1. Do you agree with the Commission that there is an urgent need to replace Regulation (EEC) 1191/69?
The organisation of public passenger transport provision has changed radically since 1969. Transport operation generally has increasingly moved out of the public sector and into the charge of private sector operators, a number of whom have developed their interests internationally. The existing Regulation 1191/69, as amended by 1893/91, which governs the way in which member states currently procure public services in transport by road, rail and inland waterway reflects the circumstances of an earlier stage in the evolution of the European transport market and of the attitude of European institutions to the provision of services of general economic interest, including public service. Public service obligations in the transport sector are defined by Article 2(1) of Regulation (EEC) 1191/69 as “obligations which the transport undertaking in question, if it were considering its own commercial interests, would not assume or would not assume to the same extent or under the same conditions”. In other words they arise when an intervention is made by the state in order to redress market failure and almost always involve a distortion in the operation of the free market as a consequence. The Nice Declaration of 2000, in stressing the importance of such services, anticipated the need for a clarification of the rules on State aid and the compatibility of aid designed to offset the extra costs incurred in performing them.
2. In addition to the need to adapt Community acquis to the demands of changing organisation, the case for a new Regulation can be made on a number of other counts.
First, it can be argued that there is an urgent need to modernise public transport and to increase its efficiency in order to maintain or even increase its market share; the Commission believes that there is sufficient evidence to show that this is best achieved by “regulated competition” of the sort practiced by Transport for London.
The Commission points to increased passenger numbers and reduced costs. It contrasts this with the more deregulated arrangements typically applied in the British bus industry outside London, which the Commission notes are associated with reduced passenger numbers as well as reduced costs. Secondly, the Commission has noted the emergence of an international market for the provision of public transport services in a number of member states.
For example, Arriva provides public passenger transport services in Denmark, the Netherlands, Germany, Italy, Spain, Sweden and Portugal as well as in Britain. The Commission is keen to encourage the further development of a competitive European market which it believes would lead to more efficient and attractive services for passengers. The Commission argues that a Community-wide regulatory framework is required that is transparent and non-discriminatory. It considers that the benefits of “regulated competition” are best secured through competitive tendering and periodic review of contract terms. Thirdly, the judgement of the European Court of First Instance in the Altmark case two years ago reinforced the urgent need to overcome procedural difficulties arising from the general restrictions on State aids under the Treaty of Rome. These seem compelling arguments for the replacement of 1191/69 with a Regulation that is attuned to current needs.
3. Do you believe the Commission’s proposal if adopted as drafted would provide legal certainty for authorities and operators and sufficiently strengthen transparency and fairness?
It is useful to respond to this question by first setting it in the context of users’ concerns. Research carried out in 2005 for the Rail Passengers’ Council on passengers expectations and priorities for improvements to rail journeys appears to reinforce the view that value for money is an area requiring improvement and that expectations immediately prior to a trip are generally lower than the level generated by actual performance. This would appear to suggest the need to address, amongst other things, the continuing need to control costs and to provide consumers with a service offering that raises rather than depresses expectations.
If these can be regarded as over-arching priorities from a consumer perspective it is fair to assess the Commission’s proposal by asking, “Is it more likely to contribute to delivering better value for money?” and “Will it produce a public passenger service that improves both the expectations and the perceptions of passengers?” British experience, supported by data collected in the context of the Commission’s on-going Rail Market Monitoring Study, seems to reinforce the view that “regulated competition” results in services that are more efficient and attractive for passengers (within the constraint of infrastructure limitations, for which solutions appear unsuited to the operation of market disciplines).
4. The Commission’s current proposals for a Regulation have the potential to result in delivery of a distinctly uneven patchwork of arrangements. As a general principle, the pressure to deliver arrangements that are transparent and/or fair will be offset by provisions allowing authorities to retain the selective right not to be required to tender services requiring financial support or exclusive rights. The ability for authorities effectively to opt-out of the processes requiring transparency would appear to be in conflict with the principles of market liberalisation and is likely to engender expectations of malpractice and deceit. It certainly blunts the competitive disciplines that favour attempts to deliver services that are both more efficient and more attractive.
5. On a practical level, there is a danger that the list of exceptions to the obligation to put public service contracts out to competitive tender will reinforce characteristics in transport organisation that frequently disadvantage the consumer. The proposed Regulation indicates (Article 5..2) that, where a contract is awarded directly to an internal operator, there will be no need to go to competitive tender as long as they perform all their public passenger transport activity within the territory of the authority. This is the sort of condition that results in service routes terminating at an administrative boundary, with provision determined by the activities of the Boundary Commissioners rather than the access needs of the communities whose local taxation is likely to be contributing to the cost of such services.
6. Likewise, it is hard to see how the exemption in relation to tendering available (Article 5.6) to authorities for subsidised regional or long-distance rail services sits easily with the intentions of the Third Railway Package announced in 2004, in particular those parts dealing with the proposed opening of the market for international passenger transport. A liberalised international operator, with the right to pick up or set down passengers at any stations on a route (cabotage) could face unfair competition from an exempted service provided by an internal operator, where costs are not transparent and relationships are not self-evidently at arms’ length.
7. A further concern is that the right to award public service contracts directly without invitation to tender makes it more difficult for stakeholders, including users and their representatives, to participate in determining the level of service required. Indeed, given the EU’s reinforced commitment to adequate consumer representation and the prominent reassertion in its Transport White Paper of its commitment to “putting users’ at the heart of Europe’s transport network” it is odd that the draft Regulation makes no mention of a general obligation to consult users and potential users in preparing an invitation to tender. (This process has worked to the advantage of all in the context of the rail re-franchising process in Britain and it is worth noting the Commission’s own research, reflected in Eurobarometer 59.2 of 2003 that reported that, in EU-15, 70% of the population believed that “If safety standards are observed, competition is the best way of improving the efficiency of rail transport”.)
8. The draft Regulation seems to reflect a rather unbalanced view of intervention. Article 1.1 describes its purpose as being “to guarantee the provision of services of general interest which are, among other things, are more numerous, safer, of a higher quality or at a lower cost than those that mere market forces would have allowed”. While it is likely to be true that, in a number of circumstances, intervention will be required to overcome market failure it is also true that competition can be vital to innovation and ensuring a return to efficiency. (This, after all, is the rationale of the bulk of EU policy activity outside the agricultural sector.)
9. Do you agree that, on subsidiarity grounds, authorities should be free to provide services themselves or award contracts directly to internal operators?
For the reasons outlined above it is hard to see how such exemptions sit easily with the interests of users or of achieving greater efficiency or more attractive services.
10. Do you agree that, on subsidiarity grounds, authorities should be free to award relatively small contracts directly to operators?
It clearly makes sense, in terms of proportionality, for certain small contracts to be awarded without the need to engage in the full tendering process. However, where this happens, there should be provision for prior consultation with stakeholders and users together with adequate and transparent monitoring provision of delivery. There should be some provision for any such award to be called in for review, both on a random sampling basis and where there may be reasonable suspicion of dealing that is not in the public interest. While the suggested cut-off levels of €1m or 300,000 kilometres may be appropriate for most rail-service contracts, these limits would exempt significant amounts of bus service provision and the cut offs should be reviewed.
11. Do you agree that, on subsidiarity grounds, authorities should be free to award contracts for regional and long-distance operators?
For the reasons outlined above, there are clearly circumstances where this could result in significant distortion of competition. It is also hard to see the equity in extending this provision to rail operators when it is likely to be denied to regional and long-distance bus and coach operators, some of which may deliver vital access to and from settlements in remoter parts of the country (e.g., the National Express Coach services from Cornwall to other parts of the UK, which also serve as registered stage services on the Cornish part of the route).
Christopher Irwin 11012006