Statutory guidance

Using bus grant payment and design powers

Published 29 January 2026

Applies to England

1. About this guidance

This guidance relates to section 154A of the Transport Act 2000 (TA2000), as amended by the Bus Services Act 2025. This provision gives powers to local transport authorities (LTAs) to pay grants to operators of local bus services (bus grants) within their area.

If they want to exercise the powers given to them under the act, an LTA can choose to either:

• administer Department for Transport (DfT) national bus grants, such as the Bus Service Operators Grant (BSOG), BSOGPlus or a future grant
• design and pay their own bus grants and set the rates, terms and conditions, and eligibility of those local bus grants

They can also choose to do both - administer DfT grants and create their own grants.

This guidance is issued under the power granted to the Secretary of State under section 154A(6) of the TA2000 to issue guidance to LTAs on the exercise of the grant-making powers. It is directed towards LTAs, as defined in section 108(4) of the TA2000.

This guidance sets out the outcomes that LTAs should aim to deliver when designing and setting up their own bus grants to be paid to operators of local bus services. It also outlines a set of practical considerations LTAs should have regard to before deciding to exercise the powers in section 154A, including when designing grant schemes.

The tendering provisions under section 88-92 of the Transport Act 1985 do not apply:

• in relation to grants made under section 154A powers
• in respect of local service contracts operated under a franchise scheme made under Part II of the Transport Act 2000)

2. Use of the section 154A bus grant payment and design powers

The section 154A powers may be used by LTAs to do any of the following.

To provide targeted funding for specific improvements in service, the provision of which is a requirement of receiving the funding, such as a local fare reduction scheme or improvements in accessibility of information to passengers.

To provide a level of support to all services in some or all of their areas, to make commercial services more economically viable using existing LTA funding. An LTA could, for example, design a grant scheme to support demand responsive transport or other types of services deemed vital that might otherwise be unsustainable.

To request devolution of commercial BSOG funding from DfT and either (1) administer the national scheme instead of DfT or (2) develop an alternative local scheme to replace BSOG.

DfT guidance on setting up a bus franchising scheme sets out that LTAs entering into franchising arrangements will have responsibility for BSOG devolved to them. The LTA should engage with DfT when making the decision to start franchising in order to determine an appropriate time at which funding can be transferred and the quantum of that funding.

LTAs will be able to use any underspend from the disbursal of BSOG bus grants to support the transition to a franchised system.

Except for LTAs who enter into franchising arrangements, it is not mandatory for LTAs to use the new powers in section 154A to design and pay bus grants in their area.

LTAs may therefore choose not to exercise the powers granted under section 154A at all. In this case, DfT will continue to pay all relevant national bus grants.

Alternatively they can choose to exercise the power under section 154A to:

• administer and pay DfT-designed bus grants to operators within their boundaries in accordance with the DfT set rates, terms and conditions and eligibility criteria

• design and pay local bus grants within their boundaries, in effect setting their own rates, terms and conditions, and eligibility criteria

• administer both DfT-designed grants, and their own locally designed grants

LTAs must have regard to this guidance if they exercise the powers under section 154A of the Transport Act 2000.

Some LTAs have had the power in section 154(1) of the TA2000 to administer national bus grants in their area devolved through various devolution deal orders prior to the assent of the Bus Services Act 2025. The power in section 154A sits alongside these orders and goes further in allowing LTAs to set the eligibility, terms and conditions for their own grants. It is recommended that all LTAs use power in section 154A of the TA2000 to design and/or administer bus grants regardless of whether they have a devolution deal order.

3. Administering a national bus grant scheme

LTAs may want to administer a national bus grant in their local area, under the terms and conditions set out by DfT. For instance, for BSOG under the Bus Service Operators Grant Regulations (2002).

If DfT agrees to transfer a share of the national bus grant funding, the LTA can then administer bus grants under DfT-set terms and conditions which might allow an LTA to get a better understanding of their local bus network, develop closer relationships with operators, and support them in transitioning – should they want to – to a franchised network.

LTAs should first demonstrate to DfT that they have the capacity and capability – including staffing and other requirements, as listed in the section of this guidance on the transfer of BSOG funding – before an assessment is made to give them responsibility to administer funding. They should:

• inform DfT, with appropriate notice, of their intention to pay out grants under DfT terms and conditions - this will enable DfT to transfer any appropriate bus funding to the LTA to administer
• inform operators of bus services in their area with appropriate/ample notice, taking into account service planning and registration timescales, to ensure they understand that grant claims will need to be made to the LTA and not to DfT

Where an LTA is disbursing bus grant funding on behalf of DfT, the LTA may also choose to design their own bus grant using other existing funding to sit alongside the DfT grant. If an LTA chooses to do this, they should take consideration of the following section on designing a local bus grant scheme.

In this scenario, the LTA should make clear to DfT how they are funding any local grant.

4. Designing a local bus grant scheme - outcomes

In addition to designing a local bus grant funded through internal resource, an LTA may wish to use a transferred share of a national bus grant for a local bus grant. When designing bus grants under this measure, LTAs should aim to deliver all or some of the following outcomes, to be tailored to local needs.

4.1 The protection of socially necessary bus services

LTAs should consider how their local bus grant would protect these services which, as defined in section 138A(15) of TA2000, are services that enable passengers to access:

• essential goods and services
• economic opportunities (including employment)
• social activities

4.2 Contributing to economic growth

LTAs should consider how their local bus grant would support connections between local residents, employment sites, leisure opportunities or other important locations, that would help boost local, regional and national economic growth.

4.3 Contributing to the protection of the environment

LTAs should consider how the design of their bus grants supports the transition to net zero, modal shift, improving air quality, and protecting biodiversity.

4.4 Maintaining and improving the quality of bus accessibility and inclusion

LTAs should consider how their local bus grant could help make bus services more accessible and inclusive for passengers.

Some LTAs may find that flexible bus services can play an integral part of their local bus network and contribute to the delivery of the outcomes above. Not all flexible bus services are considered eligible under section 154(2) of the TA2000. As such, LTAs are welcome to support services with their grants, provided they are eligible.

LTAs should consider how the design of their grant application process may disadvantage certain local operators.

LTAs should consider how outcomes and benefits achieved through the provision of a locally designed grant for bus operators are relevant to the LTAs’ reporting requirements to:

• any central government departments providing funding
• any outcomes frameworks set by government

5. Practical considerations

LTAs should take into account all of the following when deciding whether to administer and/or design bus grants under section 154A.

a) The LTA’s capacity and capability to administer a grant to operators of bus services with suitable efficiency in their area and deliver value for money for their residents, before deciding to exercise these powers. This may include:

• staffing capacity and headcount
• expertise in the local bus sector
• whether the authority has sufficient commercial expertise to design and pay out grants

b) How the exercising of these grant-making powers will interact with any plans for franchising the LTAs may have.

Bus services often operate across more than one LTA. Any changes that might affect a cross-boundary service will also have implications for neighbouring LTAs. As such, when exercising the power in section 154A, LTAs should consider how exercising these grant-making powers will impact people using cross-boundary services, their neighbouring LTAs, and operators of bus services in and around their local areas.

Where an LTA uses these powers, they should review the performance of their local bus grant regularly. They should collect data from operators, and obtain other relevant information, to measure the success of bus grants being disbursed in the local area in achieving outcomes set out in this guidance. This evidence can be used to modify a local bus grant to ensure it delivers.

Should an LTA decide to franchise some or all of their bus network, or otherwise wish to receive a share of a national bus grant they should notify the DfT as soon as possible. The LTA will be expected to work with the DfT to calculate how much money will be transferred.

DfT will begin the process of transferring the relevant funding to LTAs to coincide with the start of the next financial year, provided sufficient time is given to calculate and validate the LTA’s share of the available funding and enable financial transfers to be arranged.

6. Engaging with and notifying stakeholders

When designing their own grant, LTAs should engage with local stakeholders, including, but not limited to:

• passenger groups
• businesses
• bus operators including community transport operators and those running flexible bus services
• neighbouring LTAs

They should also consider the potential positive and negative impacts on bus operators of different sizes, including small or medium-sized (SME) operators.

LTAs should notify DfT, bus operators, and other key stakeholders when they decide to set up their own bus grant. Notice should also be provided when any changes are made to such a scheme. This should include a clear explanation of and rationale behind the nature of the new bus grant, and reasonable transition periods.

7. Duties of an LTA as a public authority

As public bodies, the Public Sector Equality Duty (PSED) applies to public authorities carrying out public functions. LTAs should therefore ensure that they discharge their duties in relation to PSED under the Equality Act 2010 when designing and administering their own grants.

LTAs should ensure any grant scheme made under section 154A complies with all relevant subsidy controls and competition requirements. LTAs should also ensure that grant schemes comply with the UK’s commitments under the General Agreement on Trade in Services (GATs).

Read separate guidance on the:

• UK’s subsidy control regime
• UK’s international subsidy control commitments

8. Transitioning to administering local bus grants

Once funding for an LTA-administered national bus grant or locally designed bus grant has been secured, it is the LTA’s responsibility to engage with operators of local bus services to inform them that the LTA will now be processing grants claims rather than DfT, and to engage with them on the administrative arrangements that will be put in place.

LTAs should allow sufficient time to ensure that they have adequate resource to administer the grants (including time to process claims and conduct any necessary checks, including for audit and financial reconciliation) and make payments. LTAs that do not have adequate resource should allow additional time to procure additional resource before any national bus grant funding is transferred and before operators begin to make claims to the LTA instead of DfT.

As set out in the Practical considerations section in this guidance, LTAs should keep DfT informed on their plans to move to a franchised system or to administer bus grants on behalf of the department. They should also actively engage with DfT whilst setting up these local bus grants schemes for the first time.

LTAs are invited to seek DfT’s advice on administering bus grant funding.

9. Reporting expectations

LTAs should report the following to DfT through BSOG@dft.gov.uk:

• the total mileage of routes supported by any grant funding disbursed to operators of local services
• the total funding disbursed to operators of local services
• the makeup of the bus fleet being operated for routes in their local area
• any other data requested by government, including any requirements set under any future local government outcomes framework

LTAs should review and report on the performance of their bus grant regularly.

Reports on the performance of bus grants, including the metrics set out in this section, should be made publicly accessible within a reasonable timeframe.

LTAs should publish:

• total spending for any local bus grants
• grant funding disbursed on an operator-by-operator basis

10. Transfer of BSOG funding 

LTAs that intend to fully or partially franchise their bus networks should request transfer of the portion of BSOG funding paid to bus services within their area. Under current BSOG regulations, franchised services are not eligible for BSOG payments. Taking on responsibility for BSOG will allow LTAs to maintain a consistent level of funding for bus services in their area as they transition to a franchised bus network. 

For LTAs that do not plan to franchise any of their bus network, where there are expected to be clear benefits for passengers and the local capacity and capability to deliver the scheme, DfT will consider the transfer of a portion of the national BSOG budget to an LTA to deliver an alternative local scheme. In this instance, DfT would no longer pay BSOG to operators for commercial services run in the LTA’s area. Before agreeing to transfer funding the department will expect an LTA to demonstrate that they have: 

• adequate capacity and capability 

• a strong track record in delivery of bus outcomes 

• a stakeholder engagement plan, focusing on cross-border services  

• a proposal for the local bus grant that will result in improved local outcomes 

• evidence of stakeholder engagement in development of the local grant 

• a monitoring and engagement plan

Any LTA interested in transfer of their portion of BSOG budget should contact the DfT bus funding team at an early stage to understand the process and timings.

11. Support

Please direct any queries to BSOG@dft.gov.uk.