Bus Services (No. 2) Bill [HL]

Lord Moylan Excerpts

Committee stage
Tuesday 28th January 2025 Grand Committee

[Lord Berkeley (Lab)]

My Lords, briefly, in looking at Amendment 1 and hearing the speeches on it, especially from the noble Lord who proposed it, I ask: what is the point of this amendment? It seems to me to be motherhood and apple pie and nothing much else. You can interpret the phrase “performance and quality” however you want—no doubt many noble Lords will link that phrase to some amendments that they will move or speak to later—but I really do not see it. Here is a Bill to improve passenger services and quality, clearly, but the noble Lord wishes to put in an amendment: Amendment 1. We will probably spend half an hour talking about it, but I hope that my noble friend the Minister has an answer as to why he does or does not like it.

[Lord Moylan (Con)]

My Lords, I was not going to speak on this group after my noble friend Lord Effingham spoke, but I am prompted to do so by an earlier intervention.

It is very important that, when you make a large change, as is proposed here—the Government will claim that this is a significant change, I think, and rightly so—you are clear about what you are trying to achieve. We might assume that everyone wants better buses and so ask why there is a need to say it, but you need to be clear about what you are trying to achieve. Of course everyone wants better buses, but what actually constitutes better buses? When the railways were nationalised, everybody wanted better railways. They did not necessarily imagine that, in the 1960s, that would involve slashing nearly all the branch lines in the country and making a dramatic change to the way in which the railways operated by cutting them back.

I am in some sense trying to help the noble Lord, Lord Berkeley, with his question on the purpose of the amendment. There is also a further question: if you have an objective, who is to be held to account for that objective? This seeks to hold the Secretary of State firmly to account and put him at the centre of the chain of being responsible for this Bill.

It seems to me that there is nothing else in the text of the Bill that explicitly puts passengers, passenger needs and the quality of the service they receive at its heart. I think that there would be great benefit in doing so. We know that the Government and local transport authorities are responsible to multiple stakeholders—not only the users of their services but their workers, trade unions, local electors and so on. They have to balance the large number of needs and demands on them. The amendment says that the requirements of passengers come ahead of those others and that the Secretary of State would be held accountable if the Bill did not work out in improving passenger services. I find it difficult to see, first, why the noble Lord, Lord Berkeley, has difficulty understanding that point and, secondly and perhaps more importantly, why the Minister, should he be moved to resist this amendment, would want to do so.

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

My Lords, the first group of amendments relates to the Bill’s purpose. At Second Reading, I set out the need for this Bill and explained why the Government are taking action to transform bus services across England. The Bill provides new powers for local leaders, so that local communities in England have greater control over bus routes and schedules. I thank the noble Earl, Lord Effingham, and the noble Lord, Lord Moylan, for their amendment and the opportunity to revisit the Government’s objectives.

Amendment 1 would place a direct requirement on the Secretary of State to have regard to improving the performance and quality of bus passenger services in Great Britain—in fact, it would make this the statutory purpose of the Bill. I absolutely support the reasons why noble Lords have drafted this amendment: they, too, want to achieve a better bus network that is more reliable and performs well. That is a shared goal. The reason we are here debating this important legislation is to reform the industry.

I recognise the points made by the noble Earl, Lord Effingham, about the KPMG report, and by the noble Baroness, Lady Pidgeon, about the benefits of buses to individuals and communities, as well as the inadequacies of the current arrangements. However, I am bound to disagree with the assertion that there is no evidence for the Government’s approach. There is plenty of evidence, some of which we have already talked about, such as the improvements in Manchester and elsewhere, including Cornwall, which is not a large conurbation. I also disagree with the assertion that there is public good and private bad in here. This is a very large menu of choices for local transport authorities. It is certainly not one size fits all.

As the noble Baroness, Lady Pidgeon, observed, during the passage of the Passenger Railway Services (Public Ownership) Act 2024, the noble Lords, Lord Moylan and Lord Gascoigne, tabled a very similar amendment. It sought to insert a purpose clause setting out improvement of passenger railway services as the purpose of that Act. At the time, I explained that the Secretary of State’s and the Government’s wider plans and objectives for the rail network included improving performance but noted that this was not the sole purpose. I offer the Committee the same rationale for this Bill. The amendment to the public ownership Bill was not carried.

Of course the objectives of this Bill include improving reliability and performance. They are important aims, but the Bill seeks to do more. It seeks to improve safety and accessibility, to provide local leaders with the powers to make the right decisions for their local areas, to support reaching net zero and to put passengers at the heart of the Government’s reforms. The noble Lord, Lord Grayling, was kind enough to suggest that I would not let ideology triumph over the right solutions. In this case, the Government are not doing that, either.

The Bill contains a range of solutions for local bus issues, which allow local choices for the best solutions and would recognise, in appropriate cases, both the adequate provision of bus services by their existing means, with commercial operators, and the range of solutions, including both large and small operators. To single out one objective would undermine the message that the Government are trying to convey to local authorities, passengers, operators and the wider industry. Thus, I do not support the proposal.

Extending this requirement across Great Britain also presents significant difficulties. The Committee will have noted that most of this Bill extends to England and Wales but applies only in England, with a limited number of clauses that extend and apply to Wales and/or Scotland. In tabling Amendment 1, noble Lords appear to be seeking to apply all the Bill’s measures across the whole of Great Britain. That would raise the potential of cutting across the powers of the Scottish and Welsh Governments to decide how to run their own bus networks and what is best for their local communities. That would not be the right approach. It would mean the UK Government interfering in policy areas where the devolved Administrations categorically do not want that. It also potentially undermines their reform agendas; as some noble Lords will be aware, the Welsh Government are due to introduce their own Bill into the Senedd in the coming months, as they seek to introduce bus franchising.

This amendment would also have significant ramifications on time and resources. Local transport is devolved, so legislative consent Motions would be required. That would potentially slow down the passage of the Bill and the pace of the Government’s reforms, which would be a bad outcome for passengers, who desperately need better bus services now, for the reasons set out by the noble Earl and the noble Baroness earlier. I am sure that noble Lords opposite would not want this outcome and therefore hope that this amendment will be withdrawn.

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Above all else, it is enabling us to integrate bus services, fares, ticketing and customer information across Metrolink and bus, with London-style tap-and-go contactless bank card payments and daily and weekly caps from March this year. We are now moving to rail integration, but that is for another day and another Bill. I hope the Minister accepts my amendments in the spirit in which they are offered. I beg to move.

[Lord Moylan (Con)]

My Lords, I rise to speak to my Amendments 3, 5, 14, 15 and 16, which are supported by my noble friend Lord Effingham. With your Lordships’ permission, I will deal with them more logically than numerically, because they form a sort of logical suite.

The dramatic thing at the heart of the Bill is the possibility of the extension of franchising to all local transport authorities without any need for permission from the Secretary of State. It is true that other models are available, but enhanced bus partnerships already exist and simply making them a little more enhanced—although that might be valuable or lead to some sort of change—is not a dramatic intervention. As for the creation of municipal bus companies, that would be dramatic, but it is not what we are focusing on today. This group of amendments—mine in particular, but the whole group—is focused particularly on franchising, which occupies a large part of the text of the Bill, and understandably so because of the importance of it.

Yet I come back to this question all the time: why do the Government believe that franchising is a model—admittedly, one they are not imposing on any LTA; of course, I grant that—that they are willing to see any LTA, possibly every LTA in the country, adopt without any supervision, by-your-leave or check on the part of the Secretary of State? It is perfectly possible that as this Bill becomes law every LTA in the country goes for a franchising model. I am not saying that is going to happen, but theoretically it could, and nothing would prevent it.

So, the question we come back to, and this is what Amendment 3 is related to, is: why franchising? At the heart of franchising is the notion that a single controlling brain—yes, we are back to similar language to that which we used in relation to the railways Bill that we had before Christmas, but I do not apologise for that because a similar form of thinking is going on in this case—can produce a better service, a more rational service and a more socially friendly service than competition generated by the private sector in response to demand. There are arguments of course on both sides. This argument has been going on, as I think I mentioned in the railways Bill, since at least the 1920s. Our first attempts, or rather our success, in this country at regulating bus services go back to the 1920s with the establishment of the traffic commissioners. After they were established, their permission was needed, up until the 1980s, for any private company to run a bus service. They had to agree the routes and the fares. So we had a single controlling brain, and we went for a privatisation model from the 1980s, but the Government have simply failed to produce any evidence that this is a model that will work in all these LTAs and at a cost that the LTAs can afford without the subsidies that, notably, the Government are not promising.

When we ask for evidence, we are constantly pointed simply to Manchester and Cornwall. The noble Lord, Lord Goddard of Stockport, has of course given an eloquent explanation of how successful that model has been in Manchester, and I do not deny that success. It is possible that other noble Lords with roots in Cornwall will want to explain why the model has been such a success there—I do not know—but that is a very slender evidence base, if we are talking about all the LTAs in the country.

Amendment 3, therefore, is a probing amendment. It allows any private bus company to operate a service without a permit and it goes to the heart of the notion—it strikes a dagger at the heart of the notion—that a single controlling brain is necessary for good public service. It would wreck the franchising model that the Government propose—I admit that frankly—but its purpose today is to give the Government an opportunity to explain more fully why they think it is a perfectly acceptable outcome that franchising should be potentially adopted by every LTA in the country, without any regard to their experience, the size of the local transport authority or any other factor that might differentiate them significantly from Manchester and Cornwall.

With Amendment 15, I come to another point. Let us assume that franchising is okay and the case for it has been made—it has not, but let us assume that and move on, so to speak, logically. The amendment says that, before it embarks on an assessment for introducing franchising, the LTA must set out clear objectives as to what it is trying to achieve. At the moment, the Bill does not require it to do so; it is perfectly possible to embark on a franchising model without setting out for the public or for stakeholders what could be achieved and what is intended to be achieved, as well as what alternative structures and approaches might achieve the same objectives. The amendment would be a genuine improvement to the working of this proposed model because it would bring clarity right at the outset.

To move on in what is, I hope, a fairly logical order, Amendment 5 asks for data on performance and passenger numbers to be collected on a standardised basis across LTAs to tell us what subsidy is being expended per passenger in the operation of the franchising model—should they choose to take it up, of course. They might not do so, I grant you; we have discussed that already. The amendment would also require the setting out of the criteria that the auditors—I am calling them “auditors” while appreciating that the name may change as the pool of resource understandably widens—are to use when assessing the plan put forward by the local transport authority. Again, I think that those two things would be really helpful. We will want that data, and we will want to know that the auditors will be applying clear criteria standardised across the country—not the sole criteria that they will be applying but some criteria that will probably be nationally applicable. Those should be set out by the Government.

That brings us to Amendment 14, which takes us on to the point where the franchising model has been established. The franchise is running, but it is not working. In this Bill, there is no step-in power on the part of the Secretary of State in circumstances where bus services are manifestly deteriorating rather than improving as a result of introducing a franchising model. When this point was tangentially made at Second Reading—I think it was then; it cannot have been anywhere else—the Minister said that, because I had spent a long time in local government, I should somehow stick up for the autonomy of local government. I am perfectly happy to do that up to a point but, at the point at which services are manifestly deteriorating, there should be a power for the Secretary of State to step in. It exists in other respects with local authorities generally. We should have something of that order so that passengers and users of bus services can be protected. I would like to hear why the Minister thinks that that is wholly inappropriate, except on rather histrionic grounds around the autonomy of local government and principles of that character.

Finally, Amendment 16 is intended to provide a degree of stability in the local bus market in the event that a franchising assessment has taken place and been audited but, as a result of the audit, either it has been found wanting or the local transport authority has none the less decided not to proceed for whatever reason. At the moment, there is no limitation on the local transport authority starting the whole process again, if it chooses to do so, almost immediately. If that were the case, why would any private bus company continue to invest in or improve services if the axe, so to speak, could be dropped on it at any moment—that is, with them having gone through a process where they were told that they could carry on but the axe then being dropped again? Amendment 16 would put in a five-year ban on local transport authorities recommencing that assessment process to give some stability to the bus operator or operators in their area.

All these amendments, except for Amendment 3, which I admit is completely probing and would seriously damage the Bill, are good, sensible, practical ways of improving the franchising model that the Government are advancing with such enthusiasm. I very much hope that other Members of the Committee and, indeed, the Minister might want to say that they could support them.

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[Lord Berkeley (Lab)]

My Lords, just before the Minister responds, several noble Lords have talked about the bus service in Cornwall, saying how wonderful it is. As many noble Lords know, I live there and I often use the buses. There is nothing particularly special about a service that runs on time, publishes timetables and has bus stops that work. They have managed to persuade somebody—I think the Department of Transport—to enable them to finance a group of double-deck buses for the trunk routes. They are very comfortable and even have conference facilities on the top deck, with tables and things. It is still working very well. I think all that was needed was some officials in Cornwall Council who knew what they were doing, led by a good friend of mine, called Nigel Blackler. He managed to persuade the Government and Ministers at the time that it was a good thing—as Cornwall is geographically long and thin with one railway down the middle and a motorway down the middle and lots of others. It is quite possible to do; it has not cost them an arm and a leg and it is very popular. Why not carry on doing it?

[Lord Moylan (Con)]

May I ask the noble Lord, briefly, if he believes that the whole success in Cornwall depends on a few people knowing what they are doing and being professional about it—I am sure he is right, he knows his area—would he not want to seek from the Minister the sort of assurances that I am looking for? That is that officers in other local transport authorities that adopt franchising are seen to have similar skills and abilities before they are allowed to do so?

[Lord Berkeley (Lab)]

If am grateful to the noble Lord. I think it was probably at Second Reading, or sometime, that we discussed the difference in the quality of local authority management between Dorset and Hampshire or somewhere there. It is down to the local authority to make sure that they have the right people. I am sure Ministers will be very keen to ensure that they do have the right people, because otherwise you will get what I found in Dorset. The train goes every hour and stops at a station called Sherborne and, interestingly, the connecting bus departs five minutes before the train arrives. That is just the kind of thing we do not want, but I hope the local authorities will be sensible enough to learn from some of these mistakes.

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[Lord Hendy of Richmond Hill (Lab)]

I thank the noble Lord for his interjection. In his case, it is true, but there are other cases where the market has shown a considerable inability to respond across the country.

To conclude on Amendment 14, it is for the reasons I gave that I ask the noble Lord, Lord Moylan, not to press his amendment.

Amendment 15 in the name of the noble Lord, Lord Moylan, would require a local transport authority to carry out a preliminary assessment if it was considering franchising its bus services. Much of what the noble Lord has proposed to be included in the preliminary assessment is already included in the current legislation and must be included in the local transport authority’s franchising assessment. An assessment may or may not conclude that franchising is the best option. The assessment would then be published if an independent assessment had been carried out and the decision was that franchising was the best option. This amendment is therefore unnecessary, and I would welcome the noble Lord not pressing it.

Amendment 16 in the name of the noble Lord, Lord Moylan, seeks to impose a five-year moratorium on repeating franchising scheme assessments in the same area if the previous attempt was unsuccessful. The aim of the Bill is to simplify the process for authorities wishing to pursue franchising, ensuring that decisions are made at the appropriate level and in a timely manner. This amendment would introduce unnecessary constraints on local transport authorities by adopting an overly rigid approach. There are many factors that might lead an authority to decide against pursuing franchising initially, only to reconsider this later; indeed, the period of time suggested by the noble Lord would in some cases exceed the cycle of local authority elections, in which a different party that chooses to do something different might be elected. Imposing a blanket restriction limits authorities’ ability to respond flexibly to evolving conditions and opportunities. Assessments are costly and time-consuming so will not be undertaken lightly. This amendment is unnecessary; I hope that the noble Lord will not press it.

[Lord Moylan (Con)]

My Lords, on that point, the Minister has made in his response no reference whatever to the private sector. We are talking about circumstances in which buses are provided by the private sector in a particular area and the local transport authority, using powers to be created under this Bill, enters a franchising assessment model with a view to terminating the business of that bus operator—not terminating its activities but terminating it as a business and turning it into, simply, an agent of the local transport authority operating to instructions for a fee of some sort. That is one of the potential outcomes.

If you face that threat to your business, so to speak, and if the Government are equanimous in thinking that that is an appropriate threat to impose on the private sector, surely, if the decision at the end of that assessment is not to proceed, that private company deserves a degree of stability. Indeed, without that stability it is very unlikely to invest in any of the things we would like to see happen. Those might concern improved buses or better technology, but also better training for staff, proper recruitment, investment in the workforce and so on. An answer entirely focused on how the public sector might behave totally misses the point of what this amendment is trying to achieve.

[Lord Hendy of Richmond Hill (Lab)]

Of course I respect the noble Lord’s view, but the needs of local communities as expressed through local transport authorities are continuous and there are many examples across the country, unfortunately, of private sector operators choosing, for legitimate commercial reasons, to significantly vary the bus network in their area with the minimum statutory notice. They are quite adept at changing their business in accordance with market circumstances, whereas I think it is quite right to afford local communities the chance—through their elected local transport authorities—to choose to take a view about whether the bus service they are being offered is good enough to continue in its present model, or whether to choose to do something different. If there is a degree of jeopardy attached to this, that jeopardy can be expressed by the continuous need for commercial operators in those circumstances to continue serving the local area well. That would therefore make it unnecessary for the local transport authority to pursue franchising, when there are already remedies in the Bill and a mixture of measures offered to local areas to achieve their aims.

The next four amendments are from my noble friend Lord Woodley, and Amendment 17 is the first of these. He has been joined by the noble Lord, Lord Whitty, who also spoke about this. It seeks to place a requirement to establish a joint forum between the franchising authority, bus operators and trade union representatives. However, current legislation states that franchised services must be provided under a local service contract between the bus operator and the franchising authority. It is then for an individual bus operator, as an employer, to discuss and determine staffing and employment standards within the bus company, in consultation with staff and their trade union representatives. It is also for the franchising authority to decide what forums it wants to put in place to support the delivery of its bus services.

It should not be for the Government to dictate how a local transport authority should run its services. I know that noble Lords are concerned about driver welfare standards, and I am pleased to tell them that this issue is covered in the current franchising guidance. I will consider further what is said in the guidance about consultation with the workforce, and workforce planning, as a consequence of this discussion. For the moment, I do not believe that this amendment is necessary and I ask my noble friend not to press it.

Amendments 18, 19 and 20 were also tabled by my noble friend Lord Woodley. They raise the important issue of ensuring that employee rights are protected when a local authority bus company is established or during the transfer to franchising. This country already has robust legislation in place to safeguard employees. As noble Lords know, the transfer of undertakings regulations apply to employees of businesses in the United Kingdom. Should a local transport authority choose to establish a bus company, it would be necessary for it to consider the application of TUPE regulations, which are supported by additional guidance to help employers and employees understand their respective responsibilities.

Similar principles apply to franchising. Section 123X of the Transport Act 2000 already provides for the TUPE regulations to apply to staff transfers resulting from the introduction or transfer of a bus franchise, meaning that proposed Amendment 20 would add little or no value beyond what is already in place.

Furthermore, the franchising statutory guidance offers detailed advice on how to determine whether a member of staff is “principally connected” with a service. In line with existing regulations, this guidance advises franchising authorities to work collaboratively with local operators and employee representatives to agree on criteria for determining which staff are principally connected with affected services. For example, such criteria could include the amount of time that an employee spends working on franchised services or whether the employee is part of a specific group assigned to those services. TUPE would then apply to employees identified as being principally connected.

It is of course worth emphasising that, like some other public service employers, existing local authority bus companies often go beyond basic statutory requirements to support their employees. This is particularly true for individuals from protected groups, with many local authority bus companies offering attractive terms and conditions, such as higher rates of pay, flexible working arrangements, and generous holiday and maternity and paternity provisions. However, as I said in respect of the previous amendment, I will consider further what is said in guidance in this respect beyond what is already there. I therefore ask my noble friend not to press these amendments.

The final amendment in this group comes from the noble Lord, Lord Hampton, and I note and welcome his interest in safety on the bus network. He will be aware that some of the most important parts of the Bill for passengers are around disability and addressing crime and safety, which includes provisions on training for front-line and wider bus staff. However, this amendment specifically relates to training for officials from franchising authorities on IOSH, which is about providing managers with the tools to maintain a safe environment, and NEBOSH, which is a qualification in health, safety and environmental management— I refuse to say either of those as an acronym.

The effect of this amendment would be an increase in the cost and time it takes to franchise, if staff had to undertake this specific training before starting the franchising process. We all understand that safety is paramount for bus staff, passengers and the wider public but there are only a small proportion of franchising cases and those involved in franchising where having such qualifications would be relevant. It may also be that some of the training for holders of an operator’s licence, the Driver Certificate of Professional Competence, might be equally appropriate.

Part of the reform is to simplify and speed up franchising and drive down costs. This amendment would disproportionately impact authorities in considering franchising, including those in smaller towns and rural areas. This would disenfranchise local authorities, which goes against some of the core tenets of the Bill. Nevertheless, I will consider further what might be said in guidance about these important qualifications for those involved in this process who should hold them. As a result, I hope the noble Lord will feel able not to move this amendment.

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[Lord Goddard of Stockport (LD)]

I support my noble friend Lord Bradshaw. That is part of what we have done with the Bee Network in Manchester. We now have park-and-rides in parts of the borough where you can park your car all day and the bus comes and takes you straight down the very busy routes. We have increased bus lanes and camera alterations mean that as the bus arrives, traffic lights respond to it. It is that certainty, especially for people going to hospital and other places, that they know they can get there if they leave the car, perhaps a mile or a mile and a half away. It stops congestion at peak times throughout the borough. It is that foresight that local authorities have to embrace.

It is a good idea that if money comes from the Government, it comes with a proviso that you are providing evidence that you can reduce traffic and increase productivity by moving people from A to B without, as my noble friend Lady Pinnock said, waiting hours and hours for a bus that could eventually cost you your job. I fully support my noble friend’s amendment.

[Lord Moylan (Con)]

My Lords, I rise to speak to four amendments in this group, Amendments 30, 31, 32 and 69, although, again, I will speak to them out of numerical order. This week I stand down as chairman of the Built Environment Select Committee, and this morning I chaired my last meeting. It is quite curious that somebody very kindly gave me as a memento and a keepsake an original edition of the government-commissioned report, largely written by Colin Buchanan, Traffic in Towns. It warned that traffic would clog up towns and get in the way and strongly suggested that measures should be introduced. The interesting thing, perhaps, is that the report was published in 1963, 60 years ago. It was a very influential report, but obviously not influential enough if we are still, essentially, making the same claim today. It is possible that there is a political explanation of why the measures that Traffic in Towns proposed have never been implemented as fully as might be wished.

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Amendment 31 in the name of the noble Lord, Lord Moylan, recognises that it is important that local transport authorities know how much funding from central government is available to them. That is why funding allocations are already a matter of public record, as is the allocation methodology. In fact, the noble Lord asked me a Question in the Chamber, to which I responded, about the allocation methodology of funding awards that had recently been allocated. I have already referred, in responding to Amendment 4, to the intention of the department, subject to the spending review, to look at a longer funding period.

[Lord Moylan (Con)]

The Minister makes a very important point there. When the last grant was allocated—in round numbers, of £1 billion, £250 million went to bus operators and £750 million went to local authorities—a new methodology was introduced for allocating it. It was based on three factors; I cannot remember what they were but, in a way, that does not matter, because the important point that I raised was that there was no evidence underlying the choice of these three factors. Although it is true that the Minister answered my point in the Chamber, he offered no rationale or evidence for the choice of those three factors; they will come back to me the moment I sit down.

However, that is not my main point. My main point is not to drag over the coals of what was discussed in the debate we had on that Statement but, rather, to point out that the Minister now appears to be saying that the same unevidenced methodology, with no rationale to explain it—a third this, a third that, a third the other—will be applied when the department comes to distribute whatever funding it has available for buses as a result of the upcoming spending review. That is a very important point, if he is making it. Does he want to confirm that that is what he meant? Or did he, perfectly understandably, fall into a momentary lapse that he would want to withdraw? We really need to know.

[Lord Hendy of Richmond Hill (Lab)]

I thank the noble Lord for his intervention; my response to him will probably be very similar to what I said at the time. First, the allocation methodology was far more transparent than the previous Government’s allocation methodology: it allocated money to all local transport authorities in England for bus services when, previously, there had been occasions when money was competed for via a long and tedious process not necessarily winding up in success. I, too, am struggling to recall all three of the criteria, only because my mind is currently full of these amendments, but two of them were population and bus mileage, which are self-evidently the sorts of indexes that you would use for this process.

[Lord Moylan (Con)]

One was deprivation.

[Lord Hendy of Richmond Hill (Lab)]

The noble Lord is absolutely right. I thank him for his further intervention; we got there between us, even though neither of us could remember to start with.

Those are pretty central ways of allocating that funding. I will not necessarily commit the department precisely to that methodology in future because, obviously, we have the right to consider the matter further. Equally, we would of course be open to any other proposed indices to consider against population, deprivation and place need, but, in my view, those seem to be pretty good ones; I cannot see that they are obviously wrong. In conclusion to this little excursion into this matter, it is certainly better than partial allocations and competing for money without local transport authorities being certain of success—I am certain of that.

It is important to note that much of the funding to local authorities and local transport authorities is consolidated. That funding is not hypothecated by central government, thus it is for the local transport authority to determine how to apportion its funding. For example, the Ministry of Housing, Communities and Local Government provides local authorities with funding through the local government funding settlement. Money from that can currently be used to support bus services, for example by tendering. In future, it is possible that a local transport authority could choose to put some of that funding towards a bus grant using the powers proposed by Clause 16. The same is true for funding provided through the Department for Transport’s bus service improvement plans. Local transport authorities can decide how to allocate that funding towards a variety of bus initiatives.

Local authorities also have access to other sources of funding, including council tax money and retained business rates. Some of this money could be used to establish a local bus grant without recourse to funding provided by central government. The Government do not wish to tie the hands of local transport authorities by specifying the total funding to be used to carry out the functions under this section. It is for them to work out how much they wish to spend on such grants from within their wider allocations.

The powers proposed under Clause 16 are optional and would be available to local transport authorities if they chose to use them. It is thus hard to see how the statutory guidance—which may be published but its publication is not mandatory—could contain the information that would be required by the noble Lord’s amendment.

Lastly, I fear that the amendment does not fully recognise that the statutory guidance provided for by Clause 16(6) is intended to set out factors that a local transport authority should consider when choosing to design and pay a grant to bus operators. The local transport authorities will be very aware of their financial situation when doing so. The amendment is therefore not needed and I ask the noble Lord not to press it.

Turning to Amendment 32, it is good to see that the noble Lord, Lord Moylan, recognises the important role that demand responsive transport can play in contributing to local public transport provision. The amendment takes a belt-and-braces approach—both proposed subsections would have the same effect by ultimately requiring local transport authorities to think about flexible bus services, a form of demand responsive transport, if they chose to use the powers that would be granted by Clause 16 to design and pay grants to bus operators. I contend that neither the belt nor the braces are needed. There is nothing in Clause 16 to prevent a local transport authority choosing to use the powers therein to have regard to, and to support flexible bus services, to the extent that they meet the definition of “service” in Clause 16(2). I am happy to have that on the record, as the noble Baroness, Lady Pidgeon, requested.

Other types of demand responsive transport—for instance, that provided using private hire vehicles—are not likely to fall within the definition of “service” in this measure. Indeed, in our drafting of Clause 16 we have deliberately made it possible for local transport authorities to support a wider range of bus service types than the Government can through the existing powers available to the Secretary of State under Section 154 of the Transport Act 2000. This is because we want local transport authorities, in line with the devolution agenda, to be able to design grants that best support the outcomes that they see as important. That is key to help ensure that local bus services are able to contribute to economic growth and to breaking down barriers to opportunity.

Noble Lords will also be aware that Clause 16(6) gives the Secretary of State the option to publish the statutory guidance. If we feel that the guidance is needed, we will publish it.

Local transport authorities will be best placed to determine whether demand responsive transport is a viable option for their areas. The Bill and other aspects of our devolution agenda—including building on the devolution deals introduced by the previous Government —are aimed at giving local authorities more freedom and flexibility. However, given that flexible bus services are a key part of the bus offering in some areas, and will continue to be an important option for local authorities when considering the appropriate mix of services, it would seem strange for the statutory guidance, if it were published, not to contain references to flexible bus services. I hope I have demonstrated that the amendment is not needed and I therefore request the noble Lord not to press it.

I thank the noble Baroness, Lady Pidgeon, for Amendment 33. I note with sadness that the late Lady Randerson is not here to be able to debate it herself. It is a terrible shame. As noble Lords will all be aware, economic growth is one of the core missions of this Government, and the amendment rightly highlights the important role small and medium-sized enterprises have to play in delivering growth. The Bill supports the economic growth mission by giving local transport authorities greater freedom in deciding how they support their local bus services to boost economic growth and remove barriers to opportunity.

The amendment is intended to ensure that local transport authorities that choose to use the new powers to design and pay grants to bus operators think about the needs of small bus operators when designing those grants. However, the amendment is not needed because under the grant-making powers given to them by the Bill, there is nothing preventing local transport authorities designing grants that prioritise and support smaller operators of bus services, subject to other competition and subsidy controls. Because most local transport authorities are in enhanced partnerships, they will be best placed to understand the needs of small operators. They will certainly know those in their areas and whether such grants would be appropriate.

As public authorities disbursing funding, local transport authorities will, however, need to ensure that any grants they design, using the powers that would be granted by the Bill, comply with relevant subsidy controls to ensure that they are not distorting their local market or the national market. I hope that assurance allows the noble Baroness, Lady Pidgeon, not to press her amendment.

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[Baroness Pinnock (LD)]

My Lords, I thank the Minister for his detailed reply and the clarity of his answers to all our amendments. I remind the Committee that my Amendment 4 seeks to encourage the Government to respond positively to the need for funding, such as TfL has enjoyed. I note that Amendment 30 from the noble Lord, Lord Moylan, is using funding to discourage enfranchising. There is quite a world of difference between us.

[Lord Moylan (Con)]

My Lords—

[Baroness Pinnock (LD)]

If I may finish my point before the noble Lord can come in, I thank the Minister for his assurance on funding. I am going to wait for the figures to come out of all that, but I am especially disappointed that the ministry has asked him to point towards local government funding as a source, when that funding is under huge stress at the moment. With that, I wish to withdraw Amendment 4 in my name.

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[Lord Moylan (Con)]

I think that the noble Baroness said Amendment 30 when she probably meant Amendment 31, but that is a minor point.

[Baroness Pinnock (LD)]

Yes, sorry.

[Lord Moylan (Con)]

It is complete nonsense to misrepresent my point in the way that she has done. I am really beginning to wonder, as I say, if the purpose of the Liberal Democrats is to use this Committee to attack the Conservatives rather than hold the Government to account. It is very odd indeed and might merit some discussion outside the Committee.

Amendment 4 withdrawn.

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This would provide better value for money for passengers and taxpayers, save local authorities the costs arising from tendering services, stop profit leakage to commercial operators under franchising and deregulation, and enable all surplus revenue to be reinvested in improving services for passengers. Transport for Quality of Life has estimated that it could save £500 million a year, which is not insignificant. Will the Minister therefore commit to reviewing and publishing the potential benefits to the farepayer and taxpayer of allowing local transport authorities to directly award their bus services to the companies they create? I beg to move.

[Lord Moylan (Con)]

My Lords, I will speak briefly to Amendment 13 standing in my name. I can see the role of direct awards as a matter of principle in certain cases. They have the effect of removing from the process competition between potential bidders for a contract, but there are benefits to competition. I know the Minister wants me to imbibe and regurgitate great chunks of Lord Ashfield’s writings from the 1920s and 1930s, in which he could barely tolerate the word “competition” without using the adjective “wasteful”, but there are some benefits that might arise from competition that even the Minister might admit to.

I am willing to accept, if the Minister gives this assurance, that taking competition out of the process can be consistent with existing procurement legislation. He started to make that argument at Second Reading. I will not challenge him and say that this is contrary to procurement legislation—possibly it can be made compatible with procurement legislation, but he needs to explain how. However, I am concerned, in cases where there is more than one incumbent operator—which may well be the case, especially where local transport is for more geographically dispersed areas—about how a direct-award process might work in a way that was seen to be fair and did not expose the process to potentially awkward, difficult and unpleasant legal challenge and things of that character.

Essentially, I am trying to get more clarity from the Government about how direct awards will work in the more difficult and complex circumstances. I am seeking explicit assurances about the compatibility with procurement legislation, which I suspect the Minister can explain convincingly, but it needs to be put on the record.

[Lord Grayling (Con)]

My Lords, I support my noble friend’s comments. The difficulty with direct awards is that sometimes they are genuinely necessary. We experienced that on the railways—where circumstances change, a business fails or there is simply a need to take greater control for reasons that come along unexpectedly. The danger is—I go back to what I said earlier about ideology —that the requirement for a direct award caused by circumstance is overtaken by direct award driven by ideology.

I am afraid that that is at the heart of the noble Lord’s amendment. I understand the principle he represents, but it would not be right to have a situation in which a local authority was able, unfettered, to set up its own bus company and make a direct award to it, regardless of whether it was any good or not—there have been many occasions in history where the local municipal bus company has not been good at all.

In the world the Government seek to create, where in my view there is a role for direct award, on occasions, when it is necessary, I too would like to understand how the Minister would ensure that that power is used in a way that is right and proper, and, ultimately, as I said earlier, beneficial to the passenger.