Last week, it was announced that the next Labour government would introduce free bus passes for everyone under 25. Labour said this would cost £1.4bn annually, although the government claimed the true cost would be greater. Regardless of who is right, it would certainly be an expensive policy.
Ignoring the cost to the taxpayer, though, free bus passes for young people is simply bad economics.
It is incredible easy to demonstrate why. It is entirely possible for someone under the age of 25 to be very well off. This person may have a well off family, or have gotten a job which pays well early on in his career. Someone in this situation will not have their life improved by not having to pay for bus travel. Yet Labour’s policy would see his bus travel funded by taxes. By definition this means bus travel of rich people would be part-funded by those on lower incomes.
Targeting such a policy as free bus passes on age, then, is ridiculous. A means-tested policy whereby those on low incomes receive free bus travel makes more sense. However, even this falls apart when the details of the policy are considered further.
You see, what Labour have proposed is not really universal free bus travel for under 25s at all. The free bus passes would only be valid in areas where local councils choose to nationalise bus services. This makes it a ‘postcode lottery’ policy, in effect. Further, consider the geographical differences in access to buses. In cities, where buses run often, people would take the most advantage of the policy. In the country, where they do not, it would be far less useful. As it will be paid for by everyone’s taxes, this represents a redistribution of income from rural to urban areas. Hardly progressive.
The economic illiteracy does not end there. Partially for the geographical reasons outlined above, and partly due to some people preferring other means of transport such as trains, not all young people will use buses much, or at all. If the government funds bus passes for people who do not use buses, this is a huge waste of funds.
Looking more generally at the transport market, it becomes clear that handing out free bus passes is horrific for competition. Suddenly, young people will not want to use new, innovative services like Uber as they can take a bus for free. This has the capacity to kill, or damage, companies which attempt to compete against bus services.
Finally, Labour’s new policy only appears worse when you look at where they’re planning on getting the money from. The funding would be coming from money currently set aside for building and repairing roads. The UK currently needs more money spent on its road infrastructure, not less. Labour supporters claim that the free bus passes will take cars off the road, reducing damage. They fail to acknowledge that heavy vehicles like buses cause far more damage.
Any government which is serious about improving the lives of young people should be looking elsewhere. Specifically, at tax cuts. Spending the same amount on cutting taxes for those on low incomes would be better in every way. People who planned to use buses could use the money on bus passes if they so desired. Those with no intention of using buses could spend it elsewhere. Of course, the public finances are in no state to be wasting £1.4bn annually anyway. If they were, though, free bus passes for people under 25 is a terrible way of wasting it.