Evaluating the long term impacts of transport policy: An initial assessment of bus
deregulation
John Preston*, Talal Almutairi
Civil, Maritime and Environmental Engineering and Science Academic Unit, Faculty of Engineering and the Environment, University of Southampton, UK
a r t i c l e i n f o
Article history:
Available online 23 June 2012
Keywords:
Local bus
Deregulation
Welfare analysis
a b s t r a c t
Local buses in Britain, outside London, were ‘deregulated’ as a result of the 1985 Transport Act, with most
of the organisational changes implemented in 1986 but many of the ownership changes occurring over
a longer period. By contrast, in London, the 1984 London Regional Transport Act introduced a system of
comprehensive tendering e but it took 10 years for the organisational and ownership changes to be fully
implemented. This paper examines the long term impacts of these changes. A key issue when examining
long term changes is that of the counterfactual e what would have happened if the changes had not
occurred? An econometric model of the demand for local bus services in Britain is outlined and used in
conjunction with extrapolative methods for key variables such as fares and bus kms to determine
demand-side counterfactuals. Some analyses of subsidy and of costs will also be outlined. This will then
permit the examination of welfare change by estimating changes in consumer and producer surpluses,
updating earlier studies. It is found that outside London, bus demand declined strongly, at least up to the
year 2000 and some of this reduction can be ascribed to deregulation. By contrast in London, demand has
generally been increasing. However, in both areas operating costs also declined strongly, again up to
2000, but since then there have been strong increases in costs and subsidy. Our initial ﬁnding is that
there are net welfare increases both outside and inside London, but with welfare increases per capita
being ﬁve times greater in London than elsewhere. However, sensitivity analysis shows that our results
are sensitive to the speciﬁcation of the modelling system and assumptions made concerning the
counterfactual, particularly for the results for London.
Ó 2012 Elsevier Ltd. All rights reserved.
1. Introduction
Transport, as in many other sectors, exhibits a relative paucity of
policy evaluation and where such evaluation does occur it tends to
focus on short run effects. Bus deregulation in Great Britain is no
exception. There was a slew of studies of the early effects (e.g.
Mackie, Preston, & Nash, 1995; Romilly, 2001; White, 1990) but
there have been no studies in recent years. There are good reasons
for this e ‘evaluation research is tortured by time constraints’
(Pawson, 2002). The effects of a policy change are distorted by
exogenous variables such as changes in population and income and
are overtaken by other policy initiatives. Undeterred, this paper
draws on the recent work of Almutairi (2011, 2012) and attempts to
evaluate the long terms impacts of the deregulation of bus services
in Great Britain.
In the next section, we brieﬂy review the history of bus deregulation
in Great Britain. Then, in section 3, we outline some of the
key trends in the bus market in Great Britain. In section 4, we outline
the development of a demand model of the bus market in Great
Britain. In section 5, we undertake an initial evaluation. In section 6,
we draw some preliminary conclusions, undertake some sensitivity
analysis and make recommendations for further research.
2. A brief history of bus deregulation
The local bus deregulation story is documented in detail elsewhere
(see, for example, Mackie & Preston, 1996). It originates with
the neo-liberal reform agenda of the Thatcher Conservative
Governments (1979e90). The 1980 Transport Act deregulated local
bus fares and set up some trial areas (most notably in Hereford).
These early reforms are documented in Savage (1985). They were
followed by the ‘Buses’ White Paper in 1984, which stimulated
a huge amount of debate (Banister, 1985; Beesley & Glaister, 1985a,
1985b; Gwilliam, Nash, & Mackie, 1985a, 1985b). Beesley and
Glaister (1985a) put forward four key propositions. They argued
* Corresponding author. Transportation Research Group, Civil, Maritime and
Environmental Engineering and Science, Faculty of Engineering and the Environment,
University of Southampton, Highﬁeld, Southampton SO17 1BJ, UK. Tel.: þ44
(0) 23 8059 4660.
E-mail address: jpreston@soton.ac.uk (J. Preston).
Contents lists available at SciVerse ScienceDirect
Research in Transportation Economics
journal homepage: www.elsevier.com/locate/retrec
0739-8859/$ e see front matter Ó 2012 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.retrec.2012.06.015
Research in Transportation Economics 39 (2013) 208e214
that deregulation would, ﬁrstly, produce a competitive market.
Secondly, it would substantially reduce costs. Thirdly, it would
improve resource allocation (through more service and lower
fares). Fourthly, it would have no undesirable spin-offs. Counter
arguments were provided by Gwilliam et al. (1985a) who favoured
competition for the market (competition for the road) rather than
competition in the market (competition on the road).
The White Paper was followed by the Transport Act in 1985. The
Transport Act introduced a raft of measures of which four should be
highlighted. The ﬁrst of these was the abolition of the system of
Road Service Licenses which meant that the quantity supplied of
bus service outside London was deregulated with effect from
October 1986. This ended a regulatory system of quantity control
that had been in existence since the 1930 Road Trafﬁc Act. The
second was it was recognised that some services (e.g. those in rural
areas) could not be provided commercially and therefore provisions
were made for the competitive tendering of socially necessary
services by Local Authorities. These tendered services have
constituted a relatively small, but growing, part of the market (now
up to 20% of bus miles). The third was the commercialisation and
eventual privatisation of the industry. In 1985 around 75% of the
industry was in public ownership with four big groups e namely
the National Bus Company (with 70 subsidiaries and 28% of the
industry), the metropolitan and municipal PTCs (around 60
companies and 28% of the industry), London Transport (with 13% of
the industry) and the Scottish Bus Group (9 subsidiaries and 6% of
the industry). By 1999, the public sector’s share of the market had
reduced to 6%, with the big ﬁve stock exchange listed companies1
controlling 68% of the industry (Cole, 1998; TAS, 1999). The fourth
was the tightening of regulations concerning safety (by strengthening
the powers of the Trafﬁc Commissioners) and competitive
behaviour (by giving the Ofﬁce of Fair Trading powers over the bus
industry).
One of the interesting features of the bus industry outside
London is the relative stability of the policy environment. The 1998
New Deal for Transport White Paper had ambitious plans to convert
local buses from workhorses to thoroughbreds but the practice saw
little substantive change (Preston, 2003). The 2000 Transport Act
brought in provision for Statutory Quality Bus Partnerships (with
just a couple of take ups) and Quality Contracts (with no take ups),
whilst the Local Transport Act 2008 enhanced the legislative
provision for Quality Contracts and created Integrated Transport
Authorities with very little effect. Arguably the most important
change to the bus industry outside London has been to the
concessionary fares regime. Since April 2006 a free fare concession
for bus use has existed in England for the over 60s and eligible
disabled people. This statutory concession operates between 9:30
am and 11:00 pm Monday to Friday and all day on Saturdays and
Sundays and originally covered travel within a Travel Concessions
Authority (TCA). In April 2008, a national scheme was introduced
which extended free travel for concessionaires to any journey on
a local bus in England.2
Another feature of bus deregulation was that the provisions did
not apply to London, which as a result became a form of experimental
control. The 1984 London Regional Transport Act took
control of bus services away from local Government (and the soon
to be abolished Greater London Council) and into central Government
control. Competitive tendering for bus services was gradually
introduced, with the process completed in 1994, whilst London
Buses Limited was also privatised (see Kennedy, 1995). Again the
broad policy has remained relatively unchanged, although the 1999
Greater London Authority Act meant that buses in the capital came
once again under the control of local government, in the form of the
elected Mayor and Greater London Assembly, and a new executive
agency, Transport for London (established in 2000).
3. Key trends in the bus industry
Data on the performance of the local bus industry is available
from a number of sources, most notably Transport Statistics Great
Britain, and the key trends are relatively well known, including
presentations to the International Conferences on Competition and
Ownership in Land Passenger Transport (see, for example,
Matthews, Bristow, & Nash, 2001; Preston,1999). Figs.1e5 illustrate
the key trends between 1981/2 and 2008/9 with respect to demand
(as measured by number of passengers), supply (as measured by
Passenger Journeys
0
1000
2000
3000
4000
5000
6000
1981
1982
1983
19841985/61986/71987/81988/91989/901990/11991/21992/31993/41994/51995/61996/71997/81998/91999/02000/12001/22002/32003/42004/52005/62006/72007/82008/9
Millions
London
GB outside London
TOTAL
Fig. 1. Trends in local bus demand (passenger journeys, millions).
1
Arriva, First Group, Go-Ahead, National Express and Stagecoach. Arriva was
taken over by Deutsche Bahn in 2010.
2
A national free scheme (including peak travel) has existed in Wales since April
2002 and in Scotland since April 2006.
J. Preston, T. Almutairi / Research in Transportation Economics 39 (2013) 208e214 209
vehicle kms), fares (as measured by receipts per passenger in 2005/
6 prices), operating costs and subsidy respectively. The key trends
since deregulation in 1985/6 are summarised by Table 1.
The difference between London and the rest of the country is
striking. Since deregulation the number of bus passengers in London
has increased by 87%, whereas in the rest of the country there
has been a 31% decline, although demand has stabilised in the last
10 years, with some recent growth due to the concessionary fares
policy discussed above. Real fares in London have only increased by
15%, whereas outside London the increase has been 55%. Services in
London have increased by 87%, whereas outside London the
increase has only been 20%. Trends in operating costs have been
broadly similar (albeit with London having much higher costs than
elsewhere). Real costs in London have come down by 28%, outside
London they have come down by 20%. For both, costs have been
increasing strongly since 2000. Subsidy (in terms of revenue
support and concessionary fares reimbursement e see also Preston,
2008) has increased by 84% in London but by only 5% outside
London. For both, subsidy was minimised around 2000. A key issue
is the extent to which subsidy reductions are part of the policy
package, with Glaister (1991) arguing that subsidy reduction was
the main motivation.
4. Determining the counterfactual
A key component to determining the counterfactual is the
development of a demand forecasting model. A pooled time series
cross section data base was created for ﬁve areas of Great Britain
(English Metropolitan Counties, English Shire Counties, London,
Scotland and Wales) for the years 1981e2008/9. Some key
descriptive statistics for London and Outside London are provided
by Table 2 and highlight the higher levels of demand and lower
fares in London than the rest of the country.
It is not the purpose of this paper to go in to detail concerning
the econometrics underpinning this work e this is detailed elsewhere
(Almutairi, 2012). Sufﬁce to say that a number of static and
Vehicle Kms
0
500
1000
1500
2000
2500
3000
1981
1982
1983
1984
1985/6
1986/7
1987/8
1988/91989/90
1990/11991/2
1992/3
1993/41994/5
1995/6
1996/7
1997/8
1998/9
1999/0
2000/1
2001/2
2002/3
2003/4
2004/5
2005/6
2006/7
2007/8
2008/9
Millions
London
GB outside London
TOTAL
Fig. 2. Trends in local bus supply (vehicle kilometres, millions).
Receipts per Passenger
0
10
20
30
40
50
60
70
80
90
1981
1982
1983
19841985/61986/71987/81988/91989/901990/11991/21992/31993/41994/51995/61996/71997/81998/91999/02000/12001/22002/32003/42004/52005/62006/72007/82008/9
Pence(2005/6prices)
London
GB outside London
TOTAL
Fig. 3. Trends in fares (receipts per passenger, excluding concessionary fares reimbursement) pence, 2005/6 prices.
J. Preston, T. Almutairi / Research in Transportation Economics 39 (2013) 208e214210
dynamic demand models have been estimated, considering both
ﬁxed and random effects, and using a variety of estimation methods
including the Ordinary Least Squares First Order Autoregressive
(OLS-AR(1)) procedure developed by Baltagi and Wu (1999), the
equivalent Feasible Generalised Least Squares procedure (FGLSAR(1))
and the Panel Corrected Standard Error (PCSE-AR(1))
method (Beck & Katz, 1995; Reed & Ye, 2007). In addition, several
Error Correction Models (ECM) were developed, including those
based on the Engle-Granger two step procedure (Engle & Granger,
1987) and those based on the system based test of Johansen
(1988). Various lag structures were examined using the Akaike
Information Criteria, with the use of the dependent variable with
a single period lag strongly supported. The model took the general
form:
LnQit ¼ a À bF LnFit þ bV LnVKMit À bY LnYit
þ bQÀ1LnQitÀ1 À bDDDD þ btt þ
XiÀ1
i
biRDVi
where Qit ¼ Number of bus passenger trips per capita in region i in
year t, Fit ¼ Receipts (excluding Concessionary Fares Reimbursement)
per passenger in region i in year t, VKMit ¼ Vehicle Kilometres
per capita in region i in year t, Yit ¼ Personal Disposable
Income in region i in year t, QitÀ1 ¼ Number of bus passengers per
capita in region i in year t À 1, DD ¼ Deregulation Dummy Variable,
t ¼ time trend and RDV ¼ Regional Dummy Variables.
The model was estimated using the PCSE(AR)(1) method. A
Wooldridge statistical test conﬁrmed the presence of ﬁrst order
Total Operating Costs
0
50
100
150
200
250
300
350
400
1985/6
1986/7
1987/81988/91989/90
1990/1
1991/21992/31993/4
1994/5
1995/6
1996/71997/8
1998/9
1999/02000/1
2001/22002/3
2003/4
2004/5
2005/62006/7
2007/8
2008/9
PenceperVehicleKm(2005/6prices)
London
GB outside London
Fig. 4. Trends in vehicle operating costs: pence per km, 2005/6 prices.
Total Subsidy
0
500
1000
1500
2000
2500
1981/21982/31983/41984/51985/61986/71987/81988/91989/01990/11991/21992/31993/41994/51995/61996/71997/81998/91999/02000/12001/22002/32003/42004/52005/62006/72007/8
£millions(2005/6prices)
Total Subsidy
Total Subsidy Outside London
Total Subsidy in London
Fig. 5. Trends in subsidy. £ million, 2005/6 prices. Note: does not include bus service operators grant (previously fuel duty rebate) e £414 million in 2007/8.
J. Preston, T. Almutairi / Research in Transportation Economics 39 (2013) 208e214 211
serial correlation in the data, although a modiﬁed Wald test
conﬁrmed homoscedasticity and a BreuschePagan (BP) Lagrange
Multiplier (LM) test conﬁrmed cross sectional independence,
although VIF (Variance Inﬂation Factor) tests do suggest the
presence of multicollinearity in the pooled data. The estimation
method is based on a form of pseudo differencing and hence non
stationarity is dealt with, whilst comparison of adjusted R2
and
information criteria measures suggested this approach was
preferable to ECM procedures which in any event are not well
developed for pooled data sets. Beck and Katz (2011) provide
general support for the modelling approach adopted here.
The results of the estimated model are given by Table 3. It can be
seen that all the key parameter estimates are signiﬁcant at the 1%
level, although only the regional dummies for London and Wales
are statistically signiﬁcant. The model R2
is 0.997, indicating
excellent goodness of ﬁt. This model is a version of the Partial
Adjustment Model (Dargay & Hanly, 2002). Short run elasticities for
fares, vehicle kilometres and income are given by the coefﬁcients
estimated above (À0.11, 0.18 and À0.34 respectively). The long run
elasticities are determined by dividing the coefﬁcients by 1 e 0.842.
This gives long run fare, vehicle km and income elasticities
of À0.72, 1.14 and À2.18 respectively. The deregulation dummy
variable indicates a 6.9% reduction in demand in the short run and
a 36.2% reduction in the long run. The time trend variable indicated
a yearly growth of 0.9% in the short run and 5.8% in the long run.
The coefﬁcient of the lagged dependent variable (0.842) suggests
a relatively slow adjustment, with 90% of the adjustment occurring
in 13.34 years (Ln(1 À 0.9)/Ln(0.842)) e suggesting relatively long
adjustment periods.3
The PCSE-AR(1) model was used to make some comparisons of
actual and counterfactual demand as illustrated by Table 4. For
simplicity of analysis, it is assumed that fares and vehicle kms are
held at 1984 levels and the ﬁrst year of deregulation having an
effect is assumed to be 1985/6, as many networks were adjusted in
advance of D-day on 26 October 1986.
From Table 4 it can be seen that of the 87% actual growth local
bus usage in London, 54% was predicted to have occurred anyway e
which is around 62% of the actual growth. By contrast outside
London, demand reduced by 31% but the counterfactual forecasts
a 9% growth e principally due to increased population. Actual
demand is thus 36% lower than the counterfactual demand e
a ﬁnding that is remarkably consistent with the long run impact of
the deregulation dummy variable.
5. Welfare analysis
Our principal measure of welfare change is:
DW ¼ DCS þ DTR À DTC
where W ¼ Welfare, CS ¼ Consumer Surplus, TR ¼ Total Revenue,
TC ¼ Total Costs. All values are expressed in 2005/6 prices and D
refers to the difference between the actual outcome and the
counterfactual.
The changes in Consumer Surplus are estimated using the rule
of half. Outside London, where counterfactual fares are lower and
demand higher than actual outcomes, this is calculated for each
year as:
DCS ¼
1
2
ðF1 À F2ÞðQ1 þ Q2Þ
where F1 ¼ counterfactual fares, Q1 ¼ counterfactual demand,
F2 ¼ actual fares and Q2 ¼ actual demand. For London, where both
counterfactual fares and demand are lower than the actual, and
hence an outward shift in the demand curve is assumed, the sign is
reversed.
Our initial welfare results are presented in Table 5. These
calculations are given as Present Values using the Treasury’s 3.5%
discount rate. It has been assumed that bus operating costs in the
counterfactual were ﬁxed at 1985/6 levels (the ﬁrst year for which
data are available).
This analysis suggests that in the long run both reforms have
been welfare positive but in different ways. In London, both
consumers and producers appear to have gained. Outside London,
the situation is different e consumers have suffered losses but
producers have had large gains in terms of reduced total costs,
although in recent years these have petered out.
Our 2008/9 population estimates (derived from the Ofﬁce of
National Statistics) are 7.62 million for London and 52.18 million for
Table 1
Key changes in the local bus market since 1985/6.
Outside London London
Demand À31% þ87%
Fares þ55% þ15%
Services þ20% þ78%
Costs À20% À28%
Subsidy þ5% þ84%
Table 2
Key descriptive statistics.
Variable Area Obs Mean Std. dev. Min Max
Demand (Journeys
per capita)
Lon. 28 191.5 36.63 153.1 282.0
Out. 28 70.8 13.76 56.6 95.9
Farea
(Pence per
journey)
Lon. 28 42.9 3.27 37.2 47.6
Out. 28 63.3 9.46 51.4 78.9
Service (Vehicle kms
per capita)
Lon. 28 49.7 8.33 38.8 63.7
Out. 28 42.9 2.79 37.3 46.4
a
2005/6 prices.
Table 3
Model results.
Coefﬁcient Standard error z p > jzj
Constant (a) 3.067 1.081 2.84 0.005
Fare (bF) À0.114 0.037 À3.08 0.002
Service (bv) 0.180 0.059 3.06 0.002
Income (bY) À0.343 0.126 À2.73 0.006
Lag (bQÀ1) 0.842 0.024 24.93 0.000
Dereg DV (bDD) À0.071 0.014 À4.93 0.000
Time trend (bt) 0.009 0.003 3.34 0.001
London DV 0.054 0.026 2.09 0.037
Mets DV 0.004 0.021 0.20 0.839
Scotland DV À0.016 0.028 À0.55 0.582
Wales DV À0.037 0.013 À2.84 0.005
R2
0.997, Rho 0.142, Wooldridge test 9.162 (p 0.039), Modiﬁed Wald test 6.13 (p
0.294), BP LM test 10.057 (p 0.4335).
Table 4
Actual and counterfactual estimates of local bus demand in London and outside
London (passengers, millions).
London Outside London
Actual Counterfactual Actual Counterfactual
1985/6 1152 1223 4489 4462
2008/9 2149 1885 3084 4884
Change þ87% þ54% À31% þ9%3
99% of adjustment takes around 27 years (Ln(1 À 0.99)/Ln(0.842)).
J. Preston, T. Almutairi / Research in Transportation Economics 39 (2013) 208e214212
the rest of Great Britain. As a result, our results indicate that the
mean beneﬁt per person over this prolonged period was around
£435 in London but only around £84 per person outside London, in
other words over ﬁvefold higher in London than outside London.
An important issue is the change in subsidy. Using a simple
counterfactual in which subsidy is frozen at 1984/5 levels, we ﬁnd
that there have been reduced levels of subsidy (based on Concessionary
Fares Reimbursements and Public Transport Support only e
data is not readily available for Fuel Duty Rebate). Between 1985/6
and 2007/8 there has been a saving in subsidy of £5106 million in
London and £6726 million outside London (2008/9 prices). This
represents a transfer but if one assumes a shadow price of public
funds of around 1.2 (after Dodgson & Topham, 1987) then there are
deadweight efﬁciency gains from this reduced expenditure of
around £1021 million in London and £1345 million outside London.
6. Conclusions and further work
This work is still at an initial stage and the ﬁndings should
therefore be interpreted with caution. Nonetheless, we ﬁnd some
relatively strong evidence that bus deregulation suppressed
demand in the long run by around 36%. As a result we ﬁnd that
consumers suffered substantial losses of beneﬁt in Great Britain
outside London, but these were more than offset by reductions in
operating costs so that society seems to gain overall. However, in
London both consumers and producers gain and the resultant
welfare increase per capita is ﬁve times greater than that outside
London. This would seem to support the view posited by Gwilliam
et al. (1985a) that competition for the market is preferable to
competition in the market. There appears to be limited competition
for bus services outside London and the resultant conﬁguration of
higher fares and services is consistent with oligopolistic competition
(Evans,1990), although more recent studies suggest a degree of
monopolisation (Competition Commission, 2011). However, Beesley
and Glaister (1985a) were correct in their forecasts of substantial
reductions in operating costs and of limited undesirable spin-offs.
It is interesting to note that, some 25 years on from the initial
reforms, our analysis indicates that the impacts are nearing completion,
whilst the year 2000 seems to have been a turning point for
some key trends (i.e. demand, subsidy and operating costs). It is also
worth comparing the big bang approach to the bus regime outside
London (where the main reforms were introduced in less than two
years) with the much more gradual approach in London (where the
reforms took at least ten years). Research in the rail industry suggests
that the gradual approach has advantages over a more instantaneous
approach (Friebel, Ivaldi, & Vibes, 2003) and there are some suggestions
here that this might also apply to the bus industry.
There is though more work to be done. A key issue is whether our
models sufﬁciently differentiate between London and the rest of
Great Britain. Our analysis was initially limited to variations to population
and income. Initial attempts to include other variables,
particularly car ownership and motoring costs, were unsuccessful.
However, the introduction of the congestion charge in London in
2003 is likely to have provided a ﬁllip to bus use that has not been
picked up by our models (see also White (2010) for details of other
factors that should be taken into consideration). As result, subsequent
work has involved the development of separate demand models for
outside London (based on pooled data) and for London (based on
time series data) (Almutairi, 2012). The model for outside London has
an income elasticity of À0.63 in the short run and of À1.70 in the long
run, whilst the demand dampening effect of deregulation is reduced
to 4.8% in the short run and 12.4% in the long run. The model for
London has lower (in absolute terms) income elasticities (À0.45 in
the short run, À0.96 in the long run) and includes a motoring cost
term. We have also developed forecasting models of operating costs
and fares that will permit more detailed counterfactual analysis of the
impact of subsidy reductions. The cost modelling has also permitted
analysis of the extent to which the operating cost reductions that
have been observed may be attributed to reductions in input prices
(particularly wages and fuel). Some sensitivity analysis using this
subsequent approach is shown in Tables 6 and 7. In both cases the
calculations have been extended to include data for 2009/10.
It can be seen that the ﬁnding that the reforms outside London
are welfare positive is relatively robust and the range of welfare
gains (from þ£2963 to þ£5404 million) bound our initial estimate
(þ£4393 million). In the variable trend assumption (Table 7), the
counterfactual assumes that there would have been reductions in
service levels and this dissipates the total cost savings (as the
increase in vehicle kms as a result of deregulation is enhanced). The
counterfactual fares assumed in Table 7 are lower than those in
Table 6, resulting in enhanced gains in total revenue, whilst overall
there are modest consumer surplus gains. The results for London
are also welfare positive but seem less robust, given our initial
estimate of a welfare gain of £3314 million is outside of the range
of þ£582 to þ£2451 million in the subsequent analysis illustrated
by Tables 6 and 7. In part, this is due to the fact that much more of
the increase in demand since the reforms can be explained by
external factors (such as rising motoring costs) but there is also
a cost impact of operating more service than predicted by the
counterfactual. The initial ﬁnding that the reforms in London had
a greater net beneﬁt per capita than the reforms outside London is
supported by Table 6 (with the gains per capita again being over
ﬁvefold higher in London) but not by Table 7 (where the gains per
capita outside London are over a third higher than those in London).
Our welfare analysis could be further reﬁned. In future work we
intend separate the impacts of subsidy changes from the regulatory
reforms. We will investigate obtaining our estimates of consumer
surplus from direct integration of the estimated demand functions,
although given their dynamic nature this is not straightforward
Table 5
An initial cost-beneﬁt analysis of bus reforms in Britain since 1985/6 (£ Million,
2008/9 prices).
London Outside London
DCS þ1505 À7320
DTR þ46 À4038
DTC À1763 À15,751
DW þ3314 þ4393
Uplifted from 2005/6 prices using a factor of 1.086 [Based on the GDP deﬂator at
market prices e see http://www.hm-treasury.gov.uk/Economic_Data_and_Tools/
GDP_Deﬂators/data_gdp_index.cfm].
Table 6
Sensitivity analysis (I) constant trend assumption concerning service levels and with
more detailed modelling of fares and operating costs (£ million, 2008/9 prices).
London Outside London
DCS þ748 À1270
DTR þ1645 À10,578
DTC À58 À14,811
DW þ2451 þ2963
Table 7
Sensitivity analysis (II) variable trend assumption concerning service levels and with
more detailed modelling of fares and operating costs (£ million).
London Outside London
DCS þ1196 þ1927
DTR þ2775 þ2598
DTC þ3389 À879
DW þ582 þ5404
J. Preston, T. Almutairi / Research in Transportation Economics 39 (2013) 208e214 213
(Dargay & Goodwin, 1995) and is particularly problematic in
circumstances where the demand curve is believed to have shifted.
We will also widen our welfare analysis to consider wider impacts,
for example on employment, on safety and on the environment. We
propose to report this work in a subsequent paper.
Acknowledgement
Talal Almutairi is undertaking PhD research funded by the
Government of Kuwait (2009e2012), supervised by Professor John
Preston and Dr Birendra Shrestha. We are grateful for the
comments of Professor Jean-Yves Pitarakis of the Economics
Division of the University of Southampton and of an anonymous
referee. Any errors are, of course, our own.
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