Competition in the local bus market

Written evidence from the Department of Transport (LBS 38)

1. Has the Competition Commission addressed the issues of most importance to the bus passenger?

1.1. Bus services play an integral part in British life – bringing people closer together in work, leisure, education and health. What is of most interest to the Government, therefore, is that local bus markets work in the interest of passengers – both existing and potential.

1.2. In its final report, the Competition Commission has found that, on average, there are lower frequencies and higher fares than would be the case if there were more competition. That is not good for the passenger. On the other hand, a single provider of bus services, or a number of providers working together in partnership, is able to offer significant passenger benefits such as integrated networks and ticketing. There is, therefore, a delicate balancing act to ensure that the theoretical benefits of competition can be married to the improvements already being made by commercial operators and local transport authorities working together in the passenger interest.

1.3. In its initial submission to the Competition Commission inquiry into local bus markets (available online on the Competition Commission’s website [1] ), the Department for Transport set out the evidence on what passengers want most from a bus service (see pp10-11): a reliable, punctual, and safe service on a stable network at a reasonable ticket price.

1.4. Further evidence on the importance of soft factors that may encourage bus patronage (such as ticketing and real time information) is available at http://www.dft.gov.uk/publications/role-of-soft-factors-in-the-bus-market-in-england/.

1.5. Building on recent initiatives such as the £50m Better Bus Area Fund and the latest £20m tranche of the Green Bus Fund, the Government intends to set out in due course its plans to secure these improvements, delivering better quality bus services and increasing bus passenger numbers, which will play an important part in growing the economy and cutting carbon.

2. How effective are the remedies proposed by the Competition Commission likely to prove?

2.1. The Government will formally respond to the remedies proposed by the Competition Commission in due course. It is not the intention to anticipate that response here.

2.2. Previous Department for Transport submissions to the Competition Commission inquiry, including the response to the provisional remedies (which vary little from the final remedies) are available online at the Competition Commission’s website. The Department broadly welcomed the provisional remedies and placed particular emphasis on the scope for effective and competitively-priced multi-operator tickets to open up local markets and improve the bus passenger experience.

3. Is sustained head-to head competition feasible or desirable?

3.1. The Competition Commission has made clear in its report that it sees ongoing, sustained head-to-head competition as delivering significant benefits for passengers. Please see p10 of the Department for Transport’s initial response to the Statement of Issues published by the Competition Commission on 10th February 2010 for a description of the Department’s views.

3.2. The Government will in due course set out its response to the Competition Commission report and its vision for the future of local bus services.

4. What role should Quality Partnerships play?

4.1. The term ‘Quality Partnerships’ (often with ‘Bus’ inserted between the two words) is used to describe a variety of different agreements between operators and local transport authorities, ranging from informal agreements through statutory voluntary partnerships to statutory Quality Partnership Schemes as set out in the Transport Act 2000 (as amended).

4.2. The Government’s position on the use of these tools was set out on p14 of the Department for Transport’s response to the Competition Commission’s provisional remedies, available online at the Competition Commission website. There, we set out the strong message that local partners should not be discouraged from working together because of an ill-advised fear of being ‘anti-competitive’.

4.3. We will set out in due course our vision for the future of local bus services, along with a formal response to the Competition Commission’s final report.

5. Has the Competition Commission adequately considered the franchising option?

5.1. It is presumed that this question refers to Quality Contract Schemes or the reintroduction of a regulated market along the lines of the one in place in London, rather than the practice of sub-contracting tendered bus services paid for by a local transport authority.

5.2. The Competition Commission has made clear that what it calls ‘area-wide franchising’ has the potential to reduce the detriment to passengers caused by a lack of competition, but that it preferred the rivalry and innovation it associated with competition in the market rather than competition for the market, which it is concerned may not be easily and effectively introduced.

5.3. The Government’s position on Quality Contract Schemes was set out on p14 of the Department for Transport’s response to the Competition Commission’s provisional remedies, available online at the Competition Commission website. We will set out in due course our vision for the future of local bus services, along with a formal response to the Competition Commission’s final report.

6. What action should local government and central government now take?

6.1. We will set out in due course our vision for the future of local bus services, along with a formal response to the Competition Commission’s final report.

20 February 2012


[1] Submissions from, and summaries of hearings with, third parties (including the DfT) can be found at: http://www.competition-commission.org.uk/inquiries/ref2010/localbus/index.htm

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Prepared 29th February 2012