DfT planning to change bus subsidy formula
Wed 10 January 2007
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The Bus Service Operator's Grant (formerly fuel duty rebate) may be abolished this year in a review of the bus regulation framework. The BSOG has been criticised in the past because it takes away financial incentives for bus operators to switch to more fuel efficient, lower carbon vehicles.
Transport Times reports that: "Bus operators’ fuel duty rebate will be abolished in next year’s Government spending review and replaced by a subsidy based on passenger numbers."
The transport trade paper said that: "sources close to the review said that there is a firm intention to scrap the rebate, which refunds up to 80% of the taxes bus operators pay on diesel."
The Transport Secretary, Douglas Alexander, announced a review of the bus regulation framework last December.
According to the same article, the replacement for the BSOG is likely to be along the lines proposed by the Commission for Integrated Transport in a 2002 report which concluded that a passenger-based payment would provide an incentive for operators to attract more passengers, particularly in urban areas, and encourage the introduction of more fuel efficient vehicles.
The regulatory framework for buses was the subject of a recent House of Lords debate. During the debate, Lord Bradwhaw commented: "The question of how the fuel-duty rebate might be replaced has been investigated at least twice—I think it has been investigated more often—on the assumption that the fuel-duty rebate, or the Bus Service Operators’ Grant, is paid for the mileage operated, when we are in fact trying to subsidise people for carrying passengers. All attempts at reform have failed because of the considerable obstacle of very little reliable information about passenger mileage, and because any other way of making the information available would be bureaucratic and expensive to administer."
Another reason for the Government's reluctance to change the BSOG has been the fact that the subsidy pre-dates European State Aid rules. Any new bus subsidy scheme will be constrained by the need to meet current State Aid requirements and, consequently, is likely to be more limited than the old mechanism.
Related Documents
Transport Times news link (login required)
Lords debate (Jan 8 2007) - Hansard text
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