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Moved accordingly, and, on Question, Motion agreed to.

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Amendment No. 18

Lord Adonis: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 18. Again, these are relatively minor and technical amendments. Amendment No. 18 relates to quality partnership schemes and specifically the power for the Secretary of State and the Welsh Ministers to make regulations about admissible objections. As noble Lords may recall from earlier debates, the idea of admissible objections is that bus operators should have the opportunity to object to requirements relating to fares, frequencies or timings in a quality partnership scheme which they believe are unachievable or commercially unviable, but they should not have the opportunity to veto local authority proposals on spurious grounds.

It is therefore envisaged that the traffic commissioners will play a role in determining whether operators’ objections are admissible, in cases where the operator and the local authority cannot reach agreement. The Government have in mind that a traffic commissioner may need to call on an independent expert to assist him, in which case it may be necessary for that expert to be paid for his or her assistance. Amendment No. 18 simply enables future regulations to provide for such payments.

Amendments Nos. 147 and 148 are about the powers of the traffic commissioners where a bus operator is failing to run his services properly. The Bill already includes a new power for the traffic commissioners to order a failing operator to expend money to improve his services. The amendments make it clear that the traffic commissioner can be more specific about the precise improvements on which the operator is to spend money delivering, and that he can also require money to be spent on improving facilities such as information at bus stops.

Amendments Nos. 152, 153 and 156 to 158 relate to bus passenger representation. Clause 69 already empowers the Secretary of State through secondary legislation to confer new functions on the Rail Passengers Council—commonly known as Passenger Focus—to allow them to represent the interests of bus as well as rail passengers. We considered this issue a moment ago in our debate on the previous group of amendments. The amendments now under discussion provide flexibility to allow the remit of Passenger Focus to be broadened to cover matters relating not only to bus and coach services but to tram services and passenger transport facilities. The department will consult on whether Passenger Focus should represent tram passengers in due course.

On Question, Motion agreed to.

Amendments Nos. 19 to 43

Lord Adonis: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 19 to 43.

Part 3 is aimed at enhancing the powers available at a local level to secure improvements in the standard of local bus services. Buses are a crucial part of our local transport system and over the past few years we have seen the first sustained increases in bus patronage

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across Great Britain for half a century. A number of places around the country where local authorities and bus operators work in partnership have delivered real improvements to services. As a result, more people are getting on buses.

However, there are still too many places where passengers are not enjoying improvements and where patronage continues to fall. Where voluntary partnerships are working well, the Government applaud them. But it is also important that other options are available, particularly for those areas where partnerships are not delivering improvements. This Bill seeks to devolve decisions to those who understand the needs and requirements of their local areas and to ensure that the right tools—voluntary partnerships, quality partnership schemes and quality contracts schemes—are available at a local level.

The Bill includes various provisions to make quality contracts schemes a more realistic option for local authorities, while also preserving appropriate safeguards for bus operators. This group of amendments covers four aspects of these provisions. The first effect of this group is to ensure that in England the elected local authority takes the final decision about whether a quality contracts scheme should be made in its area. The amendments replace the proposed approvals boards with QCS boards. Rather than making the final decision as to whether a scheme should go ahead, the role of a QCS board would be to provide an opinion and, where appropriate, to make recommendations to the local authority. It would be for the local authority to take the final decision, having considered the board’s opinion and any recommendations.

The amendments also spell out more clearly the precise role of these boards. The boards will be expected to consider two things; namely, first, whether the local authority has fulfilled the statutory requirements to give notice of their proposed scheme and to consult on it and, secondly, whether the proposed scheme meets the “public interest” criteria set out in the Bill.

The amendments retain a role for the Transport Tribunal in hearing appeals against a local authority’s decision to make a scheme. The scope of this appeal right would depend on whether the proposed scheme had received a clean bill of health from the QCS board. If it had received a clean bill of health in terms of meeting the five statutory public interest criteria and in terms of consultation, the appeal is restricted to points of law. The intention of this right of appeal to the Transport Tribunal is to provide a quicker, more accessible and less costly alternative to judicial review. Consistent with the preferences of the devolved Administration, the existing arrangements as regards schemes in Wales are left unchanged.

The second issue dealt with in this group of amendments relates to employment protection. At earlier stages of the Bill’s passage through your Lordships’ House, amendments were made to strengthen the protections available to bus workers in an area where a quality contracts scheme is being introduced. The principal effect of those amendments was to provide certainty that the Transfer of Undertakings (Protection

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of Employment) Regulations 2006 would apply where an operator is forced to stop running bus services because a quality contracts scheme is coming into force.

Amendments Nos. 132 to 136 strengthen further the protections available. They define an additional situation where TUPE would apply. They also make provision about pension protection, placing a duty on the Secretary of State to make regulations to ensure that workers involved in the provision of bus services in the scheme area before the scheme was made do not lose out in pension terms as a result of the scheme.

The third issue, covered by Amendments Nos. 20, 70 and 122 relates to local authority powers to operate bus services in certain circumstances. This responds to questions raised during the Bill’s passage through your Lordships’ House and the House of Commons. These amendments would provide a power for a local transport authority to operate local bus services in a very specific set of circumstances; namely, where an operator of services under a quality contract had ceased to provide those services before the contract was due to terminate—for example, if the contractor goes into liquidation. In such a situation, it may be in the interests of passengers for the local transport authority to be able to step in for a limited period while it takes action to make appropriate arrangements for the longer term.

Because this is intended to be no more than a temporary emergency power, the amendments include a clear time limit of nine months, after which the authority can no longer operate the services. The Government have listened to the concerns of local authorities that they could face a very difficult position if they had not quite concluded their negotiations with a “replacement” operator at the end of that nine-month period. The amendments therefore also include a provision whereby the nine-month period may be extended by up to a further three months by the local traffic commissioner. The Government consider that this allows more than ample time for a competent local authority to make the necessary arrangements for a new contractor to be appointed and builds in an appropriate degree of flexibility through the three-month extension. I beg to move.

Moved, That the House do agree with the Commons in their Amendments Nos. 19 to 43.—(Lord Adonis.)

7.45 pm

Lord Snape: My Lords, first, I apologise to your Lordships for not declaring an interest in my earlier intervention today, although I have done so on previous occasions during the passage of the Bill. I am employed as a consultant to FirstGroup plc. I am also a declarable shareholder in the National Express Group, although given the state of the Stock Exchange I perhaps will not have to make that declaration for too many more years. It is only fair to say at the outset that, while I do not believe that the amendments in this group would significantly improve the Bill from when it last left your Lordships’ House, I hope that the Minister can assure me and reassure the bus industry that the Government have stayed true to their word. Can he

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confirm that this legislation, as amended, will still protect the legitimate interests of bus operators and passengers?

I am aware that we have had a long summer of lobbying. Indeed, we have had eight long years of lobbying on quality contracts. I am also aware that there has been some glee and jubilation from certain members of the passenger transport executives up and down the country over the recent amendments to the quality contracts scheme process. Those of us who have taken a long interest in these matters are aware that a great deal of face-saving is involved and that the amendments under discussion in this group fall some way short of what the more let us say control-oriented, brethrens of the local authorities sought. Ministers have been at pains over the past few months to allay any fears that the industry might have and to point out to bus operators that any quality contract proposal will still be subject to independent and sequential scrutiny. I know that many members of the bus industry are still comfortable that quality contracts are some way from the easy option portrayed by some in the Passenger Transport Executive Group. Will the Minister assure us that quality contracts will be used only as a last resort by sensible authorities that have exhausted all faster, more economic and passenger-friendly options?

Some people in the bus industry think that pressing for these amendments is something of an own goal by the would-be regulators as it could open the door to longer and more expensive legal action. “Bring it on” was the response, as I understood it, from certain more active members of the Passenger Transport Executive Group, but it is not their money. If you are paying for court cases with local ratepayers’ money, it is less of a problem than it would be perhaps to a commercial operator.

I believe that passengers will be best served if the legitimate interests of the bus operators are, as Ministers have continuously promised, properly protected. Bus operators got a bad and inaccurate press from those rather few honourable Members of the other place who participated in the debate throughout the most recent stages of the Bill. But it is important that Ministers concentrate on fact rather than rhetoric. It is a fact that £2.2 billion has been invested in buses outside London over the past 10 years. In seven of those 10 years, that investment exceeded net profit in the bus industry.

FirstGroup, the company I work for, has built up over the past decade from a small municipal undertaking based in Scotland to a multinational company employing many thousands of people in the United Kingdom. In replying to the debate, the Minister should tread very carefully indeed so as not to cause any further anxiety in the bus industry, particularly during this somewhat delicate economic period. It is important, and I think both legitimate and right, that passengers as well as operators should have their legitimate interests protected under this legislation. Many people in the bus industry believe that if the quality contract route is to be followed without some of the safeguards that Ministers have indicated will be provided, much of their business— will be confiscated whether lawfully or not will be for the courts to say. I understand that Ministers have

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assured the bus industry privately that even though this is far from an easy option, if the proposals were to be taken forward, not only would operators have every opportunity to put their own case, they would also have a proper right of appeal against any decision. It would help to allay many fears in the bus industry if the Minister could confirm that it is indeed the case that the amendments I would have proposed had he spoken at the time I expected him to speak—that is, on this particular group—would therefore be superfluous. I trust that he can do so because I have already indicated that I do not propose to move Amendment No. 44A.

I want to ask my noble friend why the appropriate approvals authority for a quality contracts scheme in Wales may approve the scheme if it is satisfied not only that the new public interest test in Clause 19 is met but also if it is satisfied that the scheme is in the public interest. I expect to be told that it is because Wales has a devolved Administration, but I do not think that the public interest is any less important in the rest of the United Kingdom. Indeed, I would point out that Ministers and the Government generally have been consistent in saying that the legitimate interests of bus operators have to be taken into account when the merits of a quality contract are being assessed. In order to do that and to ensure that the benefits of a quality contract are proportionate to the disbenefits, surely it is essential that the QCS board is able to assess fully the financial losses that any operator might incur as the result of a quality contract being introduced, not just the collective position of all operators. Can the Minister confirm that the government amendment which creates new Section 124(1A) of the Transport Act 2000 will oblige QCS boards to assess each operator’s financial interest, not just an overall assessment of them all?

I want also to press the Minister on government Amendment No. 69. As currently drafted, the Bill restricts the scope of an operator’s appeal to the Transport Tribunal. Where a QCS board has approved a quality contract or recommendations to change the quality contract have been taken on board by the relevant authority, an operator’s appeal can be made only on a point of law, not on a point of fact. As far as I can see, this prevents operators appealing to the Transport Tribunal against the assumptions that might have been made by the authority and the QCS board in justifying a quality contract. It also prevents operators making representations to the tribunal on matters taken into account or not taken into account by the authority or QCS board. An operator’s only right of appeal to an independent tribunal against an approved quality contract would be his submission to the QCS board on the authority’s consultation. I ask my noble friend whether such a procedure actually makes sense and indeed whether it would be defensible in law. Surely there can be no justification for restricting the scope of an operator’s appeal to the tribunal, and this amendment therefore removes the restriction currently applied by the amended Bill. It will enable an operator to appeal to the tribunal on a point of law and fact, regardless of the view of the QCS board. This is a further amendment designed to ensure that the legitimate interests of operators are taken into account.

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I apologise for the length of this speech, but it is the only one I intend to make during the passage of this Bill, and these matters are of enormous concern to the bus industry. I turn finally to the question of the invitation to tender to be issued while appeals are outstanding. It is possible, under the terms of the amended legislation, for an authority to proceed to issue an invitation to tender to operators who may wish to bid for a contract to run a quality contract even if an appeal against a quality contract is outstanding. Again, we are in the realms of certain members of the Passenger Transport Executive Group saying, “If there is legislation, so what?”. I would point out that legislation of this kind is likely to be protracted and expensive, and that there ought to be a proper justification from PTEG to justify this course of action. Surely it cannot be right for public authorities to proceed with an ITT and all the costs that involves while an appeal is outstanding. If the appeal is successful, all the time and expense of proceeding with the tendering process would be wasted. The position is even more serious if a tender is awarded before an appeal against the particular contract has been won. It is, to say the least, a bizarre arrangement and there appears to be a fundamental lack of common sense and of justice in the procedures as they are presently laid down. It may well be that common sense would prevail and an authority would not proceed to prepare and issue an ITT while an appeal is outstanding, but there is nothing to stop it doing so under the terms of the Bill before us today. By stating expressly that an ITT can be issued even when an appeal is outstanding, the Bill almost encourages local authorities to proceed in that way. The straight question for my noble friend is this: how do the Government propose to ensure that authorities use their powers wisely?

In conclusion, having taken a deep interest in the Bill and having some years’ experience in the bus industry, I cannot say personally that the prospects for companies and bus passengers have been enhanced by the Government’s amendments. I hope that the Minister will take it upon himself to give an assurance to bus operators that the last stage of any change in the quality contract will not be made as easy as some, in my view overly optimistic, members of the Passenger Transport Executive Group apparently believe.

Lord Bradshaw: My Lords, I should like to add a few words to the speech of the noble Lord, Lord Snape. I have no financial interest in the bus industry, but I have a lot of experience of it. I want first to reiterate the point I made earlier: traffic congestion is by far the biggest enemy of bus services. Unless there are effective ways of dealing with congestion, bus services will continue to deteriorate.

Secondly, quality partnerships, where they are working and where they bring bus companies into partnership with the local council and the police, have a lot of virtue in them. In fact, many local authorities have not yet taken up their powers to clear their highways, monitor bus lanes and fine those who invade them. In my opinion, attention to these areas would result in much better bus services than are likely to be brought about by quality contracts. A further point to make on quality contracts is that many people look jealously at

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London and say, “If we had that system in our city, we would be all right”. I ask the Minister to pause and reflect on how much subsidy is put into public transport in London. It is vast compared with that provided outside, and any move along the road to quality contracts outside London will presumably come with a price that I think those who are proposing it intend to present to the Government. That has to be considered.

London has a huge number of people who arrive in the city by public transport without their cars and therefore use the bus services. Again, that is not the case in every city. Some cities still offer cheap and plentiful parking, and they wonder why the bus services they operate are not efficient—there is obviously a cheap alternative and the cars being driven into those car parks are in fact blocking the roads along which the buses are to operate.

I am not convinced that anyone has shown that vast profits are being made in the bus industry that could be redistributed through a quality contract to subsidise less well served or less used areas. Where you can make even a modest profit running a bus service, that will be done commercially. It is only in areas where traffic is very thin that a bus service does not work, and you will not make a sensible adjustment by cutting services in busy corridors where there are lots of people travelling—often quite poor people—and saying to them, “You can have a less good bus service so we can take some of the profits from there to run bus services in the more remote areas”.

8 pm

Lord Rosser: My Lords, I shall comment on a couple of points made by the noble Lord, Lord Bradshaw. No doubt he will strongly disagree with this, but I get the impression that the enthusiasm for the Bill from the Liberal Democrats in this House was considerably less than from the Liberal Democrats in the other place. From reading the debates it seems to me that their support was pretty wholehearted, which cannot be said of the Liberal Democrats in your Lordships’ House.

Lord Snape: My Lords, I am sure the noble Lord, Lord Bradshaw, can defend himself, but could the noble Lord, Lord Rosser, not say that the same thing is true of the Labour Party?

Lord Rosser: My Lords, I have made my point about the Liberal Democrats in the two Houses. I suspect that the Bill will be supported by my party in this House as well. Furthermore, I do not accept the argument of the noble Lord, Lord Bradshaw, that quality contracts go with high levels of subsidy. The two are separate issues and one does not necessarily go with the other.

I am pleased that the Government have accepted the principle behind the amendment. The issue is that, in the event of a quality contract operator defaulting for any reason, a local transport authority must be able to use any means at its disposal to keep bus services running, including operating services itself. Although I listened carefully to what my noble friend said, I remain concerned that the time limits being

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placed on the operator of last resort are too stringently set out in primary legislation, which is emphatic that while 12 months may be needed, 12 months and one day will not.

In the Bill, those powers of last resort are restricted to nine months, with an additional three months at the discretion of the traffic commissioner. In the other place, concern was expressed that that was too restrictive, given the wide range of scenarios that could result from an operator defaulting on a franchise. What would happen if a deal with a replacement operator for the franchise fell through at the last minute? What would happen to bus services then? Another scenario could be a franchise deal involving significant investment in new vehicles, to which reference has already been made, but where that programme of investment had not been completed when the initial quality contract operator, or contractor, defaulted. It might be a difficult task for a local transport authority to secure a replacement operator for the quality contract and ensure that the new vehicles were supplied at a competitive price when potential bidders knew that the local transport authority had a fixed period in place whereby it could keep services running as the operator of last resort. That does not seem to place the local transport authority in a strong position in any negotiations.

There are other possible scenarios, although one accepts that they would be exceptional. The independent or local transport authority might no longer require the use of a particular operator because of poor performance and could be subject to legal challenge. Surely in that situation the challenge might go on for a considerable time. Would any other operator be prepared to touch the provision of services with uncertainty remaining over the status and position of the original quality contract operator?

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