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The noble Lord, Lord Bradshaw, talked about fuel consumption and the BSOG. Most of what he said made a lot of sense to me and interested me, but I shall

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not cover it. The Question posed by the noble Lord, Lord Bradshaw, relates to the economic situation. He is right to ask it, but I am sure that he appreciates that all sectors will be affected and it might be difficult for Government to provide support to one sector but not to all the others. On the other hand, it would be a good start to attempt to rectify some of the mistakes that have been made. Furthermore, we do not know how bad the economy will become, although there is little doubt that it will be bad enough.

A personal friend of mine in the bus industry said that his business has already experienced a noticeable reduction in turnover. On the other hand, there may be some good news and some increase in patronage when some find that they cannot afford to run a car any more. Of course, all noble Lords will recognise that our problems are only just starting.

In addition to a reduction in passenger revenues, there are other problems related to the economic situation. The first problem is the cash flow and finance problems affecting relatively small operators. If they cannot finance their businesses, they may have to cease trading, even if their operations are profitable. The second problem is that the major automotive components and systems of a bus are often made in the eurozone and even in the United States. Therefore, the cost of spare parts and even new vehicles is increasing rapidly with the unfavourable exchange rate. Before noble Lords tease me about joining the euro, let us see whether the eurozone states can avoid severe social unrest due to an inability to adjust their interest and exchange rates.

My briefing covers concerns about the bus service operators’ grant, the EU Commission's proposal for the directive on passenger rights, covered by the noble Lord, Lord Bradshaw, and, of course, the quality contracts issue. I share some of the concerns expressed by the noble Lord, Lord Bradshaw, about the EU directive. We have to get it right.

Like the noble Baroness, Lady Scott, I intend to concentrate on the extension of the concessionary fares scheme so that all eligible people will be entitled to free off-peak travel. We on these Benches support the scheme, although it will be some time before I can benefit from it. Compensation to the operator will be met by the local authority in which the journey began and will be funded by a grant from the department. The noble Lord, Lord Snape, also touched on some of the problems. However, demand for concessionary travel has far exceeded expectations, resulting in increased costs to local authorities. I am being told that the grants provided by the Government are inadequate to meet the increased costs and that the guidance to local authorities on concessionary fares could be better. In addition, apparently there is a disconnect between the incidence of expenditure on the concessionary fares scheme and the distribution of the grant. The timetable is out of sync with local government budget-setting processes.

The grant is supposed to leave local councils no better or worse off, but the reality is rather different. The grant distribution system is also supposed to reflect the likely burden of cost, and is designed to direct funding towards hotspot areas such as coastal

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towns and urban centres. As indicated by the noble Baroness, Lady Scott, research shows that this has not been achieved, but these are the hotspots that are likely to suffer the most. In Cheshire, for example, this has caused a major headache for Chester City Council, while the other six districts appear to have done very well out of the funding, and apparently Brighton and Hove City Council is among the worst affected local authorities in the country. In addition, I am told that, in Lancashire, Preston is down by £824,000, whereas Pendle is up by £385,000. I am sure that that would please the noble Lord, Lord Greaves, who unfortunately is snowed in at home. I am also sure that he is not keeping quiet, as the noble Baroness, Lady Scott, suggested.

I am sure that the Minister will be well aware of the issues that we have raised, and I look forward to his reply. However, the situation is having a serious effect on local authorities. First, council funding for local bus services has had to be reduced to meet the unfunded cost of the new concessions, and a number of councils have had to withdraw a subsidy from socially necessary bus services for which they were previously paying. The north-east PTA has had to cut concessions to young people and students, and a large number of councils such as Basildon, Cherwell, High Peak, Medway, Chelmsford and Canterbury, which had previously offered enhancements to the statutory minimum such as extended hours of operation and companion tickets for carers, have been forced to consider withdrawing these benefits and to revert to the statutory minimum.

Can the Minister assure the Committee that fare-paying passengers are not suffering because they are left waiting at bus stops while the bus stops are full with concessionary passengers, or that operators are withdrawing services that are full because they are running at a loss? Just how will he put this right? What is his plan for making the welcome extension to the concessionary fare scheme work properly? Many noble Lords have made very good points, and I look forward to the Minister’s reply.

Lord Bradshaw: May I make it clear that I did not ask the Government for more money? I asked for much better administration of the resources of which they are disposing.

2.37 pm

The Minister of State, Department for Transport (Lord Adonis): I declare an interest as a taxpayer with 15 more years to pay for the concessionary travel of the noble Lord, Lord Bradshaw, and I am delighted to be doing so. I am very grateful to all noble Lords who have spoken this afternoon, particularly to the noble Lord, Lord Bradshaw, for opening this timely debate. I echo the noble Lord’s tribute to all those who work in the bus industry and who give such dedicated service.

Let me start with the Government’s role in the provision of bus services. Since the deregulation of buses in the mid 1980s, government, both national and local, has had more of a hands-off role in the running of bus services. However, the Government rightly have a significant role in shaping, and where necessary subsidising, the provision of bus services; I say rightly,

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because we have clear duties to act on behalf of the public in this area. As my noble friend Lord Rosser said, for many people buses are the only form of local public transport available. For those without access to a car, they can be a lifeline to jobs, family and services. They are also a means of tackling congestion and promoting accessibility and more environmentally sustainable journey modes, all of which are key planks of the Government’s transport policy.

Therefore, despite the fact that the vast majority of the bus network is now provided by the private sector, we have a vested interest in ensuring that we have a healthy bus sector that provides a good quality public service. That is why national and local government provides some £2.5 billion a year to support bus services. That is up from £1 billion a decade ago. Let me stress that that funding is being sustained, not cut back, in the midst of the economic downturn. That is why we have taken the Local Transport Act through Parliament, with all its provisions to improve bus services as well.

Let me now deal with a number of issues raised in the debate: bus passenger rights, concessionary travel, the economic downturn, bus service operators’ grant, and, if I have time, Newport.

On bus passenger rights, the Government support the aim of the European Commission’s proposal to improve passenger rights, but, like the noble Lord, Lord Bradshaw, and the noble Earl, Lord Attlee, we are concerned that certain aspects of the proposal, as currently drafted, do not reflect the differences between international and local services, or that the bus and coach industry consists of a significant number of small operators that have little control over the infrastructure in which their buses run.

The proposed regulation would apply to domestic services as well as to international bus and coach services. While there is an exemption for urban, suburban and regional transport, under the Commission’s current proposal this would apply only if such services were provided under public service contracts that provide a comparable level of passenger rights to that provided by the Commission’s proposal. However, the majority of local bus services in the United Kingdom operate in an open market and so would not meet the conditions of this exemption. The Government therefore believe that the scope of this exemption needs to be reconsidered, and we will seek all stakeholders’ views, not just those of the large operators, to help inform the United Kingdom’s negotiating position when we consult on the Commission’s proposal shortly. As part of the consultation, I can tell the noble Lord, Lord Bradshaw, that we will prepare an impact assessment to guide the debate. During negotiations, we will seek to shape the proposal so that ultimately it is proportionate and realistic.

On the economic downturn, our expectation is that the bus sector will be more resilient than perhaps other transport modes. Unlike rail and aviation, the sector is less reliant on business and commuter journeys. Younger and older people make up a larger proportion of the passenger base, and their journeys are less likely to be affected by wider economic conditions. It is also, of course, an inherently flexible mode of transport, which

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in fairly rapid order, as my noble friend Lord Rosser indicated, can change its provision of services and its fares to reflect changing passenger demand. During the recent spike in fuel prices, for example, several operators reported a rise in bus patronage as commuters reconsidered their use of the car and chose to try the bus. Some bus operators looked to provide more luxury services to help destigmatise bus travel and persuade the commuter market to use the bus by providing services with, for example, wi-fi, leather seats and air conditioning. The public reassess their means of travel during difficult times, and the bus industry, if it is responsive and imaginative, can develop new business to offset the passengers who are lost due to economic conditions.

As my noble friend Lord Rosser noted, the profit margins in the bus sector have been relatively good. Bus-operating profits of the “big five”—FirstGroup, Stagecoach, Arriva, Go-Ahead and National Express—have generally been enjoying profit levels of more than 10 per cent in their bus divisions, and differences in profit margins between the bus divisions and group profit margins have always been positive. However, we are not complacent, and I know that times are challenging for many in the transport industry.

As was widely trailed in the press at the time, my right honourable friend the Secretary of State recently met the chief executives of the “big five” transport operators and the Confederation of Passenger Transport. Contrary to some press reports afterwards, no requests for government bail-outs or service cuts were made, but it was agreed at that meeting that the industry would keep in touch with Ministers at my department specifically on the impact of the recession on their operations.

Concessionary travel was raised in particular by the noble Baroness, Lady Scott, and the noble Earl, Lord Attlee. The introduction of free off-peak concessionary bus travel throughout England, which took effect on 1 April 2008, offers greater freedom and independence to up to 11 million older and disabled people in England. I was glad to see it so warmly welcomed in principle by both parties opposite. Funding in total to support concessionary fares for older and disabled passengers alone now amounts to £1 billion. I was delighted that the noble Lord, Lord Bradshaw, was not asking us for more as a global sum.

In order to provide for this expansion in the scheme, the Government are providing additional funding of £212 million from 2008-09, and £217 million and £223 million respectively in each of the following years. All Members of the Committee will recognise that these are very large sums. We are confident that they are sufficient in total to meet the additional costs of the new concession. I should also stress that the additional funding is being distributed through a special grant, which is precisely what local government asked us to do.

My noble friend Lord Snape and the noble Baroness, Lady Scott, asked about the arrangements for distributing the funding between local authorities and wondered whether there were iniquities in that. I stress to them and to the other Members of the Committee that the formula used to distribute the extra funding is based

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on the eligible local population, visitor numbers, retail floor space and current bus use. As such, it takes account of likely demand in areas such as coastal towns, urban centres and other places likely to experience an increase in bus journeys.

The noble Baroness, Lady Scott, specifically mentioned Cambridge, saying that this year it received £650,000 in special grants. I want to put that in further context. That represents a 57 per cent increase on the amount that Cambridge spent on concessionary travel in 2007-08. We believe that that is an appropriate figure, but it does not surprise me that local authorities would like more government money. If there is one sure thing about this job, it is that they always do. Of course, they will use arguments about concessionary fares to secure additional funding.

I also stress that it is for local authorities to negotiate with the bus operators to settle the rate of reimbursements. The Department for Transport provides the total amount of funding, but to some extent it is down to individual local authorities how well they negotiate. I would encourage them to negotiate effectively with their local operators. My department provides guidance to operators and to local authorities on reimbursement, and it also runs workshops to help local authority officers who are engaged in the process of negotiating to do so as effectively as possible.

Finally, in respect of concessionary fares, I stress that the current distribution is part of a three-year settlement designed to provide financial certainty to local authorities. That is an improvement on the regime that often applied previously, where local authorities were subject to annual budgets. We would not wish to reopen the three-year funding settlement and thereby create financial uncertainty for all travel concession authorities that have rightly sought to plan for the entire three-year period.

Earl Attlee: Is the Minister satisfied that the scheme is working correctly and needs no adjustment?

Lord Adonis: I am satisfied about that at the moment, yes. If the noble Earl and the noble Baroness want to provide me with specific instances where they believe that that is not the case, I will be happy to look at them. I have already responded on Cambridge. It is our belief that the scheme is working satisfactorily.

I now turn to the bus service operators’ grant to which the noble Lord, Lord Bradshaw, referred. More than £400 million goes to bus operators in that form. This covers 80 per cent of fuel duty on the fuel used by operators and is a valuable contribution towards the provision of bus services. We are currently reviewing the subsidy to bring it more into line with our wider environmental objectives. The BSOG does little to discourage fuel use, so we are considering various options to incentivise better environmental policies and to improve bus services. These include the use of more fuel-efficient vehicles, including hybrids, as well as incentivising the move towards smart cards, which we hope will help to increase public transport use by making it more convenient for passengers.

We know that the industry is concerned about these changes. The noble Lord, Lord Bradshaw, reflected its concerns and its arguments why we should maintain

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the status quo. I assure him that we will work closely with the industry to ensure that the changes work on the ground and help to deliver the benefits we are looking for. However, I also point out that some of his concerns are not well founded. For example, arrangements with the new scheme will take account of the individual circumstances of each operator. The target is for a 3 per cent per year improvement on that operator’s performance, given the existing starting point of that operator. It does not make arbitrary assumptions about their ability to generate efficiencies in fuel use that are not founded on their actual performance.

My noble friend Lord Tunnicliffe has indicated that I have been talking for 12 minutes. However, since nothing will go on for the next 10 minutes, if the Committee wishes, I am happy to make further remarks.

Good driver training can also help to save fuel. As part of the changes to the bus service operators’ grant, the department proposes to fund a safe and fuel-efficient driving demonstration programme to encourage fuel-efficient driving in the bus and coach sector. The trials of this training consistently show significant improvements in fuel efficiency of, on average, 10 per cent, as well as reductions in accidents.

In respect of rural bus services, as mentioned by the noble Lord, Lord Bradshaw, we provide more than £57 million a year to local authorities in rural bus subsidy grant to help them support rural bus services. That is now supporting nearly 2,000 bus services and in excess of 38 million passengers a year.

I am aware of the proposals to withdraw some bus lanes in Newport—I have read the press cuttings that were made available to me by the noble Lord—and of the concern that has been caused to bus operators in the area. Although it is for local authorities to determine how best to manage the road space in their areas, we encourage the appropriate use of bus lanes and other bus priority measures. If we are to improve bus punctuality and approve the image of the bus as far as the motorist is concerned and deal with the very real congestion issues raised by the noble Lord, Lord Bradshaw, we need to ensure that buses have a clearer run on the roads.

In respect of Newport, I understand that the Welsh Assembly Government are looking into this issue and into grants made by them to local authorities to promote bus priority. I welcome the fact that they are doing so, and I will take a close interest in the outcome.

Lord Snape: I apologise for bringing the Minister and the Committee back to a situation in Birmingham where a bus lane, which was agreed between the passenger transport authority and the main bus company, has been temporarily suspended, in the words of the city council, for four years. Everyone knows that the city council has no intention of reinstating that bus lane. Yet the bus company concerned, of which I was chairman at the time, invested a considerable amount of money in a new fleet of vehicles on the basis of the bus lane being provided. Is there nothing that the Minister can do about that sort of situation?

Lord Adonis: I am not sure, but I am very happy to look at it in response to the concerns raised by my noble friend.

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Finally, the department announced last week the start of a new Kickstart competition. We will be providing £25 million to help to pump-prime new or enhanced bus services and look forward to announcing the winners of this competition later in the year. Kickstart contributes to increasing bus patronage, improving accessibility and developing bus services as an alternative to car use. The last Kickstart round in 2005 gave £20 million to 43 new or enhanced bus services, helping to bring these schemes to commercial viability.

In short, we continue to provide substantial assistance to local authorities and to the industry to run a comprehensive bus service nationwide. That service has significantly improved in recent years. Those eligible for concessionary travel have been significant beneficiaries. I am not complacent about the challenges ahead, but even in this economic downturn we can expect to see good quality services provided nationwide.

2.54 pm

Sitting suspended.

Energy: Nuclear Fusion

Question for Short Debate

3.05 pm

Tabled By Lord Taverne

Lord Taverne: If we achieve nuclear fusion, it will be the best solution to the problem of the world's future energy supply. It would provide a safe form of energy that is environmentally friendly, does not use up limited resources and should be economically competitive. I believe that most scientists would agree with that. However, it is a solution that always seems to be at least 35 years away. Will we ever get there? Is it worth the large investment in capital and science that it requires? There are sceptics who say that it is not. That is why I raise the Question. I want to find out the Government's assessment of the prospects and priorities. In particular, I want to know the view of the Science Minister. I am delighted that he will answer this short debate; a lot of us have very high hopes of him.

I am not an expert and the science involved is way beyond me but, after a recent visit to Culham and after a recent meeting in the Commons attended by a very high-powered group from Culham, which I am ashamed to say was attended by only three Peers and two MPs, I shall draw the picture as I see it. This shows how interested Parliament is in the big scientific issues of our time.

To achieve the conditions of fusion, two isotopes of hydrogen, deuterium and tritium must be heated to a temperature of over 100 million degrees centigrade, 10 times hotter than the centre of the sun, at which temperature they become an ionised gas called a plasma. In a structural device or machine called a tokamak which contains a vacuum chamber, the plasma is held away from the walls of the chamber by magnetic

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fields. The plasma must be kept away from the walls to protect them from damage and prevent pollution of the plasma. Magnetic confinement seems to be one of the most effective ways of doing so.

At these very high temperatures, the two particles of deuterium and tritium are forced together long enough to bring them into collision, when their nuclei fuse to form helium, and an energetic particle is ejected, a neutron, which is captured in a so-called breeding blanket that surrounds the plasma. This neutron heats the blanket, which in turn provides the heat that generates steam for turbines.

Deuterium is abundant and found in sea water. Tritium is not, and apart from what is required for the start-up, the fusion process requires that tritium is made on site. This occurs because the breeding blanket contains lithium and the reaction between the neutron and the lithium creates tritium.

There are several tokamaks in different parts of the world, but the largest is in Culham, the site of JET, the Joint European Torus. The tokamak has a toroidal shape, hence the title of the machine. One of the many impressive things about JET is that it is a splendid example of effective international co-operation, not only within the European Union, but with China, the United States, Russia, Japan, South Korea and now India; in fact, representatives of more than half the peoples of the world.

China, whose technology in this field is apparently well advanced, is particularly interested and committed, and recently sent a very high-powered delegation to Culham. Their reaction was very positive. As an aside, I might mention that the Chinese seem to think long term in a way that the West often does not. For example, about half the world’s R&D in agricultural biotechnology is now done in China because of the importance that the Chinese attach to it, but that is by the way. The fact that fusion may still be at least three decades away does not put them off at all.

Impressive progress to obtain power from nuclear fusion has undoubtedly been made in recent years. Temperatures of over 100 million degrees centigrade have been attained. In 1991, JET achieved controlled deuterium-tritium fusion reactions for the first time on Earth. In 1997, JET produced fusion power in the megawatt range for some seconds, with a maximum of 16 megawatts.

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