Franchising Schemes (Franchising Authorities) (England) Regulations 2024

Debate between Lord Hendy of Richmond Hill and Lord Grayling

Tuesday 5th November 2024 Grand Committee

[The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)]

My Lords, these draft regulations relate to access to bus franchising powers for all types of local transport authorities in England outside London. The regulations bring into effect paragraphs (b) to (g) of Section 123A(4) of the Transport Act 2000, such that the types of authorities listed in those paragraphs come within the meaning of “franchising authority”.

These powers were previously limited to mayoral combined authorities and mayoral county combined authorities. However, these regulations give all types of local transport authorities access to powers to franchise their bus services. In doing so, they will ensure that decisions are made at the right level. These regulations aim to give the power to local leaders to determine the most appropriate action to deliver an improved bus network, based on the needs and circumstances of their areas. This step does not mandate local transport authorities to franchise; it is about providing them with a suite of tools to support their communities and deliver better bus services.

The department will build on the progress of these draft regulations through the introduction of the buses Bill later in this parliamentary Session. The Bill will deliver further changes to make bus franchising easier to deliver, alongside other measures on areas such as accessible travel. It will also improve bus services for local transport authorities that choose not to franchise, allowing greater flexibility over bus funding and letting local leaders deliver their own local transport priorities. Alongside this, the department is building its capacity to provide practical support to local transport authorities throughout the franchising process, should they wish to pursue it.

I will now provide some background information about these regulations. Bus franchising powers for local transport authorities in England, outside London, were created in the Bus Services Act 2017. Powers were automatically given to mayoral combined authorities and mayoral county combined authorities to allow them to prepare a franchising scheme assessment—essentially a business case—if they chose to do so, without requiring consent from the Secretary of State for Transport.

Currently, all other types of local transport authorities wishing to prepare a franchising scheme assessment face a two-stage pre-assessment process. First, regulations must be made which switch on access to the franchising powers. Secondly, the Secretary of State for Transport must give her consent to any individual authority to prepare an assessment of their proposed franchising scheme. This instrument implements the initial stage of this process for non-mayoral combined authorities, ensuring that they will need to obtain the Secretary of State’s consent only to prepare a franchising scheme assessment. This will reduce the barriers facing these types of local transport authorities in pursuing bus franchising.

I turn to the detail of the regulations. Bus franchising is a model for providing bus services where a local authority determines the details of the service and private operators are contracted to run the services. Alternatively, in a deregulated market, any company, subject to minimum safety and operating standards, can operate and have control over bus services. These regulations seek to empower local leaders to choose the model that works best in their area to manage their bus services. Bus franchising is one of those tools. Alternatively, local transport authorities can pursue high-quality enhanced partnerships with private operators or public ownership.

These regulations are part of the Government’s delivery of their manifesto commitment to give

“new powers for local leaders to franchise local bus services”.

Bus franchising will give communities a greater say in the services they can use, connect people to opportunities and benefit those on lower incomes, who disproportionately use buses.

This instrument implements the first stage of this process for all types of local transport authorities so that they require the Secretary of State’s consent only to proceed with the assessment. The department is also revising the bus franchising guidance to streamline the franchising process. The Government consider that this onerous process has acted as a barrier to local authorities. Removing the first stage of this process will make it easier for local transport authorities to pursue franchising if they wish to do so. The regulations improve the suite of tools on offer for local transport authorities to deliver better buses.

I am pleased to say that the statutory instrument was cleared without comment by the Joint Committee on Statutory Instruments. To address the only request made by the Secondary Legislation Scrutiny Committee, for more information on franchising, the department is also revising its bus franchising guidance, which sets out the franchising process accessibly and in detail.

These regulations represent an important first step towards delivering on the Government’s aim of ensuring that local authorities have the tools they need to plan and deliver services in a way that suits their communities. The forthcoming buses Bill, which will be introduced later in this parliamentary Session, will build on this progress. Through this instrument and the forthcoming Bill, the Government will deliver on their plan for improving the bus network and ending the postcode lottery of bus services. The plan is centred on putting control of local bus services back into the hands of the communities that use them and will give local leaders the freedom to take decisions to deliver their local transport priorities. I beg to move.

[Lord Grayling (Con)]

My Lords, I stand to speak briefly about these regulations, as I was the Secretary of State when the original legislation was passed. While I understand what the Minister is trying to do—he comes at this, of course, from the perspective of somebody who has led the franchising operation in London—I have two big misgivings about this change.

We very consciously extended the franchising powers to the other metropolitan areas and mayoral combined authorities, believing that what was being done in London and the volume of passengers there made that a sensible and realistic option. Despite that, areas such as Manchester took several years before deciding to go down this road. Promises were made about franchising happening quickly, but it never actually did at that time. Of course, the mayoral combined authority areas have the critical mass to do this, whereas the reality is that, on the ground in other parts of the country, the idea that an alternative to what happens now is available through franchising is something of an illusion.

The reality is that local authorities in counties such as Surrey, where I was a Member of Parliament for 23 years, already plan their services because they pay for them where a gap cannot be filled commercially. It is not as if they can somehow suddenly dictate that this route happens and that route happens. Given the low level of ridership, getting any buses at all to run is a challenge and something they have to fund and develop themselves. So I do not really see how expanding franchising to counties such as Surrey will make any difference whatever. That in itself seems to make this change anything but what the Minister has just described it as. Of course, franchising is a realistic option in metropolitan areas and mayoral combined authority areas. That is why we gave that power in the first place, but I just do not see it going to other parts of the country.

I have a reservation that goes beyond simply not understanding why this is necessary. There is a danger that this will hold back the development of bus services for the future. The reason I say that is that it was clear to me during my time as Secretary of State that the future of bus travel in rural areas, in particular, is about demand-responsive buses. It is not about traditional routes going all day long from A to B and B to A. It is about buses that do different things at different times of the day, follow different routes and respond to passenger demand. Effectively, it is about Uber-type operations on a large scale, with routes changing all the time based on who wants to use them.

I do not see how demand-responsive buses fit within a franchise system. I would very much like to hear the Minister explain that to me. By definition, if you are dealing with a private operator that adapts the routes it follows all the time to reflect individual demand on individual days, which has to be the future of buses in some parts of the country, how on earth does franchising fit with that? Yet a local authority may decide on this for political reasons, for example—on the Labour side, there were great debates at the time about wanting to see local authorities have greater control over bus systems—and I fear a conflict between its desire to structure things in some areas, trying hard to do so even when it has to pay for a lot of the routes itself, and not unleashing the potential of demand-responsive buses. They will be the future of public transport in areas of the country that remain ill-served by buses, and where it is difficult to make them operate simply because the sheer demand that exists in our cities is not there.

So I would particularly probe the Minister about how he sees demand-responsive buses working within the system that these regulations create. I still think that they are not necessary. Franchising in big cities and major conurbations is fine. This feels like a set of regulations that will not achieve very much. As the notes say, there is no actual demand from non-metropolitan combined authority areas and this instrument may hold back the private sector from the kind of innovation that will be needed for the future.

Passenger Railway Services (Public Ownership) Bill

Debate between Lord Hendy of Richmond Hill and Lord Grayling

Committee stage
Tuesday 29th October 2024 Lords Chamber

[Lord Grayling (Con)]

My Lords, I rise briefly to support my noble friend’s amendment but perhaps from a slightly different perspective to his, given his—and indeed the Minister’s—track record, which had a strong focus on London. I believe it is very important to ensure that there is a clear explanation and, frankly, that there are detailed rules about how the interaction takes place around the London boundary, simply because there is a democratic issue here as well.

The noble Lord, Lord Berkeley, made reference to the attempt by the mayor to take control of the Southeastern franchise some years ago. I blocked that, for two reasons. First, there was a significant level of opposition outside London to that transition taking place—the sense that the mayor should not be running services that cross into Kent, Surrey and so forth—including strong opposition from local MPs. Secondly, there is the issue of fragmentation: who operates which depot, how do you divide the franchise in half and so forth? It is important to maintain a system that is simple and as easy to run as possible.

None the less, there is and will always be an issue around how the mayoral responsibility for services that cross the boundary interacts with services operating under the control of shadow Great British Railways and subsequently Great British Railways, how they interact and work together, and how the whole system is managed. While I do not support my noble friend’s level of enthusiasm for devolution because I worry about fragmentation, it is none the less important in this new world to have very clear guidance, rules and methodology about how the system in London will operate with the system that crosses paths with it around the London boundary and, indeed, into the termini in London.

I think my noble friend has put forward an important point here. Although we have a slightly different perspective on this, I very much hope that the Government will adopt this proposal, because I think it is the right one.

[The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)]

My Lords, I start by reminding the Committee that this is a short Bill, simply to bring back the national railway operations into public ownership. This is a popular policy with the public, absolutely necessary to making the railway run properly, and a necessary precursor to a more major Bill next year.

I thank the noble Lord, Lord Moylan, for this amendment, which would require not a report this time—although he has sought to require many—but Statements to Parliament about the relationship between services in Greater London provided under contract to TfL and those for which the Secretary of State is responsible.

There is no reason to expect the Bill, which allows train operations to transfer from private operators into public ownership, to have any adverse effect whatever on the existing collaboration between operators and TfL. The Bill makes no change to the existing duties on the Secretary of State for Transport and on Transport for London under Section 175 of the Greater London Authority Act 1999 to co-operate and co-ordinate passenger rail services in London. Like many noble Lords in the Committee, I know from my own experience how that works. I think we can all conclude that it has worked very satisfactorily so far and there is no reason why it should not continue.

The Bill will not have any adverse effect on those services: substantially the same staff will be running those trains under public ownership on the national railway network, as they do now, so there should be no concern about a sudden deterioration of service. In fact, I expect it to improve: publicly owned operators will prioritise the interests of passengers, rather than exploiting contractual conditions in pursuit of short-term profit.

The Bill says nothing about the devolution of further passenger rail service to the Mayor of London. It would not prevent further devolution, and nothing I have said would prevent that. If they were devolved, they could be operated in the same way as the current London Overground services are operated, under a concession from Transport for London.

When I said, as the noble Lord, Lord Moylan, quoted, that there is no current plan for further devolution, that was an accurate statement. Of course, it may not be an accurate statement in the future, but when I wrote the letter to him and other noble Lords and Baronesses, it was true. We will see what happens. It is only a few weeks since what the mayor said in July and, if he does have aspirations to operate further services, I am sure there will be a cordial discussion under the auspices of Section 175 to discuss whether and how that is carried out and the costs of doing it.

The noble Lord is also mistaken on Manchester. Certainly, the evolving situation I described with the Mayor of Manchester and Transport for Greater Manchester is that services would be operated not by Network Rail, because that is currently an infrastructure provider, but by a train company. In fact, it is most likely to be Northern Trains, which is already owned by the public sector and has been for four years.

As I have already said, I give a commitment that the future, wider Bill will give a statutory role for combined authority mayors that is better than any they have now. I have just repeated it for the avoidance of doubt. In that case, it is under Section 24 of the 1993 Act. If they were to want to operate train services, this Bill does not alter Section 24 and that would be a discussion that could be had. I described the situation as I understand it currently unfolding; in fact, they do not wish to do that, but the Secretary of State could devolve more under Section 24 if she chose to.

At the moment, if I have counted correctly, the operation of rail services in London is currently the responsibility of eight different franchised operators, plus two more under contract to Transport for London. That is without the long-distance operators whose services start and finish in London but do not otherwise serve the London market directly and, indeed, Network Rail, which is responsible for the physical railway infra- structure. Public ownership and subsequent integration into Great British Railways will simplify all this by bringing the currently franchised services together in ownership in one place. If TfL wishes to discuss or influence the provision of other rail services across Greater London in the future, it will have an easier job of engaging with Great British Railways. It will be assured that the train operators that are performing will be interested in acting in the interests of passengers.

The noble Lord, Lord Berkeley, asked where I think it is all going. I will come back and answer that on Report.

It was a pleasure to hear the noble Baroness, Lady O’Neill, talking about the particular circumstances of Bexley, and it is nice to see her in her place. I do not envisage any immediate change to the railway geography of south-east London. I cannot answer for much of the rest of what she said in the way that I once could, as the commissioner of Transport for London, but I am sure that she knows where to go to make the points about the Superloop, ULEZ and the other things she referred to for the benefit of her borough of Bexley.

The noble Lord, Lord Gascoigne, referred to Crossrail 2. It should be evident—I hope it is from what I have now said about Section 175—that, were Crossrail 2 to be promoted and come into effect, it would, like Crossrail 1, be complex, but the outcome would be a significant transfer of services to the mayor, because it would, and hopefully will, eventually take over some national railway services. The ease with which Crossrail has taken over former national railway services in London and transformed them into a coherent service for the benefit not only of London but the national economy would be replicated in Crossrail 2. Nothing in the Bill would change that; nor would it change the way that Crossrail was funded had it been proposed now, or the way Crossrail 2 would be funded if it were proposed in the future.

The answer to a lot of what has been said about the Overground is that the Bill primarily seeks to remedy those parts of the railway network that patently do not work well. I would contend—I have always contended in all my roles and in this one too—that the railway service in London works. It works because it is coherent, and there is no reason for the Bill to interfere with it.

I was very interested to hear from the noble Lord, Lord Grayling. I remember well his position on the devolution of Southeastern services, and he is right that many of them go well beyond the London boundary. There is a democratic issue about how well they serve the areas outside the boundary, and his recollection is correct that at the stage at which it was proposed— I recall it well because I proposed it, even if it was politically advocated by the mayor—it cost more to operate those services separately than it did together. That would be quite a good reason to think carefully about whether a proposition could now be made to do it differently. In a sense, he is making my case because one of the things that we need to have some regard to in a post-Covid railway, with less revenue but similar costs, is the cost of the whole thing. One of the reasons for the proposition in the Bill is to start to sort out the costs of the railway, increase its revenue and improve its performance.

I listened carefully to the remarks made by the noble Baroness, Lady Pidgeon, on devolution and I intend to come back to them on Report.

The Government’s plans will improve co-operation, not hinder it, so I see no need for the statement envisaged in the amendment of the noble Lord, Lord Moylan. I am sure that all involved will work together to ensure that publicly owned and TfL services can co-exist effectively side by side. On that basis, I urge the noble Lord to withdraw his amendment.

Passenger Railway Services (Public Ownership) Bill

Debate between Lord Hendy of Richmond Hill and Lord Grayling

Committee stage
Monday 21st October 2024 Lords Chamber

[Lord Hendy of Richmond Hill (Lab)]

My Lords, I thank noble Lords for explaining their amendments in this group, which consider some of the practical aspects of the Government’s plans to transfer services to public ownership. Amendments 1 and 48 focus on the contractual arrangements that allow the Secretary of State to terminate a franchise early, following a breach of contract or other sustained poor performance. I make it absolutely clear that this Government will not hesitate to act decisively where an operator’s unacceptable performance means that the contractual conditions for early termination are met. The Secretary of State has made this plain on a number of occasions and I am happy to reiterate it to your Lordships today.

However, I am very much afraid that the terms of the contracts we have inherited from the previous Government do not make this easy. It is far easier for an operator to return the contract to the Government than it is for the Government to take back a contract for poor performance. It is deeply regrettable that in the past couple of years, some of the poorest performing operators have been awarded the longest contracts.

Noble Lords will not be surprised to know that we have looked very hard at the form of the contract. We are closely monitoring train operators’ compliance with their contract, but at present we are not in a position—with any operator—where the Secretary of State has a contractual right to terminate for poor performance. Noble Lords might be amazed to know that Avanti has not yet triggered the need for a remedial plan, although it may well do so. While CrossCountry has triggered the need for a remedial plan, we need to let that work through, together with the timetable reduction that the Secretary of State was deeply reluctant to agree to, before we discover whether its performance then merits some further contractual remedy.

Unless and until that contractual right arises, the only sensible approach is to transfer services to public ownership when the existing contracts expire. Any other approach would require taxpayers to foot the bill for compensation to operators in return for ending their contracts early, which the Government made clear in our manifesto that we would avoid, if only because of the state of the public finances we inherited.

I have also heard representations on behalf of operators—or, rather, their owners—that, rather than transferring services as contracts expire, we should leave their services in private hands for as long as possible. All the owning groups knew of these dates and would have planned financially for them in any event. The concern seems to be that service quality will suddenly collapse, or that current plans for service improvements, or for the rollout of new train fleets, will suddenly grind to a halt.

There is no basis for these claims. DOHL is experienced in transferring services into the public sector smoothly and without disruption, as it has proved in the difficult aftermath of past franchise failures. As services transfer, the same trains will be operated by the same staff as before, and no doubt often by the same management, as happened with LNER six years ago. The improvements that are already in train will continue. I have no reason to think that performance will deteriorate. Extending specific operators’ tenure will simply delay the process of bringing services back to public ownership, where they belong, and the financial savings that will result.

In answer to the noble Lord, Lord Grayling, while there have been transfer costs from franchise to franchise, he will of course recognise that the incoming franchisee would not pay that cost gratuitously; they would simply add it to the subsidy bill for the franchise they were inheriting. In the end, the public sector pays, as it has always done. In fact, since Covid, the operators have not funded anything at all, so the quantum in the future is likely to be extremely limited.

[Lord Grayling (Con)]

I would like some clarification from the Minister on that point. Has the department added up that liability? Does he have a total number for the transfer into the public sector of all the franchises?

[Lord Hendy of Richmond Hill (Lab)]

The answer to the noble Lord is: not yet. He will recognise that those costs materialise only when the franchise transfers, so the department will never have had that total number in the past, and I do not expect it to have it now. As the franchises transfer, the number will become obvious.