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We have had some impassioned contributions on subjects ranging far and wide: quality partnerships and quality contracts; I thought I heard a plea for nationalisation at one point; concerns about road pricing in Wales, particularly from the noble Lord, Lord Roberts of Conwy, and the noble Lord, Lord Glentoran; issues about the power of traffic commissioners and, quite rightly, about governance matters in the new ITAs; and some powerful pleas for rural areas, notably led by the noble Lord, Lord Cameron of Dillington, about giving fair consideration to better access to transportation and being mindful of the potential impact of systems of road pricing. We had powerful contributions too from the noble Lord, Lord Smith of Leigh, with his insights into good governance and transportation matters in Manchester and, similarly, from my noble friend Lord Bradley, based on his time representing Manchester constituencies and his involvement in local government.
We also had concerns expressed about matters well outside the scope of the Bill, such as concessionary bus fares. We had pleas from my noble friend Lord Snape—good knockabout stuff—about consultation with Network Rail. However, Network Rail has made those pleas itself, and aggressively so—quite rightly and properly. My noble friend Lord Rosser raised the issues of TUPE, traffic commissioners and so on. I shall pick up on some of those comments and observations during the time I spend on the points raised. The noble Duke, the Duke of Montrose, Scotland’s very own watchdog, made some good points and asked some helpful questions. I cannot hope to cover every question raised; I was encouraged that noble Lords were realistic about that prospect. I will endeavour, as best I can, to respond to some of the main points raised during the afternoon. I do
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In general, not only was the debate constructive, but the Government received some plaudits. The noble Earl, Lord Attlee, described the Bill as having laudable aims—from the Conservative Benches, that is probably praise. The noble Lord, Lord Bradshaw, a great friend of public transport, was generally encouraging about the Government’s approach, as was the noble Baroness, Lady Scott of Needham Market. I think that we are in for a constructive debate as the Bill goes through your Lordships’ House. The degree of support for the Bill’s broad aims and approach came from all sectors, reflecting in large part the contribution already made during the process of public consultation and pre-legislative scrutiny.
A number of noble Lords expressed their support for the Bill’s focus on empowering local authorities—the noble Earl, Lord Attlee, and certainly the noble Lord, Lord Bradshaw, did exactly that—and on the Government’s desire to devolve greater responsibility and discretion to the local level. The noble Lord, Lord Hanningfield, described that as being a degree of localism. If that is the case and he sees it that way, that is all to the good, because that is how the Government see it. That is a key feature of many of the provisions in the Bill, which generally fits with the Government’s wider approach to local government. In our terms, that represents a real contrast with the approach adopted in some previous legislation, particularly with passenger transport authorities. I am pleased that the change is welcome in your Lordships’ House and is being perceived as such.
Noble Lords have raised points which fall outside the scope of the Bill but which are very important. The Government have taken a conscious decision to focus the Bill specifically on the linked aims of improving public transport and tackling congestion at a local level because we see action at a local level as being the most effective. In doing so we recognise that the Bill is only one part of a much wider package of measures to improve transport across the country. The Bill is not, and does not purport to be, the solution to all the nation's transport challenges.
I now turn to the specific questions, as the House deserves some answers. I found the questions very helpful and I want to answer as many of them as possible. In general, Conservative Members—I hope this is not seen as unfair—in expressing support for the Bill, were not happy about quality contracts. Noble Lords are quite entitled to take that view; I happen to take a contrary view. The noble Earl, Lord Attlee, started that debate. On quality contracts, in many places bus services are not being delivered satisfactorily, despite the best efforts of operators and local authorities. Where local authorities have the resources to develop quality contract schemes and where there is public support for them, we believe that option should be made available. Obviously, we hope that the Bill will encourage a more effective use of partnership arrangements, which, it is fair to say, received a great deal of support during the debate.
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On quality partnership schemes, the noble Earl, Lord Attlee, and the noble Lord, Lord Bradshaw, made points about the admissible objection from relevant bus operators and asked what kind of assurances we can give that that is not a device to make it difficult to establish quality partnership schemes. The intention is not to make it difficult to establish a quality partnership scheme; the intention is to ensure that local authorities cannot impose requirements on bus operators that are unrealistic or unreasonable in relation to frequencies, timings or maximum fares. However, we agree that we must not give bus operators carte blanche to veto any proposed scheme that comes forward. That would be self-defeating.
The noble Earl, Lord Attlee, made the accusation that we were trying to distance ourselves as a Government from road pricing and that we were trying to put a gap between the Secretary of State and the development of schemes. It is right that decisions on local road pricing schemes should be matters for local authorities and the communities and should not be diktats from central government because any scheme will be aimed at tackling local problems. The noble Baroness, Lady Scott, made the point that there is unlikely to be much congestion in rural areas and that it is an issue for urban areas. That is precisely why we think that working up schemes is best left to local authorities, such as those in Manchester, so that we can have effective traffic and transportation management.
The noble Earl, Lord Attlee, made the point that it is crucial that local arrangements for governance reform avoid unnecessary interference. The Bill makes it clear that the emphasis is on local areas carrying out their own review of transport governance and on identifying what changes they think are needed so that locally matters can be dealt with effectively. The noble Earl also made the point that local authorities should be required to consult; we certainly agree that consultation is very important. We would expect all authorities considering introducing a charging scheme to consult fully on any proposals that they seek to bring forward.
The noble Earl and a number of Conservative Peers, notably the noble Lords, Lord Roberts and Lord Glentoran, made the point that road pricing is a form of stealth tax. That is a very narrow consideration of the issue. Road pricing and congestion charging have been proven to work in London. Clearly, it is for other local authorities to try to make use of that in similar ways so that money can be ploughed back into improving the quality of public transportation.
The noble Lord, Lord Bradshaw, and the noble Baroness, Lady Scott, asked whether we as a Government can confirm who would be responsible for the preparation of a local transport plan and who would have to be consulted in an integrated transport area and elsewhere. The preparation of a local transport plan would continue to be an obligation of the local transport authority, which is defined in Section 108(4) of the Transport Act 2000. In an integrated transport area it will be for the ITA to prepare the local transport plan, obviously in consultation with constituent metropolitan district councils. In unitary authority areas, such as Brighton
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The noble Lord, Lord Bradshaw, asked about the public interest test, quality contract schemes and what the term “economic, efficient and effective” means. The intention is simply to ensure that schemes offer good value for money. That wording is already contained in the existing test that applies to quality contract schemes. Similar wording appears in existing general duties that apply to various authorities under the Local Government Act 1999. The noble Lord, Lord Bradshaw, asked whether the Government will amend Clause 8—that is the duty on local transport authorities to take into account and have regard to government policies and guidance on environmental protection matters. It is implicit in the Bill as drafted that the proposed environmental duty is a statutory minimum requirement. Nothing in Clause 8 or elsewhere precludes local authorities from going beyond what is strictly required by the statutory duty. A local authority will be required to do so as a matter of administrative law where it is a relevant consideration for their deliberations.
The noble Lord, Lord Bradshaw, and the noble Baroness, Lady Scott, asked who will exercise highway powers in an ITA area. Will it be the ITA or local authorities? Will district councils be able to block proposals such as bus lanes? We would hope that in reviewing transport governance in an area, ITAs and local authorities can reach agreement on how best to ensure effective integration of public transportation and raise issues. It is for them to consider where powers over roads should sit. However, under Clause 75, integrated transport authorities can also be given a power to direct authorities on how the latter exercise their road functions—for example, installing such things as bus lanes, which need longer routes to be effective.
The noble Lord, Lord Bradshaw, also raised a question about community transport provisions. I am delighted that those provisions were broadly welcomed. I think his point was whether it would be possible for local parishes in rural areas to operate regular bus services—for example, feeder services—to connect villagers to nearby commercial routes and, if so, whether it would be possible for separate fares to be paid by individual passengers. That kind of arrangement is already possible under the existing Section 22 permit regime. The Bill will provide added flexibility, allowing drivers of such services to be paid and, of course, allowing for the use of larger vehicles. Again, that has been broadly welcomed. Individual passengers would need to pay separate fares and we do not see any particular obstacle to that in the legislation.
The noble Lord also asked about private hire vehicle operators choosing to run local bus services under the taxi/bus provisions in the Bill. I think the noble Lord wanted to know whether they would have to register the details with the traffic commissioners and whether tests on drivers and their vehicles would be as stringent as those faced by bus operators. Where a private hire vehicle licence holder wanted to operate a local bus service under the taxi-bus proposals, they
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In common with other noble Lords, the noble Lord, Lord Bradshaw, was concerned about aspects of the traffic commissioner regime and how the commissioners will exercise discretion over bus registration. As a general rule, that would be a very radical step and it would be strongly opposed by operators. However, for quality partnership schemes, the Bill includes a procedure whereby both local authorities and existing local operators can make representations to the traffic commissioners on registration applications. That is contained in Clause 42. The traffic commissioner will then decide whether to accept the registration, reject it or ask for it to be revised.
The noble Lord asked who will sit on approval boards for quality contract schemes. The Bill provides that boards should normally be chaired by the traffic commissioner with the most relevant local knowledge. Its other two members would be selected from a panel appointed by the Secretary of State. It is envisaged that they would have specific relevant expertise relating to transport planning and transport economics.
The noble Lord and the noble Baroness, Lady Scott, made points about the possibility of non-elected members sitting on ITAs. The question was asked about the type of people whom the Government envisage being appointed, who would make those appointments, how many there would be and what arrangements would be in place for voting on financial matters. Clause 72 requires that a majority of members of each ITA will be elected representatives of the county, unitary or district councils making up the ITA area. However, the Bill provides flexibility for each area to propose, if they wish, that membership of the ITA should be broadened to represent other interests or to bring in wider experience to the authority. We heard from a number of noble Lords about the value of broadening that experience; the noble Lord, Lord Smith, said the value of consultation with chambers of commerce was of particular importance. The ITA could also include representatives of transport user bodies, environmental groups, Network Rail or, indeed, the Highways Agency; but it would be for the authorities carrying out a review of governance arrangements to make proposals as to how many people would sit on the ITA, what bodies they would represent and what voting rights they would have.
The noble Lord, Lord Cameron, made a number of points about ensuring that rural communities were properly recognised. The Bill deliberately provides a range of options, particularly on bus services, for local authorities across the country, reflecting the diversity of local circumstances. The work of the bus policy review in preparation for the Bill looked closely at city, small urban and rural services, and our proposals attempt to respond to concerns raised across the country. We believe that those services will deliver real benefits for all sorts of areas, too. For example, measures to support stronger partnership working would be beneficial in rural as well as in urban areas, and proposals to strengthen punctuality
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The noble Lord, Lord Cameron, made some points about the need for greater flexibility in terms of design. We agree with that and we want to see the boundaries of ITAs working well in rural areas so that they can have a powerful input into the development of rural services.
Before I sit down, I want in particular to deal with the points made by the noble Lord, Lord Rosser, about the quality contract schemes. There was a discussion about the lengthy approval procedure. We believe that the regimes that we have set out could have a big impact on bus services, so it is important that an independent assessor is involved and that operators’ rights are not trampled on without good reason. The approvals process should help to gain acceptance for schemes and reduce the likelihood of those schemes being taken through lengthy court procedures.
We have of course heard the calls for greater clarity on the application of TUPE in relation to quality contract schemes. It is important that the workforce involved in the transition to quality contract regimes has assurances. We do not want uncertainty, so the Bill includes a provision to ensure that the provisions of TUPE regulations will apply when a new employer takes on staff from an existing operator as a result of a quality contract. Broadly speaking, the effect of the provisions is to ensure continuity of employment and of the terms and conditions of employees transferred from one operator to another when a new quality contract is put in place.
I have raced through as many of the questions as I possibly can. I realise that I have not dealt with the Welsh question. All that I can say of value on that at this stage is that the Welsh provisions were put in place very much at the behest of the Welsh Assembly. We aim to work very closely with Assembly Members in putting this legislation together.
I could go on for a great deal longer on all of the questions raised, but I have a feeling that noble Lords opposite might begin to balk at that suggestion. Again, I thank everyone involved in this debate. I will ensure that a full compendium of questions is put together with answers supplied and I shall be more than happy to circulate that letter and correspondence to all noble Lords who have taken part. I am greatly looking forward to Grand Committee because I think we can have interesting discussions. I see the noble Baroness, Lady Noakes, nodding in agreement—or I thought she was—although I doubt that she will be there because her eyes will be on other matters. I welcome the support for the Bill and I am looking forward to constructive debate and dialogue—and I am certainly looking forward to Grand Committee.
On Question, Bill read a second time, and committed to a Grand Committee.
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Pre-Budget Report 2007
7.06 pm
Lord Davies of Oldham rose to move, That this House takes note with approval of the Government’s assessment as set out in the Pre-Budget Report 2007 for the purposes of Section 5 of the European Communities (Amendment) Act 1993.
The noble Lord said: My Lords, each year the Government report information to the Commission on the economic and budgetary position and our main economic policy measures. By formally sharing information from the Pre-Budget Report with our European partners, we can help to ensure a proper, accurate and effective EU system and meet our commitments, contributing to enhanced employment and growth. This information was set out in the Pre-Budget Report last month and this material forms the basis of what we are sending to the Commission.
The background to this year’s report and spending review is a time of increased international economic uncertainty and a more fragile global environment, which has already seen turbulence in America, Asia and Europe. As the Chancellor set out in his speech on 9 October, provided that we maintain the course for economic stability that we have set, we can respond to this global environment. We will do so by taking no risks with stability and no risks with unaffordable promises that put public finances at risk.
The full impact from turbulence in the international financial markets is as yet unclear, but the IMF has said that this international uncertainty will have an effect on growth right across the world. Independent forecasters expect growth next year in America and the euro area to fall to 2 and 2.5 per cent. In these circumstances, it is right that we, too, should be cautious. The forecast for growth next year is also of 2 to 2.5 per cent. However, because of the strength of our economy, our commitment to openness and liberalised trade across the world and our flexibility and dynamism here at home, the forecast for growth in 2009 and 2010 is 2.5 to 3 per cent, in line with the economy’s trend rate of growth and in line with the forecast in the Budget.
Against the backdrop of recent events, in the UK decisive action has brought inflation down to around our target of 2 per cent, with it forecast to be on target next year and the year after, employment is at a record level and productivity is growing strongly, up 2.7 per cent in the past year. While growth in America this year is expected to be 2.1 per cent, in Japan 2 per cent and in the euro area 2.6 per cent, in Britain—with exports and investment rising—growth is expected to be 3 per cent. Britain is the fastest-growing advanced major economy in the world.
The strength of the UK economy is the direct result of the monetary and fiscal policy framework that we have introduced. This Government’s monetary policy framework seeks to ensure low and stable inflation. The framework has delivered the longest period of low and stable inflation since the 1960s, along with low interest rates. This has provided the platform for record employment levels, higher investment and economic growth.
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Our two fiscal rules are, first, the golden rule that, over the economic cycle, the Government will borrow only to invest and not to fund current spending and, secondly, the sustainable investment rule that net debt should be held over the economic cycle at a stable and prudent level. We are meeting our first fiscal rule, with the current budget in surplus over the cycle. In the last economic cycle—1986 to 1997—that rule was missed, with a deficit of £240 billion. Over this cycle, with a current budget deficit last year lower than forecast, we have a surplus of £18 billion and are, therefore, meeting our first fiscal rule. We will also meet our second rule that net debt should be at a sustainable level. In America, debt is 44 per cent; it is 49 per cent across the euro area, 86 per cent in Japan and 94 per cent in Italy. In Britain, debt is 37.6 per cent this year and below 40 per cent in every year of the projection period, so we are meeting our second fiscal rule. Debt interest was 3.5 per cent of national income in 1997. Next year, it is expected to be just 2 per cent. That low debt allows more investment in front-line services.
We can afford sustained investment in our priorities only because of our two fiscal rules, which ensure sound public finances. The rules have protected an historically unprecedented increase in public net investment, while debt and borrowing remain low and stable. Last year, borrowing was 2.3 per cent of national income—£4 billion less than forecast. Over the 10 years of this economic cycle, borrowing and debt in Britain have been lower than in Japan, the euro area, America and the OECD as a whole. Net borrowing is forecast to fall from 2.7 per cent this year to 1.3 per cent in 2012, compared to a peak in 1993 of almost 8 per cent—the equivalent of about £110 billion today. The UK also continues to meet the reference value on the treaty deficit throughout the projection period, with the deficit reaching 1.6 per cent of GDP by 2012-13.
The projections that the Chancellor set out are also consistent with the Government’s prudent interpretation of the stability and growth pact. A prudent interpretation takes account of country-specific factors including the long-term sustainability of the public finances, the economic cycle and the important role of public investment. The reforms to the stability and growth pact agreed in March 2005 rightly place a greater focus on the avoidance of pro-cyclical policies and on reducing and maintaining low debt, with the flexibility for low-debt countries, such as the UK, to invest in the provision of public services.
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