Recent events show that some councils are considering their options for retaking control of buses. Is that the start of a recognition by advocates of the franchising processthat the industry does have value?
With news that Yellow Buses in Bournemouth was subject to a management buy-out, and that some councils are considering buying bus companies, there has been a certain retro feel to the industry.
We heard that members of Aberdeen City Council unanimously supported an investigation into how it could acquire First’s bus assets in the city. Then a report said that Plaid Cymru had suggested First Cymru could become a municipal operator, or that a stake could be taken in it.
Inevitably, others will follow.
Are they for even sale?
Leaving aside legislative barriers and whether the reported assets are available for purchase, an interesting dimension to these events is their recognition of bus companies’ monetary value.
‘Acquisition’ and ‘stake’ may not be huge words, but they imply a financial transaction taking place.
Why is that important? Because it reopens the debate about Quality Contracts (2000 and 2008 Transport Acts) and franchising (2017 Bus Services Act). All facilitated the possibility of financial goodwill being transferred from the private sector to the public sector at nil value, even when the market would dictate that there is some value.
If council members are now instructing their officials to draw up plans to, in effect, buy networks that they could assume responsibility for via franchising, does that not open up a public policy conundrum – or even a recognition that the principles behind the aforementioned Acts were flawed?
Pay the market rate
We have long argued, particularly as the 2008 and 2017 Acts were being prepared for their Parliamentary process, that franchising was an unsuitable way to organise networks unless in the case of total market failure (the wording in the 2000 Act). We also argued that if authorities decided that they wanted such a system, they should pay a market rate for the assets and goodwill.
A lot of us would be reluctant to leave the networks that we have built. But there would be financial recognition for the effort and we could use the proceeds from a sale to invest somewhere else.
The really important point is that this would make the transition a lot smoother and less risky for all parties. Transfers of ownership are never easy, but they cause a lot less resentment if there is ‘skin in the game’ for both sides. Maybe some local authorities are realising that a normal transaction is a better route than franchising to achieve control.
Recognition at last?
That’s not to say that I advocate a mass return to municipal control. The way to achieve good bus provision is much more complex than whether a transport business is controlled by the private sector or publicly owned.
But bus companies should not be cast aside from normal business rules. They have a value. In their recent resolution, Aberdeen’s councillors have made a significant step in recognising that.