Contact: Keith Willcox, ext 6997 email: keith.willcox@hants.gov.uk

1. Summary

1.1 This report sets out proposals for managing cost pressures on the 2005/06 bus subsidy budget. Details of services affected are set out in the attached appendix.

2. 2005/06 Budget

2.1 The 2005/06 Environment Department Passenger Transport revenue budget is £6.226 million, the same as 2004/05 plus an inflation increase of 3.2%. The Rural Bus Subsidy Grant (RBSG) for 2005/06 is £1.428 million compared to 2004/05 of £1.375 million.

2.2 The composition of the total 2005/06 Passenger Transport revenue budget in terms of sources of funding is as follows:

£'000

Passenger Transport Group Budget 6,226

(including £500,000 Developer's Contributions)

Rural Bus Subsidy Grant 1,428

Countryside Agency 118

Bus Challenge projects 442

Total 8,214

2.3 From this funding allocation, the following services are delivered:

2.4 The most significant financial pressures for 2005/06 are concerned with the conventional bus service support. Whilst there are increasing pressures on the community transport funding, the current service provision can be maintained within the current budget allocations for 2005/06 ensuring that the levels of service provision and accessibility continue during the year.

2.5 In 2005/06 contracts for subsidised bus services in three areas are being renewed: Gosport/Fareham, Andover and Basingstoke. All three have recently been re-tendered. Management initial response attempted to mitigate the financial impact of these tenders through negotiation. The results of the re-tendering exercises on the County Council's main bus budget are summarised in the table below:

2.6 The present budget pressures can be summarised as follows:

2.7 Since May, considerable further work has been undertaken in order to propose measures to balance the budget for this financial year. This has included a review of combination' contracts (where a number of services are covered by one contract). This has resulted in economies being proposed in some of these services as summarised below. These proposals all accord with the Council's current policy to limit subsidies to a maximum of £2.50 per passenger journey.

2.8

2.9 The £187,000 annual savings would realise estimated part-year savings of £111,000, as some have effect earlier in the financial year.

2.10 This would leave a funding gap of £168,000 this year (£279,000 pressure, less £111,000 savings). It is recommended that this remaining pressure be met in two ways:

(i) the withdrawal of services which are part of combination contracts, and over criteria; and

(ii) the withdrawal of the poorer performing evening and Sunday services.

2.11 For the combination contracts, it is assumed that savings would be in the order of 75% of theoretical saving (ie £51,000) for a full year, due to the reassignment of fixed costs within a contract area. Part year savings would be in the order of £25,000.

2.12 Within combination contracts there are some `school specials' (public service vehicles that are predominantly used by school children) not included in the above, which exceed the £2.50 passenger per journey criteria. There are also three `school specials' which are not part of combination contracts and also fail the £2.50 maximum subsidy per passenger criterion. However, given the review of potential options, including `yellow school buses', to address congestion caused by the school run through provision of buses for pupils not entitled, no action in this market segment is proposed.

2.13 As an alternative, further savings therefore need to be found. It is proposed that this is achieved by withdrawing the poorer performing evening and Sunday services and reducing some frequencies, which would be outside existing policy. These are also included in the appendix. A target figure of £109,000 per annum (realising approximately £50,000 in the current year) is required.

2.14 The residual shortfall of £93,000 in 2005/06 may be manageable within the overall cash limit for Environment Services. This pressure would be met in 2006/07 as the full-year effect takes place. No further re-tenderings are due this financial year, but there may be further deregistrations that have to be addressed. This will also need to be managed on the same basis as above, including identifying further services which subsequently fall outside the subsidy limit due to declining patronage.

2.15 In a full year, all of the 2005/06 budget pressure would be met by these proposals.

3. Conclusion

3.1 By implementing the measures outlined above, the 2005/06 budget will be balanced and will provide some headroom for 2006/07.

Recommendations

1. That, in order to manage the 2005/06 cost pressures on the bus subsidy budget, the following sequence be followed in maintaining the optimum deployment of resources:

(a) maintaining services which require a subsidy of £2.50 per passenger journey or less; and

(b) maintaining the better performing Sunday and evening services.

2. That, as a temporary measure pending the outcome of investigations into school transport services for those not statutorily supported, services not be withdrawn which are over £2.50 criteria, but more than 1,000 passenger journeys per annum and include a substantial number of school children.

465Rpt/KAW

APPENDIX

SERVICES WHICH ARE PROPOSED FOR WITHDRAWAL

Single Contracts

Combination Contracts

The services concerned within combination contracts are as follows:

Note (1) This total is the estimated value of these services. All are part of combination contracts and negotiations will be required with operators to establish the `actual' savings.

Evening and Sunday Service Contracts

Key: HCC Hampshire County Council

SCC Southampton City Council

WCC Wiltshire County Council