Costs of operation of public transport systems have been rising in real terms (i.e. corrected for inflation) in nearly all countries for many years now. This paper looks at the consequences of rising costs on the scope for setting fares and service levels, on car ownership and modal split and on the location of activities. It examines the likely effects of both higher and lower levels of productivity on future bus use and concludes that even with rising wages improved productivity would have a significant effect on ridership by the end of the century. In many countries the reaction to rising costs in the past has been to increase subsidy levels. Alternative strategies are considered in this paper. Though there are limitations to the improvements which are possible in the way staff and vehicles are used and in the environment in which buses operate, the combined effect of such measures could well reduce overall operating costs by some 15 to 20 per cent and the paper assembles what evidence there is in support of this. The move to less-labour-intensive systems such as rail, however, appears to be a feasible proposition only when the demand along a corridor is exceptionally heavy, unless the infrastructure is already in existence. (A)

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