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Saturday, 9 January 2010

First challenge of the New Year

Firstly thank you for all your good wishes - some through the comments section on this blog and the very many directly by email.

Now to business - we have the announcement that the Office of Fair Trading is referring the UK bus industry (though not London or Northern Ireland) to the Compettion Commission. The industry is making its comments known as is CPT. Of course we will co-operate fully and our team is already working on this.

In the media comment which has followed there has been some reckless use of the word "subsidy".

We only have two sources of money - most of it comes from the fare payers, and some comes from Local and Central Government. Some of the public money is where Local Government is buying in services (that is for all of London plus elsewhere which are not provided commercially). Quite a lot of Government money is payment for the carriage of of concessionary passengers (so is fares paid another way).

None of this is subsidy. It might be public money but it is being used to buy something. The MoD buys aeroplanes from Boeing and no one suggests that is subsidy. It is a customer/supplier arrangement and this is equally the case for concessionary fares and the procurement of bus services not provided commercially.

There is one other big dose of public money - BSOG (previously Fuel Duty Rebate) refunds most (but not all) of the excise duty on fuel which puts us in the same position as rail and aviation (who don't pay it in the first place of course).

The media manages to talk about "subsidy" when in fact my far and away most of the bus services outside London are provided commercially and the entire cost of all major investment in buses and depots is provided entirely by the private sector.

There are two particularly useful comments in the recent TAS Report into the Economics of the Bus Industry.

Frstly, since 1991 the industry has consistently invested more than it made in profit, and secondly, that a more regulated regime could easily lead to higher costs for the farepayers and/or taxpayers.

Your comments welcome!

I have not ignored the income generated by commercial advertising. It is hugely valuable, helps hold down fares, but is a small proportion of our income (Less than 1%). However I am glad to illustrate its value!


1 comment:

  1. The OFT move in mysterious ways.....sometimes I wonder who in fact they are serving. It should in theory be the public, but some of their ruling relating to the bus industry puzzle me a bit (I'm not in the industry) and actually seems to work against the bus passenger!