Bus operations in England outside London will be permitted to return profits when in receipt of Bus Recovery Grant (BRG) funding, terms and conditions for the scheme issued by the Department for Transport (DfT) show.
BRG will succeed COVID-19 Bus Service Support Grant (CBSSG) – which does not permit a profit to be made – from 1 September. It will run to 5 April 2022. BRG will be paid to operators in respect of eligible commercial services. A further stream will be paid to local transport authorities (LTAs).
No clarity on Bus Recovery Grant payments yet
DfT will issue guidance on how the commercial BRG payment formula will work in due course. Its initial document thus does not say how much reimbursement may be expected. However, in July, Under-Secretary of State for Transport Baroness Vere told operators in a letter that the £226.5m fund will pay a fixed subsidy based on “key metrics.”
The formula will consider farebox revenue loss and mileage operated during the life of the scheme. Baseline information that is central to the formula is required by the Department by 17 September.
Operators must run as close as possible to 100% of overall scheduled commercial mileage measured against an agreed baseline for the equivalent month between September 2019 and March 2020. To be eligible for BRG, they must not run less than 90% of overall scheduled commercial mileage against the equivalent baseline, although if that is not met, there is scope for justification to be offered to enable payments to continue.
As with CBSSG, operators will work closely with LTAs as part of their participation in the BRG scheme. Such work will involve consultation about, and agreement on, aggregate service levels.
“This process should have regard to the objectives of the National Bus Strategy (NBS), including taking all reasonable steps to ensure that communities with baseline commercial bus provision are not left unserved, service hours are not significantly curtailed, and that reasonable requests by LTAs to maintain existing services are complied with,” the terms and conditions state.
Operators must also provide LTAs with by-route patronage data for commercial and tendered services, and a four-weekly consolidated return detailing any service changes that are to be made from the baseline. They must submit “an overall strategic justification” for the latter.
Reasonable profit calculation also involves LTAs
While profit is permitted under BRG, the level of that return is also within scope of LTAs’ involvement.
If an LTA informs DfT, or DfT judges, that an operator is making a pre-tax profit “at a level that DfT believes is excessive,” then all bodies concerned will ensure that the excess is “reinvested into the ambitions of the NBS,” the document declares.
To determine whether a profit is excessive, DfT will take into consideration both the operator’s profit in the financial year prior to March 2020, and the report by the Competition Commission (now the Competition and Markets Authority) into local bus service markets. Management accounts are required to be supplied to DfT to cover two periods during the life of BRG.
Operators may withdraw from the active BRG scheme before its conclusion. If they do so, they must repay to DfT any profit that is defined as positive earnings before interest and tax for the period that they were in receipt of BRG support.
