Clause 3

Part of Concessionary Bus Travel Bill [Lords] – in a Public Bill Committee at 12:15 pm on 5th June 2007.

Alert me about debates like this

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport) 12:15 pm, 5th June 2007

I listened with great interest to the hon. Gentleman. I wish to speak to new clauses 4 and 5. New clause 4 deals with the review of funding allocation arrangements, and new clause 5 seeks to have an annual statement of funding, and the method of funding, laid before Parliament. The new clauses go to the heart of what the hon. Gentleman just said, and it is important to address them in conjunction.

The provisions deal in different ways with the funding for the scheme, which is giving concern to local authorities. There are two aspects to funding: whether enough money will be available—that is, whether the quantum sum provided will be sufficient to cover the cost—and the mechanisms by which funding will be given to local transport concession authorities and thereafter to operators, and whether the mechanisms will be seen to be equitable.

New clause 5 deals with the broad aspect of funding—the quantum sum available—and how the monies will be made available. The question of whether the sum provided for the scheme will be large enough to cover costs goes to the heart of the scheme. If it is not, the scheme cannot proceed.

The annual statement is key. The Government have provided initial funding for other schemes but then after a period not provided the year-on-year increases to ensure that local authorities are properly compensated. It is likely that demand will increase under the scheme. When the local concessionary fare scheme was introduced last year, demand increased substantially. In fact, it would be fairly ridiculous if it did not. One of the reasons for providing such schemes is to facilitate access to transport. If demand did not rise, access would not be facilitated and the whole intent of the Bill would be lost. We have clear evidence that take-up is increasing, and that those who take up the scheme use the pass more frequently.

Finally, there is the issue of cost increases to the bus industry. They have consistently outstripped general inflation. Bus fares are rising above the retail prices index, and industry costs have risen some 7 to 9 per cent. per annum over the past three years. That is due not only to fuel costs but in part to extra costs imposed by the EU and by health and safety regulations.

The need for a statement on the method of delivery of funds is also key. The proposed scheme has ramifications for the method of delivery in all areas. In some specific cases, extra provision needs to be made. The proposed system for reimbursement is via the local authority block grant to district and unitary councils. The first problem is that those councils are not in all cases the travel authority. There is no requirement or guarantee that the district or unitary authorities will pass on the sums that they receive to the travel authority. Secondly, the block grant is a relatively crude instrument. It cannot measure and therefore be responsive to the key thing in the Bill: the number of journeys made.

There is a danger that in areas where high-quality, improving services for concessionary bus travel are well promoted, demand will increase much faster and the authorities could be penalised financially. If that were to happen, local authorities would have only two mechanisms for dealing with a shortfall in funding: they could raise council tax or cut local services.

The Opposition made it clear on Second Reading that there is considerable scope for some authorities in so-called hot-spot or honey-pot areas to find themselves heavily out-of-pocket. The funding for the 2006 scheme was shown to be insufficient even when based on relatively static residents over-60 figures. As nationwide eligibility for over-60s is being established in the Bill, the potential for error and for a shortfall in funding to some authorities will be hugely exacerbated.

New clause 5 would oblige the Secretary of State to make an annual statement to Parliament on 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. Moreover, it would oblige him to set out the method by which such funds were made available. That approach has two major advantages. First, it would highlight the continuation of the Government’s tendency to take credit for their policies while passing some, or indeed a substantial amount, of the cost on to local authorities. Given that the doubling of council tax in the past 10 years has hit the elderly and those on low incomes hardest, it is an issue that should concern us all. As my hon. Friend the Member for Epsom and Ewell (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.”—[Official Report, 14 May 2007; Vol. 460, c. 414.]

The annual statement to Parliament would allow local authorities to demonstrate the degree to which the Government are actually providing free bus travel, and the degree to which the Government was making the authorities pay. In short, the new clause would create accountability on whether the Government are providing enough. The Government cannot will the end if they do not will the means. Under the new clause, accountability would be clear.

The second benefit of the new clause is that it would throw some light on the calculations that have resulted in Ministers often telling us that total funding for the implementation of the Bill will be £1 billion. The 2006 scheme was afforded £350 million of Government money; the 2008 scheme will be afforded an extra £250 million. The other £400 million to which the  Government refer in its calculation of £1 billion must be and is being provided in myriad guises. Some of those guises such as the bus service operator grant, the rural bus subsidy grant and the block grant, the problems of which I have already explained, are difficult to nail down.

In order that we can be certain that Ministers are being as generous as they claim—I am sure that they are—it is vital that they set out exactly how the sums that they talk about are being distributed. New clause 5 would ensure Government accountability for their actions. Will the Government’s proposed £250 million extra in the first year be enough for the scheme? Will the Government provide enough total funding in successive years, and will they deliver the funds to those who are actually providing the services? New clause 5 is sensible and necessary.

New clause 4 asks for a review of the arrangements for allocating funds necessary for the reimbursement of operators to local authorities. In Lords Committee, the overwhelming view expressed was that of unease. There was also substantial unease among local authorities because of the experience of the previous scheme, and they expected that there would not be enough money for the 2008 scheme and that the money would not be properly targeted to the correct authorities. The new clause deals with that latter aspect of the matter. It would allow for a review of the funding allocation arrangements two years after the commencement of the 2008 scheme.

It will take some time for the true extent of the take-up and cost of concessionary fares to become apparent. It is certain that in the transition and initial take-up period, some authorities will be underfunded. The review would go hand in hand with the annual financial statement established by new clause 5, and it would provide the basis for authorities to appeal against their funding allocation.

The Government may say that the Bill amends section 149 of the Transport Act 2000 to require transport concession authorities to reimburse operators for providing the national concession or for journeys starting in their areas, and that the current legislation requires the operators to be no worse and no better off for carrying concessionaires. It is still not clear, however, that that will be able to take account of hot spots, where journeys start, which exact journeys are the responsibility of particular local authorities and how local authorities will seek compensation from one another.

In the other place, Lord Davies stated:

“We are confident in broad terms that the £1 billion that we are providing

“will be sufficient to meet all demands”.—[Official Report, House of Lords, 8 January 2007; Vol. 688, c. GC25.]

Funding needs to follow the passenger, and the Government have not yet made it clear exactly how that will happen. The new clauses would provide the mechanism by which to ensure that it is clear that funding is following the passenger and how the allocation of the funding is working. If the Minister shares the confidence of her colleague Lord Davies, she can show that by accepting the new clauses. The clauses  are of such importance that although I will listen carefully to the Minister, I intend to press the matter to a Division.