Why do so many local authorities want to introduce bus franchising instead of municipal operators.

[stadler]

Why does every local authority these days seem to want bus franchising now instead of municipal operators? What is the benefit of chosing bus franchising instead of just setting up a municipal operator to run all buses?

All of the following areas are either franchised or are having franchising introduced in the next few years:

Birmingham

Liverpool

London

Manchester

South Yorkshire

West Yorkshire

Now we have others like Brighton wanting to do the same. No doubt there will be even more in coming years. It seems like every council wants franching now.

Bus franchising seems like a really bad option in comparison to a municpal operator. Yes the local authority sets the fares and routes and has more control but the buses are still being run by private companies. The local authority is still paying private operators and the buses are still in the hands of private companies.

It is also a mess as you just end up with dozens of different operators running different routes. For some reason they never tender out the entire network in one lot. It is also bad for the bus operators themselves as they have no long term certainty. They can win the routes and then loose them just a few years later.

Running a municpal operator makes so much more sense and is surely much cheaper. That way the local authority is fully in control and owns the buses and employs the drivers and runs everything themselves. They do not have to pay private operators. They do not have to spend money and time on these tendering processes.

We have over thirty municpal operators currently and they all seem to be running successfully so i wonder why larger local authorities do not want to set up one? Does anyone know why bus franchising is seen as the way forward instead of municipal operators?

 

[Cesarcollie]

Why does every local authority these days seem to want bus franchising now instead of municipal operators? What is the benefit of chosing bus franchising instead of just setting up a municipal operator to run all buses?

All of the following areas are either franchised or are having franchising introduced in the next few years:

Birmingham

Liverpool

London

Manchester

South Yorkshire

West Yorkshire

Now we have others like Brighton wanting to do the same. No doubt there will be even more in coming years. It seems like every council wants franching now.

Bus franchising seems like a really bad option in comparison to a municpal operator. Yes the local authority sets the fares and routes and has more control but the buses are still being run by private companies. The local authority is still paying private operators and the buses are still in the hands of private companies.

It is also a mess as you just end up with dozens of different operators running different routes. For some reason they never tender out the entire network in one lot. It is also bad for the bus operators themselves as they have no long term certainty. They can win the routes and then loose them just a few years later.

Running a municpal operator makes so much more sense and is surely much cheaper. That way the local authority is fully in control and owns the buses and employs the drivers and runs everything themselves. They do not have to pay private operators. They do not have to spend money and time on these tendering processes.

We have over thirty municpal operators currently and they all seem to be running successfully so i wonder why larger local authorities do not want to set up one? Does anyone know why bus franchising is seen as the way forward instead of municipal operators?

There are a myriad of reasons. Whilst many of the remaining municipal operators are successful (though look carefully at the accounts of some on Companies House) and some are superb, governments whether local or central are not generally renowned for their success at running things directly. There is a long list of municipal which no longer exist because they failed. Halton was the most recent I think. Overheads tend to be high, local government pension schemes become a point of contention, and governance is a political football. In addition the authority has to fund some pretty big capital expenditure like depots and buses (it is true some franchising schemes are choosing to fund property and buses too, but at least if money becomes tight they can move bus funding to the contractors in future, whereas a municipal doesn’t have that option). That’s all on top of the challenge of revenue risk which the authority gets with either the franchise or municipal option. Last but not least, recruiting a whole team of management to run a new operation would be a significant challenge.

 

[stevieinselby]

With franchising, it isn't necessarily that the council is "paying" private operators – the profit margins on franchises are typically a lot lower than on commercial and subsidised networks, so I don't think it's fair to imply that franchising means more public money being funnelled into shareholders' pockets.

Contracts are typically let for an 8 year period, which is longer than subsidy contracts or school contracts, so that will give an operator more long-term security than other contract work, and commercial routes only have long-term security for as long as no other operator pitches up with a competing route.

Awarding an entire city region network as a single franchise would come with a huge risk – if that operator has any problems (financial, reputational, workforce) then you've put all your eggs in one basket and your whole network is down the swanee. By making it into one humongous tender, you're limiting the number of operators who would realistically be able to bid for it, meaning they've got you over a barrel and you're less likely to get a financially advantageous result, and making it harder to hold them to account if they aren't fulfilling their side of the contract, because you can't afford for them to fail and you've got no backup plan if they do.

Running a municipal operator is potentially more risky, in terms of needing to employ the drivers, mechanics, ancillary staff and everyone else centrally. And I'm not sure what the legal position is on that – in the places that do have a municipal operator, it is either (a) a commercial entity owned by the council, which competes on a level playing field with any other commercial operations that are running, or (2) an operator of last resort picking up the basket case routes that they can't find anyone else willing to take on at a sensible price. If a council, PTE or combined authority wanted to set up a municipal operator and take over all existing commercial and subsidised routes in an area, just by eminent domain and not through any kind of competitive tendering process, would that even be allowed?

You've also got the question of longevity and security of operations. Councils can and do change colour every few years – some may be more loyal to one party, although with the current political situation it's hard to say that there are any truly safe seats – and a franchise network with 8-year contracts might be harder for a hostile administration to dismantle within a 4-year term than a municipal operation that doesn't have any fixed contracts but is subject to the whim of the annual budget round.

 

[JonathanH]

Overheads tend to be high, local government pension schemes become a point of contention, and governance is a political football.

I don't think they do. As arms length companies, municipal operators are free to establish their own defined contribution pension schemes for new employees. Staff of municipal operators are not directly employed as 'civil servants'.

 

[Megafuss]

As things stand today, the expertise to plan and run a large network of buses sits with private operators, which is probably why franchising is preferable - let them worry about duties, rotas and service delivery as it's bread and butter to them.

Unless the entire industry was nationalised, I can't see how other Local Authorities would be able to acquire the knowledge and money to plan and deliver networks by themselves.

 

[mangad]

One important thing to know is that the creation of new municipal bus companies was prohibited by law until the Bus Services Act 2025 came into effect last October. The Conservatives had put a legal block on creating new companies, which was only removed last year after Labour came into power. The Conservatives were so anti the idea of the private sector not playing a part in bus operations that they ensured it had to happen.

Greater Manchester - as the first to move on all this - didn't have an option of going municipal, and I suspect in other areas where franchising is coming were too far along with their own plans for franchising, once the block was lifted.

I can't help but think that now the path from deregulation to franchising is all known and therefore easier to implement. Everyone can look to Greater Manchester and learn from it. Going from deregulation to a whole new municipal operation however comes with new risks and potential problems. Franchising could therefore be seen as a far safer route.

 

[Dwarfer1979]

I'm assuming the question is based on the council buying a going concern and making it a municipal rather than setting up an entirely new business to enter a market that is full of established operators. For the latter it just wouldn't be feasible, you would struggle to assemble a viable volume (without risking running into issues around unfair state subsidies) and would require you to spend a lot of money to do not a lot.

The cynic in me says initial costs push councils towards franchising rather than taking over a going concern and running it as a municipal. Due to how setting up a franchising scheme has been established councils don't have to pay the full value of the business they are taking out, because they aren't actually taking over the business in a legal sense just changing who has the right to decide who operates a service and the legal structure it operates under. The council only has to pay for the assets it wants to use (vehicles & depots) and doesn't have to deal with TUPE or harmonising various pay & conditions from different employers.

If you were buying an operator you would have to pay the market value of the business, all the assets involved and include a value for the goodwill and intangible value of the route network being taken over (there have been several take overs of bus & coach operators where no physical assets changed hands but a value was paid to compensate for the intangible values - the intangible value of the customer loyalty of regular passengers, brand names, ticket sales and established communication corridors). It as decided during the introduction of franchising by someone that because you are not removing the right to operate, only change how they obtained that right, the franchising authorities don't need to compensate operators for that goodwill and since none of the operators legal objections seemed to raise this as an objection I assume that it is accepted now (I always felt the only grounds they really had to object to the principle of franchising was the lack of proper compensation for lost intangible assets being taken off an operator but no one seemed to raise it).

The cynical part of me is that having gone through the process of franchising, got the network into the shape it wants and effectively got going businesses on the "cheap" (not actually cheap but they have probably had to pay half what they would have probably had to pay for going businesses) these franchising authorities will just choose not to retender at the end of the current contracts, just like the railways have just done, and bring it all in house as a municipal without having to pay anyone compensation for lost business. I may be completely unfair and this is just my slightly cynical & suspicious nature but it is easy to see how a desire for control sees private operator contractors still making a profit may be politically not desireable long term.

There are all the other reasons that have been pointed out by others why franchising is a better path, I'm not even sure it was on the cards to become a legal options when Manchester started their process. The municipals we have left are the survivors and not all of them are performing as well as others, financially in particular (I think Ipswich, Blackpool, Newport & Cardiff have all had some level of financial wobbles over the last couple of decades and a couple have had to receive some form of financial support from their council), so there are significant risks to actually running a local (and so comparatively smaller) bus company that franchising does help insulate the council somewhat.

As things stand today, the expertise to plan and run a large network of buses sits with private operators, which is probably why franchising is preferable - let them worry about duties, rotas and service delivery as it's bread and butter to them.

Unless the entire industry was nationalised, I can't see how other Local Authorities would be able to acquire the knowledge and money to plan and deliver networks by themselves.

That is the least issue, if you are taking over a business then those skills would transfer with the business being taken over to the municipal operator. A Municipal is owned by the council but it isn't run as part of the council, it runs as a seperate commercial business whose sole shareholder is the council.

 

[WibbleWobble]

One upshot of franchising over municipal operation is that, **should** the UK (or any constituent parts if they gain independence) ever rejoin the EU, the networks already meet the requirement to open such locally controlled networks to competitive tendering. The downside to that is that networks like Reading, Blackpool etc won't meet that criteria unless the UK is able to veto it (but probably won't be able to as a condition of any rejoining).

Note I say this is a hypothetical scenario, just in case it was to happen.

 

[mattb7tl]

It is simply the fact that when the metropolitan authorities were able to take buses back into public control the only option available was franchising. The process to franchise is also incredibly long winded. So by the time municipal ownership was allowed essentially every authority was already years deep into the franchising process.

 

[buslad1988]

It will certainly be interesting to see what happens when the likes of Blackpool Transport and Ipswich Buses get ‘taken over’ as such when their respective owner councils get subsumed into new unitary authorities.

Dependant on which political party takes control, there could be a cash grab for finances and companies sold on, or there would also be scope to expand the business to cover their new wider areas.

Ipswich being an example, currently the network sparsely leaves the old/current borough area. In 2028 (also oddly when IB turns 125) the new unitary area will cover a much wider Greater Ipswich. Surely if the new council wishes to hold on to the municipal business, it needs to be seen to be covering it’s entire area… or where’s the seeming value for money for council tax payers when large parts of the new area are arguably under-bussed by other operators and their “own” bus company doesn’t serve them at all (I’m thinking Kesgrave/Martlesham and Felixstowe in this case).

Food for thought.

Currently Ipswich atleast appears to be stuck in limbo. They’ve been holding off launching a new livery and branding for the past 2 years and anything new/newer arriving is in dealer stock white. That can’t continue for another 2 years surely.

 

[WibbleWobble]

(deleted)

 

[RT4038]

Running a municipal operator is potentially more risky, in terms of needing to employ the drivers, mechanics, ancillary staff and everyone else centrally. And I'm not sure what the legal position is on that – in the places that do have a municipal operator, it is either (a) a commercial entity owned by the council, which competes on a level playing field with any other commercial operations that are running, or (2) an operator of last resort picking up the basket case routes that they can't find anyone else willing to take on at a sensible price. If a council, PTE or combined authority wanted to set up a municipal operator and take over all existing commercial and subsidised routes in an area, just by eminent domain and not through any kind of competitive tendering process, would that even be allowed?

As I understand it, this is the issue - A Council / Authority can now set up a new municipal operator, but it still has to be an arms's length company and tender for the franchise(s) / contracts. This is rather a big risk - the Authority may go to all this expense and then find it doesn't win any or sufficient for the company to be solvent.

 

[JKP]

In Scotland, local authorities have been able to run their own municipal operation since June 2022 but none have yet elected to do so. Highland Council though has acquired D&E Coaches who provide local bus and school contracts as well as being a subcontractor to Scottish Citylink on their Ullapool route. Dumfries and Galloway, Scottish Borders and Western Isles Councils all have numerous bus routes operating under section 22 permits. All have large buses or coaches in their fleets though SBC only run minibuses on their local bus routes.

 

[CMBS]

In Scotland, local authorities have been able to run their own municipal operation since June 2022 but none have yet elected to do so. Highland Council though has acquired D&E Coaches who provide local bus and school contracts as well as being a subcontractor to Scottish Citylink on their Ullapool route. Dumfries and Galloway, Scottish Borders and Western Isles Councils all have numerous bus routes operating under section 22 permits. All have large buses or coaches in their fleets though SBC only run minibuses on their local bus routes.

Stirling Council have also established a network in rural regions of Stirlingshire, though using non-conventional Ford Transit minibuses.

 

[DunsBus]

It will certainly be interesting to see what happens when the likes of Blackpool Transport and Ipswich Buses get ‘taken over’ as such when their respective owner councils get subsumed into new unitary authorities.

Dependant on which political party takes control, there could be a cash grab for finances and companies sold on, or there would also be scope to expand the business to cover their new wider areas.

Ipswich being an example, currently the network sparsely leaves the old/current borough area. In 2028 (also oddly when IB turns 125) the new unitary area will cover a much wider Greater Ipswich. Surely if the new council wishes to hold on to the municipal business, it needs to be seen to be covering it’s entire area… or where’s the seeming value for money for council tax payers when large parts of the new area are arguably under-bussed by other operators and their “own” bus company doesn’t serve them at all (I’m thinking Kesgrave/Martlesham and Felixstowe in this case).

Food for thought.

Currently Ipswich atleast appears to be stuck in limbo. They’ve been holding off launching a new livery and branding for the past 2 years and anything new/newer arriving is in dealer stock white. That can’t continue for another 2 years surely.

This happened in Scotland back in 1996 when Lothian Region was split into unitary authorities and its shares in LRT, as Lothian was known as at the time, were divided amongst the four successor councils - City of Edinburgh, East Lothian, Midlothian and West Lothian.

Memory recalls that it was the Properties Commission which settled the matter as the four councils were initially unable to agree on their shareholdings, the shares ultimately being split on the mileage run in each council area: City of Edinburgh 91%, Midlothian 5.5%, East Lothian 3.1% and West Lothian 0.4%.
Although the mileage run by Lothian Buses' sister companies has increased in East Lothian and West Lothian since then, and City of Edinburgh's share is now held by Transport for Edinburgh, the respective shares splits for the other three councils is still the same today.

 

[TheGrandWazoo]

The cynical part of me is that having gone through the process of franchising, got the network into the shape it wants and effectively got going businesses on the "cheap" (not actually cheap but they have probably had to pay half what they would have probably had to pay for going businesses) these franchising authorities will just choose not to retender at the end of the current contracts, just like the railways have just done, and bring it all in house as a municipal without having to pay anyone compensation for lost business. I may be completely unfair and this is just my slightly cynical & suspicious nature but it is easy to see how a desire for control sees private operator contractors still making a profit may be politically not desireable long term.

I have the same suspicions.

There are some authorities (in the vicinity of the East Lancs Road) that, for political ideology, would dearly like to get rid of any private involvement. That said, some others may be more pragmatic in that having a contractor at a low margin helps to be a bit of a lightning rod!

 

[johncrossley]

What is the point of using competitive tendering in any industry? To ensure you get the best value for money. You can also introduce incentives/penalties for good/bad service. That option isn't available if the authority owns its own operator.

 

[Djgr]

I think the key reason is that franchising gives one 90% of the benefits but with much lower risk.

Manchester did the hard work (e.g. deal with inevitable legal challenges) but they have created a signposted way for others to follow that works...and that it what they doing.

Of course it would be nice to insource more and lose the financial drain to the fat cats but sometimes victory has to be over several battles.

 

[gc4946]

It is simply the fact that when the metropolitan authorities were able to take buses back into public control the only option available was franchising. The process to franchise is also incredibly long winded. So by the time municipal ownership was allowed essentially every authority was already years deep into the franchising process.

I won't be surprised in 5 to 10 years time Transport for Greater Manchester (and later on, other combined authorities) will directly own and operate buses from their large depots while still franchising out smaller depots and school services.

 

[Mikey C]

The amount of margin the private companies get from running the services REALLY isn't that much. And the public really don't care, as long as the whole thing - routes, bus specifications, timetables etc is controlled by the municipal authority. If they set high standards then you get a good product; if (like in the very early days of private operators in London) you get shabby old buses, often in provincial spec, then you get a poor product.

Once that was tightened up, with TfL setting very detailed specs that all operators have to adhere to, you end up with a consistent product that the public sees as a "proper" London bus. Manchester have copied this model, as it works.

London buses being run by private companies is a political non issue in London, just as private companies operating the DLR, Overground and even the flagship Elizabeth Line is a non issue, as they are all clearly TfL services, with the Mayor and Assembly in total charge.

 

[Simon75]

With London TFL still own a few garages from London Transport era .
Bee Network own all of theirs, likewise other areas will too

 

[johncrossley]

Has any authority outside the UK reverted back to in house operation?

 

[Goldfish62]

The amount of margin the private companies get from running the services REALLY isn't that much. And the public really don't care, as long as the whole thing - routes, bus specifications, timetables etc is controlled by the municipal authority. If they set high standards then you get a good product; if (like in the very early days of private operators in London) you get shabby old buses, often in provincial spec, then you get a poor product.

Once that was tightened up, with TfL setting very detailed specs that all operators have to adhere to, you end up with a consistent product that the public sees as a "proper" London bus. Manchester have copied this model, as it works.

London buses being run by private companies is a political non issue in London, just as private companies operating the DLR, Overground and even the flagship Elizabeth Line is a non issue, as they are all clearly TfL services, with the Mayor and Assembly in total charge.

Ken Livingstone, that supposed rabid lefty, when he was mayor was quoted as saying that he was relaxed about the private operators making a profit as long as they delivered high quality services. But that was in more pragmatic times before political views became more polarised to everyone's detriment.

 

[stevieinselby]

Has any authority outside the UK reverted back to in house operation?

North Yorkshire Council has picked up a few minor rural and town services using their own minibuses over the years where that has worked out more cost-effective than contracting another company, but it's very much an operator of last resort, only using minibuses, not all routes guaranteed to be wheelchair accessible, some buses not having destination boards, no tracking, so not a proper bus company as we would think of it.

 

[richard13]

The fundamental issue is money in the form of capital. Owning a fleet of buses plus depots costs a lot of money. That money normally needs to be borrowed. Government organisations have very restricted access to borrowed money - it becomes part of the national debt and has to be essentially risk free. It is also getting stricter. For example the nationalisation of the railways to Great British Railways does not include any trains themselves - they remain privately owned and leased to GBR - access to capital.

Franchising means the private sector, which can borrow money, owns the buses, but the local authority controls what they do for a fee. The financial risks also get split.

 

[Djgr]

The fundamental issue is money in the form of capital. Owning a fleet of buses plus depots costs a lot of money. That money normally needs to be borrowed. Government organisations have very restricted access to borrowed money - it becomes part of the national debt and has to be essentially risk free. It is also getting stricter. For example the nationalisation of the railways to Great British Railways does not include any trains themselves - they remain privately owned and leased to GBR - access to capital.

Franchising means the private sector, which can borrow money, owns the buses, but the local authority controls what they do for a fee. The financial risks also get split.

I don't think there is a clear pathway to do this at the moment. Hence it is much easier to copy Manchester's franchising approach at the moment.

But clearly the available options are determined by government policy, such as their approach to borrowing. But ultimately this is political choice rather than god given commandments.

It will be interesting to follow LIverpool City Region's approach, as they have elected to purchase their own trains and are considering options for infrastructure ownership.

 

[TheGrandWazoo]

North Yorkshire Council has picked up a few minor rural and town services using their own minibuses over the years where that has worked out more cost-effective than contracting another company, but it's very much an operator of last resort, only using minibuses, not all routes guaranteed to be wheelchair accessible, some buses not having destination boards, no tracking, so not a proper bus company as we would think of it.

Many of those are using welfare buses in between schools SEND movements so yes, they are wheelchair accessible but you only get a service between 0900 and 1500.

The fundamental issue is money in the form of capital. Owning a fleet of buses plus depots costs a lot of money. That money normally needs to be borrowed. Government organisations have very restricted access to borrowed money - it becomes part of the national debt and has to be essentially risk free. It is also getting stricter. For example the nationalisation of the railways to Great British Railways does not include any trains themselves - they remain privately owned and leased to GBR - access to capital.

Franchising means the private sector, which can borrow money, owns the buses, but the local authority controls what they do for a fee. The financial risks also get split.

This is one of the things that also came to mind. At the moment, they are getting a dowry to set up the new franchises and that includes quite a number of new vehicles (but not all of them). In future, if they want to invest in new vehicles, it might be that they have to get operators to do so? If they go for direct ownership, then that capital requirement/liability falls onto the authority.

 

[Goldfish62]

North Yorkshire Council has picked up a few minor rural and town services using their own minibuses over the years where that has worked out more cost-effective than contracting another company, but it's very much an operator of last resort, only using minibuses, not all routes guaranteed to be wheelchair accessible, some buses not having destination boards, no tracking, so not a proper bus company as we would think of it.

And cash only accepted. No cards!

 

[geoffk]

It will certainly be interesting to see what happens when the likes of Blackpool Transport and Ipswich Buses get ‘taken over’ as such when their respective owner councils get subsumed into new unitary authorities.

Blackpool is already a Unitary Authority. Is it due to extend its boundaries - I'm a bit out of touch!

 

[mangad]

Blackpool is already a Unitary Authority. Is it due to extend its boundaries - I'm a bit out of touch!

Local government reorganisation is planned. The remaining two tier councils will be replaced by unitaries. In Lancashire the new structures will include changes to the unitary authorities as well