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Sunday, 23 June 2024

Proposed Publicly Owned Bus Operating Companies For London And Elsewhere, And Research About East Thames Buses

Snapshot from First Sight: Battle of the Buses - Credit BBC

I tend to keep myself impartial and not aligned with politics or political parties. The purpose of this article is to show my research and to submit my suggestions to help improve public transport. Not everyone has to agree with me. The pasted texts in this article are in italics.

To briefly mention, the first London Transport authority was the London Passenger Transport Board, formed in 1933 with the transfer of the transport undertakings of the Underground railways, trams and buses, many of which were private or owned by the local governments.

In my previous article, I quoted the manifestos from the four main political parties for the London Mayoral Election, which was held in May 2024.

Labour Mayor Sadiq Khan stated in his Mayoral election manifesto: "I’ll also work with a Labour government to explore the potential benefits and means of bringing bus operations into public ownership."

As we are in the general election period, which is due to be held on 4th July 2024, the Labour Party manifesto states:

"Local communities have lost control over their bus routes. Fares have increased, routes have disappeared, and services are unreliable. Building on the work of Labour mayors, we will reform the broken system through new powers for local leaders to franchise local bus services, and we will lift the ban on municipal ownership. This will give local communities in England control over routes and schedules.

Under the Conservatives, transport services have remained fragmented and inefficient with companies and sectors failing to speak to and plan with each other. Labour will give mayors the power to create unified and integrated transport systems, allowing for more seamless journeys, and to promote active travel networks."

Taking a look at Section 22 of the Bus Services Act 2017, it states:

“(1) A relevant authority may not, in exercise of any of its powers, form a company for the purpose of providing a local service.

(2) Subsection (1) applies whether the relevant authority is acting alone or with any other person.

Although it does not restrict the Greater London Authority (GLA) or Transport for London (TfL) from creating their own bus operating company because the legislation does not list the GLA and TfL as the “relevant authority”.

According to the Freedom of Information request back in August 2022, TfL stated:

"The failure of one of our bus operators has always been a strategic risk. Each circumstance is different, bus as recent cases have shown a trade sale is normally the preferred option. TfL does hold on Operator’s licence through one of its subsidiaries which means that in appropriate circumstances it could operate buses directly, however there are no plans to resort to that. There are no plans therefore to form a new company."

It shows that TfL can create their own bus operating company because they already hold an operator's licence through one of their subsidiaries.

Meeting: MQT on 23 May 2024
Reference: 2024/1267
Question by: Hina Bokhari

New London Bus Company

You have pledged to create a new London bus company which would look at bringing routes into public ownership. How will you go about this and which of the contracts of the 16 privately-run bus firms would be coming up for negotiations first?

Answer by London Mayor Sadiq Khan

Date: Wednesday 29 May 2024

Transport for London is considering how any public ownership model could be administered. I am interested in looking at any options that could provide better benefits for passengers, enhance decarbonisation and provide better value for money for Londoners.

So far, this is still early days, and we shall wait in the coming months for updates on Sadiq’s proposals.

Nationalisation of rail services

As for the ‘operator of last resort’, there’s a number of train operating companies provided by the government due to failed franchises, many of which are subsidiaries of the UK Department for Transport, while some of the train operating companies are provided by the devolved governments of Scotland and Wales.

I’m aware of the Labour Party’s manifesto commitment to renationalising rail services by ending the current franchised contracts, you can read more about it on the Enroute Group CIC website, and of course, like me, they maintain their political impartality during the 2024 general election.

Brief history of bus operations in the (mainland) UK

The idea for the privatisation of bus services in the UK started with the ‘Ridley Plan’ back in 1977 by suggesting to privatise the National Bus Company and to enable competition by ending the system of licencing, which is known as deregulation.

This has influenced the Conservative Party, with a commitment to privatising and deregulating bus services, as mentioned in the 1983, 1987 and 1992 manifestos, as part of increasing competition and improving efficiency.

As for the control of bus services, to briefly recap from my previous article:

During the year 1986, alongside the deregulation of bus services in Great Britain (except Greater London), public transport executives (PTEs) were compelled to transfer their bus operations to "arms length" public transport companies. Which meant they no longer had the power to regulate the routes and fares of the bus operators, nor could they prevent (legal) competition from external operators.

The concept of bus deregulation was about the abolition of Road Service Licensing removed the public sector's role in fare-setting, routes, and bus frequencies and returned those powers to bus operators.

Privatisation of London’s Buses

Logos of London Buses Ltd. companies during the sell-off

As for London, the takeover of London Transport by establishing London Regional Transport was part of the government’s policy on contracting out London’s bus services to the private sector. However, I did mention on X (formerly known as Twitter) the issue of London Bus service changes to routes 38 and 55, which was raised in the House of Commons.

In 1989, London Buses Ltd. was divided into 12 business units in preparation for a sell-off. Then in 1994, the process of privatising London Buses subsidiary companies started, and the new private owners were required to keep their bus fleet red for routes serving Central London.

According to the National Audit Office on the sale of London Transport’s Bus operating companies, the gross proceeds from the sale of London Transport's Bus operating companies totaled £233 million, with a cash settlement of £218.2 million after adjustments for outstanding working capital balances with London Transport.

You can read more on the privatisation of London Bus services on Wikipedia.

East Thames Buses

East Thames Buses logo

Before the creation of the Mayor of London, which included the Greater London Authority and TfL, back in December 1999, London Regional Transport (LRT) created the East Thames Buses in response to the collapse of Harris Bus Company, which took over their tendered routes as there were no bus operators in a position to provide those routes. Then in August 2002, London Easilylink collapsed, and they were called in to operate routes 42 and 185.

I did further research for more information about the operations of East Thames Buses on the TfL website and found the texts from the agenda papers for TfL’s board meeting. During the first 8 years of TfL (2000–2008), Ken Livingstone was the Mayor of London at the time.

From the agenda paper for TfL's board meeting that was held on 13th March 2001:

"19/01 FUTURE OF EAST THAMES BUSES

A paper outlining the future options available for London Buses Limited (trading as East Thames Buses), which had been discussed by the Management Board on 27th February, was considered.

The Board agreed the recommendations made by the Management Board on 27th February, as outlined below, subject to the Director of Bus and River Services obtaining further legal advice.

The Management Board recommended that, subject to an ability to pass a “best value” test for the 2001/2 budget, the following items should be pursued as soon as possible:

(a) the current routes operated by East Thames Buses (ETB) should not be re-tendered for the present time and ETB should continue to operate these routes;

(b) ETB will not bid for any other routes;

(c) ETB should be established as a basis for market intervention in the event of operator failure, excessive high bidding or unremedied poor performance;

(d) the financial and operational performance of ETB should continue to be separately reported to TfL;

(e) for as long as ETB does not tender for bus routes, the Director of Bus and River Services should be appointed as Chair of ETB but that in all other respects ETB will remain independent of LBSL; and

(f) ETB should be managed separately, locally and appropriately for an operation of its size; and a permanent Managing Director should be sought through competitive advertisement.

The Board agreed to delegate to the Commissioner authority to approve any changes that may arise to the recommendations set out above."

From the agenda paper for TfL's board meeting that was held on 11th June 2002:

"East Thames Buses – added to the best value programme, given that it was conducted in accordance with best value principles. It is not, however, a full best value review. East Thames Buses is the trading name for London Buses Limited and was established in order to operate a small number of bus services previously provided by an operator that went into administration.

East Thames Buses is seen as an insurance policy to provide London Buses with the capacity to ensure the continued delivery of bus operations at a reasonable cost in the event of operator failure. The company should continue to operate provided it passes the ‘best value’ test.

An independent review was commissioned to ensure an open and unbiased assessment of the business in accordance with best value principles. The review team will report in spring 2002."

From the agenda paper for TfL's board meeting that was held on 18th February 2003:

"6.3 London Buses overall performance in the third quarter was a budget overspend of £8.6m, compared with a first half overspend of £12.6m. Within this overall position, network costs at £68.6m were £9.2m higher than planned - continuing the trend of increased tender costs and network expansion. Other areas of material overspend include:-

Additional vehicle purchases (£2.2m) for East Thames Buses, replacing expired leased vehicles."

From the agenda paper for TfL's board meeting that was held on 24th May 2006:

"2.1.3 Centra

Centra, London Buses’ poorest performing operator, ceased operations from 19 May 2006. Centra (the trading name of Central Parking Systems UK), took over operation of six routes in south London from Mitcham Belle in August 2004 when that company faced severe operating and financial difficulties.

Centra has been unable to improve the performance of its services, and hence to establish itself in the London market. Over the past six months three routes have been awarded to new operators through the normal contract tendering process, and arrangements were made to transfer them before the contract end dates, to secure improved service to passengers in the short term. Of the remaining three routes, two were recently tendered under short term contracts and the third will be operated by East Thames Buses (ETB)."

During 2008, the (elected) London Mayoral Conservative candidate Boris Johnson’s Transport Manifesto made no mention of selling off East Thames Buses.

Meeting: MQT on 28 January 2009
Reference: 2009/0105-1

Question by: Valerie Shawcross

East Thames Buses

When deciding whether or not to privatise East Thames Buses, what non-financial factors will you consider?

Answer by London Mayor Boris Johnson

Date: Monday 2 February 2009

The TfL Board will ultimately make the decision as to whether or not to sell East Thames Buses.

The tender process will identify the tender that offers the best value for money and will take into account the ability of operators to deliver reliable and good quality services.

Text from Go-Ahead Group Press Release

Go-Ahead Acquires East Thames Buses

The Go-Ahead Group plc (‘Go-Ahead’) has entered into an agreement to acquire the assets of East Thames Buses from Transport for London (‘TfL’) for a total cash consideration of £5 million. TfL anticipates that the operation of East Thames Buses’ contracts by Go-Ahead will save it over £30 million pounds over a 9 year period as a result of the combination of the sale of its assets, reduced operating costs and economies of scale, thus providing ‘significantly better value for money for fare and taxpayers’. The transaction is due to be completed by 5 September 2009.

East Thames Buses has operated bus services in Southeast London for 9 years. East Thames Buses will operate as part of the Go-Ahead London Bus Company.

East Thames Buses has around 460 employees and a fleet of 113 vehicles. It operates 9 routes for TfL including 2 school routes. All contracts will be renewed with East Thames Buses for a 5 year period from the date of completion, together with a 2 year option for extension. The annual turnover of the business is around £24 million.

All staff will transfer under provisions of the Transfer of Undertakings (Protection of Employment) Regulations 2006.

Commenting on the transaction, Go-Ahead’s Group Chief Executive, Keith Ludeman said “The acquisition of East Thames Buses provides us with an excellent opportunity to further develop Go-Ahead’s London bus business. This acquisition will enable us to leverage synergies from our existing bus operations and to enhance the quality of East Thames bus services to passengers.

“Go-Ahead’s bus operations in London, which includes Metrobus, will now grow further with a market share of 21.5%, utilizing over 1,800 vehicles and over 5,500 employees. They will also serve over a million passengers each day. This business provides an essential service in London which is continuing to see increased demand for public transport as London’s population continues to grow.”

During October 2009, TfL stated in the press release: "The transfer of ETB by TfL to the private sector will save TfL more than £30m over the next nine years, through the sale of assets and reduced operating costs, thus providing significantly better value for money for fare and taxpayers.".

Further reading of East Thames Buses, including routes, garages and fleet ownership, can be read on Wikipedia.

Publicly owned bus operating companies outside of London.

At present, there are local authority owned bus operating companies in England, such as Blackpool Transport, Ipswich Buses, Nottingham City Transport (18% owned by Transdev), Reading Buses, and Warrington's Own Buses.

In 2022, the devolved Welsh government proposed new bus legislation to create franchising, which would enable local authorities to create their own bus operating companies.

Text from the consultation document, One network, one timetable, one ticket: planning buses as a public service for Wales:

"Municipal bus companies

Sometimes, local authorities receive few or no bids to run bus services, be they school services or contracted socially necessary services. This means either that services don’t run, or that they end up paying over the odds for a private operator to fill that gap because they aren’t allowed to run those services themselves except in very limited circumstances."

"This highlighted the precarious situation that if a bus operating company failed, the local authority wouldn’t be able to protect services in their communities. They aren’t able to set up a new municipal bus company to run services directly except in very specific circumstances, and they have no alternatives if there aren’t any bids to run contracted services in their area, or if the only bids are unaffordable."

"An arms-length bus company would manage services as an independent commercial organisation with its own management board. The main shareholder of the company would be the local authority, but it would not involve itself in the day-to-day running of services.

We are also proposing to allow local authorities to invest in or acquire bus companies.

In addition to removing a barrier to public investment, this would also allow the merger of two municipal bus companies, which could offer economies of scale or allow them to operate over a wider area. Under current rules, the local authority owners could not both remain shareholders of a merged company as it would count as investing in a new company. This actively inhibits collaboration between local authorities and prevents attempts to deliver services more efficiently where this can be done regionally.

Finally, municipal bus companies are currently unable to raise funds, either by borrowing or by selling share capital. This puts them on an uneven playing field with commercial competitors, an issue which was acutely highlighted during the COVID-19 pandemic, and which prevents investment in zero emission buses. We are proposing to relax those restrictions and allow municipal bus operators to raise funds on a level playing field, freeing up investment into the local bus services they run, and ensuring that there are no advantages under the franchised system.

In addition, the implementation of these reforms could also create an option for an Operator of Last Resort whereby a municipal bus company could, where viable, operate in a different part of Wales to provide network bus services should there be no bidders coming forward to tender for a franchise, or a franchisee ceases to operate part way through a contract term.

These provisions are designed to ensure a healthy and equitable bus sector, where all parts of the system, be they municipal, small, or corporate operators, are able to contribute as fully as possible to a network designed for the public good, according to their strengths."

During 2024, as part of their roadmap for bus reform document:

"The white paper also set out our plans to allow local authorities to set up new municipal operators should they choose to. We want to create a procurement approach which attracts operators that can deliver high quality services and social value."

In Strathclyde, Scotland. In their consultation document, they have investigated creating their own publicly owned bus operating company.

Text from the document, Strathclyde Regional Bus Strategy: A Consultation on the Recommended Options for Improving our Future Bus Network:

“Municipal bus company

A municipal bus company is an operator of bus services owned by a LTA. A municipal bus company can be formed from the purchase of an existing bus or coach company or the creation of a new company. Municipal bus companies compete for the market in the same way as privately owned bus companies. Currently, all bus services in Strathclyde are delivered by private sector operators. This option has been included in the appraisal as it is available to LTAs under the Transport (Scotland) Act 2019, and has not been discounted through any previous work by SPT.”

"A municipal bus operator is constrained by the prevailing operating model and commercial environment, and subsidy control regulations restrict the public sector financial support that can be provided to a municipal operator. Under the current system, a new municipal operator would need to compete ‘on the road’ with existing commercial bus operators to carve out a market share, or compete with existing bus operators to win contracts to provide socially necessary services.

With that in mind, we’ve found that establishing a municipal bus company (or companies) has the potential to improve service levels and fares as the company would be free to set its own fares and network. A high-quality municipal operator also could help drive up standards and quality in the wider bus market as other operators would need to compete with it for market share. It may also be able to invest profits back into the network, thus further improving quality. We believe, though, that only a larger scale municipal operation could have noticeable beneficial impacts on the quality of the overall bus network.

We identified that the route to establishing a new, large scale municipal operation is challenging and uncertain. Establishing an entirely new company at scale presents high financial and deliverability risk whilst a strategy based upon acquisition of existing operators to achieve market prominence could be a lengthy and costly process. Acquiring an existing larger operator with existing market share could be a faster route, but currently there are no opportunities to do so in the region.

This means there is a lot of uncertainty about the level of beneficial impact that a new municipal operator could have on the quality of the bus network in our region. However, we found that there may be merit, in the shorter term, in establishing a municipal operation to provide services in some areas where bus services are already provided under contract to SPT. A larger- scale municipal bus company is unlikely to be a viable proposition at this time."

Conclusion

Just to clarify, I am not an expert in the business field, and I could mention some inaccuracies.

For a public body to start a bus operating company, it has to start small and work its way up. This can include taking over routes once the contract with the private bus operating company ends or starting a new bus service, in which TfL has to go through the consultation process as required by the Greater London Authority Act 1999. Then they have to purchase a compound or depot to store and maintain the buses, and they also have to purchase or lease new zero-emission buses, including infrastructure, as this will require financial support from public bodies.

As for the direct purchase of new zero-emission buses, the Mayor of London, Sadiq Khan, stated in the Mayor's Question Time during September 2021: “The default position – where the bus operators and lease companies invest in buses meeting London’s requirements – has been demonstrated to be a particularly cost-effective and efficient way to continually upgrade the fleet. This model has enabled the introduction of nearly 600 zero-emission buses comprising many makes and models, with more in the pipeline. There is currently no need for Transport for London (TfL) to make direct purchases and, if there was, this would entail significant capital expenditure which TfL does not have available through its temporary funding deal with Government.”

One method is to create a bus operating company as a 'reserve'. If a bus service gets disrupted due to the private bus company going into administration, then TfL (or a transport authority in another area) should take over their assets to retain the minimum service standards and keep disruption to a minimum. This is why there should be a legal requirement for a transport authority to take over a bus operating company when their operating activity is disrupted due to financial issues.

As for the complete takeover of privately owned London bus operating companies, it may require the purchase of all 16 companies that are currently under contract with TfL at a market value, including their assets, fleet of buses, staff, etc. This method could cost London’s taxpayers billions of pounds.

During the late 1990s and early 2000s, the Labour government’s policy on Private-Public Partnership (PPP) had the purpose of raising private finance for the London Underground’s private infrastructure. The two companies Metronet Rail (a consortium of Balfour Beatty, WS Atkins, Bombardier, EDF Energy and Thames Water) and Tube Lines were awarded 30-year franchise contracts to operate and maintain the infrastructure of the London Underground. Then in 2007, Metronet Rail went into administration, costing taxpayers between £170 million and £410 million, with a £1.7 billion bailout by the government. Then it was transferred to TfL’s control in May 2008. In 2010, TfL took over Tube Lines by acquiring shares worth £310 million.

I’m not saying that I’m for or against public ownership. As previously stated, public transport needs creativity to make it attractive and to improve accessibility. This can include different branding of bus services, new routes (local or express), different types of vehicles (such as three-door, two-staircase double-decks and bendy buses), and different types of train services with new destinations that are not provided by the franchised rail operators.

At present, anyone in the mainland UK can run their own bus service and an open-access train operating company to provide new passenger services. There is an article on the Startups website that details how to start a new bus operating company.

Here are some House of Commons Research Briefings on the deregulation of buses (published in 1995), deregulation of bus services in the 1980s (published in 2010), economic policy of privatisation, and public ownership of industries and services.

I have also found a couple of articles by a campaign group named ‘We Own It’, detailing the costs of private ownership and the benefits of public ownership.

Further reading

Suggestion: The Administrative Divisions in England should be reformed and restructured to simplify responsibilities

We Should Learn About The Critical National Infrastructure And Why Public Transport Is Important For The Economy And Society

Suggestion: Why Inclusive Surcharge-free Data Roaming on Smartphones is Important for Overseas Tourists (& Vice Versa) to Navigate Public Transport, and To Purchase E-Tickets etc.

I have also posted multiple articles with my suggestions on improving public transport in London.

Why is Creativity in Public Transport Important, Including Bus Route Planning and Branding?

Suggestion: Transport for London Should Revive the Old Speedbus Proposal From the 1970s as Part of Phase 2 of the Superloop

Suggestion: London Passenger Transport Area Including London Country Buses Should Be Revived To Enhance Cross-Boundary Connections

Suggestion: I Believe It’s Time for a New Regional Transport Body for the South East of England? (This will require change to the legislation in Parliament).

I Believe TfL Should Reform The Travelcard Agreement To Offer Smart Flexible Ticketing Options

Making A Case For New Rapid Transit Lines (Including New Tram Lines) By Increasing Bus Priority Measures

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