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Who pays for bus services



In the Sussex Express MP and former coalition minister for buses Norman Baker said that the government had provided enough money for the council to fund bus services.  They had wasted money on the Bexhill Link road (approved and part funded by the coalition government) so bus cuts were down to them.  Was he right?  Travelman has been doing some investigating to find out.

 The current deregulated system dates from 1986. In East Sussex the county council is responsible for funding bus services.  Commercial operators can run the services that they think will make money on a commercial basis.  This ability to cherry pick their routes and the lack of competition under the system led the Competition Commission to conclude that many large operators were able to make excessive profits.   The 28 and 29 buses in Lewes in the day are run on a commercial basis

 The council must subsidise any other services that it thinks that are socially necessary. In Lewes almost all other services, including the evening services on the 28 and 29 are subsidised. The council’s sources of income from this are fares, council tax and government funding.  Here are some details about what has happened to funding since the coalition government took office.  Norman Baker will have responsible for or been involved in nearly all of the coalition’s bus initiatives.

 General funding

A high proportion of the money the county council has to spend comes from government funding that it not ring-fenced or allocated to anything specific.  According to a House of Commons briefing paper  government funding to councils has decreased 27%, in real terms since 2010/11. This appears to translate into a cut for East Sussex of around £65 million.  With cuts like this it is not surprising that the county wants to make major cuts across the board.  Perhaps this is the most significant figure.

 Bus service operators Grant

 This grant has been around for many years.  It is a rebate on the amount paid in tax for fuel by bus operators.  Historically all bus operators could claim it. Both Labour and Coalition governments have wanted to reform it. In 2011/2 £450 million was paid in this grant in England.

 The coalition has reduced the amount of the grant by 20%. The current payment rate is the lowest ever percentage since the rebate's inception in the 1960s. The coalition says that this is because it wants to move to a different form of subsidy.

 It has decided to pay grant for subsidised services to councils rather than operators.  This means that the costs of the services of these subsidised operators go up, but council money to subsidise them has gone up by the same amount.

 But (and it’s a big but) the money the councils have got must only be spent on bus services until 2017.  After this it will go the council’s general deficit. You can guess what happens then.


Grant for commercial services continues unless the council has a quality bus contract or is a Better Bus Authority. (See below)

 Payments in future will be based on a formula designed to promote fuel efficiency.

 Quality bus contracts

This is a scheme, introduced by the Labour government and not withdrawn by the coalition, where councils can take control of all bus services, commercial or otherwise, in an area and issue contracts for their provision.  Operators might offer to pay, or might request a subsidy. This is similar the scheme which is currently used in London. In London the number of bus journeys has continued to increase (by 72% since 2001), but outside London bus journeys have decreased by 35% since deregulation.

 In a quality bus contract, profitable routes can be used to subsidise the less profitable ones, so long as they are in the same contract. For example the council might ask bus companies to bid to run the 28 and 29 services plus the suburban services in Lewes, Uckfield and Crowborough.

 There are no quality bus contracts anywhere in England although one is being proposed for Tyneside. The report Greasing the Wheels says that this is because the five point test (paragraph 1.3 of Greasing the Wheels) that councils have to pass makes it far too easy for bus operators to sabotage attempts to set one up.

 East Sussex County council says “as high levels of resources and legal scrutiny are required to implement and manage quality contracts we currently have no plans to pursue this option”.  (which I read as saying “it’s all too much work”, since there would be a saving in reduction of subsidy- although see my comments above)

 Rural Bus Subsidy Grant

As its name suggests this was a grant specifically to support rural buses.  It was a comparatively small amount in national terms (around £58 million) but was reported to make a huge difference in some areas.  It was introduced by the Labour Government in 1998 and abolished as a ring fenced grant by the Coalition, being transferred to non-ring fenced general funding (see above)


Was a form of funding that councils could bid for to subsidise non-commercial services.  It was launched by the Labour Government with an annual spend of £25 million, later reduced to £15 million.  It was abolished by the coalition.

 Sustainable Transport Funding

Introduced by the coalition. Authorities can bid for central government to promote more sustainable transport. The amount of money are comparatively small.  Successful bids involving buses in East Sussex are:

  • Integrated ticketing and WiFi on rural bus services, as part of the South Downs, East Sussex etc. recent funding bid (I.e there will not be any buses, but if there were they would have WiFi)

  • Funding of various Sunday services in the South Downs area on an experimental basis.

  • Extension of electronic bus signing to various towns, (but for Brighton and Hove buses only, not county subsidised services)

 Local Growth Deals

Introduced by the coalition. Councils can bid to fund a range of initiatives, particularly involving road “improvements” but also including some bus improvements. Total spend is difficult to predict because this is a new scheme.

 In East Sussex this has funded a package of bus priority measures primarily along the A22 and A2270 to enable an express bus service to run between Hailsham - Polegate (Rail Station) – Eastbourne and A package of accessibility improvements on all approaches into Eastbourne town centre including public realm improvements and enhancing bus/rail integration.

 Better Bus Areas

Introduced by the coalition.  More funding that councils could bid for. The aim is to replace fuel subsidy with subsidy for long term improvements. According to a government briefing, “examples of projects which could be funded under the BBA include: bus priority schemes; marketing and information schemes (including provision of fares and real - time information, development of smart and/ or multi-operator ticketing schemes; enhancement of bus infrastructure: stops and stations; elimination of pinch points that significantly affect bus punctuality.”

 “This list is not exclusive. It is for the local authority to demonstrate how the mix of measures proposed will promote growth and cut carbon”. A major local bus operator must be on board with the scheme. Bus operators in the area covered would have to give up their bus operator’s grant, which would be passed to the council.

 This is not new money.  The scheme is funded by a reduction of 20% in the Bus service operator’s grant. However the government says that the authorities that adopt this scheme will be better off because they will get extra payments (presumably at the expense of other authorities and bus operators). Because the scheme is new it is not possible to estimate the ultimate spend.  Unlike Bus service operators’ grant, payments can be limited.  The government can decide when it will accept bids and for how much

 The most recent round of bids was for a national total of £50 million.  A maximum of £5 million could be spent on any one scheme.  You can see an example of a bid here.

 No schemes have been authorised in East Sussex under this heading. The council has not bid for any money. The council says “as we have a limited amount of resource available to us our decision as to whether we would submit a bid would be based on the resources that are required to compile the submission in relation to the overall benefit that could be achieved if we were to be successful”  (You can read this as saying either “We are not up to it”  or “The process is so complex and expensive that the game is not worth the candle” or both). They tell me that bids are currently closed.  The scheme would be easy for a major operator to sabotage since

 Green Bus Fund

A fund, set up by the Labour Government and continued by the coalition, to help the provision of new buses that are greener (and to retrofit some older buses)

 So far as I know this has only affected some Brighton and Hove buses.  East Sussex County Council says  “Previous attempts to partner with a commercial bus operator wishing to pursue this type of vehicle investment have not been successful. Submitting bids for future funding would be subject to being able to work in conjunction with a bus operator providing bus services in East Sussex who meets the required funding criteria.”

 The green bus fund has not affected the ability of Brighton buses (using mainly Diesel buses) to run the more environmentally sustainable Big Lemon bus company off the road on the university run by temporarily cutting fares and increasing frequencies.


 Since deregulation buses outside London have been trapped in a vicious circle.  Fares have risen by 35% above inflation since deregulation.  Not surprisingly passenger numbers and services have dropped.  Recent changes have made things even worse.

 We might well ask why East Sussex County Council has decided to spend £56 million of our money on the Bexhill Hastings link road when this sum would have covered nearly all the cuts it is going to make over the next 3 years in response to government cuts. We might also want ask why the council is not planning any Quality Bus contracts or Better Bus agreements. And, given how vital it is to ease congestion  and pollution (with £22 billion lost to the national economy through congestion, and the air in some Lewes streets borderline unbreathable), we have to ask why the £800,000 profit being made by the county in charges for parking is not being applied to support bus services.  This money represents a substantial proportion of the amount the council wants to save on buses.  Norman Baker is right to say that the council has choices, and it has taken the wrong ones.

 But it seems to me that the government cuts to general funding, bus service operators grant, rural bus subsidy and kickstart are likely to make it more difficult to run those rural and suburban services that are currently threatened.  The government (including Norman Baker) clearly has a lot to answer for.

 The new initiatives do not replace revenue funding are likely to be far more accessible to big cities with one or more large bus company running services.  It is hard to see how the Better Bus initiative will help the residents of Chailey, with no major bus company running their service.  They have the bus stops and shelters they need. I suppose they could benefit from a real time information board, but it is no good if it shows only an unaffordable bus every two hours and a Sunday service funded by the Sustainable transport fund that is only of use for leisure purposes- even if they can access the wifi.