Department for Transport

Concessionary Travel Division Department for Transport Zone 3/11

Great Minster House 76 Marsham Street

London

SW1 P 4DR

9.11.09

Dear Mr Billington,

Thank you for your letter of 3 October to Paul Clark MP regarding bus operators issuing tickets for longer journeys than those made by passengers under the concessionary travel scheme in Lancashire. Your correspondence has been forwarded to the Concessionary Travel Division of the Department and I have been asked to reply.

You referred to the debate in Parliament on 6 May at which Paul Clark, at that time Minister responsible for concessionary travel, spoke about funding and reimbursement. As Mr Clark stated during the debate, the reimbursement process is complicated. He pointed out that the most important element of reimbursement is the calculation of lost revenue based on the average fare that each concessionary passenger would have paid if there had been no scheme in place. The Department for Transport's reimbursement guidance advises that the average fare should be based on a basket of fares, taking into account commercially discounted and multi-journey tickets which would have been purchased by concessionaires in the absence of the free off-peak travel scheme. Operators should be left no better off and no worse off as a result of providing concessionary travel.

If local authorities followed the Department's guidance it should not matter what type of ticket is issued to a concessionaire boarding a bus because there should not be a one-to- one relationship between the ticket issued and the amount reimbursed to the operator. It is essential that the starting point of the journey is recorded because that authority is the one which must reimburse the operator. As you point out in your letter, there was concern that in Lancashire the authorities were making reimbursement on the basis of the actual tickets issued rather than an average fare calculation. This method of reimbursement is less accurate than the method set out in the Department's quidance as it is not based on the basket of fares that would have been purchased in the absence of the concessionary travel scheme.

Officials from the Department for Transport were in discussions with their counterparts in the Government Office for the North West regarding reimbursement and funding. OfT officials met local Lancashire Councillors in Preston earlier this year to gain an understanding of the complexity of the Lancashire scheme and to explore possible solutions. The reimbursement rate appeared to have been set too high. A Lancashire representative also attended one of the reimbursement workshops run by the Department. Guidance on reimbursement is currently being updated and it is expected to issue this to local authorities later this month so that they can prepare their reimbursement arrangements for 2010/11.

The bus operator reimbursement rates (1) that Lancashire have been using have been quite high in recent years -74% in 2007/08 and 63% in 2008/09. These would appear to be on the high side given our experience from recent bus operator appeals decisions, where the average rate determined was around 50%. For 2009/10 Lancashire has set a reduced rate of 50%, although we have received appeals from the local bus operators against these reimbursement arrangements and it would therefore not be appropriate for me to comment further on the reimbursement arrangements at this time.

Yours sincerely,

Paul O’Hara

(1) The reimbursement rate is the percentage of the average fare that the bus operator receives for each concessionary trip. For example, a reimbursement rate of 60% implies that 6 out of 10 concessionary journeys would have been made in the absence of the concession. These journeys need to be reimbursed so as to leave the operator 'no better and no worse off.