Bus Services after the Spending Review - Transport Committee Contents

2  Bus industry: structure and funding

Commercial and subsidised bus services

7. Outside London, bus operators choose the routes and levels of service that they wish to provide on a commercial basis. Local authorities then determine where the gaps are and can choose to provide support for services to fill these gaps. Around 80% of bus services outside London are operated on a commercial basis.[9] The remaining 20% are operated with support from local authorities, generally secured through a system of competitive tendering. Such services typically comprise routes at times of the day or week, or in areas, where usage is low—often services on evenings, Sundays and routes in rural areas.[10] Local authority-subsidised bus services in England (outside London) have increased mileage by 25% over the last 10 years, whilst the mileage of commercial bus services reduced by 18% over the same period. Norman Baker MP, Parliamentary Under-Secretary of State for Transport, implied that this trend was caused in part by bus companies withdrawing marginally commercial services in the expectation that they would be re-tendered with a subsidy from the local authority.[11] Many tendered services are not viable without local authority support, due to insufficient usage and fares revenue.

8. The proportion of tendered services varies by local authority, from zero (for example, Southend) to 100% (for example, Rutland), and it is notably high in some local authority areas—around 85% of services in Somerset, for example, received at least some subsidy prior to the Spending Review.[12]

Funding and costs

9. In 2009-10 annual operating revenue for the bus industry in England (outside of London) was £3.4 billion. This includes fares revenue, Bus Service Operators Grant (BSOG), concessionary fare reimbursement and local authority support (mainly though tendered service contracts). It does not include streams of bus operator revenue not directly related to the provision of local bus services, such as advertising income and private hire work. In 2004-05 the comparable amount was £2.8 billion (in 2009-10 prices) and the amount has increased year-on-year since then, mainly due to the increase in bus use by concessionary pass holders following the introduction of the free concessionary travel scheme.[13]

10. Table 1 shows that over half of bus operating revenue (outside London) comes from passenger fares (£1.8 billion). Concessionary fares reimbursement accounts for almost a quarter of revenue (£800 million), local authority support (mainly through tendered contracts) 15% (£500 million) and BSOG 9% (£300 million). Almost half of bus operating revenue, therefore, comes from public funding in one form or another: although a significant proportion of this is concessionary fares reimbursement, which aims to replace the on-bus fares revenue that would have been received if a government policy to provide free travel for elderly and disabled people did not operate.

Table 1: Bus Operating Revenue in England (outside London), 2009-10

Fares Concessionary travel Local authority subsidy Bus Service Operators Grant Total
2009-10£1.8 billion £800 million£500 million £300 million£3.4 billion
Proportion of total

Source: Department for Transport (Ev 70)

9   Ev 64, para 54 [Department for Transport] Back

10   Ev 147, para 31[Professor Peter White] Back

11   Q 267 Back

12   Ev 105, para 1.5.4 [TAS Partnership Ltd] Back

13   Ev 64 Back

previous page contents next page

© Parliamentary copyright 2011
Prepared 11 August 2011