Local councils will be allowed to take over and run public transport services themselves rather than contract them to private companies under new rules announced by the Government today.

Transport Minister Michael Wood said he hoped the change to a less corporate model would help councils address the current bus driver shortage, saying the emphasis on cost-cutting had driven down driver pay and led to an exodus of drivers.

That had exacerbated problems with bus service cancellations.

He hoped other spinoffs would be to increase ridership and get more people out of cars, a key part of New Zealand's climate change strategy, which aims to reduce the amount of driving by a fifth by 2035.

The Government is scrapping the Public Transport Operating Model, better known by its acronym PTOM, and replacing it with the "Sustainable Public Transport Framework".

Detractors claimed PTOM, which was introduced under the last National government, had introduced an excessive focus on driving down costs to operate public transport.

It had effectively stopped councils from owning and operating their own public transport services if they wanted to access subsidies to run those services from the National Land Transport Fund, Waka Kotahi's pool of transport funding, which comes from fuel taxes and road user charges.

Currently, even bus services operated under council branding like Auckland's AT, or Wellington's MetLink, are actually run by private operators.

"At the moment what we effectively have is a system whereby the councils to get funding out of the NLTF they have to be run through private provision. A number of councils have said to us … is that is a very rigid model and they want more flexibility in how they plan services in their regions," Wood said.

"The PTOM model as an almost totally commercially-driven model didn't lead to the right outcomes in public transport.

"The most direct place you can see that is the downward pressure on bus driver pay and conditions, which has directly led to a shortage of bus drivers and many services being cancelled across the country at the moment," he said.

The new model will amend the Land Transport Management Act and make other, operational tweaks, to allow other, broader things to be considered when setting up a public transport service.

These would include transparency of operating costs, service performance, the types of buses and ferries used on the service, and the terms and conditions of employees.

Wood said the system would also better allow public transport on demand. These were smaller services that came to people's street corners on demand and fed people into more main public transport services.

These were mainly operating in communities which were too small to sustain more traditional public transport like parts of Timaru.

"Sustainable Public Transport will bring in a wider range of considerations, including the need to decarbonise, including decent terms and conditions for drivers, and including the need to ensure more mode shift across the system, alongside the need for value-for-money," Wood said.

He believed this, along with the Government's key industrial relations reform, Fair Pay Agreements, would attract more people to become bus and ferry drivers, alleviating current shortages.

"As we increase services, we will need more drivers," Wood said.

The changes will take some time to roll out because different councils have agreements under PTOM that come up for renewal at different times.

He said the funding model for public transport would be something the Government would continue to think about.

Normally, about half of a public transport ticket is subsidised. This subsidy is split between councils and Waka Kotahi-NZTA, which uses fuel tax and road user charge funds.

"It is something we will have to think about as we work through. If we want to lift terms and conditions or we want to decarbonise the bus fleet there will need to be financial support for that," Wood said.

He said there had been a "taste" of this in Budget 2022, with the Government digging into its own pocket to fund public transport.

"There was $40 million for the decarbonisation of buses and $43m for bus driver terms and conditions over the next three years," he said.

"The ongoing funding is split between Waka Kotahi and councils and that is the way we want it to carry on, but the Crown has recognised that at this time there are particular pressures that we are setting that are going to need a bit of support.

- Thomas Coughlan, NZ Herald