Evaluating the long term impacts of transport policy: The case of bus deregulation revisited

In a previous paper in this journal, we suggested that the bus reforms that were implemented in Britain from the mid-1980s onwards were welfare positive for both London and for the rest of Great Britain outside London (Preston & Almutairi, 2013). However, we cautioned that this work was preliminary and likely to be sensitive to various assumptions made. In this paper, we have undertaken more detailed sensitivity analysis as follows. First, we have developed separate demand models for London and for the rest of Great Britain. Secondly, we have developed cost models to determine the extent to which costs are determined by external factors (such as fuel prices) or partially external factors (such as labour costs). Thirdly, we have developed fares models to assess the impact of changes in subsidy, in terms of both revenue support and concessionary fare reimbursements. We have also changed the measurements of consumer surplus so as to be more consistent with underlying economic theory. This work confirms the sensitivity of the long term evaluation of transport policy to assumptions concerning the counterfactual and trends in demand, supply and prices. Any policy lessons inferred from these long term evaluations need to take these sensitivities into account.