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28 Jun 2007 : Column 516

The Government have stipulated that the reimbursement should be on a “no better off, no worse off” basis, but there is some dispute as to exactly what that means. It is clear that the 60-odd appeals that were initially registered with the Secretary of State by operators over reimbursement arrangements suggest that there is the potential for problems. Reimbursement on a “no better off, no worse off” basis is, in reality, an extremely difficult balance to achieve. After all, the marginal cost to an operator of carrying a few extra passengers is virtually nil. However, when numbers reach the point at which extra vehicles have to be brought in and extra drivers hired, the cost is not only an operating cost but a capital cost. Should the local authority at that point be presented with a large bill for the capital cost, or merely with a bill for the operating cost reimbursement?

A review of the systems put in place by concession authorities after two years of operation would allow the Government to establish whether costs were being borne fairly between authorities and operators. It would further enable the Government to establish best practice nationally and to advise concession authorities on how to improve efficiency and achieve savings. When introduced, the 2008 scheme will involve so many variables and unknowns that a review of the kind proposed by our new clause could be extremely valuable.

A further concern is that the Bill does not lay down the mechanisms by which local authorities will be reimbursed by central Government for the cost of funding concessionary travel. The Government have said many times that the details have yet to be decided. Understandably, local authorities across the country are extremely worried about the lack of clarity over funding, and what the arrangements that are eventually put into place will mean for them.

Given that the details of the funding arrangements are, at best, opaque, and that they are unlikely to become more transparent until after the passing of the Bill, we believe that the new clause would provide the concession authorities with a degree of reassurance. They would have some hope of redress, should they find themselves short-changed by the funding arrangements. As the Opposition made clear on Second Reading, there is some scope for some authorities in so-called hot spot or honeypot areas to find themselves heavily out of pocket. The funding for the 2006 scheme was shown to be insufficient in a number of areas, even when based on fairly static numbers for residents over 60. Because the nationwide eligibility for over-60s is established in the Bill, the potential for error will be hugely exacerbated.

The new clause would oblige the Secretary of State to provide a review to Parliament, to ensure that the total sum of central Government funds made available to local authorities in the previous financial year for the provision of bus services and the funding of concessions on those services was appropriate.

David T.C. Davies: Does my hon. Friend agree that over the years in which the Conservatives were in government, numerous instances of various formulae being used to allocate money to different local authorities for different reasons were shown after only a short time to be significantly flawed? What we are
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asking for is therefore perfectly reasonable and sensible, and ought to be supported by anyone who saw the damage that previous formulae did in areas such as the overall funding for local government, resulting in massive council tax increases across the country.

Stephen Hammond: I am grateful to my hon. Friend for his eloquent support for my new clause.

Philip Davies: My hon. Friend is making a typically good case for the new clause, which I support wholeheartedly. Does he agree that an unintended consequence might be that the proposals in the Bill could lead to local authorities having to cut bus services if the funding were not allocated properly? It would be a tragedy if a Bill whose principle of promoting public transport we all support were to have that effect. Is it not one of the main concerns for local authorities that they might have to cut services if the funding is not distributed adequately?

Stephen Hammond: My hon. Friend is correct. As I pointed out earlier, there is huge concern among local authorities about both the previous scheme and the possible impact of this scheme. The Minister will say that local authorities have discretion to provide extra services above the statutory minimum, but, again, that costs. If the funding formula is not correct, the discretion is, to all intents and purposes, worthless.

Jim Cousins: In response to the interventions from the hon. Members for Monmouth (David T.C. Davies) and for Shipley (Philip Davies), does not the hon. Gentleman recognise that the stated preference of the Local Government Association, which is now controlled by his party, is to move towards formula funding as the basis for distributing central Government support, and away from funding based on actuals?

Stephen Hammond: That may be so, but it does not lead us anywhere unless the formula produces the correct amount of money. The Local Government Association also supports central Government giving local authorities the correct amount of money to undertake services. That is the issue in relation to the new clause, and that is why the new clause is relevant.

David T.C. Davies: Does my hon. Friend agree that the Local Government Association, under the leadership of various different political parties, has always called for the ability to discuss problems, preferably before they arise, with Ministers? In requesting some form of review, we are merely asking for leaders of local authorities to be allowed to put their views to Ministers—through the Local Government Association if necessary, or, if not, perhaps as individuals—and to be listened to, and, if problems have arisen, for the Minister to go away and reconsider, or get his officials to do so. What on earth is unreasonable, and what is there to oppose, about that?

Stephen Hammond: As my hon. Friend says, what on earth is there to oppose about that? We shall see whether the Minister accepts such an extraordinarily sensible amendment.

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The new clause has two major advantages. First, it would highlight any continuation of a Government tendency to take credit for policies while passing the cost on to local authorities, as we have been discussing. Council tax has doubled in the past 10 years, which has hit the elderly and those on the lowest incomes hardest.

The Parliamentary Under-Secretary of State for Transport (Gillian Merron): I am interested in the hon. Gentleman’s reference to the Government funding of the statutory scheme. Will he clarify whether he believes that £1 billion is insufficient? If so, how much Government funding would be sufficient, and will his party commit itself to that?

Stephen Hammond: The hon. Lady knows that local authorities have indicated that the £350 million that the Government provided for the 2006 scheme was not sufficient.

Gillian Merron indicated dissent.

Stephen Hammond: Well, they have. I gave examples of two of them earlier, and am happy to do the same for the other 13 if the hon. Lady wishes. Clearly, the amount of money allocated by the Government on a percentage basis for the implementation of the 2006 scheme did not prove sufficient for a number of local authorities.

Gillian Merron: Will the hon. Gentleman clarify whether he is referring to funding for the statutory scheme or funding for the discretionary elements on top? If the latter, those local decisions are for local authorities to make.

2.15 pm

Stephen Hammond: The Minister is right: that is a matter for local authorities. I was describing the funding for the statutory scheme, and local authorities indicated clearly that they had not received enough money from the Government to fund that 2006 scheme. With regard to the Minister’s initial intervention, I do not know yet whether £1 billion will be sufficient to fund the scheme. I do not doubt the Minister’s integrity or sincerity in believing that the £1 billion that the Government say that they are providing is the right amount. That does not, however, negate the purpose of the new clause, which would allow us, after two years of operation—I accept that the transitional year may be unsteady—to ensure that the Minister’s belief was correct, and if it proves not to have been correct, to review the matter. I see no contradiction whatever in that.

Mr. Scott: Does not new clause 3 do exactly what the Minister was referring to? No one can say whether £1 billion or another figure is appropriate, so a review after two years would be a first-class way of establishing the correct figure.

Stephen Hammond: Indeed it would. I hope that after some reflection, the Minister will see the intent, significance and advantage of new clause 3.

I have indicated that one of the advantages of the new clause would be to introduce some transparency
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and accountability. As my hon. Friend the Member for Epsom and Ewell (Chris Grayling) said on Second Reading:

The review, to be reported to Parliament, would allow local authorities to demonstrate to what degree the Government were providing free bus travel, and to what degree the Government were clobbering them to provide it.

Mr. Kemp: I realise that the hon. Gentleman would not have been tempted by my earlier intervention in relation to future spending commitments. Were his new clause carried, however, and were a review to conclude that there were shortfalls—he is right that there have been problems in the Tyne and Wear area, which I represent—would he fund those shortfalls through a redistribution from other English counties and transport authorities, or through new money? Will he give me a clue, because I am tempted by his seductive arguments?

Stephen Hammond: The hon. Gentleman makes an interesting intervention—but he is really just rephrasing his previous intervention. As has been indicated, the Minister is hoping to introduce a smartcard, and for all I know, there may be savings. In that case, extra funding, or redistribution, might not be required. No one can be certain about that. I am grateful to the hon. Gentleman for inviting me to make uncosted spending commitments, but I shall reject that opportunity.

The second benefit of the new clause is that it will throw some light on the calculations. We have been discussing the £1 billion figure. The 2006 scheme was afforded £350 million of Government money, and the 2008 scheme will be afforded another £250 million. The other £400 million, to which the Minister has just referred, will be provided in various ways. To be certain that that funding is coming through, it is vital that the requirement for the review be enacted. The new clause provides for a review of the funding allocation arrangements two years after the commencement of the 2008 scheme. It will take some time, as I have said, for the true extent of the take-up and the costs of the concessionary fares to become apparent.

What is certain is that some authorities have been underfunded and some have been overfunded. The hon. Member for Tyne Bridge (Mr. Clelland), who is not in his place today, but who was a member of the Committee, described the problems that his local authority faced, and I have described the problems of several others. The review, were it to be supported today, would provide the basis for local authorities to appeal against their funding allocation, and it would also provide an opportunity for central Government to show that they have funded the scheme properly.

David T.C. Davies: Has anyone done any studies of the local authorities that have been underfunded and those that have been overfunded? Past experience suggests to me—perhaps I am a little cynical after eight
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years of doing this job, albeit in two different Parliaments—that previous local government funding formula changes have resulted in Labour-run local authorities in certain areas of Wales, some of which have not even been able to keep their books in order, receiving rather more money than they are entitled to while well run rural local authorities, Conservative and Liberal Democrat alike, have had their funding cut in a disgusting fashion, resulting in higher council taxes for all. Have there been any studies of how this formula is likely to operate, and which local authorities may benefit and which lose out?

Stephen Hammond: I am not sure that such studies have been undertaken, but I suggest that if my hon. Friend’s researcher has nothing to do in the summer recess, that would be an admirable piece of work that would benefit the whole House. I would certainly be grateful for it.

As I said on Second Reading, funding needs to follow the passenger. The Government have not been clear about how that will happen, so this review is essential. Unless central Government provide the correct moneys for the scheme, local authorities will have to cut other services or raise council tax. The funding mechanisms also need to be clear. The correct and reasonable recompense that an operator should receive must be received by bus operators from local authorities. Without that, the scheme is doomed. If local authorities have established a partnership and there is correct recompense, there will be clear views on the total ridership and cost. Two years is a sensible and appropriate time for the conduct of a review.

My Conservative colleagues and I wish to make it clear that we are not in the business of making uncosted spending commitments. The new clause does not allow Labour Members to make any mischievous accusations of that sort. In two years, the costs of the scheme, as currently defined, will be much clearer and we will also know the take-up rates and whether an extension scheme—that could assist the aim of social inclusion—would be possible.

The new clause is obviously sensible and desirable. It would ensure appropriate funding, transparency and accountability. I can only hope that, in the spirit of change in the Government, elucidated by the new Prime Minister last night, the Minister will not revert to the previous era’s habit of rejecting all Opposition amendments, but instead will endorse and support the new clause.

Jim Cousins: This is clearly an excellent Bill that commands the support of the whole House. I hope that it will benefit those who receive the specific benefits of the Bill, as well as being a turning point in the recovery of our bus networks, which must be a wider object of policy for every Member of Parliament.

I admired the skill shown by the hon. Member for Wimbledon (Stephen Hammond) in giving his colleagues little holiday projects, although I hope that his example will not be taken up too widely in the House. He was correct to say that the heart of the matter is how the extra benefits will be paid for. He was also right to draw attention to variations across the country, which have a clear root. Car ownership, pensioner incomes and the density of bus networks all
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vary across the country, and those factors produce a dramatic variation in the financial consequences of the concessions being offered to pensioners.

That variation affects Tyne and Wear very particularly. Car ownership in the county is probably the lowest outside London in mainland Britain. Pensioner incomes are among the lowest in the country and the density of bus networks is therefore greater than anywhere outside London. The effect of the offer of concessions is therefore much greater than in other areas. Nexus, the passenger transport executive in Tyne and Wear, has told me that the number of bus trips per year per head of population is 186 in London, 124 in Tyne and Wear, 109 across the generality of the metropolitan counties and only 33 in the rest of England. However, I acknowledge the force of the point made by my hon. Friend the Member for Hove (Ms Barlow) that there are areas outside the metropolitan counties that have dense bus networks and high take-up of concessionary passes.

Mr. Kemp: On the point about the density of bus networks, Tyne and Wear is often regarded as an urban area, but that is not the case. For instance, my constituency, which is the largest in the area, has many isolated former pit villages that greatly rely on buses. Does my hon. Friend agree that some of the problems that we have faced in the past few years have had a big impact on those isolated mining communities?

Jim Cousins: I absolutely acknowledge that. My hon. Friend draws attention to a very important point. In the former metropolitan county of Tyne and Wear area, bus networks are dense everywhere relative to the situation common in the rest of Britain. That is the case not just in city areas like Newcastle, which I represent, but also in the outlying former mining areas that he represents. His point is correct. Within the county of Tyne and Wear, no distinction can be drawn between the city and the rural. Both experience common benefits of such schemes and common difficulties if they are not funded correctly.

The extension of the 2006 local free fares scheme across the country will reinforce those variations and not mitigate them. The use of the national scheme in areas that already have high take-up, high bus usage, dense bus networks and low car ownership will be much greater than elsewhere. It is people from areas such as the one represented by my hon. Friend the Member for Blyth Valley (Mr. Campbell) who will take great advantage of the national scheme when it becomes available, so that they can use the dense bus networks within the county of Tyne and Wear. The national scheme will not mitigate the variations; it will tend to reinforce them.

2.30 pm

Paul Rowen (Rochdale) (LD): I am following the hon. Gentleman’s point closely. Does he agree that there is an additional problem with the national scheme because in certain areas—honeypots or tourist destinations such as Blackpool and Scarborough—an influx of people will use the services, which is not reflected in the revenue support grant? It cannot take account of people who visit those places.

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