Why is Mr Osborne going to wreck the best bus industry in Europe?

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In London, Belfast and most European cities, buses are regulated and run by local authorities usually through a contracting model. They require very substantial public subsidy. Outside London, mainland UK buses are deregulated with private bus companies making all the decisions about when and where buses will run and what fares will be charged. They take the commercial risk. Because London has a highly developed bus lane network combined with a congestion charge, along with high population density and a growing economy, bus use has grown considerably in recent years. Despite this high use, the regulated system is so bureaucratic that London buses need a subsidy of about £600m per year. Belfast buses make large losses, but as they do not have London funding levels, they are facing big services cuts.

Outside London 90% of buses do not require any subsidy, the rest are mostly deep rural services and a few evening and Sunday services. Where local authorities are very pro-bus, usually to protect their town and city centres from congestion and pollution, or because it is impossible to provide a bigger road network, bus use is growing and companies are providing more comfortable buses with free Wi-Fi.

Places like Nottingham, Reading, Brighton, Oxford and Edinburgh have very high and growing levels of bus use. Customer satisfaction is high. Buses carry about four times as many passengers as the rail network and have the same levels of safety.

Despite the evidence, some of our bright local authority transport officers have decided that the buses are popular in London because they are regulated rather than because of the basic economic and financial situation there. For years these officers have been trying to get buses re-regulated and pass into local authority control. They have persuaded themselves, again against the evidence, that the huge costs of contracting could be met by cutting the profits of bus companies.

The outcome would be huge losses for the local authority, which would be passed on to council tax and business rate payers, along with big cuts to the bus network. Recently Sheffield City Council which had been a bellwether for regulation, changed its mind and signed up to a partnership arrangement with the bus companies. This will cost them very little, but they already have higher bus use and less congestion and better bus services for Sheffield are being delivered.

The puzzle is that in the name of devolution Mr Osborne is unnecessarily giving local authorities contracting powers (being described as franchising – but it isn’t in reality!) with a Buses Bill due to go through Parliament early next year.

A few dinosaur led local authorities such as West Yorkshire and Tyne and Wear are likely to rush into contracting, destabilising city budgets and undoing some of Mr Osborne’s attempts and deficit reduction. If they succeed there will be knock on effects for all Britain’s bus networks, even the best, because companies will no longer be able to raise capital for new buses from the private sector and quite quickly buses will become old and unreliable. Mr Osborne will have ruined one of the Conservative Party’s best privatisations!