19 February 2012

Wings Clipped

Both Scotland and Wales were left reeling recently when their respective devolved governments announced a reduction in Bus Service Operators Grant (BSOG) of around 20%, effective from April. This means a further reduction of one quarter of the fuel duty rebate bus and coach operators running local services receive. Scottish and Welsh operators were given just two months to prepare themselves for cuts in revenue; English operators were given a little longer.

It was during October 2010 and as a result of the Coalition Government's Comprehensive Spending Review that English bus operators were told that they would see a 20% reduction of BSOG from April 2012. Currently, operators receive a 80% rebate on their fuel duty (Ken Clarke reduced it from 100% when he was chancellor in the 1990s).

There had been fears that BSOG would be cut altogether, but this wasn't so. English operators were quoted in the trade magazines at the time saying that at least they were given sufficient warning to prepare for the loss of revenue. A number suggested that fare paying passengers were likely to be stung by fare increases of 10%.

In the Grimsby Evening Telegraph last week, local bus operator Stagecoach Grimsby-Cleethorpes released details of the bus services it plans to either reduce or withdraw completely, as a result of the reduction in BSOG. Read the full story here.

Service 12 (New Waltham-Cleethorpes-Grimsby-Bradley Park) is in line for the chop. (Click to enlarge)

A large percentage of routes are potentially affected. But what of the lengthy preparations that operators in England were given? The list of potential cancellations/withdrawals reads as if the company were located in Aberystwyth or Kingussie!

One of the problems that Stagecoach Grimsby-Cleethorpes has is its zonal fare structure. Effectively, the operator charges just two cash fares for single journeys in urban Grimsby, Cleethorpes, Waltham and Laceby (and as far west as Healing on routes to Immingham). Sure, zonal fares are incredibly simplistic for both passengers and drivers alike and offer some great savings for longer urban journeys, but when fares increases occur, every single passenger in every corner of your urban operation is affected to the same tune.

This is simply unfair. Why, for example, should someone living in Waltham (the Bradley Road terminus is 6 miles from Grimsby town centre) see their fare increase to the same tune as someone who just wants to travel to the local hospital (2 miles)? There haven't been any recent fare rises in Grimsby, but they'll be coming soon. Surely someone who lives a whopping 4 miles further down a route should pay more to travel on the same bus? This makes eminent sense.

In line for the chop (it's already been cancelled with VOSA) is Service 12, which is particularly loss-making. I believe the town's zonal fares structure is, in part, responsible for this. In other towns and cities, devoid of zones, an operator could increase the fares on this route by a higher percentage, ensuring the reasoning behind the excessive hike is made known via the local media. Community spirit is then put to the test and there could be a turnaround of fortunes for the service. As it is, forming part of the Grimsby/Cleethorpes urban operation, Service 12 falls foul of the far-too-rigid zonal fares structure and so passengers here pay the same amount as they do on the very profitable routes, say LoZone 13/14.

Service 12, as can be seen, covers a sizeable amount of Cleethorpes not served by any other service. (Click to enlarge)

Also mentioned in the article, specifically in the response by Stagecoach, is that concessionary bus pass reimbursement is not what it needs to be to make services commercially viable. These much-vaunted reimbursement rates are calculated on each route's average fare. The higher the fare, the more reimbursement received. So, by charging the same for someone travelling either 2 or 6 miles on the same bus, potential revenue is being lost, surely? Again, if the passenger travelling three times further paid a little more, the average fare would increase and so would the reimbursement payment for the free bus passes.

This could be remedied with the introduction of a third zone, the Outer Outer Zone. However, but then the elephant in the room needs to be acknowledged: Raising a £1.25 fare to, say, £1.50 is a whopping 20% increase, and with that kind of rise people will start turning away from the bus altogether. You're then in a Catch 22: increase the new zonal fare by too much and you'll turn people away; don't increase it enough and it will make little difference to the average fare for that route and so effectively be a wasted exercise as the reimbursement rate increase will be negligible.

Simply, once a zonal fares structure is introduced, it is a nightmare to remove - I'd go so far as to say commercial suicide. I don't envy any operator who has introduced one - usually during the Times of Plenty. They're offer a kind of perverse fairness, when in reality the underlying issues they possess contribute significantly to the response an operator can make to a particular loss-making route.

There is of course one other thing the operator could do, but I've hesitated to mention it as many seen it as a dirty word: cross-subsidy. Take some of the profit made from Services 9, 13, 14 and 45 and use what would be a tiny percentage to ensure the long-term operation of Service 12. North of the Humber, independent operator EYMS does it regularly and operates in precisely the same commercial, deregulated environment as Stagecoach.


Anonymous said...

£1.25 in most places is the minimum fare, not the maximum fare - infact I do not know of any town where the fare is cheaper than this for travelling more than 1 mile or so these days. I expect either the £1.25 fare is going to increase alot in April (perhaps £1.40-£1.50?), or it will be scrapped, and a more gradual fare system introduced, but these would need to be brought in gradually, increasing over inflation each year to catch up to a level the operator can make a profit. Grimsby/Cleethorpes is also one of the few places where there are no competing independent operators

Anonymous said...

Fares in Grimsby Cleethorpes are very low compared to other towns and cities. This low fare scenario is compounded by the zonal fare system introduced over recent years. I remember when over 9 stages existed late 1990's. Perhaps Stagecoach need to increase fares and/or scrap zonal fares. Cross subsidise routes and stop threatening councils with pulling services in order to obtain subsidies.

Anonymous said...

There is nothing wrong with a flat fare system in a urban area, but it needs to be at a sustainable price. All other flat fare system I know of, have fares nearer the £1.80-£2.00 price range, usually with a shorter hop fare around £1.00-£1.40.

Are the buses much better used in Grimsby than other towns of a similar size? It also seems to be the only Stagecoach operation where 2x Single tickets, are cheaper than the Dayrider.

LEYTR said...

Grimsby has always had historically low bus fares, though local residents don't always agree! 85p takes you about two fare stages and £1.25 the rest of the route, so two zones don't really exist in a way that can be shown on a system map as they're unique to every stop.

I agree that the two fares could be increased significantly, however this will once again disproportionately affect those travelling significantly fewer stops than those travelling end-to-end.

At least three, but probably four, fares are needed in towns the combined size of Grimsby & Cleethorpes - which is larger than Lincoln, for example.

Mitch said...

Surely if cities the size of Nottingham can cope with two fares £1.70(NCT & Trent) or short hop £1.00(NCT) then a place the size of G-C could cope with just two as well?

Anonymous said...

Its not the fare structure, 2 fares are fine, its the costings of those fares that are way out. I bet its 5-10 years since NCT changed 85p or £1.25 flat fares?