Devolution deals across the country calling for bus franchising powers to be handed over to local authorities are hanging in the balance this morning following a ruling in the North East.
National and local politicians expressed ‘huge disappointment’ after a bid to bring bus services back under local authority control was rejected by a Quality Contract Scheme Board (QCS), and councils told scores of millions of compensation should be paid.
The QCS Board, led by North East traffic commissioner Kevin Rooney, dismissed the plans put forward by the North East Combined Authority (NECA) and most worryingly for local authorities suggested compensation of up to £226m should be paid to operators under the proposals.
No compensation was offered under the NECA plans.
The Quality Contract Scheme's Board found that tendering would lead to cash losses of between £85m and £226m, and stated: 'Legislation enabling franchising should specifically address the issue of proportionality of financial loss of bus operators. It may be that some form of compensation is considered appropriate.
'We do not consider that Parliament ever had in its mind that incumbent bus operators would be subject to losses of this scale without compensation. We therefore find that the impact on the operators is wholly disproportionate in relation to the benefits to both the travelling public and the wider citizens of Tyne & Wear.'
This provides operators ammunition to attack the Government's proposed Buses Bill, which would allow local authorities to take on bus franchising powers similar to London.
In the current financial climate for councils, if courts ruled compensation would have to paid to operators of anything like the amounts mentioned by the QCS Boards, such legislation would be largely redundant without government financial support.
Richard Collins, lawyer at national law firm Bond Dickinson LLP, told Transport Network: 'This is the opinion of a board. However if Nexus and NECA were to disregard that opinion if would give operators good prospects for considering legal challenges, including a judicial review.'
The QCS Board is a lay tribunal not a legal court and therefore does not have the same power to set precedent, however experts suggested that lawyers working for the operators and government officials would be taking note of the Board's opinion.
Revolution on hold? NECA has to wait for news on the Buses Bill
Nick Forbes, leader of Newcastle City Council and transport lead for the North East Combined Authority said: 'This board has ruled that voters cannot have a say on bus routes, on time tables or on fares because the Act which would have given them that power does not offer compensation for some of the UK’s richest firms who might lose some routes. That compensation would cost the public anywhere up to £226m.
'The impact of this decision will be felt across a far wider area than just this region. Every devolution deal signed by Government has built into it some aspect of bus regulation, a situation which risks being undermined as a result of this decision.
'The Government must urgently set out how its soon to be published Buses Bill will address this threat to devolution, or see one of the most important part of George Osborne’s Northern Powerhouse kicked out before it even gets started.
'It cannot be right that cities outside London are denied the joined-up approach to local transport that people in the capital take for granted. With just 18 months until mayors are due to be elected across the country, the Government has to act now to ensure the promise of a new era of local bus powers is not outweighed by the demands of the bus firms. We will be seeking urgent talks with ministers and senior Department for Transport (DfT)) officials to ensure immediate action.'
Transport Network has contacted the DfT but it was unable to clarify its position at the time of writing.
The scheme proposed by Nexus, the Tyne and Wear Passenger Transport Executive, received unanimous approval by NECA councils and would have allowed the authority to map out routes and services just as London does, as well as profits to be reinvested in local services.
The NECA councils have already agreed a devolution deal under the planned Buses Bill, which would provide the combined authority with bus powers subject to the legislation and consultation.
Labour’s Lilian Greenwood, shadow transport secretary, said: ‘The board’s decision is hugely disappointing. Today’s announcement proves once and for all that the current law is not fit for purpose and the onus is now on the Government to bring forward new legislation.
'The Board’s recommendation that bus operators receive hundreds of millions in compensation from stretched local authorities is a huge blow to the devolution agenda, and the recommendation risks leaving George Osborne unable to deliver one of his major ‘Northern Powerhouse’ commitments. It’s now vital that the Government does not cave in to pressure and duck the need to include radical measures in its forthcoming Buses Bill.’
Nexus’ managing director, Tobyn Hughes, said: ‘We are extremely disappointed that the board’s opinion is negative regarding the proposal, and there are aspects of it that we simply do not agree with. Of particular concern is that the board took a highly pessimistic and surprising view of financial risks, suggesting that Nexus must budget for costs to be up to 40% higher than we know them to be, while at the same time suggesting the bus companies should be compensated out of public funds for missing out on future profits from the very same network of routes.
‘The Combined Authority’s Leadership Board will consider the opinion of the QCS Board at its next meeting. It will be up to the Leadership Board to decide whether to ask Nexus to refresh the technical analysis and submit a revised proposal, or whether to pursue other options.’
As well as the Buses Bill, other options include a partnership arrangement with authorities and bus operators, which would be a less formalised mutual agreement on planning routes and services.
Nexus has already put forward a proposed partnership agreement however this was seen as a much less favourable option.
‘Even if the partnership was delivered in full, many socially important bus services and reduced fare concessions would still be lost,’ Mr Hughes said.