What legal restrictions prevent local authorities from establishing local authority-owned bus companies along the same lines as Lothian Bus…

I am not aware of either any legal restrictions which prevent local authorities from establishing local authority-owned bus companies or any provisions which specifically empower a local transport authority to establish such a company. However, there are general powers on which transport authorities could seek to rely. Local authorities which are local transport authorities (ie local authorities outwith the area served by Strathclyde Passenger Transport Executive (SPTE)) could rely on the power to enter into a contract at section 1 of the Local Government Contracts Act 1997. Similarly, the general power to enter into and carry out agreements at section 10(1)(xv) of the Transport Act 1968 would seem to allow for this situation in relation to SPT. In line with usual practice, it would be for any local transport authority, which wished to use these powers to set up a bus operating company, to take its own legal advice as necessary. Any transport authority which set up an operating company would of course also have to abide by the legislation in relation to subsidising socially necessary services.