The Conservatives after 1979 - Transport Policy and Planning in Great Britain - page 96

This need not be the case because the commercial incentive will be there
for operators to cater to the needs of such passengers. Informal measures of
cooperation between operators will develop to ensure that their services connect
…. Through-ticketing, which involves transaction costs, may be less common,
but even in this arrangements can be expected to arise through the market where
such are clearly to everyone's advantage.
(ibid. Annex 2 para 27)
There is a double irony in these blithe assertions. Not only did they vastly
underestimate individual operators' preoccupation with their own interests (rather
than the public transport market as a whole) but subsequent application of 'fair
trading' rules condemned such cooperation as illegal anyway!
Bus deregulation outside London was legislated for in the 1985 Transport Act.
(London was exempted because the process of internal competition between divisions
of London Buses was already under way.) Under the Act the system of route licensing
operating since 1930 was abolished and the post-1978 arrangement whereby councils
subsidised network s of services run by particular operators was ended. Instead a clear
distinction was created between commercial and subsidised services. One of the
arguments advanced in the Buses White Paper was that development of profitable
services had been inhibited because of the internal cross-subsidy which the previous
licensing system had promoted. Under the new system subsidised services could only
be considered after an initial 'registration' by operators of the services they intended
to run commercially, with competitive tenders being invited by councils for other
individual 'socially necessary' services. The 1985 Act also created the conditions for
competition by requiring the sale of National Bus Company subsidiaries as well as the
'hiving off' to separate companies of the bus fleets owned by the PTEs.
In the provincial conurbations the combination of bus deregulation and the ending
of fares subsidies represented a colossal upheaval. It was not simply that the ownership,
organisation and funding of bus services was changed. In many areas the bus companies
took the opportunity to recast the pattern and numbering of the services themselves.
Anecdotal tales abounded of bus drivers as well as passengers not knowing where
they were going! Congestion worsened on city centre streets as competing companies
jockeyed for passengers and operators abandoned bus stations (for which they were
liable to a commercial charge) in favour of using kerb-side stops as 'bus stands'. The
chaos was compounded by the fact that after deregulation in October 1986 operators
began to revise their registered services in an unco-ordinated manner in order to
maintain profitability or to gain competitive advantage.
Deregulation had the intended effect of encouraging more operators to enter
the market and for companies to experiment with new services, particularly using
minibuses. The mileage operated increased and costs per vehicle mile fell. Annual
public expenditure on supporting bus services was reduced by around 60% in the first
three years. But in the conurbations particularly the combination of reduced subsidy,
lack of network co-ordination and instability of service patterns had a disastrous effect
with patronage falling by 26% in the first five years.
6.5 Rail privatisation
With rail services the Conservatives pondered long and hard on whether and how
privatisation might be introduced. The central problem was that financially the industry