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REVEALED: Freedom passes costing councils £650m

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Councils subsidised concessionary travel for pensioners to the tune of £652m in 2017-18, according to a new analysis which also raises concerns the government’s proposed new fair funding formula will exacerbate the problem for some councils.

In evidence presented to the Commons transport committee last week, North East Combined Authority chief finance officer Paul Woods said last year almost £1.2bn was being spent on the scheme which entitles English pensioners to free bus travel during off-peak hours anywhere in the country.

In 2010-11 there was almost £1.2bn available to fund the scheme, approved by parliament. However, since then the funding has been subject to repeated cuts and rolled into the upper tier baseline funding in 2014-15, making it difficult to see by how much. Mr Woods’ analysis estimates more than half of that funding has been taken out, leaving councils to plug the gap.

Mr Woods said: “It is now clear that decisions by the [former Department for Communities & Local Government] not to maintain the transparency of the funding or to protect it, has meant that central government is no longer fully funding this major programme.



“Instead councils have had to meet the funding gap, resulting in cuts to other transport services and considerable extra pressure on council finances and other services.”

Upper tier councils, and in some cases transport authorities, have a statutory responsibility to reimburse their local bus operators for journeys using the so-called freedom pass, regardless of where the pass holder is resident.

Mr Woods said this meant councils with well-developed bus networks, low levels of car ownership, more pensioners on low incomes and visitor attractions which draw in concessionary travel visitors from other areas tended to face the biggest bills for concessionary travel. London boroughs make up all of the top ten highest spending councils. Outside London Nottingham and Brighton & Hove city councils and Blackpool were amongst the councils with the biggest spending pressures. 

As a result the technical working group on needs and distribution, set up by ministers to support the development of a new fair funding formula, agreed in November 2016 that the impact of concessionary travel on councils finances was so significant that it should “remain a bespoke formula”.

However, under the proposed formula published for consultation just before Christmas concessionary travel is to be funded from the foundation formula, which is based on an area’s population.

Speaking to LGC Mr Woods said it was probably the “worst single case of unfairness” in the local government finance system. 

The scheme was first introduced in 2001 as a half-fare concession and around £467m was made available for it. That was increased as parliament agreed to expand the scheme.

Mr Woods said: “All the money that parliament had provided for concessionary travel since 2001 has in effect been removed, which is a pretty astounding piece of information that parliament don’t know about.

“I’m recommending a completely different approach where the funding is allocated directly by the Department for Transport.”

London Councils is also preparing to highlight the issue in its response to the fair funding consultation. Papers due to be discussed by the body’s leaders board on tomorrow [5 February] said there was “concern about the omission of a service-specific formula for concessionary fares”. It said around 30% of the total statutory spend on concessionary fares was spent by London, despite the capital having only 16% of the population.

LGC asked the Department for Transport and the Ministry for Housing, Communities & Local Government to clarify how much funding is being provided for the concessionary travel scheme but they declined to answer the question. LGC also asked why the agreement of the technical working group in November 2016 was apparently disregarded in the proposed fair funding formula.

An MHCLG spokesperson said: “We have launched a consultation seeking views on what factors will be included in a new funding formula. This is a complex piece of work and we want to get it right.”

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