The verdict? In an opinion which has been welcomed by the region’s bus operators, the board found that the scheme failed to meet certain statutory public interest tests and recommended that it should not be implemented.
But to what extent is NECA bound by the board’s opinion? Could Nexus (NECA’s transport executive) safely disregard the opinion and proceed with the scheme regardless?
One answer to that question is found in the make-up of the board itself. It’s a statutory body whose role is to give an opinion, not a tribunal charged with making a decision.
The legal status of the board’s opinion was hotly debated in the hearing. The conclusion reached by the board was that it has a remit to consider and reach independent conclusions based on the evidence placed before it, but, importantly, that its opinion is not a judgment and is not, of itself, binding.
Nevertheless, whilst NECA is not technically bound by the opinion, it is highly improbable that it would simply ignore it and successfully press ahead with the scheme - and indeed Nexus has already said that this won’t happen.
After all, any decision by Nexus that sought to disregard the clear and well-reasoned views of the board would be susceptible to judicial review, and any operator seeking to challenge the decision to implement the scheme would have ample evidence to support a claim that the decision was substantively flawed.
The publicity that the opinion has generated will also doubtless encourage operators to challenge any attempts to reintroduce the scheme in the future.
But how will other local authorities in other regions react? They could take the view that any QCS is dependent on its own facts, diluting the impact of the board’s opinion in this case. That feels risky. Or they could treat the opinion as part of the direction of travel towards devolution and bus franchising.
So where does all this leave the future of the bus industry? Nexus’ slow and ultimately fruitless journey from its initial proposal to this decision has demonstrated that the current regulatory process may not be fit for purpose; new forms of partnership between operators and local authorities now seem more likely than ever.
New regulatory structures should be informed by the board’s description of the lessons to be learned from the Tyne & Wear QCS, which set out recommendations for any future franchising proposals in any form. These include that such proposals should follow a staged, independently scrutinised approach and that the legislative framework should specifically address the issue of how any adverse effects on operators stack up against the benefits.
In practical terms, that means thinking about compensation if and when franchising is introduced.
The board has set out a very helpful set of signposts for the industry, and both of these specific recommendations have been welcomed by operators. However, there remains an obvious tension between the Government’s Northern Powerhouse plans to devolve more control over local transport to local authorities on the one hand, and the need to safeguard operators’ interests on the other.
So the Department for Transport has some thinking to do about how and to what extent it will propose to compensate any affected operators in the brave new world to come.
As a new regulatory structure develops, the industry will also need to take into account operational risks including those raised by the board in its opinion including, perhaps most importantly, the impact of local authorities taking on revenue risk.
Any failure to properly assess and understand that risk in particular might lead to potentially severe consequences, both economic and political.
Richard Collins is from national law firm Bond Dickinson LLP
