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Will regional authorities now legally be able to bring local bus networks back under public sector control?

Oxera is the economic adviser to Stagecoach Group and Arriva in responding to a proposal from Nexus (the North East transport executive) to introduce a quality contract scheme (QCS) in Tyne and Wear.  The QCS Board report, giving a recommendation on this proposal, has just been made public.
If Nexus' QCS proposal were implemented, it would result in local buses in the region being brought back under public sector control as franchised services. The alternative, a voluntary partnership agreement (VPA) with local operators, would mean these operators retaining their existing businesses, but that key decisions on the running of the local bus network would be made in partnership with local authorities.
In order for QCS proposal to proceed legally, it needs to fulfil five 'public interest tests' (which have a substantial economic element) and be subject to adequate consultation. The QCS Board was formed to give an independent opinion on whether these requirements have been met.
Oxera provided an in-depth economic assessment of Nexus' proposal, including its likely impact on public sector finances. Based on this assessment, Oxera concluded that the public interest tests were unlikely to be met in this case. Furthermore, Oxera identified errors in the analysis Nexus presented during the public consultation which meant that the consultation document did not give an accurate representation of the relative economic merits of the QCS and VPA. These matters were discussed during public hearings held by the QCS Board in Newcastle and Sunderland during July 2015, at which Oxera experts, Dr Luis Correia da Silva, Dr Gunnar Niels, Matthew Shepherd and Joseph Bell shared their economic findings.
The QCS Board has concluded that three of the five public interest tests would not be met and that the requirements of adequate consultation have not been fulfilled. Oxera's economic findings were highly influential in informing the QCS Board's conclusions.
‘Having been involved in the economic debate surrounding bus franchising in Tyne and Wear for more than three years, Oxera is pleased that our economics analysis has made a positive and constructive contribution to the QCS Board’s assessment of this proposal. As the first case of its kind, the experience in Tyne and Wear will have potentially far-reaching implications for future franchising proposals, and the economics of the GB bus industry more widely.’
Dr Luis Correia da Silva

Read the QCS Board's opinion on the proposal here.

Dr Luis Correia da Silva
+44 (0) 1865 253 247
[email protected]