Bus operators will no longer make ‘excessive’ profits under franchising arrangements brought in through the Bus Services Bill, a senior local politician has claimed.
Cllr Andrew Fender, chair of the Transport for Greater Manchester Committee, said that under a franchising arrangement, which allows local transport authorities to set fares and service levels, ‘there will be a profit but not the double-digit excesses we have now.’
Cllr Andrew Fender complained of 'excessive profits'
Speaking to the Financial Times, Cllr Fender criticised the current setup, which sees the vast majority of the market controlled by only a handful of operators who also receive government subsidies for unprofitable routes.
He claimed that operators in his area were making ‘excessive’ profits while 40% of their turnover came from the taxpayer, adding that they should provide better services in return.
London was protected from the deregulation of the industry, which took place after the 1985 Transport Act. In the intervening years the capital saw bus use climb while the number of journeys made outside London fell.
‘We have a vicious cycle of reduced services and increased fares and the public sector is expected to pick up the tab. The companies are more or less guaranteed as high a profit margin as they can squeeze out of the system,’ Cllr Fender said.
In the run up to the Manchester mayoral elections next May, which will see a directly elected mayor takeover from the current interim mayor who was appointed by the council leaders, Cllr Fender did manage expectations suggesting that it would take time for the new mayor to work out their approach.
‘Things are not going to change overnight,’ he said.
Bus operators have largely been against handing franchising powers similar to London’s to other areas across the country.
Recent research, based on interviews with senior directors at operators of all sizes, found cross-industry anxiety ‘that the reform process has curtailed service innovations and investment in the short-term and could discourage entrepreneurial talent from entering the industry in the future’.
They added also expressed concerns ‘that councils do not have the financial resources or political commitment to deliver their part’.