Government ruling could have massive implications for community transport provider FACT as it clamps down on using paid drivers for commercial contracts
PUBLISHED: 16:47 09 August 2017 | UPDATED: 16:47 09 August 2017
The Government has moved decisively to halt community transport providers such as the Fenland Association of Community Transport (FACT) and its Huntingdon (HACT) and Ely (ESACT) subsidiaries from competing unfairly with the taxi industry.
In a surprise letter to local authorities the Department of Transport warned that operators whose activities mirror that of a bus company – i.e. employing paid drivers and touting for commercial contracts – must in hold a public services vehicle (PSV) operator’s licence.
For years the taxi industry in Fenland – and in latter years across Cambridgeshire – have campaigned to halt the proliferation of community transport providers who on the one hand can secure charity grants and on the other can build up fleets of vehicles to under cut taxi firms on home to schools contracts.
Organisations such as FACT have relied on section 19 and section 22 of the Transport Act of 1985 that allow them to provide transport for disadvantaged communities but at the same time develop substantial portfolios of commercial work.
Local councils have turned a blind eye to the regulations that insist holders of these licences must operate on a not-for-profit basis and that drivers must be voluntary.
Stephen Fidler, the DfT’s head of buses and taxis division, wrote to local councils and the traffic commissioners last week reminding them of a recent ruling by the Driving and Vehicle Standards Agency (DVSA) on a community transport row in Derbyshire.
Mr Fidler that although the case was specific to Derbyshire it had wider implications for the industry since any operator that has contract work, employs paid drivers and wins commercial contracts in an open market can no longer be regarded as carrying out its activities exclusively for non-commercial purposes.
That means operators – and that will include FACT – will need to consider a fundamental change in the way they run if they wish to carry on with commercial work.
The DfT is to consult with local councils and Mr Fidler said there has been mixed messages about the law that have led to the fact that there may be “some organisations that are relying on such permits inappropriately”.
David Humphrey, vice chairman of the Cambridgeshire Coach and Taxi Drivers Association (CCTDA) said the issue only arose with FACT after their management developed “commercial ambitions that brought them into direct conflict with hard working private companies”.
He said: “On top of massive funding advantages, we have always maintained they have been using an illegal loophole to undertake and support their massive recent commercial expansion. This appears to have now been confirmed.
“The DfT has declared their guidance may have provided an inaccurate indication as to the use of the permit 19 scheme, and we anticipate the FACT management will use this as an excuse.
“However, DFT guidance also made it perfectly clear; if there are doubts over legality it’s the organisations responsibility to seek legal advice.”
He said the issue was raised as far back as 2013 in a meeting with MP Steve Barclay and later backed by a barrister’s report.
“Then, as now, the only legal exemption is for transport services operating ‘exclusively for non-commercial purposes’”, said Mr Humphrey. “That is law, not guidance.”
He said that since 2010 FACT have doubled their fleet size and their commercial revenue has grown by over 500 per cent, their 2016 accounts indicate approximately 75 per cent of their earned income was generated through commercial contracts “so it is difficult to believe FACT wasn’t aware of the exclusively non commercial element of the exemption”.
He added: “Questions now need to be asked over insurance, and in the last few days FACT have won 14 new commercial contracts from the county council- are these going to be put out for re-tender?”
FACT manager Jo Philpott said: “We are liaising with the authorities and other relevant agencies in understanding what this may mean for the community transport sector.”
Bill Freeman, chairman of the national Community Transport Association, predicted the DfT’s actions would have implications for his industry.
“This is not the news that any of us wanted,” he told members in a letter.
He wants the status quo to continue until a review and hopes councils will consider switching to giving grants to run home to schools contracts without the need for competitive tendering.
A county council spokesman said they had been in touch with community transport operators “to determine their approach and response to the clarification letter from the DfT”.
The spokesman said: “We are treating this as urgent but will take no action until we have considered the responses provided.”
The county council is mid way through a £50,000 investigation into FACT begun as a result of complaints by the taxi industry over a range of issues ranging from funding, award of contracts and membership numbers.
The spokesman said: “We have appointed the services of PKF International, a highly respected and experienced firm of forensic accountants. They will carry out the investigation and to be transparent will report back to the council’s audit committee.
“While this investigation is being carried out it would not be right for the council to comment further until it is completed.”
“This complex investigation covers a wider scope and is still ongoing.”
The council spokesman said that if changes are needed “and we need to re-tender these contracts, we have full contingency plans for this.
“But we are hoping to avoid this as it has some potential for some disruption short term to services and increased cost. “Please bear in mind these services are largely to provide taking children with special needs to school or respite placements, so disruption should be minimised.”
Mr Humphrey said the claim about special needs or respite placements was “simply wrong. These are normal, mainstream home to school contracts that the council awarded. And we have the evidence to prove it.”
The council spokesman declined comment on the challenge over recent contracts to FACT.
However the council spokesman added: “Based on advice from the Department for Transport, which we took in good faith as current up to last week, community transport operators were considered entitled to bid for transport contracts of whatever sort from the county council in competition with other providers and that’s the way in which these were awarded.
“Since we became aware of the announcement last week we’ve been taking advice on the implications for our transport contracts.”