TIDMSGC
RNS Number : 3273E
Stagecoach Group PLC
03 November 2015
3 November 2015
Decision by Tyne and Wear Quality Contract Scheme Review
Board
Stagecoach Group plc ("Stagecoach") welcomes the decision of the
Tyne and Wear Quality Contract Scheme Review Board ("the Review
Board") that the bus franchising scheme proposed by the North East
Combined Authority ("NECA") has failed to meet the necessary
statutory tests.
Stagecoach also believes the decision has clear implications for
bus franchising powers linked to the government's devolution
programme. The forthcoming Buses Bill must provide a legislative
framework for enhanced partnerships, and ensure any franchising
proposals are subject to proper safeguards and a transparent public
interest test.
Nexus, the transport executive of NECA, had proposed that bus
services should be franchised in Tyne and Wear through the letting
of contracts, with local taxpayers assuming the risk of the local
bus network. This approach would have replaced the current
successful system where services are largely commercially funded by
bus operators.
The Review Board received a written request to consider the Tyne
and Wear scheme on 22 October 2014. It subsequently reviewed the
consultation responses to the proposed scheme and held oral
evidence sessions involving Nexus, bus operators and other
parties.
The independent Review Board's remit was to provide an opinion
on whether the proposed scheme - which has a 10-year operating cost
of GBP1.6 billion - meets statutory public interest criteria, and
whether due process has been followed.
Any scheme must demonstrate that it will:
-- result in an increase in the use of bus services in the area;
-- bring benefits to bus passengers by improving the quality of local bus services;
-- contribute to the implementation of the local transport policies of the Local Transport Authority;
-- contribute to the implementation of those policies in a way which is economic, efficient and effective; and
-- ensure any adverse effects of the proposed scheme, such as on bus operators, will be proportionate to the wider
benefits to people in the area.
The Review Board report contains wide-ranging and fundamental
criticisms of the bus franchising proposals in Tyne and Wear, which
failed to meet key practical and financial tests. The main findings
are that:
-- the franchising scheme failed to satisfy the core test of being economic, efficient and effective. The Review
Board remarks that the effectiveness of Nexus' scheme has been "significantly overstated", with similar benefits
able to be achieved under operators' partnership plans. In addition, the Board criticises Nexus for "reverse
engineering" in an attempt to justify its proposals
-- the Review Board is "not convinced that the scheme is affordable". Indeed, the Board states that "it appears more
likely than not that the scheme will run into funding issues and that will put pressure on fares and the network"
-- Nexus has failed to demonstrate that its proposals will lead to an increase in bus use, or even reduce or arrest
decline
-- while the Review Board ruled that the scheme met the test on providing benefits, the Board noted that "any
quality improvement whatsoever" would, as a technicality, satisfy this criterion.
-- although the Review Board believes the scheme contributes to the implementation of local transport policies, it
raises "concern" over the financial viability of the scheme.
-- the Review Board said it had "no hesitation" in concluding that the "negative impacts on operators are wholly
disproportionate to the benefits" to bus passengers and citizens of Tyne and Wear. Furthermore, the Board says it
finds it "highly unlikely" that Parliament intended such schemes to lead to such harsh impacts on individual
businesses.
-- Nexus also failed to comply with its statutory duty on consultation and consultees were "misled" by claims that
the franchising scheme was superior to operators' alternative partnership proposals
Commenting on the Review Board findings, Stagecoach Group Chief
Executive Martin Griffiths said: "We welcome the Review Board's
confirmation that the core franchising proposal was unaffordable,
inflexible, high risk and not in the public interest.
"Tyne and Wear already has 90% bus customer satisfaction,
amongst the highest levels of bus use in the country, and smart
ticketing is being introduced across the region. Franchising does
nothing to build on that successful, high-quality network.
"Nexus's franchising plans envisaged no more buses, no new
routes and no more services. When subjected to proper public
scrutiny, it admitted its plan had a close to 1 in 3 chance of
financial failure, it had no money to fund the bus network after 10
years and it had made numerous multi-million-pound mistakes in its
calculations.
"We would urge the North East Combined Authority to respect the
findings of the Review Board, and put passengers and local people
first, by abandoning the misguided franchising plans. Instead, we
call on them to work in partnership with bus operators to build on
Tyne and Wear's excellent bus network and deliver on our joint
responsibility to give local people even better bus services."
In addition to its formal findings, the Review Board comments on
the government's planned devolution programme and linked potential
changes around bus delivery. It says that whatever approach is
taken, there are "valuable lessons" to be learned from the
examination of the Tyne and Wear scheme.
Stagecoach notes the Board's recommendations include that:
-- there should be a "staged, independently scrutinised, approach to the process of development and assessment of
any proposal", including the use of independent experts, and an "annual scrutiny review" of what any scheme has
delivered
-- "legislation enabling franchising should specifically address the issue of proportionality of financial loss of
bus operators". The Board adds that "it may be that some form of compensation is considered appropriate".
Mr Griffiths added: "The only fully worked up proposal for bus
franchising in the UK outside of London is in Tyne and Wear. But
the independent scrutiny provided by the Review Board has exposed
the serious risks to bus passengers and taxpayers from franchising
in any part of the country.
"Independent research* suggests it would cost up to an estimated
GBP3.2 billion a year to run a franchising system across England.
This would be a tax on the public that would dwarf the cost of the
HS2 high speed rail project in less than 20 years. We support the
principle of devolution, but it is clear that bus franchising is a
one-way ticket to worse services, higher fares and tax rises for
local people.
"We believe there are far better models for improving the public
transport offer in major cities based on true partnership working
between the public and private sectors. This approach should be
actively encouraged in the forthcoming Buses Bill. It should
address the competition law issues which would assist the delivery
of multi-modal ticketing and improved operating standards. At the
same time, this would retain innovation and competition in a
dynamic market alongside meeting the social and economic
requirements of growing city regions.
"We are open to discussing and developing an enhanced
partnership based on these principles with NECA or any other
authorities which receive devolution powers, sharing risks
appropriately between the public and private sectors."
Ends
For further information, please contact:
Stagecoach Group plc www.stagecoach.com
Investors and analysts 01738 442111
Ross Paterson, Finance Director 01738 442111
Bruce Dingwall, Group Financial
Controller
Media
Steven Stewart, Director of Corporate
Communications 07764 774680
Notes to editors
*Lessons from London: The Costs of a Bus Tendering Regime in
England (TAS Partnership, July 2015)
The Review Board is chaired by Kevin Rooney, Traffic
Commissioner for the North East of England. The two other members
of the Review Board are Alan Wann and David Humphrey. Alan Wann is
an independent consultant and strategic advisor on transport,
social, economic and cultural regeneration. He has previously held
roles at Northumberland county council. David Humphrey held a
number of senior roles in both the bus and tram sectors during a
42-year career in the public transport industry.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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