Clause
2
The
national concession:
supplementary
Question
proposed, That the clause stand part of the
Bill.
Stephen
Hammond:
The purpose of clause 2 is to amend the
definition of the travel concession authority as defined by section 146
of the Transport Act 2000. Currently, the definition includes
non-metropolitan district councils, county councils and passenger
transport executives, but the clause will extend it to the London
authority and the Isles of Scilly. So far, so good. However, there are
no eligible services on the Isles of Scilly. The intent behind the
clause is that eligible residents of the Isles of Scilly could access
eligible services on the United Kingdom
mainland.
12
noon
That raises
two questions for the Minister. There are no eligible services on the
Isles of Scilly and access to those services on the mainland is
desirable, but
residents need to get to the mainland. As we explored
in our discussions on the previous clause, what is
the rationale behind excluding from the Bill services that allow access
to eligible services? The same point was raised in regard to residents
of the Isle of Wight. I look forward to her explanation. Furthermore, she has claimed
several times that £250 million is being made available
to implement the scheme, but several documents published by the
Department have stated that figure followed, in brackets, by
“£212 million for England”. The difference is
£38 million. Will she confirm how much of that
£38 million is for the concession to the residents of the Isles
of
Scilly?
Paul
Rowen:
I am grateful for the opportunity to speak on the
clause and to ask the Minister about the paragraph concerning the Isles
of Scilly. I am sure that she is aware that under equivalent
legislation operating in Scotland, if someone is travelling from, say,
the Shetland Isles to the mainland, the ferry journey is eligible,
which allows them to access bus journeys on the mainland. The Bill does
not provide for a similar extension of services for residents of, for
example, the Isles of Scilly, where there are no bus services. Clearly,
they cannot use their concessionary bus passes on the ferry. I hope
that she accepts that a concession similar to that granted in Scotland,
under which people can use ferries to get to buses, might offer a
welcome extension for residents of places such as the Isles of
Scilly.
Gillian
Merron:
Although it is true that there are no eligible
services on the Isles of Scilly, the addition, in subsection (3), of
the Council of the Isles of Scilly as a travel concession authority
will require the council to issue passes to their residents for use on
the mainland, under new section 145A(4). That will ensure that elderly
and disabled residents of the Isles of Scilly can, on production of
their passes, like everybody else, travel for free on off-peak local
bus services anywhere in England. The Council of the Isles of Scilly is
at liberty to make arrangements with a mainland council, such as
Cornwall county council, to issue passes to residents on its behalf. It
might be worth pointing out that we will deal with issues concerning
the Isles of Scilly when we come on to amendments Nos. 3, 4 and 5 and
new clause 1.
The hon.
Member for Wimbledon raised questions about the Isles of Scilly. The
amount that they would get will depend on the basis of distribution,
which is not yet finalised. We will be consulting on that and, indeed,
later in our proceedings, we will discuss funding
arrangements.
Stephen
Hammond:
Is the Minister accepting that the £38
million does not apply to the Isles of
Scilly?
Gillian
Merron:
I am happy to get back to the hon. Gentleman on
that very point when it becomes
clear.
I refer also to
the inclusion in the clause of London authorities as travel concession
authorities, which means that such authorities will reimburse operators
of eligible London service permit routes, of which there are about 30,
so that they can accept concessionary passes for the first time. They
will also have a role in enforcement. They will not have to issue
passes to
London residents, as the legislation will allow freedom passes to be
used. London Councils can perform the functions in question on behalf
of the London authorities, as they do for the reimbursement of
Transport for London. In answer to the question that
the hon. Member for Wimbledon asked about the Isles of Scilly and the
sum of £38 million, I am happy to inform him and the Committee
that inspiration has struck me: of the total of £250 million,
£38 million goes to the devolved Administrations, leaving £212
million for the English authorities. If the hon. Gentleman would like
any further information, I should be happy to provide that.
Question put and
agreed to.
Clause 2 ordered to stand
part of the
Bill.
Clause
3
Reimbursement
of
operators
Stephen
Hammond:
I beg to move amendment No. 16, in
clause 3, page 3, line 25, at
end insert—
‘(2A) Two years
after the commencement of this Act the Secretary of State shall conduct
a review into the reimbursement of operators by travel concession
authorities and shall lay before Parliament a report setting out his
findings.’.
The
amendment is in our opinion another entirely sensible one. It is far
from clear that operators will receive the correct reimbursement. The
experience of the 2006 concessionary scheme has shown considerable
disagreement arising in a number of areas between local authorities and
bus operators about the level of reimbursement for carrying
concessionary fares. The Government have stipulated that reimbursement
should be on a no better off, no worse off basis. Yet there is some
dispute about what exactly that should mean. The Transport and General
Workers Union, for instance, has already said that it thinks that the
concessionary scheme has provided a source of subsidy for already
profitable bus operators. However, the 60-odd appeals by operators to
the Secretary of State over the reimbursement arrangements would
suggest otherwise.
It
is, of course, from the very profits that bus operators make that
reinvestment is made in new upgraded vehicles. The evidence for that is
clearly that the average age of buses on the street has fallen by more
than a third since deregulation. Several bus companies claim that the
compensation that they receive from the travel authorities for
operating concessionary fare schemes does not cover the full operating
cost, and takes no account of depreciation or capital costs. They
argue, further, that in all too many cases their recompense is given,
not negotiated. Hence the appeal procedure.
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. One could almost make a case for
saying that for carrying one extra passenger on a concessionary fare,
the operator would need no reimbursement. However, when, as is likely
under the Bill, numbers are likely to reach the point at which extra
vehicles must be bought and extra drivers hired, the cost becomes
considerable. At that point,
should not the authority be responsible for not only
the operating costs but the extra capital
costs? A review of the
systems put in place by travel concession authorities after two years
of operation would allow the Government to establish whether costs were
being borne fairly between authorities and operators. That would
further enable the Government to establish best practice and to advise
travel concession authorities on how to improve efficiency and to
achieve savings. It would allow the Government to re-examine the no
better off, no worse off approach, to consider the capital costs
element, and to ensure that operators apply best practice in their
delivery of their service to the concessionary passenger. It would also
allow an examination of procedures, and reassessment of the
concessionary fare reimbursement levels.
The 2008 scheme will involve
many variables and unknowns. There is unlikely to be a perfect forecast
of the levels of reimbursement necessary to operators. Therefore, a
review after two years of operation is not only desirable, but
essential if the Bill is to be seen as fair and equitable to both
providers and operators.
Mr.
Leech:
We are happy to support the amendment. It is vital
to ensure that the system of payments to operators works effectively.
The added complication of widening it to a national scheme will no
doubt make it more complicated. Ultimately, we want to see the swift
implementation of a smartcard system that allows direct payments to
operators, so that no local authority is better or worse off under the
payments scheme.
When
we reach the next amendment, I am sure that the hon. Member for Tyne
Bridge will explain how the existing scheme has caused Tyne and Wear
PTA serious trouble. We therefore need a review after two years, but we
also need to look at a smartcard system in the longer term to ensure
that payments for every single journey go directly to the
operators.
Gillian
Merron:
The amendment proposes that, two years
after the commencement of the Act, a review be carried out of the
reimbursement of operators by local authorities. Of course, I accept
the principle that policies should be properly evaluated, and we will
naturally review how the national bus concession is working after
implementation in April 2008. However, the amendment looks at just one
particular aspect and is not
necessary.
There
is already a procedure in place by which operators can appeal to the
Secretary of State if they consider that they are being unfairly
reimbursed for carrying concessionaires. Any formal review of
reimbursement arrangements would conclude that a wide variety of such
arrangements was in place, and that would reflect the different
discretionary concessions and local circumstances around the country. I
therefore see no real need for the
amendment.
Under
existing arrangements, authorities must balance their desire to secure
value for money from their dealings with operators against the risk of
appeal should their arrangements leave operators worse off. Although
there is inevitable variety in the way in which those principles are
applied, they remain the most appropriate and fair. Indeed, we have
already set up a reimbursement task group involving local authorities
and bus operators to look at improving the existing process.
The hon. Member for Wimbledon
asked for an explanation of what “no better, no worse
off” meant. Let me add to the points that I have made by saying
that it is about taking account of the fares that would have been
received, plus any extra costs from carrying new eligible passengers.
That refers to both capital and revenue.
Stephen
Hammond:
I am grateful for that explanation, but I did not
actually ask about that. I said that we accepted that principle, but
that it was an extremely difficult balance to
achieve.
Gillian
Merron:
I note the hon. Gentleman’s comments. If he
has any suggestions about how we might improve things, I would be
delighted to hear them in Committee or
outside.
Stephen
Hammond:
I am sure that we will have a chance to bring
them forward in two years’ time.
Gillian
Merron:
There is no need to wait two years—my
invitation can be taken up now.
With those comments, I hope
that the hon. Gentleman will agree that the amendment is unnecessary
and will duly withdraw it.
Stephen
Hammond:
I have listened carefully to the Minister and I
take some comfort from her reassurance on the matter. I beg to ask
leave to withdraw the amendment.
Amendment, by leave,
withdrawn.
Mr.
David Clelland (Tyne Bridge) (Lab): I beg to move
amendment No. 20, in
clause 3, page 3, line 25, at
end insert—
‘(2A) After
subsection (1) (as substituted by subsection (2) above)
insert—
“(1A) The
Secretary of State shall provide to each travel concession authority in
England by means of a direct annual revenue grant sufficient funding
for the authority to comply with its obligation to reimburse operators
under subsection
(1).”.’.
The
Chairman:
With this it will be convenient to discuss the
following: amendment No. 6, in
clause 9, page 7, line 28, at
end insert—
‘(aa) enabling
the Secretary of State to reimburse travel concession authorities where
they incur a deficit of over £500,000 as a result of reimbursing
individual operators under this
Act.’.
New
clause 2—Reimbursement of travel concession
authorities—
‘After
section 149 of the 2000 Act (Reimbursement of operators)
insert—
“149A
Reimbursement of travel concession
authorities
(1) Where a travel
concession authority has responsibility for the administration of
mandatory travel concessions under section 145A, including the
administration and issuing of permits under section 145A(4) and the
reimbursement of operators under section 149, the Secretary of State
shall reimburse the authority the full costs of administering mandatory
travel concessions by means of a direct annual revenue
grant.
(2) The Secretary of State shall reserve a
proportion of the funding allocated to the mandatory travel concession
scheme to provide a contingency
fund.
(3) A contingency fund
under subsection (2) shall be used to reimburse any travel concession
authority for any unforeseen capital and set up costs incurred by that
authority in introducing a scheme to comply with this
section.”’.
New
clause 4—Review of reimbursement
arrangements—
‘Two years
after the commencement of this Act the Secretary of State shall conduct
a review of arrangements for allocating funding to local authorities
necessary for the reimbursement of operators under section 3(2) of this
Act, and shall lay before Parliament a report setting out his
findings.’.
New
clause 5—Funding
statement—
‘At the end
of each financial year after the commencement of this Act the Secretary
of State shall make a statement to Parliament setting
out—
(a) the total sum
of funds made available to local authorities for the purposes of
providing bus services and concessionary fares thereon in the financial
year just ended, and
(b) the
method by which those funds have been made
available.’.
Mr.
Clelland:
As a former Government Whip and a loyal
supporter of the Government, for the most part, I regret the necessity
to table amendments to a Government Bill. However, as has been
suggested, particular problems in Tyne and Wear are not dealt with
under the Bill, so I make no apologies for taking a little time to
refer to them and to suggest some possible solutions.
At the time of the
Chancellor’s announcement of free off-peak bus travel after 9.30
am for pensioners and disabled people on local buses only, Tyne and
Wear had a half-price travel system for pensioners and disabled people
on buses to a maximum of 50p after 9 am; a 50p fare on Tyne
and Wear Metro, the Tyne ferry and Northern Rail, and concessions for
children and students. It was a popular and well used system. Indeed,
the concessionary travel take-up by the elderly alone amounted to some
75 per cent. of eligible riders. It is the largest outside of London,
which is 80 per cent. and way above the average in England of 49 per
cent.
12.15
pm
Mr.
Leech:
Will the hon. Gentleman explain what impact that
had on actual bus and Metro ridership? Did it boost the figures
considerably, or not have a noticeable
effect?
Mr.
Clelland:
I am not sure that I get the gist of the hon.
Gentleman’s question. Did what have a noticeable
effect?
Mr.
Leech:
I apologise. I did not make myself clear. Did the
implementation by Tyne and Wear passenger transport authority of the
extra concessions have an impact on the number of users of the bus
services?
Mr.
Clelland:
Yes, indeed, and the welcome new move forward
will have a similar effect on ridership. Some 36 million bus journeys a
year are subsidised under the current scheme in Tyne and Wear. It was
estimated after the Chancellor’s announcement that the
additional cost to the Tyne and Wear passenger
transport executive of free local travel would be £20
million a year. The Minister said that the Bill applies only to buses
and not to other modes of transport, but matters are not quite that
simple.
In Tyne and
Wear, we have the publicly owned and run Metro system. At the time, it
had a charge of 50p to the eligible concessionary travellers.
If we had left it as it was, it would have meant that buses would be
free, but that it would cost 50p to travel on the Metro. That would
have had two effects: first, it would be unfair to those who rely
heavily on the Metro to travel from the east end of Newcastle into the
centre. They would have had to pay, as opposed to people in the west
end of Newcastle where there is no Metro who would have had free bus
services. That could not be
tolerated.
Secondly,
such a system would have had a detrimental effect on the Metro itself.
If there were a charge to travel on the Metro, but buses were free,
people would obviously be tempted to move their mode of travel from the
Metro to buses. Bus operators would be tempted to compete with the
Metro, and they would be receiving the benefit of the additional public
subsidy, while the Metro system would suffer from the loss of
ridership, something that a Labour Government would not want to
encourage.
On 28
November 2005, my hon. Friend the Member for Regent's Park and
Kensington, North (Ms Buck), then a Minister at the Department for
Transport, wrote to hon. Members saying
that
“we are providing an
extra £350
million”
to finance the
scheme. “We” was used rather riskily because it was not
the Department for Transport that was providing the money. The
Government were providing the money through what was then the Office of
the Deputy Prime Minister, which we now know as the Department for
Communities and Local Government. It was to be distributed through the
revenue support grant
mechanism.
By the way,
there was no attempt at the time by the Department for Transport to
negotiate anything in return from bus operators who were already
receiving £1.3 billion a year in public subsidy. The local
government revenue support grant system is not fit for the purpose of
distributing the money. Calculations on the basis of population are
okay for most services, but not for the particular service that we are
discussing. It does not take account of the high levels of use, low car
ownership and higher dependency on public transport in areas such as
Tyne and Wear.
Tyne
and Wear was told to expect £12.7 million from the formula grant
system, which was £7.3 million short of the estimated cost of
introducing the new scheme. Meetings with Ministers and civil servants
were to no avail and we were told that it was impossible to correct
that anomaly through the revenue support grant system. I thought that
that was a rather curious argument because the education system already
has a system for financing schools on the basis of bums on seats. I
still do not know why we cannot have such a system for public
transport. The result was that in 2006-07, £2 million had to be
taken from Tyne and Wear passenger transport authority balances. There
were cuts in secured bus services, which was rather bizarre as it meant
that we were saying to elderly and
disabled people, “There is a new free travel scheme, but the
services on which you most rely—the subsidised, secured
services—will have to be withdrawn in order to pay for
it”. There were cuts in subsidies for students and young people,
which was unpopular with elderly people, who felt that they did not
want the advantage of free travel if it was at the cost of cutting
travel for young people and students. Indeed, some elderly people
feared that when they travelled on buses there may be some backlash
from young people as a result. Thankfully, our young people are more
sensible and that has not happened. That was the situation in
2006-07. During 2007-08 there will need to be further adjustments to
continue the current scheme. In total, by the time we get the national
scheme in 2008, it will have cost Tyne and Wear—one of the
poorest regions in the country—some £9 million to run the
Government scheme up to the introduction of the national
scheme.
I was one of
the first people to call for a national scheme. Indeed, days after the
Chancellor’s announcement, I suggested to him that the scheme
should be extended nationally because the way it was being proposed at
the time was nonsense. I welcome the increased flexibility, but, if the
same formula for distribution is to be employed, which the Bill
suggests is the case, the funding problems will remain. I still have
not given up hope that some way will be found to refund Tyne and Wear
the £9 million that it has lost over the past two
years.
The
Chairman:
Order. May I remind the hon. Gentleman that we
are discussing amendments to future legislation and although it is
quite right for him to explain what has happened in his locality in the
past as an explanation of why he wishes to make the amendment, we
cannot debate the financial position of his local authority in past
years as part of the debate on the
Bill.
Mr.
Clelland:
Thank you, Mr. Bayley, for that
guidance. I was just about to come on to the amendments. However, I
will just say that, unless the £9 million is refunded,
when the national scheme to which the amendments refer starts next
year, Tyne and Wear will be starting not from a level playing field,
but from a £9 million shortfall.
I understand
that in Scotland and Wales the system of funding for subsidised travel
is not through local authorities, but directly from the Executive.
Amendment No.20 proposes a similar system for England. It is a specific
measure and the funding would be directly targeted to where it is
intended, so that the full costs to the transport authorities are met.
Under the current system, it is nonsense that some councils can have a
surplus from the funding and use that for purposes for which it was not
intended while other authorities, such as Tyne and Wear, have serious
shortfalls. Amendment No. 20 would deal with that
anomaly.
In the event
that shortfalls do occur in future, amendment No.6 would limit the
damage to local authorities. I admit that the figure of £500,000
is somewhat arbitrary and I accept that I would not get away with an
amendment that said that every single penny had to be accounted for;
that just would not be
possible. However, £500,000 seems to be a reasonable figure. If
such a measure had been enacted from the beginning, Tyne and
Wear’s losses would have been £500,000 and not the
£7.3 million which we had to subsidise, which would have been
far more manageable. The introduction of the national scheme is
welcome, but it will result in an increased take-up and a change in
passenger and operator behaviour that cannot be predicted. It will mean
higher costs, particularly in areas where public transport is already
heavily used and where increased usage is being encouraged. I hope that the Minister will
accept that those two amendments are sensible and practical and that
she agrees that they should be incorporated into the Bill. This is a
Government initiative and it should be underwritten by the Government
in case of any losses for the local authorities
concerned.
Stephen
Hammond:
I listened with great interest to the hon.
Gentleman. I wish to speak to new clauses 4 and 5. New clause 4 deals
with the review of funding allocation arrangements, and new clause 5
seeks to have an annual statement of funding, and the method of
funding, laid before Parliament. The new clauses go to the heart of
what the hon. Gentleman just said, and it is important to address them
in conjunction.
The
provisions deal in different ways with the funding for the scheme,
which is giving concern to local authorities. There are two aspects to
funding: whether enough money will be available—that is, whether
the quantum sum provided will be sufficient to cover the
cost—and the mechanisms by which funding will be given to local
transport concession authorities and thereafter to operators, and
whether the mechanisms will be seen to be
equitable.
New clause
5 deals with the broad aspect of funding—the quantum sum
available—and how the monies will be made available. The
question of whether the sum provided for the scheme will be large
enough to cover costs goes to the heart of the scheme. If it is not,
the scheme cannot
proceed.
The annual
statement is key. The Government have provided initial funding for
other schemes but then after a period not provided the year-on-year
increases to ensure that local authorities are properly compensated. It
is likely that demand will increase under the scheme. When the local
concessionary fare scheme was introduced last year, demand increased
substantially. In fact, it would be fairly ridiculous if it did not.
One of the reasons for providing such schemes is to facilitate access
to transport. If demand did not rise, access would not be facilitated
and the whole intent of the Bill would be lost. We have clear evidence
that take-up is increasing, and that those who take up the scheme use
the pass more
frequently.
Finally,
there is the issue of cost increases to the bus industry. They have
consistently outstripped general inflation. Bus fares are rising above
the retail prices index, and industry costs have risen some 7 to 9 per
cent. per annum over the past three years. That is due not only to fuel
costs but in part to extra costs imposed by the EU and by health and
safety regulations.
The need for a statement on the
method of delivery of funds is also key. The proposed scheme has
ramifications for the method of delivery in all areas. In some specific
cases, extra provision needs to be made. The proposed system for
reimbursement is via the local authority block grant to district and
unitary councils. The first problem is that those councils are not in
all cases the travel authority. There is no requirement or guarantee
that the district or unitary authorities will pass on the sums that
they receive to the travel authority. Secondly, the block grant is a
relatively crude instrument. It cannot measure and therefore be
responsive to the key thing in the Bill: the number of journeys
made.
There is a
danger that in areas where high-quality, improving services for
concessionary bus travel are well promoted, demand will increase much
faster and the authorities could be penalised financially. If that were
to happen, local authorities would have only two mechanisms for dealing
with a shortfall in funding: they could raise council tax or cut local
services.
The
Opposition made it clear on Second Reading that there is considerable
scope for some authorities in so-called hot-spot or honey-pot areas to
find themselves heavily out-of-pocket. The funding for the 2006 scheme
was shown to be insufficient even when based on relatively static
residents over-60 figures. As nationwide eligibility for over-60s is
being established in the Bill, the potential for error and for a
shortfall in funding to some authorities will be hugely
exacerbated.
New
clause 5 would oblige the Secretary of State to make an annual
statement to Parliament on 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. Moreover, it would oblige him to set out the method by which
such funds were made available. That approach has two major advantages.
First, it would highlight the continuation of the Government’s
tendency to take credit for their policies while passing some, or
indeed a substantial amount, of the cost on to local authorities. Given
that the doubling of council tax in the past 10 years has hit the
elderly and those on low incomes hardest, it is an issue that should
concern us all. As my hon. Friend the Member for Epsom and Ewell (Chris
Grayling) said on Second
Reading:
“There
is no point in giving our pensioners free bus travel if they just have
to pay the bills through their council tax
instead.”—[Official Report, 14 May 2007; Vol. 460,
c. 414.]
The annual
statement to Parliament would allow local authorities to demonstrate
the degree to which the Government are actually providing free bus
travel, and the degree to which the Government was making the
authorities pay. In short, the new clause would create accountability
on whether the Government are providing enough. The Government cannot
will the end if they do not will the means. Under the new clause,
accountability would be clear.
The second benefit of the new
clause is that it would throw some light on the calculations that have
resulted in Ministers often telling us that total funding for the
implementation of the Bill will be £1 billion. The 2006 scheme
was afforded £350 million of Government money; the 2008 scheme
will be afforded an extra £250 million. The other
£400 million to which the
Government refer in its calculation of £1 billion must be and is
being provided in myriad guises. Some of those guises such as the bus
service operator grant, the rural bus subsidy grant and the block
grant, the problems of which I have already explained, are difficult to
nail
down. 12.30
pm
In order that
we can be certain that Ministers are being as generous as they
claim—I am sure that they are—it is vital that they set
out exactly how the sums that they talk about are being distributed.
New clause 5 would ensure Government accountability for their actions.
Will the Government’s proposed £250 million extra in the
first year be enough for the scheme? Will the Government provide enough
total funding in successive years, and will they deliver the funds to
those who are actually providing the services? New clause 5 is sensible
and necessary.
New
clause 4 asks for a review of the arrangements for allocating funds
necessary for the reimbursement of operators to local authorities. In
Lords Committee, the overwhelming view expressed was that of unease.
There was also substantial unease among local authorities because of
the experience of the previous scheme, and they expected that there
would not be enough money for the 2008 scheme and that the money would
not be properly targeted to the correct authorities. The new clause
deals with that latter aspect of the matter. It would allow for a
review of the funding allocation arrangements two years after the
commencement of the 2008
scheme.
It will take
some time for the true extent of the take-up and cost of concessionary
fares to become apparent. It is certain that in the transition and
initial take-up period, some authorities will be underfunded. The
review would go hand in hand with the annual financial statement
established by new clause 5, and it would provide the basis for
authorities to appeal against their funding
allocation.
The
Government may say that the Bill amends section 149 of the Transport
Act 2000 to require transport concession authorities to reimburse
operators for providing the national concession or for journeys
starting in their areas, and that the current legislation requires the
operators to be no worse and no better off for carrying
concessionaires. It is still not clear, however, that that will be able
to take account of hot spots, where journeys start, which exact
journeys are the responsibility of particular local authorities and how
local authorities will seek compensation from one
another.
In the other
place, Lord Davies stated:
“We are confident in
broad terms that the £1 billion that
we
are providing
“will be sufficient to meet all
demands”.—[Official Report, House of Lords, 8
January 2007; Vol. 688, c.
GC25.]
Funding needs
to follow the passenger, and the Government have not yet made it clear
exactly how that will happen. The new clauses would provide the
mechanism by which to ensure that it is clear that funding is following
the passenger and how the allocation of the funding is working. If the
Minister shares the confidence of her colleague Lord Davies, she can
show that by accepting the new clauses. The clauses
are of such importance that although I will listen carefully to the
Minister, I intend to press the matter to a
Division.
Paul
Rowen:
As the hon. Member for Tyne Bridge stated earlier,
the introduction of the local concessionary bus scheme had a number of
unintended results, although some hon. Members warned the Government at
the time about what was likely to happen. The use of the block grant
and/or the revenue support grant as a mechanism for funding is, as
anybody who has been involved in local government will know, a
notoriously unreliable and inaccurate means of funding local government
for the services that it
provides.
The hon.
Member for Tyne Bridge spoke about a shortfall of £9 million
that affected Tyne and Wear. The London boroughs have estimated that
the actual cost to them of the basic concessionary travel scheme was
£100 million, yet they received only £53 million.
Clearly, there is a huge shortfall. As the hon. Gentleman said, such a
shortfall can only be met by increasing council tax or cutting services
elsewhere.
All hon.
Members support concessionary bus fares, but we want to ensure that the
scheme, when operating, delivers what it is said that it will deliver.
Anybody using concessionary buses should able to do so without
affecting other services. It is clear that where huge numbers of people
are travelling to a tourist destination—London, for example, or
Blackpool, Scarborough or York—the revenue support grant, which
calculates the number of people in the local authority area, is not the
best means of delivering a fair recompense for the additional
costs.
If
we are to have confidence in the operation of the Bill, full costs have
to be reimbursed. I do not wish to see a nationally administered
scheme, as has happened in Scotland. The local authorities—the
passenger transport authorities—should continue to have
discretion to provide additional services or concessions that would not
be available under the national scheme. However, the basic scheme must
provide full compensation. New clause 2, which is similar to the
amendment moved by the hon. Member for Tyne Bridge, ensures that full
costs are reimbursed. It will ensure that all the local authorities
introducing measures under the Bill can do so while ensuring that other
vital services will not be
compromised.
New
clause 2 also deals with capital costs, which we discussed earlier. The
Minister has reassured us, with regard to London, that she will provide
a grant to meet the additional capital costs of replacing the Oyster
card and the freedom pass for London. We do not know what the total
capital cost of introducing the scheme throughout the country will be.
The new clause would ensure that there is a contingency scheme, making
sure that local authorities and passenger transport authorities can bid
into that concession for the costs that they have incurred. I hope that
the Minister can provide some reassurance about those issues, because
although we know that there will be increased usage, we cannot predict
what it will be. We need to ensure that local authorities, and
particularly those where there are tourist destinations, are fully
recompensed for the costs that they
incur.
On Second
Reading, I asked the Secretary of State whether he would be willing to
meet a cross-party
group of local authorities affected by this scheme. There is huge
concern about what the additional cost will be in, for example, London
and Blackpool, because there are no figures on how many 60-year-olds
visit those destinations. I therefore fail to see how the Minister can
give an assurance that the full costs of the scheme will be reimbursed
to the local authorities affected. That can be done retrospectively, by
putting a commitment in the Bill to reimburse the full costs. Relying
on the block grant will once again ensure that there are winners and
losers, and I suspect that this time round there might be more winners
than losers.
Tom
Levitt:
I am grateful to you for calling me,
Mr. Bayley. The county council in Derbyshire has implemented
the existing scheme to a greater extent than required by its minimum
legal responsibility, in that the scheme is available during the
evening rush hour as well as throughout the rest of the day
from 9.30 am onwards. However, we have experienced a problem
recently, which I hope my hon. Friend the Minister will address, about
the way in which the bus companies are claiming back money from the
local authority. That has meant that the half-price scheme, which
previously ran before 9.30 am, can no longer be operated. It appears to
many that the bus companies have, in effect, put a stranglehold on the
local authority, by insisting on a greater level of payment—a
couple of million pounds is being talked about—in order to
continue to provide the above-minimum scheme upon which Derbyshire has
embarked.
My
question, which relates to the reimbursement of operators, is this: can
we make absolutely clear the basis on which the reimbursement takes
place in order not to have bus companies making extreme or exorbitant
demands on local authorities? In the Derbyshire case, those demands
have resulted in a lessening of the service that was previously
available, albeit not in the concessionary fares window from
9.30 in the morning onwards, but in the concessionary fare scheme that
operated before 9.30, which is no longer possible because of the bus
companies’ demands on the local
authority.
Gillian
Merron:
We return in this clause to the important issue of
funding for local authorities. I am happy to tell the Committee that I
agree with the sentiment that local authorities should be adequately
funded by central Government for the costs to them of administering a
mandatory concession. After all, it is Government policy to fund new
statutory burdens fully. However, I say at the outset that it is in all
our interests to get things right. There is no underhand plan to try to
deprive anybody. The scheme is popular and will benefit 11 million
people, and we want to get it right. I can confirm to the Committee
that that is why we are paying so much attention to
it.
The Government are
providing up to an extra £250 million of funding a year
for the new concession. The hon. Member for Wimbledon asked for a
calculation of the £1 billion a year. I confirm that the figure
for getting to the full-fare national scheme is £250 million,
which is new money for 2008, and that the figure for moving up to the
full-fare local scheme
was £420 million, while the figure for moving to the initial
scheme—that is, the half-fare local scheme—was
£400 million. I hope that that is helpful but, as I have said, I
am always happy to provide any further
information. I am
confident that the £1 billion will be sufficient. There is
indeed no mention of the funding of concessionary travel in the Bill,
but for good reasons. Circumstances change, and flexibility needs to be
built into the legislation to enable future improvements to
concessionary travel to be made as efficiently and effectively as
possible. It would be neither appropriate nor wise to lock ourselves
into a particular approach now, when the important issue of funding is
being considered and discussed across government and
beyond.
Amendment No.
20 and new clause 2 propose a direct annual revenue grant to fund
authorities. It is important to recognise that the freedom and
flexibilities provided by the unhypothecated formula grant are
generally supported by local authorities. Indeed, local authorities
have long argued against having their hands tied by hypothecated
funding schemes, and if I did not listen to them, I am sure that hon.
Members would be the first to criticise
me.
Concessionary
fares reimbursement is only one of the many obligations that
authorities must meet from their council tax receipts and from the
funding provided by central Government through the formula grant
process. I am aware that the Local Government Association strongly
supports a specific grant for the extra funding for the national bus
concession, at least temporarily. We are considering the merits of
temporarily distributing the extra money through an unhypothecated
specific grant. We need to be clear, however, that such a move would
break from the policy of greater freedom and flexibility in funding,
which is generally welcomed by the local government
community.
12.45
pm
I assure hon.
Members that we continue to talk to the LGA and to the concessionary
fares working group, which consists of representatives of all tiers of
local government, about methods of distributing the extra money,
including the option of a specific grant. I hope that that reassures
the hon. Member for Rochdale about the level of consultation that we
are undertaking in addition to the regional roadshows, nine of which
have been held around the country in recent weeks, to talk directly to
local people.
New
clause 2 would require all the funding for the statutory concession to
be distributed by direct annual grant, which would mean that existing
funding for concessionary fares would have to be extracted from the
formula grant system. I am not sure whether that is the intention of
the new clause, as there is little support for such an approach.
Moreover, the LGA and our concessionary fares working group support the
idea of the current funding staying in the formula grant. They are all
too well aware of the council tax turbulence and fiscal uncertainty
that would result from the transfer of existing funding from the
formula to a specific grant. With great respect to hon. Members, I can
see little point in introducing something that local authorities do not
want.
The Treasury, the Department for
Transport and the Department for Communities and Local Government are
carefully considering the merits of different funding mechanisms for
statutory concessions. We are aware of the feedback from our working
group. I referred earlier to the nine regional roadshows that my
officials recently completed, to which all local authorities were
invited. I assure my hon. Friend the Member for Tyne Bridge that Nexus
representatives were present, and I am sure that he will wish to speak
to them about how useful it was. According to the feedback that I have
had, it was extremely
valuable.
It is
important that we get our approach right. We will continue to talk to
interested parties in the coming weeks before coming to a view on the
mechanism for the extra funding. The new clause is misplaced. If we
decide that a specific grant is the right option, we will formally
consult local authorities on the formula for distributing the specific
grant. In any case, there is no need for the Bill to oblige the
Secretary of State to fund concessionary travel as proposed by the new
clause. The Secretary of State already has the power to fund local
authorities for concessionary fares by direct grant, if he wishes. It
would be inappropriate to require the use of such a funding mechanism
in perpetuity without consulting all those with an
interest.
The hon.
Member for Rochdale expressed his dislike of funding for concessionary
fares coming from revenue support grants, but local authorities have
long argued for non-ring-fenced, single-pot funding. That is what the
Government have provided, and that approach has been generally
welcomed. New clause 2 would specify that a contingency fund be set up.
The extra funding of up to £250 million a year for the national
bus concession is based on a number of key assumptions, which include
the generation of an extra 100 million journeys and a pass take-up of
85 per cent. Those are generous assumptions, because in some regions of
England, pass take-up is less than 60 per cent. The £250 million
figure also includes a contingency allowance to recognise the
difficulties of allocating money on a formula basis. We are confident
that the extra funding is sufficient to cover the extra costs to local
authorities.
The hon.
Member for Wimbledon raised the point that he was concerned about
demand increases leading to higher costs and fare increases. I
reiterate that the extra funding includes moneys to address
uncertainties, and we have taken into account fare inflation in our
calculation.
We are
also sensitive to the issue of set-up costs. Earlier in Committee, we
said that we would provide extra funding in addition to the extra
£250 million a year to pay for the extra costs associated with
implementation, such as the issuing of new passes. We are discussing
the figures and the mechanics with the LGA and the concessionary fares
working
group.
In
addition, proposed new subsection 149A(2) in new clause 2 proposes that
a contingency fund be established to fund any unforeseen costs of the
mandatory concession. Again, as previously, I am sure that the
amendment is well intended. However, it is not practical or
proportionate. How do we define unforeseen costs? That is a rather
tricky task that will create its own bureaucracy, because every local
authority will be incentivised to make a claim and there will be no
balancing provision that such
claims must be reasonable. The amendment erodes the incentives for local
authorities to negotiate cost-effective schemes with operators and to
manage overall costs effectively. That has happened in Wales, where
local authorities pass on the full cost of their schemes to the Welsh
Assembly. As a consequence, the total cost of the Welsh national scheme
has been increasing significantly year on year. I am sure that the
Committee will agree that we cannot sanction such an
approach. The existing
arrangements contain appropriate checks and balances to ensure that
public funds are spent wisely. They include an incentive for local
authorities to reimburse cost-effectively by a fair amount and a right
of appeal for any operator that believes it has been disadvantaged.
Although the system is not perfect, it is fair to the taxpayer and
operator alike.
The
proposal for guaranteed funding carries with it the risk of unnecessary
expenditure incurred by local authorities and bus operators going
beyond what is fit for purpose. It is crucial that we get a good deal
for the taxpayer. Giving an unconditional commitment, as requested, to
fund any cost does not provide that. As I have said, extra funding
already includes a
contingency.
The
same arguments apply to amendment No. 6, which specifies that the
Secretary of State must reimburse local authorities when they incur a
deficit of more than £500,000 as a result of reimbursing
individual operators. Under section 31 of the Local Government Act
2003, the Secretary of State already has the power, with the consent of
the Treasury, to make grants to local authorities to cover their
expenses. Therefore, the amendment would add little. In addition, I do
not find it helpful to introduce arbitrary thresholds with the
potential to distort local
negotiations.
New
clause 4 proposes yet another review—in this case of the funding
arrangements for local authorities. As the Committee has heard, we have
embarked on a great deal of consultation with local authorities and
other interested parties about all the issues surrounding the
implementation of the national bus concession. We will continue fully
to consult local authorities in line with existing statutory
requirements. The Department for Communities and Local Government
already has in place a well established annual process for consulting
local authorities, both informally and formally, about the formula
grant distribution. I see little to be gained from adopting this
amendment.
New clause
5 proposes that the Secretary of State makes a statement every
financial year about the amount that is made available to local
authorities and the method of distribution. Again, I see little benefit
from that. There is already the yearly local government finance
settlement that sets out central Government’s funding of local
authorities. That settlement does not, and cannot, earmark different
sums for different purposes for the very good reason that the funding
is not hypothecated. That is generally welcomed by local government,
because it makes it clear that local government is responsible for
choices on local spending
priorities.
Referring
to the comments made by my hon. Friend the Member for Tyne Bridge,
there was indeed a problem in Tyne and Wear in respect of Nexus, which
I was very glad to meet in recent months. Following consultation, the
formula grant was adjusted to reflect
support for disabled people and the needs of areas in which the take-up
is likely to be high. That benefited not only Tyne and Wear, but all
areas that had a higher than average number of residents who were
disabled. The measure reduced the shortfall by about £7
million. I would also
make the point that extra funding was given to the metro to reflect the
unique circumstances in Tyne and Wear. £1.7 million was made
available last year, and also this financial year, to cover the
financial impact on the
metro.
With all of
those points in mind, I hope that hon. Members will agree with me that
the amendments are unnecessary and that the lead amendment will be
withdrawn.
Mr.
Clelland:
I listened with interest to what the Minister
had to say. I readily acknowledge the support that Tyne and Wear has
had from the Department for
Transport to enable it to extend the free travel service to the metro
system, and we are very grateful for that. Nevertheless, the shortfall
was as it was, regardless of all the efforts that were made by the
Minister and others in the interim. I heard what the Minister said
about the flexibility in the Bill and the fact that funding mechanisms
are still being discussed. I was particularly interested to hear that
she believes that amendment No. 6 is unnecessary because the Secretary
of State already has that power, and I look forward to his exercising
it to deal with those losses at Tyne and Wear. Perhaps between now and
Report, we may be able to have some serious discussions as to how that
might be done. On that basis, I beg to ask leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Further
consideration adjourned—[Mr.
Roy.]
Adjourned
accordingly at four minutes to One o’clock till this day at Four
o’clock.
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