Bus Funding

Baroness Vere of Norbiton Excerpts

Wednesday 17th May 2023 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Transport (Baroness Vere of Norbiton) (Con)]

My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my honourable friend the Parliamentary Under-Secretary of State. The Statement is as follows:

“With permission, Madam Deputy Speaker, I would like to make a Statement on the steps that the Government are taking to ensure that bus travel remains accessible and affordable for everyone, while bearing down on the cost of living.

Let me start by summarising the situation as we find it. People across the country are facing massive cost of living pressures following Russia’s illegal invasion of Ukraine. That is why we have a commitment to halve inflation this year to ease the cost of living and give people greater financial security. For the bus sector, this comes on the back of a global pandemic that saw passenger numbers drop as low as 10% of their pre-pandemic levels. However, bus journeys are now recovering to around 90% of pre-pandemic levels outside of London. Taking the bus remains the most popular form of public transport, and millions of people rely on these vital services every day.

Local bus networks provide great access to work, education, and medical appointments, driving economic growth right across the country. They can be a lifeline for those for whom travelling by car or other forms of transport is simply not possible. That is why over the last three years we have invested over £3 billion to support and improve bus services in England outside of London. That level of investment was a sign of the times, but today we need to move out from underneath the shadow of Covid-19, where the sudden absence of passengers made it necessary for the Government to step in, first through the Covid-19 bus service support grant, and later through the bus recovery grant.

Of course, we face a challenge to return the network to its pre-pandemic footing while confronting fundamental changes to travel patterns, but buses remain a critical part of our transport infrastructure for many people, especially outside London in suburban and rural areas. Billions in government funding has been made available to keep fares down and keep services up and running. Bus routes have been kept alive which may have proven so uneconomic that they risked being scrapped altogether. Without them, whole communities would have lost out, risking people becoming disconnected, especially older and more vulnerable people. While we have seen overall patronage recover to around 90% of pre-pandemic levels, concessionary fares continue to lag significantly behind. We recognise that we can maximise opportunities to bring concessionary fares passengers back to the bus, and I will return to that point later.

Supporting bus services at their lowest ebb was the right thing to do. However, if the public purse alone props up bus services, that would not be a funding model; it would just be a failing business. It is not the business of this Government to allow our buses to fail. We must reform bus funding in the long term, and we will work with the sector to better understand its impact before moving ahead with any implementation. We must adapt to new levels of patronage, acknowledge that these are extremely challenging financial circumstances and balance the needs of taxpayers, the travelling public, operators and local authorities. All parts of the sector have their role to play.

The Government will play their part. Today I can announce a long-term approach to protect bus services, keep travel affordable and support the bus sector’s long-term recovery. I can announce that the Government will provide an additional £300 million over the next two years to protect vital routes until April 2025: £150 million between June 2023 and April 2024; and another £150 million between April 2024 and April 2025.

Some £160 million of that funding will be earmarked for local transport authorities through the new bus service improvement plan plus—a mechanism to improve bus services while empowering local authorities to make the call on how services are planned and delivered. It comes in addition to the existing £1 billion of funding from the national bus strategy that has already been allocated. It will be focused on communities that did not previously benefit from BSIP allocations.

In addition to this money, a further £140 million will be provided to operators through the ‘bus service operator grant plus’ mechanism, supporting them with the services they run, a package that means passengers can continue to rely on their local bus to get around. Alongside it, we will consult with operators and local authorities on measures to modernise and future-proof bus funding for the longer term. This is part of the Government’s vision to improve connectivity through the bus services that this country relies upon.

This funding—and our bus vision—will grow the economy and create better-paid jobs and opportunity in every part of the country. But, at a time when the cost of living is a challenge for many, we also recognise that price is a key barrier to growth. The more affordable travel is, the more likely passengers are to get on board. We understand that every penny counts.

This Government stepped up during the pandemic, with support for businesses and their workers with low-cost loans and—most vitally—the furlough scheme. Following Russia’s illegal invasion of Ukraine and the knock-on inflation caused by the energy price shock, we have stepped up again. We have delivered an energy package of over £90 billion—literally paying half the energy bills of households across the country, with extra support for the most vulnerable. We will halve inflation this year to ease the cost of living pressures and give people financial security. We will grow the economy, creating better-paid jobs and opportunity right across the country. In transport, we also understand the pressure on people’s finances. That is why we cut fuel duty by 5p per litre, kept train fare increases significantly below inflation, and introduced the ‘Get Around for £2’ bus scheme nationwide and provided the funding for local authorities in Greater Manchester, West Yorkshire and elsewhere to do the same.

The nationwide scheme was initially for three months, until 31 March this year. It was then extended by this Government until 30 June. Today, I can also inform the House that the Government will provide up to a further £200 million to continue capping single bus fares at £2 in England, outside London, until 31 October 2023. After this, we will continue to support bus passengers and the cost of living and we will replace this with a £2.50 fare cap until 30 November 2024, when the Government will review its effectiveness and future bus fares.

Since the £2 cap was introduced, it has saved passengers millions of pounds, boosted businesses and put bums on bus seats right across the country. This decision builds on the Government’s Help for Households initiative and supports everyone through the increased cost of living, especially those on lower incomes, who take nearly three times as many bus trips as those on higher incomes. It puts money back into people’s pockets and keeps them connected with key local services. It encourages millions of passengers to get back on the bus by knocking close to a third off the average single fare—and more for longer journeys. Taking this forward, my officials will work with the sector to confirm operators’ participation in the scheme. We will also undertake a review of bus fares at the end of November 2024 to support the sector in moving to a sustainable footing.

What I have shared with the House today is part of the largest government investment in bus services for a generation. It exceeds our Bus Back Better commitments by half a billion pounds, providing certainty to industry, securing value for the taxpayer and protecting access to vital services, delivering our priority to grow the economy and helping people with the cost of living. All the while, we will work with the sector to reform bus funding in the long term, and we will work towards affordable and reliable buses for everyone, everywhere, all at once. That is what the travelling public deserves. That is this Government’s ambition, and I commend this Statement to the House.”

My Lords, that concludes the Statement.

--- Later in debate ---

[Lord Snape (Lab)]

My Lords—

[Baroness Vere of Norbiton (Con)]

Perhaps I might first respond to the noble Baronesses. I am sure that the noble Lord is desperate to come in; I await his question with interest.

I could have stood before your Lordships’ House today with the moon on a stick and the noble Baroness opposite would still not have been happy. The noble Baronesses have been calling for a long-term bus funding plan, and this is it. It is not in any way a cut to funding; you cannot cut emergency funding. That was emergency funding and then recovery funding; this is something different. This is more money than buses have had for a generation. It is never going to be enough—£500 million for buses is fantastic news, yet the noble Baroness could not bring herself to be even the slightest bit happy about what it will do for our bus services.

I have heard rumours of what Labour is going to do about powers for local transport authorities, but I do not really understand it, because local transport authorities already have the power to put bus services in place. I am sure that the noble Baroness knows that. Perhaps when these plans come out, they will be pretty much what we have now.

I need to explain the situation to the noble Baroness. There is £300 million in total—£160 million plus £140 million, so roughly half and half. Half will go to local transport authorities, and they will be able to decide which services to tender. They have the power; they have always had the power. Remember, a bus operator has to tell the local transport authority in a confidential period of 28 days before it notifies the traffic commissioners that it intends to take a route away. At that point, the local transport authority can put it out to tender. We have literally given them the money to do that, but the noble Baroness cannot welcome that.

I do not understand what the Labour Party is going to do or what more powers local transport authorities could possibly have, unless Labour wants to renationalise all the buses as well. Perhaps that is where the noble Baroness thinks things will end up. I look forward to hearing from the Labour Front Bench what its plans are because, at the moment, it is completely unclear. That goes to her comments about unfettered powers that bus operators have to slash routes. That is just not true. As I said, local transport authorities can tender them. If the worst comes to the worst and their enhanced partnership does not work—as the noble Baroness knows, they can get into an enhanced partnership, working with the operators and the local transport authority; there is lots of power in that relationship between the two, to flesh out what the network should look like—they can franchise, as in Manchester. It is up to them. They have the powers to do so. But again, apparently all the power sits with the bus operators. I think they would probably say that it does not.

I note what the noble Baroness says about public ownership of some of the bus companies, and the ones that are left are very good. I think Reading is very good and Brighton is very good, but of course there have been plenty that fell by the wayside because they were not very good. There has already been a massive weeding out of the wheat from the chaff when it comes to publicly owned bus operators, so I do not think that is the silver bullet either.

I turn to the comments made by the noble Baroness, Lady Randerson, who sounded a little bit more chipper about the funding—but, again, not wholly. If I am able to answer some of her questions, perhaps she will feel a bit more positive. The money that is going to the local transport authorities will be for places that missed out on BSIP funding the first time around or those that got very low per-capita spend. We feel that it was not quite fair, and we have more money, so they should have it. There is actually a list about where the money is going, and I will see if I can send that to all noble Lords who are speaking in today’s debate. That list will be very helpful. We have allocated 50% of the funding on tendered milage, weighted by metrics of deprivation and car ownership, and 50% on population, weighted by delivery confidence. That is how we did it. We have put in deprivation and car ownership, to make sure that it is going to places that need it most.

The noble Baroness talked about capability and capacity of local transport authorities. Again, when I was buses Minister, we focused enormously on this. We feel it is so important that they have the capability to build their own networks, which is why we gave them tens of millions of pounds of funding, specifically for developing the BSIPs. It is not the case that, if they did not have a good system and they did not have the capability and capacity, they necessarily did not get BSIP funding; we did give them the funding. There are councils that are run by other political parties to my own that choose not to spend a single penny on tendered services, and that is very disappointing.

We continue to provide capability and capacity funding to local transport authorities specifically so they can put their enhanced partnerships in place. I hope that that money and that capability and capacity funding will work together to help enhance and protect those vulnerable tendered services.

An evaluation of the £2 fare cap has been published today, so the noble Baroness might want to have a look at that. There are high levels of awareness, with seven in 10 survey respondents being aware of the scheme and one-third of them saying that they felt that the scheme was having a positive impact on their disposable income—all sorts of different things. It is too early to decide whether there is a change in patronage solely down to the fare. Obviously, you have to disaggregate other elements. Other factors may be involved as well but, again, we are keeping a really close eye on that. But, overall, I think that the Get Around for £2 scheme has been hugely positive. I am really pleased that we can talk about it and extend it for quite a long time.

I turn to the issue of zero-emission buses, which is absolutely critical. The Government remain committed to supporting the introduction of 4,000 zero-emission buses. Since February 2020, so far, an estimated 3,452 zero-emission buses have been funded across the UK. In this Parliament, we have awarded £345 million of dedicated funding for zero-emission buses in England. I am aware that the noble Baroness’s zero-emission bus award fell through because the operator was not willing to put up the amount—and that is entirely up to the operator. But that money will go back into the pot, and other operators in different parts of the country will be able to make use of that. We also understand that the award of the grant kicks off a process that necessarily has to go through public procurement rules and so on, and those things take time. It is the case that we have to award the contract, build the bus and get it on the road—so, yes, it will take some time for those particular buses to get on the road, but they are coming. That is a very positive thing, and it is also a very positive thing for our bus manufacturers.

I remain positive about zero-emission buses. I believe that the cost of the buses is falling and that, sometime soon, bus operators may actually choose zero-emission buses without government support, because we will see total cost of ownership about the same. So I think that things are moving in the right direction, and I really welcome that.

[Lord Snape (Lab)]

My Lords, as the former chairman of a major bus operator, I tell the Minister that any financial support for the bus industry is more than welcome. But her announcement today bears no resemblance to the promises made two Prime Ministers ago under the Bus Back Better project. The fact is that, no matter who runs the buses, the question of finance is always going to be there.

I address my remarks to my own Front Bench. There is an apparent belief that all we need to do to create a better bus service across this country is to give powers back to local authorities. Without proper finance, local authorities, which already struggle to provide the services that they have to provide now, will struggle even further.

Can I tell the Minister that the price of the average double-decker is currently around £250,000? A new electric bus costs around £400,000. The short-termism inherent in this package will not incentivise the bus industry to invest over the long term in fleets costing the sort of money that we are talking about here. Although the Minister made the best of a bad job, much of the finance that she has announced today is in fact short-term and not long-term. Without proper long-term financing, the bus industry will continue to struggle.

I hope that as somebody who helped set up what was a rather successful bus partnership between the private sector, in which I worked at the time, and the West Midlands Combined Authority I can say to the Minister, without causing any offence, that, again, finance was the key. We could get that sort of partnership and get successful bus services across the West Midlands provided that we got proper government support. So far, this package does not demonstrate proper long-term support for the bus industry. I have to say to the Minister —I repeat—that, welcome though it is, we need proper long-term planning if the bus industry is to invest properly in the vehicles of the future.

[Baroness Vere of Norbiton (Con)]

I have to remind noble Lords that this is not the only money the bus sector gets; there are many other streams that should be considered. I think there is just over £1 billion in concessions; there is the existing money, £260 million, from BSOG; and obviously there is some money in the block grant. All in all, we have to be realistic about what the bus sector is going to look like in the future. It will have to adjust to new travel patterns, but there is the combination of this new funding and the existing funding, which will stay in place, and we have committed to having conversations with the operators and local authorities about longer-term measures, which will include a reform of BSOG. I would not be surprised if that reform looked very carefully at emissions from buses. One could put that in place, although an element of BSOG is already based on zero-emission buses.

All in all, I am satisfied that the sector is getting the funding it needs, and we need to work as hard as we possibly can with the operators and local transport authorities to encourage people back to buses, including those who use concessionary fares. I believe that if we do that, if we use the capital spending from the BSIP effectively, and if we have bus lanes and bus priority in the right sorts of places to improve the passenger experience, that combination of input is really good. Sitting there and saying, “Just throw money at the problem” is not it. We have thrown money at the problem. We have carefully considered how much money it needs, and we believe that this is a good future for the bus service.

[Lord Young of Cookham (Con)]

My Lords, I think that so far, the House may have been less than generous to my noble friend in the welcome they have given to her announcement. At a time of enormous pressure on public expenditure, an extra £300 million has been found to help the bus industry, and some funds going towards the caps. But I just pick up a point made by the noble Lord, Lord Snape. At the beginning of my noble friend’s announcement, she said:

“Today I can announce a long-term approach to protect bus services”.


But then, towards the end, she said that the cap would be reviewed at 30 November next year and said:

“We will also undertake a review of bus fares at the end of November to support the sector”.


Can I press my noble friend a bit more on that review? November next year may be a sensitive political time and I think the bus industry and passengers will want to know before the end of November what the outcome of that review is going to be. Will my noble friend say a little more about the review, which will have to be announced before the end of November? What is the timing of it and what is the consultation exercise that will be involved in identifying the outcome of that review? I assume it will involve consultation with local authorities, passenger representatives and operators, so a little more on the timing of that review would be very helpful.

[Baroness Vere of Norbiton (Con)]

I thank my noble friend for his welcome of this funding, this additional £500 million for the sector. Yes, he is right: November next year may well be a very sensitive political time. I suspect that the review will happen before the November period. One thing that needs to happen prior to the review kicking off is the completion of various reforms. Reforms to BSOG will be key. We will also need to see how travel patterns have been impacted by the fare cap. Again, we will be getting data back from operators as to the implications and the price elasticity of demand when it comes to fares, and whether they have encouraged people back on. So, I will write with further information if I have it, but I suspect the details of the review will become clearer in about spring next year, by which time we will have brought in some of the reforms we plan to undertake later this year, particularly around the calculation of concessionary fares reimbursements and BSOG. Those things need time to bed in, so we can see what the landscape looks like.

House adjourned at 7.45 pm.