Please don't confuse 'public subsidy' with 'paying for concessionary travel'.

Let's try a flight of fantasy...

Suppose that, one day, the government decides that every pensioner in the land shall be entitled to a free pasty once a day. Greggs (and other bakers) are forced, by law, to give them out and claim reimbursement on a 'no better, no worse off' basis. The government guesses how much money it will cost and gives the money to local councils; but then, the local council's money gets bundled up into a single lump from the government and reduced by ten per cent per year.

Greggs sends its bill to the local council, based on the government's formula; but the local council hasn't got enough money.

Two questions arise:

1. Whose money is it?
2. Who is the beneficiary?

Remember, Greggs have supplied the pastys 'up front'; they've paid for the ingredients, the overheads of the shops, the wages, etc. All they want is paying. To me, it's Greggs' money that the government and the council are dithering over paying.

And the beneficiary is the pensioner, not Greggs. Greggs make no extra profit, because the formula leaves them 'no better, no worse' off, even though they've already paid out for their costs.

Next, imagine that the price of cheese on the world cheese market doubles overnight. Greggs main ingredient cost has gone through the roof, their costs have gone up, so using the government's formula, they ask for more money (and the retail cost of the pasty has jumped too!). But the council's budget is frozen and they can't pay any more money. Greggs can't afford to just give away the pastys, so what do they do? They close their shops in the little outlying villages, where the returns had been marginal to start with.

In this scenario, there's little point in having a free pasty entitlement if you haven't got a pasty shop!

And so... 'concessionary travel reimbursement' is simply the councils' fulfilling their obligation to pay for something that bus companies have already provided. It's not 'public subsidy', just as the councils paying their electricity bills for their offices isn't a 'subsidy' to the energy companies. Strip out concessionary travel from Tyne and Wear's bill, and you're left with about £10 million of public money buying bus services - split roughly one third on school buses, one third on early morning/late evening and works services, and one third on the 'battleship grey' services. You can't avoid having to run school buses; you might be able to avoid some of the rest, but these are services that we, as a 'society', decide are worth having. And I'll bet there'll always be some services like this, that will never be able to cover their costs from fares.

To me, we have a crazy system that simply leads to an increasing conflict between the bus companies and local councils, from which there is no easy escape. When I become Britain's first Benign Dictator, my solution will be simple: Concessionary travel costs about £3 per pensioner per week. So, instead, I'd remove the entitlement, but give every pensioner £3 a week more in their pension to do with as they please. I would encourage bus companies to make use of the concessionary travel smartcards by selling a simple £3 weekly, £10 four weekly off-peak multi-operator ticket for pensioners. The net effect on the Treasury remains the same: what they save on concessionary travel they give away on pensions. The effect on pensioners is either neutral or beneficial: they can pay the same (or slightly less) for their travel, or use the money as they wish. In all likelihood, some would choose to travel a little less and spend a little more at their local shops, so there would be a downside for bus companies but an upside for the local retail economy ... but that, in itself, could provide enough of a boost to lift bus patronage (more money to spend in the shops = more people working in retail).

The bus companies find themselves free from the political shackles that concessionary travel entails. They are essentially selling a commercial ticket, but at a price linked to pensions. If there aren't enough pensioners (and other passengers) willing to buy tickets, then, like any other service (bus or otherwise!), it gets taken off if it can't cover its costs. If it needs some council support, then that's up to the council to make that decision, but the maths is rather more clear cut than present arrangements.

Oh, and I must admit, I'm not a fan of BSOG, either. Take it away, make bus fares reflect true costs, and let local councils support services where required.

Sadly, I'm not likely to be offered the job of Benign Dictator very soon!

(Edited for typos)