Our Whitehall insider imagines what’s going on inside the minds of the mandarins at Great Minster House, home of the DfT

 
So the Chancellor, Rushi Sunak, finally agreed to provide the bus industry in England with a further bailout amounting to some £400m above and beyond the general business support schemes put in place. But word reaches me that the bus industry – especially the “big five” apparently – is, while grateful for this, not entirely happy and wants more.

At one level I can well understand why they might. After all, they have taken a huge hit on patronage and therefore on revenue through no fault of their own. It’s surely right, isn’t it, that the taxpayer should step in to ensure that a vital public service is secured and protected. Well, yes – and no.

The bus companies, and indeed some of the train operators, are private companies. They may be providing a public service, but they are private companies nonetheless backed by shareholders. They make profits in the good times with shareholders getting dividends, even though these profits are also backed by public subsidy – in the case of the bus operators, in the form of the Bus Service Operators Grant.

What this current crisis has highlighted is the fundamental conundrum at the heart of private companies providing public services, and making profits out of it with support from the taxpayer. Is that right? And in the case of the bus companies, I find it somewhat curious (I’m being polite) that in the good times they would prefer to see the government keep out of its affairs, but that when the going gets tough they go running back to government pleading for help.

What this has also highlighted, I suspect, is that the bus companies haven’t stored away sufficient reserves to see out the bad times. That should be the first default position for the government to take, surely – as indeed it seems to be doing with the private sector airlines. And perhaps the shareholders should put their hands in their pockets too rather than just expect the government to step in.

Now, I am absolutely not saying there isn’t a role for private companies providing public services. There most certainly is. But I think all of this has changed the dynamic if private companies expect the government to bail them out as a first default position rather than an absolute last resort. And I’m not saying that there isn’t a case for government support – I would just like to see the private sector operators demonstrably finding other solutions before expecting the taxpayer to step in.

If the bus companies want the government to stand behind them financially then that must come with conditions … we will see a renewed debate about what the role of private bus and rail companies really is

If the bus companies want the government to stand behind them financially then that must come with conditions. So I have a feeling – no more than that at this stage – that we will see a renewed debate about what the role of private bus and rail companies really is. Should they be simple utility operators operating the buses and the trains in return for a management fee, but with the services, routes, and fares set by the public sector? That, for me, is what this whole issue is beginning to suggest might be the outcome. And the train operators – some of whom also run the buses outside London – seem perfectly happy with this model. So if it’s good for the trains, why not for the buses too?

How, you might ask, can private sector companies be incentivised to make profits? I think that’s quite simple. If they out-perform on a core set of performance indicators, for example on issues such as patronage levels, customer satisfaction, the introduction of innovative service solutions, then they get rewarded though an increased management fee.

So yes, there is most definitely a role for the private operators, yet I can’t help but feel that the bus companies have rather shot themselves in the foot by suggesting they need more support beyond what the government has already given. They are demonstrating that they aren’t really private companies, in the genuine sense of the word, at all.

But I feel sorry for those bus operators who are genuinely entrepreneurial and who really do not like the idea of government bailouts one little bit. Trent Barton springs to mind as the stand-out example of a well run, successful and thriving business which runs a mile at the idea of taxpayer support. There will be others, but I’m hard pressed to think who they are.

So I think the private bus companies in particular – and their ultimate owners and shareholders – have a long hard question to ask themselves. Are you a genuine private sector company or not? Ask yourselves how it can be right to want to be left to run your own affairs in the good times, but to want government help the moment things get tough.

I accept I might be making this sound all too simplistic and perhaps it’s not as black and white as I imply. But it’s an interesting debating point which, I suggest, won’t go away.