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It’s the ‘s’-word that rankles. That’s S for Subsidy. What started out as a rebate, then became a grant, is now being referred to as a subsidy. Memo to local bus service operators: be afraid…be very afraid.

Okay, you say lightly, it’s just semantics. Well, not really. Words have meanings, and without diverting into the realms of philosophy, they influence our perception.

Fuel duty rebate. Rebate has a nice ring about it. It is like an acknowledgement that the tax on fuel is really way too high and there are some people who shouldn’t pay it, or pay it in full. Like bus operators who consume fuel as they go about providing a service.

Bus Service Operators Grant. That’s not quite so friendly. It might be a fine distinction, but a grant sounds a bit like a hand-out to the disadvantaged. Grants are what the DSS does.

Bus subsidy. That’s the worrying one. Although officially the government’s consultation paper on BSOG is called ‘Local Bus Service Support – Options for Reform’, the link on the Department for Transport’s website describes it as the Bus Subsidy Consultation Document. That might just be careless headline writing – or it might be indicative that the Department of Transport sees all the money spent on bus services, other than by passengers paying the full fare out of their own pockets, as subsidy.

Yet, whatever the words, this consultation document is important. You feel that the government is saying: “We’re spending £2.5billion a year on buses. Are we getting good value? Are there better ways that we could spend this money?”

So it’s a document you should read. The government is asking the industry for its views. If you don’t respond and don’t like the outcome of the consultation then you have no one to blame but yourself.

And in it the government – wittingly or otherwise – lumps together under the heading of Bus Support any expenditure on buses. I hope that the industry isn’t going to accept that without an argument.

The vast sums of money – even if they’re not vast enough – being spent on free travel for older people is not a bus subsidy. It’s a social benefit. It ranks alongside winter heating allowances for the over 60s and free TV licences for the over 75s. That the government chooses to give people this benefit has nothing to do with subsidising the bus industry. If it helps the industry, that’s great, but let’s not present it as a bus subsidy.

And there’s a similar argument when it comes to local authority support for bus routes. Like it or not the regulatory regime for the past 20-odd years has been based on bus companies running as commercial entities. Most of their 4.7 billion customers are individuals who pay their own fares. The other major customers are local authorities who buy services which they want – typically in deep rural areas and on Sundays. Again, it’s a social benefit. And, yes, it’s a commercial benefit to the operator who wins the tender. But the bottom line is that the local authority is just another customer – albeit a big one – who, like the passenger paying £1 on the bus, has the choice of how and where to spend its money.

Challenge and Kickstart funding makes up but a small part of bus support. Here bus operators and local authorities see a potential opportunity and want some up-front funding to get it going. The parallel is with the start-up grants which some agencies and local authorities make available to small business. In effect they say: “We can see you have what looks like a viable plan, and we’ll give you a hand to get it going.” So it is a subsidy, but a clearly-focussed one.
Which brings us to BSOG. Of course it’s perverse to have a grant which pays out more if your vehicle is not fuel efficient and so consumes greater quantities of a finite resource and creates more pollution in doing so. These clearly were not issues when fuel duty rebate was introduced the best part of 40 years ago.

One of the DfT’s suggestions is to cap the amount of BSOG available at a predetermined level of fuel efficiency. Operators running vehicles which consumed fuel at a higher rate than that set by the cap would only receive BSOG on the amount of fuel which the bus would have used had it been more fuel efficient. The consultation document notes that one side effect of this could be operators hanging on to older buses because they are more fuel efficient.

It also considers allocating money to local authorities in areas where there are quality contracts, instead of paying BSOG to the operators involved. However it says: “A grant to local authorities would be would be paid as part of area-based revenue grant to the authority and would not be ring-fenced, given the government’s general policies to offer freedom to authorities to decide their own priorities for spend.

“There could therefore be some risk that part of this grant might be spent on services other than buses. To the extent that any payment is to TfL or a PTA, the grant would, however, be spent on transport in that area.” That might be a realistic assessment, but in some areas it’s hardly a comforting one.

The idea of linking BSOG to service performance and quality sounds good, although the measures suggested in the consultation document look unsatisfactory. One idea is that the grant could depend on buses having GPS and ITSO-compatible smartcard readers. Encouraging the widespread adoption of these technologies may be a good thing, but seems more like the subject for a capital grant, rather than a substitute for BSOG.

In the long term the government suggests that the use of smartcards would allow support to be paid to operators on the basis of either the number of passengers carried, or the distances they travelled. This presupposes that most bus users will have smartcards which, at the present rate of smartcard progress is going to be a very long term aim indeed.

Putting public money in to private sector businesses is always going to be a matter for debate, no matter what the industry and how the money is paid – rebate, grant or subsidy. The DfT is looking for a formula to support bus users which makes sense, and operators have until 5 June to have their say.

And to make a bid to separate social benefit from direct industry support.

• The consultation document is on the DfT website at – scroll down the page till you come to Bus Subsidy Consultation.

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