06How franchising enables mayors to deliver a high quality bus service
Franchising offers the serious potential to address the problems set out in section four. It would increase the efficiency of every pound spent on transport in cities and help to deliver a better bus system for passengers, tax payers, operators and the environment.
Franchising gives metro mayors the powers to specify and regulate the bus network to achieve these outcomes that EPS cannot:
1. City-wide, all-day, seven-days-a-week services, as part of an integrated transport system
|Mayors can set the routes, frequencies and running hours of a stable bus network||NO||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.42
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.
|Mayors can integrate the bus network with other transport modes||NO||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.
|Mayors can create a common livery for buses||YES||YES|
|But only possible under an EPS if operators agree.|
2. Affordable and simple fares across the network with clear information
|Mayors can set fares||NO||YES|
|Only franchising lets metro mayors set fares.
Under an EPS, operators and mayors can work together to decide how multiple operator tickets are priced. But this is ultimately dependent on operators.
|Mayors can subsidise all passenger fares||NO||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.
|Mayors can specify the tickets available||NO||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 tickets, 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.
|Mayors control the farebox revenue||NO||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 the network and improves the incentives to mayors to reduce operating costs — such as by cutting overbussing and reducing congestion for buses — to drive up demand.
Under an EPS, bus operators still control farebox revenues.
|Mayors can use fare income from across the city to fund services elsewhere||NO||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.|
|Mayors can create common payment system||YES||YES|
|But only possible under EPS if the operators agree.|
3. Reliable and quick journeys at all times
|Mayors can invest in bus priority measures||YES||YES|
|All cities today have the same powers to invest in bus priority and other actions to encourage modal shift from car to bus.|
|Mayors benefit directly from bus priority||NO||YES|
|Mayors with a franchised bus network benefit directly from bus priority measures through lower costs and higher revenues, increasing their incentive to invest in bus priority.
Because mayors also have control of the bus network, they can be certain about how services will respond to improvements, reducing the risk of acting.
New bus lanes can be matched to higher-frequency services and lower fares. This sharpens the incentive to invest and derisks doing so. Greater Manchester’s assessment highlights the lower value for money to the city of investing in bus priority outside of franchising.43
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.
4. Clean and green bus service
|Mayors can set the standards for bus vehicles, emissions, seating, design||NO||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.
|Mayors can hold bus companies to account for service provision||YES||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.44 These standards are set by the mayor, rather than operators.
|Mayors can engage with other operators to encourage efficiency and innovation||NO||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.
What are the risks?
It is clear that these two frameworks are fundamentally different. Within the franchising model, the transfer of powers and revenues from a deregulated market back to a public body is complex and presents risks. The risks will become clearer as more mayors take up these powers. But through learning and exchange these risks should also be reduced.
|Are affected operators likely to challenge it?||YES||YES|
|Franchising will affect all existing operators, who might be incentivised to challenge proposals. The last time something akin to franchising was attempted in the North East in 2015, the proposal was successfully blocked by operators who faced losing control of the network and revenues.
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, not the Secretary of State, to give the final go ahead. In the case of Greater Manchester, which has progressed furthest with its proposals, the mayor would have the full support of all the major parties in his ambitions to franchise its bus network.
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.
|Will there be a big change on day one?||NO||MAYBE|
|Franchising offers two elements for change on day one.
1. Service changes. Bigger changes to timetables and routes are likely to bring bigger risks. Mayors may choose to limit these changes to reducing inefficiencies when first moving to a franchised model, as Greater Manchester has proposed in its assessment.
2. 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.
An EPS poses a lower level of transition risk for cities as the existing operators will have co-developed the scheme.
|Will the public hold the mayor to account?||YES||YES|
|A franchised network and an EPS that includes a city-wide bus network, fare zones with common livery and logos will be nearly indistinguishable to the public. Voters will understandably have expectations that the mayor is in control of any bus network with the 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 the West Midlands’ branding, to inspire a similar sense of local pride that London’s red buses do in the capital. This change was announced by the mayor last year, as part of an announcement about an integrated transport network.45
|Will the mayor be able to intervene directly?||NO||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.|
|Is the arrangement time limited?||YES||NO|
|Once the franchise system is introduced, it will continue until mayors choose to break it.
An EPS is time limited. Once it ends, operators are not limited by the provisions it contains.
|Will the mayor be directly exposed to fluctuations in bus revenue?||NO||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.