ODI Leeds

Health of the bus market inquiry

The post below is the response made by Tom Forth and Neil McClure to the Transport Select Committee's 'Health of the Bus Market Inquiry'. This, and all other public responses are avialable on the Committee's dedicated webpage.

The post was submitted to the Committee in August 2018.


National bus policy since 1985 has largely not affected London. There, buses remain a local responsibility. Bus use in London has thrived.

National bus policy has worked reasonably well in small cities, where a single operator can work informally with a local authority. There are inefficiencies caused by the inflexibility and central control of many schemes (notably ENCTS) but they are minor. These inefficiencies become larger with rural bus services, of which there are probably too many in the UK.

National bus policy has been a disaster in big cities such as Manchester, Birmingham, and Leeds. Bus use has halved in three decades, largely as a result of poor national policy. This has contributed to the UK's productivity gap with the rest of Europe.

It is in the big cities where the Department for Transport's ambition must change quickly. The Transport Act 1985 did not appreciate that a large part of the benefit of good public transport in cities accrues to the city's economy in general through agglomeration effects. Too little of the benefit of good public transport accrues to bus operators and bus passengers themselves to make investment and good service self-funding. Bus passengers in big cities endure poor service for which they pay high, complex, and confusing fares. They are disconnected from their own cities, and have no ability to improve things via their local democracy.

Most importantly, deregulation of buses has been a disaster for the economy of the UK's big cities. Much of this response considers how well the DfT is doing at accepting this and undoing the legacy of past poor policy.

The Bus Services Act 2017 is a step in the right direction. It must be urgently followed by much deeper reform and the return of even more power to local and regional government. With that reform, the UK's bus market has a bright and healthy future ahead of it. It can play a role in the economies of the UK's big cities, especially those in North England, catching up with their European equivalents and contributing to the prosperity of the whole of the UK. Buses are a key part of the industrial strategy that the UK needs.

An area where the UK has done very well is in open data. Bus service timetables and routes are available as open data for the whole of Great Britain and as a result are made available to citizens via dozens of excellent public transport planning services. Of these, Google Maps is almost certainly the most widely-used. The open data and accessibility provisions of the Bus Services Act 2017 are likely to further improve this, with the possibility that fares will be included in journey planning.

1. The effectiveness and ambition of the Department for Transport's policies on buses.

Bus passenger numbers in big UK cities outside of London (from now on, big cities) have halved since the UK government forced local government to deregulate buses in 1985. They are continuing to fall.

In London, the only city exempt from this forced deregulation, passenger numbers have doubled. Despite recent declines they remain well above historic levels.

The decline in bus passenger numbers in big cities is despite considerable central government subsidy, largely via free bus passes for the elderly and the bus service operators grant (BSOG).

On ridership measures, the effectiveness of the DfT's policies on buses has been very poor. But an even greater measure of failure lies elsewhere.

Bus deregulation, combined with low national capital transport investment and severe restrictions on locally-funded investment, has left the UK's big cities with significantly poorer public transport than their European equivalents. New research that we have conducted in Birmingham suggests that this poor internal connectivity contributes to the UK's productivity gap, explaining up to half of the average 30% gap in productivity between the UK's big cities and their equivalents in Europe.

But the failure of bus deregulation does not mean that the Department for Transport's ambition has been wrong since 1985. For the first decade of deregulation, the policy was defensible and maybe even worth trying. For the second decade of deregulation, as bus use continued to fall in big cities and increased enormously in London, it became indefensible. That it remains the default method for running buses in the UK's big cities today is bad for Britain.

The Bus Services Act 2017 realises this historic error and has taken small steps towards allowing it to be undone. Given the onerous conditions in the law before franchising will be allowed and the restrictions on local government finances it will take time before deregulation can be undone in at least some big cities. We hope it will be.

There are huge opportunities for better bus information, better ticketing, better passenger experiences, and innovation in the bus market. The experiences of the past three decades in London have shown that these advances all progress more quickly in big cities within a regulated bus market.

2. Factors affecting bus use, including the reliability of the bus service, congestion and the ways bus companies are dealing with congestion, and the effectiveness of bus priority measures.

Bus use in London has risen due to,

  • Innovations such as the Oyster card, contactless payment, open data to power travel apps, at-stop real-time information and simple bus maps, a single flat fare, daily and weekly capped fares, two-door operation, and intermodal collaboration. These are made possible by city-level government regulation and have proved almost impossible to emulate well without regulation.
  • Reliable services and faster journeys thanks to a combination of capital investment (bus lanes) and reduced congestion due to congestion charging. Since bus franchises are tendered by TfL it is in their interest to invest in better journeys as this then reduces the cost of buying services.
  • Cheap fares and extra concessionary pass perks (such as under 18 bus passes) largely paid for by cross-subsidy from other modes by TfL. Other modes such as the tube make significant operating profit as a result of large and sustained long-term capital investment by the UK government over the past two decades. Additionally, income from the few profitable London bus routes can be used to subsidise other routes that are not profitable.

Bus use in big cities has fallen because,

  • Innovations have been restricted to individual operators making them almost incomprehensible to passengers, even regular ones. It is impossible under UK laws for the governments in big cities to do anything as good as the Oyster Card in London.
  • Services are unreliable and slow because they have not been invested in by bus companies or local government. This is rational behaviour from both parties. In a competitive market, bus companies have no way to stop their competitors gaining from their own on-road investments and so it is in all companies interests not to invest. At the same time, local government has little power to raise money to invest and little incentive to invest even if they do. Since local government does not franchise bus services, any benefits from investment are collected by private operators or by members of the public (both of which the local government cannot tax). While local government is dedicated to improving the lives of its citizens, this makes the business case for doing so via investments other than buses more attractive.
  • Fares and product structures are expensive, secret, and confusing because they are designed by private companies competing for existing customers. Attracting new customers is rarely a sensible business decision for these companies. Attracting customers from rivals and then trying to retain them is more lucrative and conflicts with attempts to encourage new bus passengers.

In the face of rising competitive pressure from other urban mobility providers (such as Uber), innovative travel propositions (such as Mobility as a Service) and transport modes (dockless bicycles), the gap between the travel experience of bus and that of others continues to diverge.

In order to navigate the bus system, prior knowledge is almost always required. Information provision is patchy and depends upon the city, region or area of travel, the technical competence of the operator, quality of relationships between local authority and operator, and the strategy and business model of the operator.

Bus travel is not appealing to many new customers where they specifically face the following barriers to travel:

  • Highly complex product structures - some operators have hundreds of product variations, whilst operators define differently their product rules, such as the definition of young people, off peak times, disability criteria, return journey validity, validity of day/week/month products and so on.
  • Inconsistent payment methods - London has the successful Oyster card and universal acceptance of contactless. Elsewhere we have the M card (West Yorkshire), GMT (Manchester), Robin Hood Card (Nottingham) plus others. There are regional schemes in plan such as those at Transport for the North and Transport for West Midlands. Individual operators have their own ticketing schemes and mobile ticket apps. Some accept contactless payments, some smaller operators cannot afford the infrastructure required. This ticketing complexity is often cited as a key barrier to travel for passengers in Transport Focus research.
  • Individualism of service - in towns and cities where there are multiple competing large operators (for example, Leeds and Manchester), operators have different products, prices, websites and apps containing their own services only. Integration is a customer responsibility - in many cases, a multi-operator journey across a city will require multiple tickets, multiple payments and multiple means of journey planning and tracking (including websites and apps). In some cases these services are integrated by local or combined authorities, who lack the income streams necessary to delivery a high quality service or the legal powers to enforce operators to work with them effectively.
  • Patchy data provision, when operators provide data it is often incomplete and in a format that makes aggregation across multiple operators a complicated task. Transport for London is often cited as a world leader in open data as a facilitator of transport information innovation. Using TfLs unified API, over 600 customer-facing apps have been built. Outside of London some comparable regional examples exist (such as Transport for West Midlands) but resource is consumed on data cleansing, integration and data standardisation rather than facilitating innovation.

In the unregulated market outside of London, it has proven almost impossible to deliver the standardisation of customer outcomes experienced in London.

3. The provision of services to isolated communities in rural and urban areas, and the reliance of particular communities and groups of people on bus services.

The UK is unusual in that its rural areas are typically more prosperous than urban areas, especially once London is excepted. Rural bus services in the UK are in many ways superior to those in similar countries and they receive subsidy and support well above that merited by the economic return that support achieves. We are not convinced that the social return is worth the current level of investment given the conditions attached to that money.

Most rural residents choose to drive. In most cases, taking the money currently spent on ENCTS cards and giving it local authorities to provide services to those who cannot would lead to better outcomes for people living in rural areas than maintaining the current system of subsidised bus journeys.

Some progress has already been made in this area through the devolution of very small parts of the Bus Services Operators Grant (BSOG). This funding should be devolved entirely and local authorities should be free to spend their portion in any way that they see fit. Crucially this would include non-bus and even non-transport options.

4. The viability and long-term sustainability of bus services, including the effectiveness of funding, fare structures and public grants.

Within London, bus services are sustainable without government intervention. Fares are for the Mayor to set and could be set high enough to cover the costs of running the existing service, especially considering TfLs ability to cross-subsidise from surplus-generating tube and TfL Rail services.

In big cities, most bus services are sustainable and run without government support, except for ENCTS passengers many of whom would otherwise pay to travel. Some additional services outside of peak times or popular routes are supported by a mixture of local and central government. Under franchising, cross-subsidy could be used to support these routes with less need for central government support. In most big cities ENCTS money would be better spent investing in improving bus routes and providing more reliable and rapid services than on free fares.

In rural areas, most bus services are not sustainable without continuing support from local government and central government. Central government supports is largely via the Bus Service Operator Grant (BSOG), and via reimbursements for travel on English National Concessionary Travel Scheme (ENCTS) cards and their devolved equivalents.

We don't think that we should be too worried about declines in rural bus services, as they largely provide poor economic and social value for money. If local governments were provided with funding and freedom to ensure that rural residents were connected to essential services we believe that most could do so more efficiently than currently. Such a local approach need not cost extra money, with the cost of universal ENCTS cards a good place to find the cash.

It is notable that few other countries in Europe (Ireland and Hungary are notable exceptions) - and to our knowledge no other large country - provide ENCTS cards or similar to all elderly people. This universal benefit is not only poorly targeted, but crucially forces local authorities to provide connectivity by bus where other methods may offer better value for money.

5. Regulations affecting the provision of bus services and the adequacy of guidance to operators and local authorities.

The imposition of deregulation in big cities has greatly reduced bus use and made the UK's big cities less productive. For smaller cities and rural local authorities the negative impact has been far less, with commercial services providing acceptable coverage and the vast majority of residents traveling by car. In London, where services remain locally regulated, bus services are excellent.

The UK is strong on bus open data, and this is a rare upside of our centralised approach to service provision. This leads to significant advantages to bus users, with public transport searches in Great Britain almost always returning all available journeys. In France, where public transport remains a largely local responsibility, coverage is patchy and unreliable.

One of the key components of the Bus Services Act 2017 relates to open data. The regulations will legislate for operators to provide certain datasets (including timetables, fares and real-time information) available for use by third parties. Crucially, the regulations will define guidelines, standards and formats for data provision.

Due to the complexity of the data structures and the size of the industry, the implementation of this is likely to take place over many years but should further cement Great Britain's strong position in this area.

A short additional submission on the obstacles to franchising and investment.

We believe that bus franchising is something worth trying in at least a few big cities. We are concerned that the current Secretary of State for Transport does not realise how hard this will be, despite the improvement in The Bus Services Act 2017.

Franchising, or similar, was a possibility before The Bus Services Act 2017, as Ministers occasionally reminded people. But the conditions placed on local government by central government made it almost impossible to implement. It is estimated that Tyne and Wear spent at least 2.6m trying to regulate their buses. They failed due to UK laws.

After a decade of deep cuts to local governments there is little appetite for similarly expensive legal battles elsewhere. There is a role for UK government lawyers in further improving The Bus Services Act to make sure that it is the decision of locally elected governments and not just a battle of lawyers that determines how buses are run in our big cities.

It is widely believed in the industry that private bus companies make considerably more profit under unregulated than regulated regimes. It is in their interest to protect those profits and therefore to protect unregulated bus markets. The dedication which they show to this task is well summarised in Leeds City Councils scrutiny board inquiry into Leeds attempts to build first a tram and then a trolleybus system (NGT) which were eventually blocked by the UK government.

Specifically point 113 is worth reading. The involvement of First Group and the submission of alternative proposals at the public inquiry generated strong views during the scrutiny inquiry. Cllr Andrew Carter [Conservative] expressed the view that it was a great pity that First Bus cant put the energy into providing bus services that theyve put into scuppering Supertram and NGT. Both he and Cllr Downes reflected on the promise of buses improvement in 2005, stating their view that the major bus investment required could have been delivered over the past 12 years but has not. They expressed their concern that promises will still not be delivered and their dissatisfaction at the way that buses operate within Leeds and West Yorkshire.

About ODI Leeds and Open Transport North

The Open Data Institute Leeds (ODI Leeds) is an independent pioneer node of The Open Data Institute in London. We are funded by our sponsors in the private and public sector to be radically open in our mission to inform and provoke better debate and decisions using data.

Open Transport North is a company that started up from ODILeeds focusing on transport innovation, especially involving data.

Both Tom Forth and Neil McClure run their own businesses often operating via ODI Leeds and Open Transport North and these submissions have been written in a personal capacity.

They have additionally written about much more about transport, including,