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Andy Burnham has announced a £2 cap on bus fares from the start of next year.
The Prime Minister will cap single bus tickets from Jan 1 until the end of 2027, with maximum fares also cut by a third.
The Government has claimed the measure will cost just over £500m. It said that around £454m would come from a range of net zero projects and climate finance, in a move that risks an early split in Labour.
Around £50m will come from Department for Transport funding that was already set to be spent on buses.
The new cap on bus fares does not cover London, which has a daily cap of £5.25 and a weekly cap of £24.70.
Mr Burnham’s announcement comes a day after his pledge to cut VAT on energy bills triggered accusations that he was rolling out unfunded tax cuts.
The England-wide fare was previously capped at £2 by the Tory government in 2023, but Sir Keir Starmer increased the level to £3 shortly after the 2024 general election. The cap was due to expire in March next year.
Some city mayors used their powers to keep local fares lower, including Mr Burnham, who also placed bus services under public control during his time as mayor of Greater Manchester.
The Telegraph revealed last month that the Prime Minister wanted to introduce the £2 scheme as soon as he took over from Sir Keir in No 10.
The policy will be seen as an attempt to help get people back into work while also helping families with the cost of living.
‘No one should be priced out’
On Wednesday morning, Mr Burnham said: “Good, affordable transport links are an essential. No one should be priced out of those and left behind.
“But for too long people have said that cheaper transport isn’t an option. I don’t accept that. I’ve done it before and I will do it again now: a £2 cap on bus fares for millions across the country.
“Lower fares will help people get to where they need to – giving them breathing space to help with the cost of living.
“As I said on my first day in office – I will build a country for everyone, everywhere. That means more connected communities, better access to opportunities, and a lighter load on people’s lives.”
‘Funded by savings made elsewhere’
John Healey, the Chancellor, claimed that “millions of people” would benefit from bus fares being reduced by a third and insisted the measure could be paid for.
“This action to ease the cost of living is funded by savings made elsewhere, so there’s no burden to British taxpayers, just pounds going back into their pockets,” he said.
Heidi Alexander, the Transport Secretary, claimed the move would make “everyday journeys easier and cheaper”.
On Wednesday, she said the bulk of the cash would come from switching climate grants to other countries to loans that they would need to pay back.
Asked why the money was coming from climate projects, Ms Alexander told Times Radio: “We worked closely with the Treasury on this and with Andy’s team in No 10 and those decisions were taken centrally about how best to use money that’s available across government.”
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The fare cap is the second major economic policy to be unveiled by Mr Burnham since he succeeded Sir Keir on Monday.
He revealed plans to cut VAT on electricity bills worth £850m, which he said would use cash from his predecessor’s abandoned digital ID scheme.
However, the tax cut soon descended into farce when Darren Jones, a close ally of Sir Keir who oversaw the digital ID program, said the proposal was unfunded.
In a stinging public intervention, Mr Jones told Mr Burnham and Mr Healey that they would need to find the money for the tax cut at the next Budget.
Meanwhile, Mr Burnham is continuing to put his ministerial team in place, with Anas Sarwar, the Scottish Labour leader, expected to be given a peerage and a job in the revamped Department for Business, Innovation, Science and Trade.
Mr Sarwar, who has been Scottish Labour leader since 2021, was among the first to call for Sir Keir to stand down in February. He hailed Mr Burnham for his “bold Labour vision” as he entered No 10 this week.
Downing Street confirmed appointments, including Dan Jarvis, who stepped in as Sir Keir’s defence secretary when Mr Healey resigned amid a funding row, has been returned to his previous post of security minister.
James Murray, who became health secretary when Wes Streeting quit, has been made financial secretary to the Treasury and paymaster general.
Anna Turley is no longer Labour Party chair and has instead been made a Home Office minister.
Florence Eshalomi has become a housing minister and Andy Slaughter is now solicitor general, freeing up their roles as heads of Parliament’s housing and justice committees.
There were also 17 reappointments for ministers to remain in their roles, including Sarah Sackman as justice minister and Luke Pollard as defence minister.
