Competition in the local bus market

Over five billion passenger journeys are made by bus each year in Great Britain, journeys that are important to individuals and to businesses. Outside London, three-quarters of bus services are planned and provided commercially by private bus companies. Additionally, local and central government spend over £2.5 billion in England alone on support for bus services and concessionary travel. While many services are good, not all are as good as they could or should be and bus use outside London continues to decline. Quality varies across areas and across bus operator groups. In our previous report, Bus Services after the Spending Review, we highlighted the danger that bus services would be disproportionately affected by the spending cuts.

The Competition Commission undertook a major investigation into the operation of local bus markets and estimated that a lack of competition was imposing up to £305 million of detriment on passengers and local authorities. It proposed remedies to increase head-to-head (on the road) competition, which it believes will lead to improved services for passengers. The Government has agreed to implement most of the remedies.

Many witnesses to our inquiry argued that widespread head-to-head competition was neither sustainable nor desirable. There was general support for the individual remedies proposed by the Competition Commission, particularly for more multi-operator ticketing schemes, but a view that these measures alone were not sufficient. We support the Competition Commission’s remedies but are not convinced that it has addressed the full range of issues, including the problem of large incumbent operators who do not provide a sufficiently good service.

The Local Government Association (LGA) and some passenger transport executives (PTEs) argued for more emphasis on franchising, using the Quality Contract provisions of the Local Transport Acts. The LGA also argued for more government bus spending to be put under local authority control. Bus operators and some passenger groups were wary of these proposals. We concluded that although only a few PTEs seem likely to adopt the franchise route, it is important that this option is seen to be realistic. The Government should be even-handed in its approach to support for partnerships and franchises. The key issue will be whether franchises can deliver better value for money. London delivers a superior bus service, under a form of franchising, but in very different circumstances and with a much greater level of subsidy. Changes to the Local Transport Act 2008 are not required.

Partnerships–between local authorities and bus operators–will be the way forward in most areas. Where possible, partnerships will include multiple operators, as in Oxford, and competition will take place within a framework that benefits the public. Multi-operator ticketing schemes and smartcards should be implemented more widely. In areas with only one operator, partnerships should still be pursued. We call on local authorities and the bus industry to show leadership in developing partnerships, the best of which are based on shared interests and long-term-relationships and cannot easily be imposed. We also call on the Government to ensure that partnerships, including measures such as joint ticketing and co-ordinated timetabling, can proceed without undue constraintfrom the competition 4 authorities, where partnerships are in the interests of passengers.

Bus operators have to comply with safety regulations and punctuality standards, enforced by the Traffic Commissioners, but there is little other regulation of service quality for commercial services. We were concerned that limited resources were preventing the Traffic Commissioners from carrying out their regulatory functions as robustly as they would wish. The resourcing of bus regulation seems to compare unfavourably with that for rail.

We recommend that that the Department for Transport commission an independent review of the resources for the Traffic Commissioners in time for the next Spending Review.

In conclusion, we call on the Government to establish a framework that will encourage and enable local authorities and bus operators to work towards providing better bus services.