HCT and Section 19: here’s your answer

In our feature about HCT in relation to Section 19 licences, Dai Powell asks the question: ‘What’s the problem we are trying to solve?’ It is easily answered: unfair competition.

The evidence has been there for years. I have met minibus operators who have lost half their work to CTOs who have bid at commercially suicidal rates in open tender for contracts, which they have then gone on to operate with vehicles funded by the state, and in some cases, supported by fares or grants.

This has happened, in part at least, because council budgets have been stripped bare, and in desperation, CTOs have been encouraged tacitly or in plain view to tender for commercial contracts at rock-bottom rates. In some areas, this has taken the form of open collusion.

But the intrusion into commercial operation goes further than that. I also know of CTOs who openly offered their vehicle and driver for hire, albeit with the proviso that the hirer must be a ‘community group.’ There’s no definition of a ‘community group’ of course. Would a community’s football supporters’ club qualify? Or the local WI? And when they pay, they create a serious issue; where does hire and reward begin?

The ‘not for profit’ aspect could be claimed by anyone, including unprofitable businesses

In the opinion of one Traffic Commissioner, hire and reward happens the moment money changes hands in exchange for a transport service; a service being secured by money. After all, the ‘not for profit’ aspect could be claimed by anyone, including unprofitable businesses. For that matter, the operator could use accounting practise to foist additional cost such as salaries on to a Section 19 minibus fleet while running profitable vehicles on O licences in parallel.

That’s the problem. Distinguishing the charitable from the commercial is almost impossible; and with the balance sheets of some CTOs showing a healthy surplus, or paying excellent salaries, the waters are muddied further. It was the difficulty the DfT faced when it tried to unravel the legal aspects of the two incompatible licensing systems running in parallel.

Let’s not beat around the bush, here; the Section 19 system is a total mess in which nobody knows even how many issuing authorities there are, much less who has a valid S19 licence

Let’s not beat around the bush, here; the Section 19 system is a total mess in which nobody knows even how many issuing authorities there are, much less who has a valid S19 licence. The passenger transport system is overseen by the Traffic Commissioners who have jurisdiction over all passenger transport licensing systems, yet one of those licensing systems does not even have a central register of its licensees.

Nobody, including CTOs, disagrees with the fact that running S19-licensed vehicles is cheaper than running on an O licence; the burden of O licensing is the reason so many CTOs began to worry when the infamous letter from Stephen Fidler (OBE now, we hear) landed in July 2017. Putting aside the issue of who paid for the minibuses, the cost of the licence, its financial standing obligations and the employment of commercial drivers all stack up, enough to shut down some CTOs who have strayed into commercial work.

There is, however, a major difficulty. This industry, above all others, must have some empathy with the core customers for CT services – vulnerable people who are just one step removed from the core of this industry’s own passengers. At their best, the CTOs support tens of thousands of people, providing what are literally lifeline transport services. To treat those people as mere collateral is shameful.

It’s not the role of business, though, to provide social services for people who cannot get to the bus stop. In a welfare state, this responsibility falls solely and firmly with local and national government. Just as it is unfair for the CTOs to point a finger of blame at commercial operators for insisting other transport is run within the letter of the law, it is a dereliction of duty for government not to create an alternative path for social transport – and to support it.

At their best, the CTOs support tens of thousands of people, providing what are literally lifeline transport services. To treat those people as mere collateral is shameful

It is also a disgrace that this situation is still in limbo after almost 18 months – a period which started with an edict which then, bizarrely, morphed into a consultation. The final word on the outcome of that consultation appears to be a ‘wait and see’ policy by the DfT. Many CTOs and, for that matter, councils have made an effort to comply with the spirit of the new interpretation of the law, but many have not. Just before 2018 closed, we heard of another council awarding a whole raft of tendered contracts – which by legal definition should include ‘an element of profit’ – to S19-licensed operators.

The frustration has now prompted another legal challenge – this time, a Judicial Review which alleges that the government has not enforced the law. As the paperwork is still being filed and discussed, the precise form of the challenge cannot be revealed, but the response so far from government appears to be endless stalling, on the basis, we guess, that after we leave the EU, the UK can change the EC’s 1071/2009 regulation which is causing the problem. Maybe refresh your understanding by looking at Article 2 here https://is.gd/DlZpuw

The government should be asking itself whether it is right that vulnerable people should be carried by operations which avoid several layers of legislation, all designed to ensure passenger safety

Crucially, while it does offer a derogation for a ‘non-commercial undertaking’ it paradoxically defines a transport ‘undertaking’ as ‘any natural person, any legal person, whether profit-making or not, any association or group of persons without legal personality, whether profit-making or not, or any official body…‘

How long this situation is to remain in limbo remains to be seen but even if we set aside the commercial aspects, the government should be asking itself whether it is right that vulnerable people should be carried by operations which avoid several layers of legislation, all designed to ensure passenger safety. It may be OK for a scout group to have its own scoutmaster behind the wheel, or school trips be driven by teachers, but the general public is the general public, regardless of disability, age or mental health.

There is no evidence that CTOs operate any less safely than commercial companies, but this cannot be allowed to justify the avoidance of law designed to ensure the public is carried by regulated fleets and well-trained drivers. If this regulation is deemed excessive for CTOs carrying the public, commercial operators need to be offered the same leniency and the commercial advantage it confers.