Deregulating the bus industry in Britain — (B) the case against

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Abstract
In its White Paper ‘Buses’, the British Government sets out its proposals for creation of a freer local bus service sector than exists in any developed industrial economy in the world. The purpose of this paper is to examine the basis and nature of the proposals, and particularly to assess the validity of the analysis that has been presented in support of them. The White Paper diagnosis of the bus industry is that a potentially virile sector is being stifled to such an extent by regulation that the variety and quality of service is poor, demand is unnecessarily low, and costs unnecessarily high. The prescription is for a heavy dose of free competition on the road between commercially motivated, financially autonomous companies, supported (lest the cure be worse than the disease) by tighter quality regulation, fair competition protections, and direct support of socially desirable unremunerative services. The prognosis is the elimination of cross‐subsidy, the introduction of new types of service, and the establishment, essentially through market pressures, of the best attainable price/frequency/quality combination consistent with the external finances available. The essence of the White Paper can be reduced to four propositions. We shall examine each of these propositions in turn.

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