Bus Services Bill [Lords]

Robert Jenrick Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Monday 27th March 2017 Commons Chamber

[Robert Jenrick (Newark) (Con)]

I have listened with interest to the hon. Gentleman’s comments on small and medium-sized bus companies, and there is a lot of truth in what he says about the smallest bus companies, but does he agree that the greatest concern is for medium-sized operators? There are not many medium-sized companies in the country, but there are some in counties such as mine, Nottinghamshire, and neighbouring Derbyshire: Marshalls of Sutton on Trent and trentbarton —which the hon. Member for Nottingham South (Lilian Greenwood) will be familiar with—are good medium-sized bus companies and they stand to lose a lot from this. They will grow exponentially if they win a franchise or, in the case of either of those companies, they could find 30 years of hard work going down the toilet with no compensation whatsoever.

[Graham Stringer]

The hon. Gentleman makes a fair point, and I will come on to it. He is right to be concerned about that, but I want to develop the logic of the argument that I am making as to why these are not sensible amendments. In large parts of the country, where most bus passengers are, we do not have competition. The basis of the Transport Act 1985 was that there would be on-the-road competition and that would provide good services, and if bus companies lost out because of on-the-road competition, they lost out as in any other capitalist-competitive market situation. That has not happened, however; we have moved to monopoly.

Incidentally, when the 1985 Act was implemented in 1986 no compensation was paid to those bus companies—of which there were a number—running on regulated routes. Mayne in east Manchester, for instance, had run for many years in that area; when it had to compete, it did not get compensation.

We are now moving—through principled objectives, in a different way—to a competitive system, in those areas that choose that, because there will be choices for Norfolk, Greater Manchester and other areas at some stage. As with rail franchising, in a competitive situation, when a company loses out, it loses its business, even if it has invested in it previously. In fact, one of the difficulties with franchising is that we end up with investment up front and a lack of investment at the end; that is just the nature of franchising.

On the point made by the hon. Member for Newark (Robert Jenrick) about medium-sized bus companies, that can of course be taken into account in the way that franchises are set up, by local choice. Areas can set them up in as many different ways as they wish, so medium-sized companies could be given the right to tender for routes that fit the size of the company if that was what the franchising authority wanted to do.

That brings me to a point I made in Committee, and which was rejected. Rather than the amendments we have here, I would have preferred the Bill to say that the regulations should not be overly burdensome and that they should reflect local conditions. If they were reflecting local conditions, they could take into account those small and medium-sized companies. There is a large point here, however, and, as my right hon. Friend the Member for Leigh said, the large companies would be more pleased than the small bus companies if these amendments were passed.

There is not a single quality contract in this country, and that is because when they were brought in under the Transport Act 2000, it contained a clause that is very similar to measures here, saying that they are the only practical way of delivering a better bus service. That is an incredibly high hurdle to jump, which is why there are no such contracts. Quality partnerships were referred to; I asked the Minister in Committee how many of them there were in the country, and, after a little help from the officials, we discovered that there were 10. So even quality partnerships are not abundant on the ground in this country. We do not need overly burdensome regulations. We want to make this work because it will improve the service for passengers, be more competitive and lead to better services.

We are not discussing them now, but there are huge guidance notes associated with this Bill, which I think tend to be overly prescriptive. I prefer to rely on the good sense of local councillors; they will make some good decisions and some bad decisions, but there are many bus companies with vested interests who are opposed to this, and if local authorities behave in an unreasonable way, they have the right to apply the Wednesbury principle and go for judicial review.

Rather than having lots of prescriptions, and putting ever more hurdles in the way of locally elected people making decisions, we should rely on their good sense. Sometimes they will get it wrong, as sometimes national politicians in Governments and Cabinets get things wrong, but we can rely on them and the common law, which will ensure that if bus companies feel that they are being unfairly treated and that transport authorities are behaving in an unreasonable way, they can take that to court.

So I hope the Minister will reject these amendments. We have held in the balance throughout our discussions the question of what is central and what is going to help local authorities, transport authorities and elected mayors to make these decisions, and these amendments do not help move us towards having a better local transport system.

--- Later in debate ---

[Andrew Jones]

My point is that competition will move, but it will not disappear from the market. Competition now takes place on the road; it will move from the roadside to the tender. I do not accept that competition disappears from the marketplace. I came to this place from a robust private sector background, where competition was the daily bread-and-butter activity, and I am sure that it can have a positive impact on customer service, innovation, price and so on.

[Robert Jenrick]

The Minister kindly met my constituent John Marshall, who in addition to running a medium-sized bus company chairs the east midlands passenger transport organisation that represents other small and medium-sized bus companies in the region. He tells me that for him and his members, the question of compensation remains unanswered by the Bill. For the sake of clarity for bus operators, will the Minister say whether the Government intend that in the event that franchises are lost, no compensation will be or should be paid to any bus company in the UK?

[Andrew Jones]

We do not think that it will be a requirement to pay compensation, but an authority that goes down the route of developing a franchising model will of course be free to offer payments as it sees fit. It is not Government policy that such compensation will be mandatory.

Amendments 16 to 23, which were tabled by my hon. Friend the Member for North West Norfolk would require a franchising authority to be satisfied of, rather than to consider, certain matters when making its assessment of a proposed franchising scheme. That is a significant distinction. The assessment as set out in the Bill does not require the authority to pass certain tests or to prove that franchising would achieve certain outcomes. Instead, it reflects the standard approach for public sector investment decisions of requiring a view to be taken on the overall merits of the scheme.

That is a deliberate move away from the quality contract scheme process, under which no local transport authority has established a franchising system. A requirement for a franchising authority to satisfy itself that franchising will deliver certain outcomes risks raising an impossible hurdle. It would be difficult for authorities to satisfy themselves with certainty, as their analysis, by its very nature, will be based on assumptions and projections about the future. The amendments therefore risk making the Bill unworkable in practice. We agreed to deliver as part of our devolution commitments franchising powers that would be more usable than the existing quality contract schemes, and that is what the Bill does. I hope that, on the basis of the explanations I have given, my hon. Friend the Member for North West Norfolk will not press amendments 16 to 24.

In addition to requiring a franchising authority to prepare an assessment, the Bill requires the authority to obtain a report from a qualified auditor. In relation to the consideration of affordability and value for money, the report must set out whether the authority has used information and conducted an analysis of sufficient quality. The authority must publish the auditor’s report as part of its consultation process. Amendments 2 and 3 make it absolutely clear that the auditor appointed for this purpose must be independent. It has always been our intention that the auditor should be independent, but we wanted to make that absolutely clear and put it beyond any doubt. Amendment 3 imposes duties on the Secretary of State to issue guidance on the matters that a franchising authority is to take into account when selecting an auditor and on the criteria to be taken into account by an auditor in reaching a view on the relevant aspects of the authority’s assessment. An authority or auditor must have regard to such guidance.

I am happy to say that I am in total agreement with my hon. Friend the Member for North West Norfolk on amendment 2. He may be surprised to hear that I also agree with the principle behind amendment 25, but the nuances of how independence from the authority can be demonstrated are better addressed through guidance rather than on the face of the Bill. That is the thinking behind amendment 3. For example, amendment 25 would require an auditor to have five years of independence from the authority, which could be difficult to deliver. For the combined authority of Manchester, for example, it would have to be demonstrated that none of the bigger accountancy firms had dealt with any of the constituent authorities on any issue over the past five years, which could be quite a challenge. However, the principle of independence has absolutely been in the Government’s thinking since the beginning. I support that principle, which is behind my hon. Friend’s amendment, and that is why I hope that he will feel able to withdraw amendment 25.