Under the Scotland-wide Older and Disabled Persons Concessionary Bus Scheme, qualified Scottish residents may travel anywhere in Scotland at any time on local buses at no charge. Transport Scotland is responsible for compensating bus operators for carrying these passengers. It has the objective that bus operators should be financially “no better off and no worse off” because of their participation in the scheme, requiring it to identify a “counterfactual” situation against which to measure:

• the revenue that would have been earned by the operator if pass holders were not able to travel for free (“revenue forgone”); and
• any additional costs that the operator might have incurred as a consequence of providing free travel, in particular through carrying passengers who would not otherwise have travelled.

In 2012-13, nearly 150 million free concessionary passenger journeys are expected to be made, at a cost to the Scottish Government (and therefore taxpayers) of £187 million in reimbursement payments under current arrangements.