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Clause 45

Provision and support of bus services

Ms Hewitt: I beg to move amendment No. 3, in page 24, line 21, leave out 'large'.

Mr. Deputy Speaker (Mr. Michael J. Martin): With this, it will be convenient to discuss Government amendments Nos. 4 to 12.

Ms Hewitt: These amendments deal with the minimum seating capacity for the works bus exemption and related

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matters. We had an extremely helpful debate on the subject in Committee and hon. Members raised various matters there on which I promised to reflect further. I have done so and these amendments are a consequence of that further consideration--further proof that this Government do listen and respond.

Amendments Nos. 3 and 4 would reduce the minimum seating capacity requirement for the works bus exemption from 17 to 12. Several of the amendments moved in Committee sought to reduce our initial figure of 17. As I explained in Committee, the reason for a high seating test is simply to prevent the exemption being siphoned off, notably to family companies where husband and wife directors provide themselves with a large family vehicle, via the company, to take the two of them to and from work. There are tens of thousands of such companies. Such vehicles would normally be classed as cars and it is not the aim of the clause to change that in any way.

The provision removes the tax charge where a works bus is used to transport employees between home and work; it is part of our green transport package. However, in order to avoid potential abuse, the bus in question needs to be clearly distinguishable from a car, so the minimum seating requirement needs to be large enough to act as a deterrent against using a larger vehicle to attract a tax break. A fine balance has to be struck between avoiding a perverse incentive on the one hand, and, on the other, meeting the aims of the many employers who genuinely want to provide a bus service that will get a significant number of employees out of their own cars and on to buses.

Since the Committee stage, I have considered whether the 17-seat requirement could be reduced for works buses, and whether we could dispense with any seating capacity requirement for the public bus service exemption. As hon. Members will see from other amendments, we have indeed entirely removed the seating requirement for the public bus exemption. For the works bus, we felt able to come down significantly--by almost one third--to a minimum seating capacity of 12, which, I think, was the figure proposed in Committee by the hon. Member for Torridge and West Devon (Mr. Burnett).

That does not reduce the minimum quite as far as was proposed in some of the amendments tabled in Committee. However, there would be a real danger of opening the way to avoidance, if a figure lower than 12 were adopted. None the less, the amendment, taken with the other relaxations that we have introduced, will go a very long way towards meeting the points that were made in Committee, and in representations to us.

Amendments Nos. 5 and 6 deal with concerns expressed in Committee that the wording of the conditions about qualifying journeys in a works bus was too restrictive, and that some specific relaxation should also be introduced to enable children of employees to travel on the works bus without prejudicing the exemption. As I explained in Committee, the original wording would already have permitted some non-qualifying journeys, but concern was expressed in Committee about the use of the word "only" in relation to the qualifying conditions. The amendments retain the main thrust of the exemption--to exempt employees on their home-to-work journey from any tax on that benefit--but we have now expressed that, in amendment No. 5, in a main-use test for home-to-work journeys. We have removed the references to "substantial compliance" and to "only" about which some hon.

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Members were concerned. I hope that makes it clear that, provided the main-use test is met, a certain amount of other use of the service can take place without the exemption being lost--that is the key point.

As regards children, within the main-use test provided by amendment No. 5, amendment No. 6 includes a specific reference to allowing the children of employees to use the bus. However, that does not involve any restriction of the opportunity for a limited amount of other non-home-to-work travel by individuals without the exemption being lost. Together, the amendments introduce a simpler and, I hope, more user-friendly concept of main use.

As I have pointed out, amendments Nos. 7, 8, 9 and 12 remove any seating requirement for the public transport service subsidy, because the avoidance risk in respect of husband and wife directors, to which I referred, does not really apply to a public passenger transport service. We have decided that we can dispense with any minimum seating test.

Amendment No. 10 responds to an issue that was brought to my attention in Committee by my hon. Friend the Member for Wentworth (Mr. Healey). He wanted to cater for situations in which, for example, bodies with particular experience in the transport sector, such as passenger transport executives, provide an intermediary service--brokering the necessary payment and transport arrangements with transport companies--on behalf of one or more employers. The amendment introduces a relaxation to the road service bus subsidy exemption, by removing the requirement that the subsidy, or other support, for the bus service must be provided directly to the operator of the service.

Finally, amendment No. 11 arises from the consideration that I promised to give to an amendment proposed in Committee by the right hon. Member for Fylde (Mr. Jack). The issue is whether the condition in clause 45--that the service must be substantially used for commuting journeys only--is necessary in relation to the exemption for employer subsidies to public transport services.

As I said in my reply to the Committee, under the transport subsidy exemption, employees have to pay the same fare as other passengers. In those circumstances, there is no need to be concerned about the number of occasions, in addition to the ordinary commuting journey, on which the employee otherwise uses the service. In reconsidering the matter, we see no further risk in making the change proposed by the right hon. Gentleman. I am happy to introduce an amendment to remove entirely the requirement for employees to use the public bus service substantially for home-to-work journeys.

The amendments simplify and improve the package of measures announced by my right hon. Friend the Chancellor in the Budget to give significant support to the growing number of employers who are introducing green transport schemes and, hence, providing an incentive to other employers to follow that example. I commend the amendments to the House.

6.45 pm

Mr. Flight: After I was privileged to be elected as the representative of the citizens of Arundel and South Downs, the first business that I visited was a mushroom

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farm employing about 500 people. The business was in a rural area and many of the employees did shift work. They went through various business issues with me, and two major political points arose. The first was the subsidisation by the EU of mushroom farmers in Ireland, but the second was the advice from the Revenue that the bus service provided for the workers would be taxed as a benefit in kind to the recipients. In view of the hassle of assessing what the benefit in kind might be, it was felt that the company should stop providing the service.

I wrote to the Treasury once or twice, before the present Economic Secretary was appointed. The responses that I received were not particularly encouraging, but the point of my preamble is to explain why I am delighted that the Government have introduced these measures. They are obviously common sense, if we want to cut down the use of cars in rural areas. The benefit in kind aspect is minimal, while the benefit to the rest of the community is substantial.

My main comment is on amendment No. 6. It struck me that there could be occasional use by children, but not by spouses. I understand the explanation given by the Economic Secretary as to the purpose of that limitation, but it struck me that that might not be adhered to in practice. It might present a problem, if one spouse and the children--for whatever reason--needed a lift to the workplace of the other spouse.

Secondly, such works buses could occasionally provide valuable help in rural communities, by giving a lift to old age pensioners; I am sure that, if there were space on the bus, such people could board it. I trust that such practical anomalies would not undermine the tax advantages of the whole scheme.

Mr. Nicholas Winterton (Macclesfield): My hon. Friend obviously knows his constituency remarkably well. Out of interest--I do not seek to score political points--and given the problems that the company might encounter, or the hassle to which he refers, are there other public service buses to carry out the service?

Mr. Flight: I thank my hon. Friend for his question. The bus services are not adequate; it would be a nightmare for many of those individuals to get to work. There are substantial time gaps in the existing services, and many of the staff would have to stop working for the company. Others would have to travel by car, scooter or other forms of transport. The example that I have given is a high-employment rural industry that is currently prospering and it is a wholly suitable beneficiary of the Government's proposals. There must be many other such cases, especially in rural areas, where labour-intensive employment is sought.

The rest of the amendments strike me as beingfairly sensible, if occasionally slightly over-defined. We understand the underlying principle of avoiding exploitation of the concession by family companies, but if a 17-seat minimum is too high for the purposes of defining a bus, 12 seats is well in excess of the number found in a car. However, if a company were to use some form of dormobile, it is debatable whether 12 seats really means 12 seats. Amendment No. 12 appears to remove the definition of how the number of seats is counted, and I assume that that is done to permit a degree of practical flexibility in the matter.

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However, the essential point is that the amendments are welcome. It is good news that the Government have modified their original proposals to make them as practical and user friendly as possible. I trust that the general enforcement guidelines issued to the Revenue will reflect common sense.

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