04Franchising gives mayors control of buses

Only franchising offers the levers for mayors to address the challenges set out in section three. With franchising mayors can increase the efficiency of every pound spent on transport and increase modal share by making buses a more compelling choice. Only franchising allows mayors to specify services, co-ordinate networks and use buses as a tool to support economic prosperity.

EPSs are an evolution of an imperfect arrangement that forces transport planners to work around bus operators. This makes it impossible to have a single guiding mind while operators will inevitably deliver services that maximise returns for shareholders – not necessarily what is best for a city. An EPS is a stop-gap solution; it is a fudge which stops mayors from delivering the quality bus networks their electorate rightly expect.

The tables below set out the differences between franchising and EPSs in relation to key mayoral aspirations for bus services.

A) City-wide 24/7 services as part of an integrated transport system

Can mayors set the routes, frequencies and running hours of a stable bus network?
EPS: No Franchising: Yes
Franchising lets mayors set the route frequencies and running hours of the bus network to provide a more equitable and efficient network. Under an EPS, any incumbent operator running 25 per cent of regular service miles in the city can block a mayor’s plans for its bus network or limit them. An EPS can only move ‘at the speed of the slowest’ large operator in its area.
Agreements to control frequency to reduce ‘overbussing’ on busy routes in an EPS cannot stop new operators from adding services. In these circumstances, to control frequencies so that competition does not reduce the efficiency of the wider bus network, the corridor would need to be franchised.Nottingham’s attempts to reduce the number of buses in the city centre creating congestion highlighted the limits of any partnership scheme in a deregulated environment.6
Operators can agree to reduce the frequency of timetable changes under an EPS but decisions about changes to frequencies are still in the hands of operators.
Can mayors integrate the bus network with other transport modes?
EPS: No Franchising: Yes
Under franchising, mayors who also control trams and local train services, such as in Greater Manchester and Liverpool City Region, have the financial incentive to set the network to avoid duplication, maximise efficiency and provide the strongest public transport offer. Costs and revenues across different modes can be treated as one, enabling ticketing, timetables and the network to be designed to provide the most extensive possible network for passengers.
An EPS allows for multi-modal ticketing, but the incentive to compete between routes rather than complement remains.
Can mayors create a common livery for buses?
EPS: Yes Franchising: Yes
Only possible under an EPS if operators agree.

B) Affordable and easy-to-understand fares across the network

Can mayors set fares?
EPS: No Franchising: Yes
Only franchising lets metro mayors set fares.Under an EPS, operators and mayors can work together to decide how multi-operator tickets are priced. But this is ultimately dependent on operators.

 

Can mayors subsidise all passenger fares?
EPS: No Franchising: Yes
Mayors can use subsidy to reduce the fares of non-concessionary travel under franchising.
An EPS does not allow cities to directly subsidise fares for all bus users. It can specify different concession entitlements, such as for apprenticeships.

 

Can mayors specify the tickets available?
EPS: No Franchising: Yes
Franchising puts the entire fare structure and ticketing arrangements under the control of the mayor. There is no ‘multi-operator’ / ‘single operator’ variety for passengers, increasing simplicity. Single fares across the city can be uniform so that passengers always know the cost of bus travel.
An EPS allows for the creation of common fare zones if agreed to. But prices can only go as low as the fare agreed to by the highest-cost operator.
Under an EPS there must always be a single-operator ticket price set independently by operators. The incentive remains for operators to price this relative to multi-operator tickets so that passengers avoid travelling on other operators’ services.

 

Can mayors control farebox revenue?
EPS: No Franchising: Yes
Sixty per cent of total revenue for bus operators comes from commercial fares and the rest from public support. Under franchising mayors collect all of the commercial fares from across the city region and take on the revenue risk. This integrates funding across the network and improves the incentives to mayors to reduce operating costs — such as by cutting overbussing and reducing congestion for buses — and drive up demand.
Under an EPS bus operators still control fare revenues.
Can mayors use fare income from across the city to fund services elsewhere?
EPS: No Franchising: Yes
Only franchising gives mayors control over fare income from across the city and different operator areas. Cross-subsidy can extend from one end of the city region to another.
Can mayors create a common payment system?
EPS: Yes Franchising: Yes
But only possible under an EPS if the operators agree.

C) Reliable and quick journeys at all times

Can mayors invest in bus priority measures?
EPS: Yes Franchising: Yes
All cities today have the same powers to invest in bus priority and other actions to encourage modal shift from car to bus.
Can mayors benefit directly from bus priority?
EPS: No Franchising: Yes
Mayors with a franchised bus network benefit directly from bus priority measures through lower operating costs and higher revenues, increasing their incentive to invest in bus priority.
Greater Manchester’s assessment highlights the lower value for money to the city of investing in bus priority outside of franchising.7
Because mayors also have control of the bus network, they can be certain about how services will respond to improvements. New bus lanes can be matched to higher-frequency services and lower fares. This sharpens the incentive to invest and de-risks doing so.
Under an EPS the direct financial beneficiary of public investment is the incumbent private bus operator, not the city. An EPS provides a means for cities and operators to set out where their interests align and commit to improvements, but the incentives are weaker, less direct and the commitments less certain than under franchising.

D) Clean services which support carbon-cutting targets

Can mayors set the standards for bus vehicles, emissions, seating and design?
EPS: No Franchising: Yes
Franchising gives mayors full control over the standards of buses to run in the city. These can be as stringent as the mayor deems necessary to meet air quality or environmental goals.
An EPS requires the agreement of the operators of 75 per cent of service kilometres in the area to set binding standards. If this threshold is met then all operators must adhere to these standards and the city can enforce them by controlling bus operator registrations as the traffic commissioner.
Can mayors hold bus companies to account for service provision?
EPS: Yes Franchising: Yes
Under both arrangements operators can be banned from an area if they fail to meet the standards agreed in advance.
Emissions standards of buses in London are significantly higher than in other major cities. All double-decker buses in the city centre are now lower-emission hybrid vehicles.8 These standards are set by the mayor, rather than operators.
Can mayors engage with other operators to encourage efficiency and innovation?
EPS: No Franchising: Yes
Franchising allows cities to tender for the network they want, and multiple operators to bid. Operators can use their particular experiences from elsewhere to set out how they can bring innovation and new technology to improve bus services for mayors, such as running electric bus fleets or hydrogen fuel cell vehicles.
London has attracted operators from around the world with different experiences and methods bidding for fixed-fee contracts.

The tables above make it clear that these two frameworks are fundamentally different. While franchising gives mayors much greater controls than an EPS, the transfer of powers and revenues from a deregulated market back to a public body can be complex. The tables below set out how the two models compare in complexity.

Legal: are affected operators likely to challenge it?
EPS: Yes Franchising: Yes
The hurdles that franchising proposals must overcome and the scope for challenge have been reduced in the Bus Services Act 2017. Bus operators must provide information on ridership and income on routes to cities to develop assessments which are then signed off by an independent auditor. It is then up to the mayor to give the final go ahead.
In Greater Manchester bus operators applied for a judicial review of the combined authority’s consultation on bus franchising claiming it had failed to meet the required standards on proper process, evidence and analysis required by law.
EPSs will also see conditions and quality standards enforced on smaller existing operators. The legislation is intended to protect smaller operators but high standards open cities up to legal challenge, unless they step in to fund improvements which would increase the up-front cost and financial risk of an EPS. Under an EPS mayors will have legal obligations to deliver major bus priority schemes to improve bus reliability that may be hindered by financial, operational or political limitations.
Political: will there be a big change on day one?
EPS: No Franchising: Maybe
Franchising offers two elements for change on day one:
Service changes. Bigger changes to timetables and routes are likely to bring bigger risks from either model. An EPS poses a lower level of transition risk for cities as the existing operators will have co-developed the changes to services.Mayors may choose to reduce the risk by making changes gradually and by phasing the introduction of franchising across the city as Greater Manchester intends to do.
Operator changes. Risks will increase if tenders are won by non-incumbent operators. But London’s experience shows that there are bus operators from cities around the world willing and able to handle these transitions for staff, vehicles and depots.
Cities will need to be clear on how they will de-risk entry for new entrants — ensuring sites and planning support is available for new depots, for example, will be critical.
Political: will the public hold the mayor to account?
EPS: Yes Franchising: Yes
A franchised network and an EPS that includes a city-wide bus network, fare zones, and common livery will be nearly indistinguishable to the public. Voters will understandably have expectations that the mayor is in control of any bus network with their transport authority’s name and logo on vehicles.
In the West Midlands, under the existing Bus Alliance, all buses will be red with ‘Transport for West Midlands’ branding to inspire a similar sense of local pride that London’s red buses do in the capital. The public may perceive, incorrectly, that the mayor of the West Midlands has ultimate control over the network even though key decisions are made by operators.
Political: will the mayor be able to intervene directly?
EPS: No Franchising: Yes
Only under franchising will the mayor have the full control of the bus network to intervene directly if service levels decline and fares start to increase rapidly.
Financial: is the arrangement time limited?
EPS: Yes Franchising: No
Once the franchise system is introduced it will continue until a mayor chooses to end it.
An EPS is time limited. Once it ends, operators are not bound by the provisions it contains.
Financial: will the mayor be directly exposed to fluctuations in bus revenue?
EPS: No Franchising: Yes
Franchising opens mayors up to revenue risk — if fares income falls and operating costs rise then mayors will have to plug the gap.
Under an EPS mayors are not directly exposed to declining finances.

Enhanced partnerships are not a ‘stepping stone’ to franchising

Given looming deadlines imposed by government to commit to improvements it is understandable that some leaders are pursuing an EPS while longer term franchising plans are developed. West Yorkshire Combined Authority has received conformation from government that an EPS and the preliminary work towards franchising can be pursued in parallel.

In which case, might there be a temptation to try an EPS first and await the outcome before examining franchising? While this might seem attractive mayors should be clear that, as set out above, the improvements an EPS can ever hope to deliver are far inferior to franchising. Waiting for a foreseeable outcome – failure – before opting for franchising will be too late for some. For those that wish to deliver visible and lasting improvements to city transport networks, franchising is the only way forward.

Figure 2: Five steps to local control

Footnotes

  • 6 https://www.nottinghamcity.gov.uk/transportstrategies
  • 7 https://issuu.com/greatermcr/docs/greater_manchester_proposed_bus_franchising_scheme
  • 8 https://www.london.gov.uk/what-we-do/environment/pollution-and-air-quality/cleaner-buses