How buses are funded

The UK Government provides less funding for bus services than other European countries do and UK bus users pay a greater proportion of the cost of running buses. This means that rising bus industry costs (such as wages, fuel and insurance) lead quite directly to higher fares and to bus cuts.

However, there are some sources of public support for bus services.

Funding in county council and unity authority areas

If you are in a county council or unitary authority area, unprofitable bus services will mainly be funded by general revenue funding from council tax and from the Government’s Revenue Support Grant.

This funding is not ring fenced for buses. Your bus service is competing with libraries, children’s services, facilities for the elderly and all of the other things these councils pay for in the ‘other services’ category. In rural areas, the Rural Bus Subsidy Grant can also be used to pay for socially necessary services, but this is only a small pot of money.

Funding in Passenger Transport Authority areas

Passenger Transport Executives (PTEs) – which look after public transport in Passenger Transport Authority areas (the old metropolitan counties) – have more funding available for buses than other transport authorities do. A proportion of the area’s council tax collected is ringfenced for the PTE, which will spend it on transport: buses, rail, light rail, walking and cycling schemes, road building and road maintenance. PTEs also receive extra money from Government to pay for local rail, and they are eligible for a wide range of grants.

A guide to the powers, funding and duties of the PTE/As (PDF, 2.1 MB)

Sources of bus service support (2007/8)

£413 million	Bus Service Operators’ Grant	From the Government directly to bus operators	This is a partial rebate by Government of the fuel duty paid by bus operators providing local bus services. Government provides a fuel duty rebate on 80% of the fuel used by buses. Bus operators pay fuel duty tax on the remaining 20% of their fuel.
£330 million	Revenue Support Grant	From the Government to local authorities	Money spent to subsidise bus routes which are not commercially viable
£56 million	Rural Bus Subsidy Grant	From the Government to local authorities	Money to help provide non-commercial rural services.
£11 million	Challenge and Kickstart	From the Government to local authorities	These are small, specific, irregular funding streams for local authorities
£725 million	Concessionary Fares	From the Government to bus operators, via local authorities	The Government pays to provide free travel for pensioners and disabled people. This is not really a grant for bus services; it is a direct subsidy to the passengers who are entitled to free bus travel. The Government allocates funding to local transport authorities, who are then required to compensate bus operators for the money they spend providing free travel
£650 million			Funding for London’s buses
£300 million			Capital spending by local authorities
Total: £2.48 billion

While £2.5 billion a year may sound a lot, but it’s very little compared to what the Government spends on other kinds of transport. The Government spends £8 billion a year to maintain roads and has a multi-billion-pound road building programme and subsidises aviation by £9 billion a year. It spent £4.5 billion on rail in 2006/7 but plans to cut that investment to around £3 billion a year by 2010/11.

Better Transport

Understand the processes

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