In this paper cost-benefit rules for public transport subsidies are considered. Recent applications of cost-benefit analysis to the appraisal of bus service provision are surveyed, and justifications for public transport subsidy considered. The authors derive the cost-benefit ratio appropriate for considering the benefits to public transport users of a fare reduction financed through increased local taxation on housing services. The cost-benefit rules are then extended to allow for the impact of Central Government assistance through grants-in-aid, and to incorporate allowances for external benefits in the form of reduced road traffic congestion and for income distributional considerations. A cost-benefit rule appropriate for assessing the case for service-level improvements which reduce passenger waiting times is also noted.
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