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Lord Brabazon of Tara moved Amendment No. 44:

Page 104, line 27, at end insert--
("(3) In exercising his powers under subsection (1) above to determine the matters specified in subsection (2)(a) above, the Mayor shall be under a duty to ensure that the general level of fares to be charged for public passenger transport services by a Tube operator at any time after this Act comes into force is no more than the general level twelve months previous to that time increased by a percentage equal to the control rate.
(4) In subsection (3) above the control rate shall be at any time the number of percentage points by which the most recently available figure for the retail prices index has increased on the retail prices index for the month twelve months previous to that figure, less the factor X.
(5) Notwithstanding anything in this Act the Mayor shall have the duty to ensure, as part of his general duty under section 141 above, that Tube operators charge only fair fares.
(6) In this section--
"the retail prices index" is the general index of retail prices (for all items) published by the Office for National Statistics, and if that index is not published for a month which is relevant for the provisions of this section then this section shall be construed as referring to any substitute index or index figures published by that Office;
"the factor X" shall, prior to 1st April 2002, be equivalent to two percentage points, and on or after 1st April 2002 shall be equivalent to four percentage points; and
"a Tube operator" is London Underground Limited or any successor body or bodies, whatever their ownership, which subsequently come to operate all or part of the

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undertaking operated by that body at the date of Royal Assent to this Act, including any extensions to that undertaking subsequent to that date.").

The noble Lord said: My Lords, this amendment seeks to place an annual ceiling on the general level of fares charged by London Underground and to ensure that this level falls year on year.

The London Underground traveller, of which most days I am one and no doubt many noble Lords are as well, nowadays is almost the only user of a monopoly service or utility not to be protected by a regulator in the amount of fares charged. London Underground clearly is a public utility and in the future may well become a privatised, or part-privatised, utility, not least judged by the miserly government provision which appears to be forcing the Tube that way.

It is now established that significant utilities, whether public or private, should be subject to a regulator, one of whose functions is to protect the interests of the consumer by ensuring efficiency through a ceiling on costs. No one doubts that a major incentive to the vastly improved provision of utilities which began in the 1980s was the use of that price ceiling. One only has to look at airports, gas, electricity and telecommunications to see that, in all those cases, prices to the consumer have fallen considerably and that there has been an enormous incentive for efficiency.

On the railways--perhaps the nearest parallel to London Underground--fares have not risen by more than RPI since privatisation. When this amendment was last debated, it was mentioned that London Underground had a great need for investment. Indeed, it has. But in each of the cases I have mentioned, including and in particular the railways, the amount of investment has increased considerably, despite the fact that fares or prices charged have been capped. Therefore, the argument that you cannot have investment as well as efficiency and price control simply does not work.

In this Bill the mayor stands in ultimate relation to the Underground as its regulator. Why then, when the Government would not dare to remove the consumer's price ceiling in other utilities, should the Tube not be subject to regulation on the same basis? For that reason the clause would still hold good against a privatised Tube system, following the precedent set in the 1980s.

This amendment seeks to cap only the general fare level overall. The Bill, as drafted, refers to "general level of fares". We adopt that principle. Clearly it is right that premium services should be able to cross-subsidise other services. We have no argument with that. We merely talk about the general level of fares and putting a cap on that.

I believe that this amendment would be a popular one, certainly for all Tube users. It is about time that Tube users had the same benefits as the users of all the other privatised utilities or railway companies. I beg to move.

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Lord Whitty: My Lords, I do not believe that the parallel drawn by the noble Lord, Lord Brabazon, between the prices charged by privatised utilities for their products and services are equivalent to those charged by TfL. An independent price regulation applies in such areas, but not to TfL fares.

The privatised utilities are not the subject of democratic control in the way in which the mayor will have control over the operations of TfL. The noble Lord has referred to the popularity of pronouncements on fares. It is fairly obvious that plans for fares will feature somewhat large in the manifestos of candidates for the mayoralty. We already have some general indications. Londoners will be able to endorse or otherwise those plans at the ballot box. Therefore, there is a democratic control, whereas there is not, in that direct sense, in relation to the fares or charging policies of the public utilities.

I thought that in earlier stages of the Bill it was generally accepted that an amendment that effectively capped fares by the Secretary of State or by the will of Parliament would restrict the mayor's ability to control and direct the balance of fares on TfL's public transport services.

In addition to the democratic argument that the mayor will be in the same position as regulators in other areas, the mayor's general transport duties will require him or her to develop and implement policies for the promotion and encouragement of safe, integrated, efficient and economic transport facilities and services. In that context he or she will clearly develop a fares policy which will relate both to the need to encourage traffic on the Tube and other parts of London Transport and to the investment and other requirements of TfL.

If the proposal by the noble Lord were adopted, it could have serious effects in limiting the amount of revenue that could be raised through the fare box for re-investment in a modernised Underground because, under his formula, revenues would reduce over time in real terms and the mayor could find it increasingly difficult to keep the movement of fares in line with costs, investment needs and market demand.

The amendment is also flawed in that from April 2002 it would require the mayor to limit fares increases to RPI minus four per cent. I believe that there is a logical and statistical absurdity at the end of the amendment. If inflation were to remain around current levels, the mayor would thus be obliged to make reductions in the real level of fares. Taken to its logical conclusion, that would mean that in a sustained period of low inflation the formula would have the effect of reducing fares year after year without regard to the effect of those fares on the overall transport budget.

I do not believe that it is sensible to tie the mayor's hands in that respect in a situation where clearly some of the fares revenue will be needed for long-term investment in our transport infrastructure in London. We believe that it is right for the mayor to have direct responsibility for fares and not that he or she should be subject to rigid constraints and formulae as these amendments propose.

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Therefore, I believe that the whole approach adopted by the noble Lord is based on a wrong analogy in the first instance, and would lead to serious constraints on the mayor's ability to deliver an effective transport system for London. I hope that he will not pursue the matter.

Lord Brabazon of Tara: My Lords, I am grateful for the reply of the Minister. On the question of revenue needed for modernisation, I dwelt on that in my opening remarks. In all the other cases that I mentioned fares or the equivalent of charges have gone down, but investment has gone up. There is no reason why that should not happen in the case of the Underground if we obtain the incentives for efficiency and so on available to the other industries to which I referred.

On democratic control, yes indeed there will be democratic control in the form of the mayor and the assembly. The amendment refers to fair fares and I thought I may be doing the Minister a favour by putting this proposal forward. We remember what happened to the last fair fares proposal in the days of the GLC. Although the noble Lord may describe that as democratic control, I seem to remember that it was thrown out by the courts on the basis that it may have been democratic in certain parts of London, but it was not democratic in other areas that did not have a London Underground service.

I have listened with interest to what the Minister has said. I do not propose to test the opinion of the House on this issue tonight. I hope that the London travelling public will be able to have the benefit that has flowed to the consumers of other utilities and to travellers on the main railway system, which is a combination of lower fares and higher investment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 175 [Co-operation with other persons]:

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