Registration of local bus services regulations: Regulatory Impact Assessment

Introduction

1. This assessment estimates the costs and benefits of the Public Service Vehicle (Registration of Local Bus Services) (Amendment) Regulations 2001. It takes account of comments received in response to the consultation document 'From Workhorse To Thoroughbred - A Better Role For Bus Travel' published in March 1999. As legislative competence for bus registrations has been devolved to the Scottish Parliament, the proposed changes would affect England and Wales only.

Background and Intended Effect of Measures

2. Under the Public Passenger Vehicles Act 1981, those wishing to operate bus services are required to hold a Public Service Vehicle (PSV - bus) Operator's Licence issued by the relevant Traffic Commissioner. Under the Transport Act 1985, all local bus services (defined as ones charging separate fares and with stopping places less than fifteen miles apart) must also be registered with the Traffic Commissioner. Operators wishing to run local services must submit, among other things, a description of the route and timetable of the service as part of the registration particulars. The services may only then start operating after a 42-day notice period has elapsed. It should be noted that the Commissioner has no powers to refuse a properly submitted registration. However he can, at the request of a traffic authority, put a Traffic Regulation Condition on an operator's PSV licence to stop danger to road users or reduce severe traffic congestion in particular areas.

3. The registration system provides an important element of stability in the local bus network and ensures that passengers can have confidence that individual services will run according to the route and timetable. Once a service is registered, the operator must provide the level of service described in the registration. If they wish to make changes to the bus service, the operator must apply to the Traffic Commissioner for a variation to the registration, which along with service cancellations, are also subject to a 42-day notice period (although in certain cases the Commissioner can reduce the notice period - e.g. where an vital existing service has been cancelled and a replacement is needed). New registrations or variations to existing ones are published in the Traffic Commissioner's bimonthly 'Notices and Proceedings'.

Extend the Notice Period from 42 Days to 56 Days

4. The notice period has three purposes: firstly, it restricts how frequently operators may make changes to their services so that passengers are not confused or dissuaded from using the bus by frequent changes; secondly, it provides advance notice to other operators of forthcoming changes to the local bus network and allows local authorities time to decide whether to adjust their network of subsidised services to cater for the changes; and thirdly, it allows time to update passenger information on service timetables.

Abolish the 'Five-Minute Rule'

5. Under current legislation, operators can adjust the timetables of registered bus services by up to five minutes either side of the registered time without submitting a variation to the Traffic Commissioner (the so called 'five-minute rule'). This was intended to enable operators to make small changes that have a minimal impact on overall service provision, without the need to seek formal approval from the Traffic Commissioner.

Risk

6. The Government believes that bus services must be stable and reliable to attract new custom. One of the criticisms most commonly levelled at the deregulated system has been instability of services. It is argued that timetables change too frequently, confusing potential passengers. Sometimes frequent changes have been associated with 'bus wars', with timings of previously registered services adjusted to give competitive advantage where two or more services use the same bus stop. This has often been at the detriment of smaller operators who run less frequent, less profitable services and rely on reasonable passenger numbers to remain commercially viable.

7. Conversely, it is argued that bus operators need to be able to respond quickly to external changes such as road works, demand from new schools or factories and college terms, and that operators should be given the freedom to innovate. However, there are concerns that there is at present too much flexibility, which creates uncertainty and instability and is damaging the cause of the bus. It is clear that with changes to services possible every 42 days (six weeks), the current notice period gives authorities little time to react, and makes the task of keeping passenger information up-to-date difficult and costly.

Purpose and Intended Effect of the Measures

8. There are currently around 55,000 registered local bus services in England and Wales. Over 4200 new local bus services are registered each year with the Traffic Commissioners and there are 12-13,000 variations of existing services and about 4000 cancellations. Therefore in total, some 20,000 alterations to local bus services each year are subject to the current 42-day notice period.

9. By increasing notice periods it will take longer for bus operators to register or make changes to existing local bus services. The abolition of the five-minute rule will mean that all changes to local bus service timetables will in future require an application to the Traffic Commissioner to vary the registration and be subject to the notice period (except in specific cases as exemplified in paragraph 3 above).

Business sectors affected

10. The business sectors affected will be PSV operators whose services fall within the definition of a 'local service' in section 2 of the Transport Act 1985. A local service is defined in the Act as a service using one or more public service vehicles for the carriage of passengers by road at separate fares that has stopping places less than fifteen miles part (although not certain types of excursions and tours or minibuses operated using permits issued under Section 19 of the Transport Act 1985). Any size of PSV vehicle can operate a local service - from a saloon car to a coach or double-decker bus.

Benefits

11. The extension of the notice period will result in bus passengers benefiting from a more stable bus network that will change more slowly over time. This will provide an added incentive to use the bus both for new and existing bus passengers, thereby increasing patronage. The change will also allow local authorities more time to decide whether they should adjust their tendered services and, if so, to go through the process of inviting and agreeing tender bids. Under the Transport Act 2000, local authorities are also responsible for ensuring there is adequate information about bus services in their area (although they may arrange for others to do it). Extending the notice period for introducing or changing local bus services will help bus companies and local authorities to provide up-to-date passenger information. To the extent that abolition of the 5-minute rule may prompt additional registration changes, the Traffic Commissioners will experience some additional workload, but this administrative effort will be balanced by increased fees revenue.

12. Profit margins in the bus industry vary considerably. Companies with narrow margins, and some small ones may be vulnerable to predatory competition (see paragraph 6). Under the existing registration regime, this can result in the stifling of competition and innovation in the bus market. Operators are often unwilling to introduce services in another operator's 'patch' for fear of a predatory response, and despite increased powers recently given to the competition authorities, small operators may be open to unfair competition if larger operators decide to compete on their routes. The new measures will make such responsive predation more difficult and give all operators more notice of any new services in their area or changes to existing ones.

Costs

13. The current fee for registering a new bus service or making changes to an existing one is £38. The extension of notice periods to 56 days will incur no additional administrative effort by the Traffic Commissioner and therefore not require a fee increase. Operators will bear the additional cost of submitting a formal variation for service changes that would have formerly been covered by the five-minute rule. Figures are not available for the current usage of the five-minute rule (because usage is not reported to the Traffic Commissioner), therefore this additional cost cannot be quantified. The Confederation of Passenger Transport (the bus industry trade body) believe that whilst the five-minute rule can prove useful, the bulk of timetable changes tend to require formal variation of the registration. Operators may also bear the notional cost of waiting longer to introduce potentially profitable services and from withdrawing loss-making ones.

Impact on small businesses

14. Of the 8000 PSV licence holders in England and Wales over 2000 hold a 'restricted' licence allowing the operation of up to 2 vehicles with up to 16 passenger seats. No figures are available on the proportion that operate registered local bus services, but this is likely to be relatively small. Voluntary organisations may also provide registered local bus services to the general public (using vehicles with up to 16 passenger seats) using a permit issued under section 22 of the Transport Act 1985.

15. As explained in paragraph 6 above, smaller operators will benefit particularly from the abolition of the five-minute rule, because operators will no longer be able to gain a commercial advantage by using ad-hoc scheduling changes to run individual services just ahead of a competitor. The 56-day notice period may also require smaller operators to think more carefully before introducing new services as they will have to bear additional costs of running those that prove unprofitable. But the additional fourteen days should not present a major additional barrier to the introduction or operation of local services. Operators would also carry a slight increase in administrative load but this would be minimal.

Securing compliance

16. Any PSV operator failing to operate a local bus service in accordance with the registration faces disciplinary action by the Traffic Commissioner. Under section 26 of the Transport Act 1985, the Commissioner can attach a condition to a PSV Operator's Licence prohibiting them from running particular local bus services in certain areas, or impose a total ban. More serious transgressions can result in the Commissioner suspending or revoking the operator's PSV licence or reducing the number of vehicles they may operate under it. The Commissioners also have a network of bus monitors, employed by the DTLR's Vehicle Inspectorate, who monitor the on-the-road performance of local bus services and report to him any that fail to operate in accordance with the registration.

17. The abolition of the five-minute rule will make performance evaluation a little more straightforward and prevent operators using the five-minute rule as an excuse to justify late running services. This unlikely to result in any cost savings for the Vehicle Inspectorate.

Consultation

18. Extending the notice period and the abolition of the five-minute rule were subject to consultation in 1999 (see paragraph 1 above). Around 350 individuals and organisations replied to the consultation document including 145 local authorities (41%), 40 from the bus industry (11%) and 98 from interest groups (28%). The respondents consisted of both large and small bus companies as well as employee and passenger groups. There was general support for the extension of notice periods to 56 days and the abolition of the five-minute rule.

Declaration

I have read the Regulatory Impact Assessment and I am satisfied that the benefits justify the costs.

Sally Keeble

Parliamentary Under Secretary of State
Department of Transport, Local Government and the Regions
Date:31 January 2002.

Contact point:
Ann Godfrey
Buses and Taxis Division
Zone 3/12 Great Minster House
Telephone: 020 7944 2284