Hansard

We are to CPT what Strathclyde is to COSLA, in that FirstGroup is the largest bus operator in Scotland. We operate about 40 per cent of the buses in Scotland. We have a significant operation in Glasgow and another in Aberdeen. Our Edinburgh operation stretches from Balfron, across the central belt, through Edinburgh and down through the Borders to Berwick.As an operator we have a fair amount of experience of different concessionary schemes, of how they impact on us and of how some of the things that Marjory mentioned in general terms impact on a particular operation. That is the area in which I might be able to help.I would like to make three specific points and I will then be happy to answer any questions. My first point is one that Marjory made, but it is important—particularly in terms of the question that was left on the table when she left. As an operator we do not see concessionary fare schemes as any kind of subsidy to us. We see them as subsidies to particular customers of ours, because other people are contributing to the travel costs of the elderly, the infirm and various other groups.As an operator we are covered by the existing legislation, which obliges local authorities—or whoever is sponsoring the concessionary fare scheme—to ensure that the operator is no better or worse off as a result of participation in the scheme. We obviously appreciate the fact that concessionary fare schemes stimulate the market—we will support anything that stimulates the market and stimulates demand. At the end of the day, however, we cannot make any additional profit out of such schemes because of the way in which they are controlled.Both COSLA and SPT have more or less confirmed that that is the situation. There have in the past been challenges to various schemes—FirstGroup has challenged certain schemes for not being generous enough. We felt that we would be worse off if we participated in them.There are some schemes in which we have participated only as a result of receipt of a formal participation notice, because we felt that we were losing money by being involved in them. The general environment is not one in which concessionary schemes and the money that is put into them constitute subsidies to the operator. The schemes are a subsidy to those who use them.As Marjory said, we are happy to co-operate with any concessionary fare scheme as long as it is fair and reasonable.This might be the point at which I should pick up the issue of our annual report and investment. If members were to read the previous FirstGroup annual report, they would see that there are two significant figures. One figure is profit, which can be a big number in an organisation as large as ours. Our turnover is big and our business is big. If members revisit our annual report they should look at two numbers—profit and capital investment. From those two, members will see that we, as an operator, invest more in developing public transport than we earn from profits. Our capital investment is significantly higher than our profit figure.It is worth pointing out that in a period of two and a half years we invested £50 million in our Glasgow business alone. We replaced almost half of the Glasgow bus fleet and virtually all that investment was in low-floor, easily accessible buses, which are of particular benefit to people who are covered by concessionary fare schemes.I can speak only for FirstGroup, but to be fair to the other large public limited companies that are involved in bus operation in Scotland I will say that all have invested significant sums of money in the business. That is why Marjory commented that operators need a level of profit. If there is no profit, we cannot invest and we cannot get people to invest in us. We can assure the committee that we are investing far more in developing the future of our business and in the future of public transport in Scotland than we earn from profit. That probably answers what seemed like a difficult question.Although my second point is not of specific concern to us, we know from the way in which our business develops with our participation in concessionary fare schemes that it is of concern to the committee. We would be just as happy to participate in a national scheme as we are to participate in the series of local schemes that are run by local authorities. In some ways, a national scheme might be better for us in terms of administration, because our drivers would have to deal with just one pass instead of three.A national scheme would have significant financial and political implications. It would impose national standards in place of local standards, and that would have different financial implications depending on the market environment, the kind of operation in question and the way in which the scheme is designed. For example, the Strathclyde scheme works well in Strathclyde but might produce a different range of costs if applied in Aberdeen. The Fife scheme applied to different areas would also produce different costs. As soon as the move to a national scheme takes place, the odds are that it would not be as tailored to the market as local schemes are, which could have significant cost implications.As an operator, we are concerned that a national scheme would have to be properly funded. If it was not, it would inhibit our ability to invest in new buses and in developing our service or it would push us into a position in which we had to ask some of our customers to cross-subsidise others. That possibility would concern any business, but it is of particular concern to us. The issue arises occasionally in the debate on quality contracts and quality partnerships. As soon as we begin to cross-subsidise, we find ourselves asking people in the areas where our strongest bus services operate—such as Easterhouse in Glasgow, where earnings and rates of car ownership are relatively low and travel can be difficult—to pay even higher fares to provide safety-net bus services in places such as Newton Mearns, where there are high levels of car ownership and people use buses only occasionally. We would question whether it is sensible to move in that direction. Encouraging cross-subsidy in the bus industry means that those without much money will end up supporting services in areas where there is a significant amount of money, and that is a dangerous path.We also feel that, as Helen Eadie pointed out, there are political implications. Unless every authority is allowed to do what it wants, powers to make local decisions about what is appropriate for an area will be taken away. We have a strong view that bus operation is a very local business. The bus service that people like in one town may not be the same as the service that people like in another. In running our business, we try not to impose national standards on the way in which we deliver services in Glasgow or in Aberdeen, for example. There are different markets and different environments, and the politicians with whom we deal all have different views. The committee must be aware that that is a political concern rather than our concern as operators. We are happy to co-operate with political decisions, but we recognise their significance, as we know that all the authorities that we deal with are proud of their own schemes and would not like them to be changed. We are happy to leave that dilemma for politicians to resolve.My third point is that, whatever decisions are taken in future about concessionary fare schemes, we think it important that those decisions be taken in the context of where the public transport market, the environment and the industry are all going, rather than where they have come from. As an industry, we have emerged from the toughest 30 years that we will ever experience. In the period between the mid-1960s and the mid-1990s, there was rising level of car ownership, rising prosperity and a reasonable amount of road space. The volume of people using buses declined fairly sharply; as a result, there was a limited amount of public finance, which caused fares to rise considerably. The whole environment of running buses has not been a pleasant place to be during the past 20 to 30 years. The market has been in constant decline and we have had to contend with that.Earlier, Trond said that one of the main reasons for concessionary fare schemes was the tendency of the bus industry to increase fares regularly throughout the 1970s and 1980s. Every time that those fares increased, elderly people and others found it more difficult to travel, so concessionary fares became more important.Malcolm Reid said that the fact that fares in Strathclyde had been relatively stable for the past couple of years had assisted the SPT scheme. The stability of the scheme is owing to the fact that there have been no increases in fares in the Glasgow area for two and a quarter years. There have been some fare reductions in that time. There was no pressure on the Strathclyde scheme, because the fares against which the reimbursement is benchmarked have been stable.We are involved in partnership arrangements throughout Scotland—Aberdeen, Glasgow and Edinburgh—to develop the local bus market commercially, treating it as a consumer business, considering what customers want and trying to encourage more people to use buses. That is a market-related strategy. We want to create a bus network, providing a bus service for everyone. That relates to social inclusion, because we want to create a bus network that people will choose to use, whether or not they have a car. If we can do that and maintain reasonable concessionary fares, we will have met the social inclusion factors.It is important to look forward. The committee does not need to consider how to handle concessionary fares in an environment of declining bus use and substantial fare increases—the war zone of the past 20 or 30 years. We are now close to announcing the first significant passenger growth in bus use in Glasgow for 30 years. We are at a stage where all the partnership activities—including holding fares for more than two years—are creating a buoyant bus market: more people are using buses. There has also been an increase in passenger numbers in Edinburgh. In Aberdeen, we made a commitment not to increase fares this financial year. That is something that we have never done before. We have advised Aberdeen City Council that, unless there is an absolute disaster, we will not increase fares in Aberdeen. There was a huge sigh of relief at the news, because the budget had always been based on the assumption that bus fares increase every year, with a knock-on effect on the concessionary fare scheme. That was a factor in the break-up of the joint Aberdeenshire Council and Aberdeen City Council scheme. We want to pursue our Aberdeen strategy nationally. We are desperately trying to reverse the trend of declining bus use in the country as a whole. That is why we are investing and developing in such a way. Any changes to concessionary fares should be considered in that context. We must consider the direction that the public transport market is taking. The operators—particularly the large plc operators—take a fundamentally different approach to the market. We are driven by the need to get more people to use buses. If we continue the policy of public sector-private sector partnership, in which the operator is developing the market and encouraging growing use, while the local authorities and the Government are investing in infrastructure and—where it makes sense—supporting concessionary fare schemes, we see a bright future for the industry. Concessionary fare schemes will also be less of a problem, because in the long run fares will be better value. The business is growing. As the largest operator in Scotland, we are keen to work in partnership with Government and local authorities to find the best commercial solutions to the various social problems.Marjory alluded briefly to the national scheme for the blind, which will be introduced in November. That scheme will probably cost us money, but not a huge amount. Therefore, we are happy to participate in the scheme, to discover how it will work and develop. I repeat what Marjory said: no one should take that as a precedent. It should not be presumed that, if we will do that for a penny, people can come along and ask us to get the chequebook out and contribute a few thousand quid. That would be a slightly different charitable donation. However, we are happy to participate in the scheme for the blind. Similarly, we would be happy to participate in the development of concessionary fare schemes, provided that that is not at the expense of our other customers or investment. Investment in public transport in Scotland is essential.