The big private corporations that control the intercity bus business in the UK don't like the idea of bus franchising and are out to oppose it a every chance. Even FirstGroup is on record as saying that partnerships rather than franchises, are the "best way forward."
Outside of London bus use has been on the decline. Between 2010 and 2015 more than 2,400 bus routes have either been reduced or scrapped in England and Wales. Politicians now hope to boost buses with new legislation aimed at rolling back the 1986 deregulation of bus services outside of London.
Britain's largest bus companies that make profits in the deregulated areas outside of london are threatened by franchises. The proposed legislation makes it easier for local authorities to introduce regulated bus franchise operations that would end commercial inter-city bus operations and exclude those bus company's that do not win contracts.
Since deregulation in 1986 says the Urban Transport Group there have been two systems of bus provision in place in the UK - one for london and one for the rest of Britain. In London, Transport for London (accountable to the Mayor) determines what services are to be provided deciding on routes, timetable and fares. The services themselves are provided under contract by private companies through a competitive tendering process.
Outside of London it is a free market and bus operators are free to run whatever services they like and set fares and timetables. While in theory it is supposed to be a competitive market, most bus services are provided by five large companies (Arriva, First, Go-Ahead, National Express and StageCoach) who rarely compete against each other. There operators focus on the most profitable routes and cut service to communities where demand is weak.
In London the franchising system is working well with patronage doubling since 1986/87 and mileage increasing by 75%. Outside of London the opposite has happened and bus patronage has been in steady decline. Transport For Quality of Life reports that outside of London "deregulation and privatisation had the opposite effect: fares rose, services worsened, and bus use fell. In the big cities outside London, the earlier small rise in bus use was replaced by a fall of 13% in just one year, followed by a steady downward trend. Bus trips halved from about 2 billion per year before deregulation to about 1 billion per year now."
Local authorities have been left in the lurch with no control over the delivery of bus services and desperately try to fill the gaps.
"Local authorities have done their best since bus deregulation to pick up the pieces, but they are only allowed to reactively fill the gaps after the commercial bus companies have cherry-picked the best bits of the best routes. To fill the gaps, they tender contracts to those same bus companies to run services to less lucrative destinations, or at quieter times such as evenings and weekends. Rather than being able to use the revenue from the profitable times of day and sections of route to cross-subsidise other services, the profit is lost from the system. Our research for a new report, ‘Building a World-class Bus System for Britain’, has found that £277 million leaves the bus system every year as shareholder dividends. Meanwhile, local authorities pay to try to plug the holes, providing further profit to bus company shareholders with each tendered contract. At the end of local authorities’ reactive attempts to amend deficiencies in the bus system the resulting networks still fall far short of the networks they would design from scratch if it were setting out to maximise public benefit rather than corporate profit."
While going to a fully public option presents the most opportunity for cost savings the Transport For Quality of Life reports that there would be considerable savings and more control for local authorities if the switch was made from a the current fully deregulated system to a franchise system.
"We calculate that if the current deregulated system were replaced by franchising throughout Britain, it would generate net financial gains in the order of £340 million per year. These financial gains arise in three ways. Firstly, bus franchising would capture the ‘excess’ profit being made by bus operators outside London above the level of profit made under the regulated system in London. Secondly, with their new powers, local transport authorities could design coherent, unified bus networks that maximise the benefit to travellers (rather than networks designed to maximise bus companies’ profits) and could provide simple easy-to-use London-style ticketing valid on all buses and all other modes of transport, improvements that would lead to more people using buses and bring in more fare revenue. Thirdly, there would be efficiencies in providing the services that are currently tendered, by designing these as part of the whole network rather than an as an afterthought. The immediately available financial gains, from capturing excess profit and from efficiently designing the presently tendered services into the bus network, would be more than enough to restore all the recent cuts to fuel duty reimbursement to bus operators and to local authority support for buses. Over time, as bus patronage rose in response to better bus networks and ticketing, resulting rises in fare revenue would provide additional funding for new services over and above those that have been cut since 2010."
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