Climate Change, Environment, and Infrastructure Committee, 15 May 2025 | Open Senedd

Climate Change, Environment, and Infrastructure Committee, 15 May 2025 | Open Senedd

Aaron Hill

Thanks, Carolyn. I'll take that first. I think it's worth saying thank you, at the start, for having us to give this evidence today. Bus operators share the same objectives of the Welsh Government in this Bill to run a better bus network that is more frequent, more reliable, with more affordable services.

Our primary concern is that changing the regulatory model alone doesn't guarantee success. Local communities need policies that take buses out of traffic, co-ordinate roadworks and speed up journey times. The Bill does very little to do that. I think the concerns around affordability and deliverability are rooted in the fact that the Bill doesn't actually change the economics of running bus services in Wales. So, many of the challenges that the network faces today the network will still face on the other side of the reregulation.

If you look at other franchised networks in the UK, London has historically had a gap of around £700 million between the cost of running that service and the revenue generated through fares. More recently, we've seen Manchester come on board with franchising, and while lots of elements of what's happened in Manchester have been successful, the gap there is around £0.25 billion.

We think that the Bill exposes the network to some affordability and deliverability challenges in three different ways. The first is we don't think that the value-for-money test within the Bill is sufficient enough. There should be a more clear value-for-money test to ensure that when Transport for Wales, on behalf of Ministers, are working up the network plan, we can look at whether that network is affordable—whether we have the resources to deliver that.

Secondly, we think that the Bill lends itself to only one type of franchise—a gross cost franchise. That is the franchise that carries the most risk for taxpayers, because there isn't the opportunity to share risk between operators and to potentially help Government when budgets are constrained through innovation, through cost-cutting measures, et cetera.

The third is—Carolyn, you were asking the question around the regulatory impact assessment—we think the calculation of risk that has led to the development of this Bill has not been sufficient. I'll give you two examples. We highlight this in our written evidence in terms of the regulatory impact assessment. I understand that an RIA is always at a point in time and it's never going to be entirely accurate, but we could find, just through the difference between the salary costs in the RIA and the fact that national insurance cost uplifts aren't included in the RIA, at least £200 million of additional costs over the 30 years of the affordability assessment that aren't factored in.

That feels to me to be a significant question that hangs over the viability of franchising as we develop this. The argument would be that those costs are, of course, part of the alternatives. So, if you were to look at statutory partnerships, other forms of franchising, those costs would still be there. The difference is your ability to share risk in those other models, and not absorb that risk entirely into the public finances.

10:28Watch #Official Record

Scott Pearson

I think the main issue about the Bill is that we're lacking some clear detail in the Bill and the RIA in that it's difficult to understand cost, and difficult therefore to understand the challenge that's going to come to the Welsh Government in running the whole network, because we don't know what the intentions are around the network. We don't know what the intentions are around funding and investment in the future. If we're trying to do the same with the current funding and adding a whole load of costs into it from TfW for instance, it's simply not going to work, because you can't get more for less. And if you can, please advise me where I could get that.

The whole positioning around this has been that the networks are not sufficient, they're not good enough. Well, we've been running bus services—I have—for 25 years, and we commercially try to do the best we can to make profit. Therefore, if we can't do it in the commercial market, what makes it different from a franchise market? You take all the risk, as Aaron quite clearly said. And the RIA looks at new things that are going to be done that are not new; they're being done currently—smart ticketing, fast boarding, hubs, they're all being done now.

I genuinely can't see where the benefit's going to come to give you the revenue increase that the RIA requires and relies upon to then give you better services or more services. And it talks about patronage increase in the RIA. That's a big, big faux pas, because nothing in this Bill and nothing in the RIA looks at the main cause of patronage increase and modal shift, which is congestion. It's not dealt with at all.

I think we've got a once-in-a-lifetime opportunity here to change this system. And we're not against—. The buses Bill of 1985, let's be clear about that, it's done its time—it's gone. It needs something different. The whole UK has recognised that. But we're not addressing the main problem that we currently face as operators in the RIA or the Bill, and that is congestion.

10:31Watch #Official Record

Scott Pearson

I think that there's a disconnect here between the Bill, how local authorities are seen and will do, going forward, and what the actual network provides you. If you take the network as it is now, the bus network and your home-to-school network, which the LAs will cover, why are they separate? These are inherently combined through the commercial operation just now. If you try and separate them out of our members, the small and medium-sized enterprise marketplace, if you lost a couple of members in the rural areas who do bus services and home-to-school, and they don't get a franchise for their bus services, what happens to the home-to-school? The local authority picks it up. And that's a whole different ball game again. So I don't think that's going to work well.

We've talked about, and we've been told for many years now about, corporate joint committees. Where do they come into all this? It's mentioned briefly in the Bill, but if we come to ask for detail, we're not quite sure what they're picking up and what they're not picking up. So, what do they actually do? Are they the local authorities and, therefore, cut the 22 down to the four? Or are they going to do home to school, or are they not going to do home to school? And the network itself, I still state clearly that networks should be built by local people, giving local demand and local need. You try to regionalise these things, it just won't work. Transport for Greater Manchester, as you mentioned earlier, Carolyn, that's a massive population in a big urban area. Wales is not like that. You've got three big cities in the bottom, one at the top, and in between a whole load of hills and mountains. The rural aspect to this—. And our members, the SME membership, are petrified about this Bill. They're trying very hard to work with the local authorities, as they've done for decades. Now who do they work with? You try to take that and put it into regional, I don't think it's going to work.

10:38Watch #Official Record

Aaron Hill

I think that the core duties that are described in the explanatory memorandum, that diagram there, are actually the sort of thing industry was looking for from TfW 12 or 18 months ago, to say, 'What is the process going to be for designing the franchise?' So, it's good to see that on paper. I think it's a really helpful articulation of what the process will be. I've already talked about how I think it lacks a value-for-money test, and Scott's talked about plan B. I think a value-for-money test plus, then, a range of options, should a franchise be determined to be unaffordable in a certain area.

I think it's quite interesting to contrast what's in this legislation with what's being proposed in England, because I think that the Bus Services (No. 2) Bill in England is going to drive local authorities to ask some different questions, and we're not going to see, I think, just two options on the table of a market-led bus network with very little influence and control from Government or the entirely local authority or Government-run network that you have in Manchester or London. I think local authorities are going to begin to ask themselves questions like, 'Should we franchise part of our area, or should we just franchise a town or a city? Are there certain measures that we could share risk with operators on? Should we own fleet and depot?'—those sorts of challenging questions, which will see a range of different franchise options on the table, and it seems to me that that's missing from the core duties. There should be that conversation at a regional or local level so that Ministers, local authorities, CJCs—whoever it is ultimately taking that decision—can assess what is best for those different areas. I think we've already heard—I think Scott articulated it—that Wales is a very, very different market to anywhere that's been franchised elsewhere in the UK, and we should have a range of tools at our disposal to respond to those different circumstances.

10:55Watch #Official Record