An unhappy new year for public transport?

It’s been a shaky start to the new year for public transport and it could get a lot rougher yet.

Let me count the ways…

  1. The ‘work from home where you can’ advice has hit public transport’s core commuting market hard. Meanwhile the pre-Christmas binge on shopping and socialising which kept public transport patronage afloat looks like it has been followed by a hard January comedown
  2. Pre-Omicron, driver shortages were a serious problem for bus services with operators taking different approaches to managing them (in terms of whether the service reductions are short term or long term and whether they are focused on frequent routes or less frequent routes). Operators were also taking different approaches to how much effort and resource they were putting into recruiting staff. 

    Also, and unlike for road haulage, where the DfT has a proactive strategy for addressing multiple aspects of the driver shortage affecting the industry, there was no equivalent strategy from DfT for the driver shortage crisis on the buses. This has now been exacerbated by Omicron and associated self-isolation. Industrial action is also on the rise.
  3. Additional COVID funding support for urban public transport for public transport outside London runs out by the end of March and it’s not clear whether that funding will be sufficient given Government won’t share with us the patronage projections on which it’s based (which may prove to be optimistic).
  4. HMT standard practice is to take any decisions on additional funding right to the wire, however local tansport authorities have to set budgets well before the end of March and plan any service changes that may be required.

All of which points to operators moving to rebase commercial networks at a significantly lower level than they were pre-pandemic (and some are now starting to break cover on this). The onus then passes to local transport authorities to step in and pay private operators to keep services running. But local transport authorities themselves have limited resources to do so and the prices that private bus companies are quoting for keeping those services running have soared (price increases of 50% are not uncommon). This reflects both rising costs and operators taking advantage of low levels of competition for tenders in order to name their price.

The funding challenge for transport authorities with large light rail systems is particularly acute given that most of the costs of light rail systems are fixed so significant cost reductions are difficult to achieve (short of closing them down). They also have legal and fiscal responsibilities for their light rail systems which they do not have for bus services. So, if light rail funding isn’t extended beyond March 2022, then transport authorities may be forced to make savings from spending on bus in order to keep their light rail systems operational.  

It wasn’t meant to be this way. The national bus strategy (‘Bus Back Better’) launched in March 2021 envisaged a new dawn for buses with more, cheaper and greener bus services everywhere. It was predicated on £3 billion of additional ‘transformational’ funding and on the tacit assumption that the pandemic would soon be over. However, the pandemic is still here and in the November 2021 Spending Review the Treasury didn’t countersign the £3bn cheque that Number Ten wrote. We still don’t know how the bus money that the Treasury did agree to will be divided up. If more of it isn’t purloined for additional COVID revenue support, then this additional investment will be a shot in the arm for bus services in the areas that benefit – including through more bus priority schemes.

But the danger is that this may be too little too late as the first half of 2022 sees another lurch downwards in the scale and extent of bus networks – following on from years of pre-COVID decline and the hammer blow of the pandemic itself. There’s still time (but not much) to avert this. It could be done through devolving adequate funding to transport authorities to support networks in a planned, integrated and cost efficient way (rather than allowing the DfT to continue to take the path of least resistance and route hundreds of millions of pounds of COVID funding to private operators so that they can manage the decline of bus services in a way that serves their own commercial and corporate interests). It would also require a national strategy for tackling driver shortages as well as pressing the fast forward button on allocating the funding promised in the spending review to improve bus services so transport authorities can crack on without further clawback and second guessing from Whitehall.

Time is running out though.

Jonathan Bray is Director of the Urban Transport Group

Read more about the threat to public transport in our city regions in our briefing.

Funding and a finely balanced future

Now that the dust has settled from Comprehensive Spending Review, it’s becoming easier to see through the smoke and mirrors and work out what actually happened. The question people often ask is ‘is it new money?’. And ‘is it more money?’. All depends on what you are comparing it with. Which previous year’s actual spend are you looking at and which projections of which spending review are your starting point? It is especially tough to come to a firm conclusion when old funding streams are replaced by new ones (who can say how much would have been in the old funding stream if it had been continued)?

What we can say is that DfT did better as an ‘unprotected’ department than it has at recent blockbuster fiscal events. Like other unprotected departments the better than expected economic forecasts have fed through into spending. But it still depends on what your comparison point is. For example, revenue spend is still projected to be lower than it was in 2010/11 in real terms. However, capital spend is much higher than it was back then. But a high DfT capital budget has been the case for a while given pre-existing commitments to HS2, investment in the rest of the rail network and a bloated national road programme.

What we can say for sure though is there was good news for mayoral combined authorities which benefitted from capital spending packages (City Region Sustainable Transport Settlements) which were at the upper end of expectations, at the upper end of what those city regions were asked to bid for, and more than they were getting under previous comparable funding streams. By bundling up what were formerly separate funding streams into a single longer term funding stream there is also now greater certainty which allows transport authorities to plan and deliver schemes more efficiently and effectively than with fragmented, stop-start funding. It will also mean significant capital investment in active travel, in light rail systems and in buses (bus priority and greener buses in particular).

We asked for longer term, consolidated funding for local transport (to bring it more into line with the longer term funding deals that national roads and rail already enjoy) so that’s a tick in the box. It also provides a base to go further through revitalised Local Transport Plans which we are told will be refocussed around carbon reduction. This would also be a positive step forward. It makes sense for transport authorities to have single transport plans – and they were only sidelined in the first place due to the constant quest for policy novelty that comes with a constant churn of ministers and advisors in a country as centralised as this one.

Now for the not-so-good news. The funding for transforming bus services in England is a lot less than was expected and indeed as was pledged by the prime minister. We were expecting £3bn of transformational bus funding to deliver on the bus strategy’s aspirations. To increase service levels where there are bus services. To provide new services where there aren’t. To make buses greener and to cut fares. Our members were asked to submit ambitious Bus Service Improvements Plans to government by October 31 in order to achieve those objectives. However, instead of the £3bn, we have £1.2bn for transforming bus services (plus over half a billion for zero emission buses).

his is still a lot of money – and an increase in dedicated bus funding from what was available before. Plus, there is more dedicated funding for bus for the mayoral combined authorities in the City Region Sustainable Transport Settlements. The problem is that given bus networks and bus use were declining pre-pandemic, and that the pandemic delivered a further hammer blow to a struggling sector, even £3bn wouldn’t have been enough. Not enough for every part of the country to make their bus networks cheaper, denser and greener – given it would be split by capital and revenue, by 79 English local transport authorities and over three years. To give a sense of the level of spend that would have been needed Bus Service Improvement Plans submitted by larger urban areas were often of the order of £1bn. If it was a big ask of the promised £3bn to meet the objectives of the bus strategy in full, then the reduced levels of transformational funding now available for bus (particularly revenue funding) definitely won’t be enough to achieve those aspirations.

On top of this, the cost of keeping public transport running every week is higher than it was before the pandemic – because patronage is lower than it was before the pandemic. These costs are likely to rise further due to inflation and rising labour costs (as bus operators raise wages and conditions to attract and retain drivers). The government is providing welcome recovery funding for both bus and light rail to the end of the financial year. But it is uncertain whether this recovery funding will be enough (it’s based on projections on patronage which may prove to be optimistic) and it is uncertain what will happen after April 22 when patronage is still likely to be less than it was pre-pandemic. All of which could mean that money meant for improving services could be eaten into in order to either maintain the status quo or control the rate of decline. In short, the prospects for the bus remain fragile.

What else did we learn from the spending review? The ‘save the Union’ project is a significant driver of transport policy. A big enough priority to outrank decarbonisation where necessary (as we saw in the Air Passenger Duty reduction for domestic flights). The ‘save the Union’ project overlaps with the prime minister’s enthusiasm for big transport infrastructure and probably also contributed to keeping a zombie national road building programme lumbering on – though with some limited scaling back.

The spending review showed that the government also continues to rely primarily on tech fixes for the decarbonisation of transport and certainly doesn’t want to be seen to raise the cost of motoring. So, the fuel duty escalator is suspended again – whilst there is substantial investment in zero emission cars.

The tougher decisions necessary for modal shift and decarbonisation are deferred; in particular a fundamental realignment of the relative cost of private and public transport. However, away from the Comprehensive Spending Review and other big government policy documents, it’s a fact on the ground that environment focussed charging schemes are now becoming a more common feature in urban areas as more and larger charging air quality zones come on line. Meanwhile various think tanks (including the Tony Blair Institute for Global Change) are on manoeuvres, rolling out the pitch for road user charging for when the Treasury is ready to make its move on this (which it will have to at some point as more of the car fleet goes electric).

And outside of the game changer of road user charging, Number 10 is very clear that they see City Region Sustainable Transport Settlements and Bus Service Improvement Plans as a way of accelerating the transition of more road space from private cars to space for people on foot, on bikes and in buses. The vote of confidence for further light rail investment and expansion in the City Region Sustainable Transport Settlements is also encouraging.

Overall, the future for public transport is finely balanced, with perilous balance sheets thanks to Covid and the relative costs of using private and public transport skewed the wrong way. At the same time there is a capital funding base to build on, road space allocation slowly gaining favour, and the climate crisis contributing to unparalleled political support for the idea of modal shift. We are also starting to see more of the tough decisions being taken (like charging zones). Perhaps it’s the extent of that boldness on those tough decisions – both nationally and locally – that will swing it one way or the other.

Jonathan Bray is Director of the Urban Transport Group

After the dust has settled – what the Spending Review means for urban transport

Now that the dust has settled from the big reveal last week on the Comprehensive Spending Review, it’s becoming clearer what actually happened.

  1. First the good news. Mayoral Combined Authorities have benefitted from capital spending packages (City Region Sustainable Transport Settlements) which were at the upper end of expectations. These funding packages also bundle up what were formerly separate funding streams into a single longer term funding stream. The greater certainty this gives allows transport authorities to plan and deliver schemes more efficiently and effectively than is possible with fragmented, stop-start funding. It will mean significant investment in active travel, in light rail systems and in buses (bus priority and greener buses in particular).
  2. Now the not so good news. The funding for transforming bus services is a lot less than was expected and indeed set out by the Prime Minister. We were expecting £3bn to improve bus services and our members were asked to submit ambitious Bus Service Improvements Plans to Government by October 31. These plans would deliver on the objectives of the National Bus Strategy for new bus services where there aren’t any now, for more frequent services where there are, for greener buses and for cheaper buses. However, instead of the £3bn, we have £1.2bn for transforming bus services (plus over half a billion for zero emission buses). This is still a lot of money – and an increase in dedicated bus funding from what was available before. Plus, there is more dedicated funding for bus for the Mayoral Combined Authorities in the City Region Sustainable Transport Settlements. The problem is that given bus networks and bus use was declining pre-pandemic, and that the pandemic delivered a further hammer blow to a struggling sector, even £3bn wouldn’t have been enough (when split by capital and revenue, and by 79 local transport authorities, and over three years) for every part of the country to make their bus networks cheaper, denser and greener. To give a sense of the level of spend that would have been needed, Bus Service Improvement Plans submitted by larger urban areas were often of the order of £1bn. If it was a big ask of the promised £3bn to meet the objectives of the bus strategy in full, then the reduced levels of transformational funding now available for bus (particularly revenue funding) definitely won’t be enough to achieve those aspirations.
  1. On top of this, the cost of keeping public transport running every week is higher than it was before the pandemic – because patronage is lower than it was before the pandemic. These costs are likely to rise further due to inflation and rising labour costs (as bus operators raise wages and conditions to attract and retain drivers). The Government is providing welcome recovery funding for both bus and light rail to the end of the financial year. But it is uncertain whether this recovery funding will be enough (it’s based on projections on patronage which may prove to be optimistic) and it is uncertain about what happens after April 22 when patronage is still likely to be less than it was pre-pandemic. All of which could mean that money meant for improving services could be eaten into in order to either maintain the status quo or control the rate of decline. In short, the prospects for the bus remain fragile.

More widely…

  1. More optimistic forecasts for economic recovery have led to a better outcome overall for non-protected departments like Department for Transport and Department for Levelling Up, Housing and Communities than has recently been the case. However, the DfT’s capital budget continues to be dominated by pre-existing commitments to inter-city infrastructure (though there has been some modest rowing back on the scale of the national road building programme).
  2. The Government’s strong desire to maintain the Union is a significant policy driver (hence the cut in Air Passenger Duty on domestic flights and the enthusiasm for infrastructure for long distance journeys).
  3. The wider policy of prosecuting transport decarbonisation through tech fixes and without being seen to raise the costs of motoring continues. So, the fuel duty escalator is suspended again – whilst there is substantial investment in zero emission cars.

Jonathan Bray is Director at the Urban Transport Group