The £2 bus fare cap will be replaced by a new £3 cap until the end of 2025 at this week’s Budget, the Prime Minister has confirmed.
Sir Keir announced the change during a speech in Birmingham, in which he also defended looming tax rises and confirmed millions in funding for local services to help get people back to work.
The bus fare increase will be part of Chancellor Rachel Reeves’ first Budget on Wednesday, as the Government tries to bridge what it has called a £22 billion “black hole” in the public finances, but has already been labelled a “bus tax” by one opposition party.
The Budget will also include almost £1 billion of additional funding for local authorities and bus operators to introduce new routes, protect existing ones and make services more frequent.
Sir Keir told the audience: “On the £2 bus fare, first thing to say is the Tories only funded that until the end of 2024 and therefore that is the end of the funding in relation to a £2 capped fare.
“I do know how much this matters, particularly in rural communities where there’s heavy reliance on buses.
“And that’s why I’m able to say to you this morning that in the Budget we will announce there will be a £3 cap on bus fares to the end of 2025 because I know how important it is.”
Single bus fares in England have been capped at £2 outside London, where they are £1.75 per journey, for most routes, since January 2023
When it introduced the policy, the Conservative government said routes with some of the biggest per-journey savings were between Leeds and Scarborough (£13), Lancaster and Kendall (£12.50), and Plymouth and Exeter (£9.20).
The new Government said the £3 cap would save £12 on a ticket between Leeds and Scarborough, while a ticket between Hull and York would see a saving of £5.50.
A Government source told the PA news agency that maintaining a cap on bus fares was “hard fought for in the Budget process” and is largely aimed at helping passengers in rural areas.
The source added that analysis commissioned by the Department for Transport found the £2 cap was “not financially sustainable for the taxpayer” and “offered poor value for money”.
The Department for Transport said maintaining the £3 cap until the end of 2025 would cost £151 million, while the Government was also providing £925 million for local authorities and bus service operators to improve routes.
Transport Secretary Louise Haigh said capping fares at £3 would “avoid a cliff-edge at the end of this year and keep fares affordable across the country – improving access to opportunities, particularly in towns and rural areas, while offering value for the taxpayer”.
She added: “Our bus revolution will give every community the power to take back control of their services, end the postcode lottery of services and turn the page on four decades of failed deregulation.”
The Liberal Democrats have labelled the change “a bus tax” and described bus services as “the backbone of economic activity in communities across our country”.
The party’s environment spokesman Tim Farron said: “Keir Starmer’s hike in the bus fare cap is without a doubt a bus tax.
“While this new Government has been left to make difficult choices, they cannot allow the burden of fixing the Conservatives’ mess to be on people and small businesses across the country.”
Mr Farron accused both Labour and the Conservatives of not understanding “that for rural communities, it doesn’t matter if the cap is £2 or £3 if they don’t have a bus service in the first place”.
Silviya Barrett, director of policy and research at pressure group Campaign for Better Transport, welcomed the Government not scrapping the cap completely, but described the change as “a significant increase that could be costly to many”.
She said: “The scheme’s success has proven that by making public transport more affordable, more people will use it, and we strongly urge the Government to put a plan in place to keep fares low for years to come.
“It is vital that the Government now carries out a full review of what other discount fares could replace the cap in the long-term to avoid any further rises.”
In the same speech on Monday, Sir Keir also said that the Chancellor will announce £240 million in funding for local services to help get people back to work, when she delivers her fiscal statement in two days’ time.
The Prime Minister also defended the tax rises expected on Wednesday.
He said “better days are ahead” and that “tax rises will prevent austerity and rebuild public services”.
He said that “the time is long overdue for politicians in this country to level with you honestly about the trade-offs this country faces, to stop insulting your intelligence with the chicanery of easy answers.
“Working people know that hard choices are necessary. They lived through the Liz Truss episode. They lived through the cost-of-living crisis.
“So they know that the things they want from us – protecting their living standards, building our nation, fixing our public services – they know that this can only be achieved alongside economic stability. There are no short cuts.”
The Conservatives have accused Labour of not being “straight with the British people” through the election campaign, given the tax rises that are expected.
Laura Trott, shadow chief secretary to the Treasury, said on Monday that “Rachel Reeves said during the election campaign that Labour’s plans ‘don’t require any further increases in taxes’ other than the tax rises set out in Labour’s manifesto. Keir Starmer confirmed today that this wasn’t true.
“The Budget Labour are about to deliver is the one they planned all along and Labour simply weren’t straight with the British people about it during the election campaign.”
