DfT to change Section 19 and 22 regulations

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Whitbread Wanderbus is one of many CT operators to have a policy of never competing with commercial operators. JAMES DAY

A DVSA investigation into a community transport operator has stated that it would require an O-licence, and for its drivers to have unrestricted D1 entitlement and Driver CPC qualifications. James Day reports on the potential, though uncertain ramifications for wider community transport sector

The Department for Transport (DfT) has sent a letter to all issuing bodies of section 19 and 22 permits, including the Community Transport Association (CTA), which it intends to be distributed to operators utilising section 19 and section 22 permits. It revealed that a Community Transport (CT) operator had been investigated following complaints from a small group of commercial operators, and said the operator should have had a PSV O-licence and its paid drivers should have been holders of unrestricted D1 minibus driving entitlements and Driver CPC qualifications.

The full implications of the letter are not clear – it states that some individual operators may not need to meet these requirements, whereas others will, depending on the case they are able to make about the service they provide. However, a likely interpretation is that CT operators that make competitive bids against commercial operators may have to meet these requirements. A public consultation is expected to launch in Autumn which should offer further explanation.[wlm_nonmember][…]

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Stephen Fidler, the DfT’s Head of Buses and Taxis, penned the letter to section 19 issuing bodies. He is a familiar face at CTA events, and is seen here speaking at last year’s CTA Westminster Conference. JAMES DAY

The DVSA investigation

The letter sent to the CTA was signed by Stephen Fidler, Head of the Buses and Taxis Division of the DfT.

The letter states: “DVSA has recently issued a decision letter to a CT operator, following an investigation of a variety of allegations concerning non-compliance. The operator was operating minibuses (nine-16 seater) under permits issued under Section 19 of the Transport Act 1985.

“The decision was made following consideration of the specific circumstances of the operator. In brief, its operations comprised a range of services, including local bus, home-to-school and day care transport provided under competitively-tendered contracts with Local Authorities (LAs). These services were provided using minibuses operated under Section 19 permits, driven by salaried drivers, not all of whom held a Driver’s CPC and an unrestricted D1 minibus licence.”

The DVSA decision was then outlined. It was found that the operator did not come within any of the derogations from the requirement for operators of road passenger transport services to hold a PSV O-licence. Although there is a derogation for operators ‘engaged in road passenger transport services exclusively for non-commercial purposes or which have a main occupation other than that of road passenger transport operator,’ the fact the operator was a registered charity and could not distribute its profits was insufficient.

In view of the scope and nature of the operator’s activities – which included the services carried out pursuant to contracts won via competitive tender in contestable markets – it was found that the circumstances did not justify a conclusion that the operator’s services were exclusively non-commercial, nor did the operator have a main occupation other than road passenger transport. The DVSA found therefore that the operator did require an O-licence.

The second part of the decision found that the operator’s drivers did not fall within regulations which enable drivers with pre-January 1997 D1 (101 – not for hire and reward) endorsements on their licences to drive minibuses operated under a Section 19 permit. The drivers should have been holders of unrestricted D1.

Finally, taking account of the fact that drivers were salaried employees, the DVSA said circumstances did not justify the operator’s vehicles falling within the exemption from Driver CPC, and the drivers should have been holders of a Driver CPC qualification.

The operator was informed that it would need to take action to bring its operations into line with all applicable legal requirements. DVSA said it will be working with the operator.


Stephen Fidler’s letter continued: “It is important to emphasise that this decision applies to the operator concerned after investigation of its specific circumstances. Other cases will need to be considered on their own facts. However, developments in passenger transport provision during the last two decades may mean that the types of contracted work and driver arrangements are not unique to this operator.

“It has become increasingly apparent that guidance has not kept pace with these developments. It may therefore be helpful to set out the following principles:

“Section 19 or Section 22 permits, as exemptions from PSV O-licensing, must only be issued in circumstances meeting both the conditions set out in the relevant section of the Transport Act and one of the derogation criteria set out. It is for the organisation applying for such a permit to make its case to the relevant permit issuing body.

“The only derogation in Article 1(4) of Regulation 1071/2009 which is likely to be applicable to an operator wishing to use a Section 19 or 22 permit is the derogation for operators ‘engaged in road passenger transport services exclusively for non-commercial purposes or which have a main occupation other than that of transport operator.’

“An operator whose main activity is operating passenger transport services would plainly [not fit this criteria]. The question as to whether or not an operator’s activities are all carried out ‘exclusively for non-commercial purposes’ has to be answered objectively based on the nature of the activities and the manner in which they are being carried out.”

An interesting footnote was placed in the letter at this point. It stated: “It is important to note that the use of the legal term ‘non-commercial’ is quite distinct from the colloquial use of the same term to describe a local bus service which operates under a contract with a LA. It is unlikely that any local bus service may be characterised as ‘non-commercial’ for the purpose of Regulation 1071/2009 if it is operated pursuant to a contract which has been awarded following a competitive bidding process, run by a LA, between potential operators. By contrast, it may be possible to satisfy the derogation if contract work is being conducted in circumstances in which there is demonstrably no contestable market.”

The letter continued: “An operator whose activities are essentially those of a bus company (in that it employs salaried drivers and carries out passenger transport services under contracts won in contestable markets and/or in exchange for fares charged to passengers at more than nominal rates) cannot be regarded as carrying out its activities ‘exclusively for non-commercial purposes,’ even if it is a registered charity or other not-for-profit organisation.

“Where any of an operator’s services are not being carried out exclusively for non-commercial purposes, the operator cannot operate any vehicles under a Section 19 or 22 permit.

“The exemption in Driver CPC regulations applies only where the vehicle is being used for the non-commercial carriage of passengers or goods for personal use. Whether or not the criterion is satisfied must be considered on the basis of the facts of the case. In the DfT’s view, however, the criterion is not satisfied where the service is being provided on substantially the same basis as that of a bus company.”

Future developments

Stephen continued: “I expect that compliance with these principles is more likely to be an issue principally for larger operators who are essentially acting as bus companies and competing for contract work and/or charging fares to passengers at more than nominal rates. By contrast, I expect that many (perhaps the overwhelming majority of) smaller and more traditional Section 19 and 22 permit holders are unlikely to have any compliance difficulties.

“However, all permit holders should assess periodically their continuing compliance with all applicable legal requirements.”

Stephen announced that a public consultation is expected to launch this autumn. He said it will set out the detailed changes which are required in order to update current guidance, along with proposed amendments to the Transport Act 1985.

Stephen said: “Action in this area is required, despite the UK’s forthcoming exit from the EU, in order to avoid any uncertainty for permit issuers and holders. The UK is presently still a member of the EU, and EU law therefore continues to be applicable. While it is possible that the UK might wish to exercise their legislative competences post-Brexit, this will need to be done over time.

“I appreciate that there has historically been guidance that may have provided an inaccurate indication of the conditions and criteria for operating services under section 19 and 22 permits, and that, as a result, there may be some organisations that are relying on such permits inappropriately. Such operators will now need to take action to bring their services into compliance with legal requirements. The DfT will, of course, liaise with all relevant stakeholders, including representative bodies and will seek to support relevant operators in transitioning to full compliance.”

Bill Freeman, CEO of the CTA, made four requests to Government and the DfT in the wake of the news. JAMES DAY

CTA advice

Reacting to the letter, CTA CEO, Bill Freeman, made a statement to members on the organisation’s blog, which can be found at https://ctablog.org.

He explained: “It’s been just over two years since the European Commission required the UK Government to address how the EU directives on O-licencing were interpreted into UK law. Prior to that, and since, our sector has continually been subjected to challenges from a small group of commercial operators with regard to the awarding of LA contracts.

“Throughout that time, the CTA has urged everyone not to rush to judgement about the likely outcome and to wait until the DfT has stated its position and intended response. The letter contains that position, albeit in response to action being taken by DVSA following the complaint it had received.

“In changing how it intends to interpret the definition of ‘non-commercial’ in future, the DfT’s actions are likely to have implication for many operators. This is not the news that any of us wanted. The implication is that those operators competing for LA contracts using section 19 and 22 permits may need to do this under a PSV O-licence in future. It is less clear how other organisations that use permits, but do not compete for contracts, will be affected with regards to Driver CPC.”

Bill highlighted that the DfT had not said any CT operator was at fault for how it had operated, as they had adhered to the commonly accepted interpretation of the regulations.

“However the DfT is also saying that developments in our sector in recent decades should have led to them taking another look at the regulations,” he added.

Bill said he would be calling for four things to happen:

• DVSA and other agencies should hold off taking action against operators using section 19 and 22 permits and whose drivers don’t hold Driver CPC until the UK Government’s consultation in the autumn is complete;
• LAs and other public bodies that are currently holding contracts with CT operators, for services being run under section 19 and 22 permits, should allow these contracts to continue and work with the operators to agree a process of moving to alternative arrangements. LAs should also see whether the services could be fulfilled under a grant agreement where no competitive tendering is necessary;
• The Government must assess the impact of this change on existing services, with particular regard for identifying people and communities at risk of isolation, or not being able to access vital public services. By accepting it has guided organisations to set themselves up to work and deliver contracts under section 19 and 22 permits, it should now commit itself to understanding the full impact of these changes; and
• The UK Government should work with its counterparts in the devolved nations to provide support to those organisations affected.

Bill continued: “Once we have got over the initial shock of this news and found ways to challenge it, it is important that we all look to the future and be open to new ways to make community transport thrive. This could be the beginning of the end of this frustrating and destabilising campaign against our sector. We didn’t know how to win before, but we do now.

“I am not calling on you to be open to change without reservation. It must be matched by openness by the UK Government and their counterparts in the devolved nations to support you to change. Throughout the last few years, we have pushed the UK Government to accept that one of its objectives in settling this matter is to leave our sector in good shape. We believe that message has got through.”

Making concessions

Bill accepted that the CT sector may inevitably have to change how it operates.

“We have been called to change many times before and have done so,” he said. “We must not allow ourselves to be defined by the badge in our windscreen. Ours is a bigger cause and calling, so however hard this might seem, we must remain focused on why we exist.

“Everywhere we go, across our four nations, we meet politicians and members of the public who love CT and the difference it makes. They will not understand why anyone wants to make it harder for CT operators to continue to support some of our most vulnerable citizens. We call on all these friends across the transport industry, Government and the charity sector to stand with us and secure a stable future for these vital services.

“I have been working at CTA for four years today and I continue to be inspired every day by the dedicated and professional people working across our movement. I know we can work together to support our sector into 2018 and beyond.”

CTA’s Open letter

Shortly after speaking to CTA members, Bill Freeman published an open letter to Parliamentary Under Secretary of State for Transport, Jesse Norman MP.

The letter read: “I am writing to you on behalf of tens of thousands of our most vulnerable citizens who rely on CT to have a better quality of life and now face some real risks to the care they receive following the DfT’s statement about how it intends to regulate these services in future.

“CT is a uniquely British response to a question of how we can make transport accessible and inclusive for all. It enables tens of thousands of people to feel in control of their lives and stay connected to the people and places important to them.

“CT is about recognising that Government and business can’t do everything or meet every need, and that some needs are best met through communities doing things for themselves. But we know that this works best if Government is able to lend a helping hand; making sure there is a set of workable rules that enable us to make the biggest difference we can.

“I am pleased to say that this Government has consistently shown it understands and values the contribution made by CT operators and that’s why I am calling on you directly to give us a helping hand now.”

Bill asked for a meeting with Jesse at the earliest opportunity, and detailed the four requests he had mentioned in the CTA Blog.

He continued: “I am prepared to call on the charities and community groups I represent to not resist these changes and to work with them, but I can only do so with any credibility if there is a commitment from the UK Government to support them to make these changes.

“This is not just about transport. It is about the kind of country we want to live in and how we make everyone feel they belong. Let’s work together to secure a more stable future for these vital services that touch the lives of so many.”

The DfT letter implied that CT services in areas with ‘no contestable market,’ such as that served by Voluntary Action Rutland, are unlikely to be affected. However, how the contestability of a market would be judged is unclear. JAMES DAY

Bus and Coach Association responds

CBW reached out to the Bus and Coach Association (BCA) for its response to the developments.

Martin Allen from BCA told CBW: “Our campaigns have been ongoing for five years. First there was the state aid case, which in a way we lost, but brought about changes and better guidelines that LAs and Government departments have to adhere to. The transport regulations, directives and legislation was a more clear cut case.

“Our lawyer first challenged the DfT in August 2016. Investigations had to be taken into a CT operator and we were told we would receive the decision by July 28 on action, if any, that would be taken. I must point out that if no action was taken, then court proceedings would be started, and on top of this the European Commission was putting pressure on UK authorities to comply. The UK Government had averted the Reasoned Opinion being issued on the grounds of them complying very soon.

“I am very happy with the announcement. I have also written to Bill Freeman at the CTA and said that we now need to all sit down and plan the future of the valuable service that the CT sector provides. I informed him that we are not out to destroy the sector – this has never been our objective. The sector has a part to play in certain areas. However, I have to make it very clear that we are not prepared to let the sector obtain O-licences using public and charity funds.

“BCA also requests that we are part of any consultation. Greed has driven most of these groups and we are where we are.

“I must congratulate everyone that’s supported this over a very long period that seems like a lifetime. This will do wonders for our industry by way of investment and training.”

CPT comment

Steven Salmon, CPT’s Director of Policy Development, commented: “It has taken a long time for DfT to come round to our view, but recent developments in the CT sector have made our arguments more persuasive and we wholly support the new interpretation.

“Large and well-resourced organisations that have been using the permit system to compete unfairly against licensed operators will have to play by the same rules as the rest, regardless of how they are set up.”[/wlm_ismember]