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What happens if an operator goes out of business 13 months before the end of their contract? What would the position be, then, if the local transport authority could operate services, if necessary, only for 12 months, when the contract itself was going to end after 13? What happens if there is an argument between competing operators and an independent transport authority over the ITA’s decision on who should get a contract following the existing operator’s defaulting? That, too, might be subject to legal challenge. As I said a moment ago, if a deadline to negotiate on contracts is approaching, considerable power is handed to the bidders when they know that the local transport authority is in the position that it can no longer operate those services after a maximum period of 12 months.

It is also worth noting that when the Government used their power of last resort in the operating role to take over the operation of south-east trains, following the failure of the Connex South Eastern franchise, those powers were exercised for almost two and a half years. How would passengers and the taxpayer have fared on south-east trains if the Government had been subject to a fixed time limit set out in primary legislation on their own powers of last resort on rail franchises?

I realise that the Government are concerned that a local authority might seek to abuse these powers to, in effect, municipalise local bus services, taking them back into public ownership. Even if that were a likely threat, though, under the terms of the amendment the

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traffic commissioners would provide a safeguard against that, as they would decide whether or not the last-resort powers were to be granted. The Government’s guidance to the traffic commissioners could be used to ensure that these last-resort powers could be extended only to protect passengers in exceptional circumstances following the default of an operator and the restarting of the franchise under a new operator.

I hope that my noble friend will be prepared to consider this amendment. The deadline seems unnecessarily restrictive; it allows no room for manoeuvre if, in exceptional circumstances—and one accepts that they would be exceptional—the specific date could not be adhered to. The amendment would allow the traffic commissioner, if he or she so desired, to agree to an extension. I have no doubt that they would want some compelling reasons for granting an extension rather than seek to use the power that I propose they should have in a way that did not reflect the need for exceptional circumstances to be proved.

Lord Adonis: My Lords, the Government in this House support the Bill with exactly the same degree of enthusiasm as they supported it in the other House—there is no difference between our positions here and there. As was the case in the House of Commons, so here. We pay tribute to the entrepreneurial zeal and public service commitment of so many of our bus operators, in precisely the way that my noble friend Lord Snape would wish us to do. They make a great contribution to public transport in this country and we need them to make a greater contribution in the coming years. We recognise, as my noble friend said, that in a good many areas buses are doing well—London, mentioned by the noble Lord, Lord Bradshaw, being a case in point, where we have seen a welcome transformation for the better in the pattern of bus service usage in recent years. As I said earlier, in some areas buses are not doing as well as we would wish. There are many reasons for that. I recognise the importance of addressing congestion, which the noble Lord mentioned. It is because of these issues that we need to address that we brought forward the provisions in the Bill.

My noble friend Lord Snape’s overriding concern is that the Government should stand by their commitment to protect the legitimate commercial interests of bus operators. We absolutely stand by that commitment. The amendments I am speaking to in this group are designed precisely to ensure that appropriate safeguards are preserved in the interests of bus operators. First, the amendments retain a clear role for independent scrutiny of a local authority’s proposals. That scrutiny will take place after the authority has concluded its public consultation process. This is important because it ensures that the quality contract scheme boards can take full account of any concerns raised by operators during the consultation process.

Secondly, the amendments retain the five public interest criteria already set out in the Bill. These include a requirement that any adverse effects on operators must be proportionate to the benefits of the scheme, which is a crucial safeguard for operators. Thirdly, the amendments retain a right of appeal to the Transport Tribunal.

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To deal with my noble friend Lord Snape’s Amendments Nos. 44A and 69A in more detail, the first, on a public interest test, would require QCS boards to consider proposed schemes not only against the five statutory criteria already in the Bill, but also against a more general test of the public interest. The five criteria in the Bill already provide appropriate benchmarks against which any scheme should be judged, and are designed to provide clarity about how the public interest is to be assessed. They require an authority to show that the proposed scheme will, first, increase bus patronage; secondly, benefit passengers; thirdly, contribute to the implementation of the authority’s local transport policies; and, fourthly, do so in a way that is economic, efficient and effective. In essence, this means that the scheme must deliver value for money which, in turn, means that the authority needs to take account of all of the costs and benefits likely to arise from the scheme.

The crucial safeguard for bus operators is the fifth criterion: that any adverse effects on bus operators, both inside and outside the scheme area, must be proportionate to the benefits arising from the scheme. These five criteria make plain, in somewhat more detail than a general public interest criterion, what requirements a scheme needs to fulfil and what questions a QCS board needs to consider. They meet my noble friend’s concerns and the legitimate interests of bus operators.

Lord Snape: My Lords, before my noble friend leaves that point, why is the public interest test to be applied in Wales? Why does it not apply in England?

Lord Adonis: My Lords, ours is a better test. Under the devolution settlement, it is of course up to Wales to frame the precise test that it wishes to apply. There would not be much point in devolution if we had to replicate the provisions that the Welsh put in place in every respect. The effect of our tests is to protect the public interest precisely as we would wish to ensure effective bus services, and to protect the legitimate commercial interests of bus operators.

On my noble friend’s Amendment No. 69A, on appeals to the Transport Tribunal, under the amendments made in the House of Commons the grounds for appeal against a local authority’s decision to make a quality contracts scheme would depend on whether or not the QCS board had in effect given the final version of the scheme a clean bill of health. Where the QCS board, which will be independent of both central government and the local authorities, has given such a clean bill of health, having examined all the facts of the case and considered all the opinions expressed in the consultation, the Government consider that it is entirely appropriate for the onward right of appeal to the tribunal to be limited to points of law.

That would enable an appeal to be brought, for example, on the grounds that the authority had acted unreasonably in deciding to make the scheme, had acted with bias, or had fettered its discretion. There would therefore be a clear safeguard in the most unlikely event of a QCS board failing to identify a major flaw in the authority’s proposal. It is not correct to say that an operator would, as a general rule, have

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no right of appeal against an authority whose case for a quality contract scheme was based on unreasonable assumptions. However, where the final version of the scheme had not received a clean bill of health from the QCS board, an appeal could be brought on either points of law or on questions of fact, enabling a full-case review. The Government consider that these proposals provide an entirely appropriate level of protection, while avoiding unnecessary stages in the process, which, after all, could delay the implementation of schemes that are manifestly in the public interest.

8.15 pm

My noble friend asked me specifically why local authorities should be able to issue invitations to tender for quality contracts while an appeal to the Transport Tribunal is in progress. There is no statutory bar to local authorities beginning a tendering process while a judicial review is under way. We see no reason why the position should be different here. Of course, no local authority will be in a position to actually sign quality contracts until any appeals are fully discharged. I emphasise that we are not saying that local authorities must begin tendering during an appeal. Far from it; it would be for the authority to judge whether it would be appropriate in the particular circumstances of the case, bearing in mind the costs that the authority and others are likely to incur during the tendering process.

My noble friend Lord Rosser’s amendment to Commons Amendment No. 122 seeks to provide added flexibility to allow a local authority to continue providing services as operator of last resort, beyond the proposed 12-month period. Nine months should be more than adequate time for an authority to procure a replacement service under a new quality contract. Even so, however, as I set out earlier, our new clause leaves the option to apply to the traffic commissioner for an extension of up to three months in case this should prove necessary.

The purpose of the amendment is to provide an emergency stop-gap measure for a local transport authority, not to re-establish local authorities as long-term providers of local bus services. The Government consider that a line needs to be drawn somewhere. If a local authority has been trying to find a replacement operator for a whole year and finds itself unable to do so, it is extremely hard to see what is going to change in month 13 or beyond. I therefore hope that my noble friend is persuaded that his amendment is unnecessary. We have given considerable powers and discretion to local authorities to act as operators of last resort where services have not proved viable, or have had to be terminated for any other reason.

Lord Rosser: My Lords, more than one of the possible scenarios that I suggested—I accepted that they would be exceptional—related to legal proceedings being taken over a decision to dispense with the services of a quality contract operator, or as regards an argument between quality contract operators in the independent transport authority over who should take over an existing quality contract after the original operator had ceased to operate the services. Does my noble friend accept that that is a possible scenario, or does he dismiss that possibility? If he accepts that it is a

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possible scenario involving legal proceedings, does he not accept that those legal proceedings could go on for a considerable period, and that it is therefore not unrealistic to build in a provision which would enable us to go beyond the 12 months where it was proved that there were exceptional circumstances? If we find ourselves in that scenario, what happens the day after the 12 months are up?

Lord Adonis: My Lords, I would rather not paint precise scenarios. It is hard to predict the circumstances in which services might come to a halt. However, if there were to be a scenario of the kind painted by my noble friend of a service coming to an end in circumstances where legal proceedings followed, even by the rather lengthy proceeding standards of our learned friends, one would realistically expect them to have been concluded well within a 12-month period. Therefore, we would not expect such a scenario to justify an extension of the 12-month period. However, I come back to the central point that this is intended to give local authorities the power to act as operator of last resort, not to put in place their own bus services on an ongoing basis. Recognising that we have to make a judgment about a cut-off point at some defined period, our view is that 12 months is the longest period in which one could justify a local authority acting as operator of last resort, and that any local authority which is fulfilling its duties responsibly would be able to put in place a replacement service over that period.

If a local authority was incapable of putting in place a replacement service in 12 months, it is very difficult to see what circumstance will change in the 13th month that is suddenly going to make it possible to act in a way it was incapable of acting in the previous 12 months. Therefore, even in the scenario that my noble friend paints of there being complicating factors surrounding the ending of a bus operation, we believe that the 12-month period is sufficient to put in place successor arrangements, and that we should not need to extend the 12-month period further.

On Question, Motion agreed to.


Lord Adonis: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 44.

Moved, That the House do agree with the Commons in their Amendment No. 44.—(Lord Adonis.)

[Amendments Nos. 44A and 44B, as amendments to Commons Amendment No. 44, not moved.]

On Question, Motion agreed to.

amendments NOS. 45 to 68

Lord Adonis: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 45 to 68.

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

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Lord Adonis: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 69.

Moved, That the House do agree with the Commons in their Amendment No. 69.—(Lord Adonis.)

[Amendment No. 69A, as an amendment to Amendment No. 69, not moved.]

On Question, Motion agreed to.

amendments Nos. 70 to 121

Lord Adonis: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 70 to 121.

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


Lord Adonis: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 122.

Moved, That the House do agree with the Commons in their Amendment No. 122.—(Lord Adonis.)

[Amendments Nos. 122A to 122C, as amendments to Amendment No. 122, not moved.]

On Question, Motion agreed to.

amendments Nos. 123 to 158

Lord Adonis: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 123 to 158.

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

amendments Nos. 159 to 162

Lord Adonis: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 159 to 162. These amendments relate to integrated transport authorities and local road charging schemes. Before dealing with them, I wish to set out again the issues which we are trying to address in Part 5. As I said earlier, in the main urban areas outside London, current transport leadership and delivery arrangements do not always work as well as they might and need updating to reflect changing travel patterns. Current arrangements date from the Transport Act 1968, which allowed establishment of passenger transport authorities with responsibility for public transport across each city. There are now six PTAs covering areas such as the West Midlands.

In 1985 the power to create further PTAs was repealed, and the broad arrangements for local transport decision-making have remained the same since. However, over the past 20 years there have been many changes in the transport needs and patterns of different areas. Despite this, existing legislation offers little flexibility to update local arrangements, or for one PTA area to do things differently where local needs differ.

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We believe that reviewing existing arrangements is a priority, and that local areas are best placed to identify the changes needed. The Bill changes the generic names of the six passenger transport authorities to integrated transport authorities. This change reflects the wider responsibilities that all ITAs will have in relation to local transport policies and plans, and their powers to act for the economic, social and environmental well-being of their area. The Bill also allows local authorities, both in areas with ITAs and in those without, to review existing arrangements in their area and come forward with proposals for improvements.

It will be up to the authority in each area to decide how wide a review it wishes to carry out. A review could cover, among other things, how well public transport services operate, the management of roads and the current distribution of powers over transport between local authorities and ITAs. The Bill would then allow the Secretary of State to respond to the proposals put forward by authorities by making individual orders for each area; for instance to establish a new ITA or to make changes to the constitution of an ITA that already exists. These orders would be subject to affirmative resolution in each House.

Amendments Nos. 159 to 163 are about the membership of integrated transport authorities. These amendments have two principal effects. The first is to guarantee that each of the “representative councils”, as defined in the amendments, will appoint at least one representative to the ITA. This supports democratic accountability by ensuring that every part of the area of an ITA must have at least one representative on the ITA, and no part of the ITA’s area can be unrepresented. The Local Government and Housing Act 1989 will continue to apply to such appointments as it does now. This provides a further safeguard: that the appointment of elected members of a local authority to an ITA reflects the political balance of those councils.

The second effect of the amendments relates to a potential role for non-elected members of an ITA. The Bill allows the flexibility for non-elected members to be appointed to an ITA—for example, representatives of transport users, businesses and other groups—so long as they will be a minority of the members of the ITA. These amendments provide that such non-elected members may be granted voting rights on the ITA only by the existing voting members of the authority. This will ensure the democratic accountability of the ITA.

Amendment No. 166 restricts the power to make secondary legislation under Part 5 and makes clear that supplementary provision made under the powers in Clause 86 cannot amend or disapply the political balance requirements contained in the 1989 Act.

Amendment No. 164 provides that Clause 80 includes the power to delegate functions relating to local road-charging schemes. It also incorporates the safeguard that such functions may be delegated only with the consent of the majority of those authorities whose functions are to be delegated.

Amendment No. 168 relates to local road-charging schemes. It puts beyond doubt that English local authorities outside London, before making a local

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road charging scheme, will be required to consult such local persons, and representatives of local persons, as they consider appropriate. The key point is that there must be local consultation. That was a concern of the party of the noble Lord, Lord Hanningfield.

Amendment No 167 provides that orders made under Part 5 of the Bill, establishing new ITAs or reforming existing ones, will not be subject to “hybrid instrument” procedures in this House. I apologise to the House that this provision was not included in the Bill at its introduction. It is regrettable that the question of hybridity was not raised until after the Bill had passed through the House of Commons. It is all the more important, therefore, that I set out to the House today the compelling reasons that have led us to seek this new provision, given the concerns set out by the noble Lord, Lord Bradshaw, in Amendment No. 167A.

There are four reasons for the course of action that we propose. First, the Bill, together with the new duties introduced on 1 April this year by the Local Government and Public Involvement in Health Act, provides that orders under Part 5 will receive detailed scrutiny inside and outside Parliament. The order to set up or amend an ITA would be made only after a local area had had the opportunity to review its existing governance arrangements and to develop proposals for reform, in consultation with interested parties.

8.30 pm

Clause 73(10) and Clause 85(4) provide that the Secretary of State must consult relevant local authorities and other parties with an interest before any orders are made. These are two substantive consultation processes, one at local level and the other at national level, which must be conducted before any order can be laid before Parliament. Furthermore, the Secretary of State, before preparing any order, would have full regard to the quality and outcome of local consultation. If proper consultation and reasonable decision-making were not observed at either local or national level, proposals and draft orders would be subject to judicial review. That is all before any order comes to this House and to the House of Commons for an affirmative vote. Therefore, there is no want of transparency, or of consultation, or of power and ability to object, or of checks and balances in the proposals that I commend to the House this evening.

Secondly, over and above the provisions in the Bill, we will be making explicitly clear in guidance the necessity for local authorities to consult widely with affected bodies and persons in carrying out reviews of their governance arrangements ahead of any proposal for change being submitted to the Secretary of State. This guidance could be a further basis for judicial review if it were not observed and conformity with the guidance will be a key factor in the Secretary of State’s judgment on whether local proposals can proceed.

I emphasise that the Secretary of State’s resulting proposals are subject to further statutory consultation. If noble Lords are by now seized of the scale and scope of the consultation that is involved, they are right to be so. Our expectation is that it will take around two years for this process to be complete in respect of each successful ITA scheme.

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