The likely impact of the proposed regulation would be tighter control of public financing of public transport services; increased scrutiny of funding of public transport services; and possible increased appearance of foreign transport companies running UK public transport services.

The purpose of the regulation is to:

#  define how, in accordance with the rules of Community law, competent authorities may act in the field of public passenger transport to guarantee the provision of services of general interest which are among other things more numerous, safer, of a higher quality or at a lower cost than those that market forces alone would have allowed; and

#  lay down the conditions under which competent authorities, when imposing or contracting for public service obligations, compensate public service operators for costs incurred and/or grant exclusive rights in return for the discharge of public service obligations.

The regulation would apply to national and international operation of public passenger transport services by rail and other track-based modes and by road, except for services which are operated mainly for their historical interest or their tourist value. It could also be extended to public passenger transport by inland waterways.

The Regulation does not apply to public works concessions within the meaning of Article 1(3)(a) of Directive 2004/17 of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors (3) or of Article 1(3) of Directive 2004/18 of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts.

This common position shows that the EC is very keen to ensure that public funding of public transport services is no more than is absolutely necessary to cover costs which cannot be recovered commercially, for example, in providing services to remote or distant rural communities.