Labour's push to reverse Thatcher's bus revolution runs off the road

Telegraph

03-07-2025

When Nicholas Ridley, the arch-Thatcherite transport secretary, introduced laws to privatise Britain's bus network in 1985, it ushered in the 'bus wars', a time when private companies battled to get the plum routes across the country.
Forty years on, and Sir Keir Starmer's Government is fighting its own war for the buses: to reverse Margaret Thatcher's revolution and hand more control to local councils.
But a year into power and Labour's plans to overthrow Thatcher's privatisation of the UK bus network are already running out of road.
Growing disquiet about the scheme's financial pitfalls have prompted bus companies to call on councils to think long and hard before embracing the Government's proposed model. Meanwhile, local government sources are fearful that authorities bullish on the idea are out of their depth.
'It's all very well giving councils more control over the buses, which is something they'd all like to have, but inevitably it all comes down to cost,' said one council source.
'It's about having the money to make it happen, and recruiting the right people and having the right areas of capability. Those people are not generally sitting around in council offices.'
Franchising fears
The policy of encouraging councils and mayors to take back control of the buses has already been pulled apart by spending watchdogs fearful about ballooning costs.
The National Audit Office (NAO) warned last week about heaping more costs on local authorities that have already run up a collective £140bn of debt.
The NAO report examined the viability of plans to give town halls control of bus fares, routes and timetables, and powers to appoint contractors to provide the services.
It said Labour's franchising model would require high levels of local political commitment and entail significant risk, while requiring councils to hire more transport experts.
'Transitioning to and running franchised services requires investment, including significant planning and commercial preparation, while introducing financial risks if costs increase more quickly than fare revenues,' it said.
'Further devolution will place greater burdens on the capacity and capability of local transport authorities. Those pursuing franchising will require more specialist expertise such as commercial and legal skills.'
The NAO said the most common reasons that local authorities have put forward for not considering franchising are its cost and the skills and capacity needed.
The Department for Transport (DfT) has estimated the cost of transitioning from private buses to franchising at between £13m and £22m per local transport authority, depending on its size, plus operating costs of up to £39m a year.
'Bus wars'
Most local bus services are currently run on a commercial basis by private companies which determine routes and timetables, with services which are unprofitable but deemed socially necessary supported by local councils.
The model has been in place since the 1985 Transport Act, introduced by Ridley, who aimed to exposing the bus sector to market forces and slashing state subsidies.
Deregulation of buses was applied throughout the UK, with the exception of London, which moved to the franchising model now overseen by Transport for London, having been deemed a case apart because of the wider usage of buses in the capital.
The move triggered the 'bus wars' and claims of unscrupulous competition for the best routes, from which five firms – Arriva, FirstGroup, Go-Ahead, National Express and Stagecoach – emerged as dominant, going on to play a major role in rail privatisation a decade later.
While the Conservatives introduced plans for bus franchising in 2017, only mayoral authorities were allowed to make the switch without the permission of ministers.
Just one, Greater Manchester, under Mayor Andy Burnham, has done so to date, a process that took seven years before being completed in January.
Costs for the so-called Bee Network have surpassed £134m, though the authority insists that the bill is no higher than under the deregulated model.
While the NAO said the benefits of the change in Manchester are not yet clear, Labour is now legislating to allow all councils to franchise services in their area.
Five more mayoral authorities have completed an assessment to determine whether it is affordable, while eleven other local transport authorities have expressed an interest.
Alison Edwards, policy director at the Confederation of Passenger Transport (CPT), which represents 800 bus and coach operators, said the NAO's findings highlight the need for councils to think carefully before embracing franchising.
She said: 'Franchising won't work everywhere. It might be fine in big cities with significant revenue-raising powers, but that is not the case in every transport authority.
'Under a contract like we see in London and Manchester there's a set fee and the local authority keeps all the revenue. But they also take on all the risk, so that if the buses start to make a loss because passenger numbers drop, that rests entirely with them.'
Ms Edwards said a contract of the type adopted on the island of Jersey diminishes the franchise risk.
Under this model, the authority pays a fee but the bus company keeps the revenue, while a simple partnership deal leaves the burden of risk very much with the operator.
In some cases, franchising will also require councils to take on ownership of bus depots and fleet currently in private hands, exposing them to more of the cost of transitioning to emissions free vehicles, she added.
The CPT plans to launch a franchising handbook aimed at local councils later this month and is working on what it calls a tool kit to help them make crucial calculations.
The Campaign for Better Transport said a lack of know-how and manpower within local authorities is likely to prove a 'major roadblock' to franchising, which may prove to be a step too far for most local authorities without more government support.
Sector in crisis
The LGA, whose members include 315 of England's 317 councils, said that franchising alone won't rescue the bus sector from a slump in demand since Covid.
'We hope to see this accompanied by further funding reforms, as well as support to places who previously may not have considered franchising a realistic option,' a spokesman said.
'Continuing with an outdated funding system for running bus services makes it difficult to attract operators to run certain routes, despite proposed extra franchising powers.'
While buses remain the most-used form of public transport in the UK, with 1.8bn journeys last year in England outside London – more than that total made by rail across the whole of Britain – the sector has been in crisis since Covid.
Passenger levels are almost 10pc down since the pandemic, despite close to £6bn of public funding.
The bus network has also shrunk by 15pc, with commercial routes in more rural areas hit hardest as operators respond to higher fuel costs and spiralling wage settlements – pay has jumped almost 30pc since 2021 – by trimming mileage.
Local authorities have struggled to fill in the service gaps created as they face a debt mountain created by spending in areas such as adult social care and special educational needs.
Despite passenger numbers remaining down, traffic congestion has returned to 2019 levels, pushing more people to use their cars rather than spend longer sitting on the bus, further undermining the viability of the model.
The DfT, which is providing funding for pilot franchising schemes in Yorkshire and Cheshire, said its Buses Bill now passing through Parliament will protect routes and prevent services from being scrapped.
A spokesman said: 'We know there is no one-size-fits-all approach to public ownership and are working closely with local authorities that wish to franchise to ensure they find the model that best works for them.'