Under the Scotland-wide Older and Disabled Persons Concessionary Bus Scheme, qualified Scottish residents may travel anywhere in Scotland at any time on local buses at no charge. Transport Scotland is responsible for compensating bus operators for carrying these passengers. It has the objective that bus operators should be financially “no better off and no worse off” because of their participation in the scheme, requiring it to identify a “counterfactual” situation against which to measure:
- the revenue that would have been earned by the operator if pass holders were not able to travel for free (“revenue forgone”); and
- any additional costs that the operator might have incurred as a consequence of providing free travel, in particular through carrying passengers who would not otherwise have travelled.
In 2012-13, nearly 150 million free concessionary passenger journeys are expected to be made, at a cost to the Scottish Government (and therefore taxpayers) of £187 million in reimbursement payments under current arrangements.
Concessionary passenger journeys are made, at a cost to the Scottish Government (and therefore taxpayers) in reimbursement payments.
At the time, reimbursement payments were calculated by applying a National Rate to the adult cash single fare that would have been paid for individual concessionary journeys. The National Rate was initially fixed at 73.6% in 2006, but was reduced to 67% with effect from April 2010. However, the budget for the National Concessionary Travel Scheme is capped to £187m in both the 2012-13 and 2013-14 financial years.
Although reimbursement rates were informed by various research studies, Transport Scotland did not have a systematic method for updating the Reimbursement Rate to reflect changes in commercial fares and relevant cost measures. The objective of this study was to provide Transport Scotland with an appropriate mechanism for doing so.
The research recommended that Transport Scotland considers the option of moving away from the use of a single national reimbursement rate to determine the reimbursement payments for individual operators.
The report suggested that operator payments calculated from a single national rate which is the same for all operators gives rise to a number of issues. At the individual operator level, it may not leave each individual bus operator no better off, and no worse off (i.e. some bus operators will be better off, and others will be worse off), even if it satisfies this objective at an All-Scotland, operator-wide level.