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Andy Burnham’s £2 cap on bus fares has triggered a second major funding row in as many days.
The new Prime Minister announced on Wednesday morning that he would cap single bus tickets at £2 from Jan 1 until the end of 2027.
The Government claimed the measure would cost more than £500m, with around £454m coming from a range of net zero projects and climate finance, including turning overseas climate grants to developing nations into loans that those countries would repay.
The remaining sum of about £50m will come from Department for Transport funding already set to be spent on buses.
However, Heidi Alexander, the Transport Secretary, failed five times during an interview to say whether interest would be due on those loans, saying: “The detail will need to be worked out. We wanted to make the announcement today.”
Mr Burnham’s opponents accused him of announcing another policy without knowing where the cash would come from, a day after one of Sir Keir Starmer’s closest allies said Mr Burnham was unveiling an unfunded plan to cut VAT on electricity bills.
Ms Alexander told Sky News: “The detail of it needs to be worked through. But in order for loans to qualify as overseas development assistance, the terms of the loan need to be reasonably favourable to the developing country and it needs to contribute to developing that country’s economy.
“So it makes sense to switch the spending, instead of being a grant it will be a loan, and that frees up money to spend on domestic priorities and to spend on our public transport.”
Challenged on whether poorer countries may be anxious about whether any interest was due, Ms Alexander responded: “So this is quite standard to have loans for international climate finance. As I say, the detail will need to be worked out.”
Pressed for a third time, Ms Alexander said: “I’m not going to sit in your studio and tell you how something will work when the detail hasn’t been worked out yet.”
Asked again, the Transport Secretary said she was “not going to give you the detail”, and when challenged for a fifth time, she said the question of interest on the climate loans would need to be “worked through”.
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Speaking to BBC Breakfast later on Wednesday morning, Ms Alexander insisted she was “100 per cent sure” the bus fare cap was fully funded.
However, Sir Mel Stride, the shadow chancellor, accused Mr Burnham and his top team of “not actually specifying where the money is going to come from”.
He said: “That is a worrying sign, we need to have a Government which is on top of the public finances, not one that is making lots of spending commitments without explaining where the money is going to come from.”
The Telegraph revealed last month that Mr Burnham wanted to introduce the £2 bus-fare scheme as soon as he took over from Sir Keir.
The announcement marked the second major economic policy to be unveiled by the Prime Minister since he entered No 10 on Monday.
He previously 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 programme, said the proposal was unfunded.
In a stinging public intervention, Mr Jones told Mr Burnham and John Healey, the new Chancellor, that they would need to find the money for the tax cut at the next Budget.
Capping bus fares at £2 will be badged as an attempt to help people back into work while also helping families with the cost of living.
The England-wide bus fare cap was previously set at £2, but Sir Keir increased the level to £3 shortly after the 2024 general election.
Some city mayors used their powers to keep local fares lower, including in Manchester, where Mr Burnham placed bus services under public control.
Writing for LBC after his policy was announced, Mr Burnham said: “I’ve spoken about the wrong turns Britain has taken over the last 40 years. What we did with our buses is a sorry example. When services were sold off and communities lost a say, fares went up and passenger numbers fell.”
He continued: “The measures we’ve announced this week will help but I know they won’t solve every problem. We need to do more. And we will.
“Later this year, we’ll lay out a 10-year plan to bring down the cost of living, help young people into work and build more council homes.
“A fairer bus fare is just the start. A fairer Britain is where we all want to be. Let’s bring back hope.”
The new bus fare cap does not cover London, which has a daily cap of £5.25 and a weekly cap of £24.70.
