Heidi Alexander admits £454m funding gap behind Andy Burnham’s £2 bus fare pledge

Another Andy Burnham cost-of-living announcement was at risk of descending into chaos today.

The PM has been boasting about his decision to cap single bus fares at £2 across the country - instead of £3 typically now.

But Transport Secretary Heidi Alexander extraordinarily admitted this morning that the ’detail’ of where £454million of funding is coming from ’hasn’t been worked through’ yet. 

She told Sky News that climate grants to developing countries will be converted to loans, but pressed on whether interest would be charged merely insisted there would be ’favourable’ terms for recipients. That raises the prospect of the UK Government needing to borrow the money to lend without any real returns.

Ms Alexander said: ’The detail will need to be worked out. We wanted to make the announcement today...’

The lack of clarity comes despite Mr Burnham telling the first meeting of his Cabinet yesterday that they must ’always show how they are going to pay’ for policies.

Stressing his commitment to the Treasury’s fiscal rules, Mr Burnham said: ’Always we will show how we are going to pay for it, what we are reprioritising. That will be a theme that we will always come back to.’

In other developments today:

• Mr Burnham appeared to execute another volte-face as he suggested there will be no new funding for council housing, despite pledging the biggest construction drive in history. Instead he indicated that existing funding for social housing will be redirected to council housing;

• New Foreign Secretary Ed Miliband is set to hold talks with his US counterpart Marco Rubio for the first time;

• Defence Secretary Wes Streeting has apologised for joking about the new Justice Secretary wanting to release prisoners. 

Andy Burnham has been boasting about his decision to cap single bus fares at £2 across the country - instead of £3 typically now

Transport Secretary Heidi Alexander admitted this morning that the detail of where £454million of funding is coming from ’hasn’t been worked through’ yet

Mr Burnham said he rejected the idea that ’cheaper transport isn’t an option’

A separate proposal to knock 5 per cent VAT off domestic electricity bills this Autumn was thrown into chaos after it emerged the £850million funding had not been earmarked. 

The Government insisted it will be paid for by axing Keir Starmer’s ID cards scheme. 

But Darren Jones – who was brutally sacked from the Cabinet by phone in Mr Burnham’s purge of Starmer loyalists on Monday – warned that policy was unfunded. 

As a result, new Chancellor John Healey faces having to find the cash at the Budget, heaping more pressure on the already stretched public finances. 

Speaking to broadcasters on a visit to the South West this morning, Mr Burnham batted away questions about the funding insisting he will ’always be honest with the public’.

’This week, the three policies I’ve announced – ending rough sleeping, the bus cap we’re announcing today and the removal of VAT off electricity bills – are all fully funded, and that’s the way I will go,’ he said.

’And people will say, "Well, how?"

’I’ve reprioritised. The public’s priority is reducing cost of living pressures and that’s what I’m doing.

’I’m taking a difficult look at some of the things that the Government was committed to, digital ID being one example, and reprioritising.

’And I think that’s what people would expect me to do coming into this job.’

Mr Burnham also appeared to rule out extra funding for council housing, despite pledging the biggest construction project in history. 

’When you talk about council housing, it’s about putting greater priority on council housing,’ he said.

’The Government had already allocated £39billion to housing over ten years.

’My instruction on coming into this job is to spend a greater proportion of that funding on new council housing because that gives the biggest return on investment than anything else.’

In a recognition of the strain on spending, Mr Burnham has embarrassingly dropped a push to end the freeze on tax thresholds.

The PM had made clear twice since entering No10 that he wanted to increase the personal allowance, saying the issue had ’lodged in his mind’ after being repeatedly flagged on doorsteps.

However, aides have now admitted there is no prospect of the change happening any time soon, with even small hikes costing the Treasury billions of pounds a year.

The freeze has been in place since 2022, and is due to remain until 2031, dragging millions of people deeper into the tax system in one of the biggest ever revenue-raisers. 

The Government says some £400million of the bus fare funding will come from switching international climate grants to loans, and the rest is from underspends in the Net Zero Department budget. 

The £2 bus fare cap will be in place from January, and last through 2027.

New Chancellor John Healey faces having to find funding at the Budget, heaping more pressure on the public finances

An equivalent cap had been in place nationally between January 2023 and December 2024 but the incoming Labour administration argued it was not affordable.

Some metro mayors, including Mr Burnham, decided to fund an extension of the lower limit in their areas.

Mr Healey said ’millions of people’ would benefit from fares being slashed by a third and insisted the measure could be paid for.

’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,’ he said.