£3 bus fare – and what next?

The government will increase the capped bus fare from £2 to £3 from the end of the year. Greg Marsden, Professor of Transport Governance, discusses the wider implications of the change.

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 as part of a package of support to the bus industry struggling to recover post-Covid and to the population in 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, a cut to funding was likely to have to follow and the shift to £3 was 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 attracting new users.

The economic assessment was quite pessimistic, as some bus users 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, 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 the bus, it released money to pay for food or the rising costs of energy.

Given that those reliant on the bus are, on average, less well-off, 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 the government should set.

This will put more people at risk of social exclusion, missed medical appointments or job opportunities.

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 it should get for its money.

The easy headline is the £3 fare, but we should also keep an eye on the total subsidy 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.

Subsidy reductions 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 job opportunities.

It may push people into “forced car ownership” where they have to drive even though they can’t afford to own a car (Mattioli, 2017). All of this has negative social and environmental consequences.

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 don’t want to, it will require ongoing 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 Department for Transport and Ministry of Housing, Communities and Local Government revenue support budgets to see whether there is a long-term plan or we are just muddling through.