Scotland-wide Older and Disabled Persons Concessionary Bus Scheme - Further Reimbursement Research

1 Introduction

1.1 This study

1.1.1 This document is the Final Report of the work carried out by Minnerva Ltd and MVA Consultancy for Transport Scotland, commissioned in April 2012. The objective is to help Transport Scotland further improve and update the evidence base underpinning reimbursement payments to bus operators for carrying concessionary passengers.

1.2 The All-Scotland free concessionary travel scheme

1.2.1 Transport Scotland is responsible for compensating bus operators for carrying older and disabled bus passengers for no charge. The all-Scotland free concessionary travel scheme, which allows free bus travel anywhere in Scotland at any time for passholders, has been in place since 1 April 2006. Prior to the national scheme, individual local authorities[4] had been responsible for providing free local bus use, on a statutory basis from 1 October 2002. Since the all-Scotland scheme was put in place, Transport Scotland payments to operators have risen from around £153 million in 2006-7 to £180 million in 2011-12.

1.2.2 Under UK and EC legislation, the basis on which bus operators are reimbursed should have the objective of leaving the operators financially no better off and no worse off in financial terms. This requires Transport Scotland to identify a counterfactual 'No Concessionary Travel Scheme' situation against which to estimate:

  • the revenue that would have been earned ("revenue forgone") by the operator if passholders were not able to travel for free; and
  • any additional costs that have been incurred as a consequence of providing free travel, in particular through carrying passengers who would not otherwise have travelled.

1.2.3 Given the hypothetical nature of the counter-factual, and the sums of money involved, determining appropriate reimbursement levels is inevitably a matter of considerable debate between the organisations responsible for paying it and the operators who receive it.

1.2.4 The arrangements for calculating reimbursement for the all-Scotland scheme were originally agreed in negotiations between the Scottish Government and the Confederation of Passenger Transport Scotland (CPT) on behalf of bus operators. These arrangements were renewed, but with a reduced payment rate, with effect from 1 April 2010, in an agreement that expires on 31 March 2013. The research reported here is intended to inform Transport Scotland decision-making with regard to changes in reimbursement arrangements that might be put in place from 1 April 2013.

1.2.5 Since 2006, reimbursement payments have been calculated through the application of a fixed reimbursement rate. There has not been a systematic method for updating the reimbursement rate, except through the negotiations which led to the agreed rates payable from 2006 and 2010. Transport Scotland commissioned the Institute for Transport Studies at the University of Leeds (ITS) to improve the evidence base for determining reimbursement payments in work that reported in 2010[5]. The results from this research informed the negotiations that led to the Reimbursement Rates operative from April 2010.

1.2.6 The principal objectives of the current work is to provide updated values for the component elements of the reimbursement calculation, building on the ITS research, but also identifying a mechanism for regular updating of the reimbursement rate, while maintaining compliance with the over-arching "no better off, no worse off" objective.

1.2.7 Concessionary travel reimbursement is an exceedingly complicated area, with substantial scope for confusion over concepts, terminology and interpretation of evidence. The function of this document is to provide an accessible summary of the main findings of the research. Appendix A introduces the key concepts, and Appendix B contains a glossary of terms (generally indicated by italics in the text where they are initially introduced). Appendix C sets out the results from various sensitivity tests of key findings.

1.3 This report

1.3.1 The remainder of the report covers:

  • current reimbursement arrangements and background trends (Chapter 2);
  • calculation of the appropriate average fare that should be used in calculating reimbursement payments (Chapter 3);
  • estimates of the extent to which concessionary journeys are generated by the free concession (Chapter 4);
  • additional costs that might be incurred by bus operators (Chapter 5);
  • the reimbursement implications of combinations of the findings in each of these areas (Chapter 6); and
  • mechanisms that could be used to regularly update reimbursement rates, and discussion of longer term issues (Chapter 7).

1.3.2 The work has been greatly facilitated by the support and resources of Transport Scotland, together with the active co-operation of CPT-Scotland and its advisers Steer Davies Gleave (SDG). For simplicity, in this report we refer throughout to "CPT", which might mean CPT itself, or SDG, or CPT and SDG in combination.

1.3.3 As will become apparent, although there is firm evidence in some areas, the hypothetical nature of the counter-factual situation leads to an unavoidable reliance on assumption and judgement in other areas. Views on some of these judgements are likely to differ, especially since alternative positions can have significant implications for reimbursement payments. In the report we have sought to identify key areas where, in our view, some level of arbitrary judgement has been required. While not attempting to speak for CPT, we have highlighted those areas where we understand that CPT may take a different view to ourselves. The overall conclusions reached are, however, entirely the responsibility of MVA Consultancy and Minnerva Ltd.