Motion to Approve
That the draft Regulations laid before the House on 17 January be approved.
My Lords, the Bus Services Act 2017 contains a range of options to improve local bus services in England. In addition to franchising, there are new and improved options to allow local transport authorities to enter into partnership with their local bus operators to improve services for passengers.
One of these, the enhanced partnership regime, allows local authorities to define a geographical area in which they provide new facilities such as bus priority measures or take other measures that would make buses more attractive, such as reducing car-parking provision or increasing its cost. In return, local bus operators are required to meet service standards that are specified as part of the scheme. This can include a multi-operator smart-ticketing scheme or a requirement to operate cleaner vehicles or provide comprehensive timetable and fares information. The partnership can also limit the number of vehicles that operate along specific corridors to reduce congestion or improve air quality, or require the buses to co-ordinate their timetables with other modes, such as rail services.
The draft regulations, which were laid before the House on 17 January, set out the mechanism by which bus operators can formally object to the package of proposals during the development of an enhanced partnership scheme. A key element of enhanced partnerships is that only the majority of bus operators need to agree to the proposals for them to go ahead. This means that improvements to bus services that are supported by the local authority and the majority of bus operators cannot be prevented from being introduced by a “blocking minority” of operators which, for whatever reason, do not wish the partnership to be introduced.
The 2017 Act provides a mechanism allowing individual operators the opportunity to object to the proposals to make an enhanced partnership plan or scheme at two key stages. The first opportunity to object arises when the proposal for an enhanced partnership is subjected to a formal public consultation, and the second arises if the plan or scheme is modified following the consultation.
The regulations set out the process for determining if the number of operators objecting to the enhanced partnership plan or scheme, as proposed or modified, is sufficient to stop it proceeding any further. If this happens, the partnership would need to renegotiate the package until the objections fell below the statutory thresholds.
The regulations provide two criteria that need to be satisfied to determine whether there are a sufficient number of objecting operators to stop the partnership proposals. Both criteria need to be considered and either one, if met, would be enough on its own to stop further progress. The first criterion is that, for objections to be sufficient, the objecting operators together must represent 25% of operated bus mileage in the partnership area and at least three bus operators must be objecting. If there are fewer than three operators running bus services in the area, the regulations require them to object for this criterion to be satisfied. This ensures that objections are raised by operators with a significant stake in the local bus market while preventing a single operator, or pair of dominant operators, from exercising an effective veto.
The second criterion is that objections are received from 50% of local bus operators that, together, operate at least 4% of operated mileage in the partnership area. This prevents a large number of operators that together have only a relatively small stake in the bus market from objecting to a partnership that is supported by the local authority and the operators with the largest stake in that bus market.
I will now explain how those thresholds were arrived at. The bus market in England has been deregulated since 1986 and the number and size of bus operators in individual areas varies greatly. The objection thresholds in the draft instrument cater for this and were arrived at following detailed analysis of real-world bus markets by officials in the Department for Transport, and discussions with key stakeholders such as bus operators and local authority stakeholder groups. This objection mechanism was then subject to a full public consultation between 8 February and 21 March last year. While some respondents suggested alternative figures for the thresholds, there was no consensus on what they should be and it did not convince us to alter our proposed figures.
Following our detailed analysis and the results of the consultation, we believe these figures are the right ones to use for the objection mechanism. However, the mix of bus operators varies hugely up and down the country, as I said, and it would not be possible for any statutory criteria adequately to cater for all the ones where enhanced partnerships may develop. That is why the 2017 Act also allows for further flexibility. The statutory objection thresholds in this instrument are required to apply only when a plan or scheme is introduced. An enhanced partnership can also include a bespoke objection mechanism for use when an existing scheme is varied or discontinued. This allows individual partnerships to adopt an objection mechanism that better suits their needs.
The draft instrument also sets out those services that are not eligible to take part in the objection mechanism. The first is community bus services which, under the 2017 Act, are not required to meet the requirements of an enhanced partnership scheme. It also includes tour buses, services that operate less than 10% of their mileage in the partnership area and services paid for under subsidy by the local transport authority.
Since the Bus Services Act came into force in June last year, nearly 30 local authorities up and down the country have either expressed an interest in, or are actively pursuing, an enhanced partnership with their local bus operators. However, there will inevitably be some operators that seek to block progress, perhaps because the improvements proposed are not in their commercial interest or because they prefer the freedom to operate in a fully deregulated market. These regulations seek to strike a balance between ensuring that the partnership has broad support from local operators and not allowing a minority to block vital improvements that will make local bus services better for passengers. I ask the House to approve the regulations and I beg to move.
My Lords, I thank the Minister for her introductory comments. One of the big questions when we debated the Bus Services Bill last year was exactly how the Government were going to devise a scheme that allowed existing operators to object to a proposed partnership without allowing them to act as a complete block on progress towards improved bus services. We all hope that the enhanced partnerships will provide those improvements, so I strongly welcome the Minister’s realistic analysis of what the regulations seek to do. It seems that the scheme as outlined here is quite a cunning plan, which is well balanced between the operators and the local authorities.
However, we will see how well it works in practice. I am delighted to hear that 30 local authorities are already working on this. One hopes that they are successful because the others, the less adventurous ones, might perhaps follow suit. Given that the Government declare in the Explanatory Memorandum that a review is not appropriate, will the Minister assure us that there will be an element of informal review to assess how well this is working after a couple of years? There might be some unintended consequences or the need for some adjustment, so it is only sensible to allow for review—although I understand the Government not wanting to commit to a formal review process.
The plans set out five stages in the life cycle of an enhanced partnership. The first is when the local authority proposes a plan, the second is when it makes a plan and the third is when it proposes to vary a plan. How will that work in practice? Suppose at stage 1, when the local authority proposes an enhanced bus partnership, the bus operators object. Is there sufficient flexibility in the process for the local authority and the bus operators to meet and discuss the plan, for the local authority to amend it and for the bus operators to withdraw their objections without having to go back to square one? I fear that in practice some local authorities might look at a plan and, if the bus operators object, they might just retire from the field and say that they will not bother with enhanced partnerships again. I am concerned that we have a system that is sufficiently simple and flexible to allow both sides to address issues and concerns and to move on through the process without having to go back to the start.
I hope the system is flexible and that this is a successful way ahead, because the decline in the number of bus services, particularly in rural areas, indicates that for many areas this is the last opportunity for decent bus services to survive—and we know that when a bus service goes, it strikes at the heart of a rural area.
My Lords, I am afraid that the Minister has not really made my day since she has answered all the questions in my original speech. I shall not waste the time of the House by repeating them. Suffice it to say that I commend the realistic attitude that the Government have taken to how bus companies might behave. I shall press the point made by the noble Baroness, Lady Randerson, about a review. I am not pressing the Government to commit to a review, but should the carefully researched numbers in these regulations prove not to achieve the Government’s objectives, what complexity would there be in changing the numbers? Would it be possible within the parent legislation to bring forward new orders if the reaction of bus companies was excessively to veto apparently viable schemes?
My Lords, I again thank the noble Baroness, Lady Randerson, and the noble Lord, Lord Tunnicliffe, for their broad support for these proposals. On the flexibility point, the legislation allows operators and local authorities to negotiate a deal through the objection system. They can reach this agreement in advance of a formal objection—so we think there is enough flexibility there. As to the review, yes, we absolutely will keep the thresholds under review and will bring forward amendments if necessary.
Enhanced partnerships are a new type of partnership agreement that did not exist prior to the 2017 Act, and we are encouraged by the interest and progress that has already been shown by local authorities and bus operators. The objection mechanism is a key part of the regime, and it is important that we strike the right balance between allowing operators a fair say on what should go into the schemes while at the same time preventing a minority from blocking improvements.
As the noble Baroness, Lady Randerson, said, we will need to see how these work in practice. The fact that this mechanism is in secondary rather than primary legislation gives us flexibility to amend and further debate the rules in future. My department will not hesitate to do so if that is required to ensure the ongoing success of the schemes. I beg to move.