Bustitution: how rail companies enhance their profits

Being a former railway worker and knowing how sometimes there is a need to put on a bus instead of a train at a time of service disruption, I was surprised to hear how some rail companies had been making claims under the Bus Service Obligation Grant.

Here’s a history lesson. One of the effects of rail privatisation was that those well known – and some not so well known – company logos that appeared on the side of buses in High Streets up and down the country suddenly started turning up on the sides of trains.

In common with many other people, I thought a company that ran trains was a rail company – or to be more precise, a train operating company (TOC). The fact that most of the owning parent groups of train operators also run bus companies should have made us all wake up to what might be.

After all, there is a lot of logic for a parent company that owns a TOC and a bus operator to make the organisations work together for their mutual benefit – and may be even the benefit of the passenger.

For instance, where I live, you get off a First run train to get on a First operated bus. This almost sounds like an attempt at integrated transport although often there is a ‘disconnect’ between the different arms of the business unless it is to the financial advantage of one or both – and of course provided somebody wakes up to that fact.

The Telegraph, however, has reported that what has been happening in some companies is that when a train is replaced by a bus, perhaps because of an emergency or due to weekend engineering works, the same group’s local bus company has provided the replacement bus.

Isn’t that okay? I hear you say.

Well, yes, but not when the bus company then goes onto make a claim under the Bus Service Obligation Grant (BSOG) to run the replacement buses when the TOC has already been compensated by Network Rail for the lost rail service.

And in case you don’t know what the BSOG is, it is intended to help bus companies operating certain local services to keep their fares down and increase the number of services they can run by being able to claim a rebate on the fuel they use.

But neither emergency nor planned rail replacement services are local bus services in the true sense as the public will be unaware that rail replacement services are running unless they were intending to travel by train in the first instance. So, someone wanting to catch a bus wouldn’t be able to use a rail replacement service.

Never mind that technicality, here is the evidence from the DfT of what has been going on:

•  First Group’s specialist rail replacement bus company received £2.5m for running replacement buses in three years;
•  Stagecoach received more than £74,000 in six months ending September 2009;
•  National Express received £280,000 in 2010 for providing rail replacement buses and coaches.
   

Now, Under Secretary of State for Transport Norman Baker has announced that he will stop this practice, telling the Telegraph:

"Rail replacement services are quite obviously not a local bus service and I am proposing to put a stop to the highly questionable arrangements where some train operators can get paid twice over for running buses that replace their trains.

"When rail passengers buy a ticket they want to get on a train, not a bus. It is crazy for the public purse to subsidise these so-called rail replacement buses.”

He went on: “Network Rail is happy to get possession of the track so they can do work and train operators are happy to receive the grant, the only person who loses out is the passenger. I am not convinced that train companies are doing as much as they can to avoid replacement buses.”

You are left asking – “and why would they try to avoid replacement buses if they can legitimately claim some additional revenue to further increase there already considerable profits?”

But perhaps that is where the whole privately owned rail system is creaking because the provision of a service comes at a price for a commercial company whose priority is making money, not actually providing that service.

Of course, there is a strong moral argument against TOCs, and associated companies, making two claims for the same thing but the strength of that argument depends on your perspective. If capitalism rules for you – then nothing is out of bounds and any way to make money is legitimate whilst cutting your costs.

But if you have higher scruples then you can see this news as nothing more than a cynical exploitation of the system. Are the likes of First, Stagecoach and National Express entitled to two payments under different regimes for the same thing – the only answer has to be “No” – which is why Mr Baker has decided to act.

Perhaps Anthony Smith, the Chief Executive of watchdog Passenger Focus sums it up:

“Great care needs to be taken to ensure that replacement bus services don’t deteriorate as result of any changes to the current system.”

Unless there’s a buck (sorry, pound) to be made, perhaps the TOCs will heed the ATOC spokesperson who said:

“A significant amount of time and effort goes into making sure that disruption for passengers is kept to an absolute minimum during improvement works, including reducing the number of rail replacement buses used as much as possible.”

Then again, may be they won’t – and they certainly won’t if it will cost them.

Tell us what you think.