Concessionary pass remuneration

[Teapot42]

On another forum a poster has claimed that a bus full of ENCTS holders would be running at a loss.

Is this actually the case? I've read the ENCTS remuneration to operators isn't great, but is it really that low? I have tried googling for information to find out how much operators get but other than a generic formula which means little without context I can't find much info.

As pensioners are more likely to vote you'd have thought the government of the day would make it more viable for operators to run services which appeal to them.

 

[dodecahedron67]

It ranges between about 40-80p per pass scan depending on the issuing council. So yes, it is that bad

 

[Haywain]

I guess that low remuneration per trip has to balanced against the likelihood of making more trips. My bus use has certainly increased with the benefit of having a pass, so my local operators are getting more than they would have done without it.

 

[OptareOlympus]

As mentioned, it can range from pence to £1.30 per scan depending on the area, type of route, reimbursement method being used and generation numbers. Then consider it costs around £50 an hour for a bus to break even and you have the reason for bus service withdrawals. Also bear in mind that operators are not legally allowed to profit from ENCTS as it contravenes state aid laws. Put simply, if in 2006 an operator ran a bus at 0930 which carried 10 concessionary passengers paying half fare and took £25 in revenue, the DfT formulas are designed to ensure that same operator now receives the same (inflation adjusted) concessionary revenue in 2024 even if that 0930 trip now carries 70 ENCTS pass holders. The formulas around generated travel (journeys made only because they are now free) are complex but have to legally ensure that operators are 'no better, no worse off' than had ENCTS not existed. The problem arises when you are carrying 70 ENCTS passengers, not covering break even and have no capacity left to sell to full fare passengers.

 

[TUC]

As mentioned, it can range from pence to £1.30 per scan depending on the area, type of route, reimbursement method being used and generation numbers. Then consider it costs around £50 an hour for a bus to break even and you have the reason for bus service withdrawals. Also bear in mind that operators are not legally allowed to profit from ENCTS as it contravenes state aid laws. Put simply, if in 2006 an operator ran a bus at 0930 which carried 10 concessionary passengers paying half fare and took £25 in revenue, the DfT formulas are designed to ensure that same operator now receives the same (inflation adjusted) concessionary revenue in 2024 even if that 0930 trip now carries 70 ENCTS pass holders. The formulas around generated travel (journeys made only because they are now free) are complex but have to legally ensure that operators are 'no better, no worse off' than had ENCTS not existed. The problem arises when you are carrying 70 ENCTS passengers, not covering break even and have no capacity left to sell to full fare passengers.

Although state aid rules are yet another matter that the UK is not subject to post-Brexit and yet acts as if it is.

 

[Teapot42]

Thanks for the background. It does beg the question whether ENCTS is actually a benefit or not. It might make buses more accessible to the elderly, but if it makes the same buses not viable for an operator then it's not really doing much good.

It might also explain why our local service was cut recently from half-hourly to hourly. Usage was good enough to justify a half hourly or even better service, however we live in an area popular with pensioners and as such they were the dominant users of the service.

How does ENCTS work alongside routes being tendered? I suspect we are reaching the point where our local route will be dropped completely. Halving the frequency has had a massive impact on passenger numbers, especially as local traffic conditions lead to it being unreliable.

 

[OptareOlympus]

How does ENCTS work alongside routes being tendered?

Generally completely separate of each other. Most councils use outside consultants/agencies to manage and calculate their reimbursement/payments.

With regards to tendered routes, most operators now would tender on a 'fixed cost' basis rather than revenue retention. That way the operator would be paid £x amount per day/per annum etc regardless of how many journeys (ENCTS or not) are made during the contract period.

Although state aid rules are yet another matter that the UK is not subject to post-Brexit and yet acts as if it is.

I think we all know that the UK will be re-joining the Single Market at some point and probably sooner rather than later. It might not be called a duck but it'll walk and quack like a duck!

 

[Teapot42]

Generally completely separate of each other. Most councils use outside consultants/agencies to manage and calculate their reimbursement/payments.

With regards to tendered routes, most operators now would tender on a 'fixed cost' basis rather than revenue retention. That way the operator would be paid £x amount per day/per annum etc regardless of how many journeys (ENCTS or not) are made during the contract period.


I think we all know that the UK will be re-joining the Single Market at some point and probably sooner rather than later. It might not be called a duck but it'll walk and quack like a duck!

Sorry, just for my better understanding, does that mean the operator retains any revenue they make on a tendered service (fixed cost) or is it all passed on to the tendering council?

I'm not clear if it means they'll get paid the same regardless, or whether there is an incentive for them to try and improve passenger numbers and therefore increase their income.

Assuming state aid rules remain, is there a solution possible that would permit operators to develop services that primarily meet the needs of pass holders? I guess that is what I was thinking with regard to tendering, whether an operator could forego ENCTS renumeration in exchange for a tender which guaranteed them at least a break even point for a route.

 

[dodecahedron67]

Then consider it costs around £50 an hour for a bus to break even and you have the reason for bus service withdrawals.

£50 an hour is a little outdated. When I moved into planning a couple years ago, we used £85/hr, and now it’s closer to £100/hr!

 

[stevieinselby]

I guess that low remuneration per trip has to balanced against the likelihood of making more trips. My bus use has certainly increased with the benefit of having a pass, so my local operators are getting more than they would have done without it.

The intention when the scheme was introduced was that reimbursements would be calculated so that operators would be "no better off, no worse off" – ie, the money they received from the council to cover journeys made by passholders would equal the lost income from those passengers no longer paying to travel. This meant that, knowing passengers with a free pass would typically make more journeys than they had previously when they had to pay for them, the reimbursement rate was set well below the cash fare.

There have been questions about whether the traffic generation algorithm used has been accurate, with some operators claiming that the number of passengers travelling on a free pass didn't increase as much as predicted and they were worse off as a result. In other cases, the extra traffic led to overcrowding on busy services and calls for an increased frequency or bigger buses, but because the extra passengers weren't resulting in any extra income that was often unaffordable. I've certainly seen reports that full-size buses could be full but still not commercially viable if all passengers were travelling on free passes.

 

[Teapot42]

£50 an hour is a little outdated. When I moved into planning a couple years ago, we used £85/hr, and now it’s closer to £100/hr!

That makes me wonder how many trips in my area off a main corridor can be making any money.

For example, our bus in to town comes out, loops around our estate and goes back in. Takes just under half an hour to do that loop, so needs to take £50 based on your figure. With ENCTS, students and holders of Megariders being significant users of the service (and an E200 being less than half full on a busy journey) there is no way over the course of a day that bus is taking enough to make that sort of money. Now I'd imagine the fact wages here in Derbyshire are likely lower and the buses are 10+ years old will help, but still...

It does make you think though, if someone with a passing interest in the industry doesn't appreciate just how much is costs to run a bus, what do Joe Public think?

 

[stevieinselby]

Sorry, just for my better understanding, does that mean the operator retains any revenue they make on a tendered service (fixed cost) or is it all passed on to the tendering council?

I'm not clear if it means they'll get paid the same regardless, or whether there is an incentive for them to try and improve passenger numbers and therefore increase their income.

With a "revenue retention" contract, the bus company takes money from fares and ENCTS reimbursements, plus a subsidy from the council.
With a "fixed cost" contract, the money from fares goes to the council, and the bus company gets paid a sum to cover the entire operational cost of running the service.
Ostensibly, this looks like it benefits the bus companies, as they are not facing the risk of income falling below predictions, they get paid regardless, and they don't need to go to any great lengths to attract more passengers.
The benefit to the council may be lower overall costs, as operators may accept a lower total income if it's guaranteed rather than padding the bid to cover the risk of income falling, and it also reduces the risk of an operator bailing on a contract if it is unprofitable.

 

[dodecahedron67]

That makes me wonder how many trips in my area off a main corridor can be making any money.

For example, our bus in to town comes out, loops around our estate and goes back in. Takes just under half an hour to do that loop, so needs to take £50 based on your figure. With ENCTS, students and holders of Megariders being significant users of the service (and an E200 being less than half full on a busy journey) there is no way over the course of a day that bus is taking enough to make that sort of money. Now I'd imagine the fact wages here in Derbyshire are likely lower and the buses are 10+ years old will help, but still...

It does make you think though, if someone with a passing interest in the industry doesn't appreciate just how much is costs to run a bus, what do Joe Public think?

For completeness, this is in an area where we have just had a whole fleet replacement with EVs (the £85/hr being pre-fleet renewal), and the driver rate is £14.35/hr, paid clock to clock minus break(s).

Areas with older fleets or lower overall* driver pay may use less than our figure, and similarly areas with higher pay may use a higher figure

*some places may use lower hourly rates but pay their drivers' breaks meaning higher across a day, and some companies (cough Stagecoach cough) may not pay any dead running or stand time but a higher hourly rate

 

[OptareOlympus]

£50 an hour is a little outdated. When I moved into planning a couple years ago, we used £85/hr, and now it’s closer to £100/hr!

Yeah I was going on numbers from around ten years ago. I'm not surprised it's around that level now though with higher wages, fuel, claims and the price of spare parts is ridiculous now. A recent jaw dropper for me was the unit cost of the rocker switch and 2" rubber pipe to adjust the steering reach/rake on a Scania. £185 ex VAT. For a rocker switch. It's no wonder small and medium size operators are calling it a day.

 

[Teapot42]

With a "revenue retention" contract, the bus company takes money from fares and ENCTS reimbursements, plus a subsidy from the council.
With a "fixed cost" contract, the money from fares goes to the council, and the bus company gets paid a sum to cover the entire operational cost of running the service.
Ostensibly, this looks like it benefits the bus companies, as they are not facing the risk of income falling below predictions, they get paid regardless, and they don't need to go to any great lengths to attract more passengers.
The benefit to the council may be lower overall costs, as operators may accept a lower total income if it's guaranteed rather than padding the bid to cover the risk of income falling, and it also reduces the risk of an operator bailing on a contract if it is unprofitable.

Thanks, that makes sense to me now.

One question though, where operators have their own ticketing (day / week / month) that is accepted on a tendered service, how is that taken in to account? It must massively complicate accounting as I'd imagine an operator will set the cost of those tickets where they judge will generate a certain overall amount of revenue, rather than allocating it based on specific journeys taken with the ticket. For the operators I've used such tickets on at best the driver will record one being presented, and often just wave the passenger on. None ask for journey details to be able to equate usage to comparable revenue.

For completeness, this is in an area where we have just had a whole fleet replacement with EVs (the £85/hr being pre-fleet renewal), and the driver rate is £14.35/hr, paid clock to clock minus break(s).

Areas with older fleets or lower overall* driver pay may use less than our figure, and similarly areas with higher pay may use a higher figure

*some places may use lower hourly rates but pay their drivers' breaks meaning higher across a day, and some companies (cough Stagecoach cough) may not pay any dead running or stand time but a higher hourly rate

Our local operator is Stagecoach. That said, they seem to have a different approach to dead running where there is little if any. Instead they schedule a service to get the bus where it needs to be. I'd always assumed this was to do with being able to get fuel duty rebate as it was mileage in service. What doesn't make sense is they often do it with the same timings as the rest of the service rather than the much faster timings they could run where essentially there are no passengers and often at times of day with little traffic.

I wonder how the recent Zebra award will pan out in that regard as fleet with an average age probably exceeding 10 years will suddenly become practically new. (Currently the newest vehicles are 68 plate E400MMCs for an express route, other than that most are in the 59-64 range. A small number of newer E200MMCs are being cascaded)

 

[HullRailMan]

The intention when the scheme was introduced was that reimbursements would be calculated so that operators would be "no better off, no worse off" – ie, the money they received from the council to cover journeys made by passholders would equal the lost income from those passengers no longer paying to travel. This meant that, knowing passengers with a free pass would typically make more journeys than they had previously when they had to pay for them, the reimbursement rate was set well below the cash fare.

There have been questions about whether the traffic generation algorithm used has been accurate, with some operators claiming that the number of passengers travelling on a free pass didn't increase as much as predicted and they were worse off as a result. In other cases, the extra traffic led to overcrowding on busy services and calls for an increased frequency or bigger buses, but because the extra passengers weren't resulting in any extra income that was often unaffordable. I've certainly seen reports that full-size buses could be full but still not commercially viable if all passengers were travelling on free passes.

Surely the most sensible solution would be to means test the bus pass - if ‘free’ tv licence’s can be linked to pension credit eligibility, I see no reason why free bus passes can’t. Other pensioners would then revert back to the half fare bus pass.
Potentially politically challenging in the short term, but better than the system collapsing. If not, the funding needs revising to make it sustainable, but you’re then spending more money on a freebie for reasonable well off pensioners when public funds are tight.

 

[Bletchleyite]

Surely the most sensible solution would be to means test the bus pass - if ‘free’ tv licence’s can be linked to pension credit eligibility, I see no reason why free bus passes can’t. Other pensioners would then revert back to the half fare bus pass.

This completely misses a big part of the point of giving one to everyone. It isn't purely a benefit. It is to encourage people who would never otherwise use buses to do so - on two key grounds - one that you want fewer people driving anyway, particularly when they've got all the time in the world to use a relatively slow bus service, and two that you want to encourage older people in particular to drive less (or even give up driving entirely) as their reactions start to slow and they become more likely to have accidents (and if they do, become more likely to suffer serious and costly-to-treat medical and care needs as a result).

It's certainly worked on my parents, who were otherwise, bar the train into Liverpool, very much wedded to their cars. But in any means tested system wouldn't get one.

If you want to claw back some money from richer pensioners to pay for it, fiddle with the tax system a bit to do so.

The intention when the scheme was introduced was that reimbursements would be calculated so that operators would be "no better off, no worse off" – ie, the money they received from the council to cover journeys made by passholders would equal the lost income from those passengers no longer paying to travel. This meant that, knowing passengers with a free pass would typically make more journeys than they had previously when they had to pay for them, the reimbursement rate was set well below the cash fare.

This has happened to an extent, but it is (the £2 scheme aside) worth noting that anyone who travelled more than a few times a week would typically buy a weekly or monthly pass anyway, which are typically priced far below a return journey per day. Thus if you're going to base it on anything commercial, that would be the thing to use.

 

[Haywain]

If you want to claw back some money from richer pensioners to pay for it, fiddle with the tax system a bit to do so.

I second that.

 

[OptareOlympus]

Data the ONS collected between 2016 and 2018 shows that one in five households (22%) in Great Britain, where the main householder (the person responsible for household finances) is over 65, have a household wealth of over a million pounds.

The data also shows that one in four people aged over 65 (25%) lived in a household with a total wealth of over a million pounds.

So 20-25% of ENCTS passholders have wealth in excess of £1 million. They can enjoy free bus rides when they're on holiday in England, meanwhile college kids pay to get to college.

 

[bakerstreet]

Data the ONS collected between 2016 and 2018 shows that one in five households (22%) in Great Britain, where the main householder (the person responsible for household finances) is over 65, have a household wealth of over a million pounds.

The data also shows that one in four people aged over 65 (25%) lived in a household with a total wealth of over a million pounds.

So 20-25% of ENCTS passholders have wealth in excess of £1 million. They can enjoy free bus rides when they're on holiday in England, meanwhile college kids pay to get to college.

The 1 in 5 “million pounds plus” households are probably in London, Greater London and se England with most of that tied up in their property. They are possibly cash poor in properties they can’t or don’t wish to sell (bc it’s their lifelong home) and have high running costs.
They may have remortgaged to pay for their college kids / grand kids education or first homes.
It is not their fault that the homes they live in, purchased when homes were c. 3 times income, increased almost exponentially in value over the decades.
For transparency I am not in that category nor position, just hypothesising.

 

[TheGrandWazoo]

The 1 in 5 “million pounds plus” households are probably in London, Greater London and se England with most of that tied up in their property. They are possibly cash poor in properties they can’t or don’t wish to sell (bc it’s their lifelong home) and have high running costs.
They may have remortgaged to pay for their college kids / grand kids education or first homes.
It is not their fault that the homes they live in, purchased when homes were c. 3 times income, increased almost exponentially in value over the decades.
For transparency I am not in that category nor position, just hypothesising.

That is a large proportion of it. The definition of net wealth is, in their words, of four main components:

• net property (value of residences minus mortgage debt)
• physical (household contents, vehicles)
• private pension
• net financial (savings or investments minus financial liabilities)

In fact, it is people's pension pots that are part of that so if you have a house worth £500k, and a pension pot of £500k, then you're a millionnaire. That you might be 65 and have a relatively modest home in Dartford, and that pension might have to last for 20+ years....

Perhaps unsurprisingly, those in Southern England enjoyed the highest median wealth, and NE was lowest. Context is everything. I doubt that you're gonna find a pensioner with a million in a macaroon tin under the bed.

 

[markymark2000]

I have tried googling for information to find out how much operators get but other than a generic formula which means little without context I can't find much info.

I've gotten some data from the UK Govts Concessionary Bus Travel Statistics https://www.gov.uk/government/stati...nary-travel-statistics-year-ending-march-2023. To get the best figure, I have had to download the ZIP File on the page and check inside the spreadsheet.

In table BUS08di, Cell G70, it says that in England, excluding London (as London of course works differently and pretty much doesn't affect commercial operators), the average reimbursement is 155p (or £1.55 in normal terms). This is only the average though and as has been highlighted, the numbers can vary massively.


The formula is worked out as no better or worse off and to most LTAs, the formula is linked to the fares charged which means the higher the fare charged, the more reimbursement an operator gets. To give some examples of this in action, there was an article a few years back from the BBC speaking to Craig Temple from ConnexionsBus (https://www.bbc.co.uk/news/uk-england-york-north-yorkshire-63243763)

Craig Temple, managing director of Connexions, said cutting the route "is not something we want to do".
"We have run the service at a loss for a number of years, but we are trying to serve the community we are based in," he said.
"It's one of the biggest villages around, it deserves a bus service.
"But with increasing costs and a shortage of staff, we have been left with no alternative."
He said concessionary passes have also hit the company's finances, as Connexions gets £1.56 for a return journey between York and Wetherby from a bus pass user, compared to £7.50 for a full fare.

In this example, the pass reimbursement works out as around 21% of the normal full fare. Of course split the £1.56 into 2 as that is quoted for a return journey, Connexions here were getting 78p per pass accepted. Based off the £100 per hour break even mentioned above, that means you need 128 pass holders per hour to make this break even.

 

[OptareOlympus]

The reimbursement calculator is designed to stop operators charging high fares to increase their average fare forgone. There is a formula that is applied that implies the higher the adult fare, the less likely pass holders would have been to use the bus in the absence of ENCTS. The calculator therefore reduces the reimbursement yet again.

The entire scheme should be unlawful. It prevents from private business from making a profit. How would shops survive if the government suddenly legislated that everyone over 60 (as ENCTS originally was) could have free milk and bread and the shops would receive 20% of the cost of sales?

 

[Dai Corner]

The reimbursement calculator is designed to stop operators charging high fares to increase their average fare forgone. There is a formula that is applied that implies the higher the adult fare, the less likely pass holders would have been to use the bus in the absence of ENCTS. The calculator therefore reduces the reimbursement yet again.

The entire scheme should be unlawful. It prevents from private business from making a profit. How would shops survive if the government suddenly legislated that everyone over 60 (as ENCTS originally was) could have free milk and bread and the shops would receive 20% of the cost of sales?

The difference being that the marginal cost of carrying an ENCTS passenger is approximately zero but that of supplying a bottle of milk or loaf of bread isn't.


A better analogy might be shops receiving the wholesale price they paid for the goods. The possibility of customers coming in for their free milk and bread buying something else roughly compensating for the shop's overheads so they made neither a profit nor a loss.

 

[Haywain]

The entire scheme should be unlawful. It prevents from private business from making a profit.

If we are going to argue that private businesses are prevented from making a profit we should remove all subsidies as well, and see how they manage then.

 

[Leedsbusman]

If we are going to argue that private businesses are prevented from making a profit we should remove all subsidies as well, and see how they manage then.

I’m sure the bus operators would manage fine without subsidy. The customers faced with fewer and less frequent buses and much higher fares would manage less well.

 

[OptareOlympus]

If we are going to argue that private businesses are prevented from making a profit we should remove all subsidies as well, and see how they manage then.

I couldn't agree more. Let's be clear though, ENCTS is not a subsidy, it's legally prevented from being so. The only subsidy is BSOG (Bus Service Operators Grant).

The difference being that the marginal cost of carrying an ENCTS passenger is approximately zero but that of supplying a bottle of milk or loaf of bread isn't.


A better analogy might be shops receiving the wholesale price they paid for the goods. The possibility of customers coming in for their free milk and bread buying something else roughly compensating for the shop's overheads so they made neither a profit nor a loss.

The marginal cost is not zero though if a pass holder worth 83p is occupying a seat that could have been sold for £7. That's a direct loss to the business of £6.17. And before anybody says that is an unrealistic scenario, pay a visit to Dorset, Cornwall or other tourist areas where full fare paying passengers are left at stops by buses full of ENCTS passengers.

 

[computerSaysNo]

Is the payment for the under 22 scheme in Scotland the same as for the ENCTS scheme?
And do bus operators legally have to accept passes, or can they opt out?

 

[OptareOlympus]

Is the payment for the under 22 scheme in Scotland the same as for the ENCTS scheme?
And do bus operators legally have to accept passes, or can they opt out?

ENCTS is mandatory for registered services. There are a few exceptions, for eg, sightseeing tours, registered sections of express services and routes that include an element other than the bus journey.

 

[Stan Drews]

Is the payment for the under 22 scheme in Scotland the same as for the ENCTS scheme?
And do bus operators legally have to accept passes, or can they opt out?

In Scotland the three National Entitlement Card schemes have different reimbursement rates. The other main difference from England is that it is managed by Transport Scotland nationally, rather than by individual local authorities.