A train travelling on tracks

Table of contents

On 30 March 2023, the House of Lords is due to debate the following question for short debate:

Lord Berkeley (Labour) to ask His Majesty’s Government how bus and rail passengers will benefit from the investment plans for the transport network announced on 9 March.

1. Government’s plans for the bus and train networks

1.1 Bus services

The national bus strategy for England ‘Bus back better’, published in 2021, outlines the government’s vision for bus services in England outside of London. (The Mayor of London is responsible for London’s buses, which are run by a subsidiary of Transport for London.)

A key aim of the strategy is to increase bus journeys, firstly by returning the overall number of journeys made by bus to pre-Covid levels and then to exceed it. To achieve this, the strategy intends to bring services across England closer to London standards, with more services, simpler and cheaper fares, more bus lanes, and greener and more accessible buses.

Bus Back Better set out the following reforms to help deliver these aims:

  • a greater role for local transport authorities in planning local bus services
  • guidance for local transport authorities on the provision of socially and economically necessary services
  • local bus service improvement plans (BSIPs)—joint plans produced by local transport authorities and operators—setting out how each area will deliver the goals and expectations of the national bus strategy
  • measures to tackle the negative impact congestion has on bus services, including bus priority measures and new powers and guidance for local transport authorities
  • reforms to the bus service operators grant—a fuel subsidy paid to operators and local transport authorities
  • measures to increase the uptake of zero emission buses

According to a recent report from the National Audit Office and analysis from the House of Commons Library, bus services affect the priorities of two-thirds of government departments. This includes the government’s 2050 net zero target and its levelling up agenda. For example, improvements in bus services will help to deliver on levelling up, according to a recent report from KPMG, by providing better connections between homes, jobs and economic centres thus supporting local economic growth.

However, factors such as the impact of the pandemic on work and travel patterns has affected progress against the main objectives of the national bus strategy, with recent statistics suggesting bus journeys have not returned to pre-pandemic levels.

Alongside the main sources of government revenue for the bus networks from the bus service operators grant and the revenue support grant, the government has provided the following ad hoc support in recent years:

  • Bus recovery grant. The Covid-19 bus services support grant was set up to support operators throughout the pandemic owing to reduced patronage. This was renamed the bus recovery grant and was originally due to end in March 2022. It was extended to October 2022 and then extended again to March 2023 with a further £130mn of funding.
  • Local bus service improvement plan (BSIP) funding. As part of the government’s ‘Bus back better’ strategy, the Department for Transport asked all local authorities to develop a BSIP in 2021/22. Of the 79 local transport authorities who submitted BSIPs, 31 are due to receive central government funding of £1.15bn to deliver their plan.
  • £2 fare cap. The UK government subsidised operators across England to cap many single bus fares at £2, between January and March 2023, at a cost of £60mn.

Under the government’s ‘Bus back better’ strategy, from April 2022 onwards, future sources of funding will only be made available to local authorities that have either established ‘enhanced partnerships’ with operators or a franchising scheme. This has drawn criticism from observers such as the Campaign for Better Transport, which argues that the one-off, competitive nature of this process has resulted in local authorities with previous track records of winning grant funding being successful. In contrast, it contends that those who are missing out are often areas that already have the poorest bus provision.

On 17 February 2023, the government announced that it would extend the £2 fare cap for another three months up to June 2023 and provide £80mn to “continue support for critical bus services around England”. Alongside the £75mn to cap fares, the government said this represented a commitment of £155mn to support bus services. It added that this recovery grant support was in addition to government investment of £3bn in bus services by 2025, including over £1bn to improve fares, services and infrastructure.

1.2 Train networks

1.2.1 Williams-Shapps plan

The government’s white paper on rail reform, known as the William-Shapps plan, was published in May 2021. The plan followed a review of the railways led by Keith Williams, the former chief executive of British Airways (known as the Williams Rail Review).

In a statement to Parliament in May 2021, the then transport secretary, Grant Shapps, described the plan as “the biggest shake up in three decades, bringing the railway together under a single national leadership, with one overwhelming aim: to deliver for passengers”. The plan proposed to do the following:

  • create a new public body, Great British Railways (GBR) as a single “guiding mind” to own the infrastructure, receive fare revenue, run and plan the network and set most fares and timetables
  • replace the franchise system with new passenger service contracts, similar to the contracts operated on Transport for London’s overground and bus network
  • reform and upgrade the fares system, with an emphasis on standardisation and simplicity, together with the introduction of new and innovative products such as flexible season tickets
  • formulate a new 30-year strategy for rail to “provide clear, long-term plans for transforming the railways to strengthen collaboration, unlock efficiencies and incentivise innovation”
  • establish a national brand and identity (an updated version of the classic ‘double arrow’ logo) to emphasise that the railways are one connected network, with national and regional sub-identities; the plan also sets out who will be responsible for decisions about local train services and rail infrastructure

The government subsequently announced its intention in the 2022 Queen’s Speech to bring forward a Transport Bill, which would include the legislative changes needed to implement the Williams-Shapps plan.

Ministers consulted on the proposed legislative changes between June and August 2022. This consultation focused specifically on the legislative measures required to deliver the government’s rail reforms. Aspects of the Williams-Shapps plan were not included because they do not require primary legislation. In evidence to the House of Commons Transport Committee in March 2022, Minister of State for Transport Wendy Morton said that the government hoped the legislation would be in place by “early 2024”.

The rail industry’s income comes from government subsidy, rail fares and other sources (for example, rental income from Network Rail’s property), including private investment. The extent of government support for the railway has fluctuated over time. As noted in recent analysis from the House of Commons Library, the government has extended significant support to the railways in the wake of the Covid-19 pandemic:

Public subsidy for the railway, especially subsidies for train operators, increased significantly following the Covid-19 pandemic to make up for the loss of income from fares. Passenger journeys plummeted to historically low levels in response to government restrictions and official advice to work from home and avoid public transport. In 2020–21, there were just under 400 million passenger journeys on Great Britain’s railway compared to over 1.7 billion before the pandemic. In 2020–2021, public subsidy for the day-to-day running of the railway increased to almost £17 billion, an increase of over £10 billion. Most of the increase (£9 billion) was a direct result of emergency contracts introduced during the Covid-19 pandemic, which transferred the cost and revenue risk of running passenger services from franchised train operators to the government.

1.2.2 HS2 and Northern Powerhouse Rail

The government gave its support to completing HS2 (or High Speed Rail 2) in its entirety in February 2020, following the Oakervee review, which examined the case for the programme.

HS2 is being delivered in three phases: phase 1, phase 2a and phase 2b. Parliamentary approval for phase 1 and phase 2a has already been given through the High Speed Rail (London to West Midlands) Act 2017 (phase 1) and the High Speed Rail (West Midlands to Crewe) Act 2021 (phase 2a). However, there has been some uncertainty over the final phase (phase 2b) of the project, which was due to consist of an eastern and a western leg.

The government published its ‘Integrated rail plan for the North and the Midlands’ (IRP) on 18 November 2021. The IRP outlined the government’s plans for delivering and sequencing rail investments in both regions, including phase 2b of HS2, Northern Powerhouse Rail (NPR) and other regional rail investments. At that time, the government decided not to proceed with its previous plan to build a new high-speed line from Birmingham to Leeds. Instead, it said the eastern leg would run from the West Midlands to the East Midlands, ending at East Midlands Parkway. The government also committed to look at the best way of bringing HS2 trains to Leeds.

The development of HS2 was a key focus of the government’s statement on 9 March 2023, as examined below. The most recent six-monthly report to Parliament from October 2022, prior to the 9 March announcement, said the approximate cost range for the elements of the scheme committed to by the government for phases 1, 2a, and the 2b western leg was between £53bn and £71bn (in 2019 prices). (This estimate does not include HS2 East.)

The government also intends to proceed with a core NPR network between Liverpool and York. The NPR network is being delivered in phases and the IRP suggested that most of the work is expected to be delivered in the 2030s and 2040s. Given that the programme remains at an early stage, recent analysis from the House of Commons Library notes that the costs of the scheme are therefore subject to considerable uncertainty. A recent government estimate suggests that the project will cost £17.2bn in 2019 prices.

2. Ministerial statement on 9 March 2023

On 9 March 2023, Secretary of State for Transport Mark Harper provided a written statement to Parliament on transport investment.

The statement noted the commitments made by the Chancellor Jeremy Hunt in the autumn statement 2022, which Mr Harper said would mean £40bn of capital investment in transport across the next two financial years. However, he also said that the war in Ukraine and the recovery from the Covid-19 pandemic had created “significant headwinds” which had made it difficult to deliver on these capital programmes. As a result, he said that some schemes were going to take “longer than expected”. At the same time, Mr Harper said that “refocusing our efforts will allow us to double down on delivering the rest of our capital programme” and place transport investment on a sustainable footing.

As such, the statement made the following announcements on specific programmes and projects with relevance to buses and rail.

2.1 HS2 and rail services

The statement noted that £20bn had already been spent delivering HS2 phase 1 between London and the West Midlands. In addition, it said that the government was prioritising HS2’s initial services between Old Oak Common in London and Birmingham Curzon Street to “provide delivery of passenger benefits as soon as possible”.

Mark Harper added that the government remained committed to delivering HS2 services to Euston, and would “address affordability pressures to ensure the overall spending profile is manageable”. As a result, the statement said that the government would “therefore take the time to ensure we have an affordable and deliverable station design”, delivering Euston alongside high-speed infrastructure to Manchester. Mr Harper said the government would continue to take the High Speed Rail (Crewe–Manchester) Bill through Parliament, and said that “the Crewe-to-Manchester section will also form the foundations for improved rail services in the North through Northern Powerhouse Rail”.

On HS2 phase 2a between Birmingham and Crewe, Mr Harper said the government “remained committed” to this programme. However, he said that factors such as the pressure caused by rising inflation would delay its construction by two years:

We have seen significant inflationary pressure and increased project costs, and so we will rephase construction by two years, with an aim to deliver high-speed services to Crewe and the North West as soon as possible after accounting for the delay in construction.

In addition, Mr Harper said that work continued on progressing commitments made in the IRP to develop HS2 East, the proposed route for HS2 services between the West and East Midlands. He also reiterated the commitment to consider the most effective way to take HS2 trains to Leeds.

2.2 Wider transport investment

On wider transport funding, the statement said that the government “remain[ed] committed to supporting all forms of transport and have invested over £850m in active travel between 2020/21 and 2022/23”. It said the government will commit “to spend at least a further £100m capital into active travel over the remainder of the spending period, as part of a total of around £3bn investment in active travel over this Parliament, including from city and region sustainable transport settlements and National Highways”. Mr Harper said these levels would be reviewed “as soon as practically possible”.

No specific mention of bus services was made in the statement.

3. Reaction following the government’s announcement

3.1 Revised HS2 timetable and budget

On 14 March 2023, Chair of the House of Commons Transport Committee Iain Stewart (Conservative MP for Milton Keynes South) secured an urgent question in the House of Commons on the government’s revised plans for HS2.

As part of his question, Mr Stewart asked the government:

  • what the “increased project costs” mentioned in the 9 March 2023 statement (aside from the inflationary pressures) were
  • for clarity on what the government meant when it said that Old Oak Common to Birmingham would be finished “as soon as possible” and whether that would mean additional delays to its opening date
  • for the reasons for the delay to the Euston to Old Oak Common section

In his response, Minister of State for Transport Huw Merriman said that the increased project costs chiefly related to the opening section of the line in phase 1, which is under construction and upon which £600mn a month is currently being spent. He said that construction inflation rates of around 15% were the reason for the cost issue.

The minister said that the government expected that passengers and communities would benefit from high-speed rail services between Old Oak Common and Curzon Street by 2033. Addressing the Euston delay, Mr Merriman said that “Euston was always scheduled for delivery after the opening of phase 1, which is why we are prioritising Old Oak Common”. He added that construction at Euston would not proceed in the next two years due to affordability and profiling issues. However, he said the time would be used “to work with partners to ensure an affordable and deliverable design”.

The shadow secretary of state for transport, Louise Haigh, said that she had a leaked document from senior Department for Transport officials which said that the delays to HS2 would themselves increase the programme’s cost. She added that the document also suggested further elements of the plans were in jeopardy:

[The document] admits that [delaying construction] will cost jobs and that construction firms could go bust; it cannot rule out slashing high-speed trains that serve Stoke, Macclesfield and Stafford altogether; and it suggests that HS2 could terminate on the outskirts of London until 2041.

The minister said he would not comment on the contents of allegedly leaked documents, but maintained that it was an “entirely responsible government approach to balance the commitments we make […] and, indeed, to reflect on how the delivery of HS2 had been designed”.

3.2 Support for the bus industry

On 16 March 2023, support for the bus industry was the focus of an oral question in the House of Lords. Responding to a question from Lord Berkeley calling for the government to further devolve the subsidy and funding of bus services, the parliamentary under secretary of state, Baroness Vere, said that just because something was devolved was no guarantee that the same amount of money would provide services at a lower cost. She added:

It is the case that local authorities get funding to support bus services, including from the fare cap, the bus recovery grant, bus service operators grant and concessions. The simple answer here is that we have to make local transport authorities and bus operators work together more effectively.

Baroness Randerson (Liberal Democrat) drew upon research from the Campaign for Better Transport which contended that over the last two years there had been a 23% cut in bus services in England. She argued this presented a clear case for the reform of the bus service operators grant system, which was “clearly not working”.

In response, Baroness Vere did not comment on the findings from the Campaign for Better Transport directly but said that the bus service operators grant would be reformed, and that such reforms would be laid out later this year for consultation.

4. Read more

Cover image by Robert Owen-Wahl on Pixabay.