This article develops a framework for allocating governmental grants to public transport in the Netherlands. Following the policy statement of the Dutch Government that the share of public transport in total passenger traffic should be substantially increased, it is argued that the allocating system for financial support should produce strong incentives to encourage public transport companies to follow the preferences of individual travellers. In this respect, the recently introduced "Net- en Stadsnormering" allocating systems with a one-year time horizon, are of great importance. Further improvementsare suggested, mainly for introducing dynamic competition in the development and operation of regional bus and rail public transport systems. The best results in terms of integrated public transport are expected from a mechanism based upon "competition for the road" rather than "on the road". A key element in the proposed system is that independent public transport companies are invited to design integrated public transport networks, within certain limits set by central or local governments. (A).
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