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1. Summary

1.1 This report informs Members of pressures within the budget for the support of local bus services, considers action to rectify this matter and requests a view on the way ahead to be reported back to the Executive Member for Environment for urgent consideration.

2. Introduction

2.1 During the past 12 months there has been increasing pressure on the budget for the support of local bus services. Certain of these pressures occurred during the 2000/01 financial year and these were reported at the time to the then Public Transport Sub-Committee. Essentially the pressures arose from the withdrawal of commercial services, early termination of contracts and rise in contract prices at a level considerably in excess of inflation.

2.2 Over the first few months of the 2001/02 financial year this trend has continued and become more severe. This report outlines the main sources of this pressure, considers the resources available and action taken to date and outlines options for way ahead.

3. Budget Pressures

3.1 The three main causes of pressure on the budget are as follows.

Tillingbourne Bus Company

3.2 On 19 March 2001 the Tillingbourne Bus Company went into receivership leading to withdrawal of all services operated by the company which served Fleet, Farnborough and Frimley, the majority of which were commercially operated. Emergency contracts were put in place within a few days and these were replaced with substantive arrangements from 4 June. Although the service network was reduced and resources used cut by around 25%, the cost of replacement has a full-year effect of £182,400 with £172,000 required to maintain services for 2001/02.

Withdrawal of Commercial Services

3.3 There has been a significant number of commercial service withdrawals across Hampshire over the period since the start of the financial year, many of which have required replacement with supported services. This has resulted in increased costs, particularly in respect of drivers' wages but also with regard to fuel, and it no doubt also reflects a lack of competition in the market, particularly in the north of the county. In all cases, the action to replace services has only been taken after consideration of alternative facilities and careful examination of loadings. Such commercial withdrawals have taken place in Basingstoke, New Forest, Eastleigh, Havant, Test Valley and Winchester. The cost of providing replacement facilities has a full year effect of £190,000 with £120,200 required to maintain services in 2001/02.

Increased Costs of Supported Services

3.4 The pressures with regard to increased costs and decreased competition are also being reflected in increased overall costs when contracts are retendered or revised. This has particularly been a feature at Basingstoke and in East Hampshire where Stagecoach in Hampshire has sharply increased its prices. The full year effect of these changes is £225,600 with a cost of £202,300 in 2001/02. There is one further retendering exercise to be absorbed within 2001/02, this being in New Forest in February 2002.

3.5 The cumulative effect of these three factors to date in 2001/02 is a full-year increase of £598,000, with an effect in 2001/02 of £494,500. When added to the full-year effects of cost increases experienced in 2000/01 the predicted overspend in 2001/02 is £636,600. It should be stressed that with current trends the position is very likely to deteriorate rather than improve during the remainder of the financial year.

4. Resources Available

4.1 The revenue support budget for public transport for 2001/02 was increased by £100,000, in recognition of the fact that there was already pressure in the market resulting in higher tender prices.

4.2 In March 2001 the Government announced that the rules governing the Rural Bus Service Grant (RBSG) would be relaxed from this year to allow for 20% of funds to be used on existing as opposed to new services, and the Grant itself was increased. The combined effect of these changes is to give the County Council the potential to spend £228,400 of its RBSG this year on existing services.

4.3 Hence, there is an additional £328,400 available for the support of bus services in 2001/02. In addition, an inflation allowance of around £104,800 is expected to be added to the budget at the revised stage, leaving a net funding gap of £203,400.

5. Action to Contain Budget Pressure - 2001/02

5.1 A number of measures are currently being put in place to try to meet the increased demands on the budget, these being as follows:

(i) Implementing a reduced level of service where withdrawals have taken place, with a service level which meets the needs of users albeit on a reduced frequency or by less convenient means. The figures above are net of this work; the situation would have been more acute, perhaps approaching a full year effect of £1 million, if this had not been done.

(ii) Seeking contributions from district councils where services have been withdrawn or costs have increased. Such councils have the power but not a duty to support local bus services. Approaches have been made to Basingstoke and Deane, Eastleigh and New Forest and a similar approach is proposed at other districts. For example, Basingstoke and Deane is considering joint funding of evening services as part of a Quality Partnership arrangement. It is hoped that around £100,000 might be obtained in this way.

(iii) Reviewing other areas of spending within the public transport budget. Cuts could be made to expenditure in such areas as Community Transport and Public Transport Information, but given that local bus service support accounts for approximately 80% of the total budget and that a further 10% is committed to the funding of Dial-A-Ride schemes in partnership with district councils, the scope for action is limited without having an adverse effect on the quality of these services. It would, however, be possible to identify £30,000 in 2001/02 by housekeeping economies in these areas which arise from a combination of factors, including a reduction in spend required on one minor works scheme, the removal of a discretionary service development budget and lower than anticipated costs for bus surveys.

6. Summary of Budget Position - 2001/02

6.1 The above action leaves the situation as shown below:

	£
Over-commitment in 2001/02	636,600
Less RSBG	228,400
Less additional funding in budget	100,000
Less inflation in budget	104,800
Current over-commitment	203,400

7. Options for Consideration by the Committee for 2001/02

7.1 There is a current over-commitment of £197,200 to be addressed and the following are ways that this could be done:

(i) contributions to be confirmed from district councils, with the aim of securing at least £100,000 by this method by the end of September;

(ii) cuts to be made to other services within the rest of the public transport budget totalling £30,000 in 2001/02;

(iii) cuts to be made in supported services from the end of November. In the `best case' situation that action is possible with regard to option (i) and (ii) the sum of £73,400 will need to be required within 2001/02. Given the timing within the financial year, cuts to the annual value of £220,200 will be required to remedy the situation. If action with regard to option (i) is not possible then the figures rise to £173,400 and £520,200 respectively; and

(iv) additional funding totalling up to £73,400 to be identified for 2001/02, assuming that option (i) is successful, rising to £173,400 if this is not the case. Even if option (i) is achieved, it might be advisable to build in an allowance for further pressures over the remainder of the financial year and identify additional funding of, say, £100,000 to allow for this.

8. Local Bus Service Budget - Action from 2002/03

8.1 The budget pressures experienced in 2001/02 are likely to remain in the next financial year and thereafter. Whilst the resources referred to in section 4 above will again be available, and the Rural Bus Service Grant will increase slightly, there is likely to be difficulty in containing spend within the budget available. Clearly, in the short term, it would be possible to make some service cuts from April 2002, although these would cut less deeply than would be required now to remedy the budget position for 2001/02. Unless there is an unexpected positive change in the situation over the next few months, and in the absence of any additional funding being allocated during the budget process for 2002/03 then this is likely to be a necessary course of action.

8.2 In the medium term, there is a need to address both the total spend and targeting of the local bus service budget. This is already an outcome from the recent Best Value Review of Passenger Transport and is contained in the Action Plan for that Review which has been approved by Members. The Cross-Cutting Review of Passenger Transport undertaken at the corporate level also identified this as an area for attention. There are several elements to this work, including the following:

(i) The development of a Bus Strategy which will include the overall approach to be taken to the support of local bus services in Hampshire. This will need to be the subject of a consultation exercise. To be completed in March 2002.

(ii) A study to assess passenger transport needs across Hampshire and the extent to which these needs are currently being met with the aim of ensuring that the Council's involvement in passenger transport is more targeted. This work will be completed by September 2002 and will allow the Bus Strategy to be applied in a more focused way, including more informed decisions on the appropriate overall level of support to be provided in time for the 2003/04 budget process.

(iii) To integrate the operational provision across services to maximise use of capacity and increase efficiency through economies of scale. This is to be implemented initially by building on the Rural Bus Challenge project in Test Valley which has three year funding from March 2001, and from which the first results should be on the ground by March 2002.

(iv) To increase the use of flexible, innovative and more efficient means of providing passenger transport. An initial assessment of opportunities for this approach to be completed by March 2002 with implementation from next year.

8.3 To move forward with items (iii) and (iv) it is proposed to undertake a complete reassessment of the network in Test Valley as a precursor to wider application, assuming that this is successful. The County Council has been approached by Southern Vectis, a bus operator on the Isle of Wight, and also the owner of Solent Blue Line which operates an independent consultancy, which is keen to undertake a demonstration project along the lines that the County Council had already planned. Similar work has recently been undertaken and the results implemented on Guernsey but the company is keen to demonstrate the work in a mainland location. This would be undertaken at no cost, but there would be some obligation to share the results of this work with other authorities, along with some positive endorsement, assuming of course that the work is thought successful. This work will be undertaken during the autumn of this year, and the results could be implemented from early in 2002. Depending on the decisions taken as a result of this work there could be some budget effect in 2001/02 but this has yet to be quantified and would be marginal, the full effect being felt in 2002/03.

Recommendation

That the views of this Committee on the preferred option(s) be forwarded to the Executive Member for Environment as a matter of urgency.

6675/MR