£2 bus fare cap to increase to £3 in Budget, Starmer announces

The increase will be announced at Rachel Reeves’ first Budget on Wednesday.

Sir Keir Starmer was speaking during an event in the West Midlands (Darren Staples/PA) (PA Wire)

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.

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).

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 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.”

Ministers have been facing repeated questions about the Government’s definition of “working people”, after Labour’s election manifesto pledged not to increase taxes on working people – explicitly ruling out a rise in VAT, national insurance and income tax.

Earlier on Monday, Cabinet minister Pat McFadden had suggested that “income levels and job descriptions is not the right way to look at” whether or not somebody is classed as a working person.

Asked on the BBC’s Today programme what people who are not working people are called, he said: “When we talked about working people we referred to the promises that we made in the manifesto around the taxes on wages that people pay – they won’t go up when the Chancellor gets to her feet on Wednesday.”

Asked whether people such as landlords are classed as working people, Mr McFadden said: “I honestly think this thing about income levels and job descriptions is not the right way to look at this.

“The right way to look at this is: will we stick to the manifesto promises that we made on tax? And we will, and you’ll see that when the Chancellor gets to her feet.”

The Prime Minister also referred to the phrase in his speech, saying his plan to “return Britain to the service of working people can only be earned through actions, not words”.

“Change must be felt,” he added.

“But every decision that we have made, every decision that we will make in the future, will be made with working people in our mind’s eye, people who have been working harder and harder for years just to stand still.”