Estimates Day Debate: Spending of the Department for Transport

What are Estimates?

One of Parliament’s longest standing functions is the consideration and authorisation of the government’s spending plans, requiring the government to obtain Parliamentary consent before spending public money. Estimates, sometimes known as Supply Estimates, are the documents presented to Parliament setting out the government’s plans for spending for a given year.

The process of obtaining Parliamentary approval to those plans is known as Supply. With a few specific exceptions, the government is required to obtain authority from Parliament through the supply process before it can spend public money.

Content of an Estimate

Separate Estimates and Votes on Account are produced for each government department and published together by HM Treasury in a single volume. The key components of each Estimate are spending limits and ambits, which in each case apply to a single department for a single year only.

Department for Transport Main Estimate 2025-26

Background

The 2025/26 Main Estimates were published on 15 May 2025. They set the spending plans for 2025/26 financial year and are derived from the second year of the Phase 1 Spending Review released by the government in Autumn 2024.

They are the first full year spending plans based on the Labour government’s spending review. Although published by the Labour government, the spending plans for 2024/25, published in July 2024, were initially derived from the 2021 Conservative government’s spending review. The 2024/25 plans were then updated by the Supplementary Estimates in February 2025, which were based on the first phase of the Labour government’s Autumn 2024 spending review.

Day-to-day spending (Resource DEL)

DfT has set its Resource DEL budget to decrease by £155.5 million (-0.8%) from £20,545.4 million to £20,389.9 million.

The main drivers of this decrease are:

• £464.6 million reduction in the estimated overall net subsidy provided to the Train Operating Companies (TOCs) compared to 2024-25. This is partly due to improved income, alongside planned efficiencies.
• £352.2 million reduction in bus subsidies and concessionary fares due to the transfer of funding allocated to the West Midlands and Greater Manchester Combined Authorities to MHCLG, and the increase in the national bus fare cap from £2.50 to £3.00 reducing the overall cost of supporting the scheme.

This is partially offset by:

• £229.1 million increase in net funding for Network Rail;
• £81 million increase in central administration funding to cover the increase in employers’ national insurance contributions;
• £80.5 million increase in Local Authority Transport including a one-off income receipt of £45 million in 2024-25 for the Mersey Gateway PFI agreement, and additional funding for all Local Authorities who do not receive the City Region Sustainable Transport Settlements (CRSTS) funding; and
• £50.7 million increased costs related to the closure of Phase 2 of the HS2 programme.

Investment spending (Capital DEL)

DfT has set its Capital DEL budget to increase by £899.6 million (+4.4%) from £20,665.6 million to £21,565.2 million.

The main drivers of this increase are:

• £817.2 million increase in funding for Local Authority Transport consisting of an additional £500 million announced in the Autumn Budget for Highways Maintenance, and an additional £226 million for a new Local Transport Grant.
• £407.8 million increase for the one year capital funding settlement announced for Transport for London (TfL) for 2025-26 at the Autumn Budget.
• £219.3 million net increase for Land and Property spend related to HS2, including delayed spend from 2024-25 due to legal issues, access rights and slower than anticipated negotiations in Phase 2. This is partially offset by a £120 million reduction in capital budget for Phase 1.

This is partially offset by:

• £266 million reduction in forecast for the Interim Road Settlement profile which provides funding for operating, maintaining and enhancing the strategic road network.
• £175.5 million reduction in the Transport Development Fund due to the transfer of funds to MHCLG who will administer these payments to the Manchester Combined Authorities as part of their Integrated Settlements.
• £160.7 million reduction in Aviation, Maritime, Security and Safety due to the conclusion of an R&D programme for the UK Shipping Office for Reducing Emissions (UK SHORE) and a reduced borrowing requirement for Trust Ports.

Demand-led spending (Annually Managed Expenditure)

DfT has set its Resource AME budget to decrease by £1,009.8 million (-21.4%) from £4,711.1 million to £3,701.3 million. This reduction is driven by a movement in deferred tax which has reduced in 2025-26 compared to 2024-25, this also represents a broader reduction in the AME requirement across the department.  

The DfT Capital AME budget remains unchanged at £148.6 million.

The Spending Review 2025

Phase 2 of the 2025 Spending Review, announced on 11 June 2025, sets out planned day-to-day spending totals (Resource DEL) for all government departments for the years from 2026/27 to 2028/29, and investment spending plans (Capital DEL) for a further year (from 2026/27 to 2029/30).  

DfT spending (excluding High Speed 2) is set to increase from £22.3 billion in 2023-24 to £25.9 billion in 2028-29. The Spending Review states that in real terms (i.e. adjusting for inflation), this means spending will increase by 0.5% per year over this period. Real-terms spending from 2025-26 to 2028-29 (the ‘Phase 2’ period) is stated to decrease by 0.4% per year.  

As announced in the Main Estimate 2025-26 the national bus fare cap has been increased from £2.50 to £3.00. This policy was due to end in 2025-26 but as part of Phase 2 of the Spending Review, funding has been provided to extend the cap by over a year to March 2027, and is intended to cover 5000 bus routes and support cost of living pressures. In terms of investment, £750 million per year has also been provided to maintain and improve bus services, including franchising pilots in areas including York and North Yorkshire, and Chester and Cheshire West.

Further substantial capital investment has been announced in the Spending Review for Rail Infrastructure and HS2, following the £219.3 million increase in capital to close Phase 2 of the HS2 programme in the Main Estimate 2025-26. This includes:

• £25.3 billion to progress delivery of HS2 from Birmingham Curzon Street to London Euston. 
• £3.5 billion to deliver the TransPennine Route Upgrade by the early 2030s. 
• £2.5 billion to continue the delivery of East-West Rail. 

Whilst the Spending Review leaned heavily on the confirmation of new and previously announced funding for tram, bus and rail projects there was also funding announced for Active Travel England (ATE), with a £616 million settlement over four years. However campaigners have expressed concerns over the level of funding which currently equates to £154 million per year, a reduction of £92.4 million compared to the level of dedicated funding provided in 2025-26 of £246.4 million. It should be noted that the Main Estimate 2025-26 provides a total budget of £214.9 million split out as £85.4 million day to day funding and £129.5 million investment funding for Active Travel England (ATE).