How to fund the planned new buses?
With Cardiff Bus making unsustainable losses and looking to axe services, Rhodri Clark looks at questions raised over funding for the city’s electric bus scheme
WALES HAS waited years for a green bus grant and now three have come along at once, but there are questions over how a loss-making bus company will provide millions of pounds of match funding.
The biggest Welsh grant – £5.4m – has been offered to Cardiff Council for Cardiff Bus to help buy 36 electric vehicles in the next two financial years.
But since the council bid for the money last summer, Cardiff Bus has admitted it is making unsustainable losses, and is preparing to axe 12 services.
The grant from the UK Government covers less than half the cost of buying the 36 buses, leaving Cardiff Council and Cardiff Bus to come up with about £7.7m.
The company, owned by Cardiff Council, says it is confident the funding structures are in place, but other bus industry sources say it lacks the resources to invest that kind of money while it is not making a profit. It made a £1.9m loss in 2017/18.
The other two grant offers for Wales are for one electric bus in Newport and 16 in Caerphilly. The Caerphilly bid is part of an ambitious plan to electrify all of the town’s local public transport. The railway is due to be electrified by 2024.
Match funding for Caerphilly’s £2.8m grant, which includes £900,000 for charging facilities, has been promised by bus operator Stagecoach, a large and profitable company.
Cardiff ’s successful bid was for more than twice as many electric buses as Caerphilly’s bid, costing more than £13m in total.
The buses would help to reduce air pollution, because they would not emit exhaust gases. They would also allow Cardiff Bus to withdraw some of its oldest and most polluting buses.
Each electric bus costs more than twice as much to buy as a diesel bus. The £5.4m grant bridges most of the cost gap, but can only be claimed in full if about £7.7m is available in match funding.
Cardiff Council, which led the bid for the grant, was unable to say whether all 36 electric buses would be bought by April 2021. A spokesman said £6m of the £7.7m “should be from Cardiff Bus’s existing expenditure”.
He added: “Discussion on the shortfall of circa £1.8m will need to be held, between Cardiff Council, Cardiff Bus and potentially Welsh Government, with one potential funding route being the Clean Air Fund, which would be in the form of a grant.”
We asked Cardiff Bus how it would raise the £6m and whether, in light of the company’s losses, the plan would have to be reviewed and potentially scaled back. A spokesman replied: “We are confident there are funding structures in place, in line with our fleet replacement strategy, to deliver these buses.
“This is a successful outcome for collaborative working with different partners – the Welsh Government, the city council, bus manufacturers and ourselves.”
One industry source said: “Where is the capital coming from? It’s a significant amount of money when you’re trading at a loss.”
Taxpayers might have to step in with match funding, but that would raise questions about fairness, he said. “If there’s public money coming through for Cardiff Bus, the general rule of thumb is it’s available for every bus operator.”
Another source said banks would not lend Cardiff Bus £6m in its current predicament. A loan would have to come from the council, or the council would have to guarantee to repay a loan in the event of Cardiff Bus defaulting, he claimed.
“There’s a value in Cardiff having a [council-owned] bus company,” he said. “They’re a good company and run a decent service, but at some point they’ve got to be treated the same as everyone else.
“If that £6m is coming from Cardiff Council, that’s not right when the bus companies who have been offered grants in Manchester, etc have to use their own money to match the grant.”
Bus operators in Wales have complained for many years that there was no equivalent to the green bus grants available to English and Scottish operators. The Welsh Government did not create an equivalent to the Scottish Government’s Green Bus Fund – which has partly funded more than 340 low-emission buses – but the UK Government has now included Wales in its Ultra-Low Emission Bus Scheme.
Announcing the award of £48m from the Office for Low Emission Vehicles last week, UK Government buses minister Nusrat Ghani said: “This Government is doing more than ever before to reduce emissions across all modes of transport and I’m delighted to see the bus industry putting itself at the forefront of this.”
The funding is for 263 new buses in England and Wales.