Prime Minister Andy Burnham will announce the return of the £2 bus fare cap, slashing day-to-day travel costs for millions of passengers. Bus users will see single fares limited to £2 across England from January under the new Prime Minister's plans to offer a cost of living lifeline to hard-pressed voters.
A government source told the Mirror: “Lower fares will help people get to where they need to - giving them breathing space to help with the cost of living.”
Background of the cap
The £2 cap was introduced by the Tories in 2023 but funding was only put in place until the end of 2024. Former Chancellor Rachel Reeves hiked it to £3 as she battled to balance the books. The current cap, which applies to around 5,000 bus routes across England, was planned to last until March 2027.
As Greater Manchester Mayor, Mr Burnham placed bus services under public control and imposed a £2 limit on fares in 2022.
Broader cost-of-living measures
It comes after Mr Burnham announced VAT on electricity bills will be removed in the autumn in one of his first acts as Prime Minister. The new Labour leader, who told his first Cabinet meeting yesterday he wants to lead a “cost-of-living government”, said the move will put more money in people’s pockets. After promising breathing space on the cost of living with a policy blitz, Downing Street said the move will knock £45 off the average bill from October 1.
Gathering his top team in the No10 Cabinet room for the first time today, Mr Burnham said: "Life's hard out there, isn't it, at the moment."
"You heard me talk about the doorstep in Makerfield. We need to every day think 'what can we do just to take that little bit of pressure off people's shoulders just to give them that little extra sense that help is coming so that they can have that bit of hope that things are getting better'."
He added: "We need to be a cost-of-living Government, getting that cost of living down, looking at all possible ways of doing that."
Cost-of-living crisis data
Highlighting the scale of the cost of living crisis, new research from the Joseph Rowntree Foundation (JRF) today shows the number of households unable to afford basic essentials such as food and heating at a record high. It estimated a staggering 7.4 million low-income households were not able to afford at least one essential item in the last month.
JRF’s chief economist Chris Belfield said: “Andy Burnham starts his time as prime minister at a time when the cost-of-living crisis has never been more widely felt.
“This ongoing crisis is not numbers in a spreadsheet, it is not graphs trending up or down, it is families not being able to afford basic essential goods like food, heating and basic toiletries.”
He added: “This is the challenge facing Andy Burnham’s administration, but there is cause for optimism. Following the Government’s intervention to take £150 a year off energy bills and falling wholesale energy prices, half-a-million fewer households are unable to heat their home than two years ago.”
Funding and political reactions
Earlier, No10 said scrapping VAT on electric bills - estimated to cost £850 million in 2026-27 - will be funded by savings from the scrapping of Keir Starmer’s already scaled-back digital ID programme. It was estimated the cost of the controversial scheme could run to £1.8 billion over years.
But within hours, Starmer ally Darren Jones, who was sacked by Mr Burnham as Chief Secretary to the Treasury, cast doubt on how the policy would be paid for. While welcoming the measure, the ex-Cabinet minister, who led work on the ID project, took a swipe at the new PM. He posted on X yesterday: “The Digital ID program was unfunded. The government will have to set out how it will pay for its new policies at the Budget.”
The government said the £1.8 billion digital ID programme had already been “scored” by the Office for Budget Responsibility (OBR) - meaning the money would have had to be found from the existing government budgets.
Downing Street insisted the plan to cut VAT from electricity bills is fully funded. The Prime Minister’s official spokesman said: “It’s fully funded and will come into effect from October the first, and it applies and is funded for this financial year.”
Newly appointed Chancellor John Healey said yesterday: "For too long, too many people have struggled with the cost of living. Today’s energy tax cut will give families some breathing room on bills, and provide some reassurance this winter.
"This measure is funded this year from cancelling the Digital ID programme, and it will help bring down inflation while supporting households in every postcode."
