Bus services on life support: can franchising deliver for Wales?

Published 07/12/2023   |   Reading Time minutes

In June 2023, the First Minister announced that a Bill to reform and improve bus services would be introduced in the current Senedd term. It is expected to focus on franchising. The Bill has been long awaited, with the first proposals dating back to 2018.

This is the second article in our two-part series on bus services. It looks at what we might expect from the Bill and how stakeholders have responded to the proposals.

The first article of this series details the issues currently being experienced by bus services, and provides some background as to why we might see reform.

How did we get here?

The 2020 Bill

In 2018, the Welsh Government published a White Paper on “Improving public transport”. Subsequently, the Bus Services (Wales) Bill was introduced in March 2020. However, it was withdrawn in July 2020 due to the challenges posed by COVID-19.

Our March 2020 briefing details the situation leading up to development of the Bill. It also outlines the proposals included in the White Paper and the responses to the consultation.

The Bill proposed to give local authorities powers to introduce Enhanced Quality Partnerships or franchising. It also addressed information provision and proposed removal of restrictions on local authority run bus services.

Impact of COVID-19

COVID-19 has had significant short-term and long-term impacts on bus services, which you can read about in the first article in this series.

To keep bus services afloat during the pandemic, the Welsh Government launched the Bus Emergency Scheme (BES) in July 2020. The BES came to an end in July 2023. The Welsh Government announced in June 2023 that it would be replaced by the Bus Transition Fund, with:

…£46m available from bus budgets to support BES and the Bus Transition Fund arrangements for the whole financial year.

Additional funding of up to £6.8m to support the Bus Transition Fund in South East Wales was announced in December 2023.

However, as shown in our first article, bus services, which were already suffering from long term issues, have not yet recovered to pre-pandemic levels in a number of areas. In May, the Deputy Minister for Climate Change, Lee Waters MS, said:

…COVID blew up an already brittle business model.

Going on to say:

This inevitably has left a large gap in the finances of bus companies in Wales. This external shock has shown the hollowness of the privatised model of deregulation.

The BES required the public sector to work with bus operators to determine service levels. In doing so, the Welsh Government set out, in July 2020, that this was:

…the first stage of a wider plan which will see the public sector funders of the bus industry begin to regain control of buses for the first time since de-regulation in the 1980s.

The 2022 White Paper

A further White Paper on bus reform was published in March 2022. It proposed to:

  • require bus franchising throughout Wales;
  • permit local authorities to establish new municipal bus companies;
  • relax restrictions on existing municipal bus companies; and
  • improve passenger information and ticketing.

Unlike the 2020 Bill, the 2022 White Paper proposed to give the public sector control through a single mandatory scheme, franchising. The White Paper sets out what this means:

… Local Government, Transport for Wales and the Welsh Government will work together to design bus networks and services which best meet people’s and communities’ needs within the funding available.

Local authorities are responsible for services under current statutory arrangements. The 2022 White Paper proposes to give “the franchising power” to Welsh Ministers. This would mean that the Welsh Government bears the revenue risks:

Under a franchised system, the public sector assumes that risk to enable us to deliver the best network we can with the funding available.

In May 2023, the Deputy Minister for Climate Change gave an update on progress made to get ready to implement the proposals from the 2022 White Paper. This included meeting with Transport for Wales (TfW), trade unions, and industry and local authority representatives.

Transport for Wales is currently developing the approach to delivery of franchising, working with the Welsh Government, local authorities and operators.

In November 2023, the First Minister, Mark Drakeford MS, said that local authorities were in the process of planning a bus network with routes that best address the needs of citizens.

What have stakeholders said?

Responses to the consultation on the 2022 White Paper showed overall support for the proposals. More than 66% of participants agreed or strongly agreed with the need for franchising, and more than 76% of respondents agreed or strongly agreed with the proposed franchising model.

However, some concerns were highlighted by respondents. Several respondents highlighted the potential negative effects on small bus operators. In the 2022 White Paper, the Welsh Government recognised this risk and said it would be addressed through the bidding process with mechanisms to ensure equal opportunities. Respondents to the consultation asked for additional support for small operators, especially during the transition period.

Respondents also outlined the need for affordable fares. In May 2023, the Deputy Minister for Climate Change said the Welsh Government had been working on a fare cap, but pressures resulting from inflation and increased costs do not allow for its implementation.

Concerns were also raised about the cost and revenue risks of franchising. In its October 2023 report ‘Y Fford Gymreig (the Welsh Way)’, the Confederation of Passenger Transport (CPT) Cymru highlighted that limitations in the public resources available would constrain the provision of bus services under the franchising model. It suggested an alternative ‘Minimum Subsidy’ model and said this could provide cost savings, service improvements, and increasing passenger numbers.

In addition, CPT Cymru highlighted that most of the recent drivers of reduced bus demand (e.g. hybrid working, development of online services, car ownership growth and traffic congestion) will not be addressed by the introduction of franchising and that it is not a magic bullet”.

Why is funding a concern?

Limited Welsh Government financial support has already been blamed for the loss of services, and there are concerns that more are at risk.

The Deputy Minister for Climate Change said in Plenary in May 2023, regarding the £46m made available to support bus services:

…falls short of the figure that local authorities and the industry think is required to preserve every single service, as is now…

This announcement followed uncertainty regarding the future of the BES, which was a challenge for bus operators according to CPT Cymru.

The Deputy Minister for Climate Change highlighted the pressures on other sectors, for example the NHS, and the need to prioritise the budget. He also stated that franchising would be the best way to use money efficiently. TfW has also said it believed franchising would be the solution to mitigate current funding pressures.

In October, the Welsh Government provided an additional £125m funding to TfW to support rail services. This was met with disappointment from CPT Cymru, which said there was “a real inequity” in funding for bus and rail.

Many questions remain regarding franchising decisions that will be made. The full picture of the opportunities and risks presented by the planned bus reform will only be known once the Bill is introduced.

Article by Amandine Debus, Senedd Research, Welsh Parliament

Senedd Research acknowledges the parliamentary fellowship provided to Amandine Debus by the Natural Environment Research Council, which enabled this article to be completed.