Archived decisions

Contact: Keith Willcox, ext 6997 email: [email protected]

1. Summary

1.1 This report outlines the 2006/07 and 2007/08 budget situation and proposes a plan of action to ensure value for money and the containment of expenditure within available budget levels. It also introduces the area review process and the possibility of introducing a new mechanism for the assessment and monitoring of future bus subsidy support.

2. Background

2.1 With bus industry costs currently rising ahead of inflation (at around 9% per annum in contrast to average local authority funding increase of around 2.5%) and forecast to continue to rise in future years, together with the uncertainty over Government revenue funding for bus support, it is crucial that Hampshire County Council reviews its current service provision in a comprehensive manner and demonstrates that:

(i) value for money is being achieved;

(ii) spending is undertaken within the context of Local Transport Plan 2 (LTP2) and bus strategy objectives;

(iii) the optimum balance is achieved between conventional and unconventional services;

(iv) the relationship between secured and commercial services achieves the best possible efficiency; and

(v) the funds are being used to maximise the extent to which the unmet needs of Hampshire residents are met.

2.2 This should help to ensure that the County Council is in a position to enable a transport network in Hampshire which best matches the needs of its residents, whilst at the same time ensuring that this is affordable within the current and future financial environments.

3. 2006/07 and 2007/08 Budget Situation

3.1 The 2006/07 base budget for public transport support and coordination has been set at £7.075 million at November 2005 prices. The calculation of the base budget includes higher inflation costs of 2.5%, and incorporating the higher costs from contract re-tendering during 2005/06. The base budget also makes full allowance for the implementation of the various changes to bus services that were introduced during 2005 to absorb these and other cost pressures.

3.2 Within the above total public transport provision, the bus subsidies base budget for 2006/07 is £5.440 million. This sum is currently sufficient to fully cover estimated expenditure on existing bus service contractual commitments, but leaves virtually no scope for the accommodation of any additional costs from contract re-tendering, or other service pressures during 2006/07. Provision of £1.464 million Rural Bus Subsidy Grant has been included in the 2006/07 base budget for the provision of rural bus services, in line with the actual grant sum receivable for 2006/07, as recently notified by the Government.

3.3 Further cost pressures are expected to arise during 2006/07 from contract re-tendering in the New Forest, Havant and Alton areas, together with the possibility of de-registration of commercial services. It was estimated last autumn that the overall cost of maintaining the current level of bus services could increase between £300,000 and £500,000 in 2006/07, with a further increase of £300,000 in 2007/08.

3.4 Additional costs of maintaining Cango services will begin to fall on the revenue budget from 2006/07 onwards as external Government funding from Bus Challenge and the Rural Transport Partnership begins to run out.

3.5 From 1 April 2006 new legislation requires that half-fare travel for pass-holders (residents over 60 or who are disabled) is replaced by free travel. The Government is providing additional funding for districts on a formula basis. Although the Hampshire Farepass scheme is administered by Hampshire County Council through consultants MCL (who are retained on behalf of the districts), this work and the scheme itself are funded by District Councils and should be initially cost-neutral for the County Council. It is likely that the new "free travel" scheme will result in increased patronage county-wide but it is not possible to forecast the scale of the increase with any accuracy.

4. Approach

4.1 An affordable passenger transport network will be developed by undertaking a programme of area reviews around the county (based on district council boundaries) in advance of the future area-tendering timetable. These reviews represent a new approach to reviewing and planning passenger transport services in Hampshire.

4.2 A critical aspect of the review process is the engagement of stakeholders in the process. This includes bus operators, District Councils, the Community Transport sector and other key players. The cooperation of the major bus operators is critical to ensure that, where possible, the reviews consider both those services that are financially supported by the County Council and those that are operated on a wholly commercial basis. Stakeholder engagement has a key role to play in both developing the options and validating the final choice of options.

4.3 The timetable for the county-wide programme of area reviews is set out below:

Tendering Area	Area Reviews	New Tender	Key Area
New Forest	Complete as a draft	October 2006	New Forest
Alton	Underway	October 2006	East Hampshire
Havant	Underway	October 2006	Havant
Blackwater Valley	July 2006 NB Hart element complete as a draft	April 2007	Hart/Rushmoor
Eastleigh	August 2006	May 2007	Eastleigh
Winchester	September 2006	March 2008	Winchester
Romsey, Totton and Waterside	October 2006	June 2008	New Forest/Test Valley
Gosport/ Fareham	October 2006	May 2009	Gosport/Fareham
Andover	November 2006	May 2009	Test Valley
Basingstoke	December 2006	May 2009	Basingstoke

4.4 The area reviews in the New Forest and Hart are now complete. The next stage is to consult with Members on the preferred option, prior to drawing up specifications for tender. It is likely that options will be included in the tenders with final decisions made once tenders have been received.

Assessment Mechanism for Bus Service Support

4.5 Currently the County Council assesses its supported bus services in financial terms only. Historically, a subsidised bus service was not considered to be delivering value for money if the (subsidy) cost per passenger journey was greater than £2.50.

4.6 This mechanism has served the County Council for many years. For a variety of reasons the mechanism can now be considered to be too narrow an assessment and there is a need to move to a broader based system.

4.7 Requirements of the LTP process, such as accessibility planning and social inclusion, make it imperative that any assessment of spending on socially necessary bus routes is more broadly based. The use of more criteria, particularly accessibility and social inclusion, relates the justification for financial support for bus services more closely to other areas of County Council transport policy.

4.8 Officers are currently developing a new approach using criteria initially devised by Surrey County Council. The initial work to date has provided a solid base. Over the next few months the mechanism will be further developed in order to better reflect the County Council's more rural nature compared to Surrey and its proximity to London. . It is then envisaged, if new criteria are adopted, that they will be applied to the prioritisation of subsidised services in future years.

5. Way Forward/Action Plan

5.1 As there is no increase in the revenue budget to offset either the loss of Government grant or to meet cost pressures above the 2.5% inflation allowance in 2006/07, a plan of action to contain expenditure is required. This will comprise the following elements:

(i) Housekeeping/General Monitoring Measures

As part of monitoring performance of existing contracts, both single and combination contracts have been reviewed. As a result of some changing passenger levels from spring 2005, and considering the remaining elements of some combination contracts which were changed in summer 2005 following efficiency measures made, some of the remaining services have now moved above the existing £2.50 criteria. Consultation on their withdrawal will now take place. Until detailed discussions/negotiations occur with operators it is not possible to provide precise figures for the cost of these services. A notional figure is £200,000 for 2006/07. Consultation with local Members and the Parishes and Districts likely to be affected will commence in May.

(ii) New Forest Review

Following this review, and subject to Member views, it is thought possible to make changes to the network whilst maintaining accessibility, thus enabling the remaining services to remain affordable within the current level of budget provision. Thus efficiencies should be secured at the time of retendering. Expectations are that cost reductions of £120,000 per annum may be realised, compared with the forecast cost of the current service pattern. Only part-year efficiencies of approximately £60,000 will be realised in 2006/07.

(iii) Hart Review

Following this review and subject to Member views it is thought possible to maintain accessibility while making changes to the pattern of service support. Services could be reconfigured in the near future but it is considered more prudent to link with the Blackwater Valley area retendering which is not due until April 2007. A notional figure for these efficiencies is £90,000 in 2007/08.

(iv) Commercial Deregistration Pressures

Within the original £300,000-£500,000 forecast pressures for 2006/07, commercial deregistrations account for some £200,000. These occur when operators decide that certain services are no longer commercially viable and seek the County Council's view for possible continued operation with subsidy. It is often the case that such services perform better against the Council's subsidy criteria than existing subsidised services and therefore pose a great threat to many more existing services.

It is proposed to continue to consider such deregistrations on their merit as and when they occur. However, if it was decided to subsidise one, for example at £30,000, then the County Council will need to ensure that £30,000 is saved elsewhere following negotiation in the first instance with the operator involved to adjust their package of subsidised services, preferably in the locality. This approach will be communicated to operators so they are aware that picking up deregistered services is likely to affect service support on other contracts they hold. Special measures may also be considered which incentivise the operator towards acheiving an early return to profitability.

6. Impact Assessments

6.1 It is considered that the actions outlined above should not have any detrimental impact on equalities or race discrimination. The area reviews in particular seek to provide journey opportunities to key locations for all members of the community. However, the impact on users will be considered for the specific service changes.

Recommendations

1. That, in order to manage the 2006/07 cost pressures on the bus subsidy budget, approval be given to the following measures for which provisional, forecast efficiencies are set out in the report:

Housekeeping/General Monitoring Measures

New Forest Review

Hart Review

Commercial Deregistration pressures being absorbed

Utilising New Criteria Approach for Housekeeping/General Monitoring Measures in 2007/08.

2. That the outcome of area reviews be explored with local Members at the earliest opportunity prior to options for replacement tenders being determined.

3. That work be progressed to explore the development of new criteria for the assessment and monitoring of future bus subsidy support.

896ARpt/KAW