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Regulation returns on the buses
Local Government Chronicle – 11 February 2010

A small local government revolution took place recently on the historic streets of Oxford, as Oxfordshire CC became the first council to use new powers in the Local Transport Act 2008 to tame the free-for-all that is the bus industry says Mark Smulian

Oxfordshire's move shows councils can use the new law, unlike the heavily circumscribed powers conferred in 2000 that proved impossible to use. The act allows councils to enforce quality contracts on bus operators where this would best meet policy objectives on, for example, traffic congestion, air quality or social exclusion.

Quality contracts work rather like the regulated London system, where a public body sets routes, fares and frequencies and operators compete on tenders to run routes, rather than by running rival vehicles.

Half of all journeys in Oxford are by bus and the services provided by Stagecoach Oxfordshire and Go-Ahead's Oxford Bus Company had become so successful that the city's medieval heart was clogged with buses. When the council first suggested fewer buses in the high street we weren't happy, but looked how we could work together

Martin Sutton, managing director of Stagecoach Oxfordshire Oxfordshire has managed to have fewer buses but the same capacity by convincing operators to use double deckers instead of single deckers and accept a slight reduction in frequencies.

Both operators have signed up to a 10m investment in new low-emission vehicles and to a smartcard ticketing system, valid on any bus.

In contrast to the past, Oxfordshire could have used the act to impose these conditions, had the operators declined to co-operate. The act also allows for agreement on frequencies between operators, as it protects such arrangements from the threat of a fair trading investigation for collusion. Oxfordshire's head of transport Steve Howell says: "This groundbreaking agreement is a first for the UK. It will ensure cleaner, safer streets, better air quality and a sustainable bus network for the future."

Martin Sutton, managing director of Stagecoach Oxfordshire, says: "When the council first suggested fewer buses in the high street we weren't happy, but looked how we could work together.

"Now, instead of a bus every 2-3 minutes it will be 3-4 minutes, so there is little apparent difference to passengers, but a 25% reduction in vehicles with the same capacity because double deckers will be used."

West Yorkshire Integrated Transport Executive (WYPTE) hopes to make more ambitious use of the act. A policy paper states: "The over-arching reasons for seeking a bus-quality contract scheme are those of ensuring consistently high levels of customer services, securing better value for money and achieving transport integration."

It said local operators had been hostile to integrated ticketing and to the co-ordination of bus and rail services. The executive envisages 14 operating areas, with services procured and managed through around 50 contracts of varying size.

One issue to overcome is how to structure a viable contract. Operators regard information on costs and revenues as commercially confidential and are unlikely to share it with the executive, which has had to develop its own model for operating costs and extrapolate profit margin information from evidence in London. WYPTE chief executive Kieran Preston says: "We've been talking to West Yorkshire council leaders and chief executives first, because they are crucial to what can be delivered."

Mr Preston suspects operators would prefer a quality partnership - a mechanism where, for example, operators agree to improve services in return for councils providing bus priority measures but which does not let councils determine the actual service.

But he thinks they are mindful of the new powers. "While operators are hostile to the concept of the quality contract and would prefer not to have one, they have said they will look seriously at how our objectives could be delivered," he says. Fresh uncertainty has arisen with last month's decision of the Office of Fair Trading to refer local bus services outside London to the Competition Commission. It said this was because there was limited evidence of competition, which "tends to result in higher prices and lower quality for bus users and may represent poor value for money for taxpayers".

Neil Scales, chair of the Passenger Transport Executive Group, says: "The OFT have provided clear evidence of examples of local monopoly operators abusing their position. However, the solution shouldn't be a return to bus wars on the streets." Mark Smulian, freelance writer on local government.