Ticket to trouble: Manchester's plans to sell off its buses have come to a sudden halt. John Murray reports

AN EXTRAORDINARY political stand-off is threatening to drive the privatisation of Greater Manchester's municipal bus services off the road.

On one side of the road stands the local Passenger Transport Authority, which has defied demands that the bidding process be reopened.

On the other is the Department of Transport, which may retaliate by blocking the sale of the city's two bus companies.

At stake are the political careers of Manchester councillors and the jobs of thousands of bus workers. There is also a risk the 10 local authorities that make up Greater Manchester will lose the sale proceeds if the matter is not settled by the end of the month.

The dispute centres around the PTA's decision to sell the two bus companies - GM Buses North and GM Buses South - to employee buyout teams, despite higher rival bids from the private sector.

The transport department is principally concerned about the GM Buses North sale. The Transport Minister, Roger Freeman, wrote to the PTA three weeks ago, demanding a final round of sealed bids. But the PTA has refused to reopen the bidding and is determined to go ahead with the sale.

British Bus, another bidder, is threatening legal action, because it says that its pounds 25.25m bid beats the pounds 24m offered by the employees, who are backed by financial institutions.

Under bus privatisation rules, the sale must be to the highest bidder, although there is a provision that favours employee bids within 5 per cent of a higher private-sector bid.

Mr Freeman restated that this 5 per cent margin was unbreachable at a meeting with Manchester councillors last month, but the employee bid for GM Buses North falls short of it.

There have also been suggestions that the district auditor may mount an inquiry into the sale process. Councillors can be surcharged if they fail to obtain the maximum value from the sale of public assets. If the sale is blocked, it may mean that Greater Manchester will lose the proceeds. The Government extended an original 31 December deadline for bus buyouts to 31 March.

After that date, half the proceeds of sales go to reduce a local authority's debt to central government. So it is essential Manchester completes its sales by the end of the month.

Councillors have already talked of spending the money raised on projects such as Manchester's Metrolink.

The privatisation in Manchester started last autumn, when the PTA split Greater Manchester's bus services into two - GM Buses North and GM Buses South.

Sealed bids were invited for the companies. GM Buses North has an annual turnover of about pounds 60m, 700 buses and 2,000 employees. GM Buses South is smaller, with fewer than 2,000 employees, 600 buses and pounds 50m turnover.

The PTA subsequently announced that British Bus, a privately owned Salisbury- based bus group, which is expected to float on the stock market later this year, was the preferred bidder for GM Buses North, having offered pounds 29m.

At the same time, Stagecoach, the Perth-based group that came to the stock market last year, was beaten by a management and employee buyout for GM Buses South.

British Bus dropped its bid price for GM Buses North following due diligence and a requirement from the PTA that it give 20 per cent of the company to employees. The employee buyout team, Mebo, which had bid about pounds 20m, then came back with another bid, accepted by the PTA.

British Bus produced a revised offer - for pounds 25.5m - but the PTA stuck with the employee buyout. Meanwhile, Stagecoach, seeing the bidding reopened for GM Buses North, promptly made a revised, higher offer for GM Buses South, valuing it at pounds 17m- pounds 18m. Mebo's offer is understood to be pounds 15m- pounds 16m.

But the PTA refused to consider the new Stagecoach bid, arguing that it was too late. Councillor Jack Flanagan, a Labour member of the PTA, said: 'Stagecoach returned to the fray too late to allow the due diligence to be completed in time for our deadline. The new bid was acepted for GM Buses North because the original agreed bidder, British Bus, reduced its offer after due diligence.' Mr Flanagan argues that the PTA has tried to act in the best interests of Greater Manchester's citizens and bus users and is unconcerned about the prospect of government intervention.

'We were opposed to privatisation in the first place, but in the circumstances we have attempted to get the best deal possible for all concerned. If the minister, sitting in London, wants to interfere with that, that's his decision.'

But Mr Flanagan admitted that the PTA's permanent officials did advise the councillors to go to a final round of sealed bids for the bus companies.

Stagecoach has, like British Bus, threatened legal action. Its solicitors wrote to the PTA saying it would seek judicial review, if the sale of GM Buses South went through without its offer being considered.

Manchester is one of the last of the big metropolitan centres to privatise bus services. Councils in the towns still to privatise, such as Edinburgh, Cardiff and Nottingham, must be watching the developing crisis in Manchester with mounting concern.

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