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February 24, 2012 / politicsbitesize

Free bus passes: a help or a hindrance to the economy?

Image from Wallcoo.net

The British Government are stuck between a rock and a hard place at the moment. George Osborne’s austerity measures have been implemented in order to reduce the deficit, but these are cutting growth off at the roots. A rise in VAT and cuts in funding to local councils and other public services have resulted in an increase in the number of unemployed and caused those with jobs to reduce their spending. What this amounts to is an escalation in Jobseeker’s Allowance claims and further job losses due to the public not consuming goods in the way they did before the 2008 crisis. So, the cuts designed to reduce the UK’s deficit are actually adding to it, and because of this the Chancellor has been advised to encourage growth. However, stimulating growth requires the government to borrow money to spend on public services, which adds to the deficit, and the Chancellor is reluctant to do this.

A report published by the Social Market Foundation think tank puts forward a potential solution to this predicament. The premise of the report, Osborne’s Choice, sets out a solution for the Chancellor so that he will not need to choose between deficit reduction (more austerity measures) and growth (economic stimulus). Ian Mulheirn, the report’s author and director of the think tank, recommends ‘five specific growth-friendly cuts’ that mean the government won’t need to borrow more money in order to stimulate the economy. His top five ways to reduce spending but improve growth are:

Halve higher rate tax relief on pension contributions; capping maximum ISA holdings at £15,000; rolling child benefit into the existing tax credits system; cutting winter fuel payments and free TV licenses to better off pensioners; and scrapping free bus travel for the over 60s

On reading this section of the report it seems to amount to a list of ways to cut off access to vital provisions for pensioners and families. In this article Politics:bitesize has chosen to focus on the final of the five proposals in this report. On page 26, Ian Mulheirn outlines the reasoning behind scrapping free bus travel for the over 60s:

Since 2008, the Exchequer has funded free bus travel for those over the age of 60. This perk is now estimated to cost around £1bn per year. It is unclear what the multiplier effect of this spending is, since the state effectively reimburses transport providers for any lost revenue. What is clear, however, is that there are more growth enhancing uses for this money and that there are higher priorities for this spending in the long run. The policy should now be scrapped.’ (Politics:bitesize’s emphasis)

So, scrapping the ‘perk’ that is bus passes for pensioners will save £1bn a year for the Treasury, but at what cost to the people who use this service? Pensioner’s bus passes are a vital lifeline for many and DO boost the economy. According to pensioners their bus pass is essential for getting out to see friends, going to the cinema or for a meal and shopping in their local town or supermarket. Without this amenity many older people would be stuck at home, mainly because public transport prices are so high, but with it they can continue to lead a full life. Scrapping bus passes because they don’t help the economy to grow is false economy, and simply not true. If the over 60s can get to their local town using public transport they will spend money on the high street and keep the bus drivers in their jobs.

National Pensioners’ Convention spokesman Neil Duncan-Jordan and RMT boss Bob Crow have decried the suggestion to scrap bus passes as a ‘shameful exercise’ and ‘crude and callous’. David Crausby MP has tabled Early Day Motion 2665 in defence of free bus travel, recognising it as a ‘tremendous success’ due to ‘the increased use of public transport, reduced car dependency and improvements to the quality of life of pensioners by allowing them to keep mobile and socially connected’. There are many voices asking for free bus passes for the over 60s to be retained and not cut in the next budget and, in theory, this recommendation by the Social Market Foundation should fall on deaf ears. Back in February 2010, George Osborne stated in his speech, Unleashing the forces of enterprise, that: ‘David Cameron’s Conservative Party will not cut pension credits or winter fuel payments or free TV licenses and bus passes.’

Will David Cameron’s Conservative Party keep to its pre-election pledge or will it scrap an essential lifeline for millions of people who have paid their way all their lives in order to save £1bn? Time will tell.

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3 Comments

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  1. mhasegawa / Mar 6 2012 10:40 am

    There are interim measures. Here in Boston, seniors (public school students, and persons with disabilities) qualify for a reduced rate per ride on public transit. I think this is true in many places in the U.S.

  2. Matthias Rosberg / Jul 28 2012 10:05 am

    I am a Bus Driver and before the over 60’s were free they paid half fair which they did without complaint. We paid in far more money at the end of a shift. Paying passengers could always sit down and everything was fine. Now with the over 60’s being free the bus is full of old people and we simply do not pay in half the money we used to. Paying passengers now have to stand the whole time which could be for an hour or so. The only thing I like about the over 60’s being free is the reduction of traffic. You can park your car in town without too much difficulty. What I don’t like about it all is that some over 60’s are well off. My neighbour is 63 and drives a Range Rover Sport, she has a bus pass which she does use. Why is the state paying for her to travel free when she is better off than myself and I work full time?

    • politicsbitesize / Aug 1 2012 12:43 pm

      Many thanks for your comment Matthias, it is always good to get first hand experiences of these issues. Perhaps a way out of the deadlock would be to means test the bus pass? That way, those who need it can get it and those who don’t can pay for their public transport costs. This will then mean the bus companies will get more revenue and perhaps then the buses wouldn’t be so full of ‘free’ passengers.

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