Bus deregulation: lessons from the U.K.

Abstract

The simultaneous changes of policy in 1985, deregulation, subsidy change and reduction, and privatisation make it hazardous to interpret changes in the UK local bus industry over 1985–1987, the period for which data are available. Limited comparison between geographical areas point to subsidy reduction as a major effect. However, largely because costs have also fallen, subsidy remains an important influence. Proceeding from a review of the economics of entry, the paper argues that present subsidy and procedures are a major impediment to entry, reinforced by regulatory inhibitions to vertical disintegration and site acquisition. The importance of other obstacles to freer bus markets was largely unforeseen when the principal deregulation move of removing quantity restrictions was made.

Key words:

• Buses
• deregulation
• U.K.
• subsidy
• entry
• competition