Buses: grants and subsidies

This note summarises the different types of government financial support for bus services in England, including Bus Service Operators’ Grant, the Green Bus Fund and the Better Bus Areas Fund.

Grants and subsidies perform a variety of functions in the bus industry and in the provision of services. Some, like BSOG, effectively subsidise bus travel for everyone because they go to all bus operators, irrespective of the type of service they run (commercial or local authority-supported). Others, like concessionary travel grants, reimburse operators for carrying certain types of passenger at a discounted or nil fare and are administered via local authorities. Finally, at the most fundamental level there are direct subsidies for specific services from local authorities to bus operators; these tend to help people who live in isolated areas or in places which, for one reason or another, are not able to sustain a commercial bus service.

The overall net level of Government subsidy (i.e. public transport support, BSOG and concessionary fare reimbursement) for bus services increased dramatically after 1997, rising from approximately £763,000 in 1997/98 to approximately £2.3 billion in 2011/12. Subsidies account for around 45 per cent of all bus operators’ revenues.

Since the 2010 General Election a combination of cuts to local authority budgets, changes to the administration of concessionary bus travel and reductions to BSOG has raised concerns that the local bus network in England could be severely cut back. While there is some evidence of this, the Government has pointed to improvements in other areas and increased financial support for green buses and bus partnerships. In line with its broader localism agenda it has also announced its intention to devolve some BSOG funding to local authorities and to further reform BSOG in 2014.

Concessionary fares are not dealt with in this note; for further information, see HC Library standard note SN1499.