By far the most used form of public transport – over 4 billion journeys were made annually pre-pandemic – they have long been the poor relations of trains and trams in debates on transport policy.
All that changed when Andy Burnham began to take back control of buses in Greater Manchester (GM) for the first time in over 30 years. Other mayors are going down the same route and Labour have promised to extend the power to regulate services to other local authorities.
So how did we get to where are now, what are politicians like Burnham trying to achieve, and are they likely to succeed?
Bus usage has been in long term decline
In 1955 nearly 14 billion journeys were made by bus each year. By 1980 they had more than halved. Largely provided by the public sector (municipal bus companies and the National Bus Company), buses were increasingly subsidised by local authorities (LAs) which had a statutory duty to provide co-ordinated public transport.
The Thatcher experiment
The Thatcher government was determined to reduce the power of local government, increase the role of the private sector and cut public spending. The bus industry was an early target. The 1985 Transport Act deregulated local bus services outside London and Northern Ireland. It abolished the licensing of services (which defined routes, timetables and fare structures) and the duty on LAs to co-ordinate provision. Any operator could now enter the market provided that they met safety standards and gave a specified period of notice. The operator was free to determine the route, timetable and fares with no requirement to consult with the LA. The industry was also privatised. The companies owned by the National Bus Company were sold and LAs were also free to sell their companies. Most – but not all – decided to do so. Those that remained had to be run as arm’s-length bodies.
The idea was that actual, or potential, on-road competition by operators would drive down fares, promote new ways of working (in the process reducing union power, another key aim of the Thatcher administration) and change services in line with market demand. The result would be a more innovative industry less reliant on public subsidy. LAs were only allowed to subsidise services not provided by the private sector and only after competitive tendering.
Greater London: a special case
London was treated differently. As part of its high-profile campaign against the Greater London Council (GLC), in 1984 the Government transferred responsibility for running the buses and underground to London Regional Transport (LRT). LRT could plan and regulate bus services, but had to invite tenders from the private sector for their provision. This is the London franchise model with competition ‘for the market’, rather than the on-road competition in the rest of GB, that Burnham and others are seeking to copy.
What went wrong with deregulation?
Since deregulation in October 1986, there have been calls for re-regulation, which have become louder over the intervening years.
First, competition proved to be more difficult in practice than in theory. There was the expected burst of new entrants after deregulation, but existing operators proved adept at devising ways to discourage new entrants, such as flooding routes with buses and offering cheap (often free) fares. Enforcing competition legislation was complicated because instead of one overall body (Offbus?), the task was left to the Office of Fair Trading and the Monopolies and Mergers Commission, later the Competition Commission. Since 2014 these two bodies have been combined in the Competition and Markets Authority.
Second, sustained reductions in funding to English local government – between 2010 and 2015 real terms funding was cut by over 40% – meant that LAs did not have the resources to support all the bus services they deemed socially necessary, so that these were cut substantially.
Third, the industry has consolidated into five major operators which together account for 70% of the market with little overlap or competition between them. New entrants to the market are discouraged by the knowledge that the existing dominant operators will respond to any challenge to their position by reducing fares and/or increasing services.
The result is a fragmented, less extensive, unstable network
We now have an industry dominated by a few big private sector operators concentrating on the most profitable routes, leading to a much less extensive network. People struggle to use buses outside peak times and, particularly, at unsocial hours. The uncertainty about services and timetables discourages people relying on buses for access to work. Rural areas are in an even worse position, often with only skeleton services. Bus usage has continued to fall since deregulation and fares have doubled in real terms. There is a stark contrast with London, where bus journeys more than doubled between 1982 and 2016; they halved in other metropolitan areas in England.
Although Labour took steps towards re-regulation with the introduction of Quality Contract Schemes in 2000, none were ever implemented. Ironically, the key step to re-regulate the industry was taken by Theresa May with the 2017 Bus Services Act (BSA). This gave mayors the power to franchise services along the lines of the London model.
Why the Conservative change of heart?
There was increasing concern about regional inequalities. Buses are a key way in which local government can improve economic performance, by effectively increasing the size of the local labour market. They also improve quality of life, by reducing pollution and congestion. Both are key responsibilities of local government, so it makes no sense for buses to lie outside their control.
Following the introduction of devolution in England after 2010, franchising allows mayors to plan an integrated and stable network based on low fares. As in London, this should increase usage and revenue and give private operators incentives to invest in new vehicles.
Other factors in London
However, bus usage in London has also been boosted by measures to discourage car use, such as the congestion charge, which have proved controversial. Fares have risen, although less than outside London, and the network still requires substantial subsidy: over £600m a year before the pandemic.
The Manchester model
Andy Burnham has paid the initial £134m cost of franchising from a mix of budgets, including the mayoral precept and contributions from local councils. However, he accepts that to keep the system viable it will require ongoing support from central government and/or more local taxes. The latter is particularly controversial in Greater Manchester since the rejection of a congestion charge back in 2008. Burnham has therefore floated the idea of a hotel tax rather than restrictions on car use. Whether the carrot of better services will work without restrictions on car use is an open question.
Ultimately, it will be the state of government finances, both national and local, that will determine the future of franchised bus networks outside London.
