I have just read this on Quora written by Mike Baron. He suggests that it was the UK Labour Party that was responsible and that the spreading out of cities coupled with the lack of investment in extending the tram system led to it being replaced by buses. It raises some interesting points- the movement of workers away from their place of work in the inner city as a deliberate policy rather than the consequence of rising prices struck me as important:
I have tried to keep this as brief as possible but the answer is complicated. The main concept behind the answer is that a tramway is a system for moving people. A bus is just a vehicle.
Each tramway route had required a separate Act of Parliament under the 1896 Light Railways Act, which had subsumed the 1870 Tramways Act. Running costs doubled after the 1914-1918 War.
In 1930, the Road Traffic Act permitted local authorities to run bus services over any of its tram routes, and a later committee which was unsupportive of tramways, did not recommend any further general tramway development in the UK. This gave a green light to many towns to abandon systems, or to replace directly with trolleybuses, which could still benefit from local electricity generating stations (before the concept of a national grid) and without the need for a new Act of Parliament.
Some schemes for an amount of redevelopment of tramway systems and new tramcars were implemented at local levels after 1933 in Liverpool, Leeds, Glasgow, Sunderland and possibly elsewhere but many systems were closed, and investment in new vehicles was somewhat limited (although having said that, the vehicles from English Electric, Brush, and several local builders using parts from major manufacturers were of extremely high standards, with rapid acceleration and high cruising speeds, with electric and air wheel braking). Such trams as these were found in Blackpool, Sheffield, Leeds, Glasgow, Aberdeen, Liverpool.
After the 1939–1945 conflict, James Callaghan (Labour) was Parliamentary Secretary to the Minstry of Transport in 1947. It was Labour party policy through the British Transport Commission actively to discourage and condemn renewal of tramways and tramcars - in other words, systems that required heavy initial investment on fixed equipment and investment in life-expired equipment.
This use of fixed equipment was frowned upon because it did not fit in with the Labour party’s policy of Post-War Urban renewal and redevelopment, as town and city centres (where the heaviest traffic for these systems was generally found in the form of short stage passengers) would be rebuilt and city centre populations dispersed to new housing schemes on the outskirts of cities and towns. The bus was a more of a “quick fix” than a tram system. [in re. the dispersal of population, George Orwell had noted that such developments had picked up people and placed them several miles from their work, and this came at great cost to the worker].
There are letters existing in Local Authority archives from Callaghan that show that the Labour Party position was "not supportive of systems that used fixed equipment" which more or less sealed the fate of the remaining tramway systems.
Incidentally, some of the loans which were taken out to pay for tramcar development and new trams immediately pre- and post-war were only paid off finally in the 1990s.
In addition, the Nationalisation of Electricity Generation meant that there was no longer any real possibility that local authorities could generate their own electricity and sell it to the local tramways at a favourable price. The running of trams (and later trolleybuses) became expensive and the peak years for post-war public transport in most of the UK were over by 1956.
