Using bus service subsidy to develop the network

Abstract

This paper looks at the effects of using bus service subsidy to develop the local bus network through tendering, specifically within the city of Plymouth. However, much of this may be applicable to other urban areas. The authors argue that while tendered rural bus services may never cover their marginal costs and hence become commercially sustainable, within the urban context seed-corn funding can frequently be used to pump prime services, which then go on to become commercial operations, as has been demonstrated in Plymouth. By so doing, this releases that subsidy to be used elsewhere within the network, to develop a further section of that network. For Plymouth, the average time that this takes is approximately five years. The issue of operators ceasing to cross-subsidise services which may cover their marginal costs and contribute to overheads, but instead require external subsidy, is examined. A further question is posed regarding whether the remaining municipal bus companies (which still includes Plymouth Citybus) deliver better value for money than the publicly listed operators. Finally, although Best Value is supposedly designed to test value for money, a note of caution is sounded about its use in this context.