Frank Suttie, Commercial Director at Freeths specialising in transport projects, examines how Prime Minister Andy Burnham's planned £2 national bus fare cap could strengthen the case for bus franchising across England, while raising fresh questions for operators over funding and revenue certainty.

It should be far from surprising that Prime Minister Andy Burnham has included in his quick wins a £2 fare cap for most of England from January 2027. The proposal forms part of the Government's wider cost-of-living agenda and builds on Burnham's experience in Greater Manchester, where a £2 cap has been maintained alongside the introduction of the Bee Network franchising model.

The reform of the local bus market in Greater Manchester is a key part of his Manchester legacy. Taking back control of bus services brought with it the ability to determine what price passengers should pay, and the combined authority’s budget has been managed to ensure that a capped fare was affordable. Arguably, this will have come at a cost to other public service expenditure, so the question does need to be posed: why are bus services seen as so important?

Statistics give us a big clue. Travel by bus continues to be the most used form of public transport. Whilst there are significant issues to be addressed in rural areas, where services can be limited or even non-existent, we should look forward to this challenge also being addressed. Evidence from previous fare-capping initiatives suggests that there will be increased patronage and therefore greater mobility, particularly amongst the less well-off.

The initiative also simplifies decision-making on choice of travel mode, or whether to travel at all. Understanding sometimes complex fare tariffs is regularly mentioned as a deterrent when considering travel options.

The proposal represents another step away from the predominantly deregulated bus market established by the Transport Act 1985 and towards a more interventionist model of public transport governance.

We should also note a broader policy trend towards viewing local bus services as an essential public service rather than a purely commercial activity. That has implications for future transport policy, potentially accelerating the adoption of franchising and other regulatory reforms across England. Local authorities are already engaged in other activities driven by transport legislation, including the identification and management of local bus services that are deemed to be ‘socially necessary’.

Legally, fare caps are relatively straightforward where services operate under franchising arrangements. A franchising authority has substantial control over fares, ticketing and service specifications, allowing fare policies to be integrated directly into franchise contracts. Greater Manchester's Bee Network already demonstrates how a transport authority can use franchising powers to pursue wider social and economic objectives rather than relying solely on market-led pricing. The Bus Services Act 2017 and subsequent reforms have significantly expanded the ability of mayoral combined authorities to pursue this approach.

For areas operating under the traditional deregulated model, however, implementation relies upon agreements with operators and public funding mechanisms to compensate for lost revenue. This creates ongoing regulatory challenges around subsidy arrangements, competition considerations and ensuring that public funding is used efficiently and transparently.

For local authorities and mayoral combined authorities, the announcement is likely to increase expectations that public transport will be actively managed to deliver affordability and accessibility objectives.

Authorities operating franchised networks may see the policy as further validation of the franchising model. Under franchising, authorities can directly determine fares and integrate pricing with wider transport strategies. This may encourage more authorities to consider franchising powers, particularly following recent legislative reforms intended to simplify access to those powers. However, the upfront investment required to move from a deregulated to regulated model should not be underestimated.

For operators, the position is more complex. Lower fares may increase passenger demand and ridership, but operators will be concerned about the extent to which public funding fully compensates for reduced farebox revenue. The long-term sustainability of the policy will depend on the reliability of government funding and the treatment of fare-cap arrangements within operating contracts.

Franchised operators may welcome the greater revenue certainty that frequently accompanies public contracts. Operators in deregulated markets, by contrast, may face greater uncertainty if future funding arrangements are altered or withdrawn.

The proposal therefore has the potential to strengthen the commercial case for franchising by reducing reliance on passenger revenue and increasing the role of public funding in supporting local services. At the same time, however, this does not provide the much-desired solution to the equally important challenge of expanding the availability of local bus services.