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Bus companies 'under threat' from devolution plans

PoliticsHome | CPT UK

7 min read Partner content

Confederation of Passenger Transport President Bill Hiron warns that the drive for devolution could have disastrous consequences for the UK bus industry. 

The humble bus is often overlooked by policy makers in favour of more ostentatious infrastructure projects, but as one of the cheapest and most flexible options it is the backbone of the UK transport network.

Managing director of Essex bus company Stephenson’s, Bill Hiron, attributes this to a lack of personal experience among senior planners.

“One of the issues is that opinion formers quite often don’t travel by bus themselves,” he says.

“That’s opinion formers from Members of Parliament, right down to local councillors. There are some notable exceptions to that, but probably that is a fair assumption. But actually more people travel by bus than any other mode of public transport in the UK. So, it is a hugely important industry and in 2014 there were just over 4.7bn journeys made on local buses.”

Mr Hiron is this year’s president of the bus and coach trade association, the Confederation of Passenger Transport, and is working with the industry to raise the profile of the bus sector.

In its recent publication Connecting Britain the CPT outlines the challenges facing the sector and offers its views on how Government policy can support its aspirations.
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Outside of London the market was deregulated in 1985, opening up service delivery to private providers and introducing much needed competition.
Despite the success of this model, it is now under threat, as the drive for devolution has prompted suggestions that operating powers should be transferred to local government.    

Mr Hiron is concerned that such a substantial reshaping of the market will reverse the progress that has been made and impose significant financial burdens on councils.  

According to him, “devolution in itself is a good thing. The bus industry is a local industry. Companies provide services in local areas. Most of our business is local people making local journeys. So, the industry as a whole is generally supportive of devolution. Our issue centres around the regulatory model. The DfT centrally at the moment do not attempt to control or franchise bus services.

“So, this isn’t simply passing a power from central government to local government, it is a completely new model and effectively it is business confiscation in the extreme, because businesses of whatever size, but particularly SMEs, that have either bought companies or have built companies up by serving the public over many years could find that their business disappears overnight.

“We see no reason why the regulatory model has to change. There are very good examples across the country of partnership working with local authorities, which can deliver far more effective services, deliver change far more quickly and are far less risk to the public purse.”

Describing how the public and private sector are working together to provide necessary services, Mr Hiron stresses the economic and social advantages of the current framework.     

He says: “Around 88% of services outside London are provided commercially, so with no subsidy from the public purse. Then on top of that there is the facility for local authorities to say if they feel there is a social need for a service, where it isn’t provided commercially – so typically in a deep rural area or in the evenings, or maybe on a Sunday in areas of lower population.

“The local authority has the ability, but not a statutory duty, to say: ‘we think there should be a service between point A and B in the evenings or on a Sunday,’ and they can offer a tender for the operation of that service and pay for it, effectively. So, operators can bid to run that service if there is a need. But the vast majority of the market is provided commercially by the bus industry.

“Without a doubt the commercial market has reversed the decline in patronage in most areas. It doesn’t put a strain on the public purse and because it is a commercial industry it responds to the needs of its customers. So, like any commercial business it is in the interests of a bus company to provide the best services it can to serve its customers and ultimately grow the number of customers it has.”

These companies are understandably concerned, Mr Hiron adds, about the implications of the proposed changes, fearing that years of investment and expertise could be cast aside with immediate effect.  

“All sizes of company are worried, ranging from the big groups who have invested hugely in their networks and particularly in the big urban areas that are being talked about for devolution,” he says.

“There has been a huge level, billions of investment over the last few years. Just the uncertainty puts them at risk because no shareholder is going to thank you for spending a lot of money on brand new buses when in a few years’ time your market might be taken away from you. But for small businesses, family-owned businesses, municipally-owned businesses, who can’t simply uproot and go somewhere else it is literally the potential of losing their business overnight.

“Because if they are not successful in bidding for whatever contract the local authority decides to put to tender, they have no business. They’ve got buses, they’ve got property, they’ve got staff with nothing to do and nowhere to go. So, it’s a very real worry for the entire bus sector and the effects would be particularly pronounced, I suspect, on SMEs.”

This is why Mr Hiron is working through the CPT to inform parliamentarians on the issue, in the hope of persuading policy makers to embrace the current model.

“The bus industry and how it works probably isn’t very well understood, certainly not by the general public and even not by the majority of stakeholders and opinion formers and I include MPs in that. Now you could argue that is partly the industry’s fault perhaps but I think many people don’t understand how the industry works. They don’t understand the success that the commercial market has been able to demonstrate over the last five or ten years. And therefore, as part of the tidal wave that is devolution, the consequences and the effects on the bus industry, customers and the public purse have been overlooked. What we have got to do is make it very clear, what the commercial model brings and the lack of risk to the public purse and the benefits it brings to customers.

“You can actually have devolution whilst retaining the benefits of the commercial model. There are good partnership arrangements working in many places and the industry is ready and willing to further develop those where there is the willingness to talk locally. Of course we are concerned that in one or two areas that the desire for devolution, for business confiscation, is not based on evidence, it’s not based on fact, it’s based on a political ideology.

Because 30 years ago some of the bigger local authorities used to run their buses and there is a view that that is the only way to do it and that they should do it again, but of course times have moved on and public finances are not what they were 30 years ago. So, we believe firmly in the partnership model as the way forward,” he says.

And with the future of many British firms hanging in the balance, Mr Hiron hopes that the journey will be smooth one.

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