Switch to franchising allows for some flexibility including council run buses

The long-promised introduction of franchising of bus services in Wales seems to be arriving with the tabling of legislation before the Senedd. Rhodri Clark looks at the evolution of the detailed policy and how it fits in the Welsh Government’s overall approach to bus service provision.

The Milford Haven service is one of many operated by Pembrokeshire County Council

The Welsh Government’s aim that all bus services in Wales should be franchised has seen an overly prescriptive approach over the past few years. Not only has this made a more demanding challenge to implement, but because of the existence of many rural areas where all services are already tendered, and competition between operators is limited or non-existent. What would be gained from franchising, for example, the Pembrokeshire bus services which have been operated for years by the county council’s own fleet and drivers because the tendering produced no bids, or simply unaffordable ones?

The Bus Services (Wales) Bill now just tabled appears to soften the government’s absolutism on franchising slightly. It presents the alternative option for operators, including local authorities, to apply to Welsh ministers for Local Bus Service Permits (LBSPs).

Introducing the Bill in the Senedd, Ken Skates, Cabinet Secretary for Transport and North Wales, said local authorities would no longer be banned from setting up new publicly owned bus companies. “Therefore, for example, in rural areas that have historically been poorly served by the deregulated model and where there may be limited market interest in a franchise contract under the new system, local authorities will be empowered to bid for contracts or seek permits to run the bus services needed in their communities.” 

The Bill’s Explanatory Memorandum, incorporating the Regulatory Impact Assessment, does, however, state: “Though the Bill does not specify a hierarchy, the intention is a presumption that franchising will be the principal mechanism for delivering services.”

It also explains: “Operators may apply to the Welsh ministers to provide local bus services. The Welsh ministers can grant Local Bus Service Permits to satisfy their duty to secure [services], but permits may also be granted in respect of services that have not been determined as required by the Welsh ministers, provided the Welsh ministers are satisfied the service will not have an adverse impact on contracted or directly provided services and will not be inconsistent with the Wales Transport Strategy.”

To obtain a LBSP, operators will need to hold a Public Service Vehicle operator’s licence or a community bus permit. This restriction is to ensure that they meet the same fleet and maintenance standards as other operators.

The Welsh Government told LTT: “Services delivered via contracts and permits will be open to private, public and third sector operators. A local authority seeking to run local bus services under a PSV licence will have to establish a bus company in order bid for contracts and/or apply for permits.”

It also said: “If a local authority chooses to establish a municipal bus company, this company will be subject to the same provisions as any other operator within the Bill. The municipal operator will be required to formally bid for contracts along with any other operator.”

Wales lost all but two of its municipal bus companies after deregulation in 1986, and its unitary authorities have not been clamouring for powers to form new ones. Scottish authorities have been empowered to create new bus companies since 2022, but none has committed to doing so.

The short timeframe from the Bill’s provisions coming into force to the introduction of franchises from 2027 in any case leaves little time for Welsh authorities to evaluate the options and risks, identify funding and formally establish new municipal bus companies. They would need to do this before the bids are invited for franchise contracts, otherwise the newly formed companies could find themselves with little to do.

However, the government assured LTT that the timeframe “should give authorities enough time to establish a bus company should they choose to”.

The surviving municipals, Cardiff Bus and Newport Transport, currently meanwhile risk losing significant territory under franchising to large groups which are experienced in bidding for similar contracts in London and elsewhere. This outcome would not encourage other authorities to set up their own bus companies, but Skates promised last year to protect Cardiff Bus and Newport Transport during franchising.

The memorandum says: “It is the intention that both Cardiff Bus and Newport Bus be able to continue operating local bus services in Wales and that the existing controls on local authority transport companies contained in sections 72 to 79 of the 1985 Act should not apply once they have transitioned to the franchising model. Once Cardiff Bus and Newport Bus have transitioned to the franchising model the general controls on local authority companies contained in sections 67 to 73 of the Local Government and Housing Act 1989 and the Local Authorities (Companies) Order 1995 will apply.”

LTT asked Skates last week how the protection would be applied. He responded: “We’re still discussing the means by which we will protect the existing municipal companies. Discussions are at an advanced and sensitive stage, but we’re very conscious of the need to protect municipals.” 

The Explanatory Memorandum is available here:

https://laiddocuments.senedd.wales/pri-ld17104-em-en.pdf