Friday 26 October 2012

Nexus Bus Plan Overstated by £310M

 The colourful liveries of the major operators would disappear if Quality Contracts were introduced
• Independent consultants Oxera conclude Nexus claims “not supported by evidence”
• Review of Quality Contract Scheme (QCS) proposals reveals series of flaws in model
• Some claims also contradicted by Government and Nexus commissioned research
• Nexus pursuing QCS despite North-east having high bus passenger satisfaction

Transport bosses at Nexus have overstated the "benefits" of its bus contract plans by at least £310 million, according to a report by independent economic consultants.

The report by respected consultants Oxera reviewed the model used by Nexus to underpin its proposals to introduce a Quality Contract Scheme (QCS) in the North-east.

It found a series of flaws in the model, with several elements of the Nexus plans based on incorrect assumptions and claims that are “not supported by the evidence available”.

Some claims were contradicted by research commissioned by the Department for Transport and even Nexus itself.

One of the most serious findings in the new report centres on Nexus claims around the impact of so-called "soft measures under a QCS, including smart ticketing and a customer charter.

The Oxera report said there was no evidence zonal ticketing would increase bus use and a 2009 Department for Transport report found it may even reduce demand. Previous research for Nexus by consultants MVA “consistently found that ticketing was not a priority for bus users”.

There was also limited evidence for Nexus claims that a customer charter would lead to increased bus use. Removing the unfounded uplift from these elements from the Nexus model reduced the alleged financial benefit of a QCS by nearly 40%, which amounts to at least £310 million.

Oxera - which has advised companies, government departments, competition authorities and regulators across the world - concluded that “in deriving its model Nexus appears to have made assumptions about inputs and the outcomes of different interventions that are not adequately supported by the evidence available.”

It adds that “given the feedback effects in the model, this may have significant impacts on outcomes. In light of this, the evidence presented by Nexus thus far to suggest that the proposed QC scheme would indeed lead to net welfare gains needs to be treated with caution.”

Commissioned by Stagecoach, the Oxera report was delivered to Nexus yesterday in response to its proposals.

Stagecoach North East Managing Director Phil Medlicott said: “This independent report exposes the multi-million-pound black hole in the Nexus plan. It is based on false assumptions, unproven claims, and unsupported numbers. The QCS plans just don’t stack up.

“Elected members are being misled by officials at Nexus into taking a disastrous decision they will live to regret. Why destroy a bus system delivering high satisfaction for a flawed experiment with worse service to passengers? Make no mistake: these plans would be bad news for passengers, taxpayers and local communities across Tyne and Wear.”

The Oxera report also found:
• Nexus presented no evidence that the actions of bus operators were resulting in a decline in passenger numbers in the North-east
• Other possible explanations of patronage reduction in the North East were not considered by Nexus, such as the relationship between increasing car ownership and falls in bus use, and the expansion of the Metro system.
• Bus use in the North-east is increasing – up from 129.3m in 2005-06 to 140m in 2011-12 according to Nexus’s own draft bus strategy.
• Bus operator costs have risen “considerably faster than inflation” over the eight year period from 2004-11.
• Lower public sector support for buses in metropolitan areas compared to London. Total public support per passenger journey in London is 29.6p compared to 22.2p in metropolitan areas – a difference of a third.

"Overall, therefore, the evidence put forward by Nexus as a background to the proposed QC does not appear to provide sufficient support for the proposition that any potential problems in the bus market in the Tyne and Wear area can be addressed by a QC,” Oxera said.

“In particular, Nexus has not examined in sufficient depth the reasons behind the trends in the bus market in the north-east of England; nor has it set out how a franchising model might have addressed the problems that have occurred.”

Nexus is pursuing the expensive and bureaucratic QCS plans despite independent research by Passenger Focus that the North-east has the highest bus passenger satisfaction in the country at 91%.

Bus operators in Tyne and Wear have instead called for a partnership between the region’s transport authority and operators, to further improve the high standard of services in the area.