MR MOIR LOCKHEAD, MR KEITH COCHRANE AND MR STEVE CLAYTON

WEDNESDAY 8 MAY 2002

  80. Would you welcome the—
  (Mr Lockhead) Quality partnerships, yes, we would.

  81. Not contracts?
  (Mr Lockhead) Not contracts. We do not think contracts help the process of getting buses through the traffic. They do not help.

  82. So you do not mind giving undertakings, you just do not want to be held to them?
  (Mr Lockhead) No. Listen, the Traffic Commissioners have set standards. Our objective is to move to those standards. It is a question of how long it is going to take to do that. We are now using GPS systems to monitor the performance of our buses—I have to tell you that the standards that apply in London are much lower than the standards the Traffic Commissioners have set outside of London. We do not understand that. What we would like to do is have a set of rules that we can grow towards—and you are right, we all want to provide better services.

  83. Why can there not be better cooperation between different companies in linked services, for example, transport to hospitals?
  (Mr Clayton) The problem of coordination between businesses is a matter which is still—it is covered by the Competition Act and it is one of the areas where perhaps the Competition Act gets in the way of what we might otherwise like to do. Speaking personally, if there are two buses an hour running to a hospital, I would far rather one went on the hour and the other at half past the hour, because that would seem to me to be a more sensible approach for people, rather than have the two go together. So that is an issue where the Competition law gets in our way because it is market sharing.

  84. Has there been a specific ruling that the Competition law will prevent that happening, or is that an assumption you have made?
  (Mr Lockhead) We are making good progress with the Office of Fair Trading, I have to say. The block exemption—

  85. Has there been a ruling that you are not allowed to do that?
  (Mr Lockhead) No, there has not. They look at every case.

  86. So it is an assumption, then?
  (Mr Cochrane) I think it just the general principles of Competition law that have been developed over the years.
  (Mr Lockhead) As long as it is not market sharing, and it offers a barrier to new competition, then the OFT look at it on the basis of value of integration. It is where they believe that it might be market sharing. We have to avoid that.

  87. Yes, but why have you not tried to do that? We have information that that would not be against Competition law. You have told me that you have not had any specific rulings that you cannot do that. Why, then, do you not try to make life better for the passenger?
  (Mr Lockhead) We do. We look to the OFT to give us coordinated timetabling, joint ticketing, interchange of ticketing, transfer tickets between rail and bus—the whole concept of integration is based on that. The OFT are now seeing the benefit of that. But we have to comply with Competition law.

  88. Yes, but if Competition law did not impede it, you would then be willing to work together?
  (Mr Lockhead) We would do it, and are doing it.

  89. Are you having any difficulties with the competition in relation to travelcards and other tickets?
  (Mr Clayton) There is an ongoing dialogue with the OFT at the current time about Ticket Block Exemption. Good progress is being made, but I do not think we are finally there yet. Of the Draft Guidance that has been issued, I think there is an acknowledgment that it needs to be a lot simpler so that we can understand it, because the easier it is to understand, the more likely we are to apply the Guidance, because if in doubt, we will do nowt.

  90. Have you attempted to do things that you have been stopped from doing, or again, are you assuming that there would be a problem?
  (Mr Lockhead) We had a classic case in East Anglia where we did something and the OFT said, "You cannot do that", and they went and looked at it and are still working on how they can approve it, because they know that it is the right thing, but they have to find a mechanism of doing it that does not fall foul of the Competition law. What I am saying is that we are getting better cooperation now than we have ever had, and everyone, I think, wants to achieve integration. We want to find the best way of doing that.

  91. What about value for the £300 million Bus Operator's Grant? Do the travelling public get good value from that?
  (Mr Cochrane) I think you are referring to Fuel Duty Rebate.

  92. Yes, now called Bus Operator's Grant.
  (Mr Cochrane) I would call it Fuel Duty Rebate.
  (Mr Lockhead) It is tax relief. That is what it is.

  93. Does the travelling public get good value from it?
  (Mr Lockhead) Yes, they do. Would we say anything else? Of course they do.

  94. It has been suggested that the public do not get good value for it, and that it should be linked much more closely to performance targets. What do you say to that?
  (Mr Cochrane) As I said earlier, Fuel Duty Rebate is an important—it is paid on a "per mile" basis, so all our passengers benefit from that in terms of enabling us to sustain fair levels and an attractive a figure as possible, so from that perspective, everyone does benefit from that.

  95. The point that Mrs Ellman is making is would they not get better values, even compared with that, if it was tied to performance levels? If you did not deliver, you would not get the fuel rebate. It is not a complicated theory. Treasuries can work it out without any trouble at all.
  (Mr Lockhead) It is not complicated and the measure is mileage. So you have a very clear measure: you go in, you audit the mileage, that is the mileage you are paying for. If the bus runs, we get the relief; if it does not run, we do not get the relief.

  96. So you could say that it is actually encouraging you to do extra miles, which might have an environmental cost?
  (Mr Lockhead) It encourages us to provide frequent services. That is what it encourages us to do.

  97. Suppose it was decided to make the payment of that money dependent on, let us say, the quality of your fleet; would you oppose that?
  (Mr Clayton) It is now. The Traffic Commissioner has within their powers to levy fines and withdraw the Fuel Duty Rebate if we fail to meet their targets for reliability, and you may be aware that the bus company that we operate in the North West has just had such a fine levied on it.

  98. On how many occasions have there been fines levied?
  (Mr Clayton) I might say too often.

  99. How often is too often?
  (Mr Clayton) In the last year, we have had three, the last of which was for £150,000, so it is not insignificant and it grasps our attention.