The Office of Fair Trading (OFT) has referred the UK bus industry to the Competition Commission because it has "evidence that limited competition between bus operators tends to result in higher prices and lower quality for bus users".

Alistair Tice

OFT's scrutiny of the UK bus market has found that the industry is dominated by nine operators. The big five, Stagecoach, FirstGroup, Arriva, Go-Ahead and National Express, control two-thirds of all local bus services.

OFT goes on to explain how this monopolisation has led to key routes or areas being dominated by a single company. Fares are about 9% higher where an operator faces limited competition. There are few bidders for "supported service" contracts such as partially subsidised rural routes. New entrants and smaller companies are being deterred by the "predatory behaviour" of incumbent/bigger operators.

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In fact, the OFT inquiry was prompted by the behaviour of Cardiff Bus forcing out a low-cost competitor '2 Travel'. Cardiff Bus set up a loss-making no-frills rival which undercut and forced 2 Travel out, then Cardiff Bus withdrew its own service!

So much for Thatcher's argument of competition improving services and driving down fares that she used when the Tories deregulated the bus industry in 1986 and broke up the National Bus Company. This led to cowboy competition with buses literally overtaking each other to get to the next stop to pick up passengers.

But as with the other public utilities that were privatised like rail, gas, electricity and water, all so-called competition has done is result in a handful of big companies profiteering from the industry whilst receiving huge public subsidies.

One-third of bus industry revenue (£1.2 billion) comes from the taxpayer, including £750 million for subsidised fares. Yet there is no public control of these private bus operators outside London and Northern Ireland. They can literally charge what they like and run where they like.

One of OFT's 'solutions' is more use of Quality Contracts. QCs allow local authorities to set fares and timetables for routes or areas which private operators then bid for, similar to London. But so far, not one Passenger Transport Authority has applied for a Quality Contract. Legislation under the Local Transport Act which comes into force this month is supposed to make it easier for local authorities to obtain QCs. However, the Tories have said that they will abolish it if they win the election.

Whilst any form of regulation is to be welcomed, the recent 20% hike in London bus fares by Tory Mayor Boris Johnson shows how little public control there really is. Private operators will only bid for the contracts if they are guaranteed enough profit (£326 million in 2007/08) and the big five's monopoly has local authorities over a barrel.

Only by taking the bus industry back into public ownership, with local services democratically run by councils, bus workers and passengers, as part of an integrated public transport system, will fares be cut and services improved.

Then public transport can become a more attractive alternative to the car, thus reducing congestion and pollution.

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