November 25 2024
Buses are the lifeblood of communities, powering economic growth in every corner of the country. Those aren’t our words – they’re the words of the Transport Secretary, who is pledging a ‘bus revolution’ in Labour’s term of office.
Yet for all the warm words, and some very welcome funding pledges, there’s an elephant in the room – in the form of National Insurance. A sharp, largely unexpected, increase in employers’ NI contributions in the Budget will hit the bus and coach community hard.
Our industry is an enormous employer UK-wide. Around 105,000 people work in the bus sector, and a further 54,000 work in coaches. Taken together, that’s bigger than the workforce of Network Rail, the BBC, the Metropolitan Police and the Royal Air Force combined.
Effective April 2025, NI contributions payable by employers will rise from 13.8% to 15%, and this will be levied on all salaries above £5,000, instead of the previous threshold of £9,100.
The increase will particularly hit labour intensive industries such as hospitality, retail and transport. And the bus and coach sector is no exception. The CPT estimates that this will cost the bus industry a total of £100 million. For a bus driver on £30,000, the additional annual cost will be £800.
One of Britain’s busiest bus networks is in Nottingham, where people take 117 bus journeys annually per head – three times the national average outside London.
David Astill, Managing Director of Nottingham City Transport, says the rise in NI will raise his employment costs by £1 million – covering 1,100 employees.
“We welcomed the Budget generally, for the extra funding it provided buses,” he says. “But as the old saying goes, what they give us with one hand, they take away with the other.”
The significant cost in Nottingham will be the lowering of the threshold at which NI kicks in, rather than the higher percentage rate. Astill says this will cancel out the benefits a recent rise in the Bus Service Operators Grant announced by the DfT. And it follows two years of substantial increases in wages, driven by inflation.
“It feels like having to pay out two pay awards in a single year,” he says. “Our top rate has already gone up by more than £2 an hour in two years.”
Nationwide, bus operators are examining options on how to meet the additional cost. Some have told the CPT that they are considering putting on hold investment in new vehicles. Others will look carefully at recruitment and staffing levels. And although the Government’s £3 fare cap will be in place in England for single tickets, there will also be a greater focus on the level of season tickets, and discretionary fares, to meet the extra NI cost.
The impact is particularly challenging given that the industry has faced a nationwide shortage of bus drivers in recent years – fuelling wage inflation and increasing the cost of recruitment.
Graham Vidler, Chief Executive of the Confederation of Passenger Transport, says: “We recognise the public finances are tight. But it makes no sense to burden bus and coach operators with such a huge National Insurance bill just as the Government seeks to kick-start a bus revolution.
“For buses, the combination of higher payroll costs and extra funding for local transport schemes is the financial equivalent of pressing hard on both the brake and the accelerator simultaneously. And for investment in coaches, which don’t benefit from government investment, it’s purely hitting the brakes.”