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2.0 What is DRT and Where is it Needed?

2.1 Although the concept of day to day transport provision being influenced by the demands of users is relatively simple, fitting this simple concept into public policy is much more complex. To do so requires a systematic examination of:

• Markets for DRT
• Funding sources
• Different types of DRT operation
• Legislation for DRT delivery

2.2 This chapter discusses each of these in turn based mainly on a desk based review but supplemented by data from surveys where appropriate.

Markets for DRT

2.3 Four main markets for DRT define its current delivery:

• Premium value services - These high value services are defined by the need to reduce travel times, receive a higher degree of customer care and are often door-to-door. These have grown significantly for niche markets such as airport transfer services.
• High value to agency services - These are needed where services are tailored to particular needs of public agencies. These include some patient transport, school transport, joblink services.
• High care needs - This market is quite diverse to cater for the different care needs of travellers. It includes services for people with disabilities such as dial-a-eide and some non emergency patient transport, social services transport, and community transport.
• Best value public transport - Where demand is low, greater flexibility in the locations for picking up and dropping off passengers can ensure better value services and wider network coverage. Rural DRT services, sometimes called Ring-and-Ride, are examples of this.

2.4 Figure 2.1 shows that, although distinct markets are identified, there are overlaps, e.g. a best value public transport solution using DRT in a rural area may also allow people with mobility impairments to use public transport supporting the high care needs market. There are no direct overlaps identified between high care needs and premium service markets based on current provision, although a sub-section of the premium service market could potentially involve high care in addition to comfort, travel time and other benefits.

Figure 2.1 Markets for DRT

Premium Service DRT

2.5 These services have shown strengths for commuting, leisure and business related travel. Conventional taxis and private hire vehicles serve relatively stable markets but there may be significant potential for growing shared taxi and taxi-bus service provision. Although reducing cost when compared with single user vehicles defines the shared vehicle market, the overall experience of the traveller needs to be close to that of a single user market, putting speed, convenience and comfort at a premium.

2.6 Recent experiments by the Stagecoach bus company in this market (Stagecoach 2005) have helped to clarify the boundaries and opportunities for further developments in the future. Ingredients for success are:

• Small vehicles, with limited diversions for passengers from the most direct routes ensuring fast journey times.
• High quality / high status image to persuade people that DRT is a viable and attractive alternative to car travel
• Door-to-door a high priority as the deterrence factor of walking and waiting at stops will be significant.

High Value to Agency DRT

2.7 The value of this market is captured where a public agency has particular transport needs which cannot be met by public transport so funds services to meet these specific needs. For example there may well be public transport available from a deprived area to a workplace but 'Joblink' DRT services can provide additional support and assistance which makes it more likely the traveller will attend and retain work. Although the user generally pays a low fare (or sometimes travels for free), for what is usually an expensive service, the value to the sponsoring agency is high because of the opportunity cost that would derive from failure to make the trip. Either the trip meets a statutory duty, or the possible benefits (taking someone off benefit receipt and putting them into tax generating employment) are significant.

2.8 The Scottish Ambulance Service is planning to progressively withdraw from this market to concentrate on high care needs, more closely reflecting its core mission. However this raises questions about how the displaced trips are to be delivered and paid for, if the NHS requires more DRT provision to improve patient attendance levels.

2.9 Many local authority education services are provided within this market. Also many day care, domiciliary and residential service providers rely heavily on DRT to cater for the varied demands of their service users.

High Care Needs DRT

2.10 The personal level of care required by many older people, disabled people and families with young children can often be met better by DRT. These services include those run by CT groups, local authority social services, special needs education, and patient transport services.

2.11 These services are typically delivered by minibus sized vehicles and represent a fast growing market. The moves toward more centralised service provision such as hospitals and supermarkets alongside an increase in care in the community developments as services become less centralised, result in a situation where the optimal vehicle size will be dependent on particular user and provider characteristics and trip needs.

2.12 The health sector is responsible for ensuring that patients generally can access health care and has a statutory responsibility to provide ambulance services, including non-emergency Patient Transport Services ( PTS). In delivering this service, the principle currently applied is that PTS is only provided to those who have a medical need for transport and no other means of travel. Medical need has not however been defined consistently and transport provision has not reflected the needs of patients ( SAS 2001).

2.13 Patient transport is not available to access primary care ( GPs, opticians, dentists, pharmacists) but some health agencies use NHS funds to support public transport ( e.g. as part of a travel plan).

Best Value Public Transport DRT

2.14 In comparison to conventional fixed route bus services, DRT public transport services have the potential to improve network coverage at lower cost in areas of low demand or for users with particularly dispersed mobility needs. In particular, there may be scope for DRT services to reduce costs by replacing conventional fixed route services in areas or times where patronage is low.

2.15 DRT can also improve value from the fixed network by providing feeder services into mainline bus and rail services.

Funding sources for DRT

2.16 Whilst markets and funding sources are closely related it is helpful to look more closely at who pays for what services. This helps to illustrate gaps in provision relative to the marketplace. For example low income groups are amongst the heaviest users of premium services, since they need to rely on them for trips when they have goods to carry e.g. food shopping at the supermarket.

2.17 Table 2.1 shows the range of funding sources being used to provide services in each of the market places.

Table 2.1: Types of DRT and market

2.18 Funding for DRT therefore comes from three main sources:

• Government transport funding - national and local government discharging statutory duties to ensure that transport is available to meet all social and economic needs. This includes concessionary fares and Taxicards which leave the discretion with users about how and when they travel.
• Users - the fares or other funding contributions paid by passengers in line with their use of transport.
• Purchasers acting on behalf of users - usually public bodies such as health or education authorities purchasing transport for students, patients, staff etc. but sometimes commercial companies purchasing services for staff, clients, and visitors.

2.19 Traditional approaches to transport funding have concentrated on the first two of these, but government policy (Audit Commission 2001) is seeking greater integration. Under best practice approaches, the separate public funding sources fund joint delivery of services. The flexibility of DRT services allows them to achieve this integration at the delivery level with each purchaser paying for the services which meet their needs.

2.20 However progress with this integration agenda has been slow. One major problem has been that current funding is not explicitly linked to people's needs ( SEU 2003) but instead to types of service delivery. Clearer accountability for accessibility and best value audits are being used to encourage more rapid change. Nevertheless, delivering better value through joint delivery is complex. Well established staff skills within a single sector ( e.g. patient transport, social work transport, dial-a-ride) have not always been well tailored to joint working. Anomalies in employment conditions between drivers in different sectors have created employee relations problems.

2.21 However despite these problems significant progress has been made in some areas ( DHC 2004). Incremental progress is needed allowing DRT to be progressively integrated into wider provision ( FAMS 2004). The degree of integration possible between the needs of funders of bespoke services and public DRT services will heavily influence the future potential growth of public transport provision by DRT.

Costs of DRT operation in different markets

2.22 Although public DRT services are typically more expensive than conventional fixed route bus services per passenger trip, they are usually far less expensive than bespoke education, social service and health transport services (Enoch et al, 2003). However, this may well reflect lesser provision of care and a reduced requirement for peak provision.

2.23 Information on the costs and subsidies of operating DRT services is different in each market and for each type of service, so comparisons between markets are not straightforward. The factors that need to be included are:

• Vehicle type: Operating and start-up costs vary between the full range of vehicles currently used in DRT operation from taxi-based DRT schemes to large bus operations.
• Staffing levels / requirements: DRT services designed for users with particular needs ( e.g. in the high care needs market) may require drivers to have additional skills, or passenger assistants, increasing the cost of operation
• Technology / Despatch centre costs: The latest IT technology solutions for booking, despatch and vehicle control are both expensive to install and maintain - particularly if in-vehicle technology is used.
• Users: Different users are likely to be associated with particular fare paying levels ( e.g.DRT targeted at commuters (premium services) may charge a premium, those for persons with mobility impairments may be free / concession / low cost) and as a result the target users and their ability to pay will have a direct influence on costs / subsidy / levels of operation.

2.24 Despite these variations it is possible to outline typical costs of DRT systems as shown in Table 2.2. The table uses figures from the Audit Commission (2001), national patient transport modernisation review and other recent research (Enoch et al 2003).

Table 2.2 - Public Subsidy Costs per Trip

2.25 Note that although the averages may come into these cost bands, this covers a wide range of costs even within each grouping. For example, it is sometimes suggested that DRT or dial-a-ride could save the health service money by running PTS because they are cheaper to run than non-emergency ambulance service costs. However the NHS has a statutory duty to ensure a full range of PTS is provided. Consequently, the £10 - £20 PTS cost band reflects a significant amount of low cost provision offset by some extremely expensive provision. Transfer of the lower cost journeys from the Ambulance Service to another provider would not, therefore, necessarily save the NHS money.

2.26 Other problems in making such comparisons are that:

• Radically different approaches are taken to capital and revenue splits, particularly where vehicles are grant aided.
• Inclusiveness - It is not always clear what costs are included e.g. the cost of running a separate Travel Despatch Centre. TDC costs can be a significant proportion of overall service delivery (see Appendix A)
• Costs depend on patronage - Operating costs increase as patronage increases due to the increase in mileage although the relationship is not linear and depends on the diversity of origins and destinations being served. This phenomenon is completely opposite to what happens on fixed services as operating costs are fairly static, irrespective of passenger numbers.

2.27 In practice, service provision needs to be managed within a budget, so the challenge for DRT scheme design is to prioritise needs effectively and maximise provision which is complementary to fixed services.

Operation of DRT

Service, Design and Routing

2.28 Despite the apparent complexity of DRT, all operations can be defined in terms of the routes, stopping points and service types as summarised in Table 2.3 ( SAMPLUS 1999, VIRGIL 2000, INTERMODE 2003).

Table 2.3 DRT Route Options

2.29 For each of the routing options different types of stopping points can be considered including: fixed end points; fixed intermediate points; predefined stopping points to be used on request; and non-predefined stopping points (such as a user's home) again used on request only.

2.30 Many DRT schemes operate as area wide services with few or no defined stopping points, resulting in maximum flexibility ( e.g. most dial-a-ride services). However, in order to ensure particular destinations are served, to link in with other elements of the transport network, or to closely resemble conventional bus services, varying degrees of fixity in route design and stopping points can be applied.

TDCs and DRT operation

2.31 To receive, process and manage passenger requests for travel, DRT services need to be controlled and managed by a travel despatch centre ( TDC). The TDC collates these requests, and other travel information (such as interconnection times), to produce a schedule for the service, and despatches this to the driver prior to (or in more advanced systems through the use of information and communication technologies, during) the journey.

2.32 Travel booking can occur through a range of methods, with telephone, email, web-based, and text message all now possible through the development of new ICTs.

2.33 Table 2.4 sets out the stages in the development of DRTTDC operation ( FAMS, 2004).

Table 2.4 - TDC operation

2.34 Most DRT services are on a small scale or targeted at specific categories of people in the community. As a result, they operate at the basic 'Layer One' category with no or little IT support. Indeed, although there is much discussion in the research literature, and many pilot trials of new IT and communication technologies to operate and schedule DRT services, for many low use operations in rural areas, and specialist services such as home to hospital transport there is no need for high levels of IT support.

2.35 IT and communications technologies only become important when DRT projects begin to involve vehicle brokerage and multiple resource allocation (as identified in 'Layer 3'), route scheduling for large passenger numbers and real-time booking capabilities. The key benefits of using modern ICT systems for DRT services are that higher numbers of journey requests, and short or real time requests can be made direct to vehicles. The software systems manage and process requests, and can stay in communication with vehicles through special on board units using GPS (Global Positioning Systems) and the use of the 'mobile phone' network to transfer data and journey requests.

2.36 This has the potential to create a service that can constantly adapt to the needs of users, and avoids the restrictions placed upon services that have to be booked before the vehicle has left its base. Additional benefits such as route planning assistance through GIS systems, records of journeys, the streamlining of requests from internet, text etc., and the production of reports and invoices are also added benefits to these systems.

Operating considerations and travel needs

2.37 DRT aimed at disabled people or older people is used for multiple trip purposes such as shopping and visiting. They are commonly operated by Community Transport providers or transport operators under contract to the local authority. This type of transport often requires pre-registration (membership), which is determined by criteria such as degree of disability or age, and normally requires advanced booking.

2.38 Non-emergency medical transport and social work transport are both highly specialised forms of transport generally operated by public or quasi-public agencies (or by contractors to them) for specific purposes. These are not freely available to the public and are used to transport clients to/from home to a healthcare or therapeutic site, or between two such sites.

2.39 Commercial DRT (outside conventional taxi use) is more common overseas than in Scotland, but includes airport shuttle services. These have developed in recent years but tend to compete with taxi operators rather than be provided by traditional airport taxi operators. Inter city/rural connection services operated by minibus/van type vehicles ( e.g. in New Zealand and Newfoundland) complement or compete with traditional longer distance bus services and offer both door to door service for users as well as lower operating costs. The South Fife to Edinburgh trial which was run by Stagecoach is the nearest service to this type of market to emerge in Scotland.

Legislation and DRT

2.40 The 1985 Transport Act did not anticipate the development of flexible services, and the regulatory framework primarily depends on the size of vehicle. Consequently there is no single legislative niche for DRT services. Table 2.5 summarises the legislation by DRT market. The legislative provisions used are:

• S19 - Section 19 permits issued under the 1985 Transport Act can be issued to organisations concerned with education, religion, recreation, social welfare and other activities of community benefit but only entitles them to carry a defined population (not the general public). The defined population can include those in a geographical area who do not have access to their own private transport.
• S22 - Section 22 permits issued under the 1985 Transport Act are granted for non-profit groups that use unpaid volunteer drivers, to enable them to operate registered bus services for the public, using a minibus.
• S1(4) car sharing - Section 1(4) of the 1981 Public Passenger Vehicles Act 1981 allows not for profit contributions to vehicle running costs to be accepted by drivers without bringing this within PSV or taxi licensing. This is the legal basis for social car schemes, ambulance car services, some other community transport activities and is the common basis for small vehicle dial-a-ride operations for people with disabilities.
• Taxi and private hire car sharing - Provisions in the Transport Act 1985 allow operators to offer sharing of private hire cars and taxis licensed by local authorities under the Civic Government (Scotland) Act 1982, at the time of advance booking.
• PSV "O" Licence - Public Service Vehicle ( PSV) Operator Licences can be issued to authorise the operation of regular services on fixed routes with flexible sections as well as totally demand responsive services. Less onerous restricted and special restricted licences can be issued to certain minibus and taxi operators.
• Unlicensed operation - this would apply where no charge is made, directly or indirectly, for the service and therefore no 'hire or reward' exists, which is the criterion that triggers regulation under the systems in operation within the UK. In addition, local authorities can use their own school buses to operate 'local services' ( i.e. registered local bus services) without a licence under S46 of the 1981 Public Passenger Vehicles Act 1981.

Table 2.5 - DRT Markets and Legislation

2.41 There are therefore three main legislative options for DRT services:

• Public Service Vehicles ( PSVs)
• Taxis and private hire cars
• Community operations

PSVs

2.42 Route registration can be rather complex due to the huge range of DRT options potentially available to an operator. As a result the registration of services with Traffic Commissioners proved a barrier to the development of DRT in the early years of its growth (Grosso et al, 2002), particularly as a result of differing interpretations of the regulations between different Traffic Area Offices ( TAOs) and Commissioners.

2.43 Public Service Vehicle ( PSV) Operator Licences can be issued to authorise the operation of vehicles of any size (but normally over 8 passenger capacity). Subject to registration of the service, this enables a PSV Operator to run vehicles on regular services with a fixed route and a series of fixed stopping points. However, PSV licences can also be used to operate fixed routes with flexible sections as well as totally demand responsive services. However, at the present time there is no provision for specific registration of demand responsive bus services in Scotland, though these can and have been approved on a case-by-case basis.

Taxis and Hire Cars

2.44 The "taxibus" concept for operating DRT services introduced by the Transport Act 1985 allows a taxi operator, who must be the holder of a Hackney Carriage licence issued by their local authority, to obtain automatically from the Traffic Commissioner a Special Restricted PSV Operator's Licence, which then entitles them to register a local bus service, using their taxi. They must comply with the standard bus service registration requirements but, as with PSV services, this can be specified on a DRT basis.

2.45 Restricted PSV licences enable an organisation which is not primarily a PSV operator to run up to two minibuses without a professionally qualified transport manager. This is mostly used by e.g. hotels to operate shuttle minibuses, but is used by taxi or private hire operators to enable them to operate one or two larger vehicles in their fleet.

2.46 Private hire cars and taxis are subject to local authority licensing under the Civic Government (Scotland) Act 1982 and possibly any relevant local by-laws and regulation. Sharing when booked in advance is allowed for both types of vehicle. This cannot be used to operate a local bus service, but it is the basis for many sharing schemes promoted by local authorities. These services all require advance booking, have a fixed fare schedule, and the local authority makes up the difference between the fare and the mileage tariff agreed with the operator. The services do not run if no bookings are received. This approach is the legal basis for most of the commuter taxibus systems in operation in Great Britain.

Community Operations

2.47 The community sector can operate DRT services under Sections 19 and 22 of the Transport Act 1985. These exempt the operator from having to comply fully with the more onerous requirements of PSV Operator licensing.

2.48 Section 19 Permits can be issued to organisations concerned with education, religion, recreation, social welfare and other activities of community benefit. However, such services cannot be open to the general public and a restricted sub-set of the population needs to be defined. Although this may seem restrictive, DfT provided advice in March 2003 encouraging a usefully broad interpretation of "defined populations" covering those in a defined geographical area who did not have access to their own private transport. It has been shown that the parameters can be drawn generally enough so that, for example all residents in certain deprived areas may be eligible. However, the restrictions would tend to limit any inward trips (into the area from outside) and as a result, operation under Section 19 permits would not be an ideal mechanism for bus replacement DRT services

2.49 S22 Community Bus Permits are granted for non-profit groups that use unpaid volunteer drivers, to enable them to operate registered bus services for the public using a minibus. Registration arrangements are the same as for PSVs i.e. they can be on a fixed route or a DRT basis.

2.50 Social car schemes and some other community transport activities operate under the car-sharing provisions of the 1981 Public Passenger Vehicles Act. This is the common legal basis for dial-a-ride operations for people with disabilities using vehicles with fewer than 9 passenger capacity. Drivers may be paid, provided the aggregate of the fares collected is less than the running costs of the vehicle for the journey. Given that these are not-for-profit services this is almost always the case.

Statutory Authority Operations

2.51 Where no charge is made for the service, then there is no requirement for licensing, as 'hire or reward' does not exist. This applies commonly to social work and home to school transport operated by the authority itself and to non-emergency transport operated by the Scottish Ambulance Service. Note that other operators providing the same service on contract to a statutory authority would require a licence, as they would be a 'hire or reward' operator. Some social work authorities have introduced charges in respect of home to day centre journeys, and have needed to acquire S19 Permits to enable this to be done legally. The absence of any licence has been one of the barriers preventing the introduction of charging for ambulance journeys provided on social grounds.

2.52 S46 (1)(b) of the 1981 Public Passenger Vehicles Act 1981 allows an education authority to use a school bus belonging to the authority, when it is not being used to provide free school transport, to provide a local service, without requiring the authority to hold a PSV 'O' licence or the vehicle to be a certified PSV, tested as such and so on. This section of the legislation was designed to promote coordination between home to school transport and mainstream conventional bus transport, particularly in rural areas. However, given that many authorities' school bus fleets are not conventional buses or coaches, but are primarily accessible minibuses designed for children with special educational needs, it provided an opportunity for authorities to develop wheelchair accessible bus services on a scheduled or DRT basis, at marginal cost using the downtime of existing vehicles. Unfortunately, this was an opportunity that most authorities missed, with some notable exceptions such as Grampian's initial development of the '65 Special' accessible DRT service on Deeside. In England, it is used by, for example, Telford & Wrekin Council to operate their Wrekin Rider service.

DRT legislation in Scotland

2.53 Table 2.6 summarises the potential legislative routes for DRT operation in Scotland.

Table 2.6 - Summary of DRT Licensing in Scotland

Notes:
1. There are many examples of registered local bus services which operate extensions on demand, but none that do not operate if not requested
2. The Flexible Registration arrangements introduced in England and Wales do not apply in Scotland. However, the Scottish Traffic Commissioner has traditionally taken a more pragmatic approach to service registration, and allowed flexible services to be registered under the original arrangements. For the same reason, although in principle BSOG is not claimable on the flexible elements of the route, we suspect that such claims are in fact made and accepted by DfT on the basis that there is in principle no 'flexible registration' in Scotland.
3. See discussion of S22 services below
4. To be eligible for BSOG, s19 services must be restricted to certain passenger groups. Consequently, a service that is open to the widest group of passengers may not be able to claim BSOG

Bus Service Operators Grant ( BSOG)

2.54 There are some anomalies in the application of BSOG (formerly fuel duty rebate) which can be disincentives or barriers to DRT. For PSV based DRT operations (including registered taxi based services operating under Special Restricted PSV licences), BSOG is not available for 'flexible' sections of route. Denying this mileage-based support has inhibited the development of 'area-wide' DRT services which could be particularly beneficial in some parts of Scotland. Recent Regulations in England and Wales only (DfT 2004) have extended BSOG to flexible sections of route.

2.55 Shared hire car or taxi services are also not eligible for BSOG. BSOG was extended to Section 19 services in Scotland, England and Wales in 2002 to stimulate the development of community transport services. This was highlighted as important for the development of social inclusion policy and the changes in England were partly driven by a Social Exclusion Unit review ( SEU 2003). This was done by enabling Section 19 permit holders to claim BSOG when operating services that mainly carried:

• people aged 60 or over
• disabled people
• people on income support
• people in receipt of jobseeker's allowance
• people socially excluded by reason of poverty, unemployment, homelessness, geographical isolation, ill health, religious or cultural mores
• people with a fear of using public passenger transport services
• carers or children under 16 accompanying the above.

2.56 The eligible services would generally not include what would be classified as 'excursions', which would cover infrequent group transport from one location to another. However, many to one DRT as well as DRT for excluded groups (outlined above) would be eligible for BSOG.

2.57 The registered service part of Community Bus (S22) operations is eligible for BSOG. In practice, because such services are often deeply rural and embedded in one or two local communities, a pragmatic amount of leeway has been allowed as regards route detail and timetable detail. Like PSV local bus service operation, the demand responsive part of a community bus should in principle not be eligible for BSOG.

2.58 Table 2.7 shows the DRT services eligible for BSOG.

2.59 The only DRT services currently eligible for BSOG in Scotland therefore are those where the service is operated for specific groups under Section 19 permits. This limits claiming of BSOG to non-profit groups operating DRT for non-public, excluded groups.

Table 2.7 - BSOG Eligibility in Scotland

Notes
A - Some local councils have now applied for Section 19 permits and the services operated would normally be eligible for BSOG if the conditions were met.
B - The fixed route section of a flexible route is eligible for BSOG.
C - Unless fixed route sections were operated.

VAT and DRT services

2.60 The VAT legislation offers a potential barrier to the development of best value DRT in cases where taxis or smaller vehicles are used. VAT is currently zero rated for the transport of passengers in any vehicle designed or adapted to carry 9 passengers or more (in addition to the driver). Smaller capacity may be accepted where an eligible vehicle has had seats removed temporarily to enable the carriage of disabled persons ( HMRC 2002).

2.61 In many cases DRT services do not require large vehicles to operate, and taxi-based DRT schemes are never likely to fall into this category due to the typical size of taxi vehicles, and the fact that the largest capacity that can be licensed by a local authority under the Civic Government (Scotland) Act is for 8 seats plus the driver. It is interesting to note that the VAT legislation does take into account the need for the Royal Mail to run small vehicles for their Post Bus provision, but no amendment is presently available for other small scale public transport equivalent provision - even for taxibuses running local bus services under special restricted PSV 'O' licences. Discussions in the past with Customs & Excise suggest that any extension of zero-rating is unlikely given the need to harmonise within Europe.

2.62 The VAT legislation results in a situation where the ability to operate commercial DRT services that use small vehicles is constrained by the need to charge VAT at the full rate to users. Local Authorities and operators of supported services should allow for VAT on fares when tendering or negotiating a contract price.

Legislative anomalies

2.63 There are some important issues that arise from this complex mix of legislation that actively constrain the development or potential cost savings/efficiencies of DRT services. These are outlined as follows, and particularly limit the development of best value DRT solutions which could be used to replace or be set up as an alternative to fixed bus routes:

• Current legislation in Scotland does not formally allow the registration of fully flexible (area wide) bus services
• BSOG cannot be claimed for any flexible sections of route (this is not the case in England)
• Restricted PSV licensing limits the number of vehicles to two - constraining the development of taxi-firm based DRT initiatives with minibuses to very small operations.
• VAT has to be charged at the standard rate for passenger transport in vehicles of less than 9 passenger seats - constraining the development of MPV, Car or Taxi vehicle use in DRT services.

2.64 Setting up best value DRT to replace fixed route services can offer greatly enhanced accessibility for users as services are not restricted to fixed timetables or routes. However, current legislation results in a situation within which an operator, in switching from a conventional bus route to a fully flexible DRT service using small vehicles has to both lose the BSOG income (between 80%-100% of duty paid on fuel) and increase fares by 17.5% ( VAT), potentially reducing patronage, or simply pass on 14.9% (17.5/117.5) of fares income to Customs & Excise, or in the case of small operations, not register for VAT and forgo the ability to reclaim the input tax paid on fuel and other costs.

2.65 There is also a potential problem with loopholes created in the interface between PSV and taxi/private hire car licensing. If a small vehicle operator wishes to avoid particular requirements of the local authority ( e.g. mandatory wheelchair accessibility) they can potentially try an alternative route via the Traffic Commissioner under PSV legislation. This is not an efficient or satisfactory way to protect consumers, so greater harmonisation is needed between these legislative routes as has now been done in England under the 2000 Transport Act.

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