WIREDGOV

The Government is reviewing expenditure devoted to the bus industry and DfT has invited comments on possible reforms to the Bus Service Operators Grant (BSOG).

BSOG is a rebate to bus operators covering in excess of 80% of the duty element on fuel used in operating local bus services. The value of the grant is currently £413m a year, exceeded only by concessionary bus travel for elderly and disabled people in terms of funding for the bus industry.

We welcome an examination of BSOG, particularly the suggestion that it should be more closely allied to climate change targets in relation to fuel efficiency and vehicle emissions.

Nevertheless, we've warned about possible threats to rural bus services should the BSOG paid to operators be reduced. Only a relatively small number of services in rural areas operate commercially without local authority subsidy, often at low profit margins.

Any overall reduction in the BSOG received by an operator could mean services cease to become financially viable and would need a subsidy to continue. Services already in receipt of a subsidy would be affected because BSOG is taken into account by operators as part of their tender price and would have implications for local authority expenditure.

Both these circumstances would create additional budgetary pressures for local authorities, possibly affecting their ability to maintain the current network of services.

Withdrawal of rural bus services can cause major difficulties for rural communities, in particular people without their own transport, and creates difficulties for accessing a range of services outside their local area.

Read our full response to the consultation

Fuel price increases : implications for bus operators

A more immediate concern for bus operators is the increasing cost of fuel.

Major bus operators are able to make deals with fuel suppliers which establish the price that they pay for a future period of time (known as ‘hedging’). When these agreements come to an end the companies need to make a judgement about future price movements when negotiating new arrangements.

For smaller operators the opportunity to make these deals are not available. Many rural services are provided by smaller operators and are more exposed to current market prices.

This has a significant impact on their costs and will affect profit margins and future viability without remedial action such as fare increases and cost cutting measures, which may include termination of commercial services and a need to seek higher tender prices from local authorities.