Spending Review: Plug £452 million bus pass shortfall to boost economy and protect routes

Nearly half a billion pounds had to be spent again by councils last year to plug a shortfall in funding for free bus passes, at the expense of lower fares and other transport services to help more people into work and boost growth, latest analysis has revealed.

The Local Government Association said an estimated £452 million had to be used from councils’ already overstretched budgets last year to meet the cost of the passes, which provides older and disabled people with free off-peak travel on all local bus services. 

Councils in England are legally obligated to administer the national scheme and are responsible for reimbursing bus operators for journeys made by those with a pass.

The £452 million funding gap is the difference between the funding councils receive from government for the scheme, compared to the actual number of journeys made in 2024/25.

Discretionary bus services - such as free peak travel, community transport services, reduced fares and school transport – have had to be scaled back by local authorities across the country for them to top up the statutory national scheme from their discretionary budgets.

The LGA, which represents councils, is calling on government to use the upcoming Spending Review to provide long-term, consistent funding for local bus services and plug the gap in the scheme, which could lead to better bus services for all, including free and discounted fares for young people and other groups.

It says better local public transport can support the Government to achieve economic growth and opportunity, by encouraging more people into work, training or education, especially those in the lowest income groups who are least likely to have access to a car.

Streamlining existing, multiple bus funding pots into a single fund would also lead to more reliable services and help to kickstart growth, the LGA says.

The Government has recently provided much needed extra funding for the next year to protect routes and keep fares down including the £3 fare cap, which the LGA says lays the foundations to boost growth though long-term, fully devolved funding for local transport and highways in the upcoming Spending Review, in line with five-year funding settlements for Network Rail, National Highways and Metro Mayors.

Cllr Adam Hug, transport spokesperson for the LGA, said: 

“Free bus passes provide a vital lifeline for many in our communities, allowing vulnerable residents to go shopping, visit family and friends and attend appointments.

“Councils want to keep this scheme running but cannot keep having to find nearly half a billion pounds a year from their own overstretched budgets to make up the shortfall, money which instead could be used to help other people in need to get to work or college.

“By using the Spending Review to plug this gap and give councils the long-term funding they need, we can help government meet its own objectives of breaking down barriers to employment and opportunity, while boosting inclusive economic growth.”

Notes to Editors

• Previous research commissioned by the LGA has found that a one per cent improvement in public transport journey times could support a 0.91 per cent reduction in employment deprivation, that is the share of people who are either looking for work or would look for work with the right support or offer.

  LGA: How local transport infrastructure influences economic inclusion

• The Spending Review will set three-year day-to-day government department budgets between 2026/27 to 2028/29. The final details of the Review will be announced by the Chancellor on June 11. 

  LGA Spending Review 2025 submission