Home-to-school fuel escalator mechanism ‘is needed urgently’

Fuel escalator for home to school contracts called for by operator

A fuel escalator payment mechanism to take account of fluctuating diesel prices should be incorporated into home-to-school transport contracts by local authorities (LAs), an operator in Scotland that recently handed back one such contract has said.

It comes against a background of varied action by LAs to help tackle the current crisis. A minority that responded to routeone say that they are making additional payments, either directly or indirectly. But many more are unable to due to financial pressures of their own.

Other LAs are keeping an eye on fuel prices but with no commitment to assist. The operator concerned says that a need for relief is now critical. While another firm has seen evidence that diesel prices are starting to ease slightly, the first business notes that from a rate of 124ppl in March, it paid 149ppl in early April, in both cases for bulk delivery.

H2S fuel escalator ‘would be the fairest approach’

That operator says a fuel escalator approach is the fairest and would prevent over-payments if and when costs reduce. “As an industry we cannot fund H2S transport for UK PLC. There is an urgent need for support. LAs know what is happening because they are suffering the same.”

Of those authorities that are providing relief, Lancashire County Council says its contracts already include a mechanism to take account of fuel costs. It uses the government’s monthly and annual prices of road fuels and petroleum products dataset and applies any adjustment two months in arrears.

In Scotland, East Renfrewshire Council acknowledges the difficulties currently being experienced. “We have asked for a national review of this situation to be carried out,” says a spokesperson.

West Lothian Council adds that national discussions in Scotland on the fuel price crisis have already taken place, and that it is “liaising with our local school transport providers on this matter.” COSLA, which represents Scottish LAs, did not respond to an enquiry about how that dialogue is progressing.

Contract payment increases in small number of cases

Orkney Council is another LA that already alters payments to take account of cost fluctuations. A spokesperson says that its H2S contracts have an annual review period, where an increase – or decrease – may be introduced to account for changes. Besides fuel, those costs that it considers include wages, the Retail Price Index (RPI) and wider “motoring expenses.”

Such scope of considerations should allow Orkney Council’s calculation to “be more accurate than some others,” it says, but increases are limited to 3% per year and decreases to 1%.

Meanwhile, Moray Council says it recognises cost pressures being faced by operators. It thus awarded a 5.5% increase in H2S payments from 1 April to align with the Consumer Price Index. North Yorkshire County Council has done the same. Suggestions have emerged that Leicestershire County Council has increased payments by up to 13%, but it did not respond to an enquiry from routeone.

Fife Council will increase contract payments by “in excess of 7%” in August to take account of the inflationary adjustment that is built into contract conditions. It uses weighted indices, including RPI, as part of its calculation and thus no additional monies will be offered in the meantime.

The reality for many English LAs is articulated by Buckinghamshire Council (BC) Cabinet Member for Transport Steven Broadbent. He says that while BC is “aware of growing pressure on school transport operators due to the increase in fuel prices,” budgetary constraints mean that “we are unable to provide financial assistance with those additional operational costs.”

Approach in Wales as varied as anywhere else

In Wales, suggestions were aired in mid-March that a national review of additional funding provision to support H2S payments was being considered. Since then, the matter has cooled, and the Welsh Government has indicated that it will not assist.

At LA level in Wales, approaches are as varied as elsewhere. Flintshire County Council says that some operators have approached it seeking increases. Without support from the Welsh Government, it cannot act, a spokesperson says.

Other Welsh LAs have been more accommodating. Pembrokeshire County Council will pay an uplift based on the average monthly price of diesel, while Powys County Council has indicated that it will look at fuel cost increases over a defined period and make additional payments in arrears.

Failures to act by many LAs “represents short-termism,” says one industry representative familiar with discussions on the matter. They indicate that while a widespread handing back of contracts is unlikely, many LAs are now exposed to a risk of greatly increased immediate costs if it does happen.