Dereg - First 20 Years Pt 4

Part 3 here

The main impetus behind Nicholas Ridley’s Transport Act 1985 was a reduction in subsidies as paid by transport authorities towards bus networks.

The pre-deregulation arrangement had held sway since 1974 (earlier in rural areas). County councils as transport authorities used network support in their duty to co-ordinate local public transport. In exchange for some political control, incumbent operators facing falling traffic and increasing costs continued to supply bus services in a monopolistic fashion. Financial support was inevitably rising sharply. A kind of symbiotic relationship had developed. Councils contributed more than they wished and operators received less than they needed.

The government felt that financial support for bus services was too high. The Act introduced the concept of socially necessary bus services. These were the routes (or parts of the day or week) left unserved once an operator had registered as commercial those services for which he felt there was sufficient demand at the very least to cover costs.

The Transport Act therefore removed the duty for transport authorities to co-ordinate local public transport by revenue support payments. It instead empowered authorities to subsidise individual services by tender. Cross subsidy was anathema and local authorities and PTEs could no longer use one part of the network to subsidise another. Cross subsidy continued, of course. This was only within the context of a commercial operator choosing strategically to operate at times or to places not commercially viable but within a break-even network. In fact, operators used this principle to register as commercial more mileage in their early networks than was often justifiable.

The government introduced a tapered grant for innovations to rural services. Under deregulation, it had an expectation of lower fares and better services in urban areas but it felt that this would not necessarily translate to rural services. The Act also promoted car sharing, something of most benefit in rural areas.

Did deregulation reduce subsidy payments? A paper published in the Journal for Transport Economics & Policy suggested that if the regulatory framework continued to 1997, public subsidy would be about 200 per cent higher than it actually was.

So Dereg was successful, then? Well, erm, that rather depends…

To be continued…