UK Transport Secretary Confirms Bus Fare Cap Funding via Climate Loan Shift

UK Transport Secretary Heidi Alexander has declared she is “100% sure” that the new £2 bus fare cap in England is fully funded, despite admitting that the specific financial arrangements are yet to be finalised. The announcement comes as the government faces scrutiny over how it will finance the policy, which reverses a previous fare increase implemented by the former Labour administration in 2024.

Alexander indicated that the funding would be sourced by reprioritising the energy budget. Specifically, the government intends to convert grants previously allocated to third countries for climate projects into repayable loans. This shift marks a significant change in how international climate finance is handled, moving from non-repayable aid to debt instruments.

When questioned by Sky News regarding the specifics of this mechanism, Alexander stated that the details “need to be worked out.” She expressed uncertainty regarding whether developing countries would be required to pay interest on these converted loans, leaving the diplomatic and financial implications of the policy change unclear.

The £2 cap, announced by Prime Minister Andy Burnham, is set to take effect from January 2027. It applies to England, excluding London, which maintains separate fare structures. The measure is backed by £454m in funding and serves to undo the £3 cap introduced by the previous government under Keir Starmer and Rachel Reeves.

This funding strategy follows earlier questions from the media regarding how the government would cover the cost of removing VAT on electricity bills. While Alexander remains confident in the overall funding model, the lack of concrete details on the loan conversion process suggests that further administrative work is required before the policy can be fully implemented.