Urban Public Transport Funding – Options for Reform

This week, the Urban Transport Group published our report on options for reforming how the Government financially supports local public transport.

Before the pandemic, the National Audit Office identified that the Government spent £1.27bn supporting bus services outside of London. The bulk of this (£762 million) was associated with the English National Concessionary Travel Scheme (ENCTS). Bus Service Operators Grant (BSOG) added another £264m. There is other support from various ad hoc grants, as well as the money local authorities spend on tendered services, bus stations, bus stops, publicity, and the like.

During the pandemic, the Government had to step in to keep bus services operating throughout lockdowns and as society and the economy recovers. This emergency support ceases at the end of March. By then, patronage and revenue will still be below pre-pandemic levels, while operators are experiencing cost increases. Without further support, services cuts and/or increased fares seem inevitable. Because of the social benefits that it brings, in its 2021 bus strategy for England Bus Back Better Government set a goal of returning bus patronage to pre-pandemic levels and then for patronage to grow. This goal is repeated in the Levelling Up White Paper.

Even before the pandemic, it was clear that one of the principal means of operational support for buses – the Bus Service Operators Grant, or BSOG – needed reform. In Bus Back Better the Government committed to consulting on reform options. As our report identifies, the simple option would be to move from a payment based on fuel used to a per bus kilometre payment, but we think that there are other options to consider that could better support Government and local authority goals for buses. As well as making the grant more suited to securing policy aims, these would also fit better with the devolution of powers and funding to the mayoral combined authorities. And there is an opportunity to consider more radical reforms of wrapping up BSOG and ENCTS into a new needs-based grant.

The problem is that reform of the bus grant regime will take time. Time is needed to develop options, consult, and then to implement reform. But the bus industry does not have time. Should emergency support end at the end of March, we expect to see services cut and fares increase. This would be a major setback to the Government’s Bus Back Better and Levelling Up White Paper ambitions. Once services are lost, they are very difficult to get back. What we call for is further emergency funding to create the time for the deliberation needed to develop and then implement a new financial support mechanism.

Read the full report here.