New Clause 3 — Review of reimbursement arrangements

Orders of the Day – in the House of Commons at 1:15 pm on 28th June 2007.

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'Two years after the commencement of this Act the Secretary of State shall conduct a review of arrangements for allocating funding to local authorities necessary for the reimbursement of operators under section 3(2) of this Act; and shall lay before Parliament a report setting out his findings.'.— [Stephen Hammond.]

Brought up, and read the First time.

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

With this it will be convenient to discuss the following amendments: No. 14, clause 9, page 7, line 8, after 'may', insert

', and for the purposes of the national statutory concession shall,'.

No. 15, page 7, line 24, after 'may', insert

', and for the purposes of the national statutory concession shall.'.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

There was no dissent in the House on Second Reading or in Committee as to the intent of the Bill. The Opposition support the extension of concessionary travel for eligible people on eligible journeys in the transition from a local to a national scheme. We support the freedom pass in London and will do everything to ensure that it continues. However, the Government cannot will the end unless they will the means. I recognise that we debated this issue in Committee, but it is key to the Bill. Without the finance, the "end" of concessionary travel cannot be achieved, or can be achieved only at the expense of cuts in services or increased council tax. So far, the Government's response has been to say that enough funding will be available. Although I have absolutely no doubt as to the Minister's integrity or the sincerity of her belief that that is correct, that cannot be sufficient for the purposes of the Bill.

Photo of Philip Davies Philip Davies Conservative, Shipley

Does my hon. Friend agree that this is not just about the overall amount of money that is in place but about whether it is allocated to the right places? Many local authorities and local transport executives are concerned not necessarily about the overall level of funding but about whether it will follow the passenger.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

My hon. Friend makes a good and pertinent point. I will talk about that in more depth in a moment.

In Committee, I sought support for several measures that would have forced the Government to be more transparent in their financial obligations, to reconsider the funding package to local government, and to clarify how they would interact financially with operators. This afternoon, I seek support for new clause 3.

Let me set out some of the background to the new clause. As all Members will appreciate, council tax has doubled in the past 10 years and now constitutes a heavy burden for those on low and, in many cases, middle incomes.

Photo of David Davies David Davies Conservative, Monmouth

My hon. Friend raises an important and pertinent issue. Is he aware that in Monmouthshire, where we have a concessionary bus scheme and have done for several years as a result of measures taken by the Welsh Assembly, over the past 10 years council tax has gone up by the highest amount of any local authority in the United Kingdom—by 184 per cent.—and that one of the many reasons for that is the lack of proper funding by the Welsh Assembly Government for the concessionary bus transport scheme? Does he agree that it is vital that we ensure that constituents in England do not also suffer 184 per cent. council tax increases as a result of flawed funding formulae?

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport) 1:45 pm, 28th June 2007

Indeed I do. Again, I shall come to that point shortly. The new clause would ensure that the situation that my hon. Friend describes does not happen again.

As I was saying, council tax now constitutes a heavy burden for those on low, and even middle incomes. Naturally, a large number of those affected by the sharp increases are elderly or disabled, whose lives the Bill, commendably, aims to improve by offering them free access to local travel nationally. Those two groups are most likely to be affected, and indeed financially disadvantaged, by the Bill's potential side effects. There are several ways in which its financial effects will be felt by the people whom it was intended to help.

Let me give a brief snapshot of my experience in local government. Prior to becoming a Member of this House, I had the privilege of serving as a councillor at the London borough of Merton. I stood down when the Conservatives took control of the borough last May. While serving on that council, I became all too familiar with the impact that mayoral demands on money for concessionary travel were having on the local authority's finances. In 2004-05, the Mayor imposed on the borough a 9 per cent. increase for the freedom pass. As the Minister knows, local authorities in London have no option but to find that extra sum of money, and in that year the local authority had no option but to find it from the social services budget. That resulted in cuts to day care, disadvantaging exactly the groups who benefit from the freedom pass—the elderly and the disabled.

Photo of Angela Watkinson Angela Watkinson Opposition Whip (Commons)

Does my hon. Friend agree that one of the difficulties for London local authorities is being able to compare the cost of their contribution to the pan-London scheme with the value that they get for the use of the passes? Some boroughs might get better value than their contribution; others might get less. Does he agree that if freedom passes could be made smarter, so that their usage could be tracked, that would provide a way of knowing whether any individual London authority was getting value for money out of the scheme?

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

Indeed I do. The implementation of smartcards across the country would have that impact, as well as making more transparent usage and where the financial obligations should lie. I hope that later this afternoon we will be able to explore the London situation in rather more detail.

Photo of Lee Scott Lee Scott Conservative, Ilford North

Does my hon. Friend agree that however noble a cause may be, this Government have on many occasions announced proposals, funded them insufficiently for a short period, and then not funded them at all, leaving local authorities such as mine, the London borough of Redbridge, to pick up the bill and ultimately, as my hon. Friend says, to have to make cuts to other services to pay for them?

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

My hon. Friend makes an excellent point—I intend to make exactly the same one later.

From my experience as a local councillor, I remember the standards fund for, for example, education. We were expected as a local authority to introduce new measures and we were funded for three years. The funding was taken away but we were expected to continue with those measures. The implications for the local authority's finances were clear.

Let me consider the 2006 scheme, which was the forerunner of the 2008 scheme that the Bill introduces. The 2006 concessionary travel scheme made concessionary travel available to eligible persons on eligible services in local travel concessionary areas. The Government stated that they had made enough money available to local authorities to fund that scheme fully. Early last year, I contacted 15 local authorities to ascertain whether, according to their estimates and calculations, the Government had introduced that funding. When we phoned, for example, Brighton and Hove council, it said that the central Government grant that it is due to receive is considerably less than the consultants' forecast of the new concession's cost.

Photo of Celia Barlow Celia Barlow PPS (Ian Pearson, Minister of State), Department for Environment, Food and Rural Affairs, PPS (Ian Pearson, Minister of State), Department for Innovation, Universities and Skills

The hon. Gentleman refers to my local authority of Brighton and Hove. May I mention an additional concern of the local authority to my hon. Friend the Under-Secretary? It is worried about whether it will have enough time to implement the scheme and whether it will be given enough guidance when the Bill is introduced.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

I am grateful to the hon. Lady for that point. When we phoned the local authority back to check whether its initial suspicions had proved correct, we found that its concerns had been realised. On 15 March this year, it told us that it will experience a severe shortfall in the budget. It also made the same point as the hon. Lady: it needs more time for implementation.

We spoke to Cheshire, which made the same point. It was worried that the obligation to provide free fares will mean trimming services that it already provides. Indeed, when we phoned back this year, it made exactly the same point. The grant is not sufficient to cover its liabilities.

I could go on—I spoke to 15 authorities, but I am sure that I do not need to detain the House by going through them all.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

It is a temptation that I can resist.

For the 2006 scheme, only one local authority out of the 15 believed that it had been given sufficient resources. I accept that that is only a straw poll, which is random in its selection and, I suspect, not necessarily statistically sound.

Let us consider in depth the case of Christchurch. The chief executive of the local authority wrote to me last year. He said that Christchurch has the highest percentage—36 per cent.—of population over the age of 60 of any local authority in England and Wales. In 2005-06, Christchurch's half-fare scheme cost the council approximately £138,000. For the scheme that was to be introduced in April 2006, the Government increased the grant by £237,000. Christchurch added £20,000 of its own money to that. The total concessionary grant was therefore £395,000. However, the take-up was significantly greater than expected and the budget was overspent by 87 per cent.—some £345,000, which is equivalent to an increase of 11 per cent. in the borough's element of the council tax. Christchurch had to make budget cuts elsewhere, including in its recycling programmes.

However, not only Christchurch or the leafy south have such problems. Let us examine the problems of implementation in the north-east. Recently, The Journal in Newcastle ran the headline: "More bus services could be cut as transport chiefs prepare for changes to a free travel scheme." It reported:

"In April next year concessionary fares will change to allow pensioners and disabled people free off-peak bus travel anywhere in England. The cost of providing this will have to be met by the council in which the bus is boarded.

But transport group Nexus says that the £212 million put aside by central government to finance the changes will not be enough, especially for councils with tourists and shopping hotspots."

The problem applies throughout the country.

Photo of Alan Beith Alan Beith Chair, Constitutional Affairs Committee

While the hon. Gentleman is in the north-east, may I refer him to the problem of border areas? The Government are not willing to negotiate a reciprocal arrangement with Scotland at the same time as the introduction of the Bill, and local authorities such as Berwick will therefore have to find the money to maintain current enhancements and also bear the additional cost of the greater take-up, which is expected when the national bus pass is introduced and people elsewhere will be able to travel further on it.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

The right hon. Gentleman makes a good point, which was explored in Committee. Indeed, that consequence was presented forcefully and we wait to hear whether the Government have changed their position on the matter.

The Journal in Newcastle also reported:

"The extra burden on council finance looks set to cause a repeat of last year's transport crisis which saw a £7.3 million budget black hole emerge as authorities struggled to find funding for concessionary bus travel."

Shirley Atkinson, director of finance at Nexus, said:

"Traditional funding does not match where the travel will fall. Some authorities may think they will get more money than they do now, but undoubtedly there will be some who will lose out. It can be quite a scary position to be in. We face having an uncontrollable financial risk for the first couple of years up until we know what this policy will look like in practice."

Photo of Jim Cousins Jim Cousins Labour, Newcastle upon Tyne Central

The hon. Gentleman has set out the position in the former metropolitan county of Tyne and Wear. I hope, if I have the opportunity, to refer to that later. He has set out a problem. Will he suggest a solution?

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

Indeed. If the hon. Gentleman votes for the new clause, he will have a solution. It is that the Government should conduct a review of the funding after two years—

Photo of Jim Cousins Jim Cousins Labour, Newcastle upon Tyne Central

So we wait two years and then—

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

If the hon. Gentleman would let me finish, I can explain. After that period, we can ascertain where the funding shortfalls are and where money needs to be reallocated. The absolute solution to the problem is to vote for new clause 3.

Photo of Jim Cousins Jim Cousins Labour, Newcastle upon Tyne Central

I apologise for my sedentary interjection. I shall now make the same point in a more proper fashion. The new clause says, "We might have a big problem. Let's not do anything about it for two years and then let's have a review." If the analysis of the problem that the hon. Gentleman has set out from Nexus in Tyne and Wear is correct, the new clause is hardly a sufficient method of dealing with it.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

I am bound to disagree with the hon. Gentleman. When he hears the rest of my remarks, he will realise why we have chosen the two-year period. Several problems may occur in the transitional year. Indeed, the finance director of Nexus refers to a couple of years, during which there may be transitional problems. It is therefore right to conduct a review after two years. I repeat that the solution to the problem is to vote with us for the new clause.

To finish in Tyne and Wear, the free off-peak local bus passes were introduced in April 2006, with the council paying for the travel within its boundaries. To pay for that, Nexus had to change 11 bus services, raise the cost of child fares and scrap plans for a teen travel card. Travel chiefs are warning that, unless funding is certain and correct for the 2008 scheme, similar cuts might have to be implemented.

Only yesterday morning I received an e-mail from the new incoming Conservative administration of Carrick council in Cornwall. The concern there is exactly the same. The Carrick scheme this year is more generous than is necessary to satisfy the Government scheme. The e-mail states:

"Changing the scheme back to the minimum required standard will take some time and incur costs", if the council chooses to take that route.

"The net benefit in the current financial year is probably not worth the effort. The real problems begin next year with a change in the imposed national scheme."

The national bus concessionary travel scheme will impose considerable financial problems on Carrick, particularly as it is an area with a high number of tourists. That could have a major impact on the council tax.

Around the country, a number of councils are expressing concern about the adequacy of central Government funding to support the scheme that is being introduced.

Photo of Fraser Kemp Fraser Kemp Labour, Houghton and Washington East 2:00 pm, 28th June 2007

Let us suppose that the hon. Gentleman's new clause is accepted, and that in two years' time we discover a substantial shortfall that cannot be addressed through redistribution, perhaps by taking money from Derbyshire, Staffordshire or even Tyne and Wear. Will he give an unequivocal commitment that any future Tory Government would match that shortfall? Will he give the House a clear financial commitment that they would find the money to address any shortfall that his amendment would create?

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

The hon. Gentleman wishes to lead me down an interesting road, but I shall not pursue him. Even the Minister would not create such a hostage to fortune. Will she stand up now and unequivocally make exactly that commitment now? I am sure that she will not, but if she will, I invite her to do so now. It is not a road that any sensible person would go down, two years ahead.

Photo of Angela Watkinson Angela Watkinson Opposition Whip (Commons)

Does my hon. Friend agree that one possible way of reducing the cost of these schemes would be for local authorities to identify within the body of people who have accessed a free pass those who were making good use of them, and others who might be claiming them because they were entitled to do so, but not using them at all? There should be an opportunity to cut out that waste. People could be made aware that, if they claimed a free pass but did not use it, they would be making an unnecessary charge on the council tax.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

My hon. Friend makes a good point. Following the discussions in Committee, I hope that when the Government introduce the scheme in April next year they will be able to introduce it with a smartcard. If they can do that, we will be able to see clear ridership patterns and identify who is using the scheme. If a person is not using the card, they will not be attracting any recompense or reimbursement, but it will be possible to follow the ridership pattern. That is the overwhelming advantage of smartcards, and I believe that the Minister said in Committee that it was her intention, if possible, to introduce the scheme with smartcards.

Let me turn now from the adequacy of central Government funding to the relationship between operators and local authorities. I shall explain why new clause 3 is relevant and applicable in this regard. As the experience of the 2006 concessionary bus travel scheme has shown, there has been considerable disagreement between local authorities and the Government. There was also considerable disagreement between local authorities and bus operators as to the level of reimbursement provided for carrying concessionary fares.

The Government have stipulated that the reimbursement should be on a "no better off, no worse off" basis, but there is some dispute as to exactly what that means. It is clear that the 60-odd appeals that were initially registered with the Secretary of State by operators over reimbursement arrangements suggest that there is the potential for problems. Reimbursement on a "no better off, no worse off" basis is, in reality, an extremely difficult balance to achieve. After all, the marginal cost to an operator of carrying a few extra passengers is virtually nil. However, when numbers reach the point at which extra vehicles have to be brought in and extra drivers hired, the cost is not only an operating cost but a capital cost. Should the local authority at that point be presented with a large bill for the capital cost, or merely with a bill for the operating cost reimbursement?

A review of the systems put in place by concession authorities after two years of operation would allow the Government to establish whether costs were being borne fairly between authorities and operators. It would further enable the Government to establish best practice nationally and to advise concession authorities on how to improve efficiency and achieve savings. When introduced, the 2008 scheme will involve so many variables and unknowns that a review of the kind proposed by our new clause could be extremely valuable.

A further concern is that the Bill does not lay down the mechanisms by which local authorities will be reimbursed by central Government for the cost of funding concessionary travel. The Government have said many times that the details have yet to be decided. Understandably, local authorities across the country are extremely worried about the lack of clarity over funding, and what the arrangements that are eventually put into place will mean for them.

Given that the details of the funding arrangements are, at best, opaque, and that they are unlikely to become more transparent until after the passing of the Bill, we believe that the new clause would provide the concession authorities with a degree of reassurance. They would have some hope of redress, should they find themselves short-changed by the funding arrangements. As the Opposition made clear on Second Reading, there is some scope for some authorities in so-called hot spot or honeypot areas to find themselves heavily out of pocket. The funding for the 2006 scheme was shown to be insufficient in a number of areas, even when based on fairly static numbers for residents over 60. Because the nationwide eligibility for over-60s is established in the Bill, the potential for error will be hugely exacerbated.

The new clause would oblige the Secretary of State to provide a review to Parliament, to ensure that the total sum of central Government funds made available to local authorities in the previous financial year for the provision of bus services and the funding of concessions on those services was appropriate.

Photo of David Davies David Davies Conservative, Monmouth

Does my hon. Friend agree that over the years in which the Conservatives were in government, numerous instances of various formulae being used to allocate money to different local authorities for different reasons were shown after only a short time to be significantly flawed? What we are asking for is therefore perfectly reasonable and sensible, and ought to be supported by anyone who saw the damage that previous formulae did in areas such as the overall funding for local government, resulting in massive council tax increases across the country.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

I am grateful to my hon. Friend for his eloquent support for my new clause.

Photo of Philip Davies Philip Davies Conservative, Shipley

My hon. Friend is making a typically good case for the new clause, which I support wholeheartedly. Does he agree that an unintended consequence might be that the proposals in the Bill could lead to local authorities having to cut bus services if the funding were not allocated properly? It would be a tragedy if a Bill whose principle of promoting public transport we all support were to have that effect. Is it not one of the main concerns for local authorities that they might have to cut services if the funding is not distributed adequately?

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

My hon. Friend is correct. As I pointed out earlier, there is huge concern among local authorities about both the previous scheme and the possible impact of this scheme. The Minister will say that local authorities have discretion to provide extra services above the statutory minimum, but, again, that costs. If the funding formula is not correct, the discretion is, to all intents and purposes, worthless.

Photo of Jim Cousins Jim Cousins Labour, Newcastle upon Tyne Central

In response to the interventions from the hon. Members for Monmouth (David T.C. Davies) and for Shipley (Philip Davies), does not the hon. Gentleman recognise that the stated preference of the Local Government Association, which is now controlled by his party, is to move towards formula funding as the basis for distributing central Government support, and away from funding based on actuals?

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

That may be so, but it does not lead us anywhere unless the formula produces the correct amount of money. The Local Government Association also supports central Government giving local authorities the correct amount of money to undertake services. That is the issue in relation to the new clause, and that is why the new clause is relevant.

Photo of David Davies David Davies Conservative, Monmouth

Does my hon. Friend agree that the Local Government Association, under the leadership of various different political parties, has always called for the ability to discuss problems, preferably before they arise, with Ministers? In requesting some form of review, we are merely asking for leaders of local authorities to be allowed to put their views to Ministers—through the Local Government Association if necessary, or, if not, perhaps as individuals—and to be listened to, and, if problems have arisen, for the Minister to go away and reconsider, or get his officials to do so. What on earth is unreasonable, and what is there to oppose, about that?

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

As my hon. Friend says, what on earth is there to oppose about that? We shall see whether the Minister accepts such an extraordinarily sensible amendment.

The new clause has two major advantages. First, it would highlight any continuation of a Government tendency to take credit for policies while passing the cost on to local authorities, as we have been discussing. Council tax has doubled in the past 10 years, which has hit the elderly and those on the lowest incomes hardest.

Photo of Gillian Merron Gillian Merron Parliamentary Under-Secretary, Department for Transport, Parliamentary Secretary (the East Midlands), Cabinet Office

I am interested in the hon. Gentleman's reference to the Government funding of the statutory scheme. Will he clarify whether he believes that £1 billion is insufficient? If so, how much Government funding would be sufficient, and will his party commit itself to that?

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

The hon. Lady knows that local authorities have indicated that the £350 million that the Government provided for the 2006 scheme was not sufficient.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

Well, they have. I gave examples of two of them earlier, and am happy to do the same for the other 13 if the hon. Lady wishes. Clearly, the amount of money allocated by the Government on a percentage basis for the implementation of the 2006 scheme did not prove sufficient for a number of local authorities.

Photo of Gillian Merron Gillian Merron Parliamentary Under-Secretary, Department for Transport, Parliamentary Secretary (the East Midlands), Cabinet Office

Will the hon. Gentleman clarify whether he is referring to funding for the statutory scheme or funding for the discretionary elements on top? If the latter, those local decisions are for local authorities to make.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport) 2:15 pm, 28th June 2007

The Minister is right: that is a matter for local authorities. I was describing the funding for the statutory scheme, and local authorities indicated clearly that they had not received enough money from the Government to fund that 2006 scheme. With regard to the Minister's initial intervention, I do not know yet whether £1 billion will be sufficient to fund the scheme. I do not doubt the Minister's integrity or sincerity in believing that the £1 billion that the Government say that they are providing is the right amount. That does not, however, negate the purpose of the new clause, which would allow us, after two years of operation—I accept that the transitional year may be unsteady—to ensure that the Minister's belief was correct, and if it proves not to have been correct, to review the matter. I see no contradiction whatever in that.

Photo of Lee Scott Lee Scott Conservative, Ilford North

Does not new clause 3 do exactly what the Minister was referring to? No one can say whether £1 billion or another figure is appropriate, so a review after two years would be a first-class way of establishing the correct figure.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

Indeed it would. I hope that after some reflection, the Minister will see the intent, significance and advantage of new clause 3.

I have indicated that one of the advantages of the new clause would be to introduce some transparency and accountability. As my hon. Friend Chris Grayling said on Second Reading:

"There is no point in giving our pensioners free bus travel if they just have to pay the bills through their council tax instead."—[ Hansard, 14 May 2007; Vol. 460, c. 414.]

The review, to be reported to Parliament, would allow local authorities to demonstrate to what degree the Government were providing free bus travel, and to what degree the Government were clobbering them to provide it.

Photo of Fraser Kemp Fraser Kemp Labour, Houghton and Washington East

I realise that the hon. Gentleman would not have been tempted by my earlier intervention in relation to future spending commitments. Were his new clause carried, however, and were a review to conclude that there were shortfalls—he is right that there have been problems in the Tyne and Wear area, which I represent—would he fund those shortfalls through a redistribution from other English counties and transport authorities, or through new money? Will he give me a clue, because I am tempted by his seductive arguments?

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

The hon. Gentleman makes an interesting intervention—but he is really just rephrasing his previous intervention. As has been indicated, the Minister is hoping to introduce a smartcard, and for all I know, there may be savings. In that case, extra funding, or redistribution, might not be required. No one can be certain about that. I am grateful to the hon. Gentleman for inviting me to make uncosted spending commitments, but I shall reject that opportunity.

The second benefit of the new clause is that it will throw some light on the calculations. We have been discussing the £1 billion figure. The 2006 scheme was afforded £350 million of Government money, and the 2008 scheme will be afforded another £250 million. The other £400 million, to which the Minister has just referred, will be provided in various ways. To be certain that that funding is coming through, it is vital that the requirement for the review be enacted. The new clause provides for a review of the funding allocation arrangements two years after the commencement of the 2008 scheme. It will take some time, as I have said, for the true extent of the take-up and the costs of the concessionary fares to become apparent.

What is certain is that some authorities have been underfunded and some have been overfunded. Mr. Clelland, who is not in his place today, but who was a member of the Committee, described the problems that his local authority faced, and I have described the problems of several others. The review, were it to be supported today, would provide the basis for local authorities to appeal against their funding allocation, and it would also provide an opportunity for central Government to show that they have funded the scheme properly.

Photo of David Davies David Davies Conservative, Monmouth

Has anyone done any studies of the local authorities that have been underfunded and those that have been overfunded? Past experience suggests to me—perhaps I am a little cynical after eight years of doing this job, albeit in two different Parliaments—that previous local government funding formula changes have resulted in Labour-run local authorities in certain areas of Wales, some of which have not even been able to keep their books in order, receiving rather more money than they are entitled to while well run rural local authorities, Conservative and Liberal Democrat alike, have had their funding cut in a disgusting fashion, resulting in higher council taxes for all. Have there been any studies of how this formula is likely to operate, and which local authorities may benefit and which lose out?

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

I am not sure that such studies have been undertaken, but I suggest that if my hon. Friend's researcher has nothing to do in the summer recess, that would be an admirable piece of work that would benefit the whole House. I would certainly be grateful for it.

As I said on Second Reading, funding needs to follow the passenger. The Government have not been clear about how that will happen, so this review is essential. Unless central Government provide the correct moneys for the scheme, local authorities will have to cut other services or raise council tax. The funding mechanisms also need to be clear. The correct and reasonable recompense that an operator should receive must be received by bus operators from local authorities. Without that, the scheme is doomed. If local authorities have established a partnership and there is correct recompense, there will be clear views on the total ridership and cost. Two years is a sensible and appropriate time for the conduct of a review.

My Conservative colleagues and I wish to make it clear that we are not in the business of making uncosted spending commitments. The new clause does not allow Labour Members to make any mischievous accusations of that sort. In two years, the costs of the scheme, as currently defined, will be much clearer and we will also know the take-up rates and whether an extension scheme—that could assist the aim of social inclusion—would be possible.

The new clause is obviously sensible and desirable. It would ensure appropriate funding, transparency and accountability. I can only hope that, in the spirit of change in the Government, elucidated by the new Prime Minister last night, the Minister will not revert to the previous era's habit of rejecting all Opposition amendments, but instead will endorse and support the new clause.

Photo of Jim Cousins Jim Cousins Labour, Newcastle upon Tyne Central

This is clearly an excellent Bill that commands the support of the whole House. I hope that it will benefit those who receive the specific benefits of the Bill, as well as being a turning point in the recovery of our bus networks, which must be a wider object of policy for every Member of Parliament.

I admired the skill shown by Stephen Hammond in giving his colleagues little holiday projects, although I hope that his example will not be taken up too widely in the House. He was correct to say that the heart of the matter is how the extra benefits will be paid for. He was also right to draw attention to variations across the country, which have a clear root. Car ownership, pensioner incomes and the density of bus networks all vary across the country, and those factors produce a dramatic variation in the financial consequences of the concessions being offered to pensioners.

That variation affects Tyne and Wear very particularly. Car ownership in the county is probably the lowest outside London in mainland Britain. Pensioner incomes are among the lowest in the country and the density of bus networks is therefore greater than anywhere outside London. The effect of the offer of concessions is therefore much greater than in other areas. Nexus, the passenger transport executive in Tyne and Wear, has told me that the number of bus trips per year per head of population is 186 in London, 124 in Tyne and Wear, 109 across the generality of the metropolitan counties and only 33 in the rest of England. However, I acknowledge the force of the point made by my hon. Friend Ms Barlow that there are areas outside the metropolitan counties that have dense bus networks and high take-up of concessionary passes.

Photo of Fraser Kemp Fraser Kemp Labour, Houghton and Washington East

On the point about the density of bus networks, Tyne and Wear is often regarded as an urban area, but that is not the case. For instance, my constituency, which is the largest in the area, has many isolated former pit villages that greatly rely on buses. Does my hon. Friend agree that some of the problems that we have faced in the past few years have had a big impact on those isolated mining communities?

Photo of Jim Cousins Jim Cousins Labour, Newcastle upon Tyne Central

I absolutely acknowledge that. My hon. Friend draws attention to a very important point. In the former metropolitan county of Tyne and Wear area, bus networks are dense everywhere relative to the situation common in the rest of Britain. That is the case not just in city areas like Newcastle, which I represent, but also in the outlying former mining areas that he represents. His point is correct. Within the county of Tyne and Wear, no distinction can be drawn between the city and the rural. Both experience common benefits of such schemes and common difficulties if they are not funded correctly.

The extension of the 2006 local free fares scheme across the country will reinforce those variations and not mitigate them. The use of the national scheme in areas that already have high take-up, high bus usage, dense bus networks and low car ownership will be much greater than elsewhere. It is people from areas such as the one represented by my hon. Friend Mr. Campbell who will take great advantage of the national scheme when it becomes available, so that they can use the dense bus networks within the county of Tyne and Wear. The national scheme will not mitigate the variations; it will tend to reinforce them.

Photo of Paul Rowen Paul Rowen Shadow Minister, Transport 2:30 pm, 28th June 2007

I am following the hon. Gentleman's point closely. Does he agree that there is an additional problem with the national scheme because in certain areas—honeypots or tourist destinations such as Blackpool and Scarborough—an influx of people will use the services, which is not reflected in the revenue support grant? It cannot take account of people who visit those places.

Photo of Jim Cousins Jim Cousins Labour, Newcastle upon Tyne Central

I am grateful for that intervention. It draws attention to two significant things. First, the national scheme will compound the difficulties of financing. Secondly, the hon. Gentleman is right to say that a formula basis of distribution of support cannot inherently deal with the difficulties that we are talking about.

There is a difficulty with formula grant support. By its very nature, it cannot pick up the striking local variations that we are likely to see and which will increase as the scheme goes national. The formula approach produces winners and losers. It is in the nature of winners and losers from formula funding support that the losers become clear immediately. The winners, very wisely, tend to keep quiet about it. That there are winners and losers, however, cannot be doubted. It is a direct result of the formula funding.

I have studied the Public Bill Committee debates carefully, and that problem exercised hon. Members. In the course of those debates, my hon. Friend Mr. Clelland offered a solution, which was to withhold a certain amount of formula grant support in a special pot so that it could be paid out later to mitigate the effect of the variations in take-up. I have thought carefully about that, and new clause 1, tabled by the Conservatives, in a sense reflects that. However, I do not favour that solution for two reasons. First, if we withhold a proportion of grant, it will generate all sorts of knock-on problems. Secondly, the increasing use by local councils of judicial review against the Government will become a significant problem in the distribution of the retained money because the factual basis for that will be challenged.

That was the Government's difficulty in dealing with the problems of Tyne and Wear at the outset in 2006. Had they gone down the path of introducing a special scheme to deal with the special problems of Tyne and Wear—I know that they considered that—there is no doubt in my mind that that special scheme would have triggered a range of judicial reviews by authorities that felt that their position had been worsened by it. Given the particular place of London in this context, London boroughs would undoubtedly have taken the Government to court had a special scheme for Tyne and Wear been introduced.

I have recognised the Government's difficulty throughout the controversy about these matters in the county of Tyne and Wear. Had they attempted to deal with the specific problems facing Tyne and Wear—and similar problems affect other authorities, such as Brighton—legal challenges would have followed immediately, and the whole scheme might well have been unpicked. A rich crop of judicial reviews should not be the object of any proposals made in the House.

My amendment would take advantage of the very important clause 9. Clearly, the Government have prepared against some of the difficulties that have been set out becoming serious problems. The clause provides that the Secretary of State can take over responsibility for the financial support of the statutory national scheme to be introduced in April 2008, and the consequential responsibility for reimbursement.

I also understand the Government's concern about negotiations over reimbursement for the purposes of the statutory concessions, local or national. Authorities around the country will deal with different operators, with the result that different methods of reimbursement may be adopted. The Department for Transport is worried that that pattern of variable negotiations over reimbursement may in turn create perverse incentives. The talks may also be influenced by incompetent negotiating skills, or informal collusion between authorities and the major operators in their areas.

Those are the difficulties inherent in the reimbursement negotiations, but it is very important to ensure that the standards of reimbursement have common characteristics that apply nationwide. Apart from the very small local operators, the bus industry is now a big national operation made up of three or four main providers. It is extremely important that local authorities work to common standards in their reimbursement negotiations, and that they do not allow themselves to be picked off. They must not accept fare increases for the non-statutory schemes that are being introduced, as they would then trigger consequential increases in the costs of the concession—a difficulty that is built into the present architecture of the way that reimbursement is conducted.

Photo of David Davies David Davies Conservative, Monmouth

Does the hon. Gentleman accept that the privatisation of the bus companies might prevent the problem that he has described? Through competition, the various operators are able to offer lower fares, but it would be difficult for one to hike up costs to get greater reimbursement from central Government, via the local authority, because a rival could respond by submitting a cheaper tender the following year. Is that not one of the advantages of privatisation and competition? That approach has been robustly supported by the Opposition—and, more recently, even by Labour Members.

Photo of Jim Cousins Jim Cousins Labour, Newcastle upon Tyne Central

I remind the hon. Gentleman of the very wise words of Adam Smith. He was an honest Scotsman, and this, of course, is a time to be singing the praises of such men. His profile is now to be found on our banknotes, and in one remark he observed that, when three or four business men gather together, a conspiracy against the public was waiting to happen. So it has proved with bus privatisation.

We now have a small number of big operators. In my region, we have recently seen the sale of a body of operations in the town of Darlington, which Stagecoach had managed to capture after years of competition. The whole operation has now been sold en bloc to another national-level operator. We are not now dealing with a variety of bus companies that are all small and locally based. I know that such things exist, but the bulk of bus operations are now run by a small number of big national operators with some of the characteristics of a cartel. The block sale of all the operations in Darlington from Stagecoach to another operator in the past fortnight indicates the kind of things that happen.

Similarly, if the Government were to accept the responsibility for running the national statutory concession, the issues of reimbursement could be resolved. The Government could then negotiate forcefully with the limited number of big operators that is the reality of modern bus networks. The debate about the unfairness of the grant regime could itself be resolved and the Government could be reassured that grant given for the purposes of supporting the statutory concession would not be recycled inside local authority finances to pay for other activities. Again, if the Government met the costs of the national statutory concession, all this churning of grant through council and passenger transport authority budgets, with all the knock-on effects for council tax, could be resolved.

There would be an additional attraction for the Government if they took on the responsibility for operating the national statutory concession. They could produce a nationally branded scheme. Such a scheme could be supported by smartcard operations in the way that some Opposition Members have sensibly suggested, but even if it was not, a nationally branded scheme would be a much better incentive for the recovery of bus networks, which must be one of the objectives of the Bill, apart from simply operating the concession itself.

A nationally branded scheme would bring some benefit to the Government of the day and some clarity about how schemes were funded and supported. Of course, outside the national statutory scheme there could still be proper debate locally about extensions to the national scheme. For example, in London the freedom pass kicks in at 9 am. In the county of Tyne and Wear, it kicks in at 9.30 am. There is a debate to be had about how the national scheme, which functions from 9.30 in the morning, could be brought forward to 9 am. Those debates could be had locally without being confused by the wider arguments about the fairness of the grant support.

The rights conferred in the Bill will create new demand for bus services up and down the country. The Bill will lead to an expansion of bus services up and down the country. If the national statutory concession is nationally funded, the extra demand that will be created can then be supported by the Government. It would not be a problem for local council tax payers or local authorities. The rising level of bus use and the improvement in the quality of bus services that we hope will result from this Bill would then be seen as it properly should, as a collateral benefit, not, as it would be if we kept the present obsolete structure of formula funding, as a problem rather than a benefit.

It will be impossibly difficult to achieve through annual grant awards by formula proper support for the rising use of buses and the extension of bus networks unless the national statutory scheme is operated, funded and negotiated by the Department for Transport. That is the purpose of my amendments, and I commend them to the House. Indeed, the Government must have contemplated that course of action anyway because otherwise they would not have provided for that possibility in clause 9. I very much hope that the clause will not prove to be a residual, fallback position, but that the Government can build on it to introduce a nationally branded scheme, which is nationally funded and nationally negotiated, so that all the local difficulties that have been the by-product of doing something that in itself is commendable and good can be avoided.

Photo of Paul Rowen Paul Rowen Shadow Minister, Transport 2:45 pm, 28th June 2007

The Liberal Democrats welcome the Bill. We believe it will go a long way towards dealing with social exclusion; its introduction has the support of the whole House. Notwithstanding that fact, however, in Committee we raised a number of concerns and issues that we wanted resolved, some of which were fully discussed but some of which are still of concern. The new clause proposed by Stephen Hammond addresses one of those points.

In response to Jim Cousins, although as a general principle we welcome the introduction of a national scheme, we believe that the right and proper place for its administration and operation is with local authorities and passenger transport authorities. We certainly would not support the Government's taking over that responsibility.

Many Members in Committee and today talked about previous experience of the introduction of local concessionary bus schemes. That gives us sensible pointers to some of the issues and concerns with regard to the extension to a national scheme, and I do not intend to rehearse or repeat the arguments that have already been so eloquently put. However, earlier this year, I tabled a question to the Department for Culture, Media and Sport about the number of visitors to various places and the most popular visitor destinations in Britain. Although the DCMS was able to give fairly accurate figures for the number of visitors, it had no information about the number who might qualify under the Bill for a concessionary bus pass. That brings us to the crux of the problem with the scheme. The Minister has assured us that, with £250 million, the Bill is adequately funded, but the reality is that none of us knows whether that is the case. We do not and cannot know until the Bill is in operation what the effect of concessionary bus travel on individual authorities will be.

It is clear that certain authorities, whether we call them honeypots or tourist destinations, will be disproportionately affected by the Bill. For example, throughout the year the majority of visitors to Blackpool—a Lancashire town I know well—are retired people and they will qualify to use the bus services in the town while they are there. It is clearly wrong that Blackpool borough should therefore have to pay the cost of those visitors coming and using the service while they are on holiday in Blackpool. As the hon. Member for Newcastle upon Tyne, Central said, Blackpool will not receive from the formula grant any recognition of that use of the service. As has been repeated, the formula grant is a blunt instrument. My borough is very much likes those in the north-east, in that 32 per cent. of the people in Rochdale do not own a car. They rely wholly upon the use of public transport. Their needs will be reflected to some extent in the formula grant, but not totally. The problem with any formula grant system is that it produces winners and losers.

In Committee, we moved several amendments. One was designed to ensure that the national scheme was ITSO compliant, so that there could be an accurate measure of the number of people using buses. Although we might hope to achieve that in the next two or three years, we are certainly will not achieve it by next April. In another amendment, we wanted to make sure that local authorities were properly funded and we sought a commitment from the Minister that she would deliver on that. That amendment was not accepted. Then we supported the amendment tabled by Mr. Clelland and similar to one moved by my noble Friends in the other place. It would have provided for some money to be moved back.

The Minister accepted none of those proposals. Although new clause 3 is not necessarily as strong as I would like it to be, I believe that we need a commitment from the Government that they will take the issue seriously. Once the Bill is up and running, the problems are likely to get greater. We have seen this year for the first time, outside London, that the number of people using buses has risen. However, we need a proper analysis of who those people are. More than a cursory glance will demonstrate that they are predominantly those who have a concessionary bus pass. I welcome that. One of the Bill's laudable aims is to promote social inclusion. But if the Bill is not properly funded, the burden will fall on local authorities and that will cause disproportionate cuts that will probably affect just the people who benefit from travelling on buses. Whether those cuts are to social care or to the provision of leisure services, or whether groups such as young people end up, as happened in the north-east, facing increasing fares, that will not be right and proper.

I therefore hope that the Minister will consider the new clause. It would not alter one jot or iota of what the Government want to do, but it would commit the Department and future Ministers to carrying out a proper review, to ensure that the operation of scheme can be reviewed once it is fully in place and that we can have a proper discussion of what the funding needs are, where the money should come from and how it is to be delivered.

Photo of Charles Walker Charles Walker Conservative, Broxbourne

I have followed the debate with great interest. My postbag, like that of many Members of the House, contains many letters each week from people concerned about bus services both across the constituency of Broxbourne that I represent and the county of Hertfordshire, in which Broxbourne is located.

We have a sort of monster on our doorstep; it is called London. London absorbs a huge amount of resources, and I am interested in how we shall manage the issues of reimbursement and the allocation of resources for funding. Over the past decade, many of our bus services have been sucked into London. If someone wants to get from one part of my constituency to another part or to another part of Hertfordshire, often they have to travel through London. Sometimes they have to travel for an hour and half through London to reach somewhere in Hertfordshire that is no more than 4 or 5 miles away as the crow flies. That poses some questions. If the bulk of the journey takes place in London—although it originates in Hertfordshire—will Hertfordshire taxpayers fund that journey and will the reimbursement be allocated to Hertfordshire or to authorities in London, where the bulk of the journey takes place? I hope that the Minister will respond to that.

We need to look seriously at new clause 3 because it would enable us to have a periodic review of how funding is allocated to pay for services. It would be devastating for local council tax payers in Hertfordshire if we ended up funding additional bus services that are routed through London—services that are primarily for the benefit of Londoners, but whose cost would fall on my constituents.

I hope that the funding formula does not act as a perverse distortion on the market, drawing even more of our services away from the county and into London. That would be disastrous at a time when local hospitals are being reorganised and are going to be moved even further away from my constituency. We face the closure of Chase Farm hospital in north London and the transfer of services to hospitals further north in the county. If more of our bus providers run services through London, it will be even harder for my constituents, many of whom are elderly, to access services to take them to other hospitals. I have a lot of sympathy with the new clause and I hope that the Government will give it serious consideration.

Photo of Alan Beith Alan Beith Chair, Constitutional Affairs Committee

When the Prime Minister, in his then capacity as Chancellor, announced that there was to be a national bus pass scheme, he created an expectation and a hope among many people that they would be able to get to their relatives, friends, hospital and doctor using their bus pass. At the moment, many people in many constituencies find that they are not able to do so because of the cross-border problems. They depend on enhancement at the expense of the local authority.

The importance of the new clause is that it calls for a review of funding on the basis of whether local authorities have had enough money to carry out the scheme. I want to draw particular attention to the relevance of that to border areas, where the Bill as the Government propose to implement it will not solve the problem and where local authority enhancement will still be required. The Government have made it pretty clear up to now that they are in no hurry to negotiate a reciprocal scheme with the Scottish Executive or the Welsh Assembly Government. In the words of the Secretary of State in an earlier debate, that is regarded as a matter for "another time."

That means that local authorities such as the borough of Berwick-upon-Tweed, which has a population of 26,000—it is a very small authority—would still have to put in extra money to give access across the border so that people could get to their nearest shops or hospital, or to friends and relatives. At the same time, the funding arrangements that the new clause seeks to expose would put the authority under great pressure anyway, because the area also has one of the highest proportions of old age pensioners in the country—the highest of all being in Christchurch, which my wife used to represent and which was mentioned earlier. She well knows that that is top of the league, but the little borough of Berwick-upon-Tweed is also very high up. Where the bus journeys are long and the reimbursement element accordingly large, the financial pressures of the scheme will be great.

At the same time, whereas other local authorities will no longer have to put in extra schemes to enable people to get across local authority boundaries—as they do now in many areas—Berwick will still have to put in some kind of extra scheme to enable people to travel on local journeys to Eyemouth, to the doctor's in Coldstream, and to Kelso.

Clearly, I want the Government to use the powers that they are rightly giving themselves in clause 10 to go ahead with negotiating a scheme, which they still have time to do. New clause 3 offers the second-best solution: a review after two years that would demonstrate conclusively that the scheme had not worked satisfactorily in border areas. I support new clause 3 on the basis that if all else fails, there must be a mechanism of showing that border areas need help.

A better solution would be for the Government to use the time between now and next spring to get into negotiations with the new Government in Scotland, difficult though that might be. They might find negotiations easier with the part-Labour, part-nationalist Government in Wales. If they do not carry out such negotiations, the new clause, if accepted, will reveal that there is a serious problem in border areas. Such a problem should not arise, so I ask the Minister to think again.

Photo of David Davies David Davies Conservative, Monmouth 3:00 pm, 28th June 2007

I have a slight sense of déjà vu because some years ago, perhaps even before Ministers had thought about a concessionary scheme for England, I, like all my Conservative colleagues in the Welsh Assembly, defended and supported wholeheartedly the initiation of such a scheme in Wales. We supported it then and we support it now because the Conservative party has always believed that the public have the right to choose to use safe, efficient and reliable forms of public transport. While large amounts of tax are raised from car fuel, the public are unfortunately not given the proper choice of catching buses instead. They deserve such a choice and the situation needs to be reversed.

This scheme is good for everyone, not just the over-60s who will be entitled to a bus pass. If demand for bus services increases, especially in rural areas, it is likely that more services will be laid on. The scheme is thus good for anyone who wishes to use public transport. It is good for car users, too, because if more people use buses, roads will be less congested. If the scheme is properly managed, we will have a win-win-win situation for all those who use transport to get from A to B, which is virtually all of us.

The key factor is whether the scheme is properly managed. Several unexpected problems arose after the scheme was introduced in Wales. Many people will be aware of the market town of Chepstow, which is on the border of my constituency. Chepstow itself is in Wales, in the county of Monmouthshire. However, part of Chepstow is on the English side of the border. Pensioners who live in the Welsh part of Chepstow in the constituency of Monmouth receive a free bus pass that they may use to travel as far as Hereford, which, of course, is in England—Owain Glyndwr did not get quite that far. However, people who live in Tidenham, which is just across the river and somewhat on the outskirts of Chepstow, cannot get hold of a free bus pass to travel into the towns in Wales in which many of them do their shopping. They will not be able to do so after the introduction of the scheme under the Bill because the cross-border problems have not been sorted out.

When the Minister considers funding, I hope that one of her first actions will be to try to ensure that a scheme is introduced whereby people can use their passes throughout the whole of the United Kingdom. As an unashamed Unionist, I am disappointed that people will be restricted to their constituent nations, rather than be able to exercise their right to travel the length and breadth of the United Kingdom. They have paid their taxes over the years for such a right.

The scheme in Wales gave rise not just to cross-border issues, but to enormous problems involving the allocation of funding, many of which have been mentioned today. Some local authorities have received more funding than they might have been expected to get, whereas other received less. My hon. Friend Stephen Hammond eloquently set out the way in which such funding inequalities can arise.

I am a bit of a cynic, and I have suggested before that formulas have sometimes been used in a particular way, quite deliberately, to benefit certain local authorities at the expense of others for political reasons. I have certainly seen that happen in Wales and I want to ensure that people in England are protected from that. What can possibly be unfair about suggesting that Ministers look at the formula in two years' time to ensure that everything is being done in an equitable manner? If nothing else, that will protect existing bus services, and protect people from inordinate rises in council tax, such as those that have taken place over the past 10 years. As I have said before—I will repeat it quite a few times in the years ahead—council tax has risen by 184 per cent. over the past 10 years in Monmouthshire. Earlier, my hon. Friend the Member for Wimbledon talked about a doubling of council tax, but my constituents would have been absolutely delighted if their council tax had merely doubled. Many of them are struggling to pay their mortgages.

Many other problems have arisen in Wales as unexpected consequences of the Act. In some areas, a sort of impromptu park-and-ride scheme has developed; people drive into towns—often, I am told, in their Mercedes-Benz—and park on outlying streets, and then use the local bus service to ride into town. There is nothing wrong with that. It is a free country, and everyone would support people's right to do that. However, it means that the local authority to which those people apply for their concessionary pass ends up getting lots of funding, while the local authority that pays for them to use the buses does not. That is one example of the sort of inequity that could arise in the funding formula. We need to make sure that the Government are aware of all those problems, and the many others that are likely to arise, and we need to ensure that they have the means with which to deal with them. If they fail to deal with the problems, there will be a reduction in services, which is what all of us are fighting against.

There is also the issue of rural areas. Many rural areas have to subsidise all or most of the bus routes that are in place. I believe that all rural areas are grossly disadvantaged by virtually every funding formula used by the Government. I am sorry to have to say it, and perhaps the Minister will like to argue the point, but I see that as very much a political decision. For example, in the county of Monmouthshire, the funding formula that is used to fund local government generally used to take proper account of sparsity, and that is absolutely right, because of course it always costs more to deliver services in a rural area, where there are much greater distances for buses, or any other services, to travel. The last funding formula change reduced much of the weighting that was given to take account of sparsity. It also resulted in sparsity being calculated with reference to how long it takes to get from A to B, not by road, but as the crow flies. That meant that many isolated rural communities were counted almost as part of urban conurbations under the formula, and the local authority lost out as a result.

That sort of subtle change, which most people could not be expected to pick up on, has been deliberately used to disadvantage rural areas. We do not want the same thing to happen with the formula used for allocating money for transport. My hon. Friend the Member for Wimbledon—the Front-Bench spokesman for transport—has not suggested that there is anything wrong with the scheme; he merely suggested that it would be wise of the Government to consult the Local Government Association in two years' time to make sure that the money is being allocated in a fair and reasonable fashion. It puzzles me that anyone would argue that that is not the wise and sensible thing to do. I say again that it could prevent bus services from being cut, prevent council taxes from rising, and ensure that local authorities are listened to, in a system in which there is accountability. That is why all those in the House who care about supporting bus services should support new clause 3 this afternoon.

Photo of Gillian Merron Gillian Merron Parliamentary Under-Secretary, Department for Transport, Parliamentary Secretary (the East Midlands), Cabinet Office

We return once more to this important Bill, and in particular to the issue of funding for local authorities, which we discussed at great length in Committee, including the arrangements for the reimbursement of bus operators.

May I begin by thanking my hon. Friend Jim Cousins and his near neighbour, my hon. Friend Mr. Kemp, for recognising the importance of the Bill to passengers, to the improvement of bus services—and the figures are coming through—to efforts to tackle social exclusion, and to the improvement of the public transport network. That is why I am great supporter and advocate of this Labour Government Bill. I appreciate, too, the comments of my hon. Friend the Member for Newcastle upon Tyne about saving the Government from judicial review, and I am happy to take his advice.

I shall make some general points before coming to the specific matters raised by the amendments. I have previously stated—and I am happy to restate it—that I agree absolutely with the sentiment that local authorities should indeed be adequately funded by central Government for the costs of administering that mandatory concession. After all, it is the Government's policy to fund fully new statutory burdens. Let us be honest: it is in everyone's interest in the House that we get it right, and that is what I am keen to do. As hon. Members know—and I will restate it for the record—the Government will provide up to an extra £250 million of funding a year for the proposed new national bus concession. That is in addition to the significant extra funding that we have already provided to local authorities for the implementation last year of free off-peak local bus travel within local authorities. We provided £350 million in 2006-07, and £367.5 million in 2007-08. We remain confident that there is sufficient overall to fund the extra costs to local authorities to provide that welcome improvement, which has benefited millions of people. I shall come to our calculations in a few moments and explain them.

Photo of Charles Walker Charles Walker Conservative, Broxbourne

On reflection, I was rather inarticulate in expressing my concerns. Many bus routes start at Waltham Cross, which is in Hertfordshire and on the border with London, but 90 to 95 per cent. of the benefits go to London. Owing to the fact that the routes originate in Hertfordshire, we will fund the full cost of the scheme, although 95 per cent. of the distance covered falls within London to the benefit of Londoners.

Photo of Gillian Merron Gillian Merron Parliamentary Under-Secretary, Department for Transport, Parliamentary Secretary (the East Midlands), Cabinet Office

I can assure the hon. Gentleman that he made his point perfectly clear. Travel concession authorities will pay for all concessionaires boarding in their area, irrespective of who issued the pass and where the journey ends. What matters is the funding to the travel concession areas, and that is what we will discuss today.

Photo of David Davies David Davies Conservative, Monmouth

The main point that we were making was not so much about the amount of money, although that is clearly important, but about the way in which that money is divided up. If the Minister is about to give us an explanation, I shall await it with interest.

Photo of Gillian Merron Gillian Merron Parliamentary Under-Secretary, Department for Transport, Parliamentary Secretary (the East Midlands), Cabinet Office

I am grateful for the hon. Gentleman's encouragement.

For the benefit of hon. Members who did not participate in Committee, I should say that it is true that there is no mention of the funding for concessionary travel in the Bill, but I can assure the House that that is for very good reasons. As we know, circumstances change and flexibility needs to be built into the legislation to enable future improvements to concessionary travel to be made as efficiently and effectively as possible. It would not be appropriate or wise to lock ourselves into a particular approach now, as the important issue of funding is currently being considered and discussed across Government and beyond. The existing arrangements contain appropriate checks and balances to ensure that public funds are spent wisely, which is something with which we would all concur; an incentive for local authorities to reimburse cost-effectively by a fair amount; and the right of appeal for any operator who believes they have been disadvantaged. Importantly, the system is fair to the taxpayer and the operator alike.

The extra funding that the Government have announced for the new concession already includes a generous allowance, both for uncertainty over future travel patterns and the difficulties of allocating money on a formula basis. The sum of up to £250 million extra per year is based on a number of key assumptions. Hon. Members may be interested to know that those include an extra 100 million journeys generated and a pass take-up rate of 85 per cent. Once distributed, it will result in double-digit percentage increases for most travel concession authorities against budgets that already include discretionary spend. The extra costs will not be as much as many people may think, because many of the new trips will be generated travel, which will not require full reimbursement. I hope that that gives some indication about the sums involved. The House should be concerned about the full amount, as well as the distribution, which I am on record as saying is extremely important. The assumptions are generous. As I said, we have allowed for a pass take-up rate of 85 per cent. In some areas of England, pass take-up is below 40 per cent. at present, so we are confident that the extra funding is sufficient to cover the total extra costs to local authorities.

It is important to recognise that the freedom and flexibilities provided by unhypothecated formula grant, which was discussed earlier, are generally supported by local authorities. They have long argued against having their hands tied by hypothecated funding streams. Concessionary fares reimbursement is only one of the many obligations that authorities must meet from their council tax receipts and from the funding provided by central Government through the formula grant process.

The Local Government Association strongly supports a specific grant for the extra funding for the national bus concession, at least on a temporary basis. However, we need to be clear that such a move would be a break from the policy of greater freedom and flexibilities in funding which is generally welcomed by the local government community. It would also be inconsistent with the basis for allocating existing funding, and we would need good reasons for making such a change. However, the Department for Transport, the Department for Communities and Local Government and the Treasury are looking carefully at the merits of different funding mechanisms for statutory concessions.

Photo of Alan Beith Alan Beith Chair, Constitutional Affairs Committee 3:15 pm, 28th June 2007

One thing that the formula cannot do is recognise that there are some authorities that will still have to enhance their schemes if some of their citizens are to be able to get to relatively nearby facilities on the other side of a national boundary. That will persist until a reciprocal scheme is introduced. Therefore those authorities have to meet more out of their council tax and out of the formula than most authorities, which will no longer have the problem of making special arrangements for cross-border travel.

Photo of Gillian Merron Gillian Merron Parliamentary Under-Secretary, Department for Transport, Parliamentary Secretary (the East Midlands), Cabinet Office

Perhaps this is an appropriate point at which to remind ourselves that the Bill covers off-peak concessionary national travel within England. Any enhancement beyond that is a matter for local discretion and the Bill allows for that. I shall shortly deal with devolved Administrations, who I know are a matter of interest.

Once we have decided on the funding route we will consult local authorities on the distribution, in line with existing statutory requirements.

Photo of Jim Cousins Jim Cousins Labour, Newcastle upon Tyne Central

My hon. Friend is about to move on to a topic that has engaged several hon. Members in the debate, but before she does so, will she set out how her Department is considering variations of funding from the funding formula and, in particular, how it might use the powers that it is taking in clause 9?

Photo of Gillian Merron Gillian Merron Parliamentary Under-Secretary, Department for Transport, Parliamentary Secretary (the East Midlands), Cabinet Office

A number of hon. Members asked about how we will deal with hot spots, as they are called, where there is particular pressure on areas such as my constituency, Lincoln, which people are happy to visit, and we look forward to welcoming them. I understand the concerns expressed about the distribution of funding, especially in respect of those visitor hot spots. The overriding principle is that extra money should be directed to where extra costs fall. We should recognise hot spots, so far as it is possible to do so. Various options are being discussed in the concessionary fares working group, which involves representatives from all tiers of local government—districts, counties, unitaries and PTEs as well as operators. We are, of course, also working with the Department for Communities and Local Government and the Treasury on various options.

In looking at the wide variety of data sources that might help to develop the best possible formula distribution, we are examining issues such as visitor figures, tourist beds, retail floor space and bus patronage. We hope to have reached a decision on the preferred route by the summer, when we will consult widely on the formula basis for distribution. I hope that that helps my hon. Friend.

New clause 3 includes the exact text of an amendment that was defeated on a vote in Committee. I see very little benefit in introducing a requirement on the Secretary of State to review the arrangements for the allocation of funding to local authorities two years after the legislation is commenced. We debated the proposal in Committee, as well as the idea of another review of the reimbursement of bus operators by local authorities. The amendment has not changed, and nor has my position. There is very little to be gained from new clause 3. We have already embarked on a great deal of informal consultation with local authorities and other interested parties about the issues surrounding the implementation of the national bus concession.

I have explained the matter and the role of the concessionary fares working group on a number of occasions. Again, I emphasise that the Department for Communities and Local Government has already implemented a well-established annual process for consulting local authorities informally and formally about the formula grant distribution. I am a little disappointed this afternoon, because in Committee I invited Stephen Hammond to suggest how we might improve things now rather than in two years' time, but all we have before us is exactly the same amendment.

I gently remind David T.C. Davies that concessionary travel is a devolved issue. Local authorities in Wales can pass the full costs of the scheme to the National Assembly, and it is therefore unlikely that the situation that he described with regard to increases in council tax relates to concessionary fares.

Angela Watkinson is not currently in her place. She referred to a charge for passes claimed but not used. That is a misunderstanding, because reimbursement is made in respect of actual concessionary travel and not on the number of passes issued.

The suggestion that there should be a review in two years' time contains another contradiction. Local government funding involves a three-year settlement. If we were to accept the new clause—I ask the House not to do so—we would create uncertainty at a time when local authorities are asking for more certainty.

On funding in the Tyne and Wear area, I recently met my hon. Friend Mr. Clelland and Nexus. We had a constructive discussion on how we can go forward, which is what I intend to do.

On mutual recognition, the nature of a devolved Administration is, again as I have said before, that it will take devolved decisions. Our priority is to get a workable national concession in England, perhaps in the first instance in April 2008. Local authorities can make their own arrangements across borders, if they fund them, which is an option that will be available under the Bill. We will continue to hold discussions with devolved Administrations.

Photo of Alan Beith Alan Beith Chair, Constitutional Affairs Committee

What is delaying the Minister? Assuming that she stays in her job, she has got until next spring to negotiate in time for the arrival of the new national bus pass. What is to stop her reaching an agreement with the Scottish Executive in that time? If they were to refuse to do it, it would not be her fault, but if she does not attempt to reach an agreement in that time scale, it will be her fault.

Photo of Gillian Merron Gillian Merron Parliamentary Under-Secretary, Department for Transport, Parliamentary Secretary (the East Midlands), Cabinet Office

I thank the right hon. Gentleman for offering me a way out should success not be mine. Our priority is a workable scheme for England that everyone understands. We will continue to work with the devolved Administrations, and in the interim it is possible for local authorities to manage the current situation.

Amendments Nos. 14 and 15 would have major implications for the general funding of local authorities. It would not be possible to introduce those changes for April next year. In any case, the amendments do not set a time frame for commencement; I am not sure whether that is intentional. It would be only right and proper to consult on any changes to the fundamentals of the administration of the mandatory concessions. In fact, it is not clear from our discussions that local authorities would favour such a centralised approach as suggested by my hon. Friend the Member for Newcastle upon Tyne, Central. I assure him that we fully considered a range of options. Having said that, we are not ruling out changes to the administration in future. This is an enabling and a flexible Bill.

Bearing in mind everything that I have said today and on several previous occasions, I hope that Opposition Members and my hon. Friend the Member for Newcastle upon Tyne, Central will agree that new clause 3 and amendments Nos. 14 and 15 are unnecessary and duly withdraw the motion.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

As the Minister said, in Committee we discussed funding for the Bill at great length, because it is absolutely central to the Bill. I said in Committee that this was an excellent amendment that would enhance the Bill, and I still think so. Nothing that I have heard from the Minister this afternoon suggests that there is any reason not to put the new clause into the Bill, and I therefore wish to test the will of the House.

Question put, That the clause be read a Second time:—

The House divided: Ayes 157, Noes 257.

Division number 164 Orders of the Day — New Clause 3 — Review of reimbursement arrangements

Aye: 157 MPs

No: 257 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.