Beth Edwards and Shyann Sheehy explore the possible introduction of bus franchising.
Bus franchising is a model for providing bus services where local authorities have the power to determine the details of the services being provided, including where they run, when they run and the standards of the service.
Usually, this will involve the local authority letting an appropriate contract to a bus operator who will provide the service. This model is attractive for many local authorities as it can help correct market failures, provide local accountability, and support the specific needs of residents.
Following the recent publication of the Franchising Schemes (Franchising Authorities) (England) Regulations 2024 (the “Draft Regulations”), (laid before Parliament under section 160(2A) of the Transport Act 2000), a number of authorities, such as Cambridgeshire and Peterborough Combined Authority and South Yorkshire Mayoral Combined Authority, have commenced formal consultations on the possibility of introducing bus franchising.
In this article we discuss the current legal position, consider the changes proposed by the Draft Regulations, and look at how the future landscape of bus franchising could change as a result.
What is the current position?
Bus franchising, incorporated into in the Transport Act 2000 by the Bus Services Act 2017, is a legal mechanism which allows local authorities to determine the type of bus service which will run in a particular geographic area.
Where a service is franchised, the local transport authority will have control over various factors, including where buses run, when they run and the standards for service.
This is in contrast to “enhanced partnerships”, where, while there may be collaboration between local authorities and operators, the operators ultimately retain control over commercial matters.
Where an area is franchised, the bus operator will usually provide their service under a contract to the local authority and no other services will be able to operate in that particular area without the agreement of the local authority (acting as a franchising authority).
The powers, inserted by the Bus Services Act 2017 into the Transport Act 2000, do not have to be applied across the whole of a local authority area or require all services to be operated exclusively under the contract. They are purposedly flexible and can be used alongside enhanced partnerships to adapt to the local needs.
Currently only Mayoral Combined Authorities (“MCAs”) and Mayoral Combined County Authorities (“MCCAs”) have automatic access to the powers to prepare franchising. For example, the Liverpool City Region Combined Authority (an MCA) used such powers in October 2023, following a public consultation, to approve recommendations to move to a bus franchising model.
This ability is not available to other local transport authorities (“LTAs”) automatically but instead requires the Secretary of State’s consent and new secondary legislation to be brought into force. This power has not currently been used by any MCAs or MCCAs in the UK outside of London.
The government has published guidance (the “Guidance”) on setting up a bus franchising scheme, which includes the following five stages:
- Accessing the statutory powers and committing to prepare a franchising proposal (s123B-C Transport Act 2000) – The steps in this first stage will differ depending on whether the authority seeking to franchise is an MCA/MCCA or otherwise:
- MCA/MCCA –
- Authority issues notice of intent to prepare a franchising scheme.
- Authority develops assessment of franchising scheme.
- MCA/MCCA –
- Authority determines whether to implement.
- All other authorities –
- Authority applies to the government.
- If content that the criteria contained in the National Bus Strategy are met, the Secretary of State will give consent.
- Steps i-iii for MCAs then follow.
- Developing the franchising proposal and assessing it against other options (s123B and 123D Transport Act 2000) – Once the authority has issued the statutory notice, the authority must begin to develop the detail of their franchising proposal in a franchising assessment. This is a business case which describes:
- what the franchising will deliver,
- how it will be set up, structured, funded, and managed, and
- how it will be complemented by other measures and compares to the best enhanced partnership alternative.
Alongside this, authorities need to create a proposed franchising scheme setting out the detail of how franchising will operate in practice (e.g. the area which franchising applies to, and how users will be consulted on the operation of it).
Once the assessment is prepared it must be independently audited, which will provide a high-level assurance that the prepared assessment was carried out in good faith.
- Consulting on the proposal (s123E-F Transport Act 2000) – Following receipt of the above audit results, authorities must consult widely on their proposals to ensure that relevant persons are able to comment on the proposals before the decision to implement these is taken. The Transport Act 2000 specifies a number of bodies which must be consulted but the authority will have the flexibility to consult further.
- Receiving the decision to proceed with franchising (S123G-H Transport Act 2000) – Once the consultation process has concluded, a report must be prepared by the authority which sets out their response to the consultation, and states whether they have decided to proceed with the proposed scheme (for MCAs the mayor will make the decision on whether to proceed).
- Implementing the proposal (s123V Transport Act 2000) – Once the above stages have been complied with, authorities can then implement the scheme, noting the transitional arrangements which are required by legislation. This includes taking appropriate steps to ensure that services are maintained or replaced and ensuring all staff are transferred correctly.
What do the Draft Regulations change?
Currently bus franchising for LTAs outside of London involves a two-step process. The first step is creating regulations to ‘turn on’ their access to franchising powers in the Transport Act 2000 and second is gaining SoS consent to prepare an assessment on their proposed franchising scheme.
The Draft Regulations would give all LTAs in England the automatic power to franchise their bus services, expanding from just MCAs and MCCA, therefore taking away this first step.
These LTAs would only need to complete the second step of obtaining Secretary of State consent to prepare a franchising scheme assessment as to why they believe bus franchising should be implemented in their area.
Why have the Draft Regulations been introduced
The Draft Regulations aim to reduce barriers to local authorities seeking to utilise these powers. Bus franchising can be the preferred option for some local authorities whose existing deregulated bus services are fragmented or expensive with limited chances for local authorities to intervene.
They are introduced as a means of delivering on the Government’s manifesto commitment to give ‘new powers for local leaders to franchise local bus services’. They also demonstrate the Government’s intention to deliver better bus services, grow passenger numbers and drive opportunities in under-served regions.
Looking to the future
In addition to introducing the Draft Regulations, the Department for Transport is also revising the Guidance in relation to obtaining the Secretary of State’s consent. The Department for Transport has also issued a consultation on proposed changes to the Guidance which ran until 7 October 2024 but the responses and outcomes are yet to be published.
A number of authorities have already started consulting on the use of bus franchising, outlining its particular benefits. For instance, the Cambridgeshire & Peterborough Combined Authority’s consultation suggests that franchising could offer better value for public funds, improve the performance of local bus services and give the relevant authority the proper oversight.
Takeaways
Bus franchising is an attractive opportunity to many authorities, as it puts the power and oversight of these services back into the hands of the relevant authority. In turn this can help enable better value for taxpayers and a more consistent service based on local needs. The various recent consultations on bus franchising demonstrate that there is an appetite in the public sector to unlock these potential benefits, and the Draft Regulations and possible amendments to the Guidance could make this option easier.
Beth Edwards is a Junior Associate and Shyann Sheehy is a Paralegal at Sharpe Pritchard LLP.
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