Factsheets - No.13: Public Subsidy for the Bus Industry

Background

• Buses currently carry nearly 70% of all public transport passengers in the UK
• Public subsidy support for buses in England outside London currently cost about £1,100 million a year
• Public subsidy for rail is broadly similar even though the bus carries about five times the number of passengers and delivers far greater social inclusion benefits
• Since 1990/91 local bus fares have increased by 24% compared to a 11% rise in motoring costs in real terms
• Motoring costs are expected to fall by a further 20% in the next 10 years, while bus fares are likely to increase due to industry cost pressures
• As a result, bus patronage has continued its seemingly inexorable decline
• Over the last decade, local bus use declined by 11%, while rail use increased by 18%
• The bus can deliver patronage growth quicker and more cost effectively than any other mode
• Government has set a target to grow bus patronage by 12% over the next 10 years
• However, this target could easily be met by London growth alone, meaning that growth in the rest of England could still languish even though the overall target could still be met

CfIT's Aims

• CfIT's study looked at how national passenger growth and getting people out of their cars could be encouraged through reform of the subsidy regime for the bus sector
• CfIT wants a subsidy regime that incentivises bus operators and local authorities alike to deliver better commercial services for passengers
• CfIT wants to allow public subsidy to be focussed where it is most needed: to combat social exclusion and encourage modal shift to reduce congestion and pollution

Focus of CfIT Report

Encouraging passenger growth - by providing additional subsidy to the industry, combined with switching operator support from fuel duty rebate to an incentive per passenger carried. These proposals would deliver a 35% increase in bus passengers within seven years. This equates to an extra 850 million passenger journeys a year, or 2.3 million per day.
Boosting modal shift - through quality bus partnerships and park and ride schemes; extra benefits for those in education and operator led initiatives introduced because of incentivised support
• Supporting social inclusion - by extending concessionary fares to people on benefit and those in education, and more support for rural areas
• Contribute to reduced pollution - by removing dis-incentives to more fuel-efficiency and alternative fuel vehicles

Summary of Our Recommendations

Patronage Growth Target

Government should formally adopt a 10% bus patronage growth target for England outside London by 2012 compared with 2002

Measures to Obtain Better Value from Existing Subsidies

1. Incentive regimes should be established to encourage Local Authorities to develop and implement pro-bus strategies. Capital funding should be released from 10 Year Plan depending on progress towards delivery of bus targets

2. Rigorous evaluation frameworks should be established for appraisal of subsidised services

3. Guidelines should be established for fair and consistent application of concession fare compensation payments for operators

4. Challenge funding should be integrated into Local Transport Plan process and resources re-allocated according to policy objectives and subsidised service criteria

5. Government guarantees on tax rebates for alternative fuels should be extended for a period sufficient to incentivise take-up of cleaner technologies

Measures to Further Promote Patronage Growth and Modal Shift

6. Fuel Duty Rebate (FDR) should be replaced by an Incentive Payment per Passenger boarding (IPP); additional funding should be made available for socially necessary services in areas adversely affected by the change; and a formal review process should be established

7. Funding should be made available for additional Park & Ride schemes

8. Under-16 half fare concessions available for all journeys should be introduced where not already provided

9. Further trials should be carried out of dedicated home-to-school bus services aimed at reducing school car runs, to build on those already taking place

Measures to Further Reduce Social Exclusion

10. Funding should be made available for additional bus or alternative services in small towns, rural areas and isolated urban communities where accessibility is limited

11. Half price concession fares should be extended to socially-disadvantaged groups on means-tested benefits

12. Half fare concessions should be introduced, where not already provided, for education journeys for 16-18 year olds and others in full time education

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