Tyne & Wear Quality Contract - Benefits Evaporating

The region’s largest bus operator, Go North East, has questioned the ‘evaporating’ benefits of the proposed bus contract scheme being scrutinised by councillors who vote on 21 October.

 Go Ahead have invested heavily in their North East fleet

Since the scheme was first proposed last year the claimed benefits have already fallen by £40 million and a promise of 18 extra buses has been ‘airbrushed out’ according to Kevin Carr, Go North East managing director.

Kevin Carr said: “We’ve always believed that risks and uncertainties of this unproven proposal were under-estimated, and the benefits would evaporate as reality set in. Just one year on the claimed savings are being scaled back, and the extra buses airbrushed out. Overall, this has effectively taken £40 million of benefits out of the proposed scheme.”

The scheme as first presented in July 2013 promised savings of £7 million a year ,18 extra buses, and that a contingency fund of £78 million would be adequate.

In the revised scheme now being considered by the North East Combined Authority, the annual savings have shrunk from £7 million to just £5 million, the 18 extra buses have been scrapped and the contingency fund has increased to £80 million.

Kevin Carr said: “Benefits for passengers have been revised downwards, too. The claim for fares reductions, described last year as being as much at two and a half per cent, now appear to be around one per cent, but in reality all fares under the scheme would rise by at least 10p a year – far more than recent bus fare rises for most people.

A central government review of grants could further undermine the viability of the scheme, according to Mr Carr.

“Bus operators pointed out that the government is reviewing the benefits that passengers receive through Bus Service Operators’ Grant (BSOG), but the bus contract scheme has ignored this potential risk of a further £100 million ‘hole’ in the scheme.”

“The scheme would also give the Combined Authority unlimited powers to increase fares as often and as high as it might wish and to reduce the number of buses in service by up to ten per cent without renegotiating the scheme contracts.

“The scheme is only feasible if the five local authorities in Tyne and Wear can commit to funding it to the tune of £51.2 million a year, as well as underwriting the potential loss of BSOG of up to £10.1 million annually.”

Mr Carr said: “Despite Nexus’ claims to the contrary, the contract scheme creates new risks for our cash-strapped local councils, with no certainty of protecting Tyne and Wear’s bus system.”

Focus Comment Large sums of public money have been spent on efforts to justify this scheme. A scheme originally intended to deal with areas that had failing bus operators - certainly not the case in Tyne & Wear where passenger satisfaction figures are on a high and massive investments have taken place in fleet renewal. 

 Go Ahead, Stagecoach & Arriva all operate in the Tyne &
 Wear area. They would loose the right to run services if the 
Quality Contract went ahead. The matter would almost
certainly end up in the courts if the scheme is voted for.

According to media reports facts and figures have been distorted in an effort to mislead the local councillors who will make the decision whether to go ahead with the Quality Contract scheme. 
Speculation is that it is also an attempt to prop up the Tyne & Wear Metro which absorbs large to sums of public subsidy and cannot compete with the excellent local bus network.
If control of buses passed to local authority the bus fares and routes could be 'tweaked' to make the Metro more attractive to passengers taking away choice and competitive bus fares at a stroke. 
There is also the very realistic threat of Nexus and the local authorities being taken to court over the matter. This would be a similar scenario to that of the DfT being taken to court over the West Coast Rail franchise fiasco. We understand the same lawyers are on hand to take up the case!