Rationale for intervention
Our public transport system connects people and communities to the opportunities and services that they need in order to thrive. Jobs, education, retail, public services, leisure, recreation and social and family networks.
This is why the Scottish Government currently provides a range of financial support to help operators run services and enable specific eligible groups, such as younger, older and disabled people, to be able to access public transport.
In terms of transport operators, the Scottish Government provides grant funding and subsidies such as the Network Support Grant (NSG) which enables bus operators to continue to provide services that may not otherwise be commercially viable. Maintaining bus services, which are often more heavily relied upon by lower income groups, helps people to continue to access jobs, education and public services.
Scottish Ministers subsidise CalMac Ferries Ltd to provide ferry services on the Clyde and Hebrides network and Serco NorthLink Ferries to provide ferry services between the mainland and Orkney and Shetland, both currently under tendered contracts. In addition Scottish Ministers are the sole shareholders in Caledonian Maritime Assets Limited (CMAL), which owns the majority of ferries, ports and harbours and infrastructure necessary for lifeline Scottish ferry services. Furthermore, four local authorities operate ferry services with support from the Scottish Government.
The Scottish Government provides over £1.6 billion per year to operate Scotland`s railway with both ScotRail Trains Limited and Caledonian Sleeper Ltd now under public ownership and controlled by Scottish Ministers through Scottish Rail Holdings Ltd which is wholly owned by the Scottish Government.
In addition to this financial support, further funding is provided directly to local authorities for bus services. The Community Bus Fund also supports local transport authorities to improve local public transport in their areas.
In the case of support for individuals to access public transport, this is currently largely delivered through our National Concessionary Travel Schemes (NCTS). The Young Persons’ Scheme (YPS) provides free bus travel for those under the age of 22 while the Older and Disabled Persons Scheme (ODPS) provides free travel for those aged 60 and over and those with an eligible disability. The Scottish Government also provides vouchers for four ferry journeys per year for island residents aged 16-18 with a commitment that this be expanded to include all those island residents aged up to 22.
Under 22 Concessionary Travel Case Study
The Scottish Government has taken significant action to deliver our vision for Public Transport. In January 2022 the Government introduced free national bus travel for all residents aged under 22’s. Since then more than 116 million free bus journeys have been made under the scheme.
The scheme aims to encourage more sustainable travel and tackle issues related to transport poverty by:
- embedding positive sustainable travel behaviours.
- opening up social, education, employment and leisure opportunities.
- reducing household outgoings to aid children, particularly those living in poverty.
Evaluation of the scheme shows progress against each of those objectives, with increasing numbers of young people travelling by bus and families reporting cost savings and reduced worry and anxiety relating to travel.
By implementing initiatives to improve accessibility, availability and affordability such as the ones highlighted, we work towards increasing the attractiveness of travelling by public transport and delivering our vision for the future of public transport in Scotland.
In addition to the NCTS, there are some local concessionary travel schemes which offer discounted travel to certain groups of people on other forms of transport such as rail and ferry. However decisions on whether to provide such local schemes rest with the relevant local authorities and it is therefore the case that such local schemes only exist in certain parts of the country. Similarly some public transport operators may operate particular discount schemes for targeted groups or frequent travellers but the decision on whether to provide such a discount is generally a commercial consideration for the operator.
Road Equivalent Tariff – Increasing affordability of Clyde and Hebrides Island Ferry Services – Case Study
On the ferry network, the introduction of the Road Equivalent Tariff (RET) scheme on the Clyde and Hebrides network has helped support island businesses and extend the tourist season.
RET is a distance based fares structure, calculated by a combination of a fixed element (intended to help ensure services remain sustainable and to contribute towards fixed costs such as maintaining harbour infrastructure and vessels) and a rate per mile (calculated by Transport Scotland analysts using contemporary independent research by the RAC).
An independent evaluation of the scheme, which focused on the islands which received cheaper fares in 2015, shows a number of positive findings including around 25% of island residents made more ferry trips as a result of RET and around 40% of businesses reported an increase in turnover. RET has helped to grow the ‘visiting friends & relatives’ market, whilst also making it easier for island residents to access mainland goods and services. Across the wider Clyde and Hebrides network, there is clear evidence of an extension of the tourism season for most islands.
The costs of providing the cheaper fares that are delivered by RET are borne by government subsidy.
However, despite the financial support from government outlined, our public transport system continues to face a number of challenges which have either emerged or become exacerbated since the onset of the Covid-19 pandemic. These include:-
- Changes in how and when people travel, for example due to the growth of working from home. Reduced passenger numbers result in a reduction in revenue flowing to public transport operators which can then impact on the financial viability of some public transport services.
- Rising costs borne by public transport operators in providing public transport services. Such rising costs can lead to a pressure on operators to increase fares, thereby reducing the attractiveness of public transport to people, or result in requests for additional government subsidy to support the continued provision of services.
- Financial pressures faced by individuals and households following the emergence of the cost of living crisis in 2021/22, further impacting on the demand for public transport. These financial pressures are particularly pronounced for people living in poverty for whom public transport fares account for a greater proportion of their disposable income.
- Levels of public and user satisfaction with public transport. The most recent Scottish Household Survey, an annual survey of the general population in Scotland, which aims to collect reliable and up-to-date information on a range of topics, through a random sample of people in private residences, reported that satisfaction levels with public transport have fallen from 68% in 2019 to 58% in 2022 and with almost a quarter (23%) of respondents reporting being dissatisfied with public transport.
As well as these challenges that are specific to public transport, the sector also faces a number of external challenges.
Demographic changes impact on the amount of government that is funding that is required to support the running of and access to our public transport system. For example, as already highlighted, the NCTS provides free bus travel to all those aged 60 and above. The Scottish Government reimburses bus operators for an agreed proportion of the standard single fare for each journey made under the scheme. The scheme terms are agreed with industry through the Confederation of Passenger Transport each year with the aim of ensuring bus operators are “no better and no worse off” by participating in the scheme.
However, it is projected that the proportion of the population of pensionable age people in Scotland will increase. By mid-2043, it is projected that 22.9% of the population will be of pensionable age, compared to 19.0% in mid-2018. As the proportion of Scotland's pensionable age population grows, the proportions of both Scotland's working age and child population are projected to fall.
The ageing population of Scotland means that additional funding will likely be required to maintain the Older & Disabled Persons` NCTS scheme in the years ahead assuming cardholders continue to travel by bus at their current rates.
In addition, and significantly, given the importance of government funding to support our public transport system, the financial situation facing the Scottish Government is, by far, the most challenging since devolution. The shocks of over a decade of austerity, a hard Brexit, the Covid-19 pandemic, and the war in Ukraine are placing extreme inflationary pressure on public finances.
The funding available to the Scottish Government, with the exception of demand-led social security expenditure, is projected to fall in real terms by 2026/27 due to decisions taken by the UK Government. It is therefore more important than ever to prioritise support to those that need it most, and ensure value for money in our public services.
The timescales necessary to make changes to some aspects of financial support provided to the sector and passengers present a further challenge. For example, the individual schemes within NCTS have a statutory basis which means that any changes to the schemes require amendments to legislation and associated processes to be followed on public consultation and securing Parliament`s approval to make the desired changes. This means that it may be some time before changes and their associated benefits can be realised.
In the absence of any policy intervention, these issues could have significant detrimental impacts on our public transport system and on the communities, individuals and businesses who rely on it, as well as on achievement of the Scottish Government`s broader strategic objectives on tackling inequalities and taking action on climate change.
For example, the inflationary pressures highlighted could have disproportionate adverse impacts on low income groups who could be excluded from public transport services – and hence access to jobs / public services on affordability and cost grounds. These impacts could be exacerbated if operators reduced public transport services as a response to their rising costs leaving vulnerable households and individuals without a means of accessing the jobs, education and services that they need to live their life.
Consequently the Fair Fares Review is part of a broader package of work, referred to as the Future of Public Transport, being undertaken by Transport Scotland to support the recovery of public transport and to ensure the long term viability of the public transport sector as we progress beyond the Covid-19 pandemic and address the challenges outlined above.
This is a particularly urgent agenda given the commitment in the Scottish Government`s Covid-19 Recovery Strategy to address the systemic inequalities exacerbated by the pandemic, the extent to which lower income households are dependent upon public transport to access jobs, education, retail, public and other services, leisure and social networks, and the role that the public transport system has in supporting attainment of our target to reduce private car kilometres by 20% by 2030.