Report

by the Comptroller
and Auditor General

Department for Transport

Improving local bus services in England outside London

HC 577 Session 2019–2021 2 October 2020

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Report by the Comptroller and Auditor General

Ordered by the House of Commons
to be printed on 30 September 2020

This report has been prepared under Section 6 of the National Audit Act 1983 for presentation to the House of Commons in accordance with Section 9 of the Act

Gareth Davies
Comptroller and Auditor General
National Audit Office

29 September 2020

This study examined value for money in the local bus service system overseen by the Department for Transport (the Department). We examined the effectiveness of government’s current support for local bus services and the extent to which the enablers to improve local bus services are in place.

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006467 10/20 NAO

The National Audit Office study team consisted of:
Antonia Gracie, David Molony, Helen Roberts and Matt Paramor, under the direction of Lee-Anne Murray.

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Key facts

Summary

Introduction

1 In 2019, buses accounted for 56% of public transport journeys by those living in England outside London, or an average 5.8 million passenger journeys each day. Despite a long-term shift to private car use, buses still support millions of essential daily trips, and for many people provide the only practical, frequently used method of transport, other than walking. Bus use is particularly common for people aged from 17 to 20 and over 70, and for women and girls, most ethnic minority groups, and people on lower incomes. Reliable, affordable bus services contribute to achieving the policy objectives of two thirds of government departments, from reducing health inequalities to access to justice.

2 Since government deregulated the local bus market in 1986, the majority of local bus journeys (87% by mileage in 2018-19) are on commercial services. Private sector operators decide bus routes and frequencies and invest in new vehicles and routes according to commercial considerations. However, public money has always supported bus services:

Local authorities may choose to tender for additional supported services, which are those they consider necessary but are not otherwise commercially viable; they support these services from their general revenue funding from the Ministry of Housing, Communities & Local Government (MHCLG).

At national level, the Department for Transport (the Department) pays a subsidy to help operators provide affordable services where they might not otherwise be viable.

From 1997-98 to 2010-11 the net total of national subsidy and local revenue support for bus increased in real terms, but fell thereafter, in line with spending on other local services. Around 24% of bus operators’ income from bus services currently comes from public subsidy and support (£512 million in 2018-19). The exact percentage will vary by operator.

3 The Department is responsible for the bus policy framework, ad hoc capital funding to local authorities and operators, and legislation. It provides information to support MHCLG, in determining the overall funding for local government. Over more than 30 years, the Department has stated an aim to increase bus use and halt the decline that has continued since the 1950s. In some periods this has been expressed as a formal Departmental objective, although not currently.

4 The Department considers that good quality bus services are vital for local economies, can help ease congestion, and support better connected communities. It also sees an important role for buses in addressing air quality issues and reducing greenhouse gas emissions. In September 2019 the Department announced that it would develop the first national strategy for bus services across England and a long-term funding commitment.1 In February 2020, it announced a £5 billion new funding package for buses, cycling and walking over this Parliament.

Scope of this report

5 The National Audit Office (NAO) and the House of Commons’ Committee of Public Accounts (the Committee) last examined bus services in 2005 and 2006 respectively. This report examines the effectiveness of government’s support for buses, and the extent to which the enablers are in place for local authorities and operators to realise the long-term, sustained improvement that the Department now intends. The report:

explains what the data show on bus use, provision and performance over time and across local authorities in England. It also sets out roles, responsibilities and accountabilities for delivering and improving bus services (Part One);

examines the effectiveness of the revenue funding framework for buses (Part Two);

examines the effectiveness of government’s current approach to improving bus services (Part Three); and

assesses the issues government needs to address to achieve its aims for the future of buses in England (Part Four).

6 During fieldwork for this study, the COVID-19 crisis led to drastic reductions in bus travel across the country; potential serious health and financial consequences for passengers, staff, operators and local authorities; and rapid financial and regulatory intervention by the Department. Also, progress has been delayed on the strategy, long-term funding package and initial pilot schemes. We do not examine the value for money of the Department’s emergency interventions during the crisis. Although the issues we highlight pre-date the pandemic, we consider they remain and have been brought into sharper relief by its effects.

7 This report does not examine voluntary and community transport providers. Our examination excludes bus services in London, where the delivery model is different from the rest of England, although we draw on comparisons with London where useful. With a focus on funding arrangements and service delivery, we have not examined specific capital funding and improvements to infrastructure or vehicles. Most of our analysis uses data between 2010-11 and 2018-19 because the Department collected data on a different basis prior to 2010-11, but we have used longer-term data to reflect longer-term trends. Our evaluative criteria and methods are at Appendices One and Two.

Key findings

Bus use, provision and performance, 2010-11 to 2018-19

8 Despite the Department’s aim to increase bus use, over this period passenger journeys fell in 65 of 88 English local transport authorities outside London, and by almost 10% overall.2 This continued the gradual decline since before deregulation. By comparison, since deregulation London experienced an 89% increase, following the introduction of additional services and the congestion charge, although this has declined more recently. Average bus journeys per person per year outside London vary widely: from less than 10 in some counties and more rural areas, to around 150 in some more densely populated areas including Nottingham, and Brighton and Hove. The local authorities which include large metropolitan areas account for more than 40% of all passenger journeys outside London, but they have also seen the greatest percentage falls in average journeys per person (paragraphs 1.4, 1.11 and 1.12, and Figures 7 and 8).3

9 The decline in bus routes and bus travel disproportionately impacted supported routes, which are important for more rural or disadvantaged users. During this time, travel on supported services fell faster than on commercial services, with the total distance travelled on supported services falling by more than half. The Campaign for Better Transport estimated that since 2010-11 some 3,000 bus routes have been reduced, altered or withdrawn and these routes are more likely to have been supported services. The Department’s analysis shows that supported services can deliver high levels of socio-economic benefit, but it does not have information to understand how many people and who are being affected by route closures (paragraphs 1.10, 2.10 and 2.12).

10 Some local authorities, where there is long-term local support for prioritising bus services and tackling congestion, have improved and sustained bus use. There is good evidence on what works in improving and increasing commercially viable bus services: long-term locally led interventions with wide support, particularly those which target congestion, improving bus speed and reliability. This reduces the need for local authority support, freeing up funding for further improvements or other purposes. Urban areas including Nottingham City and the West Midlands have made progress with bus priority lanes. In Bristol, following partnership working between local operators, local authorities and the Department, passenger journeys increased by 36%, to 92 journeys per person per year. In rural areas, sustaining commercial routes is more difficult. On-demand services have had some success in a limited number of areas, for example Lincolnshire (paragraphs 1.13, 3.2 to 3.4, Figures 13 and 14 and Appendix Three).

Revenue subsidy and support for bus services, 2010-11 to 2018-19

11 The Department’s subsidy keeps routes financially viable and is important to operators but needs reforming to provide greater incentives for improvement. Increasing congestion means operators need to put on more buses to maintain frequency, which, when combined with falls in paying passengers, puts pressure on operator profit. The Department’s most recent estimate of median operator profitability is 8.5% (2017-18), at the lower end of what the Competition Commission estimated was desirable. Between 2010-11 and 2018-19, as fare-paying passenger journeys fell almost 6% (net of concessions journeys), total estimated operator revenue fell by 11%, while average bus fares increased by 18% in real terms. The Department’s subsidy (Bus Service Operators Grant) aims to keep services affordable and allow operators to run services that might otherwise be cancelled. However, the Department recognises that it is outdated and could be reformed to incentivise improvements more effectively and has committed to do so. In 2018-19, the subsidy was £248 million, 31% less than in 2010-11, mainly because the Department had reduced the rate of payments and miles travelled were lower (paragraphs 2.2 to 2.9, and Figures 9 to 11).

12 Local authorities’ have significantly reduced support for bus services, while the cost of statutory concessions has fallen more slowly. Of 85 local authorities operational over the whole period we examined, 72 have reduced spending on supported services. Of these, 42 reduced funding by more than 50%. The total real-terms fall from £425 million in 2010-11 to £264 million in 2018-19 (38%) is similar to reductions in local government spending on other non-statutory services. While not part of bus subsidy and support, the statutory duty to reimburse operators for free travel by eligible older and disabled people cost local authorities more than £650 million in 2018-19 and now forms a larger proportion of the total that local authorities spend in relation to bus travel. Authorities report that this duty, which is akin to a locally delivered national benefit, adds to pressure on non-ringfenced funding (paragraphs 2.10 to 2.11, 2.16 to 2.17 and Figures 11 and 12).

Effectiveness of government’s interventions

13 New powers for local authorities to take greater control over bus services have made little difference against a background of wider funding pressures. Deregulation shifted control over bus routes and passenger fares from local authorities to bus operators running commercial routes. Over time, the Department has tried to give a degree of control back to local authorities, by allowing various types of formal local partnerships with operators. The 2017 Bus Services Act allowed new models of partnership working and gave certain larger authorities the power to take control of services under a franchising arrangement. However, local authorities’ reduced spend on local transport, down by around 40% in real terms since 2010-11, is likely to have led to reductions in experienced transport planning staff to work in partnership with local operators. There are some long-standing, effective partnerships, but it took until April 2020 for the first, and so far only, new-style partnership to be agreed. No franchising proposals have progressed beyond consultation (paragraphs 1.9, 2.10, 3.5 to 3.9, 4.3 and Figures 6, 7 and 15).

14 The Department uses capital funding to support bus improvement, but is concerned that not all local authorities are able to access it. The Department provides a range of capital funding pots for which local authorities and operators can bid which can be useful in kick-starting bus improvement. The Department’s evaluations of bus improvement schemes it funded suggest positive benefit-cost ratios, ranging from £1.80 to more than £5.10 on average (per programme evaluated) for each £1 of investment, not including wider impacts. In the longer term, these capital projects can address congestion or reduce emissions, alongside contributing to reducing operators’ costs. The funds have ranged in size from £7 million to £2.5 billion and include the Local Sustainable Transport Fund and Transforming Cities Fund. However, the Department is concerned that local authorities with potentially viable projects are not accessing capital funding, because they lack the capability or revenue funding to bid (paragraphs 3.12 to 3.16).

15 It is too early to say whether new regulations requiring transparent data on fares and routes will increase demand. From December 2020, the Department has introduced regulations requiring operators to improve public data on fares and routes – outside London, many timetables and fares are still only available at bus stops or on the bus. Research, including from statutory consumer watchdog Transport Focus, suggests that better passenger information could encourage non-users to try the bus, especially younger people (paragraphs 1.6, 3.10 and 3.11, Figure 17).

Accountability for improving bus services

16 By choosing to deliver bus services through a deregulated model, the Department has limited its ability to influence improvement. This model involves local operator markets and few contractual relationships. Operators are not accountable to the Department or local authorities for delivering commercial services. However, their incentive to invest in improving services and adding routes may be influenced by the level of support from the local authority and its approach to managing congestion. Local authorities are accountable to local people for ensuring that bus services meet their needs, often setting out goals in a Local Plan, although there are no related statutory duties and weak incentives to prioritise bus services given the context of wider funding pressures. When we reported in December 2018, only 44% of wider Local Plans were up to date, and 14% of authorities had no Plan at all.4 In line with the principles of localism, the Department does not directly influence how local authorities fund local transport (paragraphs 1.8 to 1.11, 2.13 to 2.15, 3.3, 3.10, 4.4 and Figures 6 and 9).

17 While the Department collects data on buses, it could do more to bring together data and a set of indicators to support its future strategy. The Department told us that, in line with wider Government policy, it has been mindful of the need to reduce reporting burdens on local authorities and has therefore taken a light-touch approach to gathering information on the financial sustainability of local bus services, given this is an area of devolved spending. During our work, which primarily took place before the COVID-19 crisis, we observed that while the Department collected a lot of data on buses, it did not routinely bring data together to monitor how government interventions impacted sustainability across the bus system. We do note some gaps in government’s knowledge, for example on impact of reduced services on communities, particularly supported services. During the pandemic, the Department told us it has worked more closely with local authorities and operators to develop and use new and existing information to understand areas of critical need and target support. However, without clear objectives, it is difficult for the Department to know exactly what data it should collect. Also, if it does not identify a coherent, transparent set of indicators, it may find it difficult to monitor progress against its forthcoming strategy and make the decisions needed to stay on track (paragraphs 1.7 to 1.8, 2.12 to 2.14, 2.17 to 2.18, 3.9, 4.6 and Figures 6 and 17).

Opportunities and risks

18 Lack of coordination across government may limit the scale and pace of change. The Secretary of State for Transport has set out a long-term vision of shifting more journeys to public transport, as part of decarbonising transport. However, wider government decisions will affect people’s willingness to shift to public transport. We have previously reported on how government’s understanding of local service delivery and the interactions between service areas across different departments is weak. For example, planning guidance for new homes and public services does not need to consider and integrate bus services (paragraph 4.5, and Figure 16).

19 The COVID-19 pandemic, which has delayed the Department’s strategy, presents both additional challenges and learning opportunities. Given the pandemic, the timetable for the strategy was extended and the Department now plans to publish it by the end of 2020. Also, the Department paused or redirected £70 million of the £220 million funding announced for buses in 2020-21 to emergency support, and allowed local authorities to use a further £30 million to ensure existing services could be safeguarded. The government has also needed to shift temporarily from its aim of increasing bus use, to advising people not to use the bus, except for essential travel. However, both local government and operators told us that rapidly coming together to identify and address emergency need had improved the effectiveness of working relationships (paragraphs 2.18, 4.1 and 4.2, and Figure 17).

Conclusion on value for money

20 Bus services have been declining across England for 70 years and the decline continued following deregulation, with only a few local authorities managing to buck the trend. However, government recognises that affordable bus services have public value, and funds around 24% of bus operators’ revenue income. Government has chosen to deliver public bus services via a deregulated market model, and sensibly devolves decisions about supporting services to local authorities, who understand local needs.

21 The Department is not accountable for delivering bus services, but it has national policy responsibility. It is now preparing to commit significant new funding to bus services and to lead a national strategy for improvement against a background of considerable uncertainty. The Department collects data on buses and can show it has funded valuable improvements, but to date it has not sought to demonstrate how its actions have contributed to supporting optimal value for money across the bus system. If it is to work with and through others at central and local level, make informed choices about funding, and be able to adjust its plans to ensure it meets its objectives, it will need greater clarity on what it wants to achieve and how it will know when it has done so. During the COVID-19 pandemic, the Department has come together with local authorities and operators, intervening rapidly to target the weakest areas and keep buses running, which offers learning for the future.

Recommendations

22 Our experience of improvement strategies in other devolved, deregulated sectors shows that success requires whole-government commitment to long-term outcomes and locally led sustainable solutions. Of a number of issues this report highlights, we consider it most important that the Department should set out:

a a clear, consistent vision of the future of bus travel, that encourages and supports local authorities to make long-term plans for their own local needs. The Department should articulate clearly what success would look like for bus travel in urban and non-urban areas and how it expects new and existing models of delivery to feature. This vision should be consistent with its policy statements on future urban mobility and decarbonisation, and emerging long-term trends in travel;

b a detailed, transparent delivery plan with clear objectives, responsibilities and accountabilities for the Department and others. The Department’s forthcoming National Bus Strategy and accompanying delivery plan should incorporate details of what it will do to lead and support change, what others in central government will do and what it expects local authorities and operators to do, alongside how they will be incentivised and made accountable for doing it;

c good quality data and measures of success. The Department should look widely at all its sources of performance information to develop a basket of measures granular enough to understand outcomes for users, local authorities and operators, so that it can baseline and monitor the system’s progress, and adjust as necessary. This could build on the closer working with MHCLG, local authorities and operators during the pandemic, and include using the information created through the Bus Open Data programme;

d an active role in supporting local authorities to access evidence and experience to support improvement. The Department should work with MHCLG, local government, transport planning professional groups and operators to make it easy for local transport planners to share experience, resources, evidence and advice, and where necessary build local capacity to influence and improve bus services; and

e the amount and form of funding, for both local authorities and operators, that is necessary to achieve the objectives of the bus strategy. The Department has already committed to providing a long-term funding model. It should work with MHCLG, HM Treasury and local government as part of wider local government funding discussions, to ensure that the various elements of bus funding available combine effectively to support the objectives set out in the strategy. This should include: reform of the Bus Service Operators Grant to ensure incentives are aligned with government’s objectives; and work to understand the actual costs to local authorities of funding statutory concessions and the effect on budgets for bus improvement. The overall revenue funding model should also be transparent enough to contribute to enhanced accountability for improving buses.

1 Department for Transport, A better deal for bus users, first published 30 September 2019,
updated 6 February 2020.

2 There are 88 local transport authorities, excluding London, as metropolitan combined authorities are treated as one local authority.

3 The six metropolitan combined authorities are: Greater Manchester; Merseyside; South Yorkshire; Tyne & Wear; West Midlands; and West Yorkshire. Tees Valley combined authority is not classified as a metropolitan authority but includes five large towns and has also seen one of the largest falls in bus journeys per person.

4 Comptroller and Auditor General, Planning for new homes, Session 2017–2019, HC 1923, National Audit Office, February 2019.

Part One

Introduction to local bus services

1.1 This part sets out what the data show on bus use, provision, and performance, over time and across local authorities in England outside London. Our analysis is based primarily on data from the Department for Transport’s (the Department’s) surveys of bus operators and local authorities and its National Travel Survey. This part also sets out roles, responsibilities and accountabilities for delivering and improving bus services and the Department’s current aims for bus services.

Why buses are important, and to whom

1.2 Bus services, and wider local transport, influence the policy objectives of two thirds of government departments (Figure 1). They:

provide everyday mobility and reduce social exclusion, connecting people to: work; education; shops; sport, leisure and entertainment; and friends and family;

can protect the environment – a full bus emits less air pollution and greenhouse gases than the same number of people travelling separately in cars. By taking up a fraction of the road space, it also helps tackle congestion; and

deliver high value for money. The Department estimates that every £1 spent on local bus improvement measures has delivered up to £5 in benefits, including to health and employment.

1.3 Bus remains the most common form of public transport, comprising 56% of all public transport journeys by those living in England outside London in 2018-19, or an average 5.8 million passenger journeys per day. Together with cycling and walking, bus travel is particularly suited to short journeys. In 2018-19, the average bus journey was 2.7 miles in London, 3.5 miles in other English metropolitan areas and 4.7 miles in more rural areas. However, the car is by far the most common mode everywhere.

1.4 Bus use is heavily concentrated in more built-up areas. In 2018-19, the average number of bus journeys per person per year ranged from less than 10 in some counties and more rural areas, to around 150 in some more densely populated areas including Nottingham and Brighton and Hove. Almost 70% of all passenger journeys on local bus services were made in a quarter of the local authorities, with more than 40% of bus journeys taken in the six combined authorities that cover mainly metropolitan areas (Figure 2).

1.5 Some groups in society use buses more than others:

Annual bus trips per person are highest for people aged from 17 to 20 and those over 70.

Women make more bus trips than men.

Between 2014 and 2018, trips by local bus accounted for a higher proportion of total trips made by people from ethnic groups other than white or Asian people.5

Those on the lowest household incomes take the highest number of bus trips (Figure 3). People who depend more on the bus to travel for work tend to be lower paid, live in more deprived areas and are more likely to turn down jobs because of transport issues than those on higher incomes, who tend to use cars and trains more often.6

Passenger experience of bus services

1.6 Around 38% of people use a bus at least once a month and more than half do so at least once a year. However, a substantial minority never do. In 2019, a study by the RAC found that 35% of motorists said that they were more dependent on car than in 2018 (14% – less dependent).7 The RAC found that more than half (57%) of motorists surveyed agreed with the statement, “I would use my car less if public transport were better” and of this group the most common reason for not using public transport was that fares were too high (Figure 4). In 2018 Transport Focus, the independent watchdog representing passenger interests funded by the Department, identified cheap, easy-to-understand fare deals and using technology to provide smart ticketing and journey planning, as ways to improve user satisfaction and encourage bus use among young people.

1.7 Survey data collected by Transport Focus shows wide variation in satisfaction with bus services, particularly on value for money, journey time and punctuality (Figure 5).8 Since national records began in 2007-08 bus punctuality has never met the 95% target set by the Traffic Commissioners, who licence and regulate bus operators. Data are also incomplete. For frequent services (that is to say those intended to arrive at least every 15 minutes and more than five times an hour), the Department has 2018-19 data for only 25 of 88 local authorities, including three of the six metropolitan combined authorities.9 For non-frequent services, the data are more complete, showing that the punctuality target was achieved in only four of 67 local authorities where data were available (Figure 5).

How bus services are delivered

1.8 The Department and other parts of central government provide the policy, legal and funding framework within which bus services are delivered. Operators and local authorities determine where and when to run services and whether to provide public funding for routes. Figure 6 summarises roles, funding, objectives and measures of performance for the provision of bus services.

Bus operators

1.9 Under the deregulated bus market in England outside London, bus operators decide when and where to run commercial bus services and set fares (other than national and local concessionary schemes and participation in local ticketing schemes). Of 885 million bus miles operated in 2019, 87% were on commercial services, which derive revenue from passenger fares (including publicly funded concessions). More than 500 companies operate bus routes, from small, family-run businesses to multi-nationals, and five local authority-owned municipal companies.10 The five largest operators by market share of bus journeys are also current or former rail franchise holders, and between them operate 80% of the market.11 In 2015-16, 65 of 88 local authorities had one main local operator that delivered 50% or more of all journeys.

Local authorities

1.10 Local authorities determine local transport policies and objectives and in 2018-19 decided how to spend £3.2 billion revenue and £4.6 billion capital funding for local transport, across both roads and public transport. Where a route is not commercially viable but the local authority considers it socially necessary, it can choose to part-fund the service and tender for an operator – these are supported bus services. Support may cover: all services on a route; services at quiet times (for example weekend service); or part of a route (for example to ensure service for a deprived area). Authorities may develop formal or informal partnership agreements with bus operators, but only in London does the local authority currently have powers in place to determine routes and fares. Under the principles of devolution, local authorities are accountable to local people for their choices about spending on local transport including buses, not to central government.

Performance against the Department’s objectives for bus use

1.11 Despite its lack of direct levers for change, the Department has stated an aim, since before deregulation, to increase bus use and address the decline that has continued since the 1950s. In some periods this has been expressed as a formal Departmental objective, although this is currently not the case.12 In 2005 we concluded that government was unlikely to achieve bus growth in every region, and was therefore unlikely to meet its underlying wider objectives to tackle social exclusion, congestion and vehicle emissions. At that time the Committee of Public Accounts recommended the Department provide stronger leadership and do more to stimulate demand.13

1.12 At the time of deregulation in England almost three bus journeys took place outside London for each one in London. By 2019, less than one bus journey took place in England outside London for each one in London. Since deregulation London has experienced an 89% increase in bus use, following the introduction of additional services and the congestion charge, although it saw a decline more recently. In total, between 2010-11 and 2018-19, passenger journeys in England outside London fell in 65 of 88 local authorities. This fall represents 288 million journeys (10%) compared with a 71 million fall in London (3%) (Figure 7). Over the same period, 70 of the 88 local authorities saw bus use per person decrease and combined authorities saw the greatest falls per person, ranging from 7% in Merseyside to 19% in South Yorkshire. As well as a shift to cars, in some metropolitan areas, the introduction of light rail has had an impact on bus use.

1.13 However, in Bristol, passenger journeys increased 36% to 92 journeys per person per year from 2010-11 to 2018-19. Here, partnership working between local operators, local authorities and the Department led to a network of urban and inter-urban corridors. Other areas seeing increases included Brighton and Hove, and Oxfordshire (Figure 8).

1.14 In May 2019, the Transport Select Committee reported on bus services, and recommended a national bus strategy and a long-term funding package.14 In September 2019, the Department committed to produce a national bus strategy and announced an interim bus funding package for 2020-21 (Appendix Four). In February 2020, the Prime Minister further announced £5 billion over five years to “level up local transport connections throughout the country, making everyday journeys easier, greener and more convenient”, by improving bus services and cycle lanes in England outside London.15 The announcement included a range of initiatives on bus services including a commitment to 4,000 new zero emission buses.

1.15 The remaining parts of this report examine:

the effectiveness of the revenue funding framework for buses;

the effectiveness of government’s current approaches to improving bus services; and

the issues government needs to address to ensure it achieves its aims for the future of buses in England.

5 Department for Transport, Travel by distance, trips, type of transport and purpose, January 2020.

6 NatCen Social Research, Transport and inequality: An evidence review for the Department for Transport, July 2019.

7 RAC, Report on Motoring 2019, October 2019.

8 Transport Focus, Bus passenger survey – Autumn 2019 report, March 2020.

9 Some local authorities may not have services falling into the “frequent” definition.

10 Blackpool, Ipswich, Nottingham City, Reading and Warrington

11 The five main bus operators are Stagecoach, Go Ahead, First, Arriva and National Express.

12 Including the cross-government Public Service Agreement target between 2000 and 2011, originally announced in Transport 2010: The 10-year plan.

13 HC Committee of Public Accounts, Delivery Chain analysis of bus services, Forty-third Report of Session 2005-06, HC 851, May 2006.

14 HC Transport Committee, Bus services in England outside London, Ninth Report of Session 2017–2019, HC 1425, May 2019.

15 Prime Minister’s Office, Major boost for bus services as PM outlines new vision for local transport, Press release, February 2020.

Part Two

Revenue funding for bus services

2.1 Deregulation means that government relies on the market to provide the majority of bus services. Public money has always supported the system, reflecting government’s acceptance that the market alone cannot provide affordable bus services at all times and in all places. This part examines the effectiveness of the revenue funding model for local bus services, including:

the elements that make up the revenue funding model to operators;

central government subsidy – the Bus Service Operators Grant; and

local authority support for bus services.

It also summarises recent funding changes resulting from the COVID-19 pandemic.

The elements of revenue funding for bus service operators

2.2 In 2018-19, bus operators received £3.4 billion in revenue from bus services across England outside London. Of this, fare-paying passengers generated 59% (53% in 2010-11). The remaining 41% was public money including:

the Bus Service Operators Grant, a subsidy paid by the Department for Transport (the Department) to operators (Figure 9);

local authority funding for supported services; and

reimbursement for statutory and discretionary concessionary travel.

The Department estimates that the bus sector as a whole made a median profitability of 8.5%, before the cost of investment in buses, in 2017-18, the most recent year it has assessed. In December 2011, the Competition Commission concluded that industry profitability should be 8.5% to 11%.

2.3 Congestion means operators need to put on more buses to maintain frequency. Combined with falling bus use, this puts pressure on operator profit, which in turn leads to fare increases, contributing to falling bus use in a vicious cycle. Other pressures can include increases in fuel and wage costs and investing in new vehicles to meet modern emission and accessibility standards. Between 2010-11 and 2018-19, as fare-paying passenger journeys fell 6%, total estimated operator revenue fell by 11% (net of concessions and concessionary journeys) and fares increased by an average 18% in real terms.

2.4 Bus fares rose faster than regional rail fares, and fastest in English metropolitan areas – a 94% real increase since 1995 (Figure 10). The relative cost of fares and motoring fuel is one factor affecting bus use, for those who have the choice to drive. The Department has also noted that new regulatory costs, such as charges when entering Clean Air Zones, are further increasing pressure on the large number of small-medium sized operators that make up 20% of the bus market. Because these operators lack economies of scale they typically operate at lower profit margins resulting in them running older less fuel-efficient vehicles, which are costly to retrofit.

2.5 At the same time, net government revenue spending on bus travel in England outside London fell 26% from £1.7 billion in 2010-11 to £1.3 billion (Figure 11). Excluding the cost of concessions, the overall fall was largest in non-metropolitan areas (41%) compared with metropolitan areas (23%). Across England outside London, some 24% of bus operators’ income now comes  from government subsidy and support, compared with 31% in 2010-11.16 The following sections examine the elements of that funding.

Central government subsidy – Bus Service Operators Grant

2.6 In contrast to rail and aviation operators, bus operators pay duty on fuel.17 The Bus Service Operators Grant (BSOG) is a subsidy paid in advance by the Department to operators of eligible bus services and community transport organisations to recover part of that duty. Its aim is to benefit passengers by helping operators keep fares down and run services that might otherwise be unprofitable.18 In 2018-19, the Department spent £248 million on BSOG, 31% less than in 2010-11. The fall was mainly caused by the Department reducing the rate of subsidy and the reduction in mileage travelled.19

2.7 Operators told us that with their margins at risk of becoming unsustainable, BSOG is important for them to remain in business – this view is supported by industry experts. However, BSOG is not linked to the level of need, number of passengers, or performance of services and could act as a disincentive for operators to switch to electric buses.20 Payment in advance means the Department carries a risk should a large provider go into liquidation.

2.8 BSOG was last reformed in 2013 by:21

creating a new local government fund – Better bus areas;

tightening rules on which bus services can claim BSOG; and

devolving to Transport for London (TfL) and the Greater London Authority BSOG paid to bus operators under contract to TfL in London.22

2.9 The Department recognises the risks and limitations of the existing BSOG system and agrees with stakeholders that in its current form the subsidy is outdated. It has already tried including within the BSOG model incentives for operators to move to lower emission vehicles and improve ticketing and vehicle location technology. Its approach to encouraging a shift to electric buses is based on capital grants rather than subsidy. The Department has been discussing reforming BSOG for several years, and in September 2019 committed again to do so.23

Local authority revenue support for buses, 2010-11 to 2018-19

2.10 In 2018-19, the Department estimated local authorities spent £264 million to support bus services, resulting in around 170 million journeys on routes which would otherwise not run. However, this compares with a spend of £425 million in 2010-11, a real terms fall of 38%. This is in line with a wider reduction of around 40% in total local transport spending and is similar to reductions in local government spending on other non-statutory services. Supported local services are essential to those who rely on them but are expensive to tender and often generate little revenue to offset against the costs. In 2016, the Department concluded that tendered bus services provide between £2 and £2.50 of benefits for every £1 of local authority spend.24

2.11 Of 85 local authorities that were operational in both years, 72 reduced spending on supported bus services in real-terms.25 In 2018-19, 14 local authorities provided no funding for supported services, compared to four in 2010-11. On average, funding fell most in non-metropolitan areas, such as rural shire counties (Figure 12).

2.12 The reduction in funding for supported services has led to the loss and curtailment of routes, but the Department does not collect data on how many, or the impact on passengers. The Campaign for Better Transport has estimated that, since 2010-11, 3,000 bus routes have been reduced, altered or withdrawn.26 Total miles travelled on supported services fell more than 50% from 243 million miles in 2010-11 to 112 million miles in 2018-19, faster than on commercial services, with the biggest reduction in non-metropolitan areas. The Department reported passenger journeys on supported services fell by 31% between 2011-12 and 2017-18, but has since stopped collecting the data as it was unreliable. In some areas, for example Oxfordshire, we saw examples of community transport stepping in to replace lost services. The Department does not collect data on all community transport.

Local authority funding context

2.13 The Department told us that, in line with wider Government policy, it has been mindful of the need to reduce reporting burdens on local authorities and has therefore taken a light-touch approach to gathering information on the financial sustainability of local bus services, given this is an area of devolved spending. During our work, which primarily took place before the COVID-19 crisis, we observed that while the Department collected a lot of data on buses, it did not routinely bring data together to monitor how government interventions impacted sustainability across the bus system. As we have previously reported localism gives local authorities greater control over spending decisions, but consequently means those departments with responsibility for local services may have less oversight.27

2.14 The Department relies on the Ministry of Housing, Communities and Local Government (MHCLG) for assurance on the overall financial health and accountability of local authorities. However, we have previously reported that MHCLG has focused its attention on its priority areas such as social care, rather than on understanding the impact of funding reductions across local authority services as a whole, including transport. The Committee of Public Accounts reported in July 2018 that while there had been improvements in its oversight, MHCLG had insufficient data to assess the impact of local authority funding reductions on service users in areas such as transport.28 MHCLG had originally planned to announce a new local government funding formula in 2020-21, but has since announced that this will not go ahead and it will consider the way forward in the Spending Review.

2.15 In addition to their central government grant funding, local authorities can generate funds to support and improve bus services from local taxes and duties. In the City of Nottingham, a workplace parking levy helps fund public transport (Appendix Three). Approaches such as this rely on local political support. Authorities may also leverage funds from developers of new housing, but we found their capability in securing and using developer contributions was highly variable.29

2.16 Local authorities across England report an additional funding pressure within their transport budgets caused by the statutory duty to reimburse operators for free travel by older and disabled people. These statutory concessions, which cost local authorities more than £650 million in 2018-19, are akin to a locally delivered national benefit, which local authorities must pay for from their non-ringfenced funding.

2.17 In 2018-19 more than 28% of bus journeys in England outside London were on statutory concessions,30 and when combined with a smaller element of non-statutory free travel, this accounted for 22% of operator revenue. Concessions spending now forms a larger proportion of the total that local authorities spend in relation to bus travel (Figure 11). However, the Department does not know how this impacts on the choices local authorities make about spending on supported services or working with operators on improvements. In March 2019, the Transport Select Committee recommended the government review how concessionary bus travel is financed. The government disagreed, taking the view that this should be looked at in the round as part of MHCLG’s wider review of local government needs and resources.31

COVID-19 and bus funding

2.18 The government provided urgent support for the bus sector in response to the COVID-19 pandemic. The Department paused or redirected £70 million of the £220 million funding announced for buses in 2020-21 to emergency support, and allowed local authorities to use a further £30 million to ensure existing services could be safeguarded. In April 2020, government agreed a rescue package to keep buses in England outside London running during the pandemic for those who needed them, such as key workers. It included a 12-week ‘Covid-19 Bus Services Support Grant’ totalling £167 million paid to operators. The Department required operators to “maintain necessary services” at a level sufficient to meet the reduced demand and allow space between passengers on board. The Department subsequently announced two further support grant packages encouraging operators to run up to 100% of scheduled commercial mileage. The second package, which totalled £254million, ran from 12 May to 3 August. The third, running on a rolling basis from 4 August, provided £27.3 million per week in support. The Department also agreed to continue paying existing BSOG to operators as normal, even though fuel consumption was reduced.

16 This percentage will vary by individual operator.

17 HC Transport Committee, Bus services in England outside London, Ninth Report of Session 2017–2019, HC 1425, May 2019.

18 Department for Transport, Bus Service Operators Grant: guidance for commercial transport operators, September 2019.

19 A small proportion of BSOG goes directly to local authorities for supported services.

20 Operators of vehicles that hold a low carbon emission certificate may be eligible for an additional incentive payment of 6p/km.

21 Department for Transport, Bus Service Operators Grant (BSOG) reforms, Written statement to Parliament, July 2013.

22 In 2018-19, the administration of BSOG for commercial services operated within the Transport for Greater Manchester boundary was also devolved.

23 Department for Transport, A better deal for bus users, September 2019.

24 Department for Transport, Value for Money of Tendered Bus Services, Moving Britain Ahead, February 2016.

25 The number of operational local authorities reduced from 96 to 85 between 2010-11 and 2018-19. This was due to local government reorganisation where previously separate local authorities were merged or joined with combined authorities.

26 Campaign for Better Transport, Future of the bus: future funding arrangements, October 2019.

27 Comptroller and Auditor General, Local government funding: Assurance to Parliament, Session 2014-15, HC 174, National Audit Office, June 2014.

28 HC Committee of Public Accounts, Financial sustainability of local authorities, Fiftieth report of Session 2017–2019, HC 970, July 2018.

29 Comptroller and Auditor General, Ministry of Housing, Communities & Local Government, Planning for new homes, Session 2017–2019, HC 1923, National Audit Office, February 2019.

30 Department for Transport published data set BUS0105.

31 HC Transport Committee, Bus services in England outside London, Ninth Report of Session 2017–2019, HC 1425, May 2019. HM Government, Bus services in England outside London: Government’s response to the Committee’s Ninth Report of Session 2017-19, October 2019.

Part Three

The Department’s approach to improving bus services

3.1 This part examines the effectiveness of central government’s current approach to improving bus services. It covers:

what evidence the Department for Transport (the Department) has about how best to improve bus services;

support for partnership working between local authorities and operators;

capital funding for improvements; and

improving bus information for passengers.

What works in improving bus services

3.2 There is good evidence on what works in improving and increasing commercially viable bus services: long-term locally led interventions with wide support, particularly those which target congestion, improve speed and reliability, and hence make more routes profitable to run. This reduces the need for local authority support, freeing up funding for further improvements or other purposes. Work commissioned by the Urban Transport Group in 2019 identified six conditions for ‘good bus territory’ and used these to estimate the potential for improvement in specific parts of the country, with a view to targeting government support.32 The key challenges are different in urban areas and more rural or town-fringe areas.

3.3 Tackling congestion is key to the success of urban bus services (Figure 13). In November 2009, the Cabinet Office estimated the cost of congestion to the urban economy at £11 billion per year, before including the costs of poor air quality, ill-health and road accidents.33 A 2016 report for Greener Journeys concluded that “the potential benefit of the bus is stifled by traffic congestion” and that each 10% decrease in bus speed reduces patronage by at least 10%.34 Some urban areas (for example Nottingham City and the West Midlands) have made progress with bus priority lanes. Another example which also demonstrates the importance of long-term local leadership is from outside England – Belfast’s ‘Glider’ bus service (Appendix Three). In September 2019, the Department announced it will provide capital funding only for road improvements where bus prioritisation measures are included, unless local authorities can explain why their inclusion is not necessary or appropriate.35

3.4 In rural areas and at the fringes of towns and cities, sustaining commercial bus routes is more difficult, and local authorities have historically supported services (Figure 14). ‘Demand-responsive’ services, where passengers request a pick-up and drop-off by minibus via phone or app, although not a new concept, are now being trialled as a more cost-effective means of maintaining a service for people where there is low demand. Lincolnshire has seen success with this approach (Appendix Three).

The Department’s interventions to improve bus services

3.5 In 2018, the Department set out two actions in support of improving bus services: to implement the Bus Services Act 2017 (the 2017 Act), and to “open up data from the bus sector”. It also continues to provide a range of capital funding pots for local government. The following paragraphs examine these approaches.

Encouraging local authority–operator partnerships

3.6 Relationships between authorities and operators vary and there are some well-established informal, voluntary partnerships, for example in the West Midlands (Appendix Three). To improve partnership working across the country, the Department introduced the 2017 Act which aimed to:

strengthen arrangements for local authority–operator partnership working, introducing new Advanced Quality and Enhanced Partnership Schemes;

introduce bus franchising powers to replace Quality Contract Schemes. Franchising powers, similar to those in London, are only available automatically to mayoral combined authorities.36 Other authorities can request franchising powers, but need the consent of the Secretary of State and secondary legislation to obtain them and must demonstrate their capability to deliver (Figure 15).37

Quality Contract Schemes had been introduced under the 2000 Transport Act and provided legal powers to decide on prices and routes. However, local authorities found it difficult to meet the scheme requirements and it took 15 years for the first and only application to be made, which did not proceed. The Quality Contracts Scheme Board formed the opinion that it had not been demonstrated that the proposal met the criteria of affordability, value for money and other requirements.

3.7 The Department’s guidance to local authorities emphasises that it is for authorities to work with operators to decide which arrangements will best improve local services, and underlines the importance of: good local authority-operator relationships; consensus on what needs to be done; and trust that partners will deliver “their part of the bargain”.

3.8 It was not until April 2020 that the first Enhanced Bus Partnership using the 2017 Act was agreed between Hertfordshire County Council and more than 20 local bus operators. Under the Partnership they will work more closely together aiming to improve services and infrastructure in the county. Transport for West Midlands has developed plans for an Enhanced Partnership as part of its strategic vision for bus, and began a consultation in June 2020. Franchising is a more ambitious approach, involving local authorities taking on some of the financial risks and rewards of running local bus services and allowing them to set route frequencies and running hours of bus services, subject to conditions. Currently, Greater Manchester Combined Authority has made the most progress in considering whether to introduce franchising and following the requirements of the 2017 Act. It recently consulted on a proposed franchising scheme for the entire Greater Manchester area. In June 2020 the combined authority noted the findings of the consultation and it is awaiting a report on the potential impact of the COVID-19 pandemic.

3.9 The Department acknowledges that progress implementing the 2017 Act is slower to date than expected and has been working to understand the reasons. The Department believes the 2017 Act has encouraged informal partnerships, although their informal nature has meant it is unable to obtain reliable data on their extent, including on any local service improvements being achieved. However, at the same time, previous partnership working arrangements are likely to have declined as local authorities have reprioritised spending and reduced the size of transport planning teams. For example, in Oxfordshire a Quality Partnership led to service improvements in 2011. The local authority told us that subsequent funding cuts prevented it building on these, and the partnership lost impetus. In 2020, it set up a Strategic Bus Board with experienced members from across the council and is actively engaged with local operators to reinvigorate partnership working.

Open bus data – improving passenger information

3.10 In 2005 we reported that since operators are not formally accountable for the reliability and punctuality of bus services to local people, there was scope to make the market more effective by making performance information more readily available and transparent to local communities.38 The Department has recognised for some time that improved passenger information is an important mechanism to encourage bus use, as outside London many timetables or fares are only available at bus stops or on buses.

3.11 Under the 2017 Act, the Department has created a prototype Bus Open Data Service which aims to provide national fare and journey times.39 By 31 December 2020, operators should have provided bus timetable data; by 7 January 2021 they should provide vehicle location, basic fares and tickets data; and by 7 January 2023, all fares and ticket data. The Department has recognised concerns we heard from smaller operators about potential costs of complying with the open data requirements. It has provided free data creation tools and data hosting and plans further support; it is too early to assess the level of compliance or quality of data or whether these measures will stimulate demand and increase the beneficial effects of competition for users.

Capital funding for bus improvements

3.12 One of the Department’s main levers for influence at local level is its provision of short-term capital funding pots to fund specific improvements, usually on the basis of competitive bidding by local authorities. In the longer term, capital projects to address congestion or reduce emissions can also contribute to reducing operators’ costs. Some funds are bus-specific, for example to enable local authorities and operators to invest in zero emission vehicles, or infrastructure such as bus shelters, bus lanes and digital information. The largest funding pots have been aimed at integrated local transport improvement schemes, not just buses, and include the £2.5 billion Transforming Cities Fund. Relevant capital funding announcements since 2010-11 include £586 million (the Department’s contribution) for bus rapid transit and other local transport schemes and a number of funding pots ranging from £7 million40 to £600 million for greener buses and other sustainable transport. However, the Department does not keep a central record of the total capital funding it allocated to or actually spent on buses.

3.13 The Department aims to carry out evaluations on all the bus capital schemes it funds. The available evaluations suggest the schemes have achieved positive benefit-cost ratios, from £1.80 to £5.10 on average for each £1 invested, depending on the programme, not including wider benefits. We have not examined specific capital funding pots and specific improvements to infrastructure or vehicles in detail in this report, as our focus was on the arrangements for funding and delivery of services.

3.14 Targeted, competitive funding pots give local authorities access to additional funding to pilot riskier projects or innovations. The Department works actively with local authorities to develop initial bids and monitor project delivery in complex or risky projects, but as we reported in 2011, it is not clear to us whether the Department has a systematic process for selecting projects for more careful monitoring.41

3.15 Despite this funding, pressures on local authorities’ general un-ringfenced capital funding have seen the amount they spend on public transport capital improvements fall by 87% between 2010-11 and 2018-19. The Department is concerned about local authority transport planning capability to access funding where there is need. Local authorities report that time-limited central government funding pots for specific projects are not always helpful, for several reasons:

The cost and time investment in preparing bids. While the Department may have a specific policy objective at a certain time, high-quality proposals to improve local bus services are not always ready to present ‘off the shelf’. They often need long-term planning to succeed and sustain because they depend on other parts of an integrated local transport policy, such as congestion measures and town planning, and on investment by the bus operator. The resources required to bid for, report on and account for competitive funding can be too great for smaller authorities.

Reduced flexibility. The use of competitive capital pots gives the Department a higher degree of assurance over how the funding is used. But it can restrict local authorities’ flexibility in terms of when they use it or how they combine it with other sources of funding such as developer contributions.

Disconnect from revenue funding. The Department’s provision of ad hoc capital funding pots comes against a background of wider pressure on local authorities’ non-ringfenced revenue funding. There is a risk that authorities are unable to allocate revenue funding to maintain the capital improvements, and hence sustain the benefits.

3.16 In 2018 we cautioned that the whole local authority funding landscape was increasingly characterised by one-off and short-term initiatives – which undermines strategic planning and creates risks to value for money.42 The Department does not have cumulative data on which authorities have bid for and obtained bus capital funding, but it recognises their concerns. It is seeking to learn from experience in working with the Ministry of Housing, Communities and Local Government on that department’s Housing Infrastructure Fund.

32 Urban Transport Group, What scope for boosting bus use? An analysis of the intrinsic bus potential of local authority areas in England, October 2019.

33 Cabinet Office Strategy Unit, An analysis of urban transport, November 2009.

34 Greener Journeys, The impact of congestion on bus passengers, June 2016.

35 Department for Transport, A better deal for bus users, September 2019.

36 Greater Manchester; Liverpool city region; Sheffield city region; West Midlands; North of Tyne; West of England; and Tees Valley.

37 Except North of Tyne region combined authority which is not responsible for local transport.

38 Comptroller and Auditor General, Delivery Chain Analysis for Bus Services in England, Session 2005-06, HC 677, National Audit Office and Audit Commission, December 2005.

39 Department for Transport, Bus Open Data Service Collection, January 2020.

40 Local Sustainable Transport Fund.

41 National Audit Office, Department for Transport: Local Authority Major Capital Schemes, May 2011.

42 Comptroller and Auditor General, Financial sustainability of local authorities 2018, Session 2017–2019, HC 834, National Audit Office, March 2018.

Part Four

What government needs to get right

4.1 The Department for Transport’s (the Department’s) bus strategy has been delayed by the COVID-19 pandemic and the need to switch attention and resources to urgent response measures. The response to the pandemic also meant that government needed to shift from an objective of increasing bus use, to advising people in the short-term not to use the bus, except for essential travel. Anecdotal evidence suggests that some people may consider a more permanent switch to other modes of transport, such as car or bike, or travel less. However, bus travel will remain the primary and essential mode of daily transport for many others, especially the most disadvantaged.

4.2 The Department plans to publish its bus strategy by the end of 2020. This part sets out our analysis of weaknesses government needs to address to succeed in the long-term, including: supporting local authorities to deliver; working across government; and lessons from our previous work on the factors that departments need to address when attempting to drive strategic change in a complex devolved sector.

Supporting local government capability

4.3 The Department believes a key reason for the slow pace of improvement in bus services is diminished capability and capacity in local authorities’ transport planning teams. Our case study visits supported this view. Reductions in capability have been greatest in county councils. One council told us that a reduced transport planning team had contributed to the loss of previously strong relationships with the local operators, which it was working to recover. The Association of Transport Co-ordinating Officers, which brings together specialist transport officers at working level from across local authorities, it told us it has seen a gradual erosion in membership and sponsorship, including from local authorities, reducing opportunities for local transport planning officials to share knowledge, provide support and build skills.

4.4 At the same time the Department’s oversight and support for local transport planning has reduced. In 2005, we said the Department had strengthened its review of Local Transport Plans,43 and was challenging local authorities to set their own targets for growth in bus use. However, in 2012, we reported that the Department had stopped reviewing Local Transport Plans and no longer linked its funding formulae to the quality of these plans.44 In December 2018, we found only 44% of wider Local Plans (of which Local Transport Plans would be part) were up to date, and 14% of authorities had no plan at all.45 The Department is concerned about local transport planning capability. It has a network of contacts in cities, engaging regularly with the Urban Transport Group. However, despite links with the Association of Directors of Environment, Economy, Planning and Transport, it has less contact with towns and rural areas where transport planning capability is weakest.

Working across government

4.5 The Department has signalled a significant policy change to prioritise buses over cars, and shift more journeys to public transport.46 Achieving this outcome will involve influencing people’s travel choices in multiple ways, through joined-up working across government. HM Treasury has committed to making a stronger link between funding and outcomes in the Spending Review, including a Shared Outcomes Fund to encourage departments to work together where resources applied by one department can lead to benefits in another policy area.47 There are opportunities for the Department to expand its work, for example, with:

the Department for Environment, Food & Rural Affairs (Defra) and local authorities on prioritising the bus to improve air quality, building on the work of the Joint Air Quality Unit. We note that some local authorities are setting ambitious targets to tackle illegal levels of air pollution contributing to 40,000 premature UK deaths each year, but different solutions are being developed according to local circumstances, rather than as part of a national effort to prioritise buses. This could cause uncertainty and increase costs for operators and bus manufacturers operating across the country;

HM Treasury on legal and fiscal incentives for greener buses; and

The Ministry of Housing, Communities and Local Government (MHCLG) on integrating and incentivising bus travel into new home building, where there is clear evidence of failure to meet good practice (Figure 16).

Leading strategic change – the role of the Department

4.6 The Department has an experienced but small bus policy team. It began discussions with both HM Treasury and MHCLG about future bus funding, and wider stakeholder engagement, in late 2019. The COVID-19 pandemic meant the Department extending the timetable for the Strategy and limited the opportunity for stakeholder engagement in spring 2020. However, the Department told us that during the pandemic it has been able to work more closely with local authorities and operators to develop and use new information to understand areas of critical need and target support. Our observations and previous work across government highlight lessons the Department can learn from in leading change (Figure 17).

43 Local Transport Plans set out local objectives for transport in the context of government guidance.

44 Comptroller and Auditor General, Funding for local transport: an overview, Session 2012-13, HC 629, National Audit Office, October 2012.

45 Comptroller and Auditor General, Planning for new homes, Session 2017–2019, HC 1923, National Audit Office, February 2019.

46 Department for Transport, Decarbonising Transport – Setting the Challenge, March 2020.

47 Comptroller and Auditor General, Improving government’s planning and spending framework, Session 2017–2019, HC 1679, National Audit Office, November 2018.

Appendix One

Our audit approach

1 This study examined value for money in the local bus service system overseen by the Department for Transport (the Department). We examined the effectiveness of government’s current support for local bus services and the extent to which the enablers to improve local bus services are in place. Specifically, we examined:

what the data show on bus use, provision and performance over time and across local authorities in England; and roles, responsibilities and accountabilities for delivering and improving bus services (Part One);

the effectiveness of the revenue funding framework for buses (Part Two);

the effectiveness of government’s current approach to improving bus services (Part Three); and

the issues government needs to address to achieve its aims for the future of buses in England (Part Four).

2 We did not examine the merits of government’s policy objectives in this area, only the extent to which the system supports these objectives. We also did not include voluntary and community transport providers nor audit local government delivery of bus services, although we have considered the extent to which they are supported to deliver these services in their local contexts. Our examination excludes bus services in London, where the delivery model is different from the rest of England, although we draw on comparisons with London where useful.

3 Our audit approach is summarised in Figure 18. Our evidence base is described in Appendix Two.

Appendix Two

Our evidence base

1 We reached our independent conclusions of the value for money in the bus service system in England outside London following analysis of evidence collected between May 2019 and June 2020.

2 We reviewed who uses bus services, how bus use has changed over time, the Department’s objectives and performance measures for bus services, how bus services in England outside London are delivered, the roles and responsibilities of delivery bodies, and government’s aims for bus services (Part One).

We analysed data published by the Department, obtained from the National Travel Survey (Figure 19) (including mode of travel for short distances, frequency of use of different modes of travel, gender, age and income quintile of bus users) to understand who uses bus services.

We interviewed a range of senior staff from the Department for Transport (the Department) involved in oversight of bus service delivery. We also met with staff in HM Treasury and the Ministry of Housing, Communities & Local Government (MHCLG).

We reviewed internal and published documentation from the Department to understand the roles and responsibilities in the complex and devolved delivery landscape, the performance indicators used to monitor delivery of local bus services and the Department’s plans to decarbonise transport and related infrastructure.

We analysed data published by the Department, obtained from the Bus Fares Panel Survey (Figure 19) (including the local bus fares index) to understand passenger experience of fares over time.

3 We examined the funding mechanisms and revenue streams for operators who deliver local bus services in England outside London and significant recent interventions aimed at improving bus services in England outside London (Parts Two and Three).

We reviewed published material from stakeholders to understand trends in bus use over time, including the Transport Select Committee, the Committee of Public Accounts, the Campaign for Better Transport, the Urban Transport Group, the RAC, Greener Journeys, the Senior Traffic Commissioner, and Transport Focus.

We analysed data published by the Department, obtained from the Public Service Vehicle Survey (Figure 19) (including the average number of passenger journeys, the average number of passenger journeys per head of the population and the average number of concessionary journeys) to understand change in bus use over time.

We analysed data published by the Department on concessionary passenger journeys, bus subsidies for operators and the vehicle miles, and passenger miles travelled by local bus services. These data are obtained by the Department from the Public Service Vehicle Survey.

We reviewed published material from stakeholders to understand the benefits associated with concessionary travel. This included Greener Journeys and the Transport Select Committee.

We analysed data published by the Department on gross revenue and net government support for local bus services (Figure 19) to understand the nature of the various revenue funding streams available to operators. These data are obtained by the Department from: MHCLG Revenue Outturn forms, Bus Service Operators Grant returns, Local Authority returns and adjusted using the HM Treasury GDP Deflator.

We analysed data and documentation relating to capital funding to support bus services. We also met with staff from the Department to discuss capital funding processes. We also reviewed the Department’s evaluations of benefit cost ratios for capital funding for major bus related schemes.

We interviewed staff in the Department’s finance team to understand changes to revenue funding. We also met with staff in MHCLG and HM Treasury finance teams responsible for overseeing revenue funding allocations and processes for local bus services.

We drew on previous National Audit Office work on the local authority funding landscape.

We reviewed government objectives, commitments, legislation and guidance relating to bus services since deregulation in 1986, including the Bus Services Act 2017.

We interviewed staff in the Department’s policy teams to understand changes made to support the Department’s objectives.

We reviewed published documentation from the Department on its future plans to improve local bus services and achieve integration in a deregulated bus market. We also assessed the performance measures in place to understand how the Department tracks whether funding and interventions are successful.

4 We examined the challenges facing the Department in delivering a successful bus strategy and lessons that can be learned from previous experience in government (Part Four).

We reviewed financial information to understand the urgent support provided to bus operators in response to the COVID-19 pandemic.

We reviewed published documentation from a range of sources to understand the challenges faced and opportunities for better delivery of local bus services. This included the Cabinet Office, HM Treasury, the Urban Transport Group and Campaign for Better Transport.

We visited four local authorities (Lincolnshire County Council, Nottingham City Council, Oxfordshire County Council, West Midlands Combined Authority) and the Northern Ireland Department for Infrastructure. These were selected on a judgement basis to understand bus service delivery and the challenges faced in their respective local contexts and to gather information on best practice, but not intended to form a representative sample (see Appendix Three).

We consulted with major stakeholders within the bus sector to ascertain their views on the processes, responsibilities, oversight and delivery of local bus services. This included the Association of Transport Co-ordinating Officers; Association of Directors or Environment, Economy, Planning & Transport; Local Government Association, Campaign for Better Transport, Confederation of Passenger Transport, and the Urban Transport Group to ensure we collected a wide range of opinions from those involved.

We drew on previous National Audit Office work to identify the factors that are important to delivering a successful strategic approach in a complex, devolved system and to understand how bus services influence and support policy objectives across government.

We reviewed internal and published documentation from the Department on its plans for delivering bus services in response to the COVID-19 pandemic.

Appendix Three

Case study visits

1 During our 2019 fieldwork, we visited local authorities to understand local bus service delivery in different places, and to discuss the challenges and approaches to improvement.

2 In England we visited:

three local authorities (Lincolnshire County Council, Nottingham City Council and Oxfordshire County Council); and

one combined authority (West Midlands).

3 We also visited Belfast, Northern Ireland for a national comparison.

4 The key findings from these five visits are summarised in this appendix.

Appendix Four

The Department for Transport’s Better deal for bus users funding package

Design and Production by NAO External Relations
DP Ref: 006467-001