£104m costing error uncovered in North East bus franchising plans as audit confirms scheme remains viable

An independent audit has identified a £104.9 million omission from the financial modelling underpinning plans to bring the North East's bus network under public control, although reviewers say the overall franchising programme remains affordable.

The error, uncovered during an assurance review by Grant Thornton, relates to staffing costs that had not been included in the original 30-year financial assessment supporting Mayor Kim McGuinness' proposed bus reforms.

The revised figures mean the long-term cost of delivering the franchising model has increased, with public investment now estimated at £437.8 million over 30 years, including £113 million during the first decade of operation.

Despite the adjustment, the independent review concluded that the additional expenditure can be accommodated within the funding available to the North East Combined Authority, alongside other identified sources of finance.

The proposed reforms would replace the region's deregulated bus market with a franchising model similar to Greater Manchester's Bee Network, giving the public sector responsibility for setting fares, planning routes and determining service levels while private operators continue to run services under contract.

Supporters of the scheme argue that greater public control would deliver lower fares, improved reliability and significant passenger growth. Current forecasts suggest fares could be 22% lower after 10 years, with annual patronage increasing by 15.7 million journeys by 2059 compared with retaining the existing system.

The revised financial modelling reflects commitments made by Mayor McGuinness to keep fare increases in line with inflation and to guarantee that no reductions will be made to the size of the regional bus network during the first decade of franchising.

Responding to the findings, a spokesperson for the North East Combined Authority said the omitted staffing costs represented only a relatively small proportion of the overall financial model.

"The Independent Assurance Report agrees the total investment needed for franchising remains affordable and within the available funding envelope of the Integrated Settlement, alongside other potential funding options identified in the analysis.

"This includes all additional staffing costs required to deliver franchising, which on their own represent a small fraction of the overall cost of the whole bus service."

Over the full 30-year period, operating the North East's bus network is projected to cost more than £12 billion, while generating around £11.7 billion in revenue.

However, the discovery has prompted opposition councillors to seek further assurances over the robustness of the business case.

Newcastle Liberal Democrat councillor Greg Stone said he had asked the authority's monitoring officer to clarify how the omission had occurred.

"I have sought clarification from the monitoring officer over an apparent miscalculation of the staffing costs associated with the Mayor's plans for the administration of the franchised bus network identified by an independent assessment of the Mayor's plans.

"These plans are significant and it will be important to ensure projected ridership and financial arrangements are suitably scrutinised."

The issue was also discussed by the North East Combined Authority's Audit and Standards Committee, where chairman Dave Willis proposed holding a dedicated workshop later this year to enable members to examine the franchising proposals in greater detail before any final decision is made.

If the plans receive approval following consultation, the first services under the proposed Angel Network branding are expected to enter operation in September 2029, with the remainder of the franchised network introduced in phases over the following two years.

Mayor Kim McGuinness has consistently argued that the current deregulated system is no longer delivering for passengers, maintaining that operators receive more than £120 million annually in public subsidy while failing to provide the quality and reliability of service the region requires.