The ‘Bus Bonus’: An idea whose time has come

Claire Haigh
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Thinking ahead to the forthcoming Budget, what advice could we give to the Chancellor?  Are there any measures which would deliver real benefits both to those struggling on low incomes and to the UK economy?

One such measure is the ‘Bus Bonus’: a tax incentive to allow employers to provide their employees with ‘e-vouchers’ to help pay for the cost of commuting to work by bus.

The issue is extremely timely, with the political and public consciousness firmly focused on the cost of living and the plight of the working poor. The economy is recovering but the benefits are yet to be felt by all.  With transport costs second only to housing, fuel and power in terms of their share of total household expenditure, the affordability of commuting is a real financial challenge for many households.

The Bus Bonus is one of the three core proposals in Bus 2020: A Manifesto for the Next Parliament, which sets out how the Government can harness the potential of the bus to catalyse jobs and growth.

Buses play a central role in helping people access employment, with almost 2.5 million regularly commuting by bus and a further 1 million using them as a vital back up.  Buses are particularly important to those on low and moderate incomes with data from the National Travel Survey showing that 48% of the lowest income group and 36% of the second lowest income group do not have access to a car.

The objective of the Bus Bonus initiative is to improve access to jobs by making it easier and cheaper for people to commute to work by bus.  It will encourage more people to enter the labour market and/or travel further to find work that better matches their skills.

Whilst there may have been some sympathy for the concept at the Treasury in the past, what has been missing up until now is a clear idea of how such a measure could be implemented along with a rigorous business case.

Working with KPMG, we have developed a specification for a Bus Bonus scheme which would be both easy to implement and would target support through the tax system where it is needed most.  We estimate that the initiative would cost the Treasury just under £80 million per year, mainly in foregone tax revenues, but it would deliver some £173 million benefits to the wider economy thus generating an overall net benefit around £93 million.

Tax incentives for bus commuters has been a long standing goal for the bus sector.  Supporters of the concept point to the net rail subsidy per passenger compared with bus, and argue that a tax allowance for bus commuters would be a step towards rectifying the imbalance.

Moreover, free workplace parking for employees already effectively amounts to a tax free benefit.  We currently have a somewhat perverse situation whereby employees without a car are in effect subsidizing those with a car!

And encouraging people to commute by bus instead of car will help reduce carbon emissions and congestion, likely to become an increasingly pressing issue and constraint on growth as the economy recovers further.

Could it just be that the Bus Bonus is an idea whose time has come?  It is certainly a progressive measure which directly targets support through tax system to those who need it most, and it would give a timely boost to the UK economy and job market.

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