Written statement to Parliament

Bus Service Operators Grant (BSOG) reforms

Bus subsidy system to be reformed.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The Rt Hon Norman Baker

I am pleased to announce today (5 July 2013) our plans to reform the bus subsidy system. We intend to implement a package of measures designed to improve services by making the subsidy provided to bus companies - Bus Service Operators Grant (BSOG) - more targeted and accountable.

In 2012 there were 4.7 billion bus passenger boardings made in England and over 60% of all public transport trips were made on local buses. Given the crucial role the bus network plays in supporting social inclusion, linking people to places of commerce and providing employers with access to labour markets, buses deserve to be recognised as the backbone of our public transport system and key to a healthy, growing economy.

However, despite pockets of strong growth, overall bus patronage has been in long-term decline. Added to this, the way in which subsidy is used to support the bus market has become increasingly poorly targeted. This economic context, however, makes it imperative to push for improved bus services that are more locally accountable and provide better value for passenger and taxpayer.

This is why we intend to reform bus subsidy by making the following changes:

  • creation of a new local government fund - Better Bus Areas
  • devolution to Transport for London and the Greater London Authority of the BSOG paid to London bus operators who operate services under contract to TfL
  • tightening the existing rules defining which bus services can claim BSOG, so that the available funding is put to the best possible use
  • paying BSOG to local authorities, rather than operators, where funding relates to services they support.

The first three of these changes will take effect from 1 October this year. However, I have decided to allow more time for local authorities and operators to prepare for the paying of BSOG for supported services to authorities outside London. Therefore this change will not come into force until 1 January 2014.

We consulted widely on these proposals in late 2012, and our consultation response which we are publishing today – copies of which are being placed in the library of the house - sets out the government’s commitment to each of the above measures.

Devolving funding for supported services to local authorities will give communities more control over how money is spent. At the same time, I am keen this change should not cause temporary instability to local services. The majority of both bus operators and local authorities have asked for an extended period of ring fencing, and I believe that the case is a strong one. The funds which we devolve will, therefore, be ringfenced until the end of 2016 to 2017. In turn, we expect local authorities to take due account of the tendered BSOG foregone by bus companies operating non-commercial services in managing existing contractual arrangements with them for these services and when agreeing new contracts.

A further key reform is the introduction of Better Bus Areas. I was delighted to designate Sheffield as the first BBA in February. Other local authorities had until today (5 July 2013) to bid to become BBAs with announcements on further designations to be made this autumn. BBAs offer an opportunity to explore how bus subsidy can be better used by local authorities, working with local operators, to attract more people onto buses and ensure better value for the taxpayer.

Management of bus services in London is the responsibility of Transport for London and most of the substantial funding from central government to support transport in London is currently paid to TfL in a single grant. In line with this, from October a sum broadly equivalent to the BSOG for London services will be paid directly to TfL and the Greater London Authority.

Finally, BSOG was designed to support local bus services, but over time a wider range of services than was intended laid claim to some of the subsidy. So, we have tightened the rules so that certain services are no longer eligible for BSOG. In particular, the removal of eligibility from rail replacement buses will also serve as a message to the rail industry that we expect them to use trains rather than buses wherever possible.

The government recognises that this package of reforms represents significant change for the industry. Local authority and bus industry views have therefore been vital to the development of our proposals and I am grateful for the input we have received. The reforms announced today (5 July 2013) mark an opportunity to reshape the support we provide for the bus industry for the better, using a long-standing subsidy in a targeted manner in order to improve services, encourage partnership working and deliver better value for money. I look forward to the improvements that these reforms will bring.

Published 5 July 2013