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Session 2009 - 10
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Delegated Legislation Committee Debates



The Committee consisted of the following Members:

Chairman: Mr. David Wilshire
Bacon, Mr. Richard (South Norfolk) (Con)
Bain, Mr. William (Glasgow, North-East) (Lab)
Crausby, Mr. David (Bolton, North-East) (Lab)
Dobbin, Jim (Heywood and Middleton) (Lab/Co-op)
Hammond, Stephen (Wimbledon) (Con)
Hunter, Mark (Cheadle) (LD)
Kelly, Ruth (Bolton, West) (Lab)
Kemp, Mr. Fraser (Houghton and Washington, East) (Lab)
Khan, Mr. Sadiq (Minister of State, Department for Transport)
Leech, Mr. John (Manchester, Withington) (LD)
Stuart, Mr. Graham (Beverley and Holderness) (Con)
Tami, Mark (Alyn and Deeside) (Lab)
Timpson, Mr. Edward (Crewe and Nantwich) (Con)
Ussher, Kitty (Burnley) (Lab)
Watson, Mr. Tom (West Bromwich, East) (Lab)
Wilson, Mr. Rob (Reading, East) (Con)
Mark Etherton, Committee Clerk
† attended the Committee

Fourth Delegated Legislation Committee

Tuesday 2 March 2010

[Mr. David Wilshire in the Chair]

Local Government Finance (England) Special Grant Report (No. 130)
The Chairman: Order. Before I ask the Clerk to read the title, may I say that this Committee is dealing with a very specific matter and, given the whiff of electioneering around the building, I urge you not to stray into general debates about transport policy and its shortcomings or otherwise.
10.30 am
The Minister of State, Department for Transport (Mr. Sadiq Khan): I beg to move,
That the Committee has considered the Local Government Finance (England) Special Grant Report (No. 130).
May I begin by saying what a pleasure it is to be speaking under your chairmanship for the first time since I became Minister of State for transport, Mr. Wilshire? With the Committee’s agreement, I shall seek to be helpful by putting the debate in its proper context, while staying in order and within the remit of the special grant report.
After the huge investment over the past 13 years, there are very few shortcomings in the public transport system. Buses are the most widely used form of public transport. More than two thirds of all public transport journeys are made on them. The Government recognise that buses are particularly important for some of the most vulnerable people in our society. They often provide a vital lifeline to services such as shops, leisure facilities and hospitals and are an important connection to the community. For many older and disabled people, buses provide the only link to the places they want to go and the people they want to see.
The Government are fully aware of that, and I am extraordinarily proud of our record in this area. One of the legacies of the deregulation of buses in 1986 was a patchwork quilt of local concessionary travel schemes, which resulted in a postcode lottery of provision. In 2000, we acted to address that and to ensure that for the first time older and disabled people in England were guaranteed the same minimum concession of half-price bus travel in their local areas, regardless of where they lived. In April 2006, that minimum was further improved, and older and disabled people were able to travel off-peak on buses free of charge in their local areas. In April 2008, we extended the concession again to cover anywhere in England.
The England-wide bus concession is now a hugely popular policy, which provides an opportunity for greater freedom and independence to around 11 million older and disabled people and represents a major step forward in tackling the social exclusion of some of the most vulnerable people in our society. Precisely because the concession is provided to some of our most vulnerable people, it concerns me to see them being misled, for example by stories about plans to abolish the freedom pass in London. I hope that this debate provides the opportunity to set the record straight on concessionary travel funding.
In 2008-09, we provided an additional £212 million to travel concession authorities to fund the extension of the concession to free England-wide travel, which has risen to £217 million this year and will increase further to £223 million in 2010-11. That funding is in addition to that provided to authorities through the formula grant system and brings total spending on concessionary travel to around £1 billion a year. All the evidence shows that the total special grant funding that we have made available is more than sufficient in total to meet the extra costs of the new concession. The funding is based on generous assumptions about take-up, fairs and journey rates and also includes an allowance to recognise the difficulties inherent in any formula allocation. However, it is important to be clear that the funding has been provided solely to cover the extra costs of the new concession. It does not cover the cost of the pre-existing elements of concessionary travel or any other discretionary concessions that authorities may choose to offer. Those must continue to be funded locally.
Local government stakeholders made it clear to us before April 2008 that they would like the additional funding for the all-England concession to be provided by way of a special grant rather than formula grant. We accepted that recommendation and consulted widely to develop a distribution mechanism that would target funding to those areas that were likely to experience the greatest increase in costs. However, it is worth pointing out that the precise distribution of actual costs was simply not knowable in advance. The preferred formula used distributed funding based on the eligible local population, visitor numbers, retail floor space and bus patronage. As such, it was expected to take account of likely demand in areas such as coastal towns, urban centres and other places likely to experience an increase in bus journeys as a result of the improved concession.
In February 2008, the House approved the funded allocations derived from this formula for each of the travel concession authorities in England for the years 2008-09, 2009-10 and 2010-11. Following the first full year of the England-wide concession, the Department for Transport carried out a review of the additional costs incurred by the travel concession authorities. That confirmed that the £212 million of funding was more than sufficient in total. It also showed that in the main the formula distribution had been largely successful, with the vast majority of authorities receiving sufficient or more than sufficient funding.
However, we also found that a minority of authorities—around 30 out of more than 260—were experiencing significant shortfalls. That had severe implications for their ability to deliver local services. In the light of this clear evidence, I took the difficult decision that we could not persist with the current distribution. I would like to stress that I did not take the decision lightly. The advent of the three-year supplements has clearly provided far greater financial certainty for local government, which is why the original special grant report specified three years’ worth of payments. However, it was precisely as a result of the ability to reopen a special grant distribution, in light of the eventual evidence, that this method of payment was chosen.
In the late autumn of 2009, the Department for Transport consulted on a revised distribution of special grant funding for 2010-11 and sought views on whether it was preferable to the original distribution that this House approved in March 2008. The majority of respondents to the consultation were either in favour or had no opinion on the proposed revised distribution. Only 22 per cent. of travel concession authorities responded to the consultation to oppose the revised distribution. The new distribution has been developed in the light of hard evidence on where the costs of the new concessions have fallen. That evidence was not available to us in 2008; we could only anticipate it in developing the original special grant distribution.
Stephen Hammond (Wimbledon) (Con): The Minister just said that only 22 per cent. of consultees thought the redistribution unfair. Will he confirm that that is all those getting a downward revision, but does not include the fact that the London authorities are being counted only once?
Mr. Khan: Twenty-two per cent. of the TCAs—those that will receive the grant—responded to the consultation out of 199. That is 66 out of a total of 296 TCAs, including the 33 London boroughs. Fifty-seven per cent. of the respondents were either in favour or had no opinion. There was particularly strong opposition to the revised distribution within London, as the hon. Gentleman says. Outside London, the proportion of the response in favour was 67 per cent. As he will be aware, when in government, one governs the entire country, not just friends in London.
Stephen Hammond: I am sure that the Minister’s constituents will take note of that remark. The Minister can confirm, therefore, that the 67 per cent. he has quoted is the number of authorities receiving an upward revision to their grant.
Mr. Khan: That it is not true. The hon. Gentleman has his figures wrong. I am happy to write to him with the figures. That is out of the 199 who responded, some of which received an increase, some of which received a reduction and some of which stayed the same. I am happy to clarify the mistake he has made. I understand that when one is being briefed by Conservative leaders in London one needs to do the briefing and bidding for them.
I take your strictures carefully, Mr. Wilshire, and will try not to stray on to party political ground, and I hope that the Opposition spokesman will do the same.
The Chairman: I am grateful.
Mr. Khan: I have received a significant amount of praise from fellow MPs for proposing a revised distribution. However, as I have said, I have also received criticism from some London MPs for putting forward a distribution that will mean a reduction in the grant for London of just over £30 million in 2010-11. The facts are that in 2008-09, we gave London a grant of £55 million. The additional cost to London of the improved concession was only around £5 million, a fact that London councils—a Conservative majority—have publicly acknowledged. In 2009-10, we gave London a grant of £57 million. The additional cost to London this year will be in the region of £7 million. That suggests that over the course of the first two years of the improved concession, London has received around £100 million more funding from Government than required. I will not be asking for a repayment of that massive windfall.
Mr. John Leech (Manchester, Withington) (LD): If the cost to London has been £5 million and then £7 million, does the Minister estimate that the cost will be £20-odd million this coming year? If not, which I assume is the case, why does he still suggest that it gets £20-odd million?
Mr. Khan: The hon. Gentleman raises an interesting point. What we have tried to do in the formula is to allocate enough scope so that some surplus remains within those winners in the first two years. He alludes to an interesting point, which is that one of the options open to us would have been to recoup some of the huge windfall made by London and others. I will come on to explain the allocation for year 3 of the special grant.
By far the biggest driver of the increased cost that London faced as a result of the new England-wide concession was for the cost of non-London residents now travelling free on the London bus network. London’s precise need for additional grant was not knowable in advance, but it was expected that a sizeable grant would be necessary to meet the cost of concessionary passengers from the surrounding counties now travelling for free on the extensive London bus network. It is clear that there have been far fewer of those trips than we anticipated.
The revised funding allocations and the special grant report before the Committee today are designed to provide a more equitable distribution of funding among local authorities. In devising the new distribution we have a simple aim: to minimise the changes to individual authorities’ funding commensurate with ensuring that every authority has sufficient grant in 2010-11 to cover the cost of the new concession.
Mr. Graham Stuart (Beverley and Holderness) (Con): I am grateful that the Minister is being so frank with the Committee about the distortions in the funding formula. Perhaps he could spell out to the Committee the implications for those areas that have been underfunded. As he will be aware, health funding, education funding and rural areas, as well as transport funding, find themselves penalised. While there may have been winners, could he tell us a little about the losers and the impact that the loss has had on services, often in sparsely populated rural areas that are particularly dependent on the services?
Mr. Khan: One of the advantages of turning up on time to a debate, Mr. Wilshire, is that you hear questions that answer points that may be made later on. I am happy to come back when I close the debate to a point that I made in my opening remarks.
This distribution better matches the distribution of costs that have been incurred during the first years of the national concession. The majority of authorities will see either an increase or no change to their grant allocation as a result of the revised distribution. Only London and 55 authorities outside the capital will see a reduction in their grant allocation. However, those authorities will have already benefited from two years of windfall funding. Furthermore, they are having only a portion of their surplus funding deducted so they will still receive more than sufficient to meet the additional cost of the new concession in 2010-11.
I believe that this new report demonstrates an appropriate response to the problems that have come to light this year. We acted quickly and proportionately once data on the costs of the new concession had come to light, and the approach we have taken is entirely justifiable and the fairest possible for all concerned in the circumstances. I commend the report to the House.
10.43 am
 
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