Local councils may get control of £400M bus subsidy

19 March 2008

The Department for Transport has held out the prospect of giving local authorities the power to decide how £400M in bus subsidy funding is allocated.

The Association of Transport Co-ordinating Officers (ATCO) has claimed that the draft Local Transport Bill may not improve bus services, if the funding of services is not overhauled. Subsidy is given to operators for the amount of fuel they use, regardless of passenger numbers.

The DfT has now set out ‘options for reform’, stating that the bus service operator grant (BSOG) is ‘poorly targeted’. Paying operators per litre of diesel burned was ‘problematic’, given climate change. However, while ministers are considering making councils responsible for distributing the £700M in concessionary fares support, they have stopped short of recommending full devolution of bus subsidies.

Giving councils control over subsidy money is seen as ‘a potential long-term option’. At this stage, it is only proposed to give those local authorities introducing quality contracts control of the purse strings. This is one option, alongside simply placing a cap on the BSOG handed out, to encourage improved fuel efficiency.

Other options floated by the DfT include increasing the subsidy for ‘low carbon’ buses, and those with the latest technology. Only 0.5% of bus firms currently run low carbon vehicles such as electric-hybrid vehicles; and only one-quarter of the bus fleet outside London has smartcard readers and GPS equipment.

Transport secretary, Ruth Kelly, wanted to ‘link BSOG more effectively with our objectives on the environment, accessibility and congestion’.

The Passenger Transport Executive Group chair, Neil Scales, was ‘pleased to at last see some far-reaching reforms to this outdated and environmentally-indefensible subsidy regime’. He applauded the DfT’s ‘willingness to pursue major reforms’. Alan Hill, chair of ATCO’s bus sub-committee, stressed that ‘while it’s important to reduce carbon emissions, our biggest objective is to increase bus patronage’. But he recognised that deliverability was crucial.

The DfT said a per-passenger payment would be difficult, as it would require the widespread installation of smartcard readers, at a cost of £216M. ATCO’s bus sub-committee would consider the case for giving all councils control over subsidy, whether or not they had established contracts or partnerships.

But Hill’s view was that ‘the more influence we have, the greater confidence we’ll have when telling our residents, “We will improve your bus services.”’ A spokesman for the Confederation of Passenger Transport, welcomed the opportunity to review the subsidy level.

But, he said: ‘I can’t imagine a more unsatisfactory outcome’ than local authorities being given control over subsidy. ‘We need certainty to run a business. Channelling money through councils in an unringfenced way won’t provide that,’ he added.

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