the conventional sense because the fares are low and surpluses are intended to increase less profitable routes, or go back into the fund, so the usual commercial investors aren’t an option.
I imagine the initial operating companies would be founded by a group of people with a sound business plan approaching the fund for assistance. The group gets start-up money and free use of the buses so the operator is financed for say 2 years. As the service runs and grows the company pays its own costs (outlined above) plus a small percentage to grow the fund. The ticket price should still be less than the fares of a ‘for profits’ commercial operator.
There is one major advantage in transport compared to many other businesses starting up. 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, the customers are waiting for them at the stations and the bus stops.
Well run operators save money
A key part of any successful organisation is a motivated workforce. 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 creates 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.
‘For profits’ operators also have a significant Achilles Heel. Short term cost-cutting creates a conflict of interest between management and workforce, sometimes resulting in costly industrial action, as with Southern Rail throughout 2016. A ‘for profits’ operator can drop the quality of service and working conditions to maximise profit, profit which has no upper limit. However a cost+ operator must be a good employer, offer a high quality service and do all this while offering lower fares to the passengers.
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. But the fund cannot bail out operators that don’t deliver. So unlike a private company or a public sector employer, there is no ‘pot of money’ waiting to 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 rolling stock. Purchasing new vehicles is an opportunity to put better buses on our roads. Hybrid buses are already an option, as are biogas – reusing food and farm waste. Carbon neutral electric busses are also becoming a possibility – the city of Shenzen built an electric bus industry to overcome the cities terrible air pollution.
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 figures2 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.
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. However if a viable competitor 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.
So why hasn’t it happened already?
So is this an idealistic fantasy? Why has it not happened already? I consider the UK public transport network is under utilised partly because of ‘the bottom line’. Short term profit always takes precedence over service, reducing passenger numbers and increasing cost. The only solutions presented so far have been more privatisation vs less privatisation. Public ownership is unlikely to be an option soon, so increasing public transport participation needs a more imaginative solution. Publicly run or privately run, social enterprise or a company motivated solely by profit, you can find good and bad management, working practices and organisational structures in all of these.
As stated at the beginning of this post it comes down to this simple principle:
A reasonably well managed bus or train company, setting fares with a cost + growth model, should always be cheaper and should therefore carry more passengers than a similarly well managed ‘for profits’ company, required to charge its passengers more to keep delivering profits and bonuses for its shareholders.
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