Adam Hawksbee is the Deputy Director of Onward and was previously Head of Policy to Andy Street at the West Midlands Combined Authority.

Recently, the High Court’s Justice Julian Knowles ended months of speculation when he released his judgement in the case of Greater Manchester Combined Authority vs. Greater Manchester Bus Owners Association. For bus enthusiasts, this was a major milestone.

Burnham beat the bus operators. The court ruled that Manchester’s Mayor could continue the process to introduce bus franchising, taking decisions on routes and timetables out of the control of private bus companies and into his hands. This makes Greater Manchester the first place outside London to introduce franchising – and last week the Mayors of South Yorkshire and the Liverpool City Region announced they would follow suit.

Britain’s buses are an unlikely target for ideological debate. But, quietly, the move towards bus franchising marks a decisive shift away from the privatisation of the transport system that Margaret Thatcher introduced in the 1980s. This shift reflects the mood of the new Conservative electoral coalition, who are more accepting of state intervention in the market if it improves the quality of services. The Prime Minister and the Transport Secretary may be acting pragmatically and recognising the wishes of their new voters. If they are, then it’s worth being clear on what this shift in policy represents.

Buses really matter. In his introduction to the Government’s ‘Bus Back Better’ strategy, the Prime Minister highlighted that they are used by twice as many people as trains – dubbing them ‘lifelines and liberators’. They are used disproportionately by the young, the elderly, and people on lower incomes. Bus use is two times higher in the North East than in the South East and South West. As electric bus fleets roll out, they are also key to improving air quality and reducing carbon emissions.

But bus services have been worsening for years. In the last two decades, patronage outside London has steadily decreased by about 20 per cent, with complex ticketing and a poor passenger experience pushing people to their cars. Poor coordination with the rest of the transport system has frustrated city planners looking to integrate their networks. Covid provided an enormous shock to the bus system with patronage flatlining, and the Government introduced payments of about £1 billion a year to prop up operators.

Much of this failure is to do with the complete commercialisation of the bus network in 1986, with operator competition leading to a fragmented and confusing system that sidelined local leaders. A limited number of providers also meant that true consumer choice never really materialised. For this reason, successive governments have introduced greater regulation over time, often in return for subsidies to prop up non-commercially viable elements of the network like rural routes or evening services.

The Government’s Bus Back Better strategy offered a final choice to local areas. Option 1 was a relatively new regulated market model called ‘Enhanced Partnership’, which maintains bus operator choice but enshrines agreements between local leaders and bus companies about what happens in their areas. Option 2 was bus franchising – a public sector commissioning model which sees bus operators bid to run predetermined routes at set times, which currently only operates in London.

The Government expected most areas to go with Enhanced Partnership, but more and more are picking franchising. Even the Tory Mayor of the West Midlands, Andy Street, is gathering evidence on whether to franchise, meaning the largest bus network outside London could move towards the public-sector led model.

Is this move towards franchising the right one? The merit of the market lies in its responsiveness. Private firms have a greater incentive to rapidly respond to passenger needs, and are broadly better able to do so than public sector officials – as long as subsidies are targeted to those areas without consumer demand. And in transport, responsiveness matters, with local transport solutions like e-scooters and e-bikes, car sharing platforms, and possibly even autonomous vehicles coming in the next decade.

Part of the pressure to franchise lies in the realities of the post-Covid landscape. Local leaders are frustrated by bus operators who are cutting routes that matter to members of the public. A recent report by the Urban Transport Group (who represent major city transport bodies) warns of the loss of one third of bus routes – or almost 300 million journeys a year. Private bus companies say that these routes are not commercially viable, and point to additional pressures like the recruitment of bus drivers. But this excuse won’t go down well with Members of Parliament whose inboxes are filling up with complaints about cherished local routes disappearing.

One way to avoid market failure is to step back from markets. Another is to step in – investing in the foundations and infrastructure of markets so that they can maximise private and public benefit. Two types of investment would be needed to make Enhanced Partnership work.

First, the Government needs to slow the withdrawal of support funding for the network – the £1 billion that was provided during Covid is clearly too high, but the £150 million announced from April to October is insufficient. The Urban Transport Group estimates that £450 million is needed, which can then be tapered off. Second, the Government needs to stick to its word on the £3 billion of funding for its Bus Back Better strategy. In recent months it was revealed that half of this funding was double counted and included Covid emergency funds, meaning that only £1.5 billion of new money is available for much needed improvements to bus lanes and ticketing systems. This won’t be enough to bring patrons back to the network.

Of course, the Government could accept that franchising is the right approach. But they should do so with their eyes open – and ensure that accountability follows these new powers. Because the commitment to a ‘London-style’ transport system across the country in the Levelling Up White Paper was a double-edged sword. Passengers may welcome the scale and service on the network. But Ministers certainly don’t welcome the bailouts and bust-ups with Sadiq Khan.