Since 1930 every local bus route had to be licensed. Until 1980, it was almost impossible to start a new service in competition with an existing operator. The Department of Transport described this system as having “acted like a straightjacket preventing the bus industry from adapting to meet changing travel needs” (Buses: A Guide to the White Paper 1985).

##### 3.2.2. London

Between 1933 and the mid-1980's London Transport was granted monopoly power in the running of buses in London. Following the London Regional Transport Act of 1984, London Regional Transport (LRT) was created as a state owned, nationalised industry but it has statutory obligations to involve the private sector. Under this system LRT procures services from both public and private sector suppliers by means of a cost contract. In 1994 around 50 per cent of bus mileage in London was procured through this system. The remainder is provided by London Buses Ltd (LBL), a subsidiary of LRT. In summary, LRT decides which route or set of routes to put out to tender, the service provided specified, tenderers submit sealed bids. There is no reservation price. No information that may exist regarding operation cost is published. The price paid by the winning bidder is the bid price. The introduction of competitive tendering reflected a more general UK policy. Competitive tendering was a major part of the Government's privatisation policy (Kennedy 1994, 1). Evidence of a recent study finds that there is no statistically significant difference in costs of operation between public and private sectors on the tendered network. The estimated cost saving from tendering is 20% (Kennedy 1994).

In November 1994 the Government announced that it was not to press ahead with deregulation in London, but to privatize London Transport subsidiaries. This was completed by December 1994.

#### 3.3. Changes in regulation

The regulation of passenger-carrying motor vehicles was introduced by the 1930 Road Traffic Act. This Act marked the beginning of comprehensive state intervention by its introduction of both quality regulation (demanding particular standards for vehicles, drivers and conductors) and quantity regulation (requiring each route in operation to have a separate licence and maintaining control of the overall number and type of services offered by operators). The 1930 Act remained unchanged, despite two government reviews in 1953 and 1961, until 1980 when the Transport Act released inter-city bus services from the constraints of quantity licensing for all local services and by the competitive tendering for subsidised services (Mulley and Wright 1986, 2).

The 1985 Act, which took effect from October 1986, forms the legislative framework for these changes. A number of arguments were put forward in favour of deregulation at the time of the Act. The fundamental idea underpinning such a change of ownership was that with improved efficiency and a more flexible bus network, which have knock-on effects from improvements in the general economy, subsidies would be reduced by improved efficiency, and that the changes would reverse the decline in the industry. A strong argument for ownership change at the time was that