Bus Services Bill [HL]

Baroness Randerson Excerpts

Monday 4th July 2016 Lords Chamber

[Earl Attlee (Con)]

My Lords, not-for-profit bus services, or community transport, cover a wide spectrum of services, including those operated by charities. I am the first to praise the extraordinary work the sector does for people who need a lot of support in their daily lives—drivers who walk users to their door to make sure they have not lost their keys and then carry their shopping into the hall are local heroes. The sector can also plug a few gaps in services for the general public where there are not enough passengers to make a route a commercial proposition and the hard-pushed local authority does not have sufficient resources to fund a standard bus service.

However, I urge my noble friend the Minister to resist the amendment. Community transport services are not subject to the same regulatory regime as local bus services. Their drivers are not subject to the same stringent training regime as those driving registered services, nor do they need to satisfy many of the other compliance requirements set down by the traffic commissioner.

Services operated under Section 19 of the Transport Act 1985—it is mainly this type of service we are talking about with this amendment—are exempt from many safety and fair competition rules so long as they are not provided to the general public. So how on earth can they contribute to the success or otherwise of a franchise?

The whole issue of services operated under Section 19 and indeed Section 22, permits has been a bone of contention for many years with the EU. If community transport operators were required to enter the local bus market and operate under the same rules as operators of registered services, it would be a different matter, but they are not. There is no level playing field and, at the moment, community transport operators are able to operate more cheaply but without the regulatory safeguards in place for other operators. I therefore urge my noble friend to resist the amendment as gently as he can.

[Baroness Randerson (LD)]

My Lords, in contrast, I support the noble Lord, Lord Kennedy, in his amendment, because I believe strongly that there is a valuable role for community transport and not-for-profit operators. That role is particularly important in rural areas. I take this opportunity to thank the Minister for the very useful letter that I received today, which gives great detail about the Government’s approach to rural areas. I regret that the information is not in the formal impact assessment; nevertheless, it is now publicly available and useful to us all.

It is important not just that not-for-profit operators work in rural areas but that we look at the widest possible range of community-based schemes in urban areas as well. I give as an example Hackney Community Transport, which operates commercial services for Transport for London, and Ealing Community Transport, which runs buses in Dorset with Go-Ahead. Those are urban examples that have spread out from the area where they started, but the point I am making is that community-based and not-for-profit transport services are part of a flexible mix. If we are truly to improve bus services, we must have more variety: we must have an alternative to the big five bus companies which effectively run the vast majority of bus services outside London. Although they compete, in most cases they do not do so on the ground—they rarely compete against each other service to service. We need an alternative to that if we are to have a flourishing bus service throughout Britain.

[Baroness Scott of Needham Market (LD)]

My Lords, I support the comments of my noble friend. I had not intended to speak, but the noble Earl, Lord Attlee, slightly provoked me into it when he commented that not-for-profit services “plug a few gaps”. I can tell him that in areas such as mine, in Suffolk, they are the service. Almost all rural areas in Suffolk now have no bus service.

I agree with the noble Earl that I would not want community transport schemes to be tied up in a whole plethora of red tape, but nor would I want emerging franchising models to ignore the opportunities provided, in the way that my noble friend Lady Randerson has described, or inadvertently to disadvantage smaller community services. It is easy to see how you could do that—by cherry picking parts of their routes and not linking with others, you can affect their viability. Whether it is an urban or a rural area, but particularly in the rural area I know, it is important to understand and get the ecology of the bus industry right: to understand that something you do to one part is going to impact on another.

--- Later in debate ---

[Lord Snape]

I suspect that when we come to debate the future of the railway industry I will be speaking for my party, which is against franchising. And, as I currently understand it, the party wishes to see the railways back in some degree of public ownership. However, let us not get bogged down in the differences within our party between the two industries otherwise we could be on this amendment for a lot longer than we should be.

On the previous amendment, we talked about not-for-profit companies making a bid for franchises. The problem with that reflects directly on Amendment 35. If a successful franchise bid depends on a lower bid, and there is every chance it will given the shortage of cash in local government and the cutbacks that have been made so far as support for bus services is concerned, obviously some of the smaller and perhaps less reputable companies will start out with an advantage. If you are running a major operation that recognises trade unions, pays trade union rates, provides proper canteen facilities, uniforms and so on, you are not in a particularly advantageous position when bidding for a franchise against a smaller company that does none of those things.

Again I remind the Minister that over the years a lot of these companies have come and gone. The bus industry has rather settled down, and although we deplore the lack of competition, when we had lots of it, it was often denounced as wasteful and unnecessary. Speaking specifically to this amendment, if a company large or small loses its assets as a result of measures inherent in the Bill, surely it is only fair that it deserves to be properly compensated.

[Baroness Randerson]

My Lords, I say in response to the noble Lord, Lord Snape, that of course the arguments he makes about less reputable companies fortify my argument that a lot of these things need to be set out in the Bill, so that we can ensure that only the more reputable companies—those that observe those aspects important to passengers and indeed to our environment—are able to win a franchise.

I say in response to the noble Earl, Lord Attlee, that I cannot understand why bus companies should be immune to the usual rules of business in this country. Increasingly local government services are run through commercial companies in various forms. Many commercial organisations are involved in the provision of a range of local authority services right down, for example, to care for children, the elderly and so on. Local authorities franchise services or commission them and from time to time they will change the companies they are working with; someone loses the contract. There are well-known procedures throughout our public life which account for that to happen, thus enabling a service to be handed over from one organisation to another. I cannot see why bus companies should be exempt from that general run of business.

[Lord Kennedy of Southwark]

My Lords, Amendment 35, which has been proposed by the noble Earl, Lord Attlee, is not one that I can support today. As we have heard, the amendment puts a requirement into the Bill that would require the taking into account of any compensation payable to bus operators whose businesses are wholly or partly expropriated by the scheme. I do not think that there are any plans in the Bill to expropriate anyone’s business. The franchising model will work on similar terms to those which presently operate in London, where private bus operators happily deliver services on routes laid down by TfL. They make profits and the service works well.

I agree with the comments made by the noble Baroness, Lady Randerson, who asked why the bus industry cannot be aligned with the rest of the public sector in terms of contracts being tendered for and then won or lost. People move on and things change. That works in the whole of the rest of the public sector and is certainly the case in local government; I have said before that I am a councillor in Lewisham. I am sure that the noble Lord, Lord Ahmad, will advise the Committee, but I think I am correct in saying that the Government do not anticipate any compensation being required if a franchising authority follows the process as set out in the Bill. For me, the Bill is about improving bus services for passengers and increasing the number of bus journeys being taken by people, thus halting the decline in bus routes and journeys over recent years, and that should be embraced by bus operators. Indeed, they may find that they actually make more money if they increase their routes and more people use them.

I look forward to the Minister’s response and I hope that he will allay the concerns raised by the noble Earl and thus demonstrate to the Committee that the amendment is not necessary.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

My Lords, there are a number of amendments in this group, all related to the audit function required as part of the franchising provisions. The noble Baroness, Lady Scott, proposes an amendment to state explicitly that the auditor, whose role is to issue a report to the franchising authority on certain aspects of the assessment of the proposed franchising scheme, must be independent. The noble Lord, Lord Snape, proposes an amendment that would require the auditor to be appointed by a traffic commissioner. The noble Lord, Lord Bradley, proposes an amendment that would require the auditor to consider matters relating to an authority’s consideration of affordability and value for money. I thank all noble Lords for their amendments, and will turn to each one.

Before I go into those details, the noble Baroness rightly talked about the Public Accounts Committee’s report on local scrutiny, and I thank her for bringing that to the Committee’s deliberations. We are of course ensuring that we consider its recommendations very carefully as the Bill moves through Parliament, and we will respond during the course of the Bill.

Turning to the amendments, I recognise the importance of ensuring that decisions to move to a model of franchising are taken on the back of quality information and robust analysis. As I have explained previously, in developing this Bill we have been keen to move away from the quality contract scheme processes set out in the Transport Act 2000, which, in particular, included the need for independent scrutiny by a “Quality Contract Scheme Board”. While I agree entirely that there is a need for a level of independent assurance, I do not think that devolved decisions should be second-guessed by an independent panel. We introduced the role of the auditor to ensure that an independent third party provides assurance that certain information used in the assessment is of sufficient quality, that the analysis of that information is robust and that relevant guidance has been followed. It is not the auditor’s role to take a view on the decisions taken by the franchising authority. As I am sure that noble Lords agree, its role is to provide a quality check.

The Bill requires any auditor to have a “recognised professional qualification” and to be eligible to act as the local auditor of the authority’s accounts. As such, we would expect any auditor to be suitably qualified and able to provide independent assurance.

[Baroness Randerson]

Does the noble Lord accept that it is not just a case of qualifications but of perceptions? It is only too easy for a situation to arise within a public body where an auditor’s assurance has been given but is not seen as good enough or independent enough by critics of the scheme. Therefore, the arm’s-length rule is the safe way of going forward.

[Lord Ahmad of Wimbledon]

I agree with the noble Baroness inasmuch as it is important that it is not just the process, but the perception—and the perception in the mind of the public, too—that there is scrutiny, and effective independence in the auditor role. However, I believe that any auditor, on the basis of what we have suggested of having professional capacity, would be able to show that level of competence and, indeed, address the issues of perception. As such, it would be reasonable for the franchising authority to appoint such an auditor. That applies as much to the suggestion by the noble Lord, Lord Snape, that it should be the auditor rather than the traffic commissioner, particularly as it would be the franchising authority that paid for the services of the auditor.

Coming back to the point raised by the noble Baroness and also by the noble Lord, Lord Shipley, I do understand that an auditor could be perceived as more independent if they are appointed by a third party—indeed, the noble Lord, Lord Snape, used the example of a traffic commissioner—or if the Bill specifically stated that they must be independent. However, I would argue, again, that any auditor with an established reputation would be mindful to protect their own role and independence in any report they provided.