Smart Transport

Demand-responsive transport: Time for complete overhaul of bus rules and regs?

Author: Beate Kubitz, writer, researcher and consultant in new mobility

Peer reviewed by: Martin Howell, director, transport markets, UK&I, Worldline and Robin Pointon, managing director, Go Travel Solutions

In principle, on-demand buses – also known as Dynamic Demand-Responsive Transport (DDRT) – have the potential to reduce costs and increase the coverage of bus services by matching buses to passenger demand.

Trials of services, particularly in rural areas in the UK, have shown that DDRT can connect people who have traditionally had extremely poor public transport.

Meanwhile, abroad we see examples of on-demand services ensuring that everyone who needs to travel at the beginning and end of the day gets to their destination, at times when frequent fixed route bus services would travel with too few passengers to be (economically) viable.

DDRT services are also able to combine different use cases – social, medical and public bus services – to ensure vehicles are well used and areas get the best service possible.

For instance, the metropolitan authorities in the French city of Orleans were able to create a DDRT scheme which increased access to public transport in several areas and absorb two routes that were poorly used. Overall, costs remained the same while more people were able to use the bus.

In rural France, it’s possible to integrate DDRT services with paratransit (dial-a-ride-style access buses for people with specific mobility requirements) so a mixed fleet is managed on a single platform. The Montenbus in the Haute-Savoi can be booked between 380 virtual bus stops, however, for users with reduced mobility it will book a door-to-door trip and provide an accessible vehicle that meets the hailer’s specific needs. This optimises the vehicles available and ensures inclusive access for people with reduced mobility.

In the UK, however, the regulatory framework covering DDRT is complex and makes it difficult to combine services and increase the utilisation of vehicles.

Here, we look at the many different regulatory frameworks that DDRT operates under and how they mitigate against us optimising services to deliver great public transport that will reduce both car dependency and our carbon emissions.

While it’s hard to work out exactly what an optimal regulatory framework would look like from within the current system – particularly with the potential for perverse consequences and second order effects,­ we already have a model for testing better regulatory solutions in the e-scooter trials.

Bus laws

The issues encountered by Hertfordshire’s HertsLynx arise because there are several different ways of registering a local bus service. It’s also possible to register services that are quite like local bus services, but don’t fulfil all the same criteria, creating a minefield for any atempts to blend services and maximise use.

At base, a local bus service means carrying passengers at separate fares in a registered PSV (public service vehicle). The route can be of any length provided the passenger can alight within 15 miles (measured in a straight line) of the point where they boarded. All PSVs (more than eight people) need to be fully accessible, regardless of size.

A bus operation which is run for profit must hold a relevant PSV operator’s licence.

Community transport organisations can run local bus services open to the public if they have a community bus (Section 22) permit. They must register with the Traffic Commissioner and cannot run ‘for-profit’ bus services (unless offering hire services which do not compete with public bus services). Community transport operators run subsidised and non-profit routes in several areas – both fixed line and, in some instances, DDRT.

It is possible for a private hire vehicle operator to run a local bus service provided it has a special restricted PSV operator’s licence. For operators eyeing the not-for-profit market and wishing to reduce their regulatory burden, it’s important to note that an entity that already has a full operator’s licence cannot apply for a Section 22 permit.

Once an operator has an appropriate licence, each route or service they run is registered with the Traffic Commissioner, indicating the route (or area covered), the bus frequency or timetable. Services may be registered as flexible – enabling DDRT services to be set up.

There are mandatory periods for registration and for registering any changes in frequency or cessation of service leading to long lead times when launching or tailoring services. The operator must inform the local authority in England or the local council in Scotland 28 days before applying to the Traffic Commissioner (including all councils that the route passes through and the relevant Passenger Transport Executive, if there is one). The application to the Traffic Commissioner must be at least 42 days before the service starts (or 56 days in Wales). Effectively, this means more than two months must elapse from the start of the process to the first bus running.

Similar timescale notice periods apply to vary or cancel a service (42 days’ notice Scotland and England, with 56 days’ notice applicable in Wales).

In addition, public bus liveried dial-a-ride services are often seen in action.

However, because they only serve a limited group of people (for instance on age or disability basis) and are not open to the general public they do not (always) need to register with the Traffic Commissioner.

They are required to have either an operators’ licence (and ensure compliance with vehicle and driver regulations) or, the much less onerous Section 19 Permit. Section 19 permits for smaller vehicles (up to 17 seats) can be issued by the Community Transport Association or local authorities to organisations operating services for education, religious or community transport purposes. Larger vehicles must be registered with the Traffic Commissioner.

No blending of services

Services that are registered under these different regimes cannot then be blended into an open, individual fare-based (i.e. public) bus service.

Confusingly, there are many services which do not count as public transport services, but which share characteristics with public bus services. These include privately-run buses taking people to work, school services which are provided on behalf of the local authority or free services where there are no fares.

Registering these is less onerous for operators and the lead times do not apply.

A marked reluctance to open some of these services to other passengers could be put down to the additional administration and time delays built into any service change if the service is reclassed as a public bus service.

For instance, flexible shared work shuttles are increasingly popular to aid recruitment for businesses in transport-poor areas (often industrial parks and logistics hubs). While serving only one business on a site potentially means that buses are not full, the attendant administration to open them up to anyone travelling to the site makes that an unattractive proposition. Lead times for any service changes, fare requirements and complex interaction with taxation create layers of complexity that generally lead employers to dismiss opening them to the public.

Taxes, subsidies and other considerations

There are additional regulations that affect the running – and business cases – of services and impact their design.

For instance, flexible services that cover locations more than 15 miles apart (in a straight line) do not qualify for Bus Service Operators Grant (BSOG). When the profit (or for-profit) services often equate to the BSOG, it’s an important consideration for operators.

There is also a requirement that fares per passenger must be fixed, rather than reducing as more passengers board (in the case that fares reduce if more people share a vehicle that vehicle would be classed as a private hire vehicle or PHV).

Flexible bus regulations require that passengers should pre-book, but there is no minimum booking time.

Passengers who haven't pre-booked can be carried, but the route cannot be altered to accommodate them (because this would then be classed as a taxi service).

In addition, Bus Open Data regulations require that ticket prices for public transport buses must be notified to the Secretary of State – in practice this means uploading them through the Department for Transport (DfT) Open Data portal.

VAT muddies the waters

While fare transparency is easily complied with, there is a much trickier anomaly over VAT. HMRC allows operators to zero-rate the transport of passengers “in any vehicle… adapted to carry not less than 10 passengers”. This means that a DDRT service using smaller vehicles potentially has to charge 20% more than the same service in bigger vehicles (or absorb the VAT). This makes it harder to fit the required size of vehicle to the demand.

The role of VAT in the design of future transport cannot be overstated. A 20% price difference is a significant one for travellers and is a large margin for a provider to cover.

Other ideas for helping promote behaviour change to get people out of cars can also be penalised by HMRC. The zero-rating of transport is ‘disallowed’ for passengers travelling to ‘places of entertainment’ if the transport is sold with the ticket.

Effectively, smart destinations seeking to reduce the number of people arriving by car by offering public transport ticketing combined with admission are obliged to add the VAT to the public transport.

Unless the transport provider or the venue is prepared to take a 20% hit to their bottom line, customers see an expensive option rather than the kind of discounted one that would entice them.

The net effect is that, while there are many examples where it would appear logical or desirable for groups of passengers to be combined, the practical implications for operators are increased administration, long lead times and potential tax minefields.

E-scooter trials – a parallel?

Trials of rental e-scooters launched in 2020 provided a way of testing these vehicles in the UK before changing legislation more fundamentally. Prior to the trials, it was not legal to ride an e-scooter on the public highway or on pavements.

However, in order to create schemes which would enable investigation of how best to regulate use of e-scooters in the future, the DfT made it possible for local authorities to create trial areas where fleets of rental e-scooters could be hired.

The creation of these ‘sandbox’ areas was not entirely simple and required some amendment of existing regulations aiming to regulate rental e-scooters as similarly as possible to electrically-assisted pedal cycles (EAPCs).

During trials, e-scooters continued to be classed as motor vehicles (meaning having insurance and the correct type of driving licence continued to apply).

Before the trials were launched, the definition of an e-scooter had to be set out. This defined a sub-category of vehicle within the statutory definition of a motor vehicle with key features including limits on the electric motor size, maximum speed and weight plus setting out the means of steering and stopping. These definitions were decided during the consultation period.

The Electric Scooter Trials and Traffic Signs (Coronavirus) Regulations and General Directions 2020 (SI 2020/663) allowed the trials to take place. The regulations came into force on July 4, 2020.

Within trial areas, vehicle orders were issued under s44 and s63(5)-(7) of the Road Traffic Act 1988 for vehicles of operators assessed as being suitable to participate in the trials.

Various requirements of the Motor Vehicles (Driving Licences) Regulations 1999 were amended.  The existing requirement in the Motor Cycles (Protective Helmets) Regulations 1998 was also amended to remove the requirement to wear a motorcycle helmet in relation to e-scooters. Amendments were made to the Traffic Signs Regulation and General Directions 2016 to allow e-scooters in cycle lanes. Local authorities were required to amend their traffic regulation orders (TROs) that apply to cycle lanes.

E-scooters were exempted from vehicle registration and licensing (vehicle excise duty) by amendment of the Road Vehicles (Registration and Licensing) Regulations 2002, and from the requirements for vehicle type approval in the Road Traffic Act 1988.

The Government has recently decided to allow e-scooter trials to be extended from November 2022 to May 3, 2024.

Parallels for DDRT?

DDRT operates within a complex legal framework that is hampering the best use of the resources we have – within the context of both a climate and a cost-of-living crisis.

A sandbox approach, that allows trial areas to set up an ideal DDRT service and evaluate its impacts, could enable a process of developing a better regulatory framework for DDRT (and possibly other aspects of public transport). Rather than layering further regulation onto bus, DDRT and even PHV services, it may be time to start again.

To really understand how DDRT could benefit an area, there would need to be the ability to run schemes that offer comprehensive public transport, ensuring that everyone can get a bus when they need one.

Provided services all comply with vehicle and driver safety requirements, it should be possible to combine different fleets under different regimes and enable them to be managed within one platform including:

■ Community transport

■ Local authority-run access transport

■ Non-urgent patient transport

■ Schools services

■ Works buses or shuttles

■ Shared taxis

■ Public transport

A simplified S22 Permit for flexible services open to all operators might be suitable. In addition, there would need to be an area-wide agreement with HMRC that VAT is zero rated for DDRT services whatever the size of vehicle. Thought should be given to ensuring that behaviour change interventions that encourage people to use public transport – for instance by bundling low carbon travel with admission charges – are also not penalised by VAT.

The most contentious approach would be to suspend competition law and actively seek cooperation between bus companies on fares, timetables and network design (rather than Enhanced Partnership which – despite the best intentions of the DfT for creating a cooperative framework – are still open to legal challenge according to the Competitions and Markets Authority). This would enable services to blend fixed and DDRT routes where appropriate.

To truly ‘start again’ the regulations that would need suspending or amending involve transport, taxation and competition laws.

While this seems complex, we are currently hampered by layers of legislation that have been laid down in history, each trying to correct a previous unintended consequence. Trialling a new start is helping develop better regulation around e-scooters. Could DDRT be the next element of future transport to go back to the regulatory drawing board?

■ Smart Transport hosted a webinar featuring a keynote presentation by the DfT on how it can work with the private and public sectors in responding to rural transport challenges. Speakers also represented Padam Mobility, Enterprise Car Club and Hertfordshire County Council.

Case study: HertsLynx

The HertsLynx DDRT service launched in September 2021 and has been a successful way of providing bus services in an area that had been poorly served historically. The market town of Buntingford is surrounded by villages and hamlets, some consisting of only 30-40 houses which makes running a financially sustainable fixed line route between them virtually impossible.

Instead, the HertsLynx service is designed to allow people to travel between villages or access surrounding towns and their stations for onward travel. Users can book trips between a large number of ‘virtual bus stops’ either in advance or up to half an hour before they travel.

The service is configured so it can’t be used within the bigger (already better served) ‘key hub’ towns. It will take people to or from virtual stops within the rural area to key destinations in these hub towns or between stops anywhere within the rural zone. The three mini-buses cover an area between seven and nine miles in each direction from Buntingford, serving a total area of around 150 square miles.

The service has proved successful, reaching its target number of rides for its first year within 10 months.

The second year will see an increase to five minibuses, enabling more capacity and a better service. This will increase the frequency of services over the existing zone. During the first year, requests from the public have added 104 virtual bus stops within the zone. Despite the service’s popularity, the team still has to balance costs, passenger numbers and service flexibility.

Alice Missler, Demand Responsive/Community Transport team leader at Hertfordshire County Council (HCC), says:

“There’s a fine line between offering enough flexibility (for passengers) and maintaining the quality of service. There’s a danger in spreading it too thinly.”

Data from the service shows that it is being used to access education, with regular journeys made between the college in Buntingford and villages, and for people travelling to and from stations during peak commuter hours.

Despite its popularity, the service is not expected to be self-supporting in terms of fares. While the team can work on increasing the bookings per bus and using the service for set routes to enable the council to meet its obligations cost-effectively, the blunt truth, as Missler puts it, is: “Geography makes it expensive.”

At the same time, HCC is also rebranding and digitising its dial-a-ride service, which provides transport to people with a registered disability or older than 75 (using the same platform as its DDRT). The service has quite a low ridership (particularly since the onset of the Covid-19 pandemic) and, while it is hoped that the upgrade will improve membership and make the service more attractive, it is likely to have considerable spare capacity.

It would be easy, technically, to make these buses available on the HertsLynx platform to help top up capacity for the HertsLynx DDRT service when they are not full. However, it is not straightforward within current regulations. This is despite the fact that both services are paid for by the council and pooling the resources could improve services without additional costs.

Missler explains:

“The primary issue is licensing and how we operate with two different types of licence.”

Currently, the dial-a-ride service operator holds a Section 19 licence as it is a not-for-profit operation. It does not have a public service vehicle (PSV) licence. The DDRT service operates with an O-licence – the standard PSV operators’ licence (although, effectively, as a service paid for by the authority, it, too, is not for profit).

Missler adds: “The main problem with a Section 19 licence is that it is only granted if there are eligibility criteria for the users. Registering alone is not enough.”

While all the people using the DDRT service register, only a small proportion would meet the service eligibility criteria (and this would need to be noted when they register). The Section 19 licence would hamper integration.

HCC has explored options including consulting Essex County Council which uses buses registered under a community bus permit – as a S22 licence. In theory, the HertsLynx dial-a-ride could be registered as a S22 operation. However, this would have to be agreed with the operator – and involve them re-registering.

Missler outlines the practical hurdles: “S22 registration would require a change of service which might not sit well with the operator. It’s also not that straightforward.

"As far as we can tell the application has to be handwritten and doesn’t really have any relevance to DDRT.”

The technical issue of linking in a second contracted operator into a single platform is much less of an issue than the regulatory barriers.

Peer reviews

By Martin Howell, director, transport markets, UK&I, Worldline

Beate Kubitz has produced a clear, well-informed and accurate article on shared mobility – in this case, providing evidence showing that the devil resides, as ever, in the detail. There is broad agreement across the industry that the technology available to us would make demand-responsive transport relatively straightforward to implement. Multiple sources of data exist and could be captured that would give accurate indications of likely demand and, hence, viability.

And yet, it is clear that, as a nation, we are making life as hard for ourselves as possible to achieve the benefits that would accrue from a truly integrated transport ecosystem – increased prosperity, realisation of human potential and a more equitable society. The multiple layers of frustratingly obscure bureaucracy, the outmoded legislation, the fact that laws and regulations are developed in apparent isolation from each other are all self-inflicted obstacles.

Certainly, the situation with respect to rural bus services is already dire with some communities effectively off-grid, because they do not represent a viable option for operators using a standard timetabled model.

No one would argue for a free-for-all, and Kubitz’s article recognises that common standards and a workable framework are essential for safe and responsible operation.

But in the current climate of economic and political turmoil, the will and opportunity to review and make necessary changes to the legal and regulatory landscape is probably more distant than for many years.

Perhaps the solution lies in the interested parties and stakeholders – operators, local authorities, trade bodies and supply chain – identifying their common interests. There will most likely be multiple examples.

Unfit for purpose

We need to discard the dysfunctional, unfit for purpose patchwork quilt of laws and rules that are preventing progress and supersede them with well thought-through, simplified legislation.

This legislation could provide a platform for standards of safety and interoperability as well as removing the pointless barriers to progress, including taxation, with which we are saddled.

Having identified those common interests, we must work together to demonstrate straightforward business cases, showing payback of investment, as well as the economic and social benefits that would be derived from truly integrated, demand-responsive transport.

Only in this way, do we stand a chance of making headway in the febrile political landscape we are currently enduring (another new PM, transport secretary and ministers and, as I write this, looming Government spending cuts do not inspire huge confidence for securing much needed change).

The benefits are there, for sure, and so we, as an industry must pull together to produce irrefutable evidence that will convince Department for Transport, HM Treasury and the Cabinet Office that this is a priority for legislation that will yield national dividends.

Martin Howell leads Worldline’s work in smart mobility and strategy for transport. He was vice-president at Cubic Corporation.


By Robin Pointon, managing director, Go Travel Solutions

What a well-informed piece from Beate Kubitz. There is no doubt that legislation is not helping the benefits of DDRT to be maximised. Now is the time we need legislation covering provision of passenger transport to change and for there to be harmonisation. It’s key to unlocking the economic environmental, and societal benefits of shared transport.  

The future of DDRT in the UK is approaching a crossroads. It would be easy to be deluded into thinking we’re in a golden age, with so many different DDRT schemes in operation. The reality is that without the Rural Mobility Fund (RMF), so few would be operating today.

They are not self-funding from passenger revenue and probably will never be. 

Many of the current DDRT schemes have a finite life with funding for only a further one-two years. Unless they can secure additional funding and/or significantly increase trip aggregation, these schemes will wither on the vine.

As Kubitz has highlighted with the HertsLynx example, changes to bus service legislation would help to unlock greater income streams from being able to bring together different users. The technology is there to maximise the opportunity, but the legislation is working in the opposite direction. Given the time it takes to change legislation, this harmonisation of regulations needs to be prioritised now.

As Kubitz reflects, lessons on how we can change legislation to be more fit for purpose, can be drawn from e-scooter trials. Given the prominence of DDRT schemes with support from the RMF, could the RMF scheme locations be where we test out new approaches to bus service legislation?

Given the financial and community investment that has already been made in these areas, they could be ideal to test out new approaches to bus service legislation. 

Different use cases

DDRT services can combine different use cases – social, medical and public bus services – to ensure vehicles are well used and areas get the best service possible.

However, the key to unlocking more from DDRT will go beyond changes to the bus services regulatory framework.

I know from our experience at Go Travel Solutions of the challenge of engaging different bodies from local bus operators to community transport providers. A compelling commercial case will often not be sufficient to make progress; it’s about hearts and minds. There must be a shared desire on the part of budget-holders and organisations, for collaboration to succeed. 

It's worth remembering lessons learned from the Total Transport pilots funded by the Department for Transport in 2015. A clear conclusion was that there was no ‘one-size-fits-all solution’. However, they recognised (and this was pre-digitisation of DRT), that there were opportunities for efficiencies/cost savings, but there were many barriers that persisted. These included bus service legislation, lack of budget ownership, data sharing and the challenges of organisational restructuring.  

And a final bold ,and perhaps radical, thought when it comes to maximising the opportunity for shared transport: Why should we only consider passenger transport? Is there an opportunity for bringing together passenger transport with delivering parcels? 

There are around 800,000 home delivery vehicles in the UK serving urban and rural areas, using similar technology to DDRT.

Is there an opportunity to bring together the moving of people and goods in a way that reduces carbon impact, offers more trip making and at a lower cost?

It’s hardly a new idea because it was the premise of Post Buses that operated in Scotland. It’s a concept that will have lots of barriers. But, with the input of some major commercial players, could this be a game changer, particularly for rural mobility?

Robin Pointon is managing director of sustainable transport consultancy Go Travel Solutions. The social enterprise promotes and develops sustainable travel solutions for communities and workplaces. Prior to 2008, Robin’s career included both public and private sectors with senior roles in place marketing and inward investment. However, transport has dominated his career. He worked in a senior management position with Arriva and in public transport for a local authority at the time of deregulation.

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