Wednesday’s budget will be seen as an early assessment of Labour’s real priorities in office. The Prime Minister has trailed the increase in the cost of a capped bus fare from £2 to £3 from the end of the year. A 50% hike in fares isn’t a good look – is it really necessary and what are its wider implications. To answer that, the real questions we need to grapple with are:
- What roles do buses play in society and public policy?
- How much support should we give to them and for what outcomes?
- How do we best distribute that support?
Since 1986, outside of London (and more recently Greater Manchester) all buses have been privatised and deregulated such that it is the private bus companies that decide on fares and routes. Local authorities can pay to subsidise services on routes or at times when the commercial operator would not otherwise do so. So, the whole notion of even a £2 fare only dates back to 1st January 2023. It was introduced back then both as apart of a package of support to the bus industry which was struggling to recover post-Covid and to the population as part of a response to the cost of living crisis sparked by the war in Ukraine.
In 2019, the Department for Transport provided £256m of subsidy to concessionary fares and operating costs for the bus sector. In 2023, with provision of the £2 bus fare, this had risen to £957m. The Conservative government’s plans for 2024/25 were to reduce that to £513m. By setting out to match Conservative spending agreements then a cut to funding was likely to have to follow and the shift to £3 an almost inevitable consequence.
Was the £2 fare working? Early evaluations from the Department for Transport suggest that the most intensive users of buses used them more, rather than it attracting new users. The economic assessment was quite pessimistic, as some of the users of the bus would have travelled anyway, even before their fare was lowered to £2. So, as a form of subsidy, it was ‘inefficient’ and so shifting it to £3 would not, in those terms, be such a problem. But this takes us back to the question of what the subsidy was trying to achieve. If it was an environmental policy to try and attract car users then it seems to have had little merit. However, as a policy to help with the cost of living, then how should we count the benefits? If people paid less for using the bus then it released money to pay for food or for the rising costs of home energy. Given that those who are reliant on the bus are, on average, less well off then this might have been a good policy. These secondary benefits do not get captured in the transport statistics.
It is interesting to observe that in the space of 4 years since the pandemic started, we have moved from buses being a private sector concern to one where the government is the setter of most fares (it is possible to charge below the current £2 threshold). The debate used to be about whether the Government should get so involved in a ‘private market’ but now seems to be about what fares is should government set. Given the continued reliance on Government support for electric bus purchase, vehicle operation subsidy, concessionary fares and now wider fares it feels like the pendulum has swung towards the state taking a bolder position in specifying the services that it should get for its money.
The easy headline is the £3 fare, but we should also keep an eye on the total subsidy going in to supporting buses. The Treasury will not have forgotten that the support for buses used to be around a quarter of the 2023 levels and the £3 bus fare will not take us back to those lower levels. Reductions in subsidy will reduce usage which will impact the viability of some services. This will put more people at risk of social exclusion, missed medical appointments or unable to take up some job opportunities. It may push people into “forced car ownership” where they have to drive even though they can’t really afford to own a car (Mattioli, 2017). All of this has negative social and environmental consequences.
So, should we have kept the £2 cap? The answer to this depends on your (or the Chancellor’s) beliefs in the value of buses to a range of social and environmental outcomes. Buses move 3.7bn passengers every year. If we want public transport to play a role in tackling the climate crisis and supporting people who can’t drive, can’t afford to drive or just don’t want to then it will require on-going revenue support and a long-term plan. One that goes beyond whether £3 is the right number. Watch not just for any changes in headline fares, but what happens to the DfT and MCHLG revenue support budgets to see whether there is a long-term plan or we are just muddling through.