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 Committees
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 authoritiesaround 30 out of more
than 260were 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 TCAsthose that
will receive the grantresponded 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 Ministers 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 councilsa Conservative
majorityhave 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.
Londons 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