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Sharing the risks could be the way to a thriving bus service; WALESINMOTION WITH PROFESSOR STUART COLE.

THE mainly privately owned British bus industry is facing a financial crisis on many fronts.

At a meeting with Dr Vince Cable, the UK Secretary of State for Business in Cardiff earlier this year I expressed my concern about the tax position of hundreds of small transport operators in Wales. They are registered for VAT and duly pay their taxes to HM Revenue & Customs but many are microbusinesses (with one to three buses and under nine employees) who find the limited company processes too complex. The tax on profits for such operators are at the personal income tax rates and therefore considerably higher than corporation tax. Consequently these companies have less post-tax revenue and financial opportunity to develop the business.

How might this be alleviated, was my question to Dr Cable.

All governments are keen to support the SME (small and medium sized enterprise) sector but the Federation of Small Businesses in Wales is suggesting that micro-businesses should receive special consideration from banks and the Government.

Taxation and rising fuel costs are not the only financial problem facing bus companies. The grant funding for loss making but socially necessary services is facing a crisis also. The Welsh Government, following the cut in its block grant from Westminster, is having to spread the pain of the public sector cutbacks.

But are there other answers to overcome this reduced income from revenue support? There are options here for an incentive-based revenue support system for bus companies where a mix of profitable and less profitable services packaged together might become the basis for financial support. Such jointly aligned incentives allow benefits and risks to be shared between public authorities and bus operators.

A newly available statutory framework called Quality Bus Contracts will, according to a West Yorkshire Passenger Transport Executive report, bring considerable benefits from integrated ticketing, with better reliability, market and network stability, a clear and stable pricing structure and public sector provision of route infrastructure such as bus stop information and bus priority schemes.

This will lead to increased passenger numbers and enhance the revenue stream of bus operators of all sizes.

British bus companies have long campaigned against a London-style franchising system which exists in many European city regions and on Britain's railways.

West Yorkshire PTE have made the point that bus companies perceive the change as a threat but with declining patronage and passenger dissatisfaction with some, though by no means all services, quality has to be a key answer.

Many small and mediumsized companies however see this form of supply side competition for service provision as providing them with a guaranteed cash inflow for a high proportion of their revenue. Even with the harsh realities of public sector expenditure cuts changing this balance, revenue flows can be protected through expansion of the bus market.

The rail companies are increasing their passenger numbers by 8% per annum. The Bwcabus operations in parts of rural Wales increased demand by 40% through significantly improved frequency and reliability but with little change in revenue support per passenger.

Those bus companies' subsidiaries, where the return on turnover has fallen from 15% to 10% are not making the returns expected of them. Consequently they have to reduce costs, increase revenue but at the same time maintain service quality.

Few businesses would dispute those actions and a key move now is to create an alliance between bus companies and public authorities to work for the passengers' benefit.| Professor Stuart Cole is Emeritus Professor of Transport, Wales Transport Research Centre, University of Glamorgan


| A key move now is to create an alliance between bus companies and public authorities, says Stuart Cole
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Title Annotation:Business
Publication:Western Mail (Cardiff, Wales)
Geographic Code:4EUUK
Date:Oct 3, 2012
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