The Transport Act 1985 Radically Changed the Bus Industry by Privatising the Companies and Deregulating Services Outside London
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RESEARCH PAPER 99/59 Buses 8 JUNE 1999 The Transport Act 1985 radically changed the bus industry by privatising the companies and deregulating services outside London. This paper describes some of the effects of that legislation and discusses the government's plans for the industry as set out in the white paper, A new deal for transport: better for everyone and the daughter document From workhorse to thoroughbred: a better role for bus travel. Fiona Poole BUSINESS & TRANSPORT SECTION HOUSE OF COMMONS LIBRARY Recent Library Research Papers include: 99/40 The Youth Justice and Criminal Evidence Bill [HL] [Bill 74 of 1998-99] 14.04.99 99/41 The Football (Offences and Disorder) Bill [Bill 17 of 1998-99] 14.04.99 99/42 The Road Haulage Industry: costs and taxes 19.04.99 99/43 Disability Rights Commission Bill [HL] [Bill 73 of 1998-99] 20.04.99 99/44 Unemployment by Constituency - March 1999 21.04.99 99/45 Adoption (Intercountry Aspects) Bill [Bill 18 of 1998-99] 22.04.99 99/46 Local Elections - Proposals for Reform 28.04.99 99/47 Economic Indicators 04.05.99 99/48 Kosovo: Operation "Allied Force" 29.04.99 99/49 The Northern Ireland (Location of Victims' Remains) Bill 07.05.99 [Bill 92 of 1998-99] 99/50 Scottish Parliament Elections: 6 May 1999 11.05.99 99/51 Welsh Assembly Elections: 6 May 1999 12.05.99 99/52 The local elections of 6 May 1999 17.05.99 99/53 Unemployment by Constituency - April 1999 19.05.99 99/54 Institutional Reform in the European Union 20.05.99 99/55 Wind Power 26.05.99 Research Papers are available as PDF files: • to members of the general public on the Parliamentary web site, URL: http://www.parliament.uk • within Parliament to users of the Parliamentary Intranet, URL: http://hcl1.hclibrary.parliament.uk Library Research Papers are compiled for the benefit of Members of Parliament and their personal staff. Authors are available to discuss the contents of these papers with Members and their staff but cannot advise members of the general public. Users of the printed version of these papers will find a pre-addressed response form at the end of the text. ISSN 1368-8456 Summary of main points • The Conservative government introduced the Transport Acts 1980 and 1985 to deregulate the bus industry outside London. Road service licensing outside London was abolished from October 1986. At the same time proposals were introduced to change the structure of the bus industry through privatisation. London was treated differently: the bus companies were privatised but it retained a regulated regime and all services are secured following competitive tendering. • In 1985, 75% of bus turnover was in the hands of the public sector. By 1997, it amounted to about 7%. The large number of units set up after 1985 have quickly consolidated into a smaller number of large players and now the three largest private groups - Arriva, FirstGroup and Stagecoach - control about 53.3% of the bus market by turnover. • Bus patronage now appears to be fairly stable at about 4.3 billion journeys a year after a long period of decline since the 1950s. Buses are still the dominant form of public transport for local journeys, accounting for 67% of journeys on all public transport. • Most bus services in Great Britain are operated commercially, but some 16% are subsidised. The House of Commons Transport Committee is currently looking at tendered bus services. It is concerned that decreasing competition is leading to increased tender prices and fewer tenders. • The success of the present government's integrated transport policy will rest largely on the increased use of buses. Details of government policy were set out in the transport white paper A new deal for transport: better for everyone in July 1998 and the "daughter" document, From workhorse to thoroughbred: a better role for bus travel, published in March 1999. Great emphasis is given by the government to quality partnerships where the local authority provides traffic management schemes such as bus lanes, priority at junctions, park and ride; and the bus operator offers better quality (in terms of comfort, 'greenness', accessibility and staff training), improved marketing, better integration and more reliable services. Legislation will be introduced to back these up. Legislation will also introduce quality contracts. These would involve operators bidding for exclusive rights to run bus services on a route or group of routes, on the basis of local authority service specifications and performance targets, similar to what happens in London at the moment. Other factors being considered by the government are the scope for more effective use of bus priority measures, better arrangements for passenger information and ticketing, and better regulation. • Support from central government for the bus industry totalled £983 million in 1997/98. £222 million for additional bus services through competitive tendering, £441 million for concessionary fares, £270 million as bus fuel duty rebate and £50 million to support rural buses and rural community transport projects. The Commission for Integrated Transport is to be asked to review funding priorities, including what is spent by local authorities on social services transport and school travel (£520 million). • The government announced in the transport white paper that it would introduce legislation for a new national minimum standard for concessionary fare schemes for elderly people with a maximum £5 a year charge for a pass entitling the holder to travel at half fare on buses. • The Disability Discrimination Act 1995 requires buses to be fully accessible to disabled people, including wheelchair users. It is proposed that new large single deck buses (over 7.5 tonnes) and new double deck buses will have to comply with the accessibility requirements by January 2000 (except for wheelchair access on double deck buses which will be introduced in January 2002). All single deck buses will have to comply with the requirements by 2015 and all double deck vehicles by 2017. CONTENTS IThe Past 7 A. The Conservatives' Legislation 8 1. Transport Act 1980 8 2. Transport Act 1985: Deregulation 8 3. Transport Act 1985: Privatisation 9 4. London 10 5. Changes since 1985 11 B. Effects of the 1985 Legislation 12 C. Long Term Trends 14 1. All modes 14 2. Industry statistics 16 II The Present 19 A. An Integrated Transport Policy 19 B. Local Authorities 20 1. General responsibilities 20 2. Publicly subsidised services 21 C. Bus Operators 24 D. Finance 26 III The Future 27 A. Quality Partnerships and Contracts 27 1. Quality Partnerships 27 2. Quality Contracts 30 B. Regulation and Competition 31 C. Bus priorities and red routes 33 D. Deregulation 35 E. Concessionary fares 37 F. Community Buses 40 G. The Disability Discrimination Act 41 H. The Working Time Directive 42 IV Further Reading 44 RESEARCH PAPER 99/59 I The Past The regulation of passenger-carrying motor vehicles was introduced by the Road Traffic Act 1930. This Act marked the beginning of comprehensive state intervention in the bus industry by its introduction of both quality and quantity regulation. The Act remained virtually unchanged until 1980 despite two government reviews in 1953 and 1961. The Road Traffic Act 1930 established a system of road vehicle licensing controlled by regional traffic commissioners. This covered quality regulation - of the operators, vehicles and drivers - and quantity regulation of the number and types of services operated. It provided for the award of licences to operators to run a service defined by a route and timetable with a specified fare scale. Once granted, a licence in effect conferred local monopoly rights on the operator particularly where local services in urban areas were concerned. Such services were developed on a comprehensive basis and provided a co-ordinated network, parts of which were usually dependent on cross subsidy. Ownership of the local services was predominantly public. The structure of the bus industry had changed little over the 50 years to 1980, but the market in which it operated had altered dramatically with the increased use of the car. Patronage of the buses halved between the 1960s and 1980s. Concomitant with this the bus industry was finding that operating costs, fares and levels of subsidy were on the increase. Almost all companies suffered from a shortfall between revenue from fares and their operating costs. Following the Transport Act 1968 and the Local Government Acts of 1972 and of 1973, local authorities played an increasing role in sustaining public transport through revenue support payments, in line with their statutory obligations to provide co-ordinated public transport to meet the needs of their populations. To retain the network of services and maintain fares at acceptable levels, local authorities were asked to make good the losses by subsidy payments. The level of support provided varied considerably from area to area. Because of the extent of cross-subsidy between routes, it was often difficult to assess the value for money obtained. Bus services in large parts of rural Britain, together with many commuter-based rail and bus networks in the conurbations, continued in existence only because of the subsidy paid by local authorities and the urban Passenger Transport Authorities (PTAs). The Conservative government, committed to reductions in public expenditure and an increased role for commercial objectives, developed policies to reduce subsidies to buses, to reduce the role of local government in planning and controlling bus systems and to increase competition between bus companies. It decided that the way to deal with the decline in bus services, rising costs and increasing subsidies was to deregulate the industry and allow services to be subject to competition.