Transport Act 1985 (Amendment) Regulations 2019

Monday 20th May 2019 Lords Chamber

Motion to Regret

18:38

Moved by

[Baroness Randerson]

That this House regrets that the Transport Act 1985 (Amendment) Regulations 2019 were laid before the conclusion of the judicial review of the Department for Transport’s current position in respect of community transport, and, given the potential impact of the changes in these Regulations on community transport operators, that they do not contain sufficient detail (SI 2019/572).

Relevant document: 23rd Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)

[Baroness Randerson (LD)]

My Lords, these regulations are designed to amend the Transport Act 1985 to bring it into line with EU regulations on community transport. They are the culmination of two years of consultation by the Department for Transport and a lot of toing and froing between the community transport industry, the commercial bus operators and the Government.

The reason for my regret Motion is, I hope, clear in the wording I have used. The Government have been carrying out a consultation which many in the industry feel has been mishandled. They are going ahead with these changes while there is still a judicial review under way, which may or may not clarify at least some of the issues concerned. It is ironic that the Government, who are set on leaving the EU, are rushing ahead to try to align us with EU regulations long before receiving the clarity which the court case will hopefully provide. Once again, we must pay tribute to the Secondary Legislation Scrutiny Committee, which drew attention to the problems with these regulations and has led me to put this regret Motion forward today.

I will start with a bit of background. Most operators of public service vehicles operating for hire or reward require a PSV operators’ licence. Sections 19 and 22 of the Transport Act 1985 provide for exemptions to this. Section 19 permits allow an organisation to provide transport for its own members or people it exists to help. It can charge for this service, but the vehicle cannot be used for profit or to carry the general public. The sort of organisations covered by Section 19 permits within the community transport area include schools, churches, scout groups and so on, which own or use a minibus as part of their overall task, which is certainly not to run a transport system.

Section 22 permits allow a body to run a community transport bus service which can carry members of the public. That bus can be used for other purposes in order to financially support the community bus service. Community transport operators have traditionally used these permits to allow them to provide services in a sector that operates generally on very stretched finances. Historically, the Department for Transport accepted that, if you hold a permit, you automatically meet the EU’s non-commercial criterion. If you operate on a not-for-profit basis, you are non-commercial—that has been the accepted wisdom.

The EU regulation allows operators to be exempt from PSV licences if they have only a minor impact on the market. However, existing legislation in the UK needs updating to bring it in line with EU regulations. Hence, the Department for Transport embarked on a consultation. There is another complication because, since then, a commercial operator has launched a judicial review. The operator concerned is a small company that used to provide minibus services although, I believe, no longer does so. It is part of—or has formed—an organisation called the Bus and Coach Association, which is not to be confused with the bus and coach council. It is challenging the DfT’s approach to the non-commercial exemption.

While this judicial review is ongoing, the Department for Transport cannot update the meaning of the term “non-commercial”. Yet the result of the judicial review is not expected until 2020. Even then, the judicial review may not answer the questions that we are asking. Despite this, the Government are going ahead with these amendments to existing legislation. This means that they will be tightening up on some definitions while leaving a gap in others.

While the Department for Transport has made it clear that no local authority should cancel contracts until the outcome of the judicial review, many organisations in this socially valuable sector have, in effect, been left in limbo. The Government, however, have not issued the guidance necessary to go along with these regulations. They require an organisation that utilises permits to identify as an exempt body and to produce evidence of that.

I shall go through the various exemptions. The first is the main occupation exemption—that is, the school minibus type of exemption—which is mainly unchanged. The difference is that now you will have to provide evidence of that by 1 October. The second is the non-commercial exemption, the one that is subject to judicial review.

18:45

The third, the short-distance exemption, is a new one. It has been put in place to try to provide evidence that an organisation providing a community transport service is having a minor impact on the market. The way that it works is that if you provide services only within a radius of 10 miles of a specified place, you are entitled to a permit. I am sure that many noble Lords can immediately see the problem with that in rural areas. I come from Wales. If you are living in the middle of Wales and need to go to hospital, you will have to go a lot further than 10 miles. Already, in order to hold a permit, you have to be recognised as a non-commercial operator so that the short-distance permit comes in after the fact that you have been recognised as a non-commercial operator.

The Government have obviously recognised that the 10-mile radius has a problem associated with it, and there is now scope for exemptions to the exemption. There is a need for urgent guidance so that we can see how such complex rules can be applied, not least because in the absence of the government guidance so far some permit-issuing organisations have made up their own rules. The offices of the traffic commissioners are applying a rule that means they have been refusing permits to any organisations that have competitively tendered for contracts in the past even if that is a historical factor. So you might no longer hold such a contract or have won that contract, but if you have competitively tendered for it then you are not able to get one of these permits. The OTC interpretation seems to be in direct contradiction to the DfT’s own statements on this issue, so we urgently need government guidance in order for this to be clarified. We also need government guidance on how to operate the short-distance exemption, especially in rural areas—I have hardly scratched the surface of the complexities of applying that—and on what evidence is acceptable in order to prove that you are non-commercial.

Lastly, I want to look at the impact assessment, which I believe is woefully inadequate. Obviously it costs a lot more to get a PSV licence so the impact on operators is considerable anyway. The annual cost for a small operator is estimated to be just under £4,000 but for a large operator it could be £500,000. There is a wide variance between the figures in the impact assessment and the estimated numbers from the Community Transport Association. For example, the DfT estimates that 50% of drivers already hold a PCV D1, but the CTA says that only 6% of drivers currently hold a qualification so 50,000 drivers will need to gain a new qualification.

DfT costings do not include costs for training. The average costs of training are said to be about £1,000 per driver. Its costings are done on the basis of one transport manager shared between 10 operators, but the traffic commissioners’ regulations stipulate that a transport manager cannot be shared among more than four operators. And so on—the costings do not cover, for example, the cost of tachographs—but I have illustrated my point so I will not go on further.

The biggest problem with the impact assessment is that it totally ignores some key areas. There is nothing on the environmental impact; if the community transport service is disrupted, people will be forced to use cars rather than buses and minibuses, with an impact on the environment involving emissions and so on. There is nothing on the impact on family life if there is no longer a school minibus, or if there is no way of getting grandma to the hospital and you have to go with her instead. There is nothing on the wider social costs. Yet we are looking at legislation that could destroy parts of the community transport sector and lead to people with serious health problems being stranded in their homes.

Community transport is used across Britain by vulnerable, elderly, young, sick, poor and disabled people. For them, the trips to the lunch clubs, the youth club outings, the trips to hospital and the school outings are a vital part of their links with the community as a whole. There is nothing in the impact assessment about the danger of raising the costs of community transport, so that some organisations will fold because they cannot raise the charitable donations necessary to continue working; there is also a danger that many part-time volunteer drivers will simply turn around and say, “I don’t want to go for this additional qualification. I don’t want to spend my time training again for something new. I’m going to give my time elsewhere and not work for this community transport organisation”.

I reiterate my regret that these regulations have been brought forward while the judicial review is still under way. It means that there is a yawning gap on the key issue of the definition of “non-commercial organisations”. However, we are where we are. I will not be pushing this to a vote this evening. My purpose is to seek greater clarity for the sector. I ask the Minister to provide us with assurances: first, that the Government will provide full guidance in the very near future, for example on the application of the 10-mile rule; and secondly, that they will ensure that urgent discussions are held with the transport commissioners to ensure that they cease to apply rules that are directly at variance with the specific interpretation issued by the Minister’s colleague at the Department for Transport. I beg to move.

[Lord Berkeley (Lab)]

My Lords, the noble Baroness outlined the problem with this piece of legislation extremely well. My first question for the Minister is: why are we doing this at all? As the noble Baroness suggested, we might have left the EU on 29 March without any agreement, so it is a bit odd that the Government should be bringing this regulation through your Lordships’ House two months later, still trying to comply with European Union legislation. Since we still do not know whether we will leave, and if so when, presumably another regulation will be coming shortly that will explain how this particular regulation will be amended or removed if we leave—perhaps the Minister can clarify this. Or do the Government think that this regulation is so wonderful that they will want to keep it?

I see nothing wonderful about this at all. As the noble Baroness said, it is just more bureaucracy in a sector which, by definition, cannot afford it—and sometimes cannot even afford to run the bus. I live in a little village in Cornwall which has a community bus once or twice a week. It takes people to the shops, other villages or the hospital and is run by a dedicated team of two drivers. Occasionally they have to put their hands into other people’s pockets for more money to upgrade the bus and so on. It is run on a shoestring. The people whom it carries on the whole cannot afford very much anyway, and here we are adding more bureaucracy—for no point at all that I can see.

If this is being pushed forward by the Government after pressure from the commercial bus operators, I would ask how many of the routes currently run by community services would ever be run commercially. The answer in most cases is that you either have a community bus service—if you are lucky—or no buses at all. Given the reduction in bus services that this Government and the previous one have “achieved”, it is a pretty depressing story. I cannot understand why the Government want to do this at all. I hope the Minister will be able to explain that to the House, as well as what will happen if we leave without an agreement at the end of October or whenever. Will the Government seek to bring in another regulation to remove this SI and go back to where we were?

It may be that the European Commission has been doing good things and requires this to be done, but, frankly, if it was so important, why has it taken until May 2019 to bring this forward? It will be a disaster for the community transport sector. As the noble Baroness suggested, the sooner we get some guidance to interpret what is in here, and a sensible, achievable objective so that the services can continue and maybe even grow, the better. It would be really good if that could happen, so I look forward to the Minister’s response.

[Lord Rosser (Lab)]

My Lords, we support the terms of the regret Motion moved by the noble Baroness, Lady Randerson. These regulations were the subject of a fairly lengthy report from the Secondary Legislation Scrutiny Committee at the beginning of April. The committee drew them to the special attention of the House on the grounds that, given their potential impact on community transport operators, they give rise to issues of public policy likely to be of interest to the House.

As the noble Baroness said, the regulations are being made to align fully, and clarify, the relationship between an EU regulation and the Transport Act 1985. That Act provides for exemptions which allow certain types of organisation to operate passenger transport services on a not-for-profit basis without holding a public service vehicle operator’s licence, following the issue of a permit.

There is also an EU regulation, which I think was implemented in 2011, setting the standards to be applied to public service vehicle licence holders. However, operators are exempt from the EU regulation requirements if they operate exclusively for non-commercial purposes or have a main occupation that is not as a road passenger transport operator, and if they only operate domestically and have a minor impact on the transport market because of short driving distances. The view of the Department for Transport has been that its permit holders automatically meet the “non-commercial” exemption from the EU regulation on the basis that “not-for-profit” equates to “non-commercial”. This has now been challenged on the basis that some organisations operating under the permit system are in fact operating for commercial purposes. At the end of last year, the Bus and Coach Association applied to the High Court for permission to judicially review the Department for Transport’s current position in respect of community transport, and in particular the approach to the non-commercial exemption.

19:00

The EU regulation also allows member states to exempt national operations having only a “minor impact” on the transport market, but this exemption has to be given effect in a member state's domestic legislation, which is something we have not done. In addition, as has already been said, there is currently no guidance on the scope of the exemptions from the EU regulations. The Department for Transport has now said that while the judicial review process is ongoing, it will not make any further statements about what “exclusively for non-commercial purposes” means. Consequently, guidance on this point, following a lengthy consultation on community transport, will not be finalised until the outcome of the judicial review is known, after which it will be issued in line with the court’s decision.

These regulations amend the Transport Act 1985 to make it clear that a permit can be applied for and held only by an organisation that is exempt from the directly applicable EU regulation setting out the PSV operator licensing requirements. The regulations also give effect to the “minor impact” on the transport market exemption from the EU regulation available to member states.

If an existing “not for profit” permit holder determines that they do not meet one of the three exemptions from the EU regulations, they will have to obtain a PSV operator's licence in order to continue operating as they currently do. The cost of doing that varies considerably, depending on the number of vehicles operated. As was said by the noble Baroness, Lady Randerson, there is a disagreement over the figures. As I understand it, according to the Department for Transport there are approximately 6,300 Section 19 and 22 permit operators, and it has identified that at least 3,150 educational and religious institutions would be exempt from the requirements of the EU regulations by virtue of operating passenger transport services as ancillary to their main business. Thus the number of Section 19 and 22 permit operators potentially affected by the requirements of the EU regulation and the transition to PSV operator-licensing-related requirements is approximately 3,150 operators, or 50% of the sector.

I will ask a few questions in addition to the question raised in the regret Motion—with which we agree—about not waiting for the conclusion of the judicial review before laying these regulations. First, why has the “minor impact” on the transport market exemption from the EU regulation not already been brought into effect through domestic legislation—bearing in mind that the EU regulation came into force at the end of December 2011? Was it an oversight, or a conscious and deliberate decision? If the latter, why?

Secondly, when did the Bus and Coach Association first raise with the department the issue that is now the subject of judicial review proceedings? Was it some time ago, and, if so, what action was then taken by the Government to address the issue raised? Have the concerns only just been raised? If they have, we seem to have got to judicial review proceedings very quickly.

Thirdly, when is it anticipated that the legal case will be heard and a decision made? What will be the likely impact on community transport operators, and the future of the services they currently provide, if the decision goes in favour of the Bus and Coach Association? As I said, according to Department for Transport figures, it appears that some 3,150 Section 19 and 22 permit holders are potentially affected by the requirements of the EU regulation and the transition to PSV operator-licensing-related requirements. Therefore, once again and finally, I ask: in regard to the 3,150, what is the potential likely impact on those permit operators—some 50% of the sector—and the future of the services they currently provide, if the legal action being pursued is successful?

[The Parliamentary Under-Secretary of State, Department for Transport (Baroness Vere of Norbiton) (Con)]

My Lords, I thank the noble Baroness, Lady Randerson, for tabling her regret Motion today. It has given the House the opportunity to scrutinise these regulations in more detail, and also to raise some very important issues. Some issues raised, particularly by the noble Baroness, went into some detail and raised evidence I am not entirely sure my department has seen. I would be very grateful if she could share the evidence with us. Certainly, I will go through Hansard and make sure that if I am unable to cover issues today, I will write to her, and to all noble Lords who have taken part.

The Government always recognise the vital role of community transport in connecting people to their communities, employment, local services and each other. Most community transport operators provide a vital social care service to those who are elderly, isolated or disabled, and we know that particularly in rural areas, community transport services encourage growth and reduce isolation. However, in recent years, concerns have been raised about how the use of community transport permits fits with EU law on operator licensing. It became clear that the current interpretation of “not for profit” equating to “non-commercial” would be challenged, as noted by the noble Lord, Lord Rosser.

The noble Lord, Lord Rosser, also asked, “Why now?”. While the UK remains a full member of the European Union, all the rights and obligations of EU membership remain in force, and for the duration of the withdrawal agreement, we are also bound to implement these rules. The EU has an outstanding case against the UK in respect of them. This SI implements the short distance exemption, which we could not implement after leaving the EU or during the period of the withdrawal agreement without primary legislation. If this SI had not happened, we would not have had this exemption. In the broader context, this issue is coming before your Lordships now because there has been quite a significant amount of consultation around this issue—necessarily, because it is very important indeed. The Government have taken as many steps as they can to provide as much certainty as possible to community transport operators, given the current constraints.

As I have said, the Government recognise the importance of the sector. However, we also need to ensure that where community transport operators compete for contracts with small, family-run commercial operators, competition is fair. That includes considering how operator licensing rules affect both these groups. That is why it is important that we do this: we need a level playing field. At the same time, we must ensure that we exempt those that can be exempted. It is clear that the previous position of a blanket exemption for the sector from EU law is not legally sustainable.

In this context, the Government consulted in 2018 on how to revise the guidance. We wanted community transport operators to understand whether they were exempt from the EU regulation on operator licensing and could carry on using community transport permits or whether they needed to apply for commercial operators’ licences, so they have been aware of this issue for a while. We received almost 500 responses to the consultation and were in contact with 550 stakeholders at stakeholder events. These were people and organisations from across Great Britain. The responses to the consultation highlighted that we have to strike a delicate balance, and we have worked very hard to try to deliver that balance on the feedback that we received. But it must be pointed out that there was no consensus on this issue, which I suppose is where we are today.

My ministerial colleague Jesse Norman MP and officials from the department met members of the Bus and Coach Association during May 2018. Despite this, the association decided to launch a judicial review a few months later. The legal proceedings should eventually result in a definitive judicial interpretation of “exclusively non-commercial”, which will resolve the long-running debate about what it means and provide a way forward on this issue.

[Lord Berkeley]

Would the Minister be able to provide us with some numbers for the consultation? How many community transport operators were there, and how many small commercial ones? How many operators were trying to compete with a community one, and so on? It is easy to run a campaign by the small commercial operators who might run one minibus or coach and say, “We got 300 responses”, while the community people might not have had time to respond. It would be good to have those numbers and if she does not have them tonight, perhaps she could write to me.

[Baroness Vere of Norbiton]

I thank the noble Lord, Lord Berkeley, for asking that question. I will certainly have to write, as I do not have those numbers in front of me, but he makes an important and valid point and I will write to him.

There are three exemptions in EU law which can be used. The Section 19 and Section 22 permits guidance explain how two of them can be applied to the community transport sector. The first is the “main occupation exemption”. The guidance that we published explains how this exemption can be used by organisations whose primary activity is not transport; for example, schools, community groups or local authorities. We believe that this represents around half of the community transport organisations, which will fall into this group.

The second exemption is the short-distance exemption. This allows organisations which have a minor impact on the transport market, due to the short distances they travel, to be exempt. In defining 10 miles as a short distance, as noted by the noble Baroness, Lady Randerson, the Government believed that it was important to consider how these bus services work across the country. What is a short distance in a rural area may be a very long way in a big city, and rural areas are of specific concern when it comes to community transport. Where community transport operators provide bus services in rural areas, they have the flexibility to make the case that a short distance is longer than the automatic 10-mile distance. The noble Baroness noted some discrepancies in the application of the guidance. I would be grateful if she could share the specific pieces of evidence with me, then we will be able to review them and perhaps get to the bottom of what is going on.

Finally, the third exemption relates to the services which are non-commercial. The Government are not able to provide guidance on this exemption, as there is an ongoing judicial review in respect of it. However, as noted by the noble Baroness, Lady Randerson, the Government are clear that it would be premature for any local authority to end or withhold community transport contracts while this legal action is ongoing. The High Court has not yet given us a date for the hearing but we hope that it will be soon. Once the High Court has reached a decision, the Government will revise their guidance to give effect to it.

[Baroness Randerson]

Will the Minister extend that very welcome assurance and say that the Government will promptly contact the offices of the traffic commissioners to ensure they understand that that is the Government’s intention, and that they are not applying different rules?

[Baroness Vere of Norbiton]

Without having seen the evidence, I obviously cannot make that commitment right now but I should imagine that if we can give any further guidance, we will certainly do so.

The Transport Select Committee acknowledged that this uncertainty has already impacted some community transport operators—there has been lots of concern about it in Parliament. There are real costs from uncertainty and implications from doing nothing at all, so the Government are able to provide clarity on two of the three exemptions. Where community transport operators can use either the main or the short-distance exemption, they do not need to wait for a High Court judgment. They can plan for the future and deliver important transport services with confidence.

We recognise that in certain circumstances, according to the impact assessment, there will be an impact on some operators. We believe that 50% of the operators will fall under the main occupation exemption, but there is the extent to which the remaining 50% will be able to take advantage of the new short-distance exemption. We hope that many of them will really consider that option, and that we will therefore be able to reduce the number of operators impacted.

[Lord Berkeley]

Following this exemption and the guidance to the traffic commissioners, surely the Minister is able to commit to advising the traffic commissioners on the two issues that are not subject to a JR to ensure that they understand what is going on. They can always have more guidance later, but they should have the present one now.

[Baroness Vere of Norbiton]

I commit to reviewing the advice that the traffic commissioners have already received and will compare it with the evidence that I hope to receive from the noble Baroness, Lady Randerson. If there is a disparity and they are not following the guidance, of course we will make sure that they do so.

19:15

Continued confusion about the scope of the exemptions to the EU regulations is of benefit to nobody, least of all vulnerable people, particularly in rural areas. The noble Baroness noted that the statutory instrument does not contain sufficient detail, but I am sure she agrees and appreciates that detailed guidance is not always appropriate in a statutory instrument. That is why we have developed guidance for these two exemptions. It is extensive and provides examples of how the main occupation exemption works.

It is clear from the Government’s consultation and today’s debate that community transport evokes strong feelings for many people. I sense that this may not be the end of this conversation. On our side, we are working closely with local authorities, the Community Transport Association, Mobility Matters and the Association of Transport Coordinating Officers, and will continue to do so over the coming months. I reiterate that we will continue to support the community transport sector, because it is terrifically important. However, it is also important to achieve the right balance for this sector, so that we build a bright future for community transport operators and the communities that they serve.

[Baroness Randerson]

I listened with great interest and thank the Minister for her response. I will review Hansard tomorrow and I promise to write to provide her with more information. I hope she will write to me to provide more information as a result, because this is such a valuable sector. It is so important to the survival of many of our rural communities and social links for many who are most at risk within our society. As I promised, I will withdraw the Motion, because my interest in doing this was to get the commitments from the Government that I hope the Minister will see through, following this debate.

Motion withdrawn.