Stagecoach boss slams Government bus plans
Business case for local authority operation of services is flawed
STAGECOACH boss Martin Griffiths has launched a strong attack on plans to allow local authorities to take charge of bus networks in England and Wales, where it has major operations.
Mr Griffiths told investors at the transport giant’s annual general meeting in Perth that there is ‘no business case’ for the proposal, which stems from UK Government plans to devolve more powers to the regions south of the Border.
He said economic analysis showed it would cost councils £3.2 billion a year to run contract fran- chising for buses in England at a time of huge pressure on public budgets, with the prospect of more swingeing cuts to come.
Stagecoach operates around 6,000 buses in England and has significant operations in cities such as Manchester, Liverpool, Newcastle, Sheffield and Hull. Talks have taken place in the past over introducing franchising in some of those areas.
Mr Griffiths warned it would harm competition by squeezing smaller bus companies out of the market.
The comments follow a recent public hearing into plans for a bus contract scheme in Tyne and Wear. Mr Griffiths said independent analysis of the scheme showed it would cost the tax payer millions extra over the first 10 years, without delivering a more comprehensive bus network.
He said: “We are no strangers to devolution – it is how we run our business. It makes sense for funding and decision-making to be taken as close to the customer as possible.
“What is also clear, though, is that for government and local authorities who are already facing severe pressure on public spending, bus franchising is not the answer.
“Why? Independent research by transport consultants TAS has found that introducing bus franchising across the whole of England would cost more than £3.2bn a year. All of the evidence points to bus franchising costing the public purse more at a time when public spending is shrinking, and the Chancellor has called for further cuts of perhaps up to 40 per cent.
“Recent quality contract scheme hearings in Tyne and Wear have demonstrated conclusively there is no business case for bus franchising in that region.”
He added: “Alternatively, bus operators have offered to further develop their own network, with more buses and better outcomes, including the prospect of saving millions of pounds for the tax payer over the same period.”
Mr Griffiths claimed that the Passenger Transport Executive behind the Tyne and Wear plan has admitted there is a ‘one in three risk of the scheme collapsing due to insufficient funding’.
More broadly, he said the introduction of bus franchising would limit competition and make it difficult for small transport companies. Mr Griffiths said that in London, the only contracted market in the
UK, 98 per cent of the bus market is delivered by ‘just 10 major UK and overseas operators’.
“All of this has implications for the government’s devolution programme,” he added. “The Tyne and Wear scheme is the only fully costed proposal for bus franchising outside London which has been subjected to any kind of rigour and independent analysis – and it is full of holes.”
The company made no comment on Labour leadership candidate Jeremy Corbyn’s commitment to re-nationalising the railways. But Mr Griffiths told a well-attended AGM at Perth Concert Hall: “Our investors underpin our ability to grow the business and help deliver on our strategy.
“In tough times, too, when public sector budgets are under strain and facing further cuts to come, capital, entrepreneurship and the customer focus of the private sector is ever more important.”
Stagecoach held its AGM two days after it revealed that the depressed price of oil had impacted on its bus operations in North America in the three months to July 31.
However, it said its UK rail division had performed strongly, with Mr Griffiths stating that securing the East Coast rail franchise with Virgin will add ‘significant value for shareholders’. He emphasised yesterday that the group is ‘on track to meet expectations for the current year’.
The City is predicting Stagecoach will make underlying pre-tax profits of £210 million in the year to April 2016, up from £185m in the previous financial year.
Shares in Stagecoach closed up 3.2p at 362.9p.