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Mr. Brown: I am grateful to my hon. Friend for explaining the background to us. Does he accept that for the next financial year Nexus faces a shortfall in the funding arrangements of about £5.4 million? If so, can he give the House an assurance that meaningful discussions are going on in Government to try to resolve that problem? If he thinks the discussions are stuck and that we are not getting any further forward, will he say so, so that we can have the meeting with the Prime Minister that we were promised?

Mr. Woolas: I assure my right hon. Friend that meaningful discussions are going on. The Government recognise the real difficulties that the transport executive has in balancing its budget. Last summer's consultation with the Local Government Association and local councils resulted in general agreement that the distribution of money through the formula is the best way in which to pursue the issue. Indeed, representations by my right hon. Friend and others on the formula grant distribution method show that the needs of his authority, and of Tyne and Wear authorities in general, indicate that there is a shortfall in the ability of the formula grant to distribute money. Discussions have taken place and are taking place with the local authorities, the transport authority and the transport executive to try to resolve that problem. The level of pensioner bus usage in my right hon. Friend's area is very high, which is why we are continuing discussions with the transport authority and local authorities. My difficulty is that we must treat all local authorities fairly, and I know that my right hon. Friend agrees with that point.

Funding for concessionary fares is supported by the formula grant. My right hon. Friend is aware that the Chancellor added an additional £350 million in formula grant in 2006–07 in order to support the move from the statutory half-fare scheme to a free-fare scheme for all pensioners and disabled people. The funding for those new responsibilities has been added to formula grant in line with a commitment to provide authorities with continued flexibility in the use of their resources.

Mr. Alan Beith (Berwick-upon-Tweed) (LD): Surely the Minister knows—the Government have admitted this—that whereas the total sum might be sufficient to cover needs across the country, the distribution between authorities, including Tyne and Wear and, for that matter, Northumberland, which has different but equally difficult problems, does not reflect the particular needs of those areas.

Mr. Woolas: The right hon. Gentleman has made an important point. However, it is also true that local government in general and the LGA in particular support the idea of distributing money through formula grant. Devolution, which involves the distribution of
 
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money by local authorities, supports the idea that formula grant is the way forward. The alternative is a specific grant to target individual authorities, but the right hon. Gentleman, his party and the LGA would not support that view. The distribution of money is based on a formula that inevitably results in winners and losers.

The Government always face difficult decisions in dividing up a fixed pot of money where there will be, as I have said, winners and losers. We have looked to ensure an equitable arrangement for concessionary fares funding, which retains local control for spending as requested by local government, rather than separately distributing the money through a specific grant.

Mr. Stephen Byers (North Tyneside) (Lab): The Minister will know that local government makes a number of requests and representations to Government, not all of which are agreed. He said that he wanted all authorities to be treated fairly. The consequence of his decision is that Tyne and Wear is being treated unfairly. This debate is being held because we, as Members for Tyne and Wear, find that unacceptable. Yes, we want free travel for our pensioners, but we want it to be done in a way that is fair and just, which is not the case at the moment. What will the Minister do to resolve that situation?

Mr. Woolas: My right hon. Friend, who knows much better than I do about the problems of distributing money through formula grant, makes a valid point. The Government recognise that the amount of money distributed to Tyne and Wear is not adequate to meet the needs of the scheme as proposed or the current demand for pensioner bus travel in his area. We have moved, through consultation, to ensure that £1.7 million has been allocated to Tyne and Wear through the Department for Transport grant for the metro system. We support the idea of a co-ordinated, integrated transport system in Tyne and Wear, as elsewhere. That money has been granted in recognition of the point that my right hon. Friend makes.

The Government also have to ensure that distribution is fair among all local authorities. That is why the cost of the statutory minimum half-fare scheme was previously supported through the formula grant settlement. However, many local authorities were providing a service above the statutory minimum for their residents—for example, by extending the concessions across the whole county or by enabling their residents to buy a pass to enable them to travel on buses free of charge. Those extensions to the statutory scheme were not taken into account when allocating formula grant. Some areas already offer free travel—Greater London, the west midlands and Merseyside are cases in point. It was right that those areas, too, should benefit from the extra resource so that council tax payers did not bear the burden of an authority's prior decision to offer what is now Government policy.

Mr. Nicholas Brown: What my right hon. and hon. Friends and I want to know is how this matter is to be resolved. Can the Minister point to the way forward?
 
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Mr. Woolas: My right hon. Friend makes a valid request. The Government's approach is to examine the budget of Nexus, the transport executive in the region, to see how we can ensure that the transport concessions that are made—for example, for the student scheme, for the schoolchildren's scheme, and for the existing concessionary scheme—benefit from the allocation of Government money. We have to ensure that that scheme is legal and that it is fair to other authorities that are arguing that they are losing out. I have to say that none of the authorities that is benefiting from the allocation of money has written to me thanking me for it.

My right hon. Friend makes a serious point. We must ensure that we allocate the money through formula grant in a fair way and recognise the needs of the particular transport authority. That is why we are examining the way in which we can distribute money through the formula grant and other possible interventions. We want to ensure that my right hon. Friend's scheme for students, which has led to improvements in the stay-on rate for further education when compared with other areas, continues, and that student and school student travel for buses in his area is maintained and improved. How do we ensure that the unintended consequences of formula distribution of grant do not militate against the social benefits of the schemes that are currently in place for his constituents? That is our task, and the reason for genuinely congratulating him on raising the issue.

In developing the approach to grant distribution that we have now adopted, we had the benefit of extensive consultation, both in the official level settlement
 
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working group, in which my right hon. Friend participated, and in full consultation, especially involving local government, last summer on the range of our proposals for grant distribution.

The papers that the Association of North East Councils, which was mentioned earlier, brought to the settlement working group attempted to estimate the cost of moving from an authority's current position to a free-fare scheme. Inevitably, they could only be estimates. As I have explained, we could not base formula grant distribution only on those measurements.

Instead, we suggested that we should reweight the existing formula, known as the lower tier environmental, protective and cultural services formula to reflect the characteristics of areas where take-up of free bus travel is likely to be higher. Indeed, in the period between the announcement of the concessionary scheme in March and the consultation process in July and through to December, we took on board the points that my right hon. Friend made and the representations of others. That led to a significant increase in the money for Tyne and Wear.

We consulted on that in the summer of 2005 and, as part of the consultation, we exemplified the change in the EPCS formula. It is important to stress that the majority of responses to the consultation supported the change to the district level EPCS formula. I have to be fair to other local authorities in the area—

The motion having been made after Ten o'clock, and the debate having continued for half an hour, Mr. Deputy Speaker adjourned the House without Question put, pursuant to Standing Order.

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