Public spending boosts English bus revenue

State funds just short of 50% of total income in 2023/24

Public spending on bus services and their passengers accounted for 49.8% of the industry’s income in 2023/24, according to our new analysis  of figures published by the Department for Transport (DfT) and the Ministry of Housing, Communities and Local Government (MHCLG).

According to the figures, total industry income for operations in England outside London reached £3.67 billion in 2023/24, up by 9.8% in cash terms on a year earlier, and 8.8% ahead of the last pre-Covid year, 2018/19. The total comprised funding via local government (12.4%), three forms of direct funding from the DfT in the form of BSOG (5.7%), BSOG+ (5.6%) and reimbursement for the £2 fare cap (7.6%). Concessionary fares reimbursement accounted for another 18.5%, whilst income from fare-paying passengers represented the remaining 50.2%.

The fares income totalled £1.84 billion, 1.5% down on the previous year’s £1.87 billion. Fares income accounted for 50.2% of total income in 2023/24, down from 56.0% a year earlier and 62.2% in 2018/19. The shift is mainly the result of the DfT’s £2 fares cap, for which the government reimbursed operators to the tune of £279m during the year (up from £60m for the three months in which the scheme operated in 2022/23). Adding the two together gives a figure of £2.12 billion, up by 9.9% from the previous year’s £1.93 billion.

The DfT’s own spending on post-Covid support – routed through BSOG+ in 2023/24 – totalled £206m. This was 34.6% up on the previous year’s Bus Recovery Grant figure of £153m. Spending on the original BSOG scheme totalled £210m, up by 4.6% but still 15.3% down on 2018/19 levels. This reflects the 17% reduction in mileage run since 2018/19.

Meanwhile, gross revenue support from local government increased sharply, up by 18.1% to £623.9m, up from £528.3m the year before. After deducting revenue accruing to LTAs from gross cost tendered services, the net spending on support was £455.1m, 23.9% up on the previous year’s £367.2m. The increases reflected the availability of BSIP and BSIP+ funding to the authorities. This figure also included spending by some authorities on their own £2 fare cap scheme. The flow of BSIP funding is also reflected in a two-thirds increase in capital spending by local authorities on bus projects during the year, which totalled £388m.

You can read the full analysis in the article Bus Industry income driven by state funding growth.

Adjusting for Inflation

The DfT also publishes figures adjusted for inflation, using their preferred measure of the GDP Deflator. This shows that industry income in 2023/24 was 10.5% down since the last pre-Covid year. Support via local government was 42.2% higher, whilst BSOG was 30.4% down. Taken together, public sector support for operators increased by 85.1%. Concessionary fares reimbursement was 26.8% lower, whilst income from passengers was 27.8% down.

Comment

The shift in bus industry economics over the last five or six years has been swift and remarkable, with public funding providing almost half the operators’ income in 2023/24, compared with just 38% in the days before Covid-19 turned the world upside down. Direct revenue support, via either the DfT or local government, has doubled from 15% of total income in 2018/19 to 31.3% last year. Interestingly, that is a higher proportion than the 27% seen in the run-up to deregulation.

The analysis once again highlights the shortfalls from which operators are still suffering, five years after the first lockdown was imposed in March 2020. The story is told in pretty much every industry statistic, with falls in service levels (17%), patronage (15.7%, including 35.4% amongst concessionary pass holders) and revenue (27.8% real). In fact, the only figure that is not down is the cost of operation: rather the opposite, in fact, having risen by 12% in real terms, according to the DfT’s figures for cost per kilometre.

Patronage continued to flatline during the latter part of 2024: the DfT’s daily use statistics show that bus patronage outside London for the fiscal year to date averaged 87.8% of pre-Covid numbers between March and December, down slightly from the 89.1% recorded for fiscal year 2023/24. In many ways, this is not surprising – a flatlining economy, sluggish consumer spending, a declining retail sector and falling post-Budget employment are hardly the ingredients from which to build a boom in bus patronage. The hope of some recovery in commuting levels driven by a return to the office seems to be a forlorn one at the moment, with ONS statistics showing stable numbers of people engaged in home and hybrid working.

Meanwhile, costs continue to rise – by 6.2% in the year to June, according to industry trade association CPT’s latest Cost Monitor report. They are about to be driven higher still in April as operators face the £100m plus bill imposed by the increase in Employer’s National Insurance Contributions.

Bearing all this in mind, the likelihood is that the economics of the industry will continue to deteriorate, at least until the end of this Parliament. As a result, politicians will face the age-old dilemma of choosing one of the three options they have to balance the books – service cuts, fare increases or increased subsidy. No doubt their inclination would be to increase the subsidy, but they should not bet on the Treasury coming up with enough money.