Quick wins for now on living costs, but what next?published at 09:46 BST

09:46 BST

Kevin Peachey
Cost of living correspondent

A quid a week off electricity bills won’t count for much if global energy costs keep rising.

Young workers paying a £2 bus fare will want a decent job at the end of the journey.

The Burnham-led government is unashamedly going for the quick wins on living costs in its early days. Hence the Conservatives’ “people pleaser” attack line.

But the bigger stuff is harder to pull off. Like changes to taxation (see the retreat from raising the personal allowance), like turbocharging the economy, raising living standards, overhauling how we pay essential bills and to whom.

Some of that will be within the government’s control. Some will be dictated by uncontrollable events elsewhere.

All of it will be a challenge for a new PM and chancellor, just as it was for their many, recent predecessors.

Joe Coughlan
Live reporter

Image source, Getty Images

Andy Burnham has announced that most bus fares in England will be capped at £2 from the start of next year, with the prime minister saying no one should be "priced out" or "left behind" when it comes to affordable transport links.

The pledge is expected to cost over £500m, of which £454m will be reallocated from the Department for Energy Security and Net Zero, including by switching investment set aside for international climate finance to loans.

Chancellor John Healey says the action being funded by savings made elsewhere will allow there to be "no burden to British taxpayers", while Transport Secretary Heidi Alexander tells the BBC she is "100% sure" the money is there to pay for the cap.

Even so, the announcement prompted Shadow Chancellor Mel Stride to accuse the government of "not actually specifying where the money is going to come from".

The scheme comes after the government pledged on Tuesday to cut VAT from 5% to zero in household electricity bills from October. Burnham told his cabinet on Tuesday he would lead a "cost of living government".

But the prime minister has pulled back from suggestions he will increase the tax-free personal allowance.

Image source, Getty Images

Transport Secretary Heidi Alexander is doing the media round this morning - she's just spoken to BBC Radio 4's Today programme.

Speaking about the bus fare cap, she says this government is "not making any unfunded spending commitments" and has been "very clear about where the money is coming from for this proposal".

Earlier on BBC Breakfast, the transport secretary said she was "100% sure" the money was there to pay for this single bus fare cap.

"There is £454m of re-prioritising money. It's switch spending, we're not going to be giving those grants for international climate projects in other countries. We're going to be making those loans instead so that money comes back," she said.

Following the announcement to remove VAT from electricity bills, Alexander calls the fare cap pledge a "signal of intent" which "shows you the direction of travel of the government under Andy Burnham".

She admits it's "not the whole solution" but says "giving people a little bit of hope that help is on the way" is the right thing to do.

Bus and coach trade body CPT is calling on the government to provide a "fair" reimbursement model for operators taking part.

Chief executive Graham Vidler says it is "vital" for the government to work with the industry to place it on a "sustainable footing" following the £2 fare cap announcement.

However, Vidler says CPT will work with the government "to make the £2 fare cap a success".

He says the trade body is "pleased" to see Andy Burnham place buses "at the heart of his government's cost of living plans".

Most of England, not including London and Manchester, currently operate under deregulated bus networks, where private operators set fares.

Katy Austin
Transport correspondent

Before the pandemic, bus usage had been trending down. Covid caused a huge drop, from which numbers are still recovering.

In the year ending March 2025, 1.9 billion journeys were made by local buses in England outside London. That’s 4% up on the year before, and at 93% of pre-pandemic levels.

It's hard to get an exact number on how many bus services are running overall. But bus mileage, or miles run, gives an indication of the size of the bus network.

In the year ending March 2025, bus mileage in England outside London was at 86% of pre-pandemic levels.

Andy Burnham's £2 fare cap is "not going to be enough" to convince people to use the bus instead of a car, says the economics and environment policy chief at a British left-wing think tank.

Alex Chapman of the New Economics Foundation tells Radio 4's Today programme that he was pleased to see the initiative being brought in so soon into Burnham's premiership, but that the money being spent on the policy, expected to be over £500m, is "very small in government terms".

He adds: "The actual scale of this is very limited. It's really the reinstatement of a policy that we had only a couple of years ago."

Chapman says he would love to see more ambition on cutting bus fares for youths, adding that a £1 bus fare cap would make the service "much more competitive" with the cost of a private car.

Image source, EPA

The government's announcement of a £2 single bus fare cap applies to all areas of England outside of London.

London has its own integrated transport system - Transport for London - which is part of the Greater London Authority, and chaired by London Mayor Sadiq Khan.

Single bus fares in London currently cost a flat rate of £1.75. Earlier this month, the mayor extended a bus and tram fare freeze until 1 November.

Most of England, not including London and Manchester, currently operate under deregulated bus networks, where private operators set fares (when there is no cap).

In 2023, Manchester became the first place outside of London to introduce bus franchising - bringing buses back under public control - since privatisation in 1986. It was a key policy when Burnham was Greater Manchester mayor.

The Labour government has brought in more powers for local authorities to take control of buses, and more mayoral authorities, including West Yorkshire and the West Midlands, now have plans to do so.

Transport Secretary Heidi Alexander is speaking to BBC Radio 4's Today programme about the £2 bus fare cap.

You can watch the interview live at the top of the page.

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More from Heidi Alexander, who says Burnham's first priority in government is to "help with the essentials of day-to-day life".

Alexander says a "high-quality, reliable" public transport network is "the backbone of successful local economies".

She praises Burnham's work on public transport in Greater Manchester - more about that here - adding the new PM "wants to make sure" those sorts of services are available to people across the country.

Transport Secretary Heidi Alexander says she's "100% sure" the money is there to pay for this single bus fare cap.

"There is £454m of re-prioritising money. It's switch spending, we're not going to be giving those grants for international climate projects in other countries. We're going to be making those loans instead so that money comes back," Alexander tells BBC Breakfast.

Alexander's assertion follows disagreement yesterday over the allocation of money to pay for cutting VAT from electricity bills.

The government previously said the £1.8bn cost of that measure would be paid for by scrapping Keir Starmer's planned digital ID scheme - but Labour MP Darren Jones, newly sacked from the cabinet, said that programme was "unfunded".

Read our political editor's story.

Harry Farley
Political correspondent

As our chief political correspondent writes, Andy Burnham has pulled back from suggestions about increasing the tax-free personal allowance.

Burnham told the Times over the weekend that the "frustration about the personal allowance" he had heard while campaigning in the Makerfield by-election was "lodged in my mind".

The prime minister then told reporters on Monday that "all of this will be looked at" in the next budget but conceded any change would be expensive and "difficult given the financial circumstances in which we find ourselves".

Those close to Burnham have since told BBC News that any changes to the personal allowance are not part of his initial plan to tackle the cost of living.

The £12,570 threshold has been frozen since 2021, resulting in more people being dragged into paying tax as earnings increase.

Image source, Reuters

Two early morning announcements in two days - and both have focused on the cost of living.

That was the theme of his first Downing Street on Monday - and yesterday he told his newly formed cabinet they would be a "cost of living government".

Burnham told ministers they needed to give people a sense “that help is coming”.

This had also been a focus for Keir Starmer, who himself said every minute not talking about the issue was "wasted".

Burnham's announcements a stark shift from Starmer's first weeks at helmpublished at 07:07 BST

07:07 BST

Henry Zeffman
Chief political correspondent

This is the second announcement in two days designed to give people what the new prime minister describes as “breathing space” against the cost of living.

Combined with the tax cut on household electricity bills, it is clear that Andy Burnham is prioritising tangible measures which can be implemented quickly.

There is a stark tonal shift, too, from Keir Starmer’s first weeks in office in which he emphasised how difficult things would continue to be (something which he later acknowledged was a mistake).

The decision to reimpose the bus fare cap of £2 contrasts with Burnham backing away this morning from suggestions which he made as recently as Monday about the possibility of increasing the personal allowance – the amount people earn before paying income tax, which has been frozen since 2021.

Backing away from that reflects that this is a new prime minister who has both made quite a lot of commitments and displayed a range of instincts on major policy questions.

He talks of the biggest council house building programme since the postwar period, fixing social care on an NHS model, taking public control of utilities – and that is before you get to the level of defence spending implied by John Healey’s appointment as chancellor.

This week we are learning the order of Burnham’s priorities. And perhaps now he has access to the civil service and to more granular advice about the state of the public finances, Burnham himself is learning which of his commitments are viable in the near-term.

Image source, PA Media

During his time as Greater Manchester mayor, Andy Burnham launched the Bee Network - a London-style network where all local bus and tram services are joined up and under local control.

Public control of the region’s buses was rolled out in stages since the launch of the Bee Network in September 2023 - named after Manchester's worker bee.

Manchester became the first area outside of London to have a locally regulated bus system since the 1980s, which Burnham called "a coming-of-age moment for English devolution".

Single fares have been capped at £2 in Manchester for the last four years.

Katy Austin
Transport correspondent

As Mayor of Greater Manchester, Andy Burnham brought in a £2 cap in September 2022, at that point funded by money from central government.

The £2 cap was initially meant both as a cost of living measure and to encourage people back on buses in the wake of the pandemic.

The ONS said it played a role in reducing inflation in 2023, and it appeared popular. An evaluation of the first ten months - not published until 2025 - found that the scheme did contribute 5% of the 13% rise in bus usage during that period.

Lower-income passengers felt the most financial benefit.

However it didn’t score highly when it comes to value for money. How much money people saved varied depending how much fares in their local area cost before the cap.

The Burnham government says a £2 cap should particularly help passengers in rural and coastal areas, where single fares can be higher.

Shadow Chancellor of the Exchequer Mel Stride accuses the government of "not actually specifying where the money is going to come from" for the bus fare cap extension.

"That is a worrying sign, we need to have a government which is on top of the public finances, not one that is making lots of spending commitments without explaining where the money is going to come from," Stride tells BBC Breakfast.

In the government's announcement this morning, it says the cap extension is expected to cost over £500m, and that £454 million will be reallocated from the Department for Energy Security and Net Zero.

It says this will be used in addition to funds already earmarked by the Department for Transport for buses.

This morning's announcement follows Burnham's government yesterday promising to cut VAT from household electricity bills from October through to the end of the financial year.

That measure is projected to save people an average of £45 from their annual bill - and would be funded by reallocating funds through the cancellation of the digital ID programme.

Questions were raised over whether those funds had yet been found for the digital ID programme - but Downing Street insisted the electricity bills change was "fully funded".

"Departments were going to have to fund the Digital ID programme through their existing budget reprioritisation," a spokesperson said.

"Departments will now direct these savings towards this."

Business Secretary Jonathan Reynolds said the move would give people some "breathing space".

As with yesterday's announcement on cutting VAT from domestic electricity bills, the government has similarly said this measure will be paid for through a reallocation of funds.

In this case, the government has said £454 million will be reallocated from the Department for Energy Security and Net Zero - £400m of which will come from switching investment set aside for international climate finance to loans and the remaining £54m from savings in the department's budget.

This will be used in addition to funds already earmarked by the Department for Transport for buses.

The total cost of the scheme is expected to be over £500m.

Chancellor John Healey says: "This action to ease the cost of living is funded by savings made elsewhere, so there's no burden to British taxpayers, just pounds going back into their pockets."

A £2 cap was introduced by the Conservative government in 2023.

Initially due to last only three months, it was extended until Keir Starmer increased the cap to £3 at the start of 2025.

That cap had been due to expire in March 2027.

This new cap will lower fares to £2 from 1 January 2027, and last for the rest of the year.

In Manchester, where Prime Minister Andy Burnham was mayor from 2017 until he became the MP for Makerfield last month, single fares have been capped at £2 for the last four years.