Securing best value and outcomes for taxpayer subsidy of bus services

Tax payers are bankrolling the bus industry in England. Subsidy has risen by half in ten years, to £2.5 billion in 2007/08, amounting to over half the turnover of the industry. There is therefore a strong case for investing public money in improving the quality, frequency and coverage of local bus services.

The Local Government Association (LGA) believe there is a need for a fundamental review of the bus subsidy system to look into how better value for money and better outcomes could be secured from continued public sector investment in bus services.

To inform this debate, the LGA commissioned Oxera Consulting Ltd to produce an independent report, which would:

• examine how efficient existing subsidies are in meeting public policy objectives and delivering improved bus services in England (outside London) and Wales,
• make recommendations of how value for money could be improved.

The independent report: “Subsidising buses: How to get the best from taxpayers’ money” reaches a number of important conclusions:

• There are currently seven separate forms of subsidy to the bus industry;
• Spending on subsidy has gone up by over £1bn in the last five years;
• Most subsidy is paid without bus companies giving any guarantees in terms of what service they will provide in return
• Subsidy is badly targeted to under-served, or highly congested areas or where there are particularly low passenger numbers.
• The overall subsidy package is of questionable value for money.

This report raises some challenging questions and puts forward arguments for change. It also highlights the need for further, more detailed analysis to understand the impact on services, patronage, fares and company profits of existing subsidies and different options for change.