The Luton Dunstable Busway has moved one step closer after the Government agreed to provide 90% of the £85M costs.

The Government will supply a £78M grant, with the remainder of the funds secured from third party contributions – mainly through Section 106 funding. Two years ago, it offered to provide 50% of the cost as grant, but wanted borrowing for the other half.

But last year, the method of funding major schemes changed from part government grant/supported borrowing to direct grant for 90% of the amount – provided councils can provide 10% of the total costs.

The busway will cater for an emerging growth in employment and housing in the area, when it formally opens in 2011.

Run by Bedfordshire County Council and Luton, it is a key component of the councils’ commitment to improve public transport.

Cllr Roy Davis, Luton Borough Council’s cabinet member for regeneration, said: ‘By giving people the option of travelling to work or going to the shops without the hassle of endless traffic jams or the expense of high fuel prices, we can make our roads safer and our environment cleaner.

The busway has proven to be the most cost-effective option on the table, and this decision takes us a step closer to completion. Now we can get to work on building and delivering it.’

The 12km busway will run between Houghton Regis, Dunstable and Luton. The next step is to invite bids from potential private partners to build the project over coming months. ‘Once we get tenders back, then we go for final approval,’ a Luton council spokesman said.