Franchising Schemes (Franchising Authorities) (England) Regulations 2024
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Lord Hendy of Richmond Hill
That the Grand Committee do consider the Franchising Schemes (Franchising Authorities) (England) Regulations 2024.
Relevant document: 3rd Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)
The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)
My Lords, these draft regulations relate to access to bus franchising powers for all types of local transport authorities in England outside London. The regulations bring into effect paragraphs (b) to (g) of Section 123A(4) of the Transport Act 2000, such that the types of authorities listed in those paragraphs come within the meaning of “franchising authority”.
These powers were previously limited to mayoral combined authorities and mayoral county combined authorities. However, these regulations give all types of local transport authorities access to powers to franchise their bus services. In doing so, they will ensure that decisions are made at the right level. These regulations aim to give the power to local leaders to determine the most appropriate action to deliver an improved bus network, based on the needs and circumstances of their areas. This step does not mandate local transport authorities to franchise; it is about providing them with a suite of tools to support their communities and deliver better bus services.
The department will build on the progress of these draft regulations through the introduction of the buses Bill later in this parliamentary Session. The Bill will deliver further changes to make bus franchising easier to deliver, alongside other measures on areas such as accessible travel. It will also improve bus services for local transport authorities that choose not to franchise, allowing greater flexibility over bus funding and letting local leaders deliver their own local transport priorities. Alongside this, the department is building its capacity to provide practical support to local transport authorities throughout the franchising process, should they wish to pursue it.
I will now provide some background information about these regulations. Bus franchising powers for local transport authorities in England, outside London, were created in the Bus Services Act 2017. Powers were automatically given to mayoral combined authorities and mayoral county combined authorities to allow them to prepare a franchising scheme assessment—essentially a business case—if they chose to do so, without requiring consent from the Secretary of State for Transport.
Currently, all other types of local transport authorities wishing to prepare a franchising scheme assessment face a two-stage pre-assessment process. First, regulations must be made which switch on access to the franchising powers. Secondly, the Secretary of State for Transport must give her consent to any individual authority to prepare an assessment of their proposed franchising scheme. This instrument implements the initial stage of this process for non-mayoral combined authorities, ensuring that they will need to obtain the Secretary of State’s consent only to prepare a franchising scheme assessment. This will reduce the barriers facing these types of local transport authorities in pursuing bus franchising.
I turn to the detail of the regulations. Bus franchising is a model for providing bus services where a local authority determines the details of the service and private operators are contracted to run the services. Alternatively, in a deregulated market, any company, subject to minimum safety and operating standards, can operate and have control over bus services. These regulations seek to empower local leaders to choose the model that works best in their area to manage their bus services. Bus franchising is one of those tools. Alternatively, local transport authorities can pursue high-quality enhanced partnerships with private operators or public ownership.
These regulations are part of the Government’s delivery of their manifesto commitment to give
“new powers for local leaders to franchise local bus services”.
Bus franchising will give communities a greater say in the services they can use, connect people to opportunities and benefit those on lower incomes, who disproportionately use buses.
This instrument implements the first stage of this process for all types of local transport authorities so that they require the Secretary of State’s consent only to proceed with the assessment. The department is also revising the bus franchising guidance to streamline the franchising process. The Government consider that this onerous process has acted as a barrier to local authorities. Removing the first stage of this process will make it easier for local transport authorities to pursue franchising if they wish to do so. The regulations improve the suite of tools on offer for local transport authorities to deliver better buses.
I am pleased to say that the statutory instrument was cleared without comment by the Joint Committee on Statutory Instruments. To address the only request made by the Secondary Legislation Scrutiny Committee, for more information on franchising, the department is also revising its bus franchising guidance, which sets out the franchising process accessibly and in detail.
These regulations represent an important first step towards delivering on the Government’s aim of ensuring that local authorities have the tools they need to plan and deliver services in a way that suits their communities. The forthcoming buses Bill, which will be introduced later in this parliamentary Session, will build on this progress. Through this instrument and the forthcoming Bill, the Government will deliver on their plan for improving the bus network and ending the postcode lottery of bus services. The plan is centred on putting control of local bus services back into the hands of the communities that use them and will give local leaders the freedom to take decisions to deliver their local transport priorities. I beg to move.
Lord Grayling (Con)
My Lords, I stand to speak briefly about these regulations, as I was the Secretary of State when the original legislation was passed. While I understand what the Minister is trying to do—he comes at this, of course, from the perspective of somebody who has led the franchising operation in London—I have two big misgivings about this change.
We very consciously extended the franchising powers to the other metropolitan areas and mayoral combined authorities, believing that what was being done in London and the volume of passengers there made that a sensible and realistic option. Despite that, areas such as Manchester took several years before deciding to go down this road. Promises were made about franchising happening quickly, but it never actually did at that time. Of course, the mayoral combined authority areas have the critical mass to do this, whereas the reality is that, on the ground in other parts of the country, the idea that an alternative to what happens now is available through franchising is something of an illusion.
The reality is that local authorities in counties such as Surrey, where I was a Member of Parliament for 23 years, already plan their services because they pay for them where a gap cannot be filled commercially. It is not as if they can somehow suddenly dictate that this route happens and that route happens. Given the low level of ridership, getting any buses at all to run is a challenge and something they have to fund and develop themselves. So I do not really see how expanding franchising to counties such as Surrey will make any difference whatever. That in itself seems to make this change anything but what the Minister has just described it as. Of course, franchising is a realistic option in metropolitan areas and mayoral combined authority areas. That is why we gave that power in the first place, but I just do not see it going to other parts of the country.
I have a reservation that goes beyond simply not understanding why this is necessary. There is a danger that this will hold back the development of bus services for the future. The reason I say that is that it was clear to me during my time as Secretary of State that the future of bus travel in rural areas, in particular, is about demand-responsive buses. It is not about traditional routes going all day long from A to B and B to A. It is about buses that do different things at different times of the day, follow different routes and respond to passenger demand. Effectively, it is about Uber-type operations on a large scale, with routes changing all the time based on who wants to use them.
I do not see how demand-responsive buses fit within a franchise system. I would very much like to hear the Minister explain that to me. By definition, if you are dealing with a private operator that adapts the routes it follows all the time to reflect individual demand on individual days, which has to be the future of buses in some parts of the country, how on earth does franchising fit with that? Yet a local authority may decide on this for political reasons, for example—on the Labour side, there were great debates at the time about wanting to see local authorities have greater control over bus systems—and I fear a conflict between its desire to structure things in some areas, trying hard to do so even when it has to pay for a lot of the routes itself, and not unleashing the potential of demand-responsive buses. They will be the future of public transport in areas of the country that remain ill-served by buses, and where it is difficult to make them operate simply because the sheer demand that exists in our cities is not there.
So I would particularly probe the Minister about how he sees demand-responsive buses working within the system that these regulations create. I still think that they are not necessary. Franchising in big cities and major conurbations is fine. This feels like a set of regulations that will not achieve very much. As the notes say, there is no actual demand from non-metropolitan combined authority areas and this instrument may hold back the private sector from the kind of innovation that will be needed for the future.
Baroness Randerson (LD)
My Lords, I welcome the progress on franchising represented by this SI. I always felt it was a great pity that the 2017 Act made franchising so complex, so I am pleased about the removal of the first stage of the franchising process. However, I draw the attention of noble Lords to the report of the Secondary Legislation Scrutiny Committee, of which I am a member. That report criticised the Explanatory Memorandum because it had little information on what franchising is and how it differs from the current situation. Also—I think this is crucial—how many local authorities are expected to adopt franchising?
I do not agree with the points made by the noble Lord, Lord Grayling, in full, but he raises an issue which relates basically to capacity. I will come back to that in a moment, but if franchising is not suitable for Surrey, why was it regarded in that 2017 legislation as acceptable for Cornwall? It is my recollection that Cornwall was allowed to franchise buses. An element of doubt is sewn in this SI in the Explanatory Note, which says that no impact assessment has been produced because the SI is not expected to have any, or any
“significant, impact on the private, voluntary or public sector”.
I find that judgment worrying, because bus franchising is a very big undertaking, a multimillion pound undertaking, and it takes a long time. I have watched Manchester, for example, struggle with franchising in producing the Bee Network over many years.
Nevertheless, despite the deficiencies in the way the SI is cast, it is welcome because it removes the first stage, as I pointed out earlier, and also because it extends bus franchising powers beyond mayoral authorities. At the time that this legislation went through this House, I questioned why, having voted, as a local authority, for an elected mayor, that made you intrinsically more capable of running the buses. It struck me as totally illogical. Not all bigger local authorities have elected mayors: I think of Bournemouth, Christchurch and Poole, which is a fairly densely urban area that does not have an elected mayor.
So I am pleased that the complexity of the process is being reduced and I am pleased that it is being extended, but, in reality, the key barrier remains the capacity and expertise in our local authorities. I was pleased to read that the department is looking to build up its capacity to offer advice and assistance to local authorities, because on the ground that is what they desperately need.
When the Secondary Legislation Scrutiny Committee asked the Department for Transport why there was no proper explanation in the Explanatory Memorandum, the department provided a very clear paragraph, which was included in our report. I recommend that noble Lords read it if they are in any doubt about the importance of this legislation.
Finally, the same legislation in the 1990s that allowed London to franchise and fatally divided the country between the bus haves and the bus have-nots also encouraged local authorities to sell their bus services and their buses and forced them to run them on a strictly commercial basis. It has interested me ever since that the few local authorities that still have bus companies and run their own buses at arm’s length are largely successful and some of the best examples of bus services in the country.
Lord Moylan (Con)
My Lords, we recently had a Statement in the other place given by the Secretary of State on bus franchising. My understanding is that this instrument gives effect to that Statement—at least its initial parts. I recall that, when we debated that Statement in your Lordships’ House, I had the temerity to describe it as being essentially a bogus offer.
I gave two reasons for that, but I have now found a third, which is that the instrument does not actually allow local authorities to go in for bus franchising at all. All it does is allow them to apply to the Secretary of State for permission to prepare a plan for doing so, but nothing is said, and nothing has been said by the Minister, about what criteria will be applied when such plans are submitted. In order to understand the implications of this instrument, we need to understand that. The Minister has said nothing about how many applications he or his department expect to receive, or about what proportion of such applications he considers it likely that the department will grant. It is perfectly possible that the answers to all these questions is “zero” under this instrument, and that bus franchising will be no further forward as a result of this very grand announcement, which was made with great hoopla in the other place, and of this instrument than it is today. We really would like to know some of the answers to some of these questions in practical and not simply theoretical and legislative terms.
I return to the two reasons I gave when we debated the Statement in your Lordships’ House. The first is that the policy comes with no money attached to it. At the time, the Chancellor had not made her Budget Statement. She since has, so it should be open to the Minister to say how much money has been allocated to supporting local authorities to undertake franchising, because the whole purpose of franchising is to generate services which the market will not bear. Nobody denies that there is a cost to local authorities in undertaking franchising—a cost that they are most unlikely to be able to support from their own resources—so what money is the department, or are the Government in general, putting behind this greatly trumpeted policy?
My second cause for complaint in that earlier debate has already been referred to by the noble Baroness, Lady Randerson: the complete lack of capacity of local authorities, certainly outside the metropolitan areas, to put together and run a bus service as an integrated operation. There is more to this than simply saying “We’d like the buses to run here”. Route planning involves thinking about demand, the locations of passengers and their relationship to places of work, hospitals and other destinations, and so forth. That is a skill; it does not just come to a committee of local councillors sitting around a table. Even if you have experience of route planning, as we have seen in Manchester, you have to think about branding, fares and ticketing, and what you will accept by way of tender. Are you accepting cash or is it cashless only? You have to know what sorts of discounts, season tickets and so forth you are willing to offer. As the noble Lord knows, and as I have had the privilege of observing in the past, in the various positions that he and I have occupied, real skill is required to do this well.
The answer that we have had from the noble Lord so far is a mildly amusing one: the Department for Transport is going to set itself up as a centre of expertise in how to plan routes, and do branding, fares and ticketing, for bus companies and services throughout the country. Now, I fully acknowledge that there is at least one person in the Department for Transport who has the skill to do that, and that is the noble Lord the Minister. But he is going to be jolly busy doing all these jobs, being both a Minister and planning routes for modest settlements and hamlets in the remoter counties of England.
However, if it is not going to be the Minister, who will be recruited to do this skilled work in the Department for Transport? Will they be recruited on a sort of ad hoc consultancy basis? Is this department waiting speculatively for applications to arrive, which may or may not meet criteria that have not been vouchsafed to us so far, and which may then be rejected or accepted by the Secretary of State? How will this wonderful offer of skill and expertise inside the Department for Transport be achieved in practice? The noble Lord should not be allowed to leave this Grand Committee without explaining those things to us in some detail.
I come finally to a point that is new to me, because it struck me only yesterday evening when I went to a reception given by the Accessible Transport Policy Commission and found myself speaking to the chief executive of a private bus company—a commercial operation in a large provincial city; I will not say which. He described to me all the good work it was doing to make its fleet more accessible to people with disabilities. We even talked about something that was new to me, which I am interested to explore—dementia-friendly flooring.
He described to me the close relationship he had, working with the local authority, then he looked me straight in the eye and said, “You’re going to confiscate my business”. That took me aback, because I had not thought about it in those terms—but in practice that is what franchising will do. It is, in effect, the confiscation of a business. Of course, he may still secure the franchise, but then he would simply be operating services for somebody else, for a fee. He would no longer be running a business; he would simply be somebody else’s agent in doing that.
This is confiscation, like the nationalisation of the train operating companies, which is happening. I have to say to the Minister that there is an increasing whiff of Bolshevism about this Government’s transport policy—and we know that that did not end well.
Lord Hendy of Richmond Hill (Lab)
I thank noble Lords and the noble Baroness for their extensive comments. I turn first to the noble Lord, Lord Grayling, and his remarks about where this might apply and the circumstances in which it would be appropriate.
The primary thing to say about this is that it is a matter of choice. This statutory instrument extends choice to all local transport authorities, which might choose various solutions around the scale of public bus services in their areas.
I did not need to search for examples outside London because the noble Baroness, Lady Randerson, gave me some, including the very rural county of Cornwall, where the public transport network is now a model. It includes demand-responsive transport, to a limited extent, but it has also reintroduced bus services in places where they have not been seen for a very long time.
The noble Baroness’s example of Bournemouth, Christchurch and Poole is one of a combined conurbation where the bus services are, in my judgment, of quite a good standard. It may well be that the local transport authorities concerned decided that that service was sufficient, but there are many other places in England where the bus service is not judged to be of a sufficient standard, where it has fallen to a bare minimum and where the reintroduction of some service standards would not only be a good thing but would create revenue which would expand the total service provision.
Regrettably, I can find some examples of places—although I think it would be better not to name them—where sufficient short-term service cuts have been applied that the revenue generated is so low that the whole bus service is in a continual spiral of decline. There are other places where that has not happened. That is the supply side of the choice we are offering local authorities, so that they can do what they think is best.
The noble Lord, Lord Moylan, referred to demand-responsive transport. It is a solution, obviously, but the department is working hard on some experiments to seek to reduce the per-journey cost of DRT, which is very difficult. It is possible to register demand-responsive services, even in a franchised environment.
The noble Baroness, Lady Randerson, made a number of points; indeed, it was she who gave Cornwall as a very practical example of an extremely rural place that has, by experiment, succeeded in franchising and has a very good network. She referred to the criticism of the Secondary Legislation Scrutiny Committee. As I mentioned in my opening speech, the department is revising its bus franchising guidance in order to set out the process accessibly and in detail. I hope that this will satisfy the committee’s demand.
The noble Baroness, Lady Randerson, questioned the capacity of local transport authorities to do this job in rather more balanced terms than the noble Lord, Lord Moylan, did. The department recognises that active support is needed for local authorities that wish to franchise.
I draw both noble Lords’ attention to the Bus Centre of Excellence, which is funded by the Department for Transport and supported by the Chartered Institution of Highways and Transportation. The noble Lord, Lord Moylan, referred to my knowledge of this process as it applies to London. He will probably be very pleased to learn that the Bus Centre of Excellence is chaired by none other than Leon Daniels, who ran surface transport in Transport for London for seven years, I think, and has an intimate knowledge of how franchising works in London. Moreover, since leaving, he has got a very good knowledge of how it might work in the rest of England.
The noble Baroness referred to the impact of legislation and to the local authorities who have successfully continued to run their own in-house bus companies when many were disposed of. She is absolutely right that places such as Reading, Blackpool and Nottingham are good examples of where arm’s-length local authority companies have delivered very successful bus services. The Government intend for that route to be open to local authorities who wish to use it; it will be part of the scope of the buses Bill. It is right to offer local authorities a real choice about how they deliver their local bus services.
Lord Grayling (Con)
Will the Minister allow me to probe that? The Red Book shows that the Department for Transport has probably had the worst settlement in the Budget, with barely an increase in either capital or revenue budgets taking place, so is this new money?
Lord Hendy (Lab)
I am citing sums which are available in 2025-26. I disagree with the noble Lord in conceptual terms that it is the worst settlement for years, to paraphrase him. It is a very good settlement, bearing in mind the state of the national finances. Indeed, in real terms, local government support has gone up by 3.2%. My point is that there is enough money here to support local bus services in local transport authorities in whatever way they want to provide them, and this statutory instrument allows them to provide them in more ways than they currently can. Also, as I just said about Manchester, and as I would say about a consistent network anywhere in towns and cities in Britain, if it is provided consistently and planned rationally, revenue will go up and that virtuous circle will enable more provision.
I hope that I have answered all the points that noble Lords made, but if not, I will be delighted to write.
In conclusion, the regulations we are considering give all types of local transport authorities in England, outside London, access to powers to franchise their bus services. This Government’s plan to improve buses starts here. Our next stage of reform will be the introduction of the buses Bill. This legislation will seek to make bus franchising even easier to deliver, devolve funding and improve accessible travel. It will also improve bus services for councils that choose not to franchise. The transformative work the Government are doing will turn the tide by giving communities the opportunity to better control local bus services and have a real say in building local transport networks that work for them.