A bailout of Cardiff Bus company could cost council tax payers in Cardiff £13.6 million over the next two years.
Cardiff Bus, owned by Cardiff council, has struggled with its finances for years.
In 2018, the company reported losses of £1.9 million and cut several bus routes, prompting a shakeup of management. Its finances had been improving before the coronavirus pandemic hit.
Cardiff Bus now faces falling passenger numbers and revenue due to Covid-19, while still facing the high deficit of its generous defined-benefit pension scheme.
Details of the problems are kept secret, while councillors on the cabinet received confidential reports on the latest options on Thursday, October 15. The public was kicked out of the cabinet meeting when Cardiff Bus came on the agenda.
One brief report however was made public, where Chris Lee, the council’s corporate director of resources, warned of the risks to Cardiff Bus and the need for the extra cash.
Mr Lee said: “The interventions proposed in this report achieve the key principles of protecting the current and future entitlement of members and of the Cardiff Bus pension scheme, as well as resolving immediate risks to the viability of the company.
“The proposal staves off an immediate risk to financial viability arising from the potential risk of winding up of the pension scheme and the Pension Regulator intervention, by allowing the completion of the March 2018 valuation.”
The report explained the council needs to spend an extra £7 million on the bus company this year. Next year could also see £6.6 million spent, according to Councillor Rodney Berman, finance spokesperson for the council’s Liberal Democrat group.
Cllr Berman said: “Under Labour’s stewardship since 2012, Cardiff Bus has found itself in increasing financial difficulty which pre-dates the Covid-19 pandemic. Now it seems the only way forward is for Cardiff council to agree a massive financial bailout to stop the bus company collapsing.
“By agreeing that the council should inject £7 million into the bus company this year, with a possible further £6.6 million next year, we see the extent to which council tax payers in Cardiff will effectively be picking up the tab for Labour’s incompetent running of the company.
“While there may now be no alternative if we are to stop the company from going under, it has to be recognised that the money will have to be paid for through the council undertaking additional borrowing.
“This is nothing short of scandalous. Yet again, we see that Labour has wasted our money and it’s the city’s council tax payers who will have to pay to sort the mess out.”
Next week, councillors will vote on approving the extra financial help. Part of the money will go to buying new electric buses to replace ageing diesel buses, as well as protecting the future pensions of staff working for Cardiff Bus.
Labour councillors hit back at the criticism, and said there was cross-party support for the plans to turn around the struggling company. Labour claimed Cllr Berman, who is running in the Senedd elections next year, was just “chasing votes”.
A Cardiff Labour spokesperson said “There are two elements to the decision before the council next week. The first deals with securing the company’s pension fund valuation, which is vital not just for the company’s future, but also to protect the future pensions of its workers — it is critical this is dealt with.
“The second element deals with committing a £7 million package of investment to the company. Such investment is long overdue and will allow the company to modernise its operations, particularly by acquiring a new fleet of electric buses.
“These modern buses will allow passengers to travel in comfort, while making a massive difference to the air quality in the communities along its routes. Cardiff Labour is proud of the action it is taking to protect our city’s environment, and improve our public transport. How could any politician be against this?
“What we see here is crass electioneering from a Liberal Democrat candidate in next year’s Senedd elections who is willing to endanger Cardiff’s main bus company at a time of high financial risk in order to chase votes; while throwing the Lib Dem representative on the board under the proverbial bus as he does so.
“This tells you all you need to know about Rodney Berman’s fitness for high public office.”
Liberal Democrat councillors in Cardiff disagree on the problem, with the group’s transport spokesperson Cllr Emma Sandrey saying it is a “lot more complex” than mismanagement. Cllr Sandrey also sits on the board as a director of Cardiff Bus, along with Labour and Tory councillors.
Cllr Sandrey said: “The problems that Cardiff has with public transport are a lot more complex than some people are making out.
“We need to have a wider conversation about buses in the city and how they’re allowed to move around the city, and how we make them more punctual, reliable and sustainable in the future.
“We need a comprehensive bus lane network that runs right across the city.
“In Plasdŵr, they’ve put in bus lanes there, which is great. But the bus lane stops when it meets Pentwyn Road. Unless it’s connected to the rest of the road network, it’s not going to make a blind bit of difference.”
The council kept the details of the bus company’s finances confidential, but said councillors will have the “opportunity to discuss” the problems, in another meeting next week, which will again most likely take place behind closed doors.
A council spokesperson said: “The council strives to be as open as possible on all matters, however, there will always be times when financial and business matters have a requirement to be confidential to protect the businesses involved.
“Cardiff council made clear in its budget report this year that Cardiff Bus would require investment, and monies were set aside in the budget to enable this. The figure was detailed in the budget report and there has never been any attempt to hide that.
“Full council will have the opportunity to discuss the Cardiff Bus report next week and it will be full council which takes the decision on whether or not to proceed with the recommendations.”