Bus Services Bill [HL]

Earl Attlee Excerpts

Wednesday 20th July 2016 Lords Chamber

Moved by

[Earl Attlee]

87: Clause 9, page 39, line 31, at end insert—
“(6A) The requirements that may be specified under subsection (4)(b), (4)(e) and (4)(h) in relation to fares and the prices of multi-operator tickets may only be specified if all operators party to the enhanced partnership scheme are in agreement with the requirements.”

[Earl Attlee (Con)]

My Lords, this amendment would add an additional subsection to the list of requirements for an enhanced partnership scheme. The ability of commercial bus operators to set their own fares is a key feature of the deregulated market. Of course, fare structures are set competitively in the same way as any commercial enterprise looks at its cost base and what its competitors are charging and then structures its charges accordingly. The competition authorities have important safeguards in place to ensure that bus companies do not collude to stitch up the market and set fares at levels that disadvantage passengers, so there are already checks and balances. As an aside, I have heard people say that bus operators are charging people off their services by setting fares so high that they deter passengers. What nonsense. Why would a bus operator want to charge so much that no one uses their services?

Clause 9 inserts new Section 138C into the Transport Act 2000, setting out the requirements for an advanced partnership scheme. There are many useful things in here and I very much support the concept of enhanced partnerships where quality partnerships or even advanced quality partnerships have not been possible, for whatever reason. It would be an important addition to this new section if fare structures can be specified in an enhanced partnership only where all the bus operators in the partnership agree. Bus operators have the expertise to make these sorts of decisions and have been doing so for decades. It really should be their call, within the usual constraints of what is reasonable, on what the market will tolerate and so on. I do not think that local authorities have this expertise. Therefore, fare structures within an enhanced partnership should be for the bus operators to determine collectively. I beg to move.

[Baroness Randerson]

Before I speak to the amendments in my name, I will contribute to the debate on the amendment of the noble Earl, Lord Attlee, which puzzles me. I cannot understand how a bus operator would be about to enter into an enhanced partnership if it did not agree with something as fundamental as the fare structure. The enhanced partnership would not be taking place. This is not something that local authorities are forcing bus companies to do; it is an agreement that is entered into by both sides. Therefore, if they could not agree on the fare structure, it would not be going ahead. I find the amendment puzzling.

Amendments 96 to 99 seek to find out more about how the Government envisage the system will work for enhanced partnerships. Once again we are trying to tackle the potential power of a bus operator to block an agreement or a partnership in an unreasonable manner. New Section 138F(11) refers to what the regulations may cover. But, to be honest—and I have read this a dozen times—it is pretty meaningless without seeing the draft of the regulations. So Amendments 97 and 99 require that the regulations be approved by Parliament—they cannot be slipped through by negative resolution. The important thing is that both Houses get the chance to debate the practicality and robustness of the regulations.

I remind noble Lords of what I said the last time we debated these issues. First, the Bill is a skeleton Bill. It stands or falls on the quality of the regulations. Basically, in this part of the Bill, we are being asked to approve a blank sheet of paper because we have no concept of what the regulations will look like. I remind the Minister that there are no guarantees of success for the Bill. The fact that there is a great deal of cross-party agreement with the principles of it does not mean that it will actually work in practice, because two previous attempts failed. The 2000 and 2008 Acts have not been practical. The practicality of the Bill lies in the regulations.

Secondly, I am not confident that even the Minister and his officials have a clear view yet of how some of this will work. I say this not out of any kind of inspired thought process but because the Explanatory Memorandum actually says at one point that the policy has not yet been finalised on an issue. You think to yourself, “If the Explanatory Memorandum confesses that the Government have not got round to the policy yet, clearly the regulations have not been prepared and the practicality and difficulties of them have not been assessed”.

I turn to Amendment 98. The concept is introduced elsewhere in the Bill that unreasonable objections should not be allowed. I am puzzled about why there is no mention of the concept at this point in the Bill. In this case, the provision allows objections on a purely numerical basis, rather than introducing again—consistently, I would argue—the concept that an objection might be unreasonable. This amendment attempts to introduce the concept of unreasonable objections to enhanced partnerships and address how they should be dealt with and tested. We suggest that, in the case of unreasonable objections, local authorities should have an appeal mechanism to a traffic commissioner. I hope the Minister will take on board the spirit of these amendments in an attempt to find out more details and practicalities of how this will actually work.

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In summary, I believe that the Bill as drafted strikes the right balance between meeting the needs of bus passengers and safeguarding the legitimate commercial concerns of individual bus operators. We do not agree with the amendments, and I hope that the explanation I have given has provided some degree of insight into the Government’s thinking. Based on that, I hope the noble Earl is minded to withdraw his amendment, and other noble Lords not to press theirs.

[Earl Attlee]

My Lords, I am grateful to my noble friend for the response and to all noble Lords who have spoken to their amendments. We have had several successes from the Minister and we cannot expect all our amendments to find favour. I will consider what the Minister has said about my amendment, and subject to the usual caveats, I beg leave to withdraw it.

Amendment 87 withdrawn.

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[Lord Snape]

My Lords, I have every sympathy with this amendment, although I doubt its practicality. I do not know whether the noble Baroness who has just spoken saw the BBC “Countryfile” programme about four months ago. It was about rural bus services and was very interesting. Indeed, at Question Time I asked the Minister whether he had seen it—I do not know if he remembers—and he replied that he had better things to do on a Sunday evening than watch television, which I understood. However, all the answers to the questions that the noble Baroness has just read out from that pre-prepared speech were given over the course of that programme. The fact is that resources for local authorities to run bus services, particularly in rural areas, have been decimated by the Government. The Minister partially acknowledged that that was the fact at Question Time after this programme appeared.

My noble friend on the Front Bench talked about the impotence of local communities to provide these services. That impotence is the direct result of those reductions in local authority funding. The reductions have been country-wide but have particularly hit the rural areas that the Conservative Party professes to care about most. Those are the facts, and designating certain routes as community routes will not make any difference in restoring those services of concern. It is about money. Under the 1985 Act, the noble Baroness or anyone else can set up a bus service anywhere they like. However, people do not do so in rural areas because it is not thought possible to make a profit there. One could argue, as the noble Baroness did, that in life there are things other than profit, but most bus companies, small and large, depend on making a profit if they are to continue.

In moving the amendment, my noble friend on the Front Bench talked about designating community bus routes. One could argue that as all bus routes run through communities, they could all be so designated. However, I fear that if the Government accepted this amendment, operators big and small would be even more cautious about running services in the areas just graphically outlined by the noble Baroness, particularly if they have to operate for a minimum six-month period. If I were still involved in a bus company and someone suggested running such a service, telling me that although there was no guarantee of making any money it was regarded as an essential service in that area and would have to run for six months, I would be inclined to say, “Forget it”. I am not sure what the thinking is behind tying a route to a six-month timescale, but it makes it less rather than more likely that such a service will be introduced. In any case, what would happen to services such as the New Forest explorer bus network, which runs for short periods—in fact, serving those communities—but for less than six months? What would happen to park-and-ride schemes that are run at holiday periods? Operators would surely think twice about introducing services such as those if they had to operate them for six months at a time.

In the debate on the last group of amendments, we made it clear that in some cases the service registration function has been taken away from traffic commissioners and given to local authorities, but the amendment proposes that traffic commissioners should be responsible for the designation mechanisms for these services. That is a bit of a contradiction in terms, and in fact I am not sure how it would operate in some areas. The brutal fact is that it is for local transport authorities to decide whether a service is of community value and, if they so decide, it is open to them to support it. Obviously, many of them do not have the money to do that but the fault for that lies with those responsible—the Department for Transport and the current Government—rather than with bus operators generally.

I close as I started: people will not run a service—community or otherwise—if it obviously does not pay and if the local authority involved does not have the function to enable it to run the service in the first place.

[Earl Attlee]

My Lords, I completely concur with everything that the noble Lord, Lord Snape, has said, apart from the fact that there is not a bottomless pit of government money. However, I take on board and admire everything else that he said.

[Lord Snape]

Of course there is not a bottomless pit of public money. It is for the Government to decide the priorities for government expenditure, and I urge the noble Baroness who spoke just before me to press the Government to see the realities of life in rural areas before they take the axe to local government funding any further. I am pleased that the noble Earl, Lord Attlee, agrees with me, although I am not sure whether that will do anything for either of our careers.

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[Lord Whitty]

My Lords, most has already been said by my colleagues on the Front Bench. This clause sticks out like a sore thumb and goes against the rest of the Bill and any commitment to localism. It undermines the rest of the Bill, which essentially gives local authorities a range of options in how to optimise the bus services in their area—urban and rural. There are many circumstances in which the provision, in partnership or directly, of a municipally owned bus fleet could play a part. If that is closed off by keeping this clause in the Bill, we will be undermining the consensus behind most of its provisions. The Minister ought to take this back to his colleagues because it will be an issue of contention in the Bill’s later stages, and is already an area of extreme contention with many local authorities and bus operators around the country. It would be wise to listen to the Committee—to speakers on this side, at any rate—and withdraw the clause, preferably before Report.

[Earl Attlee]

My Lords, I very much support the inclusion of Clause 21 in the Bill, so I cannot support the noble Lord, Lord Kennedy, and the noble Baroness in seeking its removal.

Municipal bus companies—to be honest, there are only a few—served a very useful purpose prior to the deregulation of the market. Among those remaining in existence, there are indeed some great operators. Reading Buses and Nottingham City Transport, for example, consistently provide excellent services and win award after award. I hope that I am not doing others a disservice by not specifically mentioning their hard work and achievements. I agree with some of the compliments paid to these operators by the noble Baroness, Lady Randerson.

I know that the mood music surrounding this clause has caused some concerns about the future existence of the remaining local authority-owned companies. This is simply extremely unhelpful and unfortunate. I hope that my noble friend the Minister will state very firmly that those existing companies have nothing to fear and that he will be able to reassure them and the Committee that there is nothing in this Bill that threatens their existence.

The noble Lord, Lord Kennedy, asked, “What is wrong?”. In the case of a local authority looking to go down the franchise route, the authority invites a bid for the contract. Its own company submits a bid—it would be rather odd if it did not. Preparing bids is an expensive and time-consuming business. So who has paid for the local authority-owned company to bid? Yes, the local authority that owns it. Would the local authority award the contract to the company it owns? You bet it would. Otherwise it would put its own company out of business. To me this all smells of state aid.

So again we are back to fairness and level playing fields. Allowing a franchise authority to create its own company, which would then bid and win that franchise, almost by the back door, is simply wrong. My counsel is that Clause 21 should stand part of the Bill.

[Lord Shipley]

My Lords, I could not agree less with the noble Earl, Lord Attlee, on this matter. The grounds that he has produced seem to relate to a potential conflict of interest where the local authority is a franchising authority. Clearly, there could be—but, of course, not all contracting will relate to franchises. A whole set of partnership arrangements will be possible. The noble Earl is asking the wrong question, if I may say so.

I remind the Committee of my vice-presidency of the Local Government Association. Clause 21 is a very bad clause and I hope that the Minister understands that it will become a major issue on Report if the matter is not resolved. The clause is headed, “Bus companies: limitation of powers of authorities in England”. Of course, it does not apply in Wales, where local authorities would have the right to continue to create companies if they wished to. But that right to form a company exists now and it seems to have worked. So it is not clear why the Government have decided to include this clause in the Bill, which is otherwise, as the noble Lord, Lord Whitty, pointed out, by and large very good in many respects. Many of the amendments we have been discussing are matters of detail that would enhance what is already a good Bill.

I remind the Minister that five years ago this House passed the Localism Act 2011, which granted an extension of powers to local authorities with an associated general power of competence. That is not to say that local authorities then take on that power and start creating lots of companies, but it means that they have the power to do so should there be an occasion when it seems necessary and in the public interest so to do. It is therefore wrong in principle to remove the right of local councils to do that.

So I hope the Minister will understand the strength of feeling about this issue, and I hope that he will be able to explain to the House why the Government think it is necessary to strike out a power that local government currently has, which has served local government well and would potentially improve public transport networks rather than make them worse.

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[Baroness Randerson]

Amendment 127A in my name would insert a new clause after Clause 21 that would cover essentially two things. First, it would phase out the bus service operators grant, with the money instead going to local transport authorities. Secondly, where there would otherwise be no bus service, yet there is a demand for such a service, it places an obligation on local transport authorities to work with specialist and community operators in partnership.

On the bus service operators grant, in a recent reply to me the Minister stated that this grant is worth £250 million a year to bus operators and local authorities, and that it has helped to extend the rural bus network by 13%. But that is only part of the picture. Basically, the bus service operators grant is going directly to operators. It is a poor incentive, particularly to greater energy efficiency. It represents the largest proportion of direct funding for the bus industry outside concessionary travel, which, of course, is not a subsidy. I believe that BSOG is currently paid to operators at a rate of 34.57p per litre of fuel used for running eligible bus services. Because it is directly linked to fuel consumption, a bus operator receives more subsidy if it increases its fuel consumption. It is therefore poorly linked to environmental objectives. BSOG artificially lowers the price of fuel and therefore reduces commercial incentives to bus operators to invest in more expensive low-carbon buses which deliver longer-term fuel and carbon savings.

At the moment, the grant subsidises bus journeys regardless of value or profitability of the service. Therefore, my amendment suggests that this grant should be phased out and that the money should go directly to local authorities. I suggest that it needs to be ring-fenced. These are, after all, tough times for local authorities and we need to ensure that the money is retained for the subsidy of bus services. Local authorities are well placed to decide local needs and priorities and to use the money to help them meet the objectives they set in their local transport plans; for example, the greening of their bus fleets. It is reasonable for the Government to decide what type of schemes can be covered by the grant but to leave it up to local authorities to choose local priorities. Crucially, the grant could be used to offer tenders to bus companies when otherwise local services would be withdrawn. I remind noble Lords that small operators, in particular, work to very small profit margins in some areas, particularly rural areas. Life as an operator in such areas is very tough and often on the margins. This grant could be used to assist them. We need to give local authorities the tools to encourage operators to keep running rural services.

Finally on this issue, as I understand it, the Government have already said that the bus service operators grant will be devolved to local authorities where franchising exists, so clearly there is no objection in principle to that. I urge the Minister to apply that approach everywhere.

The second part of the amendment is designed to ensure that local authorities work with other organisations which have a responsibility to provide local transport services, such as education, health and social services. In practice, this often means one local authority department being asked to co-operate with another local authority department, or it could mean co-operation with a neighbouring authority or with the Post Office or the health service. It seems to me simple common sense to require local authorities to work with others to get what is in effect best value for money. This is already done by some local authorities so there is no reason why it should not be done by many more. This amendment encourages them to do this. It does not force them to do it; it simply encourages them. I urge the Minister to give that serious consideration. I beg to move.

[Earl Attlee]

My Lords, I have always had concerns about the fuel efficiency argument that the noble Baroness so skilfully articulated. I do not oppose her vision but do not quite understand why the proposed new grant to local authorities would not get swallowed up in their general budget and not result in any additional services. If the noble Baroness would touch on that point, it would be helpful.

[Lord Ahmad of Wimbledon]

My Lords, as a Minister, one gets used to looking in front of one and not behind. I apologise to my noble friend for not realising that he wished to speak and for attempting to speak before he did. I thank the noble Baroness for her contribution. Her proposed new clause seeks to devolve the bus service operators grant, or BSOG as it is known, to local authorities, and would require authorities to consider joint funding of subsidised local bus services in partnership with specialist and community operators.

I know that the issue of funding for bus services was raised by many noble Lords during earlier debates on the Bill, and I agree that it is a key issue that we need to tackle. BSOG is a payment made to bus operators by my department to help support local bus services outside London. Since 2013-14, some £40 million a year of BSOG has been devolved to local authorities outside London, rather than paid to the bus operators. This money is for the services that local authorities subsidise themselves through the tendering system. However, the remaining BSOG funding is paid to bus operators for commercial rather than tendered services, reflecting the fact that in the current model of bus-service delivery bus operators are responsible for providing our local bus services and deciding which services to run.

I agree that where an authority takes on the financial risk associated with providing bus services through establishing a system of franchising they should have access to the BSOG funding that would have been paid to bus companies in the area. So BSOG funding will be devolved to local authorities where franchising is established. However, it is important to remember that where franchising is not established the deregulated market remains, with bus operators responsible for devising and running local bus services.

For many bus operators, BSOG can be the difference that ensures a local bus service is viable, and this can be especially true in rural areas—a concern expressed by several noble Lords. Such commercial services, which operate with no contractual relationship with local authorities, often run across local government boundaries. So decisions taken by one local authority, if BSOG funding was devolved to it, could very easily have a significant adverse impact on services in another area. Devolving BSOG to all authorities as a matter of course could therefore have significant implications. I should explain that we are already reviewing the BSOG system with the aim of ensuring that funding is targeted where it is most needed. I envisage that we will launch a consultation later this year on how the system could be reformed.

The noble Baroness made a couple of points about BSOG being a poor incentive for fuel efficiency. A number of existing top-ups to BSOG incentivise particular improvements, including environmental improvements. I agree that a fuel-based system sends unhelpful signals. That is an issue we will be looking at in our review and the consultation to which I referred.

I hope this reassures the noble Baroness that we are thinking about the BSOG system with the aim of ensuring that we get the best out of the funding available. However, I would not want to pre-empt that exercise by setting out changes on the face of the Bill. However, I agree that resources can be used more effectively where services are planned together, and where specialist and community operators are involved. This is something we are exploring through our total transport pilots as we want to ensure we make the funding available go as far as possible.

I reassure the noble Baroness that we will continue to look further at the extent to which this policy can be pursued and championed, and whether it is something that can be considered further in the Bill. Given that reassurance and explanation, I hope that she is minded to withdraw her amendment.