Andy Burnham Caps Bus Fares at £2 Across England, Funds VAT Cut on Electricity

Single bus fares across England will be capped at £2 from January, Andy Burnham has announced, as he continues to introduce measures to tackle the cost of living in his first week as prime minister.

The nationwide cap is currently set at £3 until the end of March 2027, although some areas – including London and Greater Manchester, where Burnham set a £2 limit as mayor – have lower top rates for single tickets.

The £2 cap reverses an increase put in place by Keir Starmer and Rachel Reeves in 2024, and will be in place throughout 2027. The same cap was in place between January 2023 and December 2024, but the former prime minister and chancellor argued it was not affordable. Some metro mayors, including Burnham, decided to fund an extension of the lower limit in their areas.

“Good, affordable transport links are an essential. No one should be priced out of those and left behind,” Burnham said on Wednesday. “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.”

The initiative, which will apply across all of England except London, is expected to cost more than £500m, with money allocated to allow devolved governments to take similar action.

About £400m of that will come from switching investment in international climate finance to loans, with the rest from savings in the budget of the Department for Energy Security and Net Zero and about £50m from Department for Transport funding already set aside for buses.

The move attracted criticism from Bond, a network of UK NGOs working on international development. Its chief executive, Romilly Greenhill, accused Burnham of “continuing to raid the diminished UK aid budget”, saying he had pitted marginalised communities in the UK against those in countries vulnerable to the climate crisis.

“Climate finance must not worsen the debt burden of countries that are already suffering the worst – and most costly – impacts of a climate crisis they did not cause,” she said.

The transport secretary, Heidi Alexander, said the change was “about giving people a little bit of breathing space and help with the cost of living”. She told BBC Radio 4’s Today programme that it was “a signal of intent and shows you the direction of travel of the government under Andy Burnham”.

Alexander insisted the bus fare cap scheme was fully funded. “There is £454m of reprioritising money, it’s switch spending,” she told BBC Breakfast. “We’re not going to be giving those grants to international climate projects in other countries. We’re going to be making those loans instead, so that money comes back.”

She also insisted the cut to VAT on domestic electricity bills was properly financed. On Tuesday, Burnham said he would pay for the VAT cut by scrapping the government’s digital ID scheme, but the former cabinet minister Darren Jones said the money for that scheme had not yet been identified.

Speaking on BBC Breakfast, Alexander said it was “not true to say the money isn’t there to implement the changes on electricity bills”.

“The Office for Budget Responsibility said that implementing the digital ID programme was going to cost £1.8bn, about £800m of that money is actually going to be used to fund that change to cutting VAT off energy bills,” she said.

Burnham said the removal of VAT from electricity bills would reduce them by an average of £45 a year from October.

The Trades Union Congress general secretary, Paul Nowak, welcomed the measures but called for Burnham to tax profits made by banks and introduce a “social tariff” to boost living standards. “Along with the tax cut to energy bills, capping bus fares is a good start and means working people can get around for cheaper. That’s good for households, businesses and local economies,” he said.

Buses have long been a preoccupation of the new prime minister who overhauled the bus network in Greater Manchester. The region’s Bee Network, a system of joined-up, accessible transport, has brought buses under local control through franchising.

On his third day in the job, Burnham was given a boost as figures showed the rate of consumer prices index inflation fell to 2.6% in June, from 2.8% in May, the Office for National Statistics said.

The newly appointed chancellor, John Healey, said millions of people would benefit from bus fares being slashed 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.

The shadow chancellor, Mel Stride, accused Burnham of wanting “to go back to the 1970s” and said Healey had “a huge job ahead of him”.

“I fear that he is somewhat captive to a prime minister who seems to want to go back to the 1970s and huge spending and state intervention, higher taxes, higher borrowing, and all of that, which is what we’ve seen from Labour to date, but even more of it,” Stride told BBC Breakfast. “Also constrained by his backbenchers, who do not have any appetite, particularly for welfare reform, which I think is key to the success of our economy.”