Nick Brown (Newcastle upon Tyne East & Wallsend, Labour)

Truly it is said that no good deed goes unpunished. A year ago, my right hon. Friend the Chancellor of the Exchequer announced in the Budget statement that there would be free bus travel for pensioners. The announcement was widely welcomed and the Treasury allocated some £350 million—a sum of money that covers the cost of the policy. The Office of the Deputy Prime Minister chose to distribute that money in such a way that some authorities got more than they needed to implement the policy and 32 authorities were short-changed. In cash terms, by far the greatest losers are the five district councils in Tyne and Wear, with a shortfall of £5.4 million. The problem arises because Ministers chose to use a general formula to distribute a grant that was designed for a specific purpose. There are two related issues that I would like to raise—pensioner travel on the Tyne and Wear metro and pensioner bus travel between Tyne and Wear and the neighbouring counties of Durham and Northumberland.

As soon as the problem became clear, strenuous efforts were made to achieve a solution. There have been discussions between officials from Nexus, the Office of the Deputy Prime Minister and the Department for Transport. There have been two meetings between the Minister for Local Government and local Members of Parliament, and there has been some progress. A small adjustment has already been made to the distribution formula in Tyne and Wear's favour. Separately, the Secretary of State for Transport has given Nexus £1.7 million to deal with the potential loss of income for the metro, which Nexus owns, if pensioner bus travel is free but metro travel is not. I wish to place on record my gratitude for the part that the Secretary of State for Transport has played in trying to resolve that issue. [Hon. Members: "Hear, hear."] My hon. Friends are obviously grateful as well.

Two problems remain. Despite the free pensioner bus travel within counties it is now more expensive for pensioners to travel from Durham to Sunderland or Newcastle. The half-fare scheme covered the cost of the whole journey, but free travel only takes them to the county boundary. After that, they must pay the full fare for travel. Far worse—and this is at the heart of the issues that I wish to raise tonight—Nexus faces a £5.4 million shortfall. The authority must set a budget, and it must tell the five district councils what that budget is. There is little room for further delay.

Fraser Kemp (Houghton & Washington East, Labour)

On the shortfall and the way in which Nexus has handled it, does my right hon. Friend agree that while we must try to find a solution in the final few days, it is imperative that we find a fair funding formula so that Tyne and Wear does not face this problem every year? Those reserves cannot be spent again. They have been spent this time, but they will not be available in future. We need to resolve the problem this year, but we must make sure that we do not face it again in future.

Nick Brown (Newcastle upon Tyne East & Wallsend, Labour)

My hon. Friend is quite right. The Nexus budget for the financial year must cover the shortfall; the authority has no choice. Nexus has set a provisional budget, which is a combination of fare increases and cuts in secure services. As my hon. Friend has suggested, it is drawing down its reserves to cover half the shortfall. It can only do so once, as those reserves will not be available for drawing down again. We need a solution to this year's problem, and a permanent solution for future years.

Students who will be hit by the fare rise think that it is unfair. They are right to hold that view, as Nexus did not intend to introduce a fare rise until the budget shortfall became clear. Pensioners and organisations that represent them are upset too, as pensioners do not want their free travel to be paid for by service cuts and fare rises for others. That point has been made clear to me, and I am quite certain that it has been made to my right hon. and hon. Friends who represent the county. I am grateful to my hon. Friend the Minister for the part that he has played in trying to find a solution. Talks are continuing, but I fear that they are doing so in the same way that a fairground roundabout continues in motion—it goes round and round, but it does not go anywhere.

My hon. Friend Mr. Clelland secured on the Floor of the House a promise of a meeting with the Prime Minister. If there is not some real progress, my hon. Friends and I will very soon insist on that meeting. We want our money, and I for one will not give up until we have secured justice for our constituents.

David Clelland (Tyne Bridge, Labour)

I congratulate my right hon. Friend Mr. Brown on securing an Adjournment debate on such an important subject. As he intimated, I have taken a great deal of interest in the matter from the beginning. Like him, I have received representations from pensioners in Tyne and Wear who, for the first time in my 20 years' experience as a Member of Parliament, have said to me that they reject something that the Government have offered: free transport. They do not want free transport at the expense of transport for young people and others who currently receive concessions. Additionally, they do not want free transport at the expense of services, which will also be on the cards unless the problem is resolved.

My right hon. Friend referred to a possible long-term solution and reminded the House that the matter was initially raised by the Chancellor in last year's Budget. When the Chancellor announced the scheme, it was widely welcomed, not least by those of us in Tyne and Wear who had concessionary fares, but welcomed the idea of free fares for pensioners. However, we did not anticipate such an unintended outcome.

The long-term solution might well lie in next week's Budget. Even at this late stage, I urge the Minister to talk to the Chancellor and the Treasury about what that Budget might contain. It might well be that the Chancellor can resolve the problem by introducing a national scheme for free transport, rather than a local one. As I understand it, such a scheme would not cost a massive amount. It would be much easier to administer and would certainly resolve our problems in Tyne and Wear. It might also resolve the problems that are anticipated in other parts of the country. The existing scheme is restricted to local government boundaries. A national scheme could be introduced at low cost, so I ask my hon. Friend the Minister to raise the matter with the Treasury in the anticipation that next week's Budget might bring a resolution to the problem.

David Anderson (Blaydon, Labour)

rose—

Alan Haselhurst (Deputy Speaker)

Order. I sense that there is a co-operative at work. The normal courtesy is that Mr. Brown and the Minister have given permission for the additional contributions to be made to the debate. I think that that was perhaps implied by the concise speech made by the right hon. Gentleman, but I need to get things in order.

David Anderson (Blaydon, Labour)

I will try to be even more concise. My right hon. Friend Mr. Brown and my hon. Friend Mr. Clelland did not talk about the way in which the scheme applies to disabled people. It is perverse that the impact of free travel for disabled people, which was announced in the Budget, might well be that we find that the care bus service will be withdrawn from Tyne and Wear.

Let me read from an e-mail that I received from a man living in my constituency who has severe problems due to muscular sclerosis. He wrote:

"No-one I speak to on the bus can actually believe that it will be stopped . . . as threatened—they cannot contemplate their lives without it. It is a mental torture for them to be worrying about losing their independence, when many already have enough to worry about with illness and disabilities . . . As our MP I hope you can let those with the power to solve this realise that they are not playing with pound signs, they are playing with the independence of already vulnerable people who deserve to be treated with respect & dignity—not left hanging on a thread of threats!"

That is what we are talking about with this cock-up. We are talking about bus services that should be a real bonus for our people actually becoming a detriment.

Phil Woolas (Minister of State (Local Government), Office of the Deputy Prime Minister; Oldham East & Saddleworth, Labour)

I should start by paying the usual tribute to my right hon. Friend Mr. Brown for securing the debate and raising a matter that is extremely important to his constituents and those of other hon. Members in the Chamber. I have a useful opportunity to explain how we support services via the formula grant. My right hon. Friend is obviously especially concerned about the distribution of funding for free bus travel for pensioners in Tyne and Wear.

Before looking in detail at the process, it is worth reminding ourselves of the substantial social benefits that will be delivered by the Government initiative on concessionary travel. The need to meet the transport requirements of a growing population of older people is vital to the success of the Government's commitment to sustainable mobility and to people's ability to retain a high quality of life as their income, health and mobility levels change. Despite the rising number of older driving licence holders, declining driving ability and financial constraints mean that many motorists will have to adjust their driving practices, and probably ultimately give up their car. A high proportion of the older population will be dependent on public transport. However, evidence suggests that many will experience difficulties in using bus and rail services.

For the first time, in 2006–07, we have announced two-year grant allocations for every local authority in England. We have put a premium on the stability and predictability of funding, so that councils can plan ahead for better service delivery. The first three-year settlement will be introduced alongside the next spending review round commencing in 2008–09. In the interests of further stability, we have made grant floors a permanent part of the grant distribution system. Floors guarantee a minimum year-on-year grant increase for all authorities and increase local authority confidence in planning for the medium to long term.

Tyne and Wear, to which my right hon. Friend referred, has benefited from the extra money that we have provided in recent years to the local authorities, which have invested in improving local services—for example, reducing antisocial behaviour and providing more support for vulnerable people in Newcastle, developing healthy communities in Gateshead, and supporting carers in Sunderland.

For the 10-year period to 2007–08, we have been able to provide Tyne and Wear metropolitan district councils with an average annual increase in general grant of 4 per cent. in cash terms. For 2006–07 and 2007–08, the grant increases going to Tyne and Wear district councils are £14.7 million and £14.8 million respectively, or 2.8 per cent. in each year, running ahead of current inflation. Additional transport funding for Tyne and Wear has also come through the local transport plan and Challenge funding routes. We have provided £12.9 million for concessionary fares above last year's grant, and £1.7 million for the Metro transport system.

Capital funding to enable implementation of the local transport plan is allocated by my right hon. Friend the Secretary of State for Transport to the Tyne and Wear authorities, mostly in the form of supported capital expenditure revenue—SCER—as my right hon. Friend the Member for Newcastle upon Tyne, East and Wallsend knows. The allocations are determined primarily by formulas reflecting transport need and adjusted to reflect the quality of the local transport plan and the progress made in implementing the plan. A single allocation is made for Tyne and Wear, which is distributed among the authorities in accordance with their wishes.

The allocation for 2005–06 is 68 per cent. higher than that for 1999–2000. As this is capital funding, it cannot be used directly to support the cost of concessionary fares. However, this high level of central Government capital support releases local authorities' own funding to support other initiatives in accordance with local priorities.

Since 1998 the Government have provided Nexus, the Tyne and Wear transport executive, with more than £7.7 million funding specifically to support the operation of a number of bus services through the urban and rural bus Challenge and Kickstart programmes. Funding for concessionary fares is supported through formula grant.

Nick Brown (Newcastle upon Tyne East & Wallsend, Labour)

I am grateful to my hon. Friend for explaining the background to us. Does he accept that for the next financial year Nexus faces a shortfall in the funding arrangements of about £5.4 million? If so, can he give the House an assurance that meaningful discussions are going on in Government to try to resolve that problem? If he thinks the discussions are stuck and that we are not getting any further forward, will he say so, so that we can have the meeting with the Prime Minister that we were promised?

Phil Woolas (Minister of State (Local Government), Office of the Deputy Prime Minister; Oldham East & Saddleworth, Labour)

I assure my right hon. Friend that meaningful discussions are going on. The Government recognise the real difficulties that the transport executive has in balancing its budget. Last summer's consultation with the Local Government Association and local councils resulted in general agreement that the distribution of money through the formula is the best way in which to pursue the issue. Indeed, representations by my right hon. Friend and others on the formula grant distribution method show that the needs of his authority, and of Tyne and Wear authorities in general, indicate that there is a shortfall in the ability of the formula grant to distribute money. Discussions have taken place and are taking place with the local authorities, the transport authority and the transport executive to try to resolve that problem. The level of pensioner bus usage in my right hon. Friend's area is very high, which is why we are continuing discussions with the transport authority and local authorities. My difficulty is that we must treat all local authorities fairly, and I know that my right hon. Friend agrees with that point.

Funding for concessionary fares is supported by the formula grant. My right hon. Friend is aware that the Chancellor added an additional £350 million in formula grant in 2006–07 in order to support the move from the statutory half-fare scheme to a free-fare scheme for all pensioners and disabled people. The funding for those new responsibilities has been added to formula grant in line with a commitment to provide authorities with continued flexibility in the use of their resources.

Alan Beith (Berwick-upon-Tweed, Liberal Democrat)

Surely the Minister knows—the Government have admitted this—that whereas the total sum might be sufficient to cover needs across the country, the distribution between authorities, including Tyne and Wear and, for that matter, Northumberland, which has different but equally difficult problems, does not reflect the particular needs of those areas.

Phil Woolas (Minister of State (Local Government), Office of the Deputy Prime Minister; Oldham East & Saddleworth, Labour)

The right hon. Gentleman has made an important point. However, it is also true that local government in general and the LGA in particular support the idea of distributing money through formula grant. Devolution, which involves the distribution of money by local authorities, supports the idea that formula grant is the way forward. The alternative is a specific grant to target individual authorities, but the right hon. Gentleman, his party and the LGA would not support that view. The distribution of money is based on a formula that inevitably results in winners and losers.

The Government always face difficult decisions in dividing up a fixed pot of money where there will be, as I have said, winners and losers. We have looked to ensure an equitable arrangement for concessionary fares funding, which retains local control for spending as requested by local government, rather than separately distributing the money through a specific grant.

Stephen Byers (North Tyneside, Labour)

The Minister will know that local government makes a number of requests and representations to Government, not all of which are agreed. He said that he wanted all authorities to be treated fairly. The consequence of his decision is that Tyne and Wear is being treated unfairly. This debate is being held because we, as Members for Tyne and Wear, find that unacceptable. Yes, we want free travel for our pensioners, but we want it to be done in a way that is fair and just, which is not the case at the moment. What will the Minister do to resolve that situation?

Phil Woolas (Minister of State (Local Government), Office of the Deputy Prime Minister; Oldham East & Saddleworth, Labour)

My right hon. Friend, who knows much better than I do about the problems of distributing money through formula grant, makes a valid point. The Government recognise that the amount of money distributed to Tyne and Wear is not adequate to meet the needs of the scheme as proposed or the current demand for pensioner bus travel in his area. We have moved, through consultation, to ensure that £1.7 million has been allocated to Tyne and Wear through the Department for Transport grant for the metro system. We support the idea of a co-ordinated, integrated transport system in Tyne and Wear, as elsewhere. That money has been granted in recognition of the point that my right hon. Friend makes.

The Government also have to ensure that distribution is fair among all local authorities. That is why the cost of the statutory minimum half-fare scheme was previously supported through the formula grant settlement. However, many local authorities were providing a service above the statutory minimum for their residents—for example, by extending the concessions across the whole county or by enabling their residents to buy a pass to enable them to travel on buses free of charge. Those extensions to the statutory scheme were not taken into account when allocating formula grant. Some areas already offer free travel—Greater London, the west midlands and Merseyside are cases in point. It was right that those areas, too, should benefit from the extra resource so that council tax payers did not bear the burden of an authority's prior decision to offer what is now Government policy.

Nick Brown (Newcastle upon Tyne East & Wallsend, Labour)

What my right hon. and hon. Friends and I want to know is how this matter is to be resolved. Can the Minister point to the way forward?

Phil Woolas (Minister of State (Local Government), Office of the Deputy Prime Minister; Oldham East & Saddleworth, Labour)

My right hon. Friend makes a valid request. The Government's approach is to examine the budget of Nexus, the transport executive in the region, to see how we can ensure that the transport concessions that are made—for example, for the student scheme, for the schoolchildren's scheme, and for the existing concessionary scheme—benefit from the allocation of Government money. We have to ensure that that scheme is legal and that it is fair to other authorities that are arguing that they are losing out. I have to say that none of the authorities that is benefiting from the allocation of money has written to me thanking me for it.

My right hon. Friend makes a serious point. We must ensure that we allocate the money through formula grant in a fair way and recognise the needs of the particular transport authority. That is why we are examining the way in which we can distribute money through the formula grant and other possible interventions. We want to ensure that my right hon. Friend's scheme for students, which has led to improvements in the stay-on rate for further education when compared with other areas, continues, and that student and school student travel for buses in his area is maintained and improved. How do we ensure that the unintended consequences of formula distribution of grant do not militate against the social benefits of the schemes that are currently in place for his constituents? That is our task, and the reason for genuinely congratulating him on raising the issue.

In developing the approach to grant distribution that we have now adopted, we had the benefit of extensive consultation, both in the official level settlement working group, in which my right hon. Friend participated, and in full consultation, especially involving local government, last summer on the range of our proposals for grant distribution.

The papers that the Association of North East Councils, which was mentioned earlier, brought to the settlement working group attempted to estimate the cost of moving from an authority's current position to a free-fare scheme. Inevitably, they could only be estimates. As I have explained, we could not base formula grant distribution only on those measurements.

Instead, we suggested that we should reweight the existing formula, known as the lower tier environmental, protective and cultural services formula to reflect the characteristics of areas where take-up of free bus travel is likely to be higher. Indeed, in the period between the announcement of the concessionary scheme in March and the consultation process in July and through to December, we took on board the points that my right hon. Friend made and the representations of others. That led to a significant increase in the money for Tyne and Wear.

We consulted on that in the summer of 2005 and, as part of the consultation, we exemplified the change in the EPCS formula. It is important to stress that the majority of responses to the consultation supported the change to the district level EPCS formula. I have to be fair to other local authorities in the area—

The motion having been made after Ten o'clock, and the debate having continued for half an hour, Mr. Deputy Speaker adjourned the House without Question put, pursuant to Standing Order.

Adjourned at twelve minutes to midnight.