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Waverley Borough Council Committee System - Committee Document

Meeting of the Community Overview and Scrutiny Committee held on 13/11/2006
CONCESSIONARY FARES



Summary & Purpose
At the last Committee meeting, members asked for a report giving information about the Concessionary Fare scheme. This report provides a background to Concessionary Fares, the financial implications arising from the Government’s decision to introduce ‘free bus travel’ for people aged over 60, and the possible implications that may arise from the Chancellor’s announcement that free bus travel will be available nation-wide from April 2008.

APPENDIX D
Waverley Borough Council

COMMUNITY OVERVIEW AND SCRUTINY COMMITTEE –
13TH NOVEMBER 2006
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Title:
CONCESSIONARY FARES
[Wards Affected : All]
Note pursuant to Section 100B(5) of the Local Government Act 1972

The (Exempt) Annexe contains information by virtue of which the public is likely to be excluded during the item to which the report relates, as specified in Paragraph 3 of the revised Part I of Schedule 12A to the Local Government Act 1972, namely:-
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Summary and purpose:

At the last Committee meeting, members asked for a report giving information about the Concessionary Fare scheme. This report provides a background to Concessionary Fares, the financial implications arising from the Government’s decision to introduce ‘free bus travel’ for people aged over 60, and the possible implications that may arise from the Chancellor’s announcement that free bus travel will be available nation-wide from April 2008.
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Environmental implications:

Bus passes offering free travel for people aged over 60 help to promote the use of public transport and help to reduce congestion, and fuel usage.

Social / community implications:

A significant number of people aged over 60 are on fixed incomes and are more likely to experience financial hardship. Bus passes offering free travel helps to promote social inclusion and because it is a universal benefit, there is no stigma attached to receiving a bus pass.

E-Government implications:

There are none arising from this report. However, with the introduction of a national free bus travel scheme in 2008, it may be that the Government will wish to further its E-Government agenda by issuing ‘smart-cards’ to eligible people.

Resource and legal implications:

The Transport Act 2000 resulted in significant revenue implications for the Council. Additional costs were added to the Council as a result of the Chancellor’s announcement in 2005 that he intended to introduce a free bus travel scheme (rather than a half-fare scheme), though a Government Grant covered most of the additional costs leaving the Council to pay 1,690 more than before. There are increased revenue costs to Waverley for 2007/08, detailed in the (Exempt) Annexe. The Government’s most recent proposals for a scheme whereby people aged over 60 can travel by bus free throughout the country from 2008/09 will have financial implications. However, how this new scheme is to be financed and managed is currently being considered by the Department of Transport and Treasury. These issues are covered in the body of the report.
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Introduction

1. In 1978, as part of a concord between Surrey County Council and the Borough/Districts in the county, it was agreed that the County Council would take responsibility for operating and funding Concessionary Fares (i.e. half-price bus travel for certain eligible groups, primarily those of retirement age). The Boroughs/Districts would take responsibility for the operation and funding of Meals-on-Wheels and Day Centre for the elderly (which are normally a Social Service responsibility). At that time, it was considered to be a reasonable division of responsibilities and costs involved. This agreement appears to have been unique to Surrey.

Transport Act 2000

2. The Transport Act 2000 clarified that Borough and District Councils had the statutory duty to provide the Concessionary Fares scheme. Hitherto, in Surrey, the County Council had provided and funded this service.

3. Under the Act national minimum standards were set for the Concessionary Fares scheme, whereby people aged over 60 and people with disabilities eligible for a bus pass would be offered half-price bus travel. The half-fare was to be offered on any bus service that was entitled to the Bus Service Operators Grant (previously known as Fuel Duty Rebate).

4. Authorities have been free to offer more generous schemes or alternatives under the powers in the Transport Act 1985. A number of other areas in England had exercised such powers to provide free bus travel and even tokens for taxis. The Council Tax-payers in those areas covered such costs.

5. The Transport Act requires local authorities to reimburse bus operators for providing the concession. Reimbursement arrangements include the requirement that bus operators should be no better and no worse off as a result of participating in a Concessionary Fares Scheme in terms of revenue and vehicle resource.

6. Calculation of reimbursement by local authorities should take account of the number of passengers who travel at a reduced fare, the additional costs incurred carrying extra passengers generated by the scheme and the fact that Concessionary Fares tend to encourage more passengers and extra journeys (otherwise known as the ‘generation factor’).

7. As the County Council had staff with experience and expertise in administering the Concessionary Fares scheme and negotiating with bus operators, the County Council and Boroughs/Districts agreed to work in partnership to administer the scheme together. This meant that the scheme boundaries were cross-county, not just limited to borough/district boundaries.

8. As a consequence of the Transport Act 2000, the duty to provide and fund a Concessionary Fares scheme was placed clearly on Borough and District Councils. For most authorities this was not an issue as they had already been doing so. However, in Surrey the County Council had previously funded this area of work. From 2001/02, the Boroughs/Districts had to fund the scheme in full. In Waverley’s case an additional sum of 222,327 had to be found to fund from the General Fund in 2001/02 to cover the costs of the Waverley element of the scheme. By the same token, Surrey County Council enjoyed significant cost savings.

9. The Table below illustrates Waverley’s expenditure on the Concessionary Fares scheme from 2000/01 – 2005/06.

Financial Year Actual Expenditure on Concessionary Fares
2000/01
17,280
2001/02
239,607
2002/03
254,578
2003/04
263,929
2004/05
242,629
2005/06
247,626

Free Bus Travel Scheme from April 2006

10. In 2005, the Chancellor announced that the Government intended to extend the Concessionary Fares scheme from half-fare to free off-peak local bus travel for those aged over 60 and for people with disabilities, with effect from 1st April 2006. This was introduced as an Order made under Section 147 of the Transport Act 2000.

11. Off peak travel is travel after 9.30am, Monday to Friday, and all day at weekends.

12. Experience elsewhere in the country showed that free bus travel encouraged significantly more eligible people to obtain a Bus Pass entitling them to free bus travel. In Waverley 40% more bus passes have been issued between April and June 2006, than were issued in previous years. In 2005/06, 7,936 bus passes were issued and by June 2006, 11,100 had been issued. This would suggest, by implication, that more people are intending to take advantage of free bus travel.

13. Of course, as people who had previously used buses and paid a half-fare or a full-fare are now paying no fare at all, the bus companies need to be reimbursed for their loss of income.

14. The Chancellor acknowledged that for some local authorities the introduction of the free bus travel scheme would add to their costs and could prove problematic mindful of Council Tax capping. In response to pressure from local authorities like Waverley, the Chancellor announced that English local authorities were to receive 350 million per year from 2006/07 to help meet the costs of providing the additional concessionary fares.

15. As members will see from the Budget Book 2006/07 (page 119), the anticipated cost arising from the new more generous scheme was a net expenditure of 619,790 (assuming no Government Grant), which would have been an increase on the previous years estimated expenditure of 247,050 – an additional 372,740. The Government grant received by Waverley for concessionary fares was in fact 371,050, so the net additional cost to the Council amounted to 1,690.

16. Most Government grants are allocated to local authorities on the basis of a formula, rather than on the actual expenditure incurred by a local authority. The Government’s allocation formula for grant in respect of concessionary fares has resulted in there being some ‘winners and losers’. In Waverley’s case, the grant allocated for 2006/07 did not quite cover the additional expenditure incurred by the Council.

2007/08

17. The revenue grant to support the concessionary fare scheme was fairly neutral for Waverley in 2006/07. However, there is some uncertainty for 2007/08 as it is expected that the General Fund will receive a small increase in grant but it will rolled-up in the Revenue Support Grant (RSG) rather than being a clearly hypothecated sum. The fact that take-up of bus passes has increased significantly is not expected to produce any extra grant for Waverley. The only increase is likely to be an inflationary uplift, thus leaving Waverley worse off.

18. In any event, it is possible that this might be a one-year issue, as the Government has more proposals for changing and extending the Concessionary Fares scheme further (see below).

19. In the meantime, Bus Operators have indicated that the costs of operating their services across the county have increased disproportionately – well beyond normal inflation - partly as a result of significant increases in the price of fuel, the costs of recruiting and retaining bus drivers etc. Negotiations are currently in hand with the Bus Operators to determine the reimbursement package for 2007/8. The (Exempt) Annexe to this report indicates the anticipated level of expenditure that Waverley is likely to have to contribute to the Concessionary Fares scheme for 2007/08.

National Concessionary Fares Scheme 2008 and beyond

20. At present, the statutory minimum Concessionary Fares scheme requires local authorities to provide free bus travel within a local authority’s boundary, with the passenger paying the full fare for any travel outside of the Borough/District. Waverley – along with the other Surrey authorities – recognised that such boundaries can often be artificial when dealing with access and transportation issues and so the scheme operated in Surrey means that Waverley Concessionary Fares pass-holders can travel on any bus to the end of its route – rather than only to the Borough boundary. Similarly, Surrey residents cannot use their bus passes when in London, on holiday in other parts of the country or when visiting friends and relatives elsewhere in the country.

21. Mindful of the limitations of the statutory scheme, the Government intends to extend the Concessionary Fares scheme still further so that residents can use their bus passes anywhere in England.

22. There are major practical implications arising from this proposal for example:

who negotiates with each of the bus companies the new scheme? - It would be unreasonable to expect Waverley to have to negotiate with each bus company across the country on the basis that a Waverley resident might possibly use their pass on a bus, say, in Cumbria.

how much additional use of buses will a national scheme encourage and how will this be monitored and measured? - For example, it is likely that more Waverley residents might seek a Concessionary Bus Pass so that they can have free travel in London (where there are more buses) when visiting the capital for either work or leisure.

how are the additional costs of this scheme to be calculated and who will have to fund the additional costs?

will the national scheme be restricted to the current scheme hours i.e. starting at 9.30am as opposed to the Surrey scheme, which operates from 9am? will it be necessary/desirable to introduce ‘smart-card’ technology to help reduce fraud, measure usage, frequency of travel and help calculate payments to bus companies? – And if so who will provide the technology and fund it?

23. There are working groups at the Department of Transport looking at the practical issues but they have yet to report their findings and proposals. To date there has been no official announcement or guidance by the Department with regard to payment methods, issuing of cards, need for new technology, the reimbursement system, scheme definition and legal implications

24. Although by no means certain, it now seems likely that it will be a locally based National Scheme. This means there will be no change in the way that it is administered – i.e. it remains the responsibility of the local authority (Borough/District).

25. An important change proposed is from the current mileage scheme to a ticket based form of reimbursement (revenue foregone). In effect, the Council will have to reimburse bus companies for each passenger trip taken by a pass holder within the Borough, regardless of whether they are a Waverley resident or not. This will have a significant impact on district and borough council budgets for 2008/9. In addition, the Surrey scheme will need adequate time for re-negotiation with bus operators and to implement the new arrangements.

26. This is further is exacerbated in areas that have visitor attractions because of the likely increase in use by tourists and visitor-attractions in London and across Surrey. Each borough and district close to these attractions will have to meet the cost of the boarding passenger. If funding is on this basis then this will lead to constant budget pressures and uncertainties for district and borough councils. No basis of distribution of the Revenue Support Grant could easily cope with the cost variations caused by a demand led service.

27. At the same time the standard of schemes varies throughout the country and in Surrey residents are able to travel from 9am yet the national scheme is likely to be restricted to 09.30 to 23.00. Also passengers with disabilities can travel in the peak before 9am. If a National Standard pass is provided then local variations will be difficult to introduce. Additionally, any attempt to offer different concessions to the holder of a national card within a single area is certain to cause significant disruption to the operation of the scheme for passengers and add to the costs and difficulty for drivers, who already have to issue a variety of tickets and passes.

28. On the basis that a locally based national scheme is adopted, it is vital that clear guidance is provided by the Department for Transport. This must include:

a national reimbursement rate according to Region;
a single method for calculating “average fares” and how these should be reviewed over time in light of fare increases;
a single method for calculating revenue foregone;
a single method for calculating generation factors;
a method for calculating additional costs falling on operators from the changes, including the costs of introduction and administration; and
clear advice on the use of payment “caps” given the limited funding available to local authorities to meet reimbursement claims.

29. The scheme must be adequately funded on the basis of pass issue and fare levels (to reflect higher fares in the south east due to local circumstances), rather than straightforward apportionment according to population, which has led to significant inequalities in funding between statutory authorities during the present year.

30. There is a great deal of uncertainty about the implementation and funding of the National Scheme. Were the Department for Transport to administer the scheme nation-wide, there would be clear opportunities for Gershon efficiency savings, these may well be lost particularly with c350 authorities involved in administering the scheme.

31. Although the start date of the new scheme is April 2008, there are many practical issues that need to be addressed – not least the issue of new bus passes and negotiations with bus companies. The timescale is short and it is understood that the associated Bill may not be placed before Parliament until late Summer 2007, which is itself a matter of concern.

Officer Comment

32. The agreement entered into in 1978 with Surrey County Council, when it was agreed that Borough/District councils would take responsibility for the provision of Meals-on-Wheels and Day Centres in their areas and in lieu, the County Council would be responsible for Concessionary Fares, no longer holds. As a direct consequence of the Transport Act 2000, this Council has a duty to fund Concessionary Fares, which has placed a significant additional cost on the Council’s budget of over 220,000 per annum since 2001/02. However, there has been no commensurate reduction in expenditure on Meals-on-Wheels or Day Centres. The County Council has enjoyed significant savings as a result of the Transport Act.

33. There is now a period of uncertainty. First, in respect of 2007/08 and whether the Government grant made specifically in respect of Concessionary Fares for 2006/07, will be clearly replicated in 2007/08; and furthermore whether the grant will only increase with inflation or will it cover the actual increased costs anticipated, which are well over inflation? Officers consider that the Government grant is unlikely to cover the additional costs for 2007/08 and so Waverley will have to take that strain.

34. The second area of uncertainty relates to how the national scheme is to be administered and funded from April 2008.

35. It is worth being aware of the issues because there are potentially significant resource implications arising from them. The risk areas are:

Resource and Legal Implications

36. The Transport Act 2000 had a significant impact in relation to the Council’s duties and resources. As from April 2000/01 this Council had to fund the costs of operating a statutory half-price bus concession for eligible people. This increased the Council’s expenditure by 222,327 at a stroke.

37. Although the additional costs of the free bus travel scheme has been ameliorated by the specific Government grant awarded for 2006/07, it is not yet clear how the Government intends to deal with the grant issue for 2007/08. It is clear that there will be additional costs to the Council, as outlined in the (Exempt) Annexe. There is a real risk that the Government grant will not cover these additional costs and the General Fund will have to bear them.

38. There is much uncertainty about the National Concessionary Fares scheme being introduced in 2008, as to how it will be managed, operated and funded. Officers have no information about this matter at this time. Unless the Transport Act 2000 is repealed or amended, the duty to provide a concessionary fares scheme (and to fund it) lies with Borough/District Councils.

Recommendation

It is recommended that the Committee:

1. receives this update report and the changes being planned in respect of the Concessionary Fares scheme;

2. notes the potential financial and budgetary implications for 2007/08;

3. recommends that the Executive makes appropriate budgetary provision for 2007/08 to fund its statutory duty to provide a Concessionary Fares scheme for eligible residents.;

4. officers make representations to the Department of Transport for seeking early clarifications on the matters outlined in paragraphs 24 – 31 in this report.
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Background Papers (DoH)

There are no background papers as defined as by Section 100–105 of the Local Government Act 1972.
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CONTACT OFFICER:

Name: John Swanton Telephone: 01483 – 523375

E-mail: jswanton@waverley.gov.uk



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