Bus Funding

Statement

The following Statement was made in the House of Commons on Monday 18 November.

“With your permission, Madam Deputy Speaker, I will update the House on our plans for better buses in England outside London. When we talk about fixing the foundations of our country, our minds should turn to the nation’s most popular form of public transport, because nothing props up our economy more or better supports our society than the 3.4 billion passenger journeys carried by our buses each year. They are more than just taking people from A to B: they are a lifeline for young and old, in cities or towns, binding us to jobs, public services and opportunity. From trips to the shops or a doctor’s appointment to a job interview, buses shoulder the daily needs of Britain and, in doing so, underpin every single one of our national missions. That is why, come what may, this Government will always back our buses.

Like much of the economy, our inheritance is dire. Some 40 years of failed deregulation have turned many lifeline bus services into liabilities. Passengers are let down as they sometimes wait for hours for buses that do not turn up. Areas are cut off as operators prioritise more viable routes in town centres. Fares continue to rise, and nearly 300 million fewer miles are being driven than in 2010. None of this was inevitable or an accident, but all of it was down to choices—political choices—paving the way for decline and placing a ceiling on the ambitions of many, especially the poorest in society, who catch 10 times more buses than trains. Enough is enough.

This Government have chosen to back our buses and the millions who rely on them every day. In last month’s Budget, we confirmed more than £1 billion in funding to improve services, protect vital routes and keep fares down. Today, we are distributing that funding, which means more than £700 million for local councils to deliver bus service improvement plans and better meet local needs, and a further £243 million for bus operators, including funding a long-standing grant to drive down fares and drive up services.

In many places, this is record investment, and every region and authority in England will benefit, especially areas that are historically underserved, such as rural areas and small towns. Councils such as Leicester, the Isle of Wight, Torbay and Cambridgeshire will see unprecedented levels of funding for services. Routes that are at risk will be saved and passengers will see faster, more reliable journeys. We are also putting money into safer bus stops and more accessible passenger information so that our bus sector is fit for everyone. I am delighted that metro mayors have welcomed the announcement, with city regions such as Greater Manchester, West Yorkshire and Liverpool receiving some of the biggest allocations.

That is not all. We are committing over £150 million to cap bus fares at £3, ensuring that passengers do not face a cliff edge of higher prices from next year, particularly in rural areas where buses are a lifeline. The current fare cap was funded until only 31 December, meaning that without the action we are taking some fares would have risen by 80%. We were not going to let that happen. We are investing to keep fares down, putting money back in people’s pockets, and to provide more frequent services so that more people can get to more places at more times of the day.

Not only are we a pro-investment Government, we are a pro-reform Government. We will not hesitate to overhaul parts of the system that simply are not working for passengers. If that means changes to how we allocate resources, we will make them; if passengers’ needs are not being met, we will prioritise them; and if laws are needed, we will introduce them. We have called time on the way that bus funding has historically been allocated. Previously, the Government made councils compete for funding, wasting resources and delaying decisions. That was overly complicated, led to inconsistent funding, and created uncertainty for authorities and operators. We are taking a fundamentally different approach.

We have allocated funding based on local need, population, the distance that buses travel, and levels of deprivation. That puts fairness at the heart of future funding and ends the postcode lottery for bus services. It ensures taxpayer money goes to the areas that are most in need, where it will have the most impact and where passengers will most benefit. This is the first stop on our journey to support local areas to take back control of services and deliver better buses across the country.

Finally, we will introduce our landmark buses Bill in the coming weeks—the biggest shake-up of the sector for 40 years. This Bill will allow councils across the country to adopt franchising models, as in Greater Manchester and London. That means local leaders taking back control of services, ensuring that routes, fares and timetables are all geared towards local passenger needs. This model works. It has been over a year since buses were brought under public control in Greater Manchester. Since then, passenger numbers have grown, reliability has improved, and new 24/7 services have been introduced. Roads are now managed in a way that works for buses, meaning that unexpected congestion or unplanned roadworks do not leave passengers stranded. That is what power in local hands looks like. It is why we are simplifying the franchise process to ensure that local leaders waste no time in driving improvements for passengers. We will also remove the ideological ban on publicly owned bus companies so that our buses can finally be run for the public, by the public.

I have said it before, and I will say it again: when it comes to our public transport, we are moving fast and fixing things. After years of decline, we are putting passengers back at the heart of our buses through record levels of investment and generational reform. Last month’s Budget sent the signal that, even in difficult economic times, this Government will never take our buses for granted, because we know that investing in buses means investing in people, in communities and in the future growth of our country. Better buses are just a few stops away. I commend this Statement to the House”.

15:47:00

My Lords, another week and another highly operatic Statement from the person in the other place who wishes to be known as the passenger-in-chief. But, unlike the Statement we had last week, this one has some substance. Its purpose is to announce how the Government are going to spend on buses the approximately £1 billion allocated for that purpose by the Chancellor in her Budget a few weeks ago. About £750 million is to be given to local authorities and the other quarter to bus companies. There is an important methodological change in this that I would like to explore with the Minister, which is that the Secretary of State announced that previously councils had to compete for funding—wasting resources and delaying decisions. In making that statement she puts her finger on something that has come to the attention of quite a number of noble Lords, not least those who are members of the Built Environment Select Committee of your Lordships’ House, which I have the privilege to chair, which is that the widespread use of bidding by local authorities is time consuming, costs money and is particularly wasteful for local authorities that bid and receive nothing at the end of the process. Perhaps there is a case for something being done about this—perhaps. I also understand that Governments want to know that the money they are allocating will go to good projects that stand up to scrutiny, so there is a balance to be struck. None the less, the right honourable Lady has made a point of interest. She has said that funding will be allocated based on a “formula”, saying: “We are taking a fundamentally different approach. We have allocated funding based on local need, population, the distance that buses travel, and levels of deprivation”.—[Official Report, Commons, 18/11/24; col. 43.] I know what a formula looks like: it has pluses and minuses, multipliers and weightings, and it shows how money is to be allocated according to certain criteria. I would love to explore this formula and know more about it, but it has not been published. That is the most astonishing thing. We do not know what the formula is or how these criteria have been melded together to produce an outcome. Indeed, what do these criteria mean? Local needs—how many Governments are going to allocate money that is not related to local needs? Population—does that mean that areas with higher populations get more or less money? If it means they get more money, what is that saying to rural areas, which are very dependent on buses? The distance that buses travel—what does that mean? Again, in rural areas buses may travel very long distances. Does that mean that they get more money or less because it is the shorter distances that are being rewarded? Levels of deprivation—I think we have a reasonable idea what that means. What does it all mean? Was it consulted on? I think we should know. Local authorities might have wanted to have a say in how this money was allocated and how a formula was developed. Was an independent assessment made of what its effects and impacts would be? Were alternatives considered by Department for Transport officials before this particular formula was alighted on? How crucially does it relate to what the Deputy Prime Minister might do when she comes to allocate money to local authorities? It is very likely that she too will say that the bidding system is discredited and she wants to move to a more formulaic allocation of funding. As I say, there is an argument for doing that but it depends fundamentally on the credibility of the formula used, which means that it has to be exposed to light. Finally, I do not mean to be rude about anybody, certainly not the Minister or his Government, and I also know that £1 billion is just loose change for a Government who are determined to spend their way to growth. But we on this side of the House would still like to be assured about a formula that nobody can see, which depends on criteria that need to be interpreted and are not in any sense plain, and which could simply be a way of spending money to reward your mates. Is that what is going on here? There is every reason to think that it might be.

My Lords, I am pleased to welcome the Statement made by the Secretary of State in the other place. Bus services outside London have been allowed to atrophy and die for far too long. They are vital to society and our economy. They are used by the poorest, the oldest and the youngest. Although we love to talk about trains here, buses are the most used form of public transport. The funding information in the Statement, as far as it goes, is welcome, as are the commitments to reform. The situation with buses has been too complex, too fragmented, too short-term and too competitive. In practice, the competition has led to money going to, in effect, the councils that are best at filling in the forms rather than those most in need. Courtesy of the Campaign for Better Transport, I have some illustrative statistics. Why should Swindon get £3.98 per head for buses and Reading, just down the road and not dissimilar in size, get £168.68 per head? No formula would explain that. Of course, Reading has extremely good buses as a result of extremely good funding. There are currently six different funding pots. We need one single integrated fund with “long-term” written all over it, so can the Minister explain in more detail exactly how the current six funds will be amalgamated and repurposed? I turn to the £3 bus fare cap and its impact. It is, of course, effectively a 50% fare increase in an industry that has already seen fares rise by 59% since 2015, so it will have a huge impact. Yet there were reports at the weekend that the Secretary of State had said that maybe it would be linked in some way to the rate of inflation. Will the £3 cap be applied in the same way as the £2 cap, or will it be amended in some way? What analysis have the Government made to lead them to abandon the £2 cap, which appeared to be working well? In many areas, particularly rural areas, demand-responsive and Dial-a-Ride services are vital. I ask the Minister, because this is not mentioned in the Statement: what will the Government do to encourage these services to ensure proper co-ordination between local authorities, bus operators and other bodies, such as NHS trusts, so that rural areas get a better deal from the providers at various levels in their area and a structure that local people can rely on?

I thank the noble Lord, Lord Moylan, and the noble Baroness, Lady Randerson, for their comments on this Statement, which was made by my right honourable friend the Secretary of State for Transport in the other place yesterday. I turn first to the noble Lord’s comments. He correctly identifies a methodological change in the way this money has been allocated. The formula used is simple but, the Government think, fair. It relates equally, in thirds, to the level of population, so the greater the population of the local transport authority the more money; to bus mileage, so the greater the bus mileage, the more money; and to the index of multiple deprivation, published by the Ministry of Housing, Communities and Local Government, which is the official measure of relative deprivation in England. That is a much fairer method of allocating money for a service that, as the noble Baroness said, is disproportionately used by people on lower incomes, women, the young and old, and is the mainstay of public transport in Great Britain. The Government are entitled to make decisions about how they wish to spend money, but the point I most want to make is that the previous competitive system has all the disbenefits the noble Lord referred to—the time spent bidding, the costs, the use of consultants and the uncertain outcomes—whereas this method provides a much more certain way of allocating this money and is much fairer across the whole of England. Of course this money is not loose change; it is a substantial amount for a vital public service in Britain, but use of this formula is a much fairer way of allocating this money. In fact, a competition arbitrated by nameless officials on criteria that, frankly, have not been clear to the local authorities in the past is a much more likely source of rewarding “your mates”, as he refers to them, than this formula. The noble Baroness, Lady Randerson, welcomed the Statement, and I thank her for that. There are, of course, differences in the allocations to local transport authorities, and I can probably account afterwards for the difference between Swindon and Reading. I will attempt to do so to her in due course. The allocations have been allocated by this formula and represent, in the Government’s view, a fair method of distributing a considerable amount of money. While there are some headings in the allocation—capital, revenue, some money for helping source officer help and so on—local authorities that receive the money are free to use it in the way they want. The principle the Government are delighted to have is that the capital sums can be used for new vehicles, bus stops, information systems or bus stations and the revenue can either support fares initiatives, in particular for the young—some combined authorities have kept the maximum fare at £2—or support services to enable a fair distribution of bus mileage throughout their towns and areas. The reference the noble Baroness made to the £3 fare and the 50% fare increase is, of course, not so. Most bus journeys are short and are carried out in urban areas. With the £3 maximum, there are many fares that will not go up at all. The reference to inflation has been made by the Government to ensure that fares under £3 rise only by the rate of inflation, whereas the previous £2 limit encouraged some operators to put up their fares by far more than inflation to the £2 limit. The analysis of the effect of the maximum bus fare will be published by the department in due course. Finally, the noble Baroness referred to demand-responsive transport and dial-a-ride. Local transport authorities that receive this money are able to spend it on bus services in the way that they want, so they are able to support demand-responsive services if those are the right way of dealing with their area. The principle is that local transport authorities know much better than government how the money is best spent. Therefore, this money has been distributed with great freedom to allow them to spend it in the right way for their area, to create economic growth and to support jobs and housing in the way that local transport does.

16:03:00

My Lords, the other day, I referred to the Harrogate Bus Company, and I think the Minister agreed with me that it is a good example of a company that has proceeded with environmental approaches, particularly the electrification of its fleet, and done some inspiring things. The formula that my noble friend Lord Moylan referred to seems to be rather rough and ready. Will the Minister confirm to me that, when we have an innovative approach taken by a bus company such as Harrogate, that in itself will result in some reward in terms of funding arrangements: some kind of compensation or at least some kind of acknowledgement of these initiatives, which so are important in the bus industry?

The noble Lord is right to refer to the innovation by the Harrogate Bus Company. There are two ways in which this formula, which I think is serviceable rather than rough and ready, works in operators’ favour. One is that it is proportionate to bus mileage, so places in which the present bus operator has done well will have more bus mileage, which is a good measure of saying roughly how much bus service there is. The other is that local authorities will get a capital allocation that can be and normally is used to support the purchase of vehicles. This formula works for good bus companies as it works for good local authorities, and I think it will be self-evident that the innovations that the noble Lord referred to will be replicated elsewhere.

My Lords, in a diocese such as mine, which covers Bedfordshire and Hertfordshire, where many people look outside the county for services—for example, many people in Bedfordshire go to hospitals in and work in Milton Keynes, in another county—lack of integration of the bus services is causing quite a lot of problems. How is the new system going to lead to more and better integration? Secondly, what consideration has been given to finding, I hope, free bus passes for school children, since our towns are absolutely gridlocked at rush hour, at a time when we need children to get on the buses, get exercise and learn independence rather than being driven one by one in cars causing huge jams?

I thank the right reverend Prelate for his question. The question of cross-border bus services is not altered, at least by this settlement, compared with previous settlements. But it is a question that the Government intend to address through the wider buses Bill, which will come before this House shortly. To some extent, you rely on local transport authorities to collaborate with each other, because the movement of passengers is quite often across local authority boundaries. We will have something more to say about that in due course. The congestion caused by children travelling to school is a very common phenomenon in towns and cities throughout Great Britain. It is open to local transport authorities with the revenue element of this funding to devise schemes for cheaper bus fares for children and the Government will, of course, encourage them to do so, providing it is the right thing for their local area.

My Lords, on this side of the House I am sure there is a very warm welcome for these proposals. Under the previous Government, when Boris Johnson was Prime Minister, a White Paper was produced which, if I remember correctly, was called Bus Back Better. At the time, I was a Cumbria county councillor and we had to put forward plans to see whether the Department for Transport would give us the money. We did not get any money, despite the problems of rural bus services in such a widespread geographical area as Cumbria. Frankly, the reason we did not get any money was that Cumbria was run by a Labour and Liberal Democrat joint administration. It was politics that decided it, not any attempt at objectivity. Does the Minister agree that a far better system is one where there is some rough and ready objectivity for some years ahead, which gives transport authorities an opportunity to plan?

I very much agree with my noble friend that a serviceable formula for the allocation of this money is a better thing to do, and to allocate some money to every local transport authority in England. The most damaging feature of all to bus services—which is a feature of the previous methodology of funding—is to have some money one year and no money the next. What happens in those circumstances is that supported services are withdrawn, the passengers disappear—either they cannot travel or they find some other method of travel—and it becomes much harder to re-establish those services. I will not bore the House with details, but I can find many examples across England of perfectly good services forced to be withdrawn because of the inadequate distribution of the previous funding. They are far more difficult to re-establish when funding turns up. The best thing you can have with a bus service is certainty of service over a long time.

My Lords, I go back to the question of increasing the cap to £3. In rural areas, such as I live, for a couple going shopping—for example, in Lincoln—several times a week, the cost would be quite challenging. Would the Minister reconsider limiting the uplift in the cap to, say, £2.50? It is a challenge for people in low-salary areas.

The raising of the cap from £2 to £3 was entirely necessary because of the fiscal position that this Government inherited. A cap of £3 is actually a pretty good cap in rural areas with long bus journeys compared with the previous fare structures. We know that many fares have gone down by 60%, 70% or 80% for passengers. Of course, there will be some who have to pay more under this system. The subject in question—the distribution of local bus funding for the next year—is designed to make sure that there are services to travel on. It is not just bus fares that matter. What matters equally is that there are buses to travel on. This distribution will ensure that there are buses across the whole of England, in local transport authority areas, to do so.

My Lords, I welcome the Statement and the fact that we are talking about buses in the House, but in some parts of our country, including rural areas, bus services have not only been reduced but have vanished completely. What special support will the Government be providing to help rural authorities rebuild their bus services, including an integrated fund to support the switch to zero-emission buses? Can the Minister clarify, following the discussion we have just had, over what period this funding is being provided? As he has already outlined, single-year funding settlements and stop-start pots of funding will not reinvigorate our bus services across the country.

The funding provided by what is effectively a £1 billion settlement will allow local transport authorities in all areas to spend this money in the best possible way. I am very sympathetic to rural areas, where services have disappeared in the past, and I have explained some of the reasons why recently that might be the case. There is capital funding in this settlement for zero-emission vehicles, as there should be. It is for one year, but the spending review in the spring will no doubt give direction for future years. The equitable distribution of this through this serviceable formula is much more likely to result in service patterns across both rural and urban areas, which will be sustainable into the future.

My Lords, on 5 November, London bus drivers marched on Westminster to complain about their working conditions, including that most routes now have toilet facilities only at one end, meaning that drivers have three hours between toilet breaks, that the headway driving system sometimes requires drivers to break the speed limit, and that conditions within cabs can become unbearably hot or cold. In all this talk about funding, could the Minister assure us that drivers will not be forgotten?

The noble Lord might know that, for some years I was responsible for the London bus service. I am not any longer; the Mayor of London is. I would question some of the things the noble Lord has asserted, simply because I know through prior knowledge that we spent an awful lot of time and money providing far more toilet facilities for bus drivers in London than anybody had done before. I would question whether any responsible operator licensed by the traffic commissioners would commission schedules which expected buses to exceed the speed limit. What I would say to the noble Lord is that it is very important that bus drivers are paid properly and looked after properly, and that their scheduled and actual hours comply with the law. To that end, the Driver and Vehicle Standards Agency will inspect those operations, whether in London or elsewhere. The traffic commissioners will take action against operators that do not comply with the legislation in respect of the operation of urban bus services.

My Lords, reliability of services is as important as fare levels to bus users. Many folk in my patch in west Yorkshire tell me that they were at risk of losing their jobs because they could not get to work on time because the bus failed to turn up. I can confirm that. I had decided to travel from my hometown to Leeds on the bus, and the first two buses were cancelled going, and, on the way back, three were cancelled. This was in the middle of a Friday afternoon. Reliability is absolutely key to encouraging people to use buses. What will this new funding formula do to penalise the providers of bus services if they cannot provide a reliable service?

The reliability of bus services is terribly important to the people who use them and to the local economies of the places where they operate. This funding formula of itself will not affect the reliability of services, other than to give local authorities more resources for the officers and skills to be able to manage local bus services that they procure. The real penalty for unreliable operation of bus services outside London lies, currently at least, with the Driver and Vehicle Standards Agency and the traffic commissioners, which can bring operators in front of them when they fail to operate the services that they have registered. One reason why conurbations, led by the Mayor of Greater Manchester, are looking at franchising bus services is so that they can have greater control. In those cases where operations are franchised, there is a different way in which to penalise operators. In fact, one of the successes in Manchester has been a much higher level of reliability, not only because there is more direct control over the provision of the bus service but because the Mayor of Greater Manchester is taking a much stronger interest than previously in the ability of the road network to enable reliable bus operation. I would expect that to be replicated in other combined authority areas that choose to go down the route of bus franchising.

My Lords, I congratulate my noble friend on this Statement. It is not before time, and it is really good that we have a much longer-term commitment to the provision of cost-effective buses—which is, after all, what a very large proportion of the population need for their everyday use. As my noble friend said, buses are needed for going to work, school, college and so on, and I am sure that this will be very welcome around the country. There is one group of conurbations that cannot be helped by this bus Statement, because there are no roads. I refer to the Isle of Wight, which does not have any roads to the mainland, and which has a population of over 100,000. Where I live, in the Isles of Scilly, the population is a bit smaller, at 2,500, but it certainly does not have any roads to the mainland. The people who live in those places still need access for everyday use—for visits to hospitals, schools and so on. Would my noble friend consider meeting some of the people involved to see whether there is not a similar formula that could be adapted for the sea routes, rather than the air routes, to give the residents of these island groups a fairer bite of the cherry, as is now going to be delivered to the rest of the country?

My noble friend has raised this subject before, certainly with respect to the Isles of Scilly, and I am also familiar with the issues raised by the two Members of Parliament there are now for the Isle of Wight at a recent meeting with my right honourable friend the Secretary of State for Transport and me. Of course, there is a very comprehensive bus service on the Isle of Wight and it will be supported by payments to the local transport authority there. I am not sure whether the rather smaller bus service on the Isles of Scilly is supported in that manner, but if the noble Lord would like me to find out I will do so. Ferry services are very different. I know that the issues with the Isle of Wight, in particular, have been raised with the Secretary of State for Transport, and I will write to the noble Lord on where we are with that.