07 January 2011

The free bus pass explained

Spotted this on North Somerset Coaches Facebook page and feel that it deserves as wide an audience as possible!. A great little 'story' that explains all that is wrong with the free bus pass scheme:

Now, a little story... hope you are sitting comfortably! (This is pure fantasy but bear with us...)
The government decides bread should be free to the elderly. They design a complex formula using "base line data" based on how much bread is sold now to the elderly.
Each council uses the government computer spreadsheet to work out the average sale price of all the loaves actually sold by each shop, of all types and sizes, and this then decides from the "base line pre-scheme data" what percentage of the average sale price should be the repayment amount to each shopkeeper for the free loaves. This annually-fixed amount of money then paid for each loaf of any type or size given away.
The theory goes that shops should be no better or worse off than if there was no free bread scheme, so because more people will take free bread, because it is free, the total amount of money the shop receives should stay the same in real terms...(a shop selling 100 loaves a day before it was free and then "sells" 200 after the free bread scheme, as a mixture of free and paid-for bread, should still only receive the same amount of money as if they had sold 100 for "real money".)
By law the shopkeepers all have to give away all their bread to "free bread card" holders but only after 9am when it is a bit quieter, but they will only be paid their individual set amount described above - no matter what type of bread they give away, how much it would cost a "fare paying shopper" or what it cost to make/distribute/store/sell.
In some areas councils go one step further and average out every shop in their area, and this means the corner shop also has to give its bread away for the same reimbursement as Tesco, despite having totally different costs. The village baker also has to give away his super-special £1.99 loaf, for the same reimbursement rate per loaf as the Tesco Value 5p loaf.
Carry this on further, next year even more people are claiming their free bread, so the percentage of the average sale price goes down to stop the shops making any money. Eventually it costs more to make and stock because shelves are full of bread that will be given away free for next-to-no reimbursement.
Now the finishing touch... Tesco in Yorkshire, or Torquay, or Gloucester will all receive wildly different amounts of repayment because of the different figures used by their individual local authorities on the input side of the spreadsheet.
Doesn't that all sound crazy? Well thats exactly how it works for bus passes - bus companies forced by law to give their "product" away free for a repayment amount that has no relevance to the cost of providing that product - and indeed have no say WHATSOEVER in how much they are paid.
And what makes it all so very sad? We are all trying to get more people using buses and to impove Public Transport.

The full article - with lots of interesting comments on North Somerset Coaches Facebook


  1. North Somerset Coaches is quite right. When the government starts to run out of money (shurely shome mishtake), it unilaterally decreases the amount the baker is paid for baking the bread, regardless of his costs. And then what will happen is that the shop will shut, and pensioners won't be able to get any bread at all. A well intentioned policy appallingly implemented. Contact your council and ask them how much less they intend to pay for concessionary travel, and what they think the bus companies will then do.

  2. It's a good analogy, the one big difference being that most shops (not so bakeries) sell a lot of other lines which are not given away free by law. Bus companies don't have that product mix offset losses on the sale of bread.

  3. The major difference of course between bread and bus services, is that to produce 200 loaves of bread rather than 100, a bakery will incur many additional variable costs (extra ingredients, labour, electricity, etc.) - so a free bread scheme based on keeping total revenue the same as it would have been without the scheme would clearly be unreasonable, as costs would rise substantially. Whereas for a bus operator, the additional cost incurred in allowing extra free passholders to occupy seats that would otherwise be empty is virtually nil.

    So the analogy really isn't a valid one.

    That said, I don't deny that the rather crude and broad-brush implementation of the current scheme is short-changing certain operators and jeopardising certain routes.

  4. Well unless there is some untruth’s being told, my understanding is that this "fictitious scenario" was the basis for First's reason why the Plymouth to Wembury bus service was no longer commercially viable.

  5. Surely if pensioners were paid enough in their pension, to buy their own bread when and how they wanted, there would not be a problem to begin with!!!


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