Mr. David Clelland (Tyne Bridge): I beg to move amendment No. 20, in clause 3, page 3, line 25, at end insert -
'(2A) After subsection (1) (as substituted by subsection (2) above) insert -
"(1A) The Secretary of State shall provide to each travel concession authority in England by means of a direct annual revenue grant sufficient funding for the authority to comply with its obligation to reimburse operators under subsection (1).".'.
The Chairman: With this it will be convenient to discuss the following: amendment No. 6, in clause 9, page 7, line 28, at end insert -
'(aa) enabling the Secretary of State to reimburse travel concession authorities where they incur a deficit of over £500,000 as a result of reimbursing individual operators under this Act.'.
New clause 2 - Reimbursement of travel concession authorities -
'After section 149 of the 2000 Act (Reimbursement of operators) insert -
"149A Reimbursement of travel concession authorities
(1) Where a travel concession authority has responsibility for the administration of mandatory travel concessions under section 145A, including the administration and issuing of permits under section 145A(4) and the reimbursement of operators under section 149, the Secretary of State shall reimburse the authority the full costs of administering mandatory travel concessions by means of a direct annual revenue grant.
Column number: 32
(2) The Secretary of State shall reserve a proportion of the funding allocated to the mandatory travel concession scheme to provide a contingency fund.
(3) A contingency fund under subsection (2) shall be used to reimburse any travel concession authority for any unforeseen capital and set up costs incurred by that authority in introducing a scheme to comply with this section."'.
New clause 4 - Review of reimbursement arrangements -
'Two years after the commencement of this Act the Secretary of State shall conduct a review of arrangements for allocating funding to local authorities necessary for the reimbursement of operators under section 3(2) of this Act, and shall lay before Parliament a report setting out his findings.'.
New clause 5 - Funding statement -
'At the end of each financial year after the commencement of this Act the Secretary of State shall make a statement to Parliament setting out -
(a) the total sum of funds made available to local authorities for the purposes of providing bus services and concessionary fares thereon in the financial year just ended, and
(b) the method by which those funds have been made available.'.
Mr. Clelland: As a former Government Whip and a loyal supporter of the Government, for the most part, I regret the necessity to table amendments to a Government Bill. However, as has been suggested, particular problems in Tyne and Wear are not dealt with under the Bill, so I make no apologies for taking a little time to refer to them and to suggest some possible solutions.
At the time of the Chancellor's announcement of free off-peak bus travel after 9.30 am for pensioners and disabled people on local buses only, Tyne and Wear had a half-price travel system for pensioners and disabled people on buses to a maximum of 50p after 9 am; a 50p fare on Tyne and Wear Metro, the Tyne ferry and Northern Rail, and concessions for children and students. It was a popular and well used system. Indeed, the concessionary travel take-up by the elderly alone amounted to some 75 per cent. of eligible riders. It is the largest outside of London, which is 80 per cent. and way above the average in England of 49 per cent.
12.15 p.m.
Mr. Leech: Did the implementation by Tyne and Wear passenger transport authority of the extra concessions have an impact on the number of users of the bus services?
Mr. Clelland: Yes, indeed, and the welcome new move forward will have a similar effect on ridership. Some 36 million bus journeys a year are subsidised under the current scheme in Tyne and Wear. It was estimated after the Chancellor's announcement that the additional cost to the Tyne and Wear passenger transport executive of free local travel would be £20 million a year. The Minister said that the Bill applies only to buses and not to other modes of transport, but matters are not quite that simple.
In Tyne and Wear, we have the publicly owned and run Metro system. At the time, it had a charge of 50p to the eligible concessionary travellers. If we had left it as it was, it would have meant that buses would be free, but that it would cost 50p to travel on the Metro. That would have had two effects: first, it would be unfair to those who rely heavily on the Metro to travel from the east end of Newcastle into the centre. They would have had to pay, as opposed to people in the west end of Newcastle where there is no Metro who would have had free bus services. That could not be tolerated.
Secondly, such a system would have had a detrimental effect on the Metro itself. If there were a charge to travel on the Metro, but buses were free, people would obviously be tempted to move their mode of travel from the Metro to buses. Bus operators would be tempted to compete with the Metro, and they would be receiving the benefit of the additional public subsidy, while the Metro system would suffer from the loss of ridership, something that a Labour Government would not want to encourage.
On 28 November 2005, my hon. Friend the Member for Regent's Park and Kensington, North (Ms Buck), then a Minister at the Department for Transport, wrote to hon. Members saying that
"we are providing an extra £350 million"to finance the scheme. "We" was used rather riskily because it was not the Department for Transport that was providing the money. The Government were providing the money through what was then the Office of the Deputy Prime Minister, which we now know as the Department for Communities and Local Government. It was to be distributed through the revenue support grant mechanism.
By the way, there was no attempt at the time by the Department for Transport to negotiate anything in return from bus operators who were already receiving £1.3 billion a year in public subsidy. The local government revenue support grant system is not fit for the purpose of distributing the money. Calculations on the basis of population are okay for most services, but not for the particular service that we are discussing. It does not take account of the high levels of use, low car ownership and higher dependency on public transport in areas such as Tyne and Wear.
Tyne and Wear was told to expect £12.7 million from the formula grant system, which was £7.3 million short of the estimated cost of introducing the new scheme. Meetings with Ministers and civil servants were to no avail and we were told that it was impossible to correct that anomaly through the revenue support grant system. I thought that that was a rather curious argument because the education system already has a system for financing schools on the basis of bums on seats. I still do not know why we cannot have such a system for public transport. The result was that in 2006-07, £2 million had to be taken from Tyne and Wear passenger transport authority balances.
There were cuts in secured bus services, which was rather bizarre as it meant that we were saying to elderly and disabled people, "There is a new free travel scheme, but the services on which you most rely - the subsidised, secured services - will have to be withdrawn in order to pay for it". There were cuts in subsidies for students and young people, which was unpopular with elderly people, who felt that they did not want the advantage of free travel if it was at the cost of cutting travel for young people and students. Indeed, some elderly people feared that when they travelled on buses there may be some backlash from young people as a result. Thankfully, our young people are more sensible and that has not happened.
That was the situation in 2006-07. During 2007-08 there will need to be further adjustments to continue the current scheme. In total, by the time we get the national scheme in 2008, it will have cost Tyne and Wear - one of the poorest regions in the country - some £9 million to run the Government scheme up to the introduction of the national scheme.
I was one of the first people to call for a national scheme. Indeed, days after the Chancellor's announcement, I suggested to him that the scheme should be extended nationally because the way it was being proposed at the time was nonsense. I welcome the increased flexibility, but, if the same formula for distribution is to be employed, which the Bill suggests is the case, the funding problems will remain. I still have not given up hope that some way will be found to refund Tyne and Wear the £9 million that it has lost over the past two years.
The Chairman: Order. May I remind the hon. Gentleman that we are discussing amendments to future legislation and although it is quite right for him to explain what has happened in his locality in the past as an explanation of why he wishes to make the amendment, we cannot debate the financial position of his local authority in past years as part of the debate on the Bill.
Mr. Clelland: Thank you, Mr. Bayley, for that guidance. I was just about to come on to the amendments. However, I will just say that, unless the £9 million is refunded, when the national scheme to which the amendments refer starts next year, Tyne and Wear will be starting not from a level playing field, but from a £9 million shortfall.
I understand that in Scotland and Wales the system of funding for subsidised travel is not through local authorities, but directly from the Executive. Amendment No.20 proposes a similar system for England. It is a specific measure and the funding would be directly targeted to where it is intended, so that the full costs to the transport authorities are met. Under the current system, it is nonsense that some councils can have a surplus from the funding and use that for purposes for which it was not intended while other authorities, such as Tyne and Wear, have serious shortfalls. Amendment No. 20 would deal with that anomaly.
In the event that shortfalls do occur in future, amendment No.6 would limit the damage to local authorities. I admit that the figure of £500,000 is somewhat arbitrary and I accept that I would not get away with an amendment that said that every single penny had to be accounted for; that just would not be possible. However, £500,000 seems to be a reasonable figure. If such a measure had been enacted from the beginning, Tyne and Wear's losses would have been £500,000 and not the £7.3 million which we had to subsidise, which would have been far more manageable. The introduction of the national scheme is welcome, but it will result in an increased take-up and a change in passenger and operator behaviour that cannot be predicted. It will mean higher costs, particularly in areas where public transport is already heavily used and where increased usage is being encouraged.
I hope that the Minister will accept that those two amendments are sensible and practical and that she agrees that they should be incorporated into the Bill. This is a Government initiative and it should be underwritten by the Government in case of any losses for the local authorities concerned.
Gillian Merron: We return in this clause to the important issue of funding for local authorities. I am happy to tell the Committee that I agree with the sentiment that local authorities should be adequately funded by central Government for the costs to them of administering a mandatory concession. After all, it is Government policy to fund new statutory burdens fully. However, I say at the outset that it is in all our interests to get things right. There is no underhand plan to try to deprive anybody. The scheme is popular and will benefit 11 million people, and we want to get it right. I can confirm to the Committee that that is why we are paying so much attention to it.
The Government are providing up to an extra £250 million of funding a year for the new concession. The hon. Member for Wimbledon asked for a calculation of the £1 billion a year. I confirm that the figure for getting to the full-fare national scheme is £250 million, which is new money for 2008, and that the figure for moving up to the full-fare local scheme was £420 million, while the figure for moving to the initial scheme - that is, the half-fare local scheme - was £400 million. I hope that that is helpful but, as I have said, I am always happy to provide any further information.
I am confident that the £1 billion will be sufficient. There is indeed no mention of the funding of concessionary travel in the Bill, but for good reasons. Circumstances change, and flexibility needs to be built into the legislation to enable future improvements to concessionary travel to be made as efficiently and effectively as possible. It would be neither appropriate nor wise to lock ourselves into a particular approach now, when the important issue of funding is being considered and discussed across government and beyond.
Amendment No. 20 and new clause 2 propose a direct annual revenue grant to fund authorities. It is important to recognise that the freedom and flexibilities provided by the unhypothecated formula grant are generally supported by local authorities. Indeed, local authorities have long argued against having their hands tied by hypothecated funding schemes, and if I did not listen to them, I am sure that hon. Members would be the first to criticise me.
Concessionary fares reimbursement is only one of the many obligations that authorities must meet from their council tax receipts and from the funding provided by central Government through the formula grant process. I am aware that the Local Government Association strongly supports a specific grant for the extra funding for the national bus concession, at least temporarily. We are considering the merits of temporarily distributing the extra money through an unhypothecated specific grant. We need to be clear, however, that such a move would break from the policy of greater freedom and flexibility in funding, which is generally welcomed by the local government community.
I assure hon. Members that we continue to talk to the LGA and to the concessionary fares working group, which consists of representatives of all tiers of local government, about methods of distributing the extra money, including the option of a specific grant. I hope that that reassures the hon. Member for Rochdale about the level of consultation that we are undertaking in addition to the regional roadshows, nine of which have been held around the country in recent weeks, to talk directly to local people.
New clause 2 would require all the funding for the statutory concession to be distributed by direct annual grant, which would mean that existing funding for concessionary fares would have to be extracted from the formula grant system. I am not sure whether that is the intention of the new clause, as there is little support for such an approach. Moreover, the LGA and our concessionary fares working group support the idea of the current funding staying in the formula grant. They are all too well aware of the council tax turbulence and fiscal uncertainty that would result from the transfer of existing funding from the formula to a specific grant. With great respect to hon. Members, I can see little point in introducing something that local authorities do not want.
The Treasury, the Department for Transport and the Department for Communities and Local Government are carefully considering the merits of different funding mechanisms for statutory concessions. We are aware of the feedback from our working group. I referred earlier to the nine regional roadshows that my officials recently completed, to which all local authorities were invited. I assure my hon. Friend the Member for Tyne Bridge that Nexus representatives were present, and I am sure that he will wish to speak to them about how useful it was. According to the feedback that I have had, it was extremely valuable.
It is important that we get our approach right. We will continue to talk to interested parties in the coming weeks before coming to a view on the mechanism for the extra funding. The new clause is misplaced. If we decide that a specific grant is the right option, we will formally consult local authorities on the formula for distributing the specific grant. In any case, there is no need for the Bill to oblige the Secretary of State to fund concessionary travel as proposed by the new clause. The Secretary of State already has the power to fund local authorities for concessionary fares by direct grant, if he wishes. It would be inappropriate to require the use of such a funding mechanism in perpetuity without consulting all those with an interest.
The same arguments apply to amendment No. 6, which specifies that the Secretary of State must reimburse local authorities when they incur a deficit of more than £500,000 as a result of reimbursing individual operators. Under section 31 of the Local Government Act 2003, the Secretary of State already has the power, with the consent of the Treasury, to make grants to local authorities to cover their expenses. Therefore, the amendment would add little. In addition, I do not find it helpful to introduce arbitrary thresholds with the potential to distort local negotiations.
Referring to the comments made by my hon. Friend the Member for Tyne Bridge, there was indeed a problem in Tyne and Wear in respect of Nexus, which I was very glad to meet in recent months. Following consultation, the formula grant was adjusted to reflect support for disabled people and the needs of areas in which the take-up is likely to be high. That benefited not only Tyne and Wear, but all areas that had a higher than average number of residents who were disabled. The measure reduced the shortfall by about £7 million.
I would also make the point that extra funding was given to the metro to reflect the unique circumstances in Tyne and Wear. £1.7 million was made available last year, and also this financial year, to cover the financial impact on the metro.
With all of those points in mind, I hope that hon. Members will agree with me that the amendments are unnecessary and that the lead amendment will be withdrawn.
Mr. Clelland: I listened with interest to what the Minister had to say. I readily acknowledge the support that Tyne and Wear has had from the Department for Transport to enable it to extend the free travel service to the metro system, and we are very grateful for that. Nevertheless, the shortfall was as it was, regardless of all the efforts that were made by the Minister and others in the interim. I heard what the Minister said about the flexibility in the Bill and the fact that funding mechanisms are still being discussed. I was particularly interested to hear that she believes that amendment No. 6 is unnecessary because the Secretary of State already has that power, and I look forward to his exercising it to deal with those losses at Tyne and Wear. Perhaps between now and Report, we may be able to have some serious discussions as to how that might be done. On that basis, I beg to ask leave to withdraw the amendment.
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