Memorandum by Dr Roger Sexton (Bus 25)
REGULATION OF THE BUS INDUSTRY
1. ABOUT MYSELF
Coming from a family of busmen, I have had throughout
my life a very keen interest in the bus industry.
I have been a law teacher for over 30 years,
and for the last 16 years I have watched (aghast) at the legal
chaos which "governs" the British bus industry outside
London. I am a frequent visitor to Switzerland, Germany and Sweden,
and I find a very strong contrast between (non-London) British
bus services and bus services in these three countries.
I am a (non-operating) member of the Confederation
of Passenger Transport, even though (as may already be apparent)
I strongly disagree with that organisation's views on Bus Regulation.
I frequently express my views in letters published in the specialist
Transport press, and on three occasions "The Times"
has published letters from me on the subject of transport regulation.
2. THE CENTRAL
ISSUE OF
BUS REGULATION
I will largely concentrate on the fourth point
on which you have asked for views. It seems to me that the other
four issues are (while not unimportant) subordinate to this central
question of regulation.
3. EXTEND LONDON
FRANCHISING TO
THE REST
OF BRITAIN
I would extend the system of franchising used
for London bus routes to the rest of Britain. The franchising
would be administered by a network of regional PTEs. Eg there
would be an East Midlands PTE covering (approximately) Nottinghamshire,
Derbyshire, Leicestershire and Lincolnshire.
4. THE CASE
FOR REREGULATION
BY FRANCHISING
Outside of London, the bus industry has, for
over 15 years, had a large degree of freedom from legal controls.
The result of this freedom has been a 30 per cent drop in passengers.
Yet in regulated London, passenger numbers continue to increase.
In my view, the case for stricter controls on the bus industry,
preferably through quality contracts (=franchises) is unanswerable.
5. The obvious, simplest, and best solution
is to extend the London franchising system to the rest of the
country. The regional PTEs would become the franchising authorities.
6. If the bus industry is so hostile to
franchising, why then is it that
(1) four of the five biggest bus groups are
strongly represented within London;
(2) all five of the biggest bus groups are
involved in the franchised rail passenger market;
(3) at least four of the five biggest groups
have bus interests in foreign countries where services are franchised
out?
7. I would further add
(a) that it is very strange to talk of "integrated
transport" where one half of public transport (railways)
is subject to one (very strict) type of legal regime, while the
other half (buses) is subject to a very different (very lax) legal
regime.
(b) The British system of deregulation is
way out of line with the rest of our EU partners, and with almost
all comparable countries outside the EU. (Note especially the
USA and Switzerland)
(c) The British system of "deregulation"
has the necessary concomitant that the Bus Industry has become
subject to the full rigours of Competition law. Competition law
discourages, sometimes even penalises, co-operation between operators.
The recent Arriva/First case in Leeds highlights this. Yet to
my mind, the words "integration" and "co-operation"
are almost synonymous.
8. THE LEGAL
WEAKNESSES IN
QUALITY PARTNERSHIPS
Firstly, the local authority cannot use a quality
partnership to control either fares or (it seems) detailed timetables.
Secondly, while a local authority can create
excellent facilities for company X who promises (say) to run low-floor
buses not more than three years old, company X is still open to
competition from company Y which runs poorly maintained low-quality
vehicles.
Thirdly, there is also the fundamental question,
what legal sanctions does the local authority have if a bus company
fails to operate the high quality buses it promised? A "quality
partnership", assuming it is a legally binding contract,
is not the kind of contract which a court could, by a decree of
specific performance, order to be carried out. (See Co-operative
Insurance v Argyll [1997] 3 All ER 297, where the House of Lords
refused specific performance of a tenant's covenant to keep its
shop open during normal trading hours) The only other possible
sanction is monetary compensation, ie damages. But what loss does
a local authority suffer if the promised buses do not run? Probably
very little. It is the general public who suffer.
9. THE PRACTICAL
WEAKNESSES IN
QUALITY PARTNERSHIPS
My home county of Nottinghamshire has been a
major centre of these so-called "partnerships". My pragmatic
observations suggest the following problems:
(a) There is an initial upsurge in passengers
(usually around 10 per cent) on the "quality" routes,
but this dissipates because people are driven back to their cars
by
(i) a fare increase (often unannounced);
(ii) the frequent appearance of old (non
low-floor) buses on the route;
(iii) poor (or non-existent) evening
services, so that the bus is no use when working late.
(b) Operators put all their efforts into
the quality routes, and the other services are neglected.
10. THE GREAT
LONDON/PROVINCIAL
DIVIDE
35 per cent of all bus journeys within Britain
are within Greater London—even though London accounts for
barely one-seventh of the population. How come?
Supporters of provincial bus deregulation produce
lame excuses for the London bus boom, such as "Hideous traffic
congestion in Central London"; "No sane person would
drive into London"; "There is no choice in London except
to use the bus". These supporters of provincial deregulation,
who still (it seems) dictate government thinking, ignore two further
crucial facts about London.
Firstly, buses are booming not just in central
London but also in the London suburbs. Suburban centres such as
Croydon, Harrow and Enfield are similar in size, economy and congestion
problems to provincial cities such as Nottingham, Leicester or
Derby.
Secondly, London has an extensive rail system
(both surface and tube). The London public transport user often
does have a choice between bus and train. Not so his provincial
counterpart. With the sole possible exception of Glasgow, no British
provincial city has a comprehensive rail network serving all the
suburbs. Here in Nottingham, only about two per cent of public
transport journeys into the city are by rail.
For the vast majority of provincial passengers,
public transport and buses are synonymous. Yet our free-market
orientated bus companies have (with isolated exceptions) failed
to stem the decline in bus patronage. Outside London, the general
public sees buses as old, inconvenient, unsafe and contributing
to (not curing) environmental damage. From time-to-time most provincial
cities see the outbreak of "bus wars" between rival
operators, with major streets congested with too many buses chasing
too few passengers. Edinburgh has just been suffering from such
a war. When a bus war broke out in historic Oxford, a Times Editorial
described the situation as "Mayhem". When we had a bus
war in Nottingham, correspondents to our local paper described
it as "an environmental disaster".
11. COMPETITION
LAW AND
BUSES
As the Leeds Firstbus/Arriva cases shows, provincial
operators are now working in a legal minefield which discourages
all co-operation (ie integration) between operators. However,
the current deregulation gives to bus operators the freedom to
start up, vary or cancel services more-or-less at will. The quid-pro-quo
for this freedom is regulation by the OFT. Freedom to establish
and remove services and OFT intervention are opposite sides of
the same coin.
12. EXEMPT BUSES
FROM COMPETITION
LAW?
While the franchised bus industry should generally
be exempt from Competition law, I would propose one major exception
to this exemption.
For franchising or tendering to work, there
must be plenty of bidders competing for each contract. Mergers
of potential bidders (and cartels) must therefore be carefully
policed by the Competition Law Authorities.
We should, as a matter of urgency, seek advice
from the Swedish Competition authority "Konkurrensverket".
This body has experience policing that countries bus (and train)
franchising system. One interesting feature of the Swedish system
is that small operators are allowed to form a consortium to bid
for contracts in competition with the three big groups operating
in Sweden. Some of these small operator consortia have been very
successful. "Buss I Vast" operating in the Gothenburg
region built up to about 625 vehicles in a space of five years!
13. FRANCHISING
AND INTEGRATED
TICKETING
There is very limited integrated ticketing outside
London. Franchising of bus services would allow the following:
(a) A system of all-operator area travel
cards which extends to the whole country.
(b) A national system of through bus-rail
tickets modelled on the Swedish Tågplus system.
(c) A national system under which a person
buying a day return train (or coach) ticket to a particular town
can, for a small supplement (say £2 for a town like Nottingham)
buy a "day anywhere" ticket on the destination town's
transport system.
(d) A system under which all University towns
would be required to introduce "Semester Tickets". This
is a German idea; all students have to buy an all-route travel
card. But the "Semester Ticket" (The English word is
used) is valid for 6 months and is very cheap. (Currently the
price is usually less than 50 Euros)
(e) (Another German idea using English words.)
Employers would be able to buy "Job Tickets"—ie
All operator travel cards sold in bulk at a discount price. If
the employer chooses to give the Job Ticket to an employee, that
ticket would be tax-free. (Car parking spaces are currently tax
free!)
14. A PARTICULAR
NEED FOR
FRANCHISING IN
RURAL AREAS
There are rural areas where the presence of
isolated commercial registrations hampers the planning of co-ordinated
inter-connecting services. This is particularly true of parts
of Nottinghamshire. I will give just one example. NCC has tried
hard to improve services to a group of villages north-east of
Nottingham—Oxton, Epperstone, Lambley and Woodborough. The
latter two villages are served by a commercial registration running
Nottingham to Woodborough every ninety minutes. I am sure a much
better "value for money" group of routes (probably running
hourly) could be planned if the commercial registration were withdrawn.
15. THE SWISS
PARADOX—NO
FREE MARKET
IN PUBLIC
TRANSPORT
Switzerland is the most free-market orientated
nation in Europe. Its public transport (including buses) is the
envy of the rest of the world. But that public transport is not
the product of the free market. Rather it is a system planned
by National, Cantonal and local governments.
Planned Swiss public transport works effectively.
The British free market in bus services does not work, and should
be consigned to the rubbish bin of history.
Roger Sexton
28 March 2002
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