Source · Select Committees · Public Accounts Committee
Recommendation 11
11
Accepted
Fragmented short-term bus grant schemes hinder effective investment by operators and authorities.
Recommendation
Over the period 2019–20 to 2024–25, the Department provided £5.9 billion of funding to the bus sector via 13 different grant schemes. Most of these were short term, which hindered effective investment in the sector by bus operators and local transport authorities.21 We asked the Department why it had administered bus grants in such a fragmented manner. The Department acknowledged the issue, explaining that part of the complexity was due to emergency COVID funding and cost-of-living schemes and told us it has already taken some steps to simplify bus funding, for example by combining two grants to local transport authorities.22 The Department also told us that it intends to set out longer-term funding settlements for each local transport authority later this year.23
Government Response Summary
The government will consolidate bus funding through the Local Authority Bus Grant (LABG), which combines Bus Service Improvement Plan (BSIP) funding and the Local Authority Bus Service Operators’ Grant (LA BSOG). Funding letters will set an expectation that the funding should be spent on eligible bus schemes, and a rural metric will be introduced for revenue LABG.
Government Response
Accepted
HM Government
Accepted
2. PAC conclusion: The department’s funding for buses has been short-term, fragmented and poorly targeted, hindering effective investment in the sector. 2. PAC recommendation: The department should, in its Treasury Minute response to this report, update the committee on its progress towards providing longer- term, consolidated funding to the bus sector and explain when it will be able to detail its plans more fully. This should include how it will reflect the additional challenges for rural areas and how it will ensure funding for buses is spent on buses. 2.1 The government agrees with the Committee’s recommendation. Recommendation implemented 2.2 Bus funding for local authorities began to be consolidated in 2025-26 with the introduction of the Local Authority Bus Grant (LABG), which combined Bus Service Improvement Plan (BSIP) funding and the Local Authority Bus Service Operators’ Grant (LA BSOG). 2.2 In December 2025, the department announced LABG allocations for 2026-27 to 2028- 29 (and 2029-30 for capital). This fully subsumed LA BSOG outside London from 2026-27 which is no longer allocated separately. LABG will be provided to local transport authorities through a consolidated settlement; and the department anticipates: 3 a) six Mayoral Strategic Authorities receiving LABG as part of their Integrated Settlement with MHCLG; b) Mayoral Strategic Authorities with an elected Mayor having a Mayoral Transport Fund, consolidating nearly all local transport funding, including capital and revenue LABG; and c) the remaining local transport authorities having: • a dedicated Bus Services Fund, containing the revenue LABG plus other bus revenue funding such as devolved BSOG; and • a consolidated Integrated Transport Fund, containing local transport capital including capital LABG and all non-bus revenue funding. 2.3 While the Bus Services Fund is not ring-fenced, funding letters will set an expectation that the funding should be spent by local authorities on eligible bus schemes, otherwise funding could be clawed back or reduced in future. 2.4 To address rural challenges, the formula for revenue LABG introduces a rural metric. 2.5 Bus funding is also provided directly to operators through BSOG and BSOGplus. The department has already transferred a share of BSOG to Greater Manchester where it is being used to support franchising; and intends to transfer an appropriate share of BSOG to other local transport authorities pursuing franchising – in addition, the department has given powers to all local transport authorities to design and pay grants to bus operators.