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Merseytravel begins next stage of bus regulation study


Andrew Forster
13 April 2018

Merseytravel is launching the next stage of a review into possible changes to the regulatory framework for buses in the area. 

Consultant Steer Davies Gleave recently completed a strategic outline case of the regulatory options available to the Liverpool city region. Merseytravel will now prepare an outline business case of: retaining the existing bus alliance; enhanced partnerships; and franchising.

Advanced quality partnership schemes have been ruled out as the overall framework, though Merseytravel says they remain an option “on a more targeted basis outside the scope of the business case”.

Under the Bus Services Act 2017, Merseytravel can request data from operators to inform the assessment. The legislation requires Merseytravel to analyse the capital and revenue requirements of each option, for both the transition and operations phases. 

Head of bus Matt Goggins told councillors: “To enable this, data will be required from operators to help build a year-by-year cost analysis, broken down by capital and resource expenditure, and a year-by-year income forecast where relevant, for example in the case of gross cost franchising.” 

Law firm Addleshaw Goddard is advising Merseytravel to ensure the review of options complies with the Bus Services Act, minimising the risk of a judicial review challenge from operators.

The bus alliance includes the combined authority, Merseytravel and operators Arriva and Stagecoach. It is supported by a voluntary partnership agreement.

Goggins said the alliance had “a track record of delivering improvements”. Bus patronage has grown over the last two years, bucking the national trend. 

Fare-paying passenger numbers  on Stagecoach and Arriva services rose 16.2 per cent over the three-years March 2014 to March 2017. Goggins said this was largely driven by the operators introducing a more attractive ticket offer for young people.

“Efforts are currently being made, supported by the Confederation of Passenger Transport, to encourage smaller bus operators within the Liverpool city region to join the alliance,” he said.

As of 1 April, any party to the alliance can serve a termination notice, though it cannot take effect for three years. Merseytravel has ruled out serving a  notice without having a replacement operating model.

Goggins said financial pressures were likely to put pressure on existing levels of bus service provision. Merseytravel is currently using reserves to make up a funding gap between income and expenditure.

In 2017/18, the Passenger Transport Executive allocated about 80 per cent of its £92m transport levy to bus-related activity, including £44m to concessionary travel and £19m to supported bus services. Goggins said this public funding made up between 30 and 40 per cent of bus operators’ income.

Bus operating costs were likely  to grow faster than passenger revenue, he added. “The expected response to this by bus operators would be to reduce the number of services they operate to preserve profit margins,” he said.

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