£2.3 billion for transport awarded to LTAs in Spending Review

‣ Local Transport Grant money for rural areas and smaller cities and towns could be used for bus projects

‣ Extension of the bus fare cap scheme confirmed

‣ £750 million per year announced for bus services

‣ Cheshire West and Chester, and York and North Yorkshire to take part in bus franchising pilots

The government has allocated £2.3 billion in Local Transport Grant (LTG) funding to local transport authorities (LTAs) over the next four financial years as part of the Spending Review published today.

Allocations have been made to 60 areas in England which are not in receipt of funding via the City Region Sustainable Transport Settlements (CRSTS) or Transport for City Regions (TCR) schemes.

Included in the scope for use of the funding is “improving public transport, funding new zero-emission buses, improving accessibility, addressing congestion”, although DfT says detailed guidance will follow later this year.

The funding for the final year of 2029/30 represents an approximately four-fold increase in the £150 million handed out for the initial phase of LTG funding in 2025-26, which was born out of former HS2 money, although that money was exclusively for bus.

Those allocations were made via the Bus Service Improvement Plan mechanism and only to LTAs in the Midlands and the North.

Over the next four years, areas in the South will now also benefit, with those LTAs sharing £1.3 billion of the £2.2 billion of capital funding. The remaining £900 million will go exclusively to the North and Midlands “to make up for years of underinvestment in these regions”.

The other £100 million is resource funding, spread over three years.

Capital funding allocations have been decided based on a formula taking into account population (70%) and deprivation (30%).

The fund is designed for smaller cities and towns, and rural areas following last week’s announcement regarding TCR, which saw £15.6 billion handed out to transport projects in the larger mayoral combined authorities.

A four-year funding certainty will be welcomed by the sector after Local Transport Minister Simon Lightwood previously hinted that three years was possible with regard to bus service funding in broad terms.

Fare cap confirmed and £750 million for bus services

Meanwhile, the Chancellor also used her speech to confirm that the bus fare cap scheme in England would be extended until at least March 2027.

It was also announced that the government would provide a separate £750 million per year to “maintain and improve bus services”.

That is assumed to include Bus Services Operators Grant – accounting for £243 million in 2025/6 – but detail is lacking.

Franchise pilot locations revealed

However, the review confirms this includes funding for already announced franchising pilots, including in York and North Yorkshire.

York and North Yorkshire Combined Authority has previously indicated an interest in franchising.

Cheshire West and Chester could thus become the first area in England that is not a mayoral combined authority to move towards franchising, taking advantage of legislation in the Bus Services (No 2) bill, which is due later this year.

Reaction to the Spending Review

The Confederation of Passenger Transport, in reacting to the Spending Review, insisted bus must receive a fair allocation as part of the LTG.

Alison Edwards, Director of Policy and External Relations at CPT, says: “Transport is fundamental in kickstarting economic growth. Buses, in particular, enable 11 million people every day to get to work, to access education and to spend money in local high streets.

“Today the Chancellor stated her commitment to improve the journeys people make every day with the promise of a four times increase in local transport grants by the end of this Parliament. Buses, which are Britain’s favourite form of public transport, must receive their fair share of this capital funding. They are great value for money; every pound dedicated to buses generates a return to the economy of £4.55.

“While most passengers already pay less than the £3 cap, we recognise that low headline fares are an important part of the mix to enhance buses’ appeal, so the industry will again work closely with government to make the latest extension to the fare cap work.

“But affordability is only one part of the picture. Good bus services improve life in communities across the country and are vital for social and economic inclusion. They improve peoples’ health, combat loneliness and revive footfall in town centres.

“The bus network outside London costs £3.5 billion to run. While bus fares pay for most of this, the social importance of transport is such that councils need to step in and support the cost of certain services.”

“Operators will continue to work hard with local authorities to ensure that all funding allocated to buses is used effectively and that bus passengers get a fair deal.”

On the fare cap news, Claire Miles, CEO of Stagecoach, says: “We welcome today’s announcement on the extension and look forward to working with the Department for Transport to understand more details regarding the scheme.

“Affordable, accessible bus travel is vital for connecting people to jobs, education and essential services. This continued support will help our customers manage the cost of living while encouraging more people to choose more sustainable public transport options.

“Reliable, affordable transport is essential to our infrastructure and economy, and we’re proud to play our part in ensuring vital routes are served.”

Jason Prince, Director of the Urban Transport Group, says: “The Spending Review – together with the Chancellor’s transport funding announcement last week – acknowledges the tireless work of our members in delivering better public transport services, and provides a clear commitment to devolution.

“We now have funding clarity over the coming years that will help deliver vital local transport schemes and services, spurring economic growth and investment in public transport.”

Transport for the North Chief Executive Martin Tugwell adds: “We are very pleased with the extra investment in the North’s transport infrastructure and services that has been announced.

“An extra £3.5 billion for the TransPennine Upgrade, support for the reopening of Doncaster Sheffield Airport, and a four-fold increase in local transport grants are all very welcome, especially after last week’s announcement of billions for city region transport schemes.

“We are also pleased to see more support for bus services, including the extension of the fare cap, and franchising pilots in York and North Yorkshire and Cheshire.”

Local Transport Grant phase 2 capital allocations