Introduction

Local bus services are a vital component of Scotland’s economic and social infrastructure, accounting for approximately 75% of all public transport journeys. Bus services are key to supporting our ambitions for reducing car use and as Scotland transitions toward a net zero future, the role of bus will become increasingly significant.

Set against this backdrop, the Transport (Scotland) Act 2019 (“the 2019 Act”) enhances the regulatory framework by equipping local transport authorities (LTAs) with a range of flexible tools which can help to reverse the long- term decline in patronage and improve service quality in ways that reflect local needs. The 2019 Act introduces new powers for LTAs to operate local authority-run bus services, complementing existing capabilities to subsidise services, establish Bus Services Improvement Partnerships (BSIPs), and implement Local Services Franchises.

Franchising is a system that allows an LTA to award exclusive rights to run certain bus services to the most competitive bidder for a set period. During this period, no other operator can run those services. Franchising via the statutory Quality Contract model had been available in Scotland under the Transport (Scotland) Act 2001 (“the 2001 Act”), however, these powers were never used.

The 2019 Act replaced the Quality Contract model in the 2001 Act with a new franchising model. This new model is designed to enable an LTA to streamline services and develop better integration and control over fares. It also increases the range of situations in which an LTA can consider using the franchising option. The process is designed to ensure that appropriate checks and balances are in place to assess whether an LTA’s franchise proposals are robust and deliverable. This structured approach is intended to ensure that decision making is more transparent via a process of rigorous assessment and evidence-based analysis.

The new bus franchising provisions inserted into the 2001 Act offers LTAs discretion in the scale and scope of their franchising schemes. While operating under different legislation, bus franchises are already in operation in other parts of the UK, most notably London and Manchester, with others in the process of being developed by the relevant authorities. It is important to note that the Scottish franchising model is intended to be adaptable. While LTAs may wish to consider the comprehensive, area wide franchising approaches adopted by Transport for Greater Manchester or Transport for London, a franchise in Scotland may also be designed to deliver targeted benefits at a smaller scale along a single corridor or route.

The terms ‘must’ and ‘may’ are used throughout this guidance to distinguish between legal obligations and best practice.

This document is intended to support LTAs who are seeking to develop their franchising proposals. The majority of this guidance has been issued by Scottish Ministers under section 79(c) of the 2001 Act. Specific guidance which Scottish Ministers must issue under other parts of the 2001 Act (Section 13E(5) and Section 13H(5)) are outlined separately and are also highlighted in blue. Throughout the document, key considerations for good practice for LTAs are also highlighted in blue.

In addition, Scottish Ministers must issue guidance under section 13F of the 2001 Act to help auditors in preparing reports on the analysis of the financial implications contained in an LTA’s franchising assessment. LTAs should also be familiar with this guidance, which is outlined in the relevant sections of this document and are highlighted in pink.

The franchising process comprises of eight core stages:

  • Reviewing the relevant general policies
  • Preparing a franchising framework and assessment
    • This includes commissioning a report prepared by an independent auditor on the assessment
  • Consultation on the proposed franchising framework
  • Approval by an independent panel
  • Making the franchising framework
  • Entering into franchising agreements
  • Transitional process from a de-regulated market to a franchise model, including staff transfers, and

Throughout this document, we refer to timescales for different stages of the franchising process as set out in the 2001 Act and associated regulations. Scottish Ministers have powers to amend the majority of these timescales, to enable the periods to be adjusted in light of operational experience, subject to parliamentary approval.

We have no plans at present to make use of these powers; however, we will continue to engage with LTAs on their experience of using the franchising powers and will keep this position under review.

It is important to note that Scottish Ministers or Transport Scotland do not have the power to intervene in the development or approval of an LTA’s franchising framework or assessment.

This guidance has been developed in consultation with local and regional transport authorities, and other key stakeholders, including the Competition and Markets Authority, Audit Scotland, the Office of the Traffic Commissioner and the bus industry. We will monitor the use of this guidance and review it to ensure that it remains fit for purpose.