(09 Jul 2013, 6:14 pm)eezypeazy wrote No, I'm saying that BSOG is the ONLY subsidy; in practice, it's a refund of part of the fuel duty that bus companies already pay. I think I read in The Journal last week that it only accounts for about 5% of bus costs; I seem to recall a Tyne and Wear figure of about £12 million before it was cut by 20%, which would make it about £9.6 million today. Railways and airlines don't pay any fuel taxes - now that's a huge subsidy!

Granted, this article's a bit out of date now. But The Observer reported in July 2010, when the BSOG first came under threat, that the profit margins of bus companies would be wiped out if the fuel subsidy was withdrawn.

End of fuel subsidy 'will wipe out bus company profits'
But low-income households will be hit hardest if fares rise and services are cut

Link: http://www.guardian.co.uk/politics/2010/...el-subsidy

Four of Britain's biggest bus companies could lose more than £200m in profits under plans to axe public spending on transport. The government is considering scrapping a scheme that allows bus operators to reclaim around 80% of what they pay in fuel duties.

But City analysts says that if the government abolishes the Bus Service Operators Grant (BSOG) in one go, it could wipe out most of the profits of stock market-listed bus companies. These include First Group, Go-Ahead, Stagecoach and National Express.

Analysts at JP Morgan Cazenove say it is more likely that the grant will be frozen or phased out, as the consequences of sudden abolition would be dramatic, but one broker warned: "Abrupt cuts would be very negative for the immediate earnings outlook."

The grant is worth £500m to the bus industry as a whole, and £235m to the big four, according to JP Morgan. In June, ministers signalled concern at the profit margins of the largest public transport groups, but dozens of independent operators would also be affected by changes to BSOG, as would Arriva, which is being taken over by Deutsche Bahn and is not included in JP Morgan's research.

The broker added: "Uncertainty will weigh on the relative share price until there is greater clarity. However, we believe this is reflected in current valuations, which we view as cheap."

Bus operators could compensate for the loss of the fuel subsidy by reducing services and hiking fares by around 7%.

Simon Posner, chief executive of the Confederation of Passenger Transport, warned that outside London the bus is the main form of public transport, and is relied upon most by low-income households: "If we want to cut carbon, give jobless households the means to access work and ensure that our cities keep moving, we need to ensure buses get their share of government support."

Earlier this month the government was caught up in a row over free bus passes for the elderly. Sources in Whitehall denied ministers planned to raise the qualifying age from 60 to 65.

However, JP Morgan said: "A change to the qualifying age, the use of smart card technology or the requirement to purchase the annual bus pass are all possible ways of limiting expenditure."

If that was true back then, and if what The Journal reports is true now, then it might appear to some that the BSOG has been used, not to lower fares, but to help prop up the share price as fares continue to rise.