Section 3 - Costs, impacts and benefits
Quantified costs to businesses
Option 1 – Do nothing
Under this option, the basic requirements for the TC to convene a panel are in place under the 2001 Act. However, the Act does not provide necessary detail in relation to different aspects of the panels, such as the criteria by which persons may be eligible to be appointed to a panel and the panels’ decision-making processes. Without these regulations, it may be difficult for the Traffic Commissioner to set out transparent processes in respect of the panels. A lack of detail and transparency in the franchising proposal approval process may lead to unnecessary delays and create uncertainty about the effectiveness of the overall franchising model.
Option 2
Proceed with the laying of the Local Services Franchises (Traffic Commissioner Notices and Panels) (Scotland) Regulations 2024. While there will be little to no costs to local transport authorities or bus operators in relation to these regulations, we do expect the TC to incur costs because of the legislation. The costs relate to the setting up and operation of these panels. The establishment and operation of these panels is a new duty for the TC. While the costs will fall on the TC in the first instance, there is an expectation that expenditure will be reimbursed by the Scottish Ministers. We will be engaging with the DfT, DVSA and the TC on the development of a Memorandum of Understanding (MOU) to address the potential costs associated with these additional duties that the Traffic Commissioner for Scotland has under the new franchising model.
We acknowledge the costs will vary depending on the number of panels that the TC needs to convene to approve the making, varying, or revoking of a franchising framework. The costs will cover matters such as the recruitment and training of panel members, accommodation costs, remuneration, expenses, and associated costs for operating the panel. An illustration of the breakdown of the potential costs is provided in the paragraphs below.
For the purpose of illustration, when the TC was required to establish a Quality Contract Scheme (QCS) Board in 2011/12 under sections 126A to 126E of the Transport Act 2000 (as inserted by the Local Transport Act 2008) to consider Nexus’ proposed QCS, the costs in setting up the Board were as follows:
| Description | Amount |
|---|---|
| The cost is made up of a Deputy Traffic Commissioner to cover for the Traffic Commissioner panel chair, fees and expenses for panel members and a supporting member of staff and miscellaneous costs, including accommodation and postage. | £186,447.71 |
The Scottish franchising panel model, as set out in these regulations, is more closely based on the ‘School Closure Review Panel’, which was introduced via the Schools (Consultation) (Scotland) Act 2010 by the ‘Children and Young People (Scotland) Act 2014’.
The Convener of the School Closure Review Panels appoints three members to form a panel to review the school closure proposal and ultimately decide on whether to consent, or refuse to consent, to the proposal. The panel must consider whether, in making the proposal, the local authority has failed to comply with its statutory responsibilities and whether it has failed to take proper account of any relevant material considerations. A breakdown of the costs associated with operating the School Closure Review Panel in 2023 is below:
| Cost Breakdown | Amount |
|---|---|
| Administrative, business, financial and payroll services (including staff costs and office overheads) | £74,046.06 |
| Training and accommodation hire | £1,749.17 |
| Fees for the Convener | £ 1,543.06 |
| Fees for the panel members | £ 1,021.14 |
| Expenses for the Convener and panel members | £ 576.62 |
| Legal expenses | £0.00 |
| Total | £ 78,936.05* |
*This is an increase of £2,058.22 on the expenditure for 2022.
2021 was the most recent year in which a School Closure Panel was convened , with a panel convened on 2 August 2021 to consider two call ins. The expenditure breakdown for 2021 was as follows:
| Cost Breakdown | Amount |
|---|---|
| Administrative, IT, financial and payroll services including staff costs and office overheads | £56,855.16 |
| Training and recruitment and accommodation hire | £0 |
| Additional costs, including annual report, IT, and postage | £560 |
| Fees for Convener | £ 2,800.00 |
| Fees for panel members | £ 9,800.00 |
| Expenses for the Convener and panel members | £ 22.92 |
| Legal expenses | £458.40 |
| Total | £ 70,496.48 |
Other impacts
During our recent engagement with the TC, we sought further information from them about potential costings to convene panels for the purpose of considering whether to approve a local transport authority’s franchising proposals, particularly as they are not currently in receipt of any funding from Scottish Ministers.
We will be engaging with DfT, DVSA and the TC on the development of an MOU to address the costs associated with the additional duties that the Traffic Commissioner for Scotland has under the new franchising model. The costs will include those connected with the recruitment of panel members, and the setting up and operation of the franchising panels.
Scottish firms’ international competitiveness
These regulations do not impact Scottish firms’ international competitiveness.
Benefits to business
These regulations will not provide any direct benefits to business. However, where a local transport authority implements a franchising framework, operators will only be able to provide services within the geographic area of the framework if they enter into a contract with the local transport authority.
Although the local transport authority will determine the geographic area for their franchise, and the services to be provided and to what standard, the overall franchising policy does provide opportunities for bus operators to be innovative in how they deliver and operate the local services, should they be successful in winning contracts.
Small business impacts
These regulations will not provide any direct benefits to small businesses, however, the overall policy for franchising should provide some benefits for bus operators by providing them opportunities to be innovative in the way they deliver local bus services.
Investment
These regulations will not directly affect investment. However, bringing the bus franchising provisions into full effect under the 2001 Act will deliver an established policy to improve Scotland’s bus network and help arrest the decline in patronage.
Workforce and Fair Work
These regulations will not directly affect workforce or Fair Work First Principles. However, should a local transport authority decide to proceed with a franchise and obtain approval to make a franchising framework under the 2001 Act, they will be required to take account of the workforce and Fair Work First principles, including the requirements under the Transfer of Undertakings (Protection of Employment) Regulations 2006 should staff need to be transferred to a new operator.
Climate change/ Circular Economy
We do not consider that these regulations will have an effect on circular economy principles.
Competition Assessment
Having considered the Competition and Markets Authority (CMA) five competition assessment questions, which are below, we can confirm that there should be no competitive advantage to any individual or group due to the introduction of these regulations. These regulations are designed to deliver greater scrutiny and transparency to the franchising process.
- Will the measure directly or indirectly limit the number or range of suppliers? No.
- Will the measure limit the ability of suppliers to compete?
- Will the measure limit suppliers’ incentives to compete?
- Will the measure affect consumers’ ability to engage with the market and make choices that align with their preferences?
- Will the measure affect suppliers’ ability and/or incentive to introduce new technologies, products, or business models?
Finally, the CMA is a mandatory consultee as part of the franchising process and will be able to provide feedback to a local transport authority on their franchising proposals.
Consumer Duty
No assessment is required as the panels in respect of which provision is made in the Local Services Franchises (Traffic Commissioner Notices and Panels) (Scotland) Regulations 2024 will not impact consumers. In addition, the local transport authorities making the franchising proposals which will be considered by the panels are not considered to be consumers under the definition in the Consumer (Scotland) Act 2020. See Annex A for further information.