Date: 13th August 2008

Fuel crisis presents opportunity for sea-change in public transport habits

SEStran urges Government to support bus services

The SEStran board is to consider a report recommending that the Scottish Government provide bus operators with short-term financial support, to encourage a permanent modal shift towards public transportation.

Fuel price increases of up to 20% have led to increased use of bus services, but they have also resulted in higher fares and the threat of reduced services on unprofitable routes. If fares continue to rise, reductions in congestion and atmospheric pollution achieved through modal shift could be lost, as travellers gradually resume driving.  

SEStran is urging government to intervene, to stabilise fares, secure routes and ensure permanent modal shift towards public transport.

SEStran Chair, Cllr Russell Imrie said:

“We currently have a golden opportunity to achieve a permanent change away from car use, towards public transport.”

“Soaring prices on the forecourt have made public transport an attractive option for people who would otherwise drive, but this will only continue if it remains cost effective and the service provided is comprehensive”. 

“Bus operators are being hit hard by rising fuel costs and this has led to higher fares and a reduced service on less profitable routes. It is essential that the government takes action to ensure that the current move towards increased use of public transport is not just a flash in the pan.”

ENDS

SEStran - South East of Scotland Transport Partnership - is one of seven new Statutory Regional Transport Partnerships (RTP) created by the Transport (Scotland) Act 2005 and is a partnership of eight local councils covering the Borders, East Lothian, Midlothian and West Lothian, Edinburgh, Fife, Falkirk and Clackmannanshire.

For further information, please contact:Andrew Dougal, SEStran Communications Officer

T: 0131-524-5161M: 07889-010-291

E: Andrew.dougal@sestran.gov.uk

Notes *Please see full text of report below

FUEL PRICES AND PUBLIC TRANSPORT  

1.    INTRODUCTION 

1.1  This report highlights the potential for serious disruption of bus services throughout the SEStran area due to the impacts of the current sustained rises in fuel prices. It also highlights the possibility of significant mode shift from car to bus as a result of fuel price rises and the likelihood that this potentially beneficial effect will be diluted as a result of increases in bus fares. 

1.2  The report suggests a possible way forward and seeks Board approval to make representations to the Scottish Government.  

2.    BACKGROUND 

2.1. Public transport, and in particular bus services, is at the heart of the Scottish Government’s transport policy and is also central to the SEStran regional Transport Strategy. Modal shift away from the use of the private car is fundamental to achieving both the Scottish Government’s and SEStran’s key objectives including the reduction of congestion.  

2.2. The continued importance placed on modal shift to public transport comes at a time when fuel prices are at an all time high and Bus Service Operators, as well as the whole transport industry, are facing substantial increases in the costs of running their businesses, especially in rural areas with smaller privately owned bus companies. 

2.3. Over the last year we have seen general fuel price increases of 20% that have strongly contributed to fares increases over the same period of 10 – 14% putting pressure on existing contracted services and marginal commercial services. For Lothian Buses’, for example fuel costs have risen even higher by £1.95 million, an increase of 41% on last year’s costs.  In recent months Lothian Buses diesel costs have risen from 35p to 55p per litre. 

2.4. In Scottish Borders, one operator has returned some £1.2m of socially necessary bus service contracts which have subsequently been re-tendered. Following the tender process the contracts have now been re-let at a cost increase of some £550K (46%). In Falkirk one contract has been returned although it has been successfully awarded to another operator at no extra cost. Lothian buses have intimated a withdrawal or reduction of over 20 services as a result of rising fuel and staff costs combined with lower passenger numbers, possibly caused by road works disruption. The Council has no provision in its existing budget to provide subsidy to cover the potentially very high costs of maintaining at their existing levels those services that Lothian Buses is about to withdraw or reduce.                                                                                            

2.5. As a result of fuel price elasticity for car travel we can expect to see a short term reduction in car trips in the SEStran area which if consolidated would not only be maintained but significantly increased in the longer term. This has been borne out by recent experience in the USA where fuel price increases have resulted in a significant increase in public transport patronage although from a lower base than in the UK .

2.6. Offset against this potentially beneficial consequence, as a result of the fares increases we have seen over the past year, we can expect to see a reduction in local bus trips due to fares price elasticity of demand. It is possible that the potential for mode shift from car to bus as a result of fuel price rises could be of the same order of magnitude as the potential loss of bus patronage as a result of the higher levels of fares increases that have been announced. 

2.7. Meanwhile, local transport authorities are facing significant price increases on supported services as a result of fuel price increases and in some cases withdrawal of operators from supported services contracts and/or cuts in commercial services. While it is essential that supported services continue, the increased investment that will be required does not contribute to the objective of mode shift from car to public transport with the price levels on supported services mirroring price levels on commercially provided services.  

2.8. In addition, as a result of increased subsidy requirements to cover increased fuel costs, authorities are facing the prospect of potentially substantial cuts in subsidised services to keep within available budgets.  

2.9. The effect of increasing fuel prices is also being felt by the community and voluntary transport sectors, which provide an increasingly important contribution to the overall public transport system in many areas, compounding the problems faced by operators and transport authorities.  

2.10.             In addition the freezing of the level of the Bus Services Operating Grant (BSOG) and arguably the capping of funding for the National Concessionary Travel Scheme  have placed added pressure on bus fares.  

2.11.             These potential effects are all contrary to National, Regional and local objectives for public transport as reinforced by the recent High Level Bus Forum chaired by the Minister for Transport, Infrastructure and Climate Change.  

2.12.             In summary we now face a situation where there is significant potential for mode shift from car to public transport, with all the attendant benefits in congestion and carbon reduction and associated environmental and health benefits that are included in National, Regional and Local Transport Strategies. However this is being eroded by the potential for mode shift in the other direction as a result of increases in bus fares and possible service cuts. This could be a major opportunity missed to contribute to the Government’s environmental targets. Meanwhile local transport authorities are being faced with potentially unaffordable price increases for supported services in an environment where any necessary increased investment to support socially necessary services would not necessarily contribute to mode shift.  

3.    POSSIBLE WAY FORWARD 

3.1. It is clear that the current rises in fuel prices are placing significant pressure on local bus service provision. On the other hand the increase in fuel prices for car drivers has the potential to encourage significant modal shift to buses provided the bus network has the capacity to accommodate any increased patronage.  

3.2. In this context  a relatively short term financial intervention by Scottish Government,  aimed at encouraging and supporting bus operators who minimised fares increases,  could help to stabilise bus fares and service provision, minimise the risk of loss of bus patronage from increased fares and provide the opportunity to capture and consolidate  mode shift from car to public transport. The use of Bus Service Operators Grant, which is currently under review by Scottish Government, could be a possible mechanism. At the same time there is a need for increased support to local transport authorities to maintain supported services at their current levels.  

3.3. This could potentially be funded from the increased VAT being accrued from increased fuel prices. It is accepted that issues related to fuel duty and VAT are  not a devolved matter and therefore this approach could only be pursued with the agreement of the Westminster Government.    

4.    RECOMMENDATION

 4.1. It is recommended that the Board: 

4.1.1.    notes the difficulties being experienced by the bus industry and local Transport Authorities as a result of increasing fuel prices,

4.1.2.    notes the potential for mode shift from car to public transport as a result of fuel price rises and that this will be reduced as a result of increased bus fares,

4.1.3.    instructs the director to write to the Scottish and Westminster Governments highlighting the issues and seeking consideration of the possible interventions as described in section 3 of this report. 

Alex Macaulay

Partnership Director

25^th July 2008 

Policy Implications	Delivery of RTS policy on encouraging modal shift
Financial Implications	None to SEStran
Race Equalities Implications	None
Gender Equalities Implications	None
Disability Equalities Implications	None

  

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