Socio-economic case
Full Value for Money analysis is undertaken in Section 8 once all 5 Dimensions have been considered.
Methodology
A bespoke fare cap model has been developed within Transport Scotland. The model:
- Is Local Authority based
- Uses concessionary fares data to determine the distribution (by price) of existing bus journeys within each LA
- Scales this Concessionary Fares data at LA level to the non-concessionary eligible population
- Scales the data at a national level to DfT data on the total revenue of bus operators with an allowance (in a similar manner to the standard approach for concessionary travel) for the scale of multiple/discounted journey tickets
- Uses the concessionary fares data to calculate the mean and median of the distribution of journeys by residents of the LA
- Applies a log-normal distribution analysis to calculate the expected value of the distribution for journeys over £2 in order to estimate the cost associated with the fare cap.
The model allows variation in the demand responsiveness of bus passengers (price elasticity of demand) in line with established estimates but is a revenue rather than journey based model fundamentally.
In addition to the bespoke model (and in an approach similar to that undertaken for the Removal of Peak Rail Fares the results are triangulated with a run of the Transport Model for Scotland (TMfS). Further detail is given on this below.
Data and calibration
As noted above, the model is based on revenue rather than journeys. Commercial bus demand in Scotland (i.e. non-concessionary demand) has been stable at around 150 million annual passenger journeys over the period 2022-25 (latest data available in Scottish Transport Statistics). STS also produces a table showing overall journeys in the SPT area as 137m. Applying the national share of non-concessionary journeys gives 62 million commercial passenger journeys in the SPT area but this does not account for the specific demographic characteristics of the area.
The Transport Scotland bespoke model estimates that 43% of all commercial journeys are undertaken by residents of the SPT area. This equates to an estimated baseline demand of around 65 million journeys per annum which is close to the 62 million figure above. For the purposes of the £2 fare cap, specifically the cost estimates, the key metric is “journeys undertaken under the cap”. However, a significant proportion of these journeys will be undertaken using flexi or multi-tickets or passes which may still offer better value under a £2 cap. For this reason the model is calibrated to commercial revenue rather than demand as this results in a more accurate cost estimate.
The key factor in the use of the model is the assumptions over the demand response of the public to changes in the price of bus – the bus price elasticity of demand.
The primary source of evidence on elasticities is a DfT report - Bus elasticities and diversion factors - GOV.UK. This has subsequently influenced the parameters recommended within Scottish Transport Appraisal Guidance (via a link to the technical material available in the DfT Transport Appraisal Guidance (TAG).
Historically, based on this data, a reasonable range for bus fare elasticities in Scotland, when covering all trips types has been considered to be -0.4 to -0.8. This forms the basis of the subsequent analysis.
However, there is a reasonable view that in the lack of updated evidence to the contrary that elasticity values may have got smaller post-pandemic. As such it is likely to be prudent to use values at the low end of the ranges. In addition, elasticities are most suitable for relatively low changes in fare levels. High proportionate changes are subject to significantly more uncertainty and also reinforce the prudence of using smaller values. So whilst the standard range of -0.4 to -0.8 is used, further sensitivity tests are undertaken and an overall conclusion reached looking at a wider range of estimates.
Transport Model for Scotland results
A model run of the Transport Model for Scotland was commissioned to examine the impact of a £2 fare cap. The model run was at the national level to give an indication of the overall potential impacts of the scheme as it is extremely complex to segment the bus fare structure on a regional basis.
As such the results are a helpful addition to the evidence base but can not form the main basis of analysis.
At a national level the model suggests that a national £2 fare cap would result in a circa 20% increase in demand for bus, a relatively high impact on rail (covered in more detail in the rail impact section below) and minimal impact on private car use in percentage terms (less than 0.5%). The small reduction in car use reflects that only around half the additional demand for bus is abstracted from car as well as the considerable lower mode share for bus across the country.
Demand Results
This section focuses on the projected demand impacts, but the modelling approach also generates the cost estimates that appear in the financial case below.
The base prices in the model are based on 2025 data and are inflated (initially by 10%) to represent 2026 prices.
The mean and median are used within the model to assess the impact using a log-normal distribution that ensures that the tail of the distribution (very high price journeys) is represented accurately.
| LA | 2025 Mean (p) | 2025 Median (p) | 2026 Mean (p) | 2026 Median (p) |
|---|---|---|---|---|
| East Ayrshire | 415 | 340 | 456 | 374 |
| East Dunbartonshire | 377 | 310 | 415 | 341 |
| East Renfrewshire | 316 | 310 | 347 | 341 |
| Glasgow City | 313 | 310 | 344 | 341 |
| Inverclyde | 417 | 310 | 458 | 341 |
| North Ayrshire | 312 | 280 | 343 | 308 |
| North Lanarkshire | 369 | 310 | 406 | 341 |
| Renfrewshire | 341 | 310 | 375 | 341 |
| South Ayrshire | 416 | 340 | 458 | 374 |
| South Lanarkshire | 351 | 310 | 386 | 341 |
| West Dunbartonshire | 329 | 310 | 362 | 341 |
A £2 fare cap represents significant savings on the average (mean) fares across the area - of between a third (Glasgow City, North Ayrshire) and over a half (East Ayrshire and South Ayrshire). This represents a level that pushes standard demand analysis to its limits.
The core results generated by the model for the range of elasticities (low – 0.4, high -0.8) are:
| Elasticity Scenario | Low | High |
|---|---|---|
| Increase in demand | 19.1% | 38.2% |
The results from the Transport Model for Scotland suggest that at a national level the demand impact would be in line with the low scenario – at around 20%.
There is an obvious further issue that demand increases of close to 40% would cause a clear and present danger of capacity issues. Given the discussion above, it is sensible to examine the impact of lower demand responses.
Rerunning the analysis for elasticities of (very Low) -0.1 and (Lower) -0.2 gives:
| Elasticity Scenario | Very Low | Lower |
|---|---|---|
| Increase in demand | 4.8% | 9.5% |
In this case the “Lower” rather than very low scenario seems to give sensible results – a shift in demand of 9.5% is in excess of that what was achieved over the course of the trial of the removal of peak fares on ScotRail Services with a greater monetary reduction in ticket prices.
As such it is sensible to use a range of estimate as follows:
| Elasticity Scenario | Lower | Low | High |
|---|---|---|---|
| Increase in demand | 9.5% | 19.1% | 38.2% |
With the expectation that the High demand scenario is somewhat unlikely.
By way of sensitivity analysis, if 2025 fares are inflated by 20% rather than 10%, then the increased discount increases the demand impacts to:
| Higher price Scenario | Lower | Low | High |
|---|---|---|---|
| Increase in demand | 10.4% | 20.8% | 41.5% |
As such the demand response is relatively insensitive to changes in existing (pre-cap) fares. Note that as detailed in the financial case, this is far from the case for the costs of the scheme.
Impact on bus users
The clear purpose of the scheme in an economic context is to provide a discount on bus travel for existing users (an equity rationale) and to encourage additional bus travel (a externality or market failure rationale).
Standard economic theory suggests that a price cap results in an increase in “consumer surplus” – the extra benefit consumers receive when they pay less for a good or service than they were willing to pay, applying to both trips they were already making and trips which are a result of more people travelling by bus as its cheaper.
This is illustrated in the diagram below.
The increase in consumer surplus in the stylised diagram above is the area B+C. In the context of bus travel, the largest area, i.e. where most benefits accrue, is area B which represents the benefit to existing bus users, with a smaller proportion of benefits to additional journeys i.e. the increase in demand, shown in area C.
In this case, a system of perfect reimbursement for operators would cost the funding agency an amount equivalent to area B, leaving the area C as the “net benefit” of the scheme.
However, reimbursement to operators is a transfer payment and is neutral in terms of the socio-economic case (although not in terms of the financial case – see following section).
In these terms the pure value for money of the scheme depends on the relationship between the value of the additional generated (area) C and the implementation and running costs of the scheme. However, the equity case depends on who benefits. The balance between the gains that accrue to consumers is crucial as is (if equity concerns are a prime factor) the nature of which consumers gain from the scheme.
The economic efficiency benefits represented by generated demand are only one element of the overall case for intervention. The distributional impacts of the scheme are particularly important, as a significant proportion of the benefits are likely to accrue to households with lower incomes and to individuals who rely on bus services to access work, education, healthcare and other essential services. Consideration should also be given to wider transport and social outcomes, including increased accessibility, social inclusion, reduced transport poverty, potential mode shift from private car use, and associated environmental and congestion benefits. As such, the overall value of the scheme cannot be assessed solely on the basis of generated demand and implementation costs.
These factors are brought together in a subsequent section following the analysis of the costs of the scheme in the Financial Case but the remainder of this section focuses on who is likely to gain from the scheme and the wider impacts. For convenience this analysis is undertaken in line with an Impact Assessment approach as detailed in section 1.2 above.
EQIA – Equalities Impact Assessment
The prime focus of the Equalities impact assessment component included within this OBC is to examine the characteristics of bus users. This is based on data in Scottish Transport Statistics and Transport and Travel in Scotland and covers equality groups for which data is available in detail.
Age
| Sub-category | Every day, or almost every day | 2 or 3 times per week | About once a week | About once a fortnight, or once a month | Not used in past month |
|---|---|---|---|---|---|
| All people aged 16+ | 6.6 | 11.3 | 7.7 | 13.4 | 61.0 |
| Male | 6 | 10 | 8 | 13 | 62 |
| Female | 7 | 12 | 8 | 13 | 60 |
| Prefer not to say | [small sample] | [small sample] | [small sample] | [small sample] | [small sample] |
| 16-19 | 30 | 18 | 8 | 19 | 26 |
| 20-29 | 12 | 15 | 9 | 12 | 54 |
| 30-39 | 7 | 11 | 8 | 13 | 61 |
| 40-49 | 5 | 8 | 4 | 13 | 69 |
| 50-59 | 3 | 5 | 6 | 14 | 72 |
| 60-69 | 4 | 13 | 9 | 14 | 59 |
| 70-79 | 4 | 14 | 10 | 14 | 58 |
| 80+ | 3 | 11 | 9 | 11 | 66 |
The assessment of the policy in terms of age is framed by the existing concessionary fares schemes for those over 60 and those under 22. As such the bus use characteristics of those between those ages is of interest but would not generally be considered a key issue given the scheme extends a form of concessionary travel to those who currently do not receive it.
Looking at the data in the table below, the age groups not currently eligible for concessionary travel tend to use the bus less than those who are eligible. This is unsurprising and unconcerning and a key part of the evaluation of the scheme will be to test the impact on bus demand of those who are in scope of the £2 cap. Men are slightly less likely to use bus than women but the difference is minimal.
Ethnicity
White Scottish/British and Polish ethnic groups are significantly less likely to use the bus at present than other ethnic groups. See table below. However, White Irish and Other White groups have broadly similar bus use to Asian groups. The group who stand to gain the most from the cap is “Other ethnic group”.
| Sub-category | Every day, or almost every day | 2 or 3 times per week | About once a week | About once a fortnight, or once a month | Not used in past month |
|---|---|---|---|---|---|
| White Scottish | 6 | 10 | 7 | 13 | 63 |
| White other British | 4 | 9 | 10 | 14 | 62 |
| White Irish | 9 | 15 | 11 | 13 | 52 |
| White Polish | 11 | 10 | 4 | 11 | 64 |
| Other white | 11 | 18 | 9 | 13 | 49 |
| Asian, Asian Scottish or Asian British | 13 | 15 | 11 | 10 | 52 |
| Other ethnic group | 21 | 22 | 8 | 17 | 32 |
Religion
In terms of religion those with no religion and Christian faith are those least likely to use bus as a mode of transport, with those with no religion falling between Roman Catholic and non-Catholic Christian faiths. Muslims are the most likely to use bus with other faiths being relatively similar.
| Sub-category | Every day, or almost every day | 2 or 3 times per week | About once a week | About once a fortnight, or once a month | Not used in past month |
|---|---|---|---|---|---|
| None | 6 | 11 | 8 | 14 | 61 |
| Church of Scotland | 5 | 9 | 7 | 14 | 65 |
| Roman Catholic | 10 | 13 | 8 | 11 | 58 |
| Other Christian | 4 | 10 | 6 | 15 | 65 |
| Muslim | 16 | 16 | 13 | 10 | 45 |
| All other religions | 8 | 17 | 12 | 13 | 50 |
Disability
There is no difference in bus use based on disability. This is despite the existence of the existing concessionary scheme for the disabled.
| Sub-category | Every day, or almost every day | 2 or 3 times per week | About once a week | About once a fortnight, or once a month | Not used in past month |
|---|---|---|---|---|---|
| Disabled | 7 | 12 | 8 | 12 | 62 |
| Not disabled | 7 | 11 | 8 | 14 | 61 |
Summary
Whilst data is not available for other equality groups, analysis of existing bus users suggests that the policy – which is beneficial - is geared towards those groups that might generally be of concern if there were minimal or negative impacts.
FSD – Fairer Scotland Duty
The Fairer Scotland Duty (the Duty) is set out in legislation in Part 1 of the Equality Act 2010. It came into force in Scotland from April 2018. It requires Scottish Ministers and named public bodies to actively consider what more can be done to reduce the 'inequalities of outcome' caused by 'socio-economic disadvantage' when making 'strategic decisions'.
Employment Status
| Sub-category | Every day, or almost every day | 2 or 3 times per week | About once a week | About once a fortnight, or once a month | Not used in past month |
|---|---|---|---|---|---|
| Self employed | 1 | 4 | 4 | 10 | 81 |
| Employed full time | 6 | 8 | 6 | 14 | 67 |
| Employed part time | 9 | 13 | 7 | 16 | 55 |
| Looking after the home or family | 5 | 13 | 8 | 11 | 63 |
| Permanently retired from work | 4 | 13 | 10 | 14 | 59 |
| Unemployed and seeking work | 9 | 19 | 11 | 17 | 43 |
| Permanently sick or disabled | 6 | 15 | 8 | 11 | 60 |
| Unable to work because of short-term illness or injury | 8 | 6 | 13 | 19 | 55 |
In terms of employment status, the self employed are significantly less likely to use bus than all other groups. This is likely to be due to the nature of much of self-employment in term of trades that require access to private vehicles.
The group most likely to use bus are the unemployed and those seeking work and this may be correlated to financial metrics.
Income
Other than for those on income of less than £15,000 who have bus use characteristics slightly below the next income group, there is a clear link between increasing income and declining bus usage.
| Sub-category | Every day, or almost every day | 2 or 3 times per week | About once a week | About once a fortnight, or once a month | Not used in past month |
|---|---|---|---|---|---|
| up to £15,000 p.a. | 9 | 17 | 10 | 11 | 53 |
| over £15,000 - £20,000 | 11 | 16 | 9 | 13 | 51 |
| over £20,000 - £25,000 | 9 | 12 | 9 | 11 | 59 |
| over £25,000 - £30,000 | 5 | 12 | 9 | 15 | 59 |
| over £30,000 - £40,000 | 5 | 10 | 8 | 14 | 62 |
| over £40,000 - £50,000 | 7 | 8 | 5 | 13 | 67 |
| over £50,000 - £60,000 | 4 | 8 | 5 | 15 | 68 |
| over £60,000 p.a. | 4 | 8 | 6 | 14 | 68 |
Equivalised income
When considering equivalised income (which adjusts for household size) there is a clear negative relationship between higher equivalised income and bus use.
| Sub-category | Every day, or almost every day | 2 or 3 times per week | About once a week | About once a fortnight, or once a month | Not used in past month |
|---|---|---|---|---|---|
| 1 (20% lowest incomes) | 10 | 15 | 9 | 12 | 54 |
| 2 | 7 | 12 | 9 | 14 | 57 |
| 3 | 7 | 10 | 7 | 12 | 64 |
| 4 | 6 | 10 | 6 | 14 | 64 |
| 5 (20% highest incomes) | 4 | 8 | 7 | 15 | 66 |
Scottish Index of Multiple Deprivation
| Sub-category | Every day, or almost every day | 2 or 3 times per week | About once a week | About once a fortnight, or once a month | Not used in past month |
|---|---|---|---|---|---|
| 1 (20% most deprived) | 10 | 16 | 9 | 10 | 54 |
| 2 | 9 | 12 | 7 | 13 | 59 |
| 3 | 6 | 8 | 7 | 12 | 67 |
| 4 | 4 | 8 | 6 | 14 | 69 |
| 5 (20% least deprived) | 5 | 12 | 10 | 17 | 55 |
When looking at SIMD (as a whole) the picture is somewhat mixed. The lowest and highest decile are similar in terms of non-bus usage but the lowest decile has the highest everyday and 2 or 3 times a week use. This is likely to be because of interactions between the overall SIMD score and the Access domain (see earlier section).
Summary
Looking at available data on socio-economic disadvantage linked to bus use strongly suggests that the policy is strongly targeted towards those at a potential disadvantage.
Looking at the totality of SIMD data perhaps presents a slightly less clear picture but this is likely to be due to the interactions between overall SIMD rank and the Access domain (which includes public transport) and potentially high quality bus services in well ranked urban areas.
Consumer Duty
The Consumer Scotland Act 2020 (the Act) came into force on 1 April 2024 and was applied to Scottish Ministers through secondary legislation (The Consumer Scotland Act 2020 (Relevant Public Authorities) Regulations 2024).
The duty is intended to improve the extent to which consumers are considered in strategic policy and decision-making in order to deliver better policy outcomes for consumers in Scotland.
The Act defines a consumer as either an individual or a small business that purchases, uses or receives goods or services in Scotland, where those goods or services are supplied in the course of business.
The duty covers consumers of services provided by government departments, local government and other public authorities. All users of public services are consumers regardless of whether or not they pay directly for that service. A consumer can also refer to potential or future consumers.
The entire policy is targeted at improving the experience of consumers of bus. The experience is likely to be strongly positive for all options.
BRIA - Business and Regulatory Impact Assessment
Business and Regulatory Impact Assessments (BRIAs) are used to assess the costs, benefits and risks of any proposed primary or secondary legislation, voluntary regulation, codes of practice, policy changes or guidance that may have an impact on the public, private, third sector or regulators. The material contained within this OBC is considered to be broadly equivalent to a “Partial BRIA” and will demonstrate the consideration given to, and the engagement with, those businesses affected by the policy.
A full formal BRIA will be undertaken for the National Scheme as it develops.
As discussed above there are no negative impacts on members of the public from the proposal (other than those mentioned under consumer duty for Option 6) and the public will benefit from the proposal and all options.
The key potential impact is that on bus operators and this is considered in the commercial case and below.
There are likely to be some modest positive wider private sector impacts with bus travel becoming less expensive and the only other part of the private sector that could be significantly negatively impact is operators of competing modes. These are considered below. The main private (non-transport) sector impacts are likely to be those associated with greater population mobility – easier access to leisure opportunities, potentially easier access to employment (see above) and (marginally) potentially reduced congestion from private car use.
Impact on bus operators
A key impact of the scheme is that on bus operators. There has been discussion with as many operators as possible over the course of summer 2026 and the experience of the Highlands and Islands pilot has also been drawn on. This section shows how the scheme would work in practice for a stylised bus operator before consideration is given to wider factors.
Worked example of how scheme reimbursement will work in practice
This example is for a stylised operator who has a limited number of cross boundary services. The impact is considered in stages for a 90% reimbursement rate.
For each journey, the operator receives the fare paid plus 90% of the difference between the fare and £2 as reimbursement.
Stage 1 - Before there is a demand response
| Journeys | Original Fare | Original Revenue | New Fare | Reimbursement / Journey | Revenue / Journey | New Revenue | Lost Revenue |
|---|---|---|---|---|---|---|---|
| 100 | £2.50 | £250.00 | £2.00 | £0.45 | £2.45 | £245.00 | £5.00 |
| 100 | £3.00 | £300.00 | £2.00 | £0.90 | £2.90 | £290.00 | £10.00 |
| 200 | £4.00 | £800.00 | £2.00 | £1.80 | £3.80 | £760.00 | £40.00 |
| 100 | £5.00 | £500.00 | £2.00 | £2.70 | £4.70 | £470.00 | £30.00 |
| 50 | £6.00 | £300.00 | £2.00 | £3.60 | £5.60 | £280.00 | £20.00 |
| 30 | £10.00 | £300.00 | £2.00 | £7.20 | £9.20 | £276.00 | £24.00 |
| 10 | £15.00 | £150.00 | £2.00 | £11.70 | £13.70 | £137.00 | £13.00 |
| 8 | £25.00 | £200.00 | £4.00 | £18.90 | £22.90 | £183.20 | £16.80 |
| 5 | £40.00 | £200.00 | £15.00 | £22.50 | £37.50 | £187.50 | £12.50 |
| 603 | £4.98 | £3,000.00 | £2.75 | £7.75 | £11.42 | £2,828.70 | £171.30 |
The bottom line of table shows total or average values. Before (or if there is no) demand response, the scheme reduces operator revenue by £171.30 post reimbursement.
If demand does not change - Operator loses £171.30 and is restored to original position.
Stage 2 – Demand Changes
If demand does change, the extent of the change will vary. It is possible to calculate how many extra journeys would be required so that there was no overall impact on revenue.
| Journeys | Original Fare | Original Revenue | Extra Journeys (Rounded Up) | New Revenue | Implied Reaction |
|---|---|---|---|---|---|
| 100 | £2.50 | £250.00 | 3 | £252.35 | -0.15 |
| 100 | £3.00 | £300.00 | 4 | £301.60 | -0.12 |
| 200 | £4.00 | £800.00 | 11 | £801.80 | -0.11 |
| 100 | £5.00 | £500.00 | 7 | £502.90 | -0.12 |
| 50 | £6.00 | £300.00 | 4 | £302.40 | -0.12 |
| 30 | £10.00 | £300.00 | 3 | £303.60 | -0.13 |
| 10 | £15.00 | £150.00 | 1 | £150.70 | -0.12 |
| 8 | £25.00 | £200.00 | 1 | £206.10 | -0.15 |
| 5 | £40.00 | £200.00 | 1 | £225.00 | -0.32 |
| 603 | £4.98 | £3,000.00 | 35 | £3,032.17 | -0.13 |
In the above table, the required number of journeys has been rounded up to the nearest journey. Thus, revenue is (slightly) higher than it was originally.
The “Implied reaction” – technically the price elasticity of demand - is low – it does not require a “large” shift in demand to leave operators no worse off.
In this case, the operator would receive no additional funding and no subsidy but after standard reimbursement (and because of the rounding) would be slightly better off.
The normal range for demand reaction is between -0.3 and -0.7. This is shown below.
| Journeys | Original Fare | Original Revenue | Extra Journeys - low reaction | Revenue - low reaction | Extra Journeys - high reaction | Revenue - high reaction |
|---|---|---|---|---|---|---|
| 100 | £2.50 | £250.00 | 6.00 | £259.70 | 14.00 | £279.30 |
| 100 | £3.00 | £300.00 | 10.00 | £319.00 | 23.33 | £357.67 |
| 200 | £4.00 | £800.00 | 30.00 | £874.00 | 70.00 | £1,026.00 |
| 100 | £5.00 | £500.00 | 18.00 | £554.60 | 42.00 | £667.40 |
| 50 | £6.00 | £300.00 | 10.00 | £336.00 | 23.33 | £410.67 |
| 30 | £10.00 | £300.00 | 7.20 | £342.24 | 16.80 | £430.56 |
| 10 | £15.00 | £150.00 | 2.60 | £172.62 | 6.07 | £220.11 |
| 8 | £25.00 | £200.00 | 2.02 | £229.37 | 4.70 | £290.92 |
| 5 | £40.00 | £200.00 | 0.94 | £222.66 | 2.19 | £269.53 |
| 603 | £4.98 | £3,000.00 | 86.75 | £3,310.18 | 202.42 | £3,952.16 |
In the low case the operator gains £310.18 from the scheme and in the high case, £952.16. These two amounts are what is counted as subsidy.
This provides some strong evidence that there may need to be a mechanism by which operators who do not see sufficient demand impacts may need to be compensated to restore their pre-scheme position
Other operator impacts
A clear and obvious impact of the scheme is the partial removal of price competition between operators. However, it is important to note that operators are still able to compete on price if they choose to do so – there is nothing that prevents them from charging below £2 as a standard fare. However, it is much more likely that there will need to be a focus more on “non-price” competition in terms of quality of service, reliability, frequency etc. It is noted that this may put some operators at a disadvantage and discussion with operators as part of the evaluation of the scheme will be crucial.
Impact on Subway
The current single subway fare in Glasgow is £1.80, below the fare cap. So the Subway will not face a price competition impact directly from scheme on the price for single journeys that match the subway network. Subway is also likely to be time and comfort competitive over the bus network for the same journeys.
However, there may be more complex interactions that either reduce, or conceivably, expand demand for sub way and it is suggested that this will require careful monitoring of subway patronage levels to gauge the extent of interactions.
Impact on Rail
Around 55% of all Scottish rail journeys are wholly within the SPT region, generating c .£154 million a year. It does not account for the same proportion of revenue as those journeys are already heavily subsidised or have different characteristics relative to those in other regions.
A blanket £2 bus fare cap would likely result in significant modal shift from rail to bus on parallel corridors (e.g. Ayrshire to Glasgow) especially where journey times are competitive: provisional estimates from Scotrail suggest a 25% reduction in revenue based on modal shift seen on some lines in the Highlands pilot area, and the potential annual revenue risk is estimated at £25 million - £45 million. We state this large range because the estimate is subject to considerable uncertainty.
The table below compares rail and bus fares, if the £2 bus cap is extended to the SPT area:
| Journey | Rail Fare (Anytime Day Single) | Pilot Bus Fare (one way) | Rail Fare (Anytime Day Return) | Pilot Bus Fare (Return) |
|---|---|---|---|---|
| Glasgow - East Kilbride | £5.30 | £2 | £5.70 | £4 |
| Glasgow - Gourock | £9.50 | £2 | £9.90 | £4 |
| Glasgow - Largs | £10.90 | £2 | £12.50 | £4 |
| Glasgow - Ayr | £11.60 | £2 | £13.90 | £4 |
| Glasgow - Oban | £33.40 | £38.80 | £4 | |
| Glasgow - Fort William | £38.80 | £65.10 | £4 |
Costs in the railway are largely fixed, so changes to train services in response to lower patronage would release only marginal savings, such as energy consumption. Revenue loss would increase the subsidy required for Scotrail.
Detailed assessment of rail cost estimates
Given the uncertainty a range of technical analysis has been used to determine the likely impacts on rail.
ScotRail aggregate approach
This is the basis of the cost estimates drawing on early experience of the pilot and general rail knowledge. This results in the range of £25 million to £45 million. Central analysis suggests a loss of demand/revenue of around 25%. On total revenue in the area (£154m) that represents £38.5m.
Transport Scotland aggregate approach
A national run of the Transport model for Scotland - this suggests that the impact will be 20% for a national scheme. This gives £30.8m when applied to the revenue in the SPT area. When used in a similar manner for the removal of peak fares from rail, TMfS results were at the lower end of evaluated impacts. However, the national scheme will have a greater impact on price than the SPT scheme alone but there is already an existing impact on journeys to Highland eg Glasgow to Inverness.
Individual route approach
Analysis by ScotRail shows the most "at risk" routes - that generate a total of nearly £40m in revenue. This information was used to "sense check" the aggregate results. The most at risk routes represent around 25% of total revenue. So we considered two scenarios:
Scenario 1
The “Most at risk" routes have impact of 25% (in line with total SR estimates), remainder have impact of 12.5% (simply half the impact on average) – this is equivalent to the least "at risk" route will having zero impact and the impacts continuously falling with risk. This generates a revenue loss of around £25m in line with the lower end of the estimated range. (25% of 38 plus 12.5% of 116 is £24m). So Scenario 1 serves as a useful triangulation of the bottom half of the range.
Scenario 2
The impact in “most at risk routes” was adjusted in order that applying the same methodology as in Scenario 1, resulted in an overall demand impact of 25% - in line with the aggregate SR estimates. This required an impact of 40% in the high risk routes and 20% (on average elsewhere) but results in a revenue loss of just less than £40m (£38.4m) - at the higher end of the range.
A final further "rule of thumb" triangulation was undertaken. The peak fares analysis suggested that bus demand changes accounted for about 25% of the increased demand to rail. Our "middle" scenario for bus suggests an increase in demand of 20%. And bus demand is around 4x that of rail. So applying the peak fares result in the opposite direction gives an impact on rail of 20% x 4 x 25% or 20% in line with the TMfS estimates. Doing the same analysis as in Scenario 2 above but for 20% rather than 25% gives an impact of just shy of £30m.
Finally, the emerging experience in the HITRANS pilot suggests a 2x greater than modelled impact on longer distance journeys. A component of this is probably due to tourism over the summer and the increase in Ember services since 2025 (which the model is based on). But the latter applies to SPT as well, hence the prudence of including the higher end of the range (£45m) of rail impacts.
So in summary, the range of £25m to £45m represents three considered analytical approaches plus a rule of thumb calculation. There remains considerable uncertainty and while anecdotal views around the substitutability of bus and rail in the SPT area would perhaps suggest a level below the lower end of the range, there is no real evidence to support this. Given the significant price reductions from the scheme and the wider cost of living pressures faced by all in the SPT area (and elsewhere) £25m to £45m is the best estimate of the impacts.
Impact on Taxi services
There is some academic evidence on the impact of bus fares on demand for taxi services but very little that is based in the UK or in Scotland specifically.
In the UK, a major evidence review for the UK Department for Transport found extensive evidence that lower bus fares increase bus patronage. However, most diversion occurs from:
- car travel;
- walking;
- other public transport modes,
rather than from taxis. The report also highlights that diversion factors vary significantly by geography and trip purpose.
Similarly, a comprehensive review of transit elasticities in 2025 (Litman (2025), Transit Price Elasticities and Cross-Elasticities) notes that public transport demand responds to fare changes, but the strongest cross-elasticities identified in the literature are typically with private vehicle use rather than taxi use.
The notable point is that neither source reports a widely accepted taxi-bus cross-price elasticity. That absence itself is informative: the academic literature has generally not identified bus-taxi substitution as one of the major demand relationships in urban transport.
The strongest evidence suggests that:
- Bus and taxi are substitutes only for a limited subset of trips, not close substitutes across the market as a whole.
- Taxi demand is driven heavily by convenience, door-to-door access, availability, late-night travel, luggage, mobility needs and time savings, factors that bus fares do not materially change.
- A bus fare cap is likely to draw some demand away from taxis, particularly for short urban trips by price-sensitive users, but the literature does not support the view that large volumes of taxi users would switch to buses solely because bus fares become cheaper.
No clear estimation of bus/taxi cross price elasticities in a form relevant to the SPT £2 fare cap has been found so it is not possible to quantify impacts. However, looking in detail, the following evidence suggests any impact may be small.
Taxi demand tends to be only weakly connected to public transport fares
Hensher, Rose & Greene (2014) explicitly analysed factors influencing taxi use and found that demand is shaped by a broad set of service-quality attributes rather than simply price comparisons with public transport. Taxi users place significant value on convenience and time savings, indicating that taxis occupy a distinct market segment rather than acting as a simple substitute for buses.
A key implication is that if bus fares fall, only taxi customers whose primary reason for using taxis was cost-related are likely to switch
Bus, rail and taxi can be competitors in some places and complements in others
A useful empirical study, albeit in the Chinese context is Huang et al. (2019).
Using large-scale smartcard and taxi data from Shenzhen, the authors found that interactions between bus, metro and taxi services varied across locations and time periods. The relationship was sometimes competitive and sometimes complementary rather than purely substitutive.
This is important for Glasgow and the wider SPT area:
- taxis often provide first-mile/last-mile connections;
- taxis serve trips where public transport frequencies are poor;
- taxis cater for evening and night-time travel when bus provision is weaker.
Fare matters, but mode choice is driven by more than fare
A recent UK study by Coventry University's National Transport Design Centre found that fare levels are important in mode choice, but travel time and service characteristics remain critical determinants. Even when cost considerations become weaker, travellers display strong preferences for taxi and private vehicle travel because of convenience and flexibility.
Most vulnerable taxi demand
The segment most likely to be affected is:
- short urban daytime trips;
- trips where both bus and taxi are realistic options;
- lower-income travelers (but a switch to bus in this case is in line with the policy objectives);
- discretionary travel.
Least vulnerable taxi demand
Much of the taxi market is likely to remain relatively insulated:
- airport trips;
- night-time economy trips;
- mobility-impaired users;
- business travel;
- passengers carrying shopping or luggage;
- trips where waiting and interchange costs are high.
There is perhaps some evidence or possibility that given the characteristics of vulnerable and less vulnerable demand, the greatest risk may actually be to:
- App-based private hire,
- Occasional taxi use,
- Short-hop city-centre journeys.
Traditional black-hackney demand associated with ranks, rail stations and late-night activity may prove more resilient because those journeys are often less sensitive to fare differences.
It will be sensible, if possible, to work with the taxi industry to monitor and evaluate any impacts of the scheme as part of the wider evaluation work.
Strategic Environmental IA
Strategic Environmental Assessment (SEA) assesses the likely significant environmental effects of a public plan, programme, or strategy. It considers how negative impacts can be avoided or minimised and, where appropriate, identifies opportunities for positive effects to be enhanced.
At this stage it is not possible to quantify with precision the environmental impacts of the scheme. However it is clear that providing a reduced bus fare regime will be unlikely to have negative impacts.
There may be possible positive impacts in terms of mode shift from private car to bus and this will be evaluated as part of the wider scheme evaluation. It should be noted however that the TMfS run referred to above.
Island IA
Under the Islands (Scotland) Act 2018, relevant authorities must assess and consider the impacts of policies, strategies, or services on island communities with a focus on where any policy, strategy, or service is likely to have a significantly different effect on an island community compared to other communities (including other islands).
The initial pilot covered the majority of islands in Scotland and the SPT extension primarily adds Cumbrae and Arran to the list of islands where a cap is in place. The scheme does not impact differently directly on island communities (other than in terms of existing fare structures) so a full assessment is not required.
There is a potential difference between the reimbursement to operators across different island groups – the reimbursement rate in Orkney and Western Isles is 95% and it is 98% in Shetland compared with 90% in mainland Highland. This was chosen to reflect the demand impacts in island communities likely being lower than on the mainland and was sensible because of the physical separation of services and technically possible because only 1 operator (Stagecoach) operates on the Mainland and (in this case) Orkney.
Primarily for technical reasons it is likely that the same reimbursement rate will be put in place across the SPT area. This will not directly impact on communities.
Cumbrae
The bus service on the island is run by Millport Motors Ltd. The service is 15 mins from end to end, and has a single adult fare of £2.30 with a £4 return. As such those taking single journeys will benefit from the fare cap but the impact will be relatively small.
Arran
There are 3 bus services on the island run by Stagecoach – the 322, 323 and 324 operating
- Route 322: Brodick → Balmichael → Shiskine → Blackwaterfoot
- Route 323: Brodick → Lamlash → Whiting Bay → Kildonan → Lagg → Corriecravie
- Route 324: Brodick → Corrie → Sanox → Lochranza → Catacol → Pirnmill → Imachar → Dougarie → Machrie
Day tickets are available for £8.40 and for example a single and return ticket from Whiting Bay to Brodick is £4.40 which perhaps suggests moderate savings.
Both islands are close to the major population centres around Glasgow and have frequent ferry services making day-trips feasible and there being reasonable potential for increases in demand.
In summary, it is judged that there will be no differential impacts on the two island compared with the mainland but it will be useful to monitor the impacts specifically.
Summary
This section has covered the demand response likely to be generated by the scheme and the range of potential impacts on various groups. The analysis is brought together in Section 8 below with the remaining Cases to make a recommendation.
More generally the section has highlighted the potential impact on the taxi industry (although evidence suggests it will be minimal/small) and the two island communities should be specifically considered in the future evaluation of the policy