What we know about plans to raise bus fare cap by 50%

JAYWICK, UNITED KINGDOM - APRIL 03:  A woman waits for a bus in the seaside town of East Jaywick, the most deprived place in England, on April 3, 2013 in Jaywick, England. The Government's 2011 Indices of Multiple Deprivation' measure ranks Jaywick as the most deprived of all 32,482 small wards in England and Wales. The area also has the greatest number of young people not in employment, education or training; one third of 16 to 24 year-olds claim Jobseeker's Allowance, compared to the national average of 6 per cent. Changes to the benefits and tax system which came into force on April 1, 2013 have included a cut in housing benefit payments for working-age social housing tenants whose property is deemed larger than they need and council tax support payments now being administered locally.  (Photo by Oli Scarff/Getty Images)
Bus fares could go up by up to 50%. (Getty)

Keir Starmer has confirmed the existing £2 cap on bus fares will be increased to £3 in this week's budget.

The announcement follows speculation that the cap, which was introduced by the previous Conservative government, could be scrapped when it expires at the end of this year, leaving people facing a hike in ticket prices.

It represents an increase in bus fares of up to 50%

Campaigners had voiced concerns that the removal of a cap could see fares rise by as much as £10 in some rural areas, but in his pre-budget speech on Monday, Starmer effectively ruled that out by committing to a 50% increase in the cap to £3.

The government is under scrutiny in the run-up to the budget, after previously committing not to raise income tax, national insurance and VAT for "working people". Despite this, a raft of other changes are expected, including possible hikes to employers' national insurance as well as capital gains tax and inheritance tax.

The £2 bus fare cap was launched on 1 January 2023, with the government supporting bus operators to implement a £2 cap on eligible single tickets for adults.

According to the government website, the aims of the fare cap were to save passengers money and encourage more people to use the bus.

Chancellor Rachel Reeves had been under pressure to extend the cap (which was due to end in December) into 2025, with campaigners warning of the impact that more expensive tickets could have on people who need to use bus services.

Earlier this month, Labour frontbencher Baroness Blake of Leeds hailed the cap as a "real success", saying the initiative introduced by the Tories had boosted passenger numbers and changed travel habits.

But the financial impact of the scheme is thought to be the main factor in the argument for not extending it, with reports suggesting that analysis set to be published has found the £2 cap cost £200m between January and October 2023, and that every £1 spent to support it generated 71p to 90p of economic and social benefits.

However, in the wake of concerns, Starmer said the government will keep a fare cap of £3 in place until the end of 2025.

Revealing the move during questions after his pre-budget speech, he said: "On the £2 bus fare, first thing to say is the Tories only funded that until the end of 2024 and therefore that is the end of the funding in relation to a £2 capped fare.

“I do know how much this matters, particularly in rural communities where there’s heavy reliance on buses.

“And that’s why I’m able to say to you this morning that in the budget we will announce there will be a £3 cap on bus fares to the end of 2025 because I know how important it is.”

The £2 fare cup operates on hundreds of routes run by dozens of bus companies across the country, though not all routes in every region are involved.

According to the government website, participation in the bus fare cap scheme is voluntary and some bus companies have chosen not to take part.

Some types of routes are also not covered by this scheme, such as coach services, school-only services or airport services.

The scheme also excludes London, Greater Manchester and West Yorkshire, as fares are already capped in those areas, the website advise.

You can check out the full list of bus companies and bus routes that currently use the scheme here.

London, England, UK. 23rd Oct, 2024. RACHEL REEVES, Chancellor of the Exchequer, is seen arriving at HM Treasury. (Credit Image: © Tayfun Salci/ZUMA Press Wire) EDITORIAL USAGE ONLY! Not for Commercial USAGE!
Rachel Reeves is expected to scrap the £2 cap on bus fares. (Zuma)

According to the latest government figures, in the year ending March 2023, there were 3.4 billion passenger journeys made by local bus in England - an increase of 0.5 billion or 19.3% compared with the year ending March 2022.

After the COVID pandemic, which saw a steep decline in bus use, use of the mode of transport started to recover and continued to up to March 2023. The government has said the sector is still recovering following the impact in previous years.

As she praised the scheme as a success, Baroness Blake of Leeds said it had led to an increase in bus use, saying: “Of all the schemes that have come into place, this one is very well known. The public actually know about it and this has led to an increase in patronage. People have changed their habits from using other forms of transport to using the bus. In my view, it has been a real success.”

Bus use
Bus use

Campaigners have welcomed the move, with Silviya Barrett from the Campaign for Better Transport saying: “We are pleased to see that the government has avoided fully scrapping the bus fare cap that has successfully increased bus use and benefitted millions of passengers since its introduction.

“Taking the bus should never be a financial burden and while we welcome efforts to keep bus fares affordable, this is a significant increase that could be costly to many.

"The scheme’s success has proven that by making public transport more affordable, more people will use it and we strongly urge the government to put a plan in place to keep fares low for years to come. It is vital that the government now carries out a full review of what other discount fares could replace the cap in the long-term to avoid any further rises.”

Concerns over bus fare rises went hand in hand with criticism of the government and allegations of hypocrisy around its claims that it would protect working people from tax hikes.

The party had promised in its manifesto that it would not increase taxes on working people – explicitly ruling out a rise in VAT, national insurance and income tax.

But it has since been urged to define who it considers ‘working people’ after reports that the budget will include a freeze on income tax thresholds introduced under the Tories, and suggestions from Sir Keir Starmer that those who make money from assets such as property do not meet the definition.

Amid the ongoing debate, rumours of the potential removal of the bus fare cap was seen by many as another blow to the working people Labour promised to protect.

However, the government has been keen to point out that the financial situation it inherited requires difficult decisions and it needs to prioritise funding for critical services like the NHS, school rebuilding and pothole repairs.

The Chancellor has claimed there is a £22 billion “black hole” in the public finances left by the previous government. The Institute for Fiscal Studies has disputed this claim in part, saying that while some of the challenges facing Labour “genuinely appear to be greater" than anticipated, much of it was “entirely predictable".

During his speech, Starmer said that Labour would not continue the “fiction” that you can have lower taxes and public services that run properly. He said: “No. I think for too long, we pretended that you could lower tax and spend more on your public services, but you can’t. And it’s about time we faced up to that.”

He added: “Almost everybody knows the NHS is broken. We’re going to fix it, put it back on his feet, and make it something we can be proud of again. That’s the path we’re choosing, and that’s what we’ll deliver for working people.

“But what we’re not going to do is continue the fiction that got us here in the first place, the pretence that you can always have lower taxes and that your public services will run properly. Because the last 14 years have shown this is completely and utterly untrue, and people voted for change.”

Yahoo News has contacted the Treasury for comment.