Prime Minister Andy Burnham has announced a nationwide cap of £2 for single bus fares across England, effective from January, as part of a suite of measures to address the cost of living crisis in his first week in office. The current cap, set at £3, is scheduled to remain until the end of March 2027. Some regions, like London and Greater Manchester, where Burnham previously implemented the £2 cap as mayor, already maintain lower fare limits. The new policy reverses a fare increase introduced by former leaders Keir Starmer and Rachel Reeves in 2024.
The £2 fare cap is not a new concept. It was in place from January 2023 to December 2024 but was scrapped on the grounds of affordability, according to the former government. Burnham and other regional mayors extended the cap in their jurisdictions and now aim to do so nationwide. No one should be priced out of those and left behind,' Burnham said, highlighting his commitment to making transport more accessible.
Financing the New Cap
The government estimates the £2 fare cap initiative will cost over £500 million. Funding will be drawn from reprioritizing international climate finance, which will be converted to loans, and through budget savings within the Department for Energy Security and Net Zero. An additional £50 million is being taken from existing Department for Transport funding reserved for buses. This reallocation has drawn criticism, particularly from Bond, a UK-based development network, which accuses Burnham of undermining international climate aid.
Romilly Greenhill, chief executive of Bond, stated that Burnham is 'raiding the diminished UK aid budget,' which she argues pits vulnerable domestic communities against those in developing countries most affected by climate change. Greenhill warned that such a move could exacerbate debt burdens in already vulnerable regions.
Government Defends Funding
Transport Secretary Heidi Alexander defended the funding strategy on BBC Radio 4’s Today programme, stating the £454 million in reprioritized funds would allow the government to 'give people a little bit of breathing space.' Alexander confirmed no new money is being spent, only 'switching spending.' The funds for international climate projects will instead be provided as loans, ensuring the money returns to the public purse.
Alexander also addressed concerns about the government’s plan to cut VAT on domestic electricity bills, which was initially funded by scrapping the digital ID scheme. Darren Jones, a former cabinet minister, had pointed out that the funds for the ID programme were not yet identified. Alexander maintained that the Office for Budget Responsibility had already accounted for £800 million of the £1.8 billion cost of the digital ID programme, which would now be redirected to fund the VAT reduction.
Burnham’s measures have drawn both praise and skepticism. Paul Nowak, general secretary of the Trades Union Congress, welcomed the fare cap and VAT reduction but urged Burnham to go further by taxing bank profits and introducing a 'social tariff' to support living standards. Nowak highlighted that the policies would benefit households, businesses, and local economies.
Burnham, who oversaw transformative changes to Greater Manchester’s bus network through the Bee Network, has long championed local control of transport systems. The new prime minister’s early actions are already showing signs of broader economic impact. On his third day in office, he received a positive economic signal as the Office for National Statistics reported that inflation fell to 2.6% in June, down from 2.8% in May.
Newly appointed Chancellor John Healey reinforced Burnham’s stance, noting that millions of people would benefit from a one-third reduction in bus fares. Healey emphasized that the measure is affordable and has already been planned for within the budget. As the policy rolls out, the government will watch closely how it impacts transport demand and public sentiment in the coming months.