Labour’s bus plans – no more tinkering?

Bus franchising looks set to be rolled out in new areas, but time and due process could yet prove to be the enemy of radical reform

Whatever the outcome of the General Election on 4 July, it is increasingly likely that, by 2030, the commanding heights of the UK bus industry will be specified and controlled by the public sector. This was clear even before the recent local elections, but the election of Richard Parker as the new Mayor of the West Midlands meant that all the combined authorities in the conurbations are committed to implementing this approach over the next five years, alongside the West of England and Cambridgeshire and Peterborough (see table below).

If all goes according to plan, they will be joined by the whole of Wales and the Strathclyde area of Scotland. The latter is a little less certain, since the procedures for establishing a “local franchise” under the Transport (Scotland) Act 2019 require an additional layer of consent from a panel convened by the Traffic Commissioner, rather as Tyne & Wear did in 2015.

Authorities Currently Pursuing a Franchise

Finally, if – as expected – Labour wins power at Westminster later this summer, the party is committed to “making it easier” for local transport authorities outside the conurbations to adopt a franchising model as well.

However, all may not be quite as it seems. The rhetoric is strong: “no more tinkering on the edges” said shadow local transport minister Simon Lightfoot at CPT’s conference in January, though he quickly qualified this by saying “we won’t be able to deliver as quickly as we would like”. And again last month, when shadow transport secretary Louise Haigh promised new reform legislation “during the first term of a new Labour Government” before going on to assert that this would “require no additional central government spending”. It would, she claimed, permit local authorities to introduce franchising “in as little as two years”, and save hundreds of bus routes.

Assuming for a moment that the DfT wins a slot for a bill in the second session of a new Parliament (November 2025-October 2026), the planned primary legislation and its associated secondary legislation could be expected to come into force in middle or late 2027. If the authorities wanting to use their new powers moved very quickly, and the two-year promise was deliverable, franchise implementation could begin in the summer of 2029.

A more pessimistic scenario sees the Bill delayed until the third session (2026/27), putting full introduction back until late 2027 or even early 2028. It is not inconceivable that the required detailed regulations could be further delayed, so that the new law would not be implemented until 2029, around the time of the next General Election. Allow local authorities a year to deliberate and prepare their business cases, and then allow a more realistic three year implementation period and we’re into 2033, which could well be the year of the General Election after next.

Thus, non-Metropolitan authorities could wait at least five and possibly up to ten years before the reform could be implemented. Of course, authorities that wanted to move more quickly to a franchise could do so much earlier under the provisions of the 2017 Act. But this involves a demanding process of writing a full five-part business case to Treasury standards. However, most LTAs would lack the ability to fund such a business case, so would await Labour’s promised easier path to franchising.

This likely delay may seem a minor point, but is actually quite important – because we now have two additional layers of uncertainty in the bus industry equation, so deterring potential investors and existing and potential SMEs (and that’s before we even talk about Sadiq Kahn’s nationalisation plans for London). All this at a time when the need for investment funding is rising and the investors are above all seeking some stability before committing funds. Meanwhile, the likelihood of there being any cash to fund public sector investment in the sector sits on a scale ranging from extremely unlikely to no chance.

Operators and their investors seem at the moment to be much more relaxed about the moves towards re-regulation outside the capital. The major players, especially those involved in overseas markets, are well used to competing for business through competitive tendering. It is, after all, the default mechanism for bus service provision in many parts of the world. The operating risks are well understood, and any financial uncertainties are reduced by the fact that the tendering authority retains revenue risk. In many cases, the authority also retains ownership of key assets such as vehicles and depots. This minimises the need for the operators to fund capital investment, reduces the capital employed and therefore the size of the required profits.

The emerging Enhanced Partnership (EP) arrangements in other parts of the English market (and the BSIPs in Scotland) are also reasonably attractive to investors. True, revenue risk is retained, but then is offset by reductions in the risk of competition, and the retention of some measure of commercial freedom. The reduced risk of competition is partly a function of the current poor state of demand, but also reflects the power of incumbency and the entrenched nature of a successful relationship between local transport authority and local operator. Not for nothing do academics and analysts studying bus markets in other parts of the world warn of the dangers of too cosy a relationship, often referred to as “regulatory capture”.

Which brings us to the SME sector – battered by Covid, cost inflation, high interest rates and downward pressure on tender prices. Many are already fearful of the cost and complexity of introducing zero-emission vehicles, and suddenly they are faced with the prospect of losing their business in new moves towards franchising – a move that could happen at any time once new legislation was passed. What incentive would there be to invest in complicated new technology with that hanging over you like a sword of Damocles?  Much better to take the latest offer from the major group up the road and retire.

It is already clear that, despite protestations and declarations of faith, the sector has missed out badly in Greater Manchester’s franchising process and the recent Welsh retendering exercise. The cost and complexity of bidding is a powerful disincentive to their involvement in the franchising process, and it is difficult to see how this can be overcome without compromising the compliance requirements of procurement specialists in franchising authorities. 

Even throughout the previous nationalised period in the 1970s, small local operators continued to prosper and provide locally focused services to their home communities, providing home to school transport, private charter and excursions alongside the bus service. Their loss now would be another serious blow to the life in rural and semi-rural areas.

It’s clear that the arrival of a new Labour government in Whitehall, widely expected in a few weeks, will herald another round of reform for the bus industry. However, those of us with long memories might recall the promises made by Claire Short and her shadow team at a similar point in the electoral cycle in the 1990s and compare them with the actual legislation enacted three years after the election … and then consider the actual outcome.

Meanwhile, it looks as if “no more tinkering at the edges” might not be as firm a statement as might have been thought. Time and due process could yet prove to be the enemy of radical reform. We shall see.

Also published in Passenger Transport magazine.