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Expenditure On Public Passenger Transport Services

Volume 79: debated on Wednesday 22 May 1985

The text on this page has been created from Hansard archive content, it may contain typographical errors.

I beg to move amendment No. 87, in page 78, line 11, at end insert

'provided that any such authority shall have the option of adopting a system of comprehensive competitive tendering'.
I am pleased that I have the opportunity to initiate the debate on what I consider to be a genuine and middle-way attempt to ensure that the Bill is more workable. I should like the Minister to appreciate that I tabled the amendment in an attempt to provide a genuine alternative to the subsidy system outlined in the Bill. Competitive compulsory tendering was proposed by the Transport Select Committee in its second report during the 1984–85 Session. At the risk of wearying the House I shall read one or two extracts from it to explain the purpose of the amendment. Page 66 says of comprehensive competitive tendering:
"This option consists of a co-ordinating authority being responsible for planning the provision of services, but being required to put all services, whether profitable or unprofitable, out to tender. That could be done on a gross cost basis, with all revenues accruing to the authority … or on a net cost basis, with competing operators offering either to pay for the privilege of providing a specified service or to undertake it for a declared subsidy. The profits from the sale of the profitable franchises could then be ploughed back into the payments for the unprofitable franchises. Either version makes the subsidy system more transparent … and fully retains the potential to use internal cross-subsidy within the bus sector without giving any individual operator a secure profits base from which to engage in predatory competition in other parts of the network."
It is significant that such schemes have already been tried in Oslo, Paris and Munich, to name but three major continental cities. It is interesting to note that when the Select Committee took evidence from the guru of the Government's philosophy, Professor Beesley, and pressed him to give an example of anywhere in the world with a system such as that outlined in the Bill, he was hard pressed to find one. The amendment's proposals have been tried elsewhere, but the Government's proposals are completely untried on the scale on which they are intended to operate.

7.45 pm

The House is entitled to ask why it is necessary to put forward an alternative. The answer is contained in an interesting report from Hertfordshire county council, before the recent county council elections, when it had a somewhat bluer tinge. That study examined the changes in transport supplementary grants, and the probable alteration as a result of the ending of cross-subsidy. It is interesting that the county council estimated that, because of the loss of cross-subsidy, it could need up to £2 million of extra revenue support, or would need to reduce its support by about £2 million. In any event, it forecast the danger of about a 30 per cent. loss of services should the Bill be put into operation. The cost of school transport, social services transport, district health transport and works transport would escalate. That one report shows the need to pause before accepting the Government's proposals on tendering.

It may be no accident that a range of local authority organisations have expressed doubt about this aspect of the Bill. The Association of District Councils, which is Conservative-controlled, stated:
"The basic weakness of the proposals stems from the fact rhat they are a product of political and economic theories with no practical input and will not stand up in practice."
I seek to put forward a proposal that is based on practice and that is practical.

The Association of Metropolitan Authorities in its recent publication states that the problems of the Bill
"can be avoided by use of a suitable system of competitive tendering within a co-ordinated network of services."
I ask the House to note the following words:
"This is the solution being used by London Regional Transport (London is excluded from deregulation for the present, although the Bill gives the Secretary of State reserve powers to deregulate in London in due course)."
The most significant comment comes from the Association of County Councils, which has deliberately set out not to oppose the Bill but merely to improve it. In a letter dated 17 May, the ACC stated:
"We do not believe that the tendering system set out in the Bill can operate satisfactorily unless in appropriate cases the tendering authority can obtain protection for the tendered services against competition on the road from other operators."
All those comments show the strength of feeling in local government. When the idea was put to my right hon. Friend the Secretary of State by hon. Members who represent Kent, they received replies which stated that such ideas were a franchise. The Government believed that the great danger was that such a franchise, once having been granted, would mean that the incumbent was protected from competition, and that the franchise conferred monopoly power and the scope for exploitation of the passenger. That was the answer given to my hon. Friend the Member for Maidstone (Sir J. Wells) and others on 7 March. Even if that were entirely true, the Government must explain why it is satisfactory to pursue such a policy in London and not elsewhere.

The leader of Kent county council, Mr. Tony Hart, wished to rebut the arguments in that letter, especially the arguments produced in a document entitled "Problems with Franchising". Anyone who has read that document will understand Mr. Hart's comment that the arguments in it are merely an academic prediction. He pointed out that one of the most interesting remarks in the document appeared in paragraph 9, which states:
"This paper"—
a paper in the Bell Journal of Economics in 1976—
"is the source of a considerable number of the comments made in the present paper."
That shows that this interesting document has been culled from someone else's intellectual or academic exercise.

In his letter to members of the Standing Committee of 29 March, Mr. Hart said that it was odd that the Government had leaned so heavily on that paper. He said that they quoted from it only selectively. He went on to quote from page 102 of the paper, which states:
"I should point out that there are circumstances where I suspect that regulation or public ownership can be supplanted by franchise bidding with net gains."
It gave the specific example of local service airlines. Even from that paper, which shows that the Government are hostile to the idea of an alternative method of tendering, it appears that their source is not secure.

In his letter to members of the Committee, Mr. Hart came down firmly on the side of competitive tendering. He said that, as matters stand, under total deregulation,
"Kent county council's revenue support could escalate from £3·2 million to £5 million, in order to retain the current levels of service."
The interesting point that he makes is this:
"Under a system of franchise tendering, it is estimated that for this county there could be a reduction in revenue support to under £3 million."
The Government's objective to keep down the cost of revenue support can be achieved in another way, which will cause considerably less dislocation.

There is a tendency to confuse franchising, as it has been interpreted in the Government's document, with comprehensive competitive tendering. But the two are different. Comprehensive competitive tendering would allow an authority to define the network of services that it considered necessary to meet the needs of the area. It would then divide those services into different sized packages that could be put out to competitive tender on a rolling cycle to ensure that, in any area, there were regular opportunities for operators to compete for packages or services.

The specification of services in the package would be flexible enough to encourage operators to develop innovatory services. Where operators believed that they had spotted a gap in the services specified by the authority to develop a new market, they would still be able to apply to register the service with the traffic commissioner. The authority would have to demonstrate that it was against the public interest.

Such a system would largely solve the problem with franchising that was identified by the Secretary of State and outlined in the pamphlet to which I referred. The problem of an authority being captured by an operator who would be protected from competition would not occur, because there would be a constant cycle of reletting of contracts.

It is interesting to note that, far from that proposal being seen by many bus operators as an opportunity to make a great deal of money, the trade association of the operators —the Bus and Coach Council—is not happy about the ideas that I am putting forward. Indeed, it rejected proposals for comprehensive competitive tendering. That shows that the argument is not one of allowing the operators to be protected ad infinitum. Existing operators would be kept on their toes by new operators bidding for the smaller packages that can be operated by local authorities. It would be for the local authority to ensure that the packages suited companies that had only one bus. At the same time, because of the constant ringing of the changes with the contracts, there would be room for the innovation of new services.

I commend that system to the House, because its great advantage is its flexibility. It is flexible because it is a genuine option. I suggest not that it should replace the proposals in the Bill, but that local authorities could use it if they wished. The proposal is flexible because the authority could introduce the scheme throughout its area or only in parts of it. It is flexible because it could be introduced and as easily withdrawn by allowing contracts to lapse and other operators to register their services.

The Government's ideas on tendering are based on hope rather than certainty. Whatever one says about Hereford and Worcester—I do not wish to become involved in an argument about whether those schemes were successful —to say that we shall fundamentally change support on the basis of two experiments, one of which the Transport and Road Research Laboratory study said was inconclusive and one of which was debatable, may lead the Government into severe trouble in a year's time. If the Government are determined to innovate and if they wish to move from the present system, it must be right to experiment with at least two alternative systems to see which is the best. That was the view of the Select Committee.

The last paragraph of the Select Committee report states:
"We therefore favour comprehensive competitive tendering as a system capable of catching the largest proportion of the cost saving potential (as all routes go to competitive tender), consistent with an acceptable ability to maintain the benefits of integration and co-ordination, and a very explicit and transparent responsibility of the local political authority. The fact that the responsiblity and power was very explicit should, we think, encourage local authorities to show the kind of enterprise and skill which has been shown in this aspect of the behaviour of the County Council in Hereford. We therefore recommend that the Government should amend its proposals by retaining the overall responsibility of the local authority for the planning of public transport provision; by extending the obligation to undertake competitive tendering to cover all services; and by requiring all authorities to devise modes of operation of the regime which give proper scope for the development of innovatory services."
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That recommendation and others were not passed by one odd Conservative voting in favour of them. In fact, in the Division on that section of our report, three Conservatives voted for it and only one against. The one honourable exception was my hon. Friend the Member for Derbyshire, West (Mr. Parris). What was the amendment that he suggested, which the rest of us voted down? While not accepting the recommendation that I have just read out, he suggested that the idea of tendering on that basis was very useful as a backstop for the Government. Therefore, even he could see that there was a necessity for something to be there in case the Government ran into trouble.

I say to the Under-Secretary that, if the Government can accept that there is an alternative way which can keep some of the best of the present system and, in terms of negative tendering, produce extra funds to subsidise many other services that are unprofitable at the moment, it would give a flexibility to the Bill which, I regret, has not been too apparent so far during our deliberations. I want flexibility. The Bill has to be made to work, so I think that the best alternative should be put in it. It is not obligatory; it is something that local authorities can pick up or lay down as they choose.

I support the hon. Member for Wellingborough (Mr. Fry). He has taken most of my guns from me because his was the speech that I would have made on clause 1 yesterday had the appropriate amendment been called. However, I do not deny him that, because he has much more knowledge and expertise than me.

Comprehensive competitive tendering is under attack from two directions—first, from those, including some hon. Members, who believe that almost any change in the status quo is an attack on our current bus services, and, secondly, from the Government, who took the unusual step of publishing a detailed rebuttal of the Select Committee's case for adopting CCT about a month or more ago under the heading "Problems with Franchising". That document has been perused by many people. They find it full of holes, as does the chairman of Kent county council, to whom the hon. Member for Wellingborough referred. While those supporting the present organisational arrangements for bus services hold their views strongly, and no doubt sincerely, it is clear that the status quo cannot continue. I accept that, as I did on Second Reading and in Committee. There is no doubt that the threat of competition has stimulated cost cutting and innovation. One has seen it in the railways in particular. Furthermore, while the public no doubt cherish the bus services, they are not all satisfied with the present arrangements.

The Government's paper, "Problems with Franchising", is disingenuous. Many of the criticisms that it ascribes to such a system also apply to a significant extent to the Government's proposals for limited competitive tendering for loss-making services. The Government's argument seems to be, first, that franchises offer protection to the incumbent, as it is in the local authority's interest to maintain continuity of contract; secondly, that franchises are an abuse of monopoly power — that argument is poorly developed in the paper; thirdly, that the performance specifications in the contract cannot accurately reflect customers' wishes; fourthly, that invitations to tender are likely to be biased towards incumbency or variety; fifthly, that the criteria for finally awarding the contract will be artificial; sixthly, that the franchisees will tend to use imprecision in the contract as room for manoeuvre and/or to press for renegotiation; seventhly, that monitoring of franchisees' performance will create new bureaucracy; and finally, that new operators will find it difficult to win contracts.

I wonder whether the Department of Health and Social Security is aware of those arguments against franchising hospital cleaning, for qualitatively they are true. However, in the case of buses, the pros and cons of comprehensive competitive tendering must be balanced quantitatively against those of the present system and the Government's proposals — in other words, deregulation plus limited competitive tendering. On that basis, CCT comes out a clear winner. It ensures the benefits of competition but minimises the danger. Furthermore, many of the problems attributed to CCT can be overcome if the contracts are not homogenous, as the Government assume. Thus, there would be a mosaic of short contracts, of perhaps three years, and long contracts, of perhaps five years, covering large and small networks of services. Some contracts would cover a network of profitable routes only, the operator paying the local authority for the privilege of running the service exclusively. Other contracts would be for networks of loss-making services, for the provision of which operators would be paid by the local authority.

Thus, at a stroke, a large proportion of cross-subsidy would become transparent to public inspection, as the cross-subsidy would be going through the local authority's books rather than remaining hidden within the operator's paper franchise. Clearly, some contracts would, for operating purposes, cover a mixed network of profitable and unprofitable routes. If the opacity of cross-subsidy is to be significantly reduced, the number of such internally subsidising contracts would need to be kept to a minimum. Cross-subsidy would not be totally eliminated by CCT, but even the Government accept that eradication is neither possible nor commercially desirable.

For the success of CCT, it is essential that, first, local authorities must have a clear statutory obligation to co-ordinate transport provision—-unfortunately, we failed to get that written into the Bill under the previous amendment —and, secondly, that at the very least contracts should ensure that a minimum standard, agreed nationally, of frequency, reliability, network and price is attained.

I call one other important witness in support of the idea of franchising — Dr. Quarmby, the former managing director of buses on London Regional Transport. 1 think that he is now running the Sainsbury fleet. In evidence to the Select Committee on 19 December 1984 he said:
"Deregulation is likely to lead, at the end of the day, to less competition because it is likely to lead to the re-establishment of the territorial monopolies, of the kind we were familiar with 50 or 60 years ago. I think tendering within a planned framework is more likely to maintain real competition. In order for that to happen one has to parcel out routes in a way that reflects the ability of the supplying market to produce the service."
I know of at least four county councils, perhaps more—1 know that the Association of County Councils also goes along with the idea—which would very much like to go down the path of comprehensive competitive tendering. Three of those councils are Hertfordshire, Essex and Kent. The councils should have that option. I go further and say that it is the right way forward. I support the amendment.

I voted with considerable reluctance for the Second Reading of the Bill because I recognised that, incontrovertibly, change was and is needed in the present bus licensing arrangements. The Bill is an expression of political will and I think that virtually all Conservative Members recognise the Government's courage in trying to achieve their objective in the Bill. My support for the amendment is based on a transport rather than a political view, and I support it for transport reasons, not for political reasons and certainly not for party political reasons. I do not believe that any public transport system can be run without an element of cross-subsidy.

Like my hon. Friend the Member for Wellingborough (Mr. Fry), I believe that experimentation is necessary. The Government have rightly expressed the hope that new ideas will permeate the whole bus transport industry as a result of the Bill and I believe that that is likely to be the case. What I do not like is the attitude, "We support experiments in public transport provided that they are the experiments laid down in our legislation". To me, that smacks of Henry Ford's dictum that people could have any colour motor car so long as it was black.

My hon. Friend the Member for Wellingborough has proposed the amendment with great conviction. I hope that my hon. Friend the Minister will recognise that the amendment is essentially modest in both spirit and wording. By no stretch of the imagination is it motivated or likely to be taken up by people inherently hostile to the Bill. I put it to my hon. Friend the Minister in these simple terms: if he wants my vote for the Third Reading of the Bill, will he please accept my hon. Friend's amendment?

The hon. Member for Isle of Wight (Mr. Ross) seemed rather bewildered by the brief that he was reading and I am sorry to say that I did not understand it any more than he did. I believe, however, that the point that he was trying to make was encapsulated in the speech of my hon. Friend the Member for Wellingborough (Mr. Fry) and supported by my hon. Friend the Member for Christchurch (Mr. Adley).

The hon. Member for Isle of Wight quoted evidence from the Select Committee in support of his view, based on a package of profitable and loss-making routes so that the cross-subsidy from the profitable routes could be used to run the loss-making routes. In fact, that is the root of much of the trouble with the existing system and I would not wish it to be perpetuated.

My hon. Friend the Member for Wellingborough, supported by my hon. Friend the Member for Christchurch, put the case for comprehensive competitive tendering—a form of franchising which, I grant, would be some improvement on the present system. There is, however, the inherent disadvantage that the pattern of services would be decided by the county transport planners and not by the market. It was scarcely surprising that my hon. Friend the Member for Wellingborough was able to pray in aid the views of the Association of County Councils and the Association of Metropolitan Authorities as the proposal would give them the decision-making power that they sought.

With a franchising system, we would never know how much the market could do on its own. Cross-subsidy would be retained, thus losing passengers on the better routes and the lower fares and more frequent services that would come with free competition. Cross-subsidy is essential to the package proposed by my hon. Friends and would undoubtedly be seen by county and district councils as a way through, based on a continuation of the existing system of overcharging customers on the better routes and providing an inferior service in order to generate the profits needed for cross-subsidy to take place. I appreciate the moral compulsion behind my hon. Friends' case, but my hon. Friend the Member for Christchurch must know from his knowledge of transport that if one overcharges customers or provides substandard services to create profits for cross-subsidy one drives away customers. That is the economic reality at the heart of much of the failure of the present system.

8.15 pm

As both my hon. Friends know, cross-subsidy is a feature of a multitude of businesses, but in that case it is commercial cross-subsidy — providing attractive loss leaders to bring customers into the main business. The reverse is true of cross-subsidy in the bus industry where it means damaging the main business to provide for minority customers. That is not commercial and it is totally damaging to the health of the industry. The chairman of the National Bus Company, in his report last year, identified excessive use of cross-subsidy as one factor leading to the early demise of efficient and profitable services.

I understand what my hon. Friends are trying to do and I do not lack sympathy with them. I also accept that the proposal would be some improvement on the present system. Nevertheless, it would have the fatal flaw of perpetuating a system which drives away customers on the best routes. For every 10 per cent. increase in fares or reduction in the value of services there is a 3 per cent. loss in customers. The effect of my hon. Friends' proposal would thus be to perpetuate the weaknesses of the present system.

My hon. Friend the Minister is proffering a one-option high-risk proposition in the Bill which we may all live to regret. I repeat the question that I asked before: how many major cities can he name in which the scheme that he is propounding in the Bill is in operation and working successfully?

I shall be happy to deal with that in a moment.

A franchising system would lack flexibility. Worst of all, once the franchise was awarded competitive pressure would be off. There would be no on-going pressure for efficiency, high productivity and control of costs. There was a dramatic change in Midland Red when it had to face open competition rather than a closed franchise. That company managed to improve its productivity by 25 per cent. If we adopted the franchise system proposed by my hon. Friends, that kind of pressure would be off once the franchise was granted. I accept that the amendment would make some improvement, but it would provide nothing like the revitalisation of the industry that is needed.

It may help if I draw attention to some of the other consequences of my hon. Friend's proposal. The level of fares, the pattern of routes and the frequency of services would all be settled by the planners—perfect in theory, but in practice lacking the ability to change and to respond to the market.

The Minister is back on his favourite theme about planners. Has it never occurred to him that planners who work for local authorities and have spent years obtaining proper qualifications are far more likely to be responsive to the needs of bus travellers than anyone planning for the needs of just one company? Why does he show such deep contempt for anyone who knows anything about transport?

I assure the hon. Lady that I feel no such contempt. Perhaps she has not heard of consultants, who are available to provide specialised services to a multitude of operators and who form an inherent part of the private sector system for identifying markets and ascertaining what the public want.

Invitations to tender and awards put a premium on the incumbent operator. I shall return to that point because, in practical terms, it is important. Moreover, it is exceedingly difficult, if not impossible, properly to assess bids in the way that would be necessary in this case. How does one assess a cheaper, older vehicle and compare it with a smaller, newer fleet? How does one assess differential peak fares proposed by one operator and compare them with those proposed by another operator? As soon as a contract is awarded for the term period—the proposed franchise—the operator is protected from all of the normal business pressures to improve efficiency. And how does one police it? If there is a gradual deterioration, at what point does one say that the gradual deterioration is sufficiently bad that something must be done about breaking the contract? The reality is that there would be a drift which embodied many of the weaknesses of the present system. I accept that it would be an improvement upon the present system, but it would be nothing like the improvement to be obtained from an open, competitive market.

What would happen in practice in a place like Manchester? How many other operators in Manchester would be prepared to compete with the passenger transport executive for these market franchises? What proportion of the market could conceivably be taken other than by the existing Manchester PTE? In that case, what would happen under the rolling system of replacement franchises when they are relet and the number of private sector operators is increased? Is my hon. Friend the Member for Wellingborough prepared to face the Manchester PTE bus workers and tell them that at the toss of a coin their jobs will be lost and they will be unemployed simply because a contract has been let like that? That would not be acceptable to a very high proportion of the bus workers in Manchester, but it would be the inevitable consequence of the high proportion of the contracts that the Manchester PTE would have to have in the first place because of the insufficient number of competing operators.

My hon. Friend the Member for Wellingborough asked why competitive franchising is not good enough for the rest of the country when there is competitive franchising for London. I think he knows that the arrangements for London are only temporary. The interim franchising arrangement is better than the previous monopoly system, but it is not as good as the system that London will enjoy when the Bill is enacted.

My hon. Friend also referred to Kent. He said that the revenue subsidy for Kent is now £3·2 million and that it will rise to £5 million when the Bill is enacted. What figure has my hon. Friend placed on the potential improvement in efficiency of the Kent operation? Does he expect a 5 per cent. or a 10 per cent. improvement in productivity because of competition? I shall be happy to give way to my hon. Friend because it will help to take the argument forward.

The figures I gave for Kent were submitted by the Conservative leader of Kent county council. As my hon. Friend the Under-Secretary of State knows, Kent has been working on this proposal for some time. I do not know the entire basis of its calculations, but occasionally it is worth trusting some of the experts in the counties who are on our side to come up with the right figure.

I do not doubt the wisdom of what my hon. Friend is saying, but I have to make two points to him. Kent is operating the same system as was operated by Norfolk before it went out to competitive tender. When Norfolk went out to competitive tender, it saved over 60 per cent. of ratepayers' money. I understand the theory of my hon. Friend's argument, but he has failed to take account of the reality that as soon as there is competition operators' costs are brought tumbling down.

Let me give another example to my hon. Friend. In Kent there is both a municipal undertaking and a National Bus Company undertaking. When the private sector challenged the National Bus Company, Surrey county council was not sure that it could believe the figures that it had been given. Therefore, it called in consultants to make an assessment. They said, "No, we do not think that it could be quite so good as the private operators say, but we think that it could be 20 per cent. below the operating costs of the National Bus Company." If my hon. Friend could demonstrate that the Kent figures to which he referred would stand up to a 20 or 25 per cent. improvement in productivity and would still result in an increase in the subsidy that would be required, I should concede the argument. However, my hon. Friend cannot do so.

If one takes the turnover for Kent and expects a 20 or 25 per cent. improvement in productivity, one finds that there is an enormous difference in terms of the prospective amount of subsidy that would be required. If my hon. Friend the Member for Christchurch can show that, with the improvements in efficiency which have demonstrably been obtained, he cannot minimise this subsidy, then he has made a good point. If he cannot do that—and I do not believe that he can—I hope that he will join me in the Lobby in voting down the amendment.

It is clear that the figures that have been bandied about for Norfolk were comparing like with like. The problem is that the level of services has not been entirely the same.

My hon. Friend has slightly missed the point about the improvement in productivity in Kent. When tenders are competed for, an opportunity is provided for those who have increased their productivity to put in lower bids. As it is a competitive tender, it will allow certain costs to come down. The innovative entrepreneur will be encouraged. I fail to see why the system I have put forward should not lead to a considerable improvement.

My hon. Friend was seeking to demonstrate that the existing system will lead to increased costs falling on the ratepayers of Kent. I have sought to demonstrate that that is not so.

My hon. Friend says that in the case of Norfolk one is comparing like with like. It was, in fact, a case of comparing equivalent with equivalent. There were considerable cutbacks in Norfolk, but they took place before the county council went out to tender. If my hon. Friend examines in detail what happened when the county council went out to tender, he will discover that there was a substantial reduction—from £500,000 to £150,000—in the tenders for the equivalent routes. However, inherent in it was a very curious fact: that, faced with competition, the National Bus Company suddenly discovered that it could run a block of those routes without a subsidy, although previously it had said that it required a subsidy. That is a further argument to set against those that have been advanced by my hon. Friend. When the chips are down, competition will get the costs down and make marginal routes viable to an extent that my hon. Friend has not fully taken into account.

My hon. Friend may have difficulty in withdrawing his amendment. I do not know how far he is committed. I hope that he will feel able to do so. In view of the arguments that I have deployed, I hope that my hon. Friend the Member for Christchurch will at least feel that his support for the amendment has been weakened.

I apologise to my hon. Friend. I have failed to answer two points. My hon. Friend asked me to name the other cities which had introduced the system. I shall not name the other cities which have introduced this system because I am not afraid to be a pioneer. My hon. Friend is a great exponent of the railways and knows that in their day they were pioneers. If those who pioneered the success of the railways, which my hon. Friend cherishes, had adopted the chicken-hearted approach that my hon. Friend has tried to suggest, we should not have railways in this country today.

8.30 pm

My hon. Friend said that the Hereford and other trial areas were too small on which to base such a major change. But we have not built this Bill solely on those trial areas. We have built it on the known effects of competition where it has been introduced to replace monopoly. One example is the aviation industry, where internal air services have been improved, where there has been substantial investment, and whose services more travellers are now using. Another example is the long-distance coach services that have modern coaches, more investment, better quality services, such as video shows, lower fares, and more people travelling on them. Those are things that the customers like. We have no reason to believe that the principle that has been well tried in other areas will be found to be flawed when applied to the bus industry.

I am not surprised that the hon. Member for Wellingborough (Mr. Fry) has been looking mildly bemused throughout the Minister's peroration. He was treated to the kind of monologue that we heard ad nauseam in Committee. The reality is that, when the Minister was asked to name one city, or even a suburb, in which the proposal has been tried and found to be successful, he was overcome with the most incredible inability to discover any area where it had worked.

The Minister told his hon. Friend not to worry because the Government knew that it worked in competition with express coach services—omitting, as he always does, to say that he was not comparing like with like, that the express coach services do not go to all the places that they did previously and that the costs of running those services is largely borne by reduced revenue for British Rail. He sticks to his theory that if it works for the express coach services, it must work for everything.

I do not believe that franchising is the ultimate answer, but that will not come as any surprise to Conservative Members. I would prefer to lose the Bill entirely—it is a disaster. Conservative Members, when they are being honest, realise that. They know that such a major change, which will produce utter chaos, will not be to the advantage of the Conservative party or any other party. If the Bill goes through — and heaven forfend that that should be so—anything that is slightly better than what is intended in the Bill may be an improvement.

I find it amusing when Ministers get up with such vigour, if not sense, and defend their refusal to accept amendments. I have discovered something interesting. In the brave new world of 1961, a certain Mr. Nicholas Ridley, Member for Cirencester, proposed to the then Minister of Transport that bus services should be allocated to operators on the basis of franchising. I suppose that we should at least be grateful because we have absolute proof that it takes only 20 years for the Secretary of State to change his views, so we can wait around and, with any luck, will find a new public transport system in the next 20 years—although the right hon. Gentleman will not be left in charge of it for more than 20 minutes.

It is amusing to read that the Secretary of State told a conference at Bristol university last year that since 1961 he had seen the error of his ways. I am afraid that that is not all consistent with his record either as a Treasury Minister or as a Transport Minister. If that is the case, there is always the hope that the worst sinner will eventually repenteth.

The Opposition regard the whole theory of franchising as inadequate compared with our present system. The argument is not whether franchising would do as good a job as is being done at present, but whether franchising could ameliorate the chaos that will happen under the Bill. Certainly the Government are not prepared to talk sensibly about transport. On that basis we are prepared to listen to the arguments put forward by the hon. Member for Wellingborough, but, if this appalling Bill becomes law, we want it struck off the statute book as soon as possible.

I apologise to my hon. Friend the Member for Wellingborough (Mr. Fry) for missing part of his speech. However, I heard him say, quite rightly, that the members of the Select Committee did not agree on every point. But all Members of all parties did agree that something was seriously wrong in the bus industry and that radical change was needed. Some of us thought that comprehensive competitive tendering was the answer, while others thought that the proposals in the Bill were the answer.

In Committee I listened to Labour Members and wondered whether they accepted that something was seriously wrong in the bus industry and that radical change was necessary. They appeared to waver, and I thought that they would come down on the side of comprehensive competitive tendering—that is, franchising. However, the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) has now rejected that and said that the Labour party does not think that franchising is the answer. I wonder whether Opposition Members accept that anything needs to be done in the bus industry. I wonder what their analysis of the problems may be and what their thinking is on possible solutions. From what the hon. Lady says, it appears that there is no thinking at all and that they have no solutions to put forward. I find that interesting.

Some of the comments of my hon. Friend the Minister about this form of tendering assume that the remainder of the Bill has not happened. The very fact that bus services will be referred to the Office of Fair Trading is one way of ensuring that there is not a monopoly or that one operator does not take an unfair advantage. I must tell him—and I never thought that I would do this—that I call to my defence my right hon. Friend the Secretary of State, who I have heard say at least twice that he objects to cross-subsidy that cannot be discovered. He has said that if cross-subsidy is transparent, it is acceptable. I believe that the cross-subsidy in this system would be transparent. Now that transport support grant does not relate to revenue support, every local authority will want to keep down the amount of money that it will be using out of its rate support grant to subsidise public transport, so it will be demanding value for money.

My hon. Friend may live to regret boasting about rates of improvement of 25 to 30 per cent. across the country. I accept that such improvements are possible in some places, but they are clearly not possible in other places. If he had listened to the evidence given to the Select Committee, he would realise that the experts were divided. Most of them said that, while there were improvements in some cases, in others improvements were not possible. If my hon. Friend thinks that he will obtain a 25 to 30 per cent. improvement in costs across the country, he is in for a sad shock.

My hon. Friend will be aware that one authority that took the view that no further improvement could be made in its efficiency and productivity was Plymouth. He will also be aware that, when Plymouth went to a firm of consultants, its report suggested a 20 per cent. potential for improvement. Yet Plymouth is one of the most efficient municipal operators in the country. If the most efficient operator has the opportunity for a 20 per cent. improvement in productivity on the basis of a consultant's external report, perhaps my hon. Friend would like to consider again whether there are many such areas. I do not ask for every authority, but I should be interested to have my hon. Friend's list of those which are so good that there is not this improvement. However, Plymouth stands out as one of the best.

I do not deny that there are areas in which there could be considerable improvement, but I say that one cannot make such a generalisation. It is because I believe that the Government's stand is based on hope rather than knowledge that I think it would be valuable if the Bill were amended as I propose, to provide an alternative. I hope that my hon. Friend will not live to regret not having accepted the amendment. I think that he probably will.

The Secretary of State for Transport, the right hon. Friend of the hon. Member for Wellingborough (Mr. Fry), rubbished the report of the consultants in Plymouth and said that it was not accurate and that the figures in it could not be accepted. Would the hon. Gentleman mind asking his right hon. Friend why it is that, when the report states that Plymouth will have to pay a considerable amount more to supply its existing level of services, he does not like the figures, but, when he wishes to argue with his hon. Friend the Member for Wellingborough, he suddenly finds it an extremely convincing report and one that should be accepted?

The report states:

"We believe that we have demonstrated, in Plymouth's case, that there is a strong likelihood that this will not be true if the proposals are implemented in their present form."
In other words, there will be savings, and it is likely to cost the local authority considerably more if it implements the schemes as proposed by the Government. That is the overall conclusion of the document.

There are certain fundamental flaws in the report. It assumes, for example, that there will be no cross-subsidy, but every commercial undertaking has cross-subsidy.

Not commercial cross-subsidy. The report assumes that there will be no increase in the patronage on the loss-making services as a result of competition. However, neither of those arguments will stand up to careful analysis.

If I may help my hon. Friend the Member for Wellingborough, I think that what is not at issue is that there is a potential for a 20 per cent, increase. We do not disagree with that. If we and the consultants are agreed, perhaps my hon. Friend will accept that at least there is a strong probability that such a potential for improvement in productivity exists.

I apologise to the hon. Member for Wellingborough (Mr. Fry) for having missed the first part of his opening remarks.

As a first choice, comprehensive competitive tendering for any such scheme is not one for which I would opt. On the other hand, I do not have the luxury of choosing an integrated transport system. I am not particularly interested in whether there is cross-subsidy. If there were a choice between its being hidden or perceived by the public, I would always go for the latter, because there is nothing to hide and the public should be informed if there is a cross-subsidy. I am sure that most people in a town would recognise that bus services must extend to the outskirts and make provision for everybody in the town rather than, as will happen if the Bill is enacted unamended, bus services being provided in the centre of the town and the outskirts generally having a poor bus service, if they have one at all.

However, as I said, I do not have the luxury of opting for an integrated transport service. In the circumstances —I do not know whether I speak for my hon. Friends— I support the amendment and, if the hon. Gentleman presses it to a vote, I shall support him.

8.45 pm

It is a pity that such a Bill has been presented to Parliament. The Bill was based originally on the Hereford trial area. It was vaunted throughout the country that it had succeeded beyond the wildest dreams of the Government who had proposed the scheme. In the last two days, I have noticed a change in the attitude of the Government. They have said that they learnt a great deal from the Hereford trial area, and it is no longer a fantastic success. It is regrettable that the country at large will have to learn from the experiment that the Government are now foisting on it.

Question put, That the amendment be made: —

The House divided: Ayes 91, Noes 225.

Division No. 220]

[8.47 pm

AYES

Adley, RobertAshton, Joe
Archer, Rt Hon PeterBeith, A. J.
Ashdown, PaddyBennett, A (Dent'n & Red'sh)

Bermingham, GeraldLester, Jim
Bidwell, SydneyLewis, Ron (Carlisle)
Boyes, RolandLitherland, Robert
Bray, Dr JeremyLoyden, Edward
Brown, Gordon (D'f'mline E)McKay, Allen (Penistone)
Brown, Ron (E'burgh, Leith)McKelvey, William
Callaghan, Jim (Heyw'd & M)McNamara, Kevin
Campbell, IanMcTaggart, Robert
Campbell-Savours, DaleMadden, Max
Canavan, DennisMarek, Dr John
Carlile, Alexander (Montg'y)Marshall, David (Shettleston)
Cartwright, JohnMeadowcroft, Michael
Clark, Dr David (S Shields)Michie, William
Clarke, ThomasMillan, Rt Hon Bruce
Cocks, Rt Hon M. (Bristol S.)O'Brien, William
Cohen, HarryO'Neill, Martin
Corbett, RobinOwen, Rt Hon Dr David
Deakins, EricPark, George
Dixon, DonaldPatchett, Terry
Dubs, AlfredPenhaligon, David
Duffy, A. E. P.Pike, Peter
Dunwoody, Hon Mrs G.Richardson, Ms Jo
Evans, John (St. Helens N)Rooker, J. W.
Fisher, MarkRowlands, Ted
Flannery, MartinShort, Mrs H.(W'hampt'n NE)
Foot, Rt Hon MichaelSilkin, Rt Hon J.
Foulkes, GeorgeStewart, Rt Hon D. (W Isles)
Freeson, Rt Hon ReginaldStott, Roger
Fry, PeterStrang, Gavin
Golding, JohnThomas, Dr R. (Carmarthen)
Gould, BryanThompson, J. (Wansbeck)
Hamilton, W, W, (Central Fife)Thorne, Stan (Preston)
Hancock, Mr. MichaelTorney, Tom
Harrison, Rt Hon WalterWainwright, R.
Hattersley, Rt Hon RoyWallace, James
Haynes, FrankWareing, Robert
Home Robertson, JohnWhite, James
Howells, GeraintWilson, Gordon
Hughes, Sean (Knowsley S)Winnick, David
Hughes, Simon (Southwark)Wrigglesworth, Ian
Janner, Hon Greville
John, BrynmorTellers for the Ayes:
Kirkwood, ArchyMr. Stephen Ross and
Lamond, JamesMr. Malcolm Bruce.
Leighton, Ronald

NOES

Alexander, RichardEyre, Sir Reginald
Amess, DavidFallon, Michael
Ancram, MichaelFarr, Sir John
Atkins, Robert (South Ribble)Favell, Anthony
Beaumont-Dark, AnthonyFenner, Mrs Peggy
Bellingham, HenryFookes, Miss Janet
Benyon, WilliamForsyth, Michael (Stirling)
Best, KeithForth, Eric
Body, RichardFox, Marcus
Boscawen, Hon RobertFranks, Cecil
Bowden, Gerald (Dulwich)Fraser, Peter (Angus East)
Brandon-Bravo, MartinFreeman, Roger
Bright, GrahamGale, Roger
Brooke, Hon PeterGarel-Jones, Tristan
Brown, M. (Brigg & Cl'thpes)Glyn, Dr Alan
Buck, Sir AntonyGoodlad, Alastair
Burt, AlistairGow, Ian
Butcher, JohnGower, Sir Raymond
Carlisle, Kenneth (Lincoln)Greenway, Harry
Carlisle, Rt Hon M. (W'ton S)Gregory, Conal
Carttiss, MichaelGriffiths, Peter (Portsm'th N)
Cash, WilliamGrist, Ian
Chope, ChristopherGummer, John Selwyn
Clark, Sir W. (Croydon S)Hamilton, Hon A. (Epsom)
Clegg, Sir WalterHamilton, Neil (Tatton)
Coombs, SimonHampson, Dr Keith
Cope, JohnHannam, John
Crouch, DavidHarvey, Robert
Dicks, TerryHaselhurst, Alan
Douglas-Hamilton, Lord J.Havers, Rt Hon Sir Michael
Dunn, RobertHawksley, Warren
Durant, TonyHayhoe, Barney
Dykes, HughHayward, Robert

Henderson, BarryParris, Matthew
Hickmet, RichardPawsey, James
Hicks, RobertPeacock, Mrs Elizabeth
Hind, KennethPollock, Alexander
Hirst, MichaelPorter, Barry
Hogg, Hon Douglas (Gr'th'm)Powell, Rt Hon J. E. (S Down)
Holland, Sir Philip (Gedling)Powell, William (Corby)
Holt, RichardPowley, John
Hordern, PeterPrentice, Rt Hon Reg
Howarth, Alan (Stratf'd-on-A)Proctor, K. Harvey
Howarth, Gerald (Cannock)Rathbone, Tim
Howell, Ralph (N Norfolk)Renton, Tim
Hubbard-Miles, PeterRhodes James, Robert
Hunt, David (Wirral)Ridley, Rt Hon Nicholas
Irving, CharlesRidsdale, Sir Julian
Jackson, RobertRoe, Mrs Marion
Jenkin, Rt Hon PatrickRossi, Sir Hugh
Johnson Smith, Sir GeoffreyRowe, Andrew
Jones, Gwilym (Cardiff N)Rumbold, Mrs Angela
Jones, Robert (W Herts)Sackville, Hon Thomas
Joseph, Rt Hon Sir KeithSainsbury, Hon Timothy
Kellett-Bowman, Mrs ElaineSt. John-Stevas, Rt Hon N.
Kershaw, Sir AnthonySayeed, Jonathan
Key, RobertShaw, Giles (Pudsey)
King, Roger (B'ham N'field)Shaw, Sir Michael (Scarb')
King, Rt Hon TomShelton, William (Streatham)
Knight, Gregory (Derby N)Shepherd, Colin (Hereford)
Knowles, MichaelSilvester, Fred
Knox, DavidSims, Roger
Lamont, NormanSkeet, T. H. H.
Lang, IanSmith, Tim (Beaconsfield)
Latham, MichaelSpeed, Keith
Lawler, GeoffreySpencer, Derek
Lawrence, IvanSpicer, Jim (W Dorset)
Lee, John (Pendle)Spicer, Michael (S Worcs)
Leigh, Edward (Gainsbor'gh)Squire, Robin
Lewis, Sir Kenneth (Stamf'd)Steen, Anthony
Lightbown, DavidStevens, Lewis (Nuneaton)
Li 1 ley, PeterStewart, Allan (Eastwood)
Lloyd, Peter, (Fareham)Stradling Thomas, J.
Lord, MichaelSumberg, David
Luce, RichardTaylor, John (Solihull)
McCurley, Mrs AnnaTaylor, Teddy (S'end E)
Macfarlane, NeilTebbit, Rt Hon Norman
MacKay, John (Argyll & Bute)Temple-Morris, Peter
Madel, DavidThomas, Rt Hon Peter
Malins, HumfreyThompson, Donald (Calder V)
Malone, GeraldThompson, Patrick (N'ich N)
Marland, PaulThornton, Malcolm
Marshall, Michael (Arundel)Thurnham, Peter
Mates, MichaelTownend, John (Bridlington)
Mather, CarolTownsend, Cyril D. (B'heath)
Maude, Hon FrancisTracey, Richard
Mawhinney, Dr BrianTwinn, Dr Ian
Maxwell-Hyslop, Robinvan Straubenzee, Sir W.
Mayhew, Sir PatrickVaughan, Sir Gerard
Mellor, DavidViggers, Peter
Merchant, PiersWaddington, David
Meyer, Sir AnthonyWakeham, Rt Hon John
Miller, Hal (B'grove)Waldegrave, Hon William
Mills, lain (Meriden)Walden, George
Mills, Sir Peter (West Devon)Walker, Bill (Tside N)
Mitchell, David (NW Hants)Wall, Sir Patrick
Moate, RogerWaller, Gary
Molyneaux, Rt Hon JamesWard, John
Monro, Sir HectorWardle, C. (Bexhill)
Montgomery, Sir FergusWatson, John
Morrison, Hon C. (Devizes)Watts, John
Morrison, Hon P. (Chester)Wells, Bowen (Hertford)
Murphy, ChristopherWheeler, John
Neale, GerrardWhitfield, John
Needham, RichardWhitney, Raymond
Nelson, AnthonyWiggin, Jerry
Neubert, MichaelWinterton, Mrs Ann
Nicholls, PatrickWinterton, Nicholas
Oppenheim, PhillipWolfson, Mark
Oppenheim, Rt Hon Mrs S.Wood, Timothy
Osborn, Sir JohnYeo, Tim
Page, Richard (Herts SW)Young, Sir George (Acton)

Younger, Rt Hon George
Mr. Mark Lennox-Boyd and Mr. John Major.Tellers for the Noes:

Question accordingly negatived.

It being after Nine o'clock, MR. DEPUTY SPEAKER proceeded, pursuant to the order [1 April] and the resolution yesterday, to put forthwith the Questions on the amendments moved by a member of the Government to the remainder of the Bill.