Reimbursement rates to fall as £10m found to plug budget hole

The Scottish Government has confirmed that it is to cut reimbursement rates to bus operators for their participation in Scotland’s free concessionary bus travel scheme.

Bus operators in Scotland are reimbursed 67% of the adult single fare at present, but this will be cut in two stages to 60% in 2013/14 and 58.1% in 2014/15.

However, the figure for 2013/14 is higher than that planned (60% rather than 58.9%) after talks with operators. In addition, for 2014/15, the concessionary reimbursement budget will be increased by £5m to reach £192m.

Although the headline figures represent a significant cut in current reimbursement rates, the reality is that the cut is in fact much lower as the budget cap for the scheme is regularly reached. This means that the full reimbursement rate is not always paid out in full over the course of the full year.

To try and mitigate this issue, the Scottish Government has also announced that an additional £10m will be pumped into the budget this year as the budget cap for 2012/13 was £187m, but operator claims are expected to surpass £200m.

Without this additional funding, there were increasing concerns that operators would not have been reimbursed at all during March. Transport Scotland has described the move as a “cash injection in March to help with [bus operator] cash flow”.

The new reimbursement rate is based on work by consultants MVA/Minnerva, as well as what the Scottish Government said was “lengthy technical dialogue” with the Confederation of Passenger Transport. CPT in turn appointed consultant Steer Davies Gleave to review the MVA/Minnerva work, which is understood to have originally recommended a reimbursement rate below 50%.

However, there has been a mixed reaction to the news from operators. In a letter to The Herald, Ralph Roberts, the managing director of McGill’s, Scotland’s largest independent operator, warned that the additional £10m in funding would only cover two thirds of the anticipated budget shortfall.

“From a bus operator’s perspective, this isn’t additional money, this is only two-thirds of the money they owe us for free trips that will be made in March of this year anyway,” he wrote.

Roberts praised ministers for listening to the concerns of smaller operators, but warned that any cuts to reimbursement rates would lead to service cuts. “There is no fat to be trimmed off to absorb this cut,” he added.

 

This article appears in the latest issue of Passenger Transport. Click here to subscribe.