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4. FUNDING

4.1 This section of the guidance concerns the funding of bus services and infrastructure. Following agreement between the Scottish Government and COSLA on the terms of the Local Government Concordat (see below), certain funding streams were included within the overall financial settlement from the Scottish Government. These include previously ring-fenced funding for the Bus Route Development Grant ( BRDG), the Rural Transport Fund ( RTF) and the Demand Responsive Transport ( DRT) initiative which transferred to local government on 1 April 2008. It is for councils, in line with their Single Outcome Agreements ( SOAs), to decide how they will best allocate their funding according to local priorities.

4.2 Specific guidance has been included here on the impact of the Concordat and the BRDG, the RTF and the DRT schemes. However, beyond certain ongoing commitments, local authorities have discretion on the extent to which they wish to support new funding applications. It should be noted that, in its public transport authority role, SPT generally administers these schemes on behalf of its twelve constituent councils.

Local Government Concordat

4.3 The Local Government Concordat sets out the terms of a new relationship between the Scottish Government and local government based on mutual respect and a partnership approach. The Concordat underpins the funding to be provided to local government over the period 2008-09 to 2010-11. Central to this is the creation of Single Outcome Agreements ( SOAs) between the Scottish Government and individual local councils.

4.4 The National Performance Framework ( NPF) introduced by the Scottish Government as part of the Scottish Budget Spending Review 2007 sets out the Government's purpose and strategic objectives for a better Scotland: Wealthier and Fairer; Smarter; Healthier; Safer and Stronger; and Greener. It also underpins delivery of the Government's objectives and is designed to provide a clear framework for demonstrating performance against the Government's stated objectives. The NPF is supported by a series of 15 National Outcomes and 45 Indicators and Targets.

4.5 In developing their SOAs in line with the National Outcomes, local councils will wish to set out the outcomes which they are seeking to achieve with their community planning partners, and which ought to reflect local needs and priorities, including those for modal shift to more sustainable travel modes.

National Outcomes

4.6 By providing a shared set of policies and priorities we can all work towards, the Concordat gives local government an active role in the delivery of the Scottish Government's National Outcomes. Bus improvement policies fit well with the NPF and it is important that public transport authorities have a good insight in how these policies can be part of SOAs. For example, the policies within the Government's Action Statement for buses produced for the High Level Forum in March 2008 (attached at Annex B) contribute to the following National Outcomes:

• " We realise our full economic potential with more and better employment opportunities";
• " We live in well-designed, sustainable places where we are able to access amenities and services we need";
• "We reduce the local and global environment impact of our consumption and production"; and
• "Our public services are high quality, continually improving, efficient and responsive to local people's needs".

4.7 The National Outcomes do not need to make specific reference to bus to be relevant: for each of those outcomes, it is possible to make links to the policies set out in the Government's Actions Statement. Local bus improvement measures may therefore be similarly highlighted within SOAs as contributing to the National Outcomes. In a wider view, bus can readily be seen as contributing to other National Outcomes, for example in accessing health and education, and for travelling to work.

National Indicators and Targets

4.8 Bus improvement measures also support many of the 45 National Indicators and Targets. Bus improvement measures clearly impact directly on two:

• " reduce the proportion of driver journeys delayed due to traffic congestion"; and
• " increase the proportion of journeys to work made by public or active transport".

As with the National Outcomes, there are obvious direct links, but also many indirect links, where bus can be seen as supporting and underpinning the National Indicators and Targets.

Confederation of Passenger Transport

4.9 At the High Level Bus Forum in March 2008, the Confederation of Passenger Transport ( CPT) tabled a series of Cross Referencing Spreadsheets detailing the ways in which bus improvements contributed to the Scottish Government's National Outcomes, Indicators and Targets. Copies of the Cross Referencing Spreadsheets may be obtained from CPT (see Section 6 for contact information).

4.10 The above comments are offered to public transport authorities as guidance. It will be for each authority to develop its own SOA, taking account of its own bus priorities.

Bus Route Development Grant

4.11 In keeping with the terms of the Local Government Concordat, the funding stream for the former central government BRDG scheme was absorbed into the main local government settlement from 1 April 2008. From that date, public transport authorities have discretion on whether they wish to make use of the BRDG mechanism, bearing in mind the requirements of European State Aid regulations. The following guidance provides an account of how BRDG has been administered by the Scottish Government in the past, and how public transport authorities might wish to use the mechanism in future.

4.12 BRDG is an approved State Aid market intervention measure providing financial support for a maximum period of three years, after which the BRDG supported service had to be self supporting. A public transport authority wishing to continue support to a service for a longer period would have to use other service support mechanisms, e.g. public service contracts ( i.e. tendered services) to do so.

4.13 As public services concession contracts, BRDG proposals should not be tendered. This is because they are contracts where the operator receives only minimum aid and bears the revenue risk of providing the service; in other words, contracts where the operator receives a net subsidy and retains the revenue from the service. Contracts structured in a way that ensures that revenue risk lies with the operator - and where the grant provider has not entered into any other arrangement to protect the operator from revenue risk - are not subject to the normal public service contract rules. (Indeed, if they were to be in future, public transport authorities could potentially face legal challenge for anti-competitive practice as the normal requirements of a public service contract would not be met by a public services concession contract).

4.14 BRDG has been made available to operators which meet the terms of the specified public service obligation ( i.e. the requisite route, frequency, stopping points, capacity, emissions, fares and quality of vehicles, e.g. low floor accessible, engine type, age) and which qualify for the minimum Aid in return for the assumption of the obligation and the associated risks.

4.15 In this context the minimum Aid represents all eligible operating costs (including staff costs, fuel, insurance, vehicle depreciation, marketing, monitoring etc), which may include a reasonable profit, and capital costs (bus infrastructure and priority measures) less revenues relating to the designated services which have been allocated on a reasonable and proportionate basis and taking account of the rates and fares which apply. Revenues, for example, have included passenger revenue, Bus Service Operators Grant, income from Concessionary Fares schemes, schools transport and subsidised services. In the case of enhanced services (as distinct from new services), the minimum Aid has been calculated based on the whole costs and revenues of the enhanced service, and not just the net additional costs and revenues of the service.

Application Process

4.16 As explained above, the processes by which local transport authorities take forward BRDG is a matter for individual public transport authorities to consider. This guidance should be read in that context.

4.17 The requirements of State Aid regulations for transparency and non-discrimination have been met by an open approach to the development of BRDG proposals. Public transport authorities might wish to consult bus operators about possible BRDG initiatives in their area and seek to strengthen the existing commercial bus network. Proposals might be identified in conjunction with bus operators and be set within the context of the local transport strategy for the area.

4.18 To ensure that the requirements of transparency and non-discrimination are met, it is suggested that public transport authorities clearly define the route and frequency of any new or enhanced BRDG supported service. Any element of overlap with existing services might be highlighted and the operators of any affected service within the market (a service which operates within half a mile of the proposed BRDG supported service) might be informed of the proposal. Any comments made by any affected operator might be addressed and remedial action taken where it seems appropriate.

Project Proposals

4.19 Public transport authorities may wish to avoid being too prescriptive about what represents a "proposal". However, it is suggested that in general a proposal might consist of an identifiable bus service(s) or transport corridor where an improved level of service, passenger numbers, quality of vehicles and service, and bus priority measures or other infrastructure will be delivered. BRDG supported services can play a significant role in the development and optimisation of transport infrastructure such as Park & Ride projects, e.g. at Ferrytoll, Ingliston and Sherriffhall.

4.20 Good quality proposals have been defined in the past as those which demonstrate high potential for developing new and under used registered local bus services and scheduled coach services, achieving high levels of passenger growth, greater service frequency and quality, and other significant benefits to passengers.

4.21 Projects have been identified in conjunction with the bus operator(s) who run them, and, consequently, have not needed to be tendered. Where funding is to be offered, the public transport authority might contract with the operator(s) with whom the scheme was developed to ensure Best Value. BRDG support has been operated in a non-discriminatory way. Therefore, if during the period of an approved project, another operator wishes to seek funding for a project in relation to the same service or transport corridor, and it is similar to the approved project, the public transport authority may wish to consider approaching the Scottish Government for guidance on any State Aid issues arising.

4.22 Further guidance on project proposals involving vehicle purchase, project appraisal and project presentation is provided in Annex C.

The former Rural Transport Fund and demand responsive transport initiative

4.23 The funding streams for the former RTF and DRT initiatives were absorbed into the main local government settlement on 1 April 2008

4.24 Thus, from that date, local authorities have discretion on whether they wish to offer funding (and the terms which will apply) to extend existing RTF and DRT projects or to support new funding applicants. However, Scottish Ministers wish to see many more DRT services introduced in the future and have additionally requested local authorities to honour the Scottish Government's funding commitments to Rural Community Transport Initiative ( RCTI) projects over the period 2008-11.

4.25 The RTF was introduced in 1998-99. The scheme's objectives were to improve transport accessibility in rural areas; reduce social exclusion from transport services; and improve connections in remote rural areas.

4.26 DRT can be defined as any form of transport where day to day patterns of service provision can be varied through flexible routing and timetabling in line with users' needs. DRT services offer public transport in areas which would not normally benefit from a regular bus service. Most DRT services tend to occur in rural areas as their relatively low population and remoteness make them unattractive to bus operators looking to run profitable routes. The Scottish Government funded several DRT pilot projects in both rural and urban areas between 2003-06. The more successful projects were given further funding to continue until March 2008. All projects improved accessibility to public transport and social inclusion. For example, Glasgow City Council's DRT pilot project included partnership working with the Greater Glasgow and Clyde Health Board and Community Transport-Glasgow to establish new patient transport and visitor services to local hospitals.

4.27 The RCTI grant scheme was introduced in 1998-99 also as part of the Rural Transport Fund. The scheme's aim was to fund community transport measures which will be of particular help in the more remote areas of Scotland particularly where there are no scheduled bus services or where the services are very limited.

4.28 Following discussion with COSLA, the Scottish Government issued detailed background briefing material on the current funding streams to local authorities in February 2008. This included an overview of the funding streams in use until 31 March 2008 and provided individual local authorities with details of the Scottish Government's ongoing funding commitments to RCTI projects within their areas and a description of the projects by type ( e.g. dial-a-bus, community minibus or car schemes). This briefing material was issued for reference purposes only and, at COSLA's request, the individual local authorities received data that was relevant to them only.

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