Experiences of bus privatisation in GB

As threatened a number of times, I’ve finally pulled together this piece on why bus privatisation isn’t all it’s made out to be (cross-posted to my own site, where I’ve included a bibliography)

I simply want to walk through the scenarios for privatisation we have seen in GB since 1986 and their pitfalls.

Deregulation

The main model followed in GB outside London was to deregulate bus transport.  All publicly owned bus companies, including municipal fleets, were privatised, either by sale or Management-Employee Buyout, and were no longer regulated.  They and any bus company holding the appropriate accreditation could operate on any route having given 56 days notice, and charge as they pleased.

Popular routes saw plenty of competition and some at best doubtful (and in some cases quite illegal) practices designed to get competitors off the road, such as selective price reductions (which presumably had to be paid for by higher fares on less profitable routes) and running extra buses just before the competitor’s bus arrived.  Former multi-operator ticketing schemes being undercut by operator-specific schemes (as in Birmingham) have seen it made harder for entrants to gain access because of the convenience and price to the customer of sticking to the incumbent operator.

Off-peak services and rural routes saw very little competition, and this has got worse because the market is dominated by five main operators – Arriva, First, Go-Ahead, National Express and Stagecoach – who largely run monopolies in local areas with little outside competition.

Public subsidies were restricted to unprofitable services, which meant that fares in former metropolitan areas rose by 47.7% in real terms between 1986 and 1994, compared to a GB-wide general rise of 16.9% over the same period – Sheffield, for example, had to increase its fares by 35% due to the ending of subsidies.  Between 1984 and 2010, bus fares would rise by 60% in real terms from 1986 to 2010 against an increase in motoring costs of 10% – which in itself is enough to push people off public transport.

Unprofitable services, which include evening and Sunday services on otherwise profitable routes, had to be subsidised.  In one case I read of, but for which you won’t find the citation in my further reading, a bus company gave notice that it was going to withdraw a particular bus service because it wasn’t profitable.  The local authority decided it was socially necessary, and tendered it as a subsidised service.  The same company won the tender, where in the past they would have cross-subsidised against other routes where possible, costing the ratepayer/council tax payer money.

There were two added problems with tendered services.  Firstly, a local authority might not be able (or might not even wish) to subsidise all routes that might be considered “socially necessary,” and routes would therefore cease.

Secondly, as would happen in the course of rail privatisation, a minimum service would be specified.  Unless there was sufficient farebox income to be made from running additional services, the successful company would not operate more that minimum.

The effect of the cut in subsidy in 1986 was to increase the proportion of bus operating costs paid for through the fare box from 64% in 1985 to 72% in 1986.  Falling demand and increased subsidy of unprofitable services saw this proportion fall to 50%.

Tendering arrangements

London followed the opposite model.  Route planning and fare setting were centralised, and private companies were able to tender to operate London bus services – so no competition on the ground, but rather companies were able to compete to receive the farebox income for the duration of their contract.

This model was actually quite successful, with the rise in passenger numbers far eclipsing the fall in the rest of the country, although much of this can be attributed to increased subsidy, particularly since 1999.

General notes

The key problem with privatisation is that every privately-owned commercial company has the same object in its Memorandum of Association: to carry on the business of a company, or, in short, to make money.

The immediate cost to the staff of a privatised company is downwards pressure on wages, which in the case of bus drivers was to see their average wages fall from 7% above the average manual wage in 1985 to 13% below in 1995.  This was caused by a number of factors, such as more part-time drivers, and the explosion in the use of minibuses, for which new drivers could be paid a lower rate (as indeed happened on Ulsterbus – new drivers would start on 25-seaters at a lower rate of pay, and be promoted to big buses later)

The cost to the council tax payer is that the tolerance of a private company for cross-subsidisation is low, which has pushed up the burden on them of supporting unprofitable services.  By way of contrast, the Rural Transport Fund in Northern Ireland subsidised a number of Ulsterbus services, including tourist services, but Metro is expected to cross-subsidise all of its services from the profitable ones.

The advantage of the London model is that because the farebox income goes to TfL rather than the operator, it means little to the operator whether they carry five passengers per bus or 50.

There was a massive increase in subsidy for London services from 1999 to 2002, coinciding with the establishment of Transport for London, with the clear intention of pulling more people onto the buses to aid congestion.  A further country-wide increase in 2003/2004 can be attributed to expansion in concessionary fare entitlement.

The Northern Ireland picture

Translink is painted as a monopoly, which isn’t actually entirely true.  As in GB, express services (with stops more than fifteen miles apart) are already open to competition, as with AirCoach and the excellent Eamon Rooney coach service to Rostrevor.  Local services not currently operated by Translink are I believe open to a private operator to tap into, and I don’t think this is restricted to school services.

The same subsidies are available to private operators as are available to Ulsterbus and Metro:  concessionary fares and, until April of this year, fuel duty rebate – so the services have to be run commercially.  This mirrors the situation in GB, where fares for commercially viable services cannot be artificially lowered through subsidy.

Significantly, apart from the Rural Transport Fund, there is no operating subsidy for Ulsterbus and Metro services in Northern Ireland.  Actual buses are paid for through the capital budget of DRD, partly due to Executive policy to reduce the average age of buses and keep it low, but otherwise the two bus subsidies of Translink are left to balance the books between farebox income and operating expenses.

Conclusions

What I was not able to do was source figures on public transport subsidy all the way from 1985 to the present day – something I suspect Salmon of Data could dig up rather more quickly.  Rail subsidy is known to have escalated quite considerably (it doubled within a year of privatisation, and had gone up a further 50% to £3 billion by 2003), and I would want to see figures excluding the impact of concessionary fares to be able to comment accurately on the potential impact of privatisation on subsidy levels for Northern Ireland.

What I can do is present some general principles.

It is known that DRD do not intend to deregulate bus or train services in Northern Ireland, probably because of the examples throughout Great Britain where services have been lost because of lack of profit to the operator and the cost to local authorities of maintaining unprofitable services.

They do intend to follow one of two models: to invite tenders for baskets of routes (some profitable, some not) where either the operator keeps the farebox income in return for a fixed sum, or where all farebox income is handed to DRD in return for a higher fixed sum.

With the number of unprofitable routes being operated in Northern Ireland (and of course unprofitable journeys on otherwise profitable routes), I think they are tending towards the latter model, one with its own dangers.

One of the things that has pushed Translink subsidy up over the last fifteen years has been bus replacement, partly to get rid of buses with increasingly difficult to source parts due to engine age, and because old buses are not attractive to passengers.  Private bus companies would be required to buy their own vehicles, and would tender on that basis – or, indeed, tender in such a way that average bus age considerably increases so they can avoid renewing vehicles at all to save money.  This is considerably less obvious than when one could board an aging Leyland Leopard or Bristol RE in the 1990s compared to the new Cityliners and Goldliners from 1989 or so, because passenger comfort is in a completely different world from when I went to school in the 1980s, but even to compare the oldest vehicles in the Metro fleet with the newest shows the newer buses off well.

It also changes competition from an illusion to non-existent.  The passenger is likely to get the same bus (purchased from Translink by a private operator) and the same driver (different uniform) in the same traffic jams at the same time (if not less frequent), with fares theoretically set to balance the books (certainly this side of 2020, where DRD and its successor are likely to remain substantially underfunded), and making the same complaints about the buses being late, and probably seriously considering moving back into their car.  In other words, nothing will change.

There also lies within this a question of responsiveness to customer demand.  Translink used to issue monthly amendments to its timetables, although these have decreased in frequency.  With tendered services, there will be restrictions on how quickly DRD can expect a private company to respond to increased demand, including obtaining vehicles and the services of drivers.

The final aspect for now is the prospect of selling Translink off to the private sector wholesale.  The NI Audit Office report highlighted that the big firms in GB experience a lot lower overheads due to sheer size, but there would have to be considerable reorganisation before this could happen – if bus operations in NI are not to be deregulated, transport planners currently working for Translink would have to be transferred to DRD, for example.  Both the NIAO and the Committee for Regional Development have raised questions about DRD’s ability to plan transport effectively, and since Translink would need to retain some planners to deal with private hires, drivers’ rosters etc, it isn’t clear that enough professionals would be available to move to DRD.  It also isn’t clear how much Translink would raise on the open market due to its dependence on public subsidy.

Between that uncertainty, the expectation I would suggest that will maintain pressure to keep fares up to maintain the profits of the private company (whether directly through the farebox or indirectly through the tender to operate) and the lack of funding available from the Executive that goes way beyond the problems of Stormont House it is hard to see how any of the suggested benefits to the ratepayer and passenger of privatisation in terms of lower subsidy, lower fares and certainly better timetables would actually come to fruition beyond the short term.

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  • chrisjones2

    The fundamental issue is that we provide so many unprofitable services that people think are ‘essential’ but almost no-one uses. In the local politics of Norn Iron this cannot be remedied until the cash runs out and they have to make a real choice.
    Closing down all the railways apart from Bangor – Belfast – Dublin would be a start – but we are ‘investing’ millions in the Derry line!!!

  • AndyB

    I think the passengers at Mossley West who find their trains are standing room only might disagree with you, Chris, especially since the M2 foreshore is nearing capacity in the morning. I should also add that to the best of my knowledge, Bangor-Portadown is not profitable either.

    The definition of “socially necessary” which leads to Public Service Obligation is rather broader than “Wee Mrs Brown needs to get the bus to do her messages” or “Mr Black isn’t allowed a driving licence because of his health and there are a pile of kids living on that route whose parents’ lives would be turned upside down if they had to ship them to school themselves” and includes services which are critical to diverting traffic from the roads.

  • chrisjones2

    Ok -n if its not profitable, close it. We have two services both subsidised to compete with the other.Madness

  • AndyB

    So close all the railways in NI and put up with the extra traffic? Belfast really would grind to a halt if you did that – it’s not reasonable.

    Besides, your comment is not factually correct. As I pointed out, the parallel Ulsterbus services aren’t subsidised except to carry concessionary fare passholders – and for that matter, they aren’t actually parallel.

  • Korhomme

    We can only look on with jealousy at Switzerland where a mixture of public and private providers gives a public transport system second to none.

  • chrisjones2

    There are parallel ulsterbus services from

    Derry
    Portrush
    Coleraine
    Ballymoney
    Ballymena
    Antrim
    Bangor

    I am not suggesting abolish all transport on these routes. Cancel the trains and run viable profitable buses

  • notimetoshine

    I am very concerned about the possible privatisation of TransLink. I’m not opposed to privatisation per say and I have to say I find first groups services in Aberdeen to be really good. However NI is a weird shape, a small place and I’m not sure privitisatjon would maintain an acceptable service. The route I normally use would only be truly cost effective 3 or 5 times a day. However this would cause real disruption to the lives of working people locally and disrupt the local economy.

    I use the Eamonn Rooney service every weekday and its wonderful so I think the private sector has a real role to play, but maybe revenues generated from an expanded private sector role could be channelled into subsiding TransLink routes that might not always be profitable.

  • AndyB

    To replace one train would require four slower buses, and it’s a fact proven since Beeching in GB and Benson in NI that if you cancel trains, people do not automatically get the bus alternative. Ulsterbus use is also falling while train use in NI has been rising against all previous trends for the last number of years.

    Short version, replace trains with buses and the reality will be a lot more private cars on roads that are already saturated.

  • AndyB

    Also, on the Bangor line alone there are no bus services to Seahill (no through road), Helens Bay (bridges), and all other lines when closed expect train passengers to walk up to a mile to get substitute buses because the railway station is somewhere great for passengers but difficult for buses.

  • chrisjones2

    But its back to a fundamental issue – do you subsidise Helens Bay commuters or pay for hip joints and education?

    There is a bus stop on the Bangor Road close to the junction with Seahill Road

  • AndyB

    False comparison. Do you subsidise rail services or stop people getting about their business due to traffic jams caused by people not having trains to catch?

  • AndyB

    In the end, public transport subsidy pays for itself in money saved by people and businesses who can get about their business more easily. It’s a definite benefit to the economy.

  • Skibo

    Our public transport system is part of the extensive Civil service that people complain about. If we have to make cuts in public spending this is an area we could make savings. Not something I as a socialist would be in favour of though.

  • AndyB

    You could make savings, but it would be at the cost of increased fares and cut services, which would chase passengers away, which would make services uneconomic so fares would have to be increased and services cut in a vicious circle.

    I’m neither a socialist nor a capitalist, so I tend to appeal to the benefits to those who can’t use public transport of everyone else using it!

  • chrisjones2

    False comparison too – 4 buses to replace a train – yes…twice a day and the rest of the time they’re next to emply

    None of this is easy.The bottom line is that no matter how you analyse it when you have no more cash – and we are in that position – you cannot spend it. Something has to give

  • chrisjones2

    Where is the evidence for that?

    The public good of spending the money wasted on the Derry line to help build a dual carriageway from Holywood to Ballyrobert would return the investment many times over, a few more buses and use the hard shoulders as bus lanes and bingo you have fast economic flexible service to Belfast

    You might even fuind most of it selling off the trackbed for housing

  • AndyB

    Wrong. You have slow uneconomic flexible service to Belfast. At some stage, buses will have to leave the hard shoulders and join the traffic jams created by drivers who are prepared to catch the train but not take a bus. There’s a reason why the train takes little over ten minutes off-peak to get from Holywood to Belfast Central, where a peak bus service takes more than twice that.

    In addition, new dual carriageways are not usually built with hard shoulders. Marginal strips, such as on the A1, are a lot narrower, and that’s the standard for a rural non-motorway dual carriageway. The Sydenham Bypass and the 60mph sections of the Bangor dual carriageways, if built today, wouldn’t have a hard shoulder, and would look a lot more like the narrow part of the Holywood bypass.

    There is also little or no prospect of a dual carriageway being built between Holywood and Crawfordsburn. There are already two lanes each way, a capacity which would not be altered by providing a dual carriageway, and even as a non-engineer I can see too many physical obstacles to widening the road just to provide bus lanes for two buses an hour, and little more in rush hour.

    Finally, it’s all very well to talk about selling off trackbeds for housing, but even if a developer were prepared to and permitted to level an embankment or fill in a cutting, the space thus generated wouldn’t fit many houses. Having built developments up to the edge of railway property, it is unlikely that space could be found to extend onto it.

  • AndyB

    Traffic jams aren’t currently an issue outside peak times, so that’s irrelevant, although having a return train at a time that suits is very relevant (and why off-peak services run at all!)

    It’s also worth noting that NIR is using in the region of 20 full trains at once in the morning rush, and Ulsterbus and Metro between them do not possess 80 spare buses. You’d probably not get much more than half the passengers onto an alternative bus, but because the buses are slower, you’d still need a lot more buses than you’d think to replace the trains.

    Nor would selling off the trains earn much income, because there is only one company in the market – Irish Rail – and they currently have a surplus of rolling stock. While the CAFs’ bogies might be regauged to standard gauge (more likely to need brand new bogies), the loading gauge – the envelope that has to be maintained around them for them to pass obstacles safely – might or might not fit on Network Rail.

    Something has to give, but public transport is an obvious case where cutting is bad for the economy because fare rises and service cuts push people back into cars, in many cases because they simply can no longer afford to get public transport. People going back into cars creates havoc for those who drive for a living, or who are awaiting deliveries, and pushes up costs for those making the deliveries (which inevitably get passed on.) It damages the private sector because tradesmen take longer to get between jobs. Households waste more money and time in traffic or on more expensive public transport.

    In short, cutting public transport funding is penny wise, pound foolish.

    Of course, the alternative would be to raise the Regional Rate, since that is what is supposed to fund public transport.

  • chrisjones2

    You ignore the huge investment in developing and maintaining the railway. A service that is inflexible and costly and of limited use

  • chrisjones2

    Just watch the ingenuity developers show if the land is available along the gold coast

    And while I accept your comment on time the reality is that even now its just a 10 minute longer journey – we are into marginal utility here!! How much wasted on rail is that 10 minutes worth?

    And the bus delivers them to the city centre not a station that for most people is another 10 minutes walk away from work or the shops.

  • chrisjones2

    ” I can see too many physical obstacles to widening the road ”

    They managed it in Carrick and does it have to use the current route? Over Craigantlet instead?

  • AndyB

    They won’t get the bus. Passengers on railway lines that have closed have never got the bus, and if you don’t believe me, look at the collapse in demand for public transport from Ballinderry and Crumlin since the railways stations closed.

    Your ten minutes extra is a slow crawl through suburban East Belfast and along the Old Holywood Road that takes more than twice the time of the equivalent train. To get a bus through to the Europa takes another ten minutes, and the train stays that full ten minutes ahead on its way to GVS.

    If people wanted the bus, they’d save money and use it. That’s the other part of the equation – they’re paying for convenience and speed, both of which are limited with buses. Taking away the trains would massively increase the number of cars on the road, and if in accordance with your logic all loss-making bus services were cancelled Belfast would grind to a halt, and the ambulances couldn’t get to the sick to take them to hospital.

  • Here in England we are replacing buses by new railway lines. Deutsche Bahn-owned Chiltern Railways has nearly finished a station on the northern edge of Oxford, the first step in a new Oxford-London railway link, in competition with First Great Western and two bus companies. Then the line to Bedford is being reopened, to make an E-W link bypassing London.

    I’m surprised that some people in Northern Ireland are still talking about closing down lines, instead of looking for new routes (for rail) that cut across country without requiring people to go via Belfast or Dublin. Or trams on commuter links. How about Belfast to Westport (via Portadown and Sligo) in 2 hours?

  • Skibo

    Saw a report on the news about a prisoner who walked out of a high security prison after shaving his beard off. Turns out the prison was run by a private company and was under staffed. Just how far has has privatisation gone in Britain? Is that what we can expect when the rest of the cuts hit here?

  • Dessie

    Where did you read Translink are about to start tendering bus routes?

  • AndyB

    It wouldn’t be Translink who tendered bus routes (although they can contract out their own services, as they did on the 200 and 273 to Chambers a few years ago) – it would be the DRD itself under their powers in the Transport Act (NI) 2011.
    Funnily enough, regardless of what may be considered, the cash isn’t there to carry out any form of tendering process.

  • AndyB

    The answer depends on the competence of those carrying out any privatisation. It’s a serious worry for those in the public sector though, because stress levels will have an impact, especially as stress absence can have a snowball effect as others attempt to pick up the slack.

  • chrisjones2

    …bit extreme old chap.

    But even then, assume you keep the commuter lines. Whats the justification for the Ballymena Coleraine Derry line which is probably half the mileage of the railway but well under 10% of the traffic

  • Dessie

    Regardless of who awards it there is absolutely no intention to tender any routes. Translink are about to get a ten year contract to provide bus services and while other companies will be able to get permits for additional services, these will be outside of the established network. Even the BRT contract will be awarded directly to Translink.

  • AndyB

    You’d be surprised. Translink knows better than to look for funding for lines where they can’t show the likelihood of growth – and I believe that the double figures increase is across all lines. It’s also the case that better services mean nmore passengers – in other words, if there’s a better chance of having a train when you need it, you’re more likely to take it.

    It’s also incredibly good for moving students, even with the growth in students owning and using cars.
    I’m actually looking into the subsidy levels of Translink at the moment and trying to get comparative figures for bus subsidy for England, Scotland and Wales. Rail subsidy will not be comparable between the two due to the costs of privatisation.

  • AndyB

    Put it this way. I believe it’s in our interests to keep it that way, and that’s what my piece basically says (together with a spot of “If you must do this damn silly thing…”)
    However, every time Translink is in the news, all you hear is “Privatise them!” and with funding as it is, I wouldn’t want to bet against a change in policy – however misguided I believe such a change to be.

  • Dessie

    Obviously the GB model (deregulation) has failed however (regulated) private sector involvement and tendering of route bundles (including unprofitable routes), like they do in the Netherlands, should not be dismissed.

  • AndyB

    An interesting question which arises from that is whether when services were retendered, did the tender sum start increasing ahead of inflation – in other words, were the original tenders artificially low to make it look as though it was a good deal for the taxpayer?
    Excuse me while I send an FOI request to TfL. Part two of this article will be to consider the changes in subsidy levels since privatisation across GB and compare them to the same curves in NI.

  • AndyB

    … however, that’ll be some weeks away 🙂

  • aquifer

    Great programme about the pre-privatisation railways last night. Most economic system in Europe apparently, with trains that could do 125 MPH, so ripe for a hive-off. They even developed a tilting train that ran super-fast on existing tracks, but made the mistake of entertaining the journalists the night before the joy-ride, and serving them draught beer on the train. Sickly or cynical journalists and civil servants scared to invest killed a train type that was eventually to be successfully deployed elsewhere in Europe.

  • Bedhead1157

    The APT was years ahead of it’s time, but it was rushed into service before it had been adequately tested and with, as you said, a load of piised up journos on board. No wonder it got bad press.

    And yet the old HST’s still rumble on after nearly 40 years.