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Grand Committee

Volume 697: debated on Wednesday 12 December 2007

Grand Committee

Wednesday, 12 December 2007.

The Committee met at a quarter to four.

[The Deputy Chairman of Committees (LORD TORDOFF) in the Chair.]

Local Transport Bill [HL]

(Second Day)

I start by making the usual statement that if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and will resume after 10 minutes.

Clause 17 [Regulations about schemes which specify frequencies, timings or fares]:

[Amendments Nos. 18 to 21 not moved.]

22: Clause 17, page 17, line 10, leave out “not”

The noble Lord said: A quality partnership approach would function in the intended way only if it is fair and reasonable to both bus operators and authorities. I am not certain that the clause in question gives a reasonable balance of power to both parties. I am afraid that this may lead to undermining the quality partnership approach. Clarity and transparency are needed to ensure that there is no ambiguity in this section.

The Bill states that,

“the revision of requirements as to frequencies, timings or maximum fares … is not be to regarded as a variation of the scheme for the purposes of section 120”.

While I can see that this has a legitimate application, I would be very grateful if the Minister could confirm whether the present drafting would allow an authority to change requirements pertaining to frequency, timings or maximum fares without an operator’s consent.

We talked about admissible objections from relevant operators and what they may constitute. While I agree that the point needs clarification, I do not think that it is fair that an operator might have an unreasonably modified requirement imposed without any grounds for discussion or disagreement. For instance, if the maximum fare proposed by an authority is not agreed in the first instance, what is to prevent an authority from modifying the fare at a late stage unchallenged? I contend that at present the drafting is not sufficiently attractive to operators, bringing into question how many quality partnerships would be opposed at the earliest stage. The operator should have a mechanism for objecting if a material change is made after the scheme has commenced. Indeed, it is unclear what would happen to a quality partnership application after an admissible objection has been filed. Can the Minister please clarify that? The amendment seeks for all revisions to be regarded as a variation of a scheme under Section 120. I beg to move.

Before I get on to the amendment, I want to record my thanks to the noble Lord, Lord Hanningfield, and the noble Earl, Lord Mar and Kellie. We have had some discussions about having an extra session in Committee before Christmas, and I know that this has caused some difficulties. I want to thank colleagues for their forbearance on this. I hasten to add that it is not a problem that has been caused by my own side. I understand that there have been some difficulties—

I understand that the noble Lord has other responsibilities, and I am very sensitive to that. I shall certainly do my bit to make sure that matters are kept as brief as possible. I want to record my thanks also to other colleagues who have played a part in this.

This is an interesting amendment, but not one that I ultimately find attractive. It raises some interesting points and subjects.

The effect is that every change in the requirements for frequencies, timings or maximum fares in a quality partnership scheme would need to go through an extensive consultation process. I understand that the noble Lord wants fair and reasonable treatment for operators; I understand that he seeks clarity and transparency. We seek a balanced approach. We certainly regard consultation as an excellent thing—I have not heard many speeches against the value of consultation in my time in your Lordships' House—but one has to have a sense of proportion. It is important to approach things in that way.

I see two problems with the approach adopted by the noble Lord. First, fares and frequencies are market-sensitive issues—I am sure that the noble Lord appreciates that—and a scheme is more likely to be acceptable in competition terms if there are provisions that allow such matters to be regularly reviewed, so that operators in the scheme are not bound to standards that may have been realistic at the outset but are not in the longer term, and so that new operators are not crowded out of the market by the high frequencies demanded of those in the scheme.

A regular review process—perhaps once a year—should be an integral part of the system. It should be agreed at the outset so that all the participants know exactly where they stand. That would not be compatible with going through the variation procedure with full public consultation. That could take almost a year to complete in itself. There is a danger that the process gets so cumbersome that there are not enough resources to put into the scheme and it would not then deliver its objectives.

A second concern is that if there is not the reassurance that any provision on frequency, timing and fares can be revised quite quickly and easily, operators are less likely to make the commitments in the first place and may well have admissible objections to doing so. All those factors are interrelated and we could easily upset the balance.

Bus operators will have to be fully engaged in the review process. It is perhaps worth reminding the Committee of the regulation-making powers that Clause 17 would insert into Section 122 of the Transport Act 2000. Those include, in paragraph (3)(c), a power to make provision,

“for any requirement as to frequencies, timings or maximum fares to be revised only if there are no admissible objections to the revision from relevant operators”.

So it would be possible, under the provisions as drafted, to provide that such revisions could not take place without consulting relevant operators, without the need to impose the full, heavy-handed and perhaps sometimes overbearing consultation process in respect of such changes.

I hope that the noble Lord is satisfied on that point. I certainly understand his desire for greater clarity and transparency in these matters, but we need a sense of balance and proportion. I have a feeling that if the noble Lord were, in his own patch, to go along the route that he is recommending in the amendment, he could find himself rather bogged down and mired in consultation that could be never-ending.

No one wants to be bogged down in consultation that is never-ending. I repeat, as the Minister said, that we are looking for some clarification and transparency about the processes. We will read carefully what he said today to make certain whether we want to clarify the matter any further at a later stage but, with that, I beg leave to withdraw the amendment today.

Amendment, by leave, withdrawn.

Clause 17 agreed to.

Clause 18 [Quality contracts schemes]:

In calling Amendment No. 23, I should point out that, were it to be agreed to, I should not be able to call Amendments Nos. 24 to 31 because of pre-emption.

23: Clause 18, page 17, line 20, leave out subsection (2)

The noble Lord said: I am uncertain that quality contracts are the right approach for local transport authorities to adopt. It is all too easy to forget the problems with the regulated market and to assert that the London model provides a paradigm applicable—or, indeed, affordable—in all areas. The amendment seeks to remove revised proportionality criteria when setting up a quality contract, leaving the original with no other practical way for criteria to apply.

It should be borne in mind that there are currently no quality contracts anywhere in the country. The inference is that the nature of the scheme and the interim period before a functioning scheme can operate are not sufficiently attractive prospects for local authorities. Since there is currently no precedent, I contend that the one factor precluding the uptake of quality contracts is the legal uncertainty surrounding the implementation of the scheme. The Bill goes some way to streamlining the appeals process, but I am afraid that the time and resources required will remain an insurmountable barrier.

I have much confidence in the quality partnership approach, done properly and, with respect to both sides—the consideration we have been talking about—collaboration can produce excellent results. Can the Minister provide evidence to demonstrate the superior benefits of quality contracts over and above quality partnerships? After all, that is one of our aims.

An additional reason for removing this subsection is the ambiguity of some terms. Further to the comment of the noble Lord, Lord Bradshaw, at Second Reading, what, exactly, constitutes an economic, efficient and effective contribution to local transport policy? Furthermore, the lack of mention of financial compensation is likely to aggrieve bus operators. There is an argument that the loss of assets such as buses and depots without compensation is likely to cause operators to be opposed to a scheme from the outset. It should be remembered that not all the assets will necessarily be transportable. Urban vehicles such as articulated and double-decker buses would not be suitable for redeployment in a rural area. We therefore oppose the revised criteria for quality contracts. I beg to move.

I want to ask the Minister briefly about the application of these quality contract schemes to Wales. In an otherwise extremely helpful note in the Explanatory Memorandum on the territorial applications of the Bill, there is no reference to Clause 18. Can we first clear up whether these quality contract schemes will apply and, if so, how they will be implemented and by whom? Secondly, what consultation has taken place, not only with Ministers in the National Assembly but also the National Assembly itself? I know a later clause is the subject of proper consultation, but these clauses have not been. I wonder whether we can get some clarification as to the exact territorial extent and application of Clause 18 and the quality contract schemes.

I do not wish to detain the Committee by having a Second Reading debate on quality contracts and their necessity, but I ask the Minister what consideration has been given by the department to the question of compensation raised by the noble Lord, Lord Hanningfield, if companies themselves lose certain routes, or parts of routes, because of a franchising scheme which would be the natural outcome of Clause 18. What consultation, if any, has taken place with shareholders in bus companies? Despite the generally held myth, they are not all Montecristo-smoking fat capitalists. Indeed, many of those working in the bus industry are shareholders in the company for which they work. I have already drawn your Lordships’ attention to my entry in the Register of Members’ Interests, and do so again. Certainly, the two bus companies for which I have worked both have a considerable number of their employees as shareholders. In the National Express Group, accepting shares was actually a condition of employment. Obviously, any diminution of earnings for those companies arising from this clause about quality contracts will impinge on those shareholders and the employees as well, as many of them are one and the same. Will the Minister therefore address the point about compensation for shareholders and the impact of the franchising system in the clause on local bus services? Again, although it might sound superficially attractive to some to say that there should be a franchising system in a particular area, one cannot imagine that the losing applicant, if that is the right way to put it—the person or the company that already operates the services—will be prepared to walk away, handing in the keys to garages and passing over their assets, without seeking some compensation. I have no idea what the likely outcome of such an approach is—I am glad to say that I am not a lawyer—but one can envisage a fairly protracted and difficult situation arising in the circumstances that I have just outlined. I therefore hope that the Minister will spend some time on this point when he replies.

Lastly, aside from my own interests in these matters, I believe that a partnership is a far superior method of operating bus services than a quality contract is. However, I appreciate that other people might have different views. Does the Minister agree that a quality contract, in most circumstances if not in all, really should be the court of last resort, and that, if all else fails, it is an avenue that should be explored if other aspects of bus operation have not been tried? I have no wish to repeat points that I made earlier in this debate, but your Lordships will be aware that I mentioned cases in which I have been involved when local authorities, for various reasons, were not prepared to participate wholeheartedly in the successful operation of quality partnerships. That is why, whether the blame lies with operators or with local authorities, I would be grateful if the Minister underlined the fact that, in his opinion and, I hope, that of the Government, the clause really will be the last resort and that everything else has been tried before quality contracts are applied in any area.

I am grateful to noble Lords who have contributed to the debate, and I will try to deal particularly with the points made by the noble Lord, Lord Snape. It is rare indeed for us to hear any words in favour of what has become known as the “only practicable way” test. One must concede that at the outset. The noble Lord, Lord Hanningfield, was right to remind us that, as yet, no one has gone down the quality contracts route.

One of the main objectives of the Government’s policy document, Putting Passengers First, onwards has been to replace the “only practicable way” test with something that is more suitable yet still sufficiently exacting to ensure that quality contracts schemes are not made unadvisedly or without regard to the cost or the consequences. The noble Lord, Lord Snape, is right to pick up on some of those consequences. It is certainly right to understand them, and obviously we have endeavoured to do so. I assume from what the noble Lord, Lord Hanningfield, said that the main purpose and drift of his amendment is in essence to preserve the status quo—I think that that is where he is coming from—where quality contracts schemes are a theoretical possibility but bus operators are pretty confident that they will never be used. The noble Lord, Lord Snape, reminded me that when, back in 2000, Ministers described quality contracts schemes as a last resort, they assumed that they would be an option that could be resorted to in the right circumstances. We have moved on from that experience, and the experience of the past few years suggests that even that may have been a touch overoptimistic. For various reasons, even the local transport authorities that are convinced that only a quality contracts scheme can deliver the improvements in bus services that the public rightly demand are daunted by the task of proving that there is absolutely no other practicable way of making those improvements. Probably, on reflection, the “only practicable way” test is somewhat odd in other ways. In theory at least a local transport authority could develop a policy that by its very nature could be implemented only through a quality contracts scheme. A uniform fare structure across the whole area of the authority might be an example. That could never be achieved in a deregulated market or even under a quality partnership scheme. Perhaps it is worth noting that only maximum fares and not the actual fare could be specified under the amendments proposed in Clause 12—at least not without blatant breach of competition legislation. So, on the face of things, the “only practicable way” test could be passed by an authority whose public interest case did not have much merit.

Rather than relying on that test, Clause 18 will substitute a series of positive criteria that a proposed scheme will have to satisfy, and against which it can be measured when a decision is needed on whether to keep it in force. Without these criteria, against which an independent approvals board can check and evaluate a scheme, much else in this part of the Bill would not work as intended. The additional requirements on consultation and affordability in Clause 19, which we shall come to shortly, would make the whole procedure even more daunting than it is at present.

I come close to agreeing with the noble Lord, Lord Snape, in his assertion that we see this very much as an approach of last resort. There may be occasions when it is deemed a sensible approach when all else has failed and when a quality contract—a quality partnership—clearly is not delivering the goods. We need to increase bus patronage and usage. If that is not happening in a particular area, the provisions set out in Clause 18 on quality contracts schemes would be the right approach. I know that there is some enthusiasm for that approach, and understandably so.

The noble Lord, Lord Snape, asked about consultation with operator shareholders. I understand where the noble Lord is coming from. We have had several consultations with bus companies, which have been very responsive in telling us exactly what they thought. It is only fair to say that bus companies and their shareholders’ interests will be very much aligned. The noble Lord also asked me about compensation, which has been raised forcefully by bus operators in response to consultation on the draft Bill. In the end we cannot accept their arguments. A quality contracts scheme will not deprive operators of their assets—primarily the buses themselves. Of course, they would be free to deploy them elsewhere on a network that they operate if they do not wish to tender for quality contracts, or fail to win any tenders. Of course, the buses themselves will retain a substantial value if the companies ultimately had to dispose of assets. The same applies to land holdings and depots, which might become surplus to an operator’s requirements.

The provisions in Clause 18 mean that a local transport authority would need to satisfy fairly exacting criteria to get a scheme approved. There is still agreement on that point, and that would include a proportionality test. That test is an important protection. Any adverse affect on operators’ businesses would need to be proportionate to the increase in public benefit from achieving the objectives of the scheme.

I am sure that Members of the Committee will be aware that the department has published a draft of its proposed guidance for local authorities, which should assist them in understanding how to apply the proportionality test, and encourage them to ensure that all operators have a fair opportunity to compete for quality contracts in the areas affected.

The noble Lord, Lord Rowlands, asked about the application of this part of the Bill to Wales. Local authorities in Wales can make a quality contracts scheme at present and still will be able to do so. But, unlike the operation of the scheme in England, Welsh Ministers will continue to approve the schemes as now. In a sense, that it is not a particularly relevant consideration. New criteria will apply in Wales, as in England.

I understand where the noble Lord, Lord Hanningfield, is coming from on this. I am confident that we will make nearly all the progress that we want to make through the quality partnership route, which is the major thrust of government policy. There may be occasions when the quality contract route, because all else has failed and because of local circumstances, ends up being embarked upon. But there are important tests and protections in place to ensure that that approach will be proportionate and appropriate, with each party understanding their part.

There apparently are a few considering the approach, but we do not have any hard and fast data at the moment. In fairness, we are at quite an early stage of the journey of legislation through Parliament and it is not surprising that there is not a mad rush of enthusiasm at this stage.

I have no wish to detain your Lordships unduly, but I want to raise two points arising from the Minister’s reply. I am grateful to him for what he said. Many people on both sides of this argument in the bus industry would be grateful for clarification on how he sees the way forward. I caution him on two matters. I do not mean to be insulting, but the Minister rather brushed aside what happens to companies’ assets—I shall come to compensation in a moment. He implied that vehicles can always be deployed if a company loses a contract or a franchising system is introduced, but that is not always the case.

I have bored Members of the Committee before on the subject of bendy buses in Birmingham and I do not wish to do so again. But they were bought specifically for one route. Usually, it is operators who are condemned for reneging on discussions. In this case it was one of the highway authorities. I do not want to cause too much grief to the Liberal party, but they were part of this decision. However, a particular bus lane was removed and, in a city such as Birmingham, it is very difficult to imagine bendy buses being deployed on many routes. The city does not lend itself to the use of those vehicles. Some Members of the Committee might feel that no city does.

However, Travel West Midlands, the company I worked for at the time, consulted bus passengers about the introduction of bendy buses. They prove to be surprisingly popular for women passengers who feel safer on a bendy bus with a television screen and being able to see the driver in front than they feel on a conventional double-decker bus, which is one reason why they were introduced on this route. But they are not readily deployed elsewhere, as the Minister glibly—I do not mean that in any insulting way—implied. Birmingham is not a city that lends itself to the deployment of these vehicles. If they were not used on that route, there would be a great operational problem as to where else they could be used.

As regards property, in my experience, many bus garages are in attractive areas of the city. I readily concede that they not particularly attractive buildings and often are not seen as good neighbours. A company of which I was chairman at the time had a garage at Quinton, a suburb of Birmingham, which was subject to lots of complaints about early morning and late night bus operation. All of us who care about public transport like to see it operating for as many hours as possible, but the neighbours of a bus garage might take the opposite view.

Eventually, because there were so many complaints, the planning authority held that the company was in breach of its planning permission and wanted to restrict the hours we worked. The company concerned succumbed to the blandishments of a supermarket chain, moved the buses out and sold the property at a rather decent price, as far as the shareholders were concerned, to the supermarket chain. I understand that the neighbours are not particularly happy at having noisy buses being replaced by shoppers seven days a week, some of whom are less than careful about where they park their car in the immediate area.

Going back to what my noble friend said, it is easy to say that it is possible to dispose of the assets. That disposal is not necessarily what the immediate neighbours might like. It is difficult to imagine in a competitive world and a competitive industry such as the bus industry that a bus company losing an area to a franchise system under this clause would readily dispose of its assets—whether land, property or buses—to what is seen as a rival competitor. It may decide to sell to the highest bidder to the detriment of the amenities of the neighbourhood.

I do not expect my noble friend to give me a comprehensive answer on those two examples. Without sounding smug or complacent, I hope I have indicated to him that this is what happens in reality when one gets involved in these matters rather than when reading a brief which has been prepared by someone else.

I always listen very carefully to my noble friend because what he says is grounded in the realities and practicalities of the way in which services—in this instance, buses—operate. I take the point. This example operates outside the framework that we are proposing in legislation. The point on bendy buses is good. I agree that they are a good vehicle on the right route. They have proved to be surprisingly popular in some areas for the very reasons that my noble friend raised.

Similarly, I understand the pain that can occur when you have to dispose of an asset. I have been in a local authority and I have had to dispose of assets. We caused problems and we rubbed up against other interests. However, the proportionality test would bear very heavily on the decision-makers involved in quality contracts. Those very considerations are precisely why that proportionality test is there and why it has value. I understand and accept that that is not a complete answer to my noble friend’s point. I know that there is a sharp division of opinion about whether we should build forms of compensation into this. I do not think that we can go down that route, but I think that the proportionality test probably offers what the noble Lord is seeking. I hope that that issue will be highlighted during our debates. I certainly respect the point made by the noble Lord.

I thank the Minister for his response and I thank the noble Lord, Lord Snape, for his contribution. I do not think that we will pursue this much more today. I am a great believer in partnership and I think that quality partnerships could be improved to be the main answer. I do not know how people will take up quality contracts, but I am sure that we will pursue this debate further on Report. With that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

24: Clause 18, page 17, line 23, leave out “proposed”

The noble Lord said: I should like to continue the debate on quality contracts now rather than wait for Report stage. Amendment No. 24 would fundamentally change the Bill so that the local transport authority is the body that takes the decision on whether a quality contract scheme should be approved or made. If an operator believes that the decision of the local transport authority has breached its human rights, or unfairly or unreasonably prevented it from continuing to trade either completely or in part, or is not in accordance with the Bill’s guidelines, they have a right to seek to pursue the matter through the courts.

We do not want to end up with the situation in which we found ourselves following the Transport Act 2000, which provided, as we know, in theory for statutory quality partnerships and quality contracts. But, in practice, the requirements, the procedures and the criteria set out in that Act meant that those provisions were little used. As I understand it, there is only statutory quality partnership in place in England and no quality contracts anywhere in England, so it does not suggest that the Transport Act 2000 has been particularly a howling success.

We do not want to end up making the same mistakes again, but the Bill looks likely to achieve that feat. With the right of a veto by an operator on frequencies, timings and maximum fares in a quality partnership, a local transport authority may well take the view that it is not in a significantly stronger position than it is now, where, in return for providing improved infrastructure, it essentially gets some potential improvements in vehicle quality. Hence this Bill will not result in any significant increase in the number of statutory quality partnerships, although it probably would have done before the Government gave bus operators an effective veto on frequencies, timings and maximum fares; hence the importance of quality contracts.

However, as the Bill stands, with the apparent time-consuming and costly procedures involved in securing a quality contract, it is unlikely that more than one or two of even the largest transport authorities will think it worth the cost, hassle and uncertainty of going through the extended quality contact procedure. Of course, the noble Lord, Lord Hanningfield, asked precisely that question, and did not get a very informative answer when he asked how many authorities were likely to be interested in going down that particular road.

Indeed, it seems odd that the Bill on the one hand expands the existing duty of local transport authorities to develop policies relating to transport so that they must cover all aspects of transport, and take protection and improvement of the environment into account, and on the other says, “Even though we deem you capable of carrying out this major function, we do not trust you to look after the interests of the public you serve over issues such as frequencies, timings and fares, so we are going to bring in other bodies, such as the Approval Board and Transport Tribunal, to decide what you’re going to be allowed to do to bus services”. To believe that a local transport authority is going to put its bus operator or operators out of business through unreasonable schemes and then be left trying to explain to its electorate why bus services upon which they depend are no longer running is, frankly, extraordinary. The only recent example of which I can think of an attempt to put a bus company off the road is the highly questionable methods of Stagecoach to overcome the local bus operator in Preston. Needless to say, Stagecoach is among the strongest opponents of the Bill’s proposals, which would put an end to that kind of activity if only the Government would facilitate rather than impede their implementation.

However—my noble friend Lord Snape hinted at one example—maybe the Minister has examples of local transport authorities that have sought, like Stagecoach, to use questionable measures to put bus operators off the road. If so, I ask him to give the details when he responds.

The quality contracts procedure is in marked contrast to the Bill’s provisions in relation to local road user charging schemes where decisions are to be made by local authorities, even though there will no doubt be some who say, as some bus operators claim will be the situation with quality partnerships or contracts, that a road user charging scheme would either put them out of business or adversely affect the finances of their business.

In line with the question of the noble Lord, Lord Hanningfield, I again ask what evidence my noble friend has that local transport authorities will think it worth going through the quality contract procedure. How long does my noble friend think the procedure will take? First, as I understand it—I am quite happy to be corrected—there will presumably have been an attempt to make a quality partnership scheme in most circumstances. There will have been a veto on frequencies and timings by one or more bus operators. The matter will have gone to the traffic commissioners to consider. It is not clear whether they simply uphold or dismiss the objection, or whether they can amend the local transport authority’s partnership scheme. If they can amend it, could there then be further admissible objections by either the original parties involved in the application or a new party who claims to be affected by the amended scheme? That could lead to even more delay.

Will a party involved be able to appeal to either the transport tribunal or the courts against a decision by the traffic commissioners on a quality partnership scheme and, if so, on what grounds? If a party can make a further appeal in this way, that will be even more delay, and we have not even started on the quality contracts process. Again, can my noble friend say if it will be possible to go straight to a quality contract process only in certain limited circumstances without first having tried the quality partnership route? If so, can he reiterate under what circumstances that would be, where it would not be in danger of having the quality contract thrown out on the basis that a quality partnership would have achieved the same objectives?

The quality contracts scheme appears to be the franchising of a network of services similar to the arrangements for bus services in London and rail services nationally, except that for London’s bus services and the national rail network, there appears to be no equivalent of the procedure set out in the Bill for bus services outside London. A local transport authority submits an application for a quality contracts scheme to the Approvals Board shared by a traffic commissioner. The board considers it, presumably with public hearings—I am sure that the Minister will put me right if I am wrong—and decides either to accept or to reject the scheme, or perhaps to approve it as amended in whichever way it thinks fit. Will the Minister confirm whether my understanding is right?

There will then be a right of appeal to the Transport Tribunal on any matter as of right. The Transport Tribunal will then make arrangements for a hearing, hear the appeal, and take a decision. Will the Minister say when he responds whether the Transport Tribunal may amend the quality contracts scheme or simply uphold or dismiss the appeal? Will he also say whether the Approvals Board may amend a local transport authority’s partnership scheme? Will he also say whether a party that did not wish to challenge the original scheme but wanted to challenge the Approvals Board’s amended scheme could do so, and whether that would mean another hearing by the Approvals Board into representations by a new party into its amended scheme or an appeal to the Transport Tribunal?

Would a bus operator have to disclose to the local transport authority concerned all information that it put in front of the Approvals Board and the Transport Tribunal in support of its case, including financial information? Would that information also be made public? I understand that, once the Transport Tribunal has taken a decision, there can then be an appeal to the courts. Will the Minister say on what grounds an appeal can be made? If it can be made on the grounds that the decision by the tribunal was unreasonable or did not give proper weight to certain evidence, presumably the case would in effect be re-run in front of the appropriate court. We should be under no illusions that, if a local transport authority decided to go down the road of the quality contracts scheme, the bus operators would resist it all the way if the Approvals Board and Transport Tribunal decisions were not to their liking. The views of the bus operators are on the record, and they do not seem to be keen on seeing anything akin to the London arrangements for buses being extended elsewhere. A lengthy process could lead to other difficulties for a local transport authority. Existing operators who had not tendered for a quality contract or who had been unsuccessful would have little incentive to improve or even to maintain their services in the area concerned. Existing users might move to alternative forms of transport, including the car, probably contrary to the local transport authority’s own transport strategies and plans.

Will the Minister, in response to the questions that I have already asked, say how long the Government intend or believe this procedure could take? If, in the normal course of events, the quality partnership route would have been expected to have been traversed before the road of the quality contracts scheme was embarked on, I hope that his view on the time involved will reflect that fact and will include an appropriate period for a local transport authority to draw up and consult on its proposals. If it managed to jump all the hurdles, I hope that it would have an appropriate period to implement those proposals. Will the Minister also say how much the Government anticipate it will cost a party to go through this procedure in full?

The amendments also give rise to the question of who should be the key player in determining the frequency and timings of services and fare levels. Those decisions are crucial in determining transport plans and policies that are in the best interests of the communities concerned.

Clearly, an affected party has a fundamental right to go to law and pursue through the courts any injustice, unfairness, human rights breach or illegality felt to have resulted from a decision of a local transport authority. That decision would have to have been made after proper consultation and right-to-state-your-case procedures, set out in the Transport Act 2000. The issue is why we need all the other procedures and processes as well. The members of a local transport authority may have fought their successful election campaigns on pledges to deliver improved bus services. Is the will of the electorate to be turned over by an unelected approvals board or a transport tribunal? Does my noble friend think that the London system of franchising a network of bus services is unfair, or is he saying that the problem is getting from the unregulated bus monopolies that we have in reality in many areas to a regulated market of fixed-term franchises, but that once we have got there the problems largely disappear?

If the real problem is the first stage of getting from an unregulated to a regulated market, we will not get through it if we have a process and a procedure that will, in my view, deter nearly all local transport authorities—I sense that the noble Lord, Lord Hanningfield, probably agrees—from going down the road of quality contract schemes. We are in real danger of finding that this Bill will give birth to the same number of quality contract schemes as the Transport Act 2000—none—and it will not be because large numbers of quality partnership schemes covering fares, timings and frequencies are being concluded, thus negating the need for quality contracts. It will be because the procedure is designed, no doubt unintentionally, to thwart rather than to encourage progress and the extension of the democratic process into the provision of bus services for the community. I beg to move.

I support my noble friend’s amendments. This is the second time that we have tried to amend the disastrous deregulation of 1986. Looking round the Room, I think that I am perhaps the only one here today who sat in this Room eight years ago when we considered the Bill that became the Transport Act 2000. It was a failure, as my noble friend said. It did not give local authorities enough power to influence what went on on the ground, so we continued to have the bus wars that he described in Preston. Preston is not the only place affected; it happened in Manchester slightly earlier.

Why has the 2000 Act not worked? In response to an earlier question from the noble Lord, Lord Hanningfield, my noble friend the Minister used the words, “cumbersome and complicated”. As my noble friend described, the implementation of quality contracts under this system is cumbersome, complicated and costly.

I believe that partnerships are the best way forward, but local authorities should have a real alternative, because of the suspicion and the problems between local authorities and bus operators. I am not necessarily taking sides; it is always one problem, but we must admit that there are problems. A partnership will not work if there are not two willing parties to it. The local authorities should defend the interests of the public, as my noble friend said. That is their role in their area. If we are to achieve our goal of sustainability, that must include both defending the interests of existing passengers, who tend to be from the poorest and most deprived parts of the community and who rely on bus services because they have no access to any other form of transport, and encouraging more of us to leave the car at home and get on to a bus system that works for that community. I am not sure that bus companies are able to operate in those interests.

The deregulation was meant to create an effective network through competition, but it is a funny form of competition. In Manchester, a single local authority operator has been largely replaced by two private operators who operate north and south. There are two monopolies covering slightly different geographical areas. The situation seems to be similar in most areas.

I thought that one of the factors of competition was risk, yet we are talking about compensating people who are not able to win a contract in a marketplace. In what other areas would we be talking about public compensation for people who have lost business? If they want to go into a bus service business that involves competition, they have to accept the risk. Local authorities have a right to use their own assets as they want and we have to use the planning laws in a fair and proper manner to ensure that they do not do so in any way that affects the public.

Most bus operators rely heavily on public subsidy—the money from local authorities that enables them to subsidise pensioners and non-commercial routes. My colleagues on the Greater Manchester passenger transport authorities never feel that there is an open book arrangement on the amount of money that goes from local authorities to bus companies. Their level of risk is mitigated by public subsidy.

I hope that the Minister has listened carefully. My noble friend Lord Rosser asked him a large number of questions and he will need to think about the responses. We are saying that we should not do what we did in 2000, when we tried to change the disaster of 1986, but did not achieve it. If we make it too difficult for local authorities to have a quality contracts system, this will be another failed transport Bill.

I was around during the passage of the 2000 Bill. It seems like only yesterday. It is a matter of record—this is the great benefit of Hansard—that I said at some length that without fares and frequencies in quality partnerships, you would not achieve anything in a statutory quality partnership that you could not do with a voluntary one. That has proved to be the case. The many successful quality partnerships are, with one exception, all voluntary. I also recall saying at the time that the test for introducing quality contracts was so stringent that no one would bring them in. That has proved to be the case.

I make those points partly to remind myself and be smug about it, because it is always nice to say I told you so. More usefully, I urge the Government not to carry on in the same way when something clearly has not delivered what they were hoping for in 2000. The stated aims have not been achieved.

I have a lot of sympathy with the comments of the noble Lord, Lord Hanningfield, on the previous group of amendments. I would prefer voluntary arrangements. However, if we make quality contracts impossible—I would prefer that they were not used on the whole, if possible—the noble Lord should consider what might happen in areas that are seriously considering the introduction of road user charging. That really worries me, because it transforms the landscape in a way that we have not understood before. In London, the only reason that the Mayor could even consider introducing a congestion charge was that he was controlling public transport. If the Government really believe that there are local authority areas that need to introduce road user charging to manage congestion, giving them the option of a quality contract may be the only way in which they can introduce it. Otherwise, the local authority will be charging citizens for something that they previously enjoyed, but will not be able to guarantee the improvements in public transport that citizens will expect to be part of the deal. The Government need to think very carefully about the relationship between the two. If they are not prepared to make quality contracts useable and capable of being developed, they probably ought not to expect road user charging.

I found the contributions of both my noble friends interesting—not 100 per cent accurate, but interesting. My noble friend Lord Smith said that he was the only Member of the Committee who was around at the time of the Transport Act 2000. He was immediately contradicted by the noble Baroness opposite, so he was wrong there. The same debate took place down the Corridor and I was involved in it then.

My noble friend is right that some of the fears expressed at the time of the passage of that Act have been realised, especially the fear that local authorities would not get their hands on what were their assets. Understandably, many local authorities wish to turn the clock back to pre-1986, but that is not possible. We are not going back there, and I am sure that my noble friend would agree with that. He said that he regretted the fact that the London arrangement for buses does not appertain countrywide. That view is widely shared by many local authorities. That is not perhaps surprising when one looks at the cost of the London system of bus regulation. The figures for the support of bus services in London have increased by more than 200 per cent, compared with the last full year before deregulation, which I think was 1985, and by 1,700 per cent since 1995-96. That increase continues to pile on year on year because of the policies followed by the current Mayor of London and Transport for London.

I am making no criticism, but I cannot imagine any Government of any political hue having the ability—or the inclination—to spend that sort of money countrywide. We have to accept that London is a different market from the rest of the country. My noble friend shakes his head, but he will have to accept that it is the capital city and that that is because of congestion, I presume—I am not saying that other cities, including Wigan, do not have a degree of congestion, but that their congestion is nothing like it is in London. I understand why no Government of any political hue will follow that example—certainly financially.

The noble Lord, Lord Rosser, asked—presumably, he was asking me, as some of his remarks seemed to be aimed in my direction—for examples of local authorities that were not co-operating with the bus industry.

That is an incorrect statement. All my questions were addressed to my noble friend who will be responding to the debate; none of my questions were addressed to the noble Lord, Lord Snape.

I am grateful but I am also in some ways sorry because I always enjoy exchanges with the noble Lord.

Ministerial gratitude is not a commodity that is in long supply at the best of times. I am afraid that the Committee will have to put up with this spat between the two of us. Whether the remarks of the noble Lord, Lord Rosser, were aimed at me or not, I did not find them particularly new. That view has been held by local authorities for many years—certainly since the passage of the Transport Act 2000.

As my noble friend Lord Smith of Leigh said, it is a question of partnership, but it is not always the bus operators who fail to implement partnerships. I have a couple of examples involving not so much local authorities, although they are involved as well, but when Passenger Transport Authority executives—the elected element—have not followed through. Sometimes that is because of change in the political control of PTAs, of which Birmingham is a fine example—or perhaps not so fine an example—of the sort of situation that I am outlining. Because of the change in political control, the money to the constituent authorities and policies are seen through a different prism.

Despite agreements being made at PTA level, because the district councils are themselves the highway authorities responsible for implementing some of those agreements entered into at a different level, such agreements have not been implemented; indeed, they have been countermanded. There are examples of failure on both sides since the passage of the Transport Act 2000; I am sure that my noble friend will accept that.

Let us take the example of the bus industry—I hesitate to start quoting my own experience once again, but I shall do so. I served on a passenger transport authority in Greater Manchester in the early 1970s as an elected councillor. It was then known by the long-winded name of south-east Lancashire and north-east Cheshire PTA. I do not think that any bus passenger would have said at the time that the services that we ran were quite as comprehensive and as rosy as those that both my noble friends seem to feel would be run if only the local authorities had a greater part to play once more.

On Second Reading and during our discussion on an earlier amendment, I pointed out to noble Lords that the biggest survey of bus passengers carried out by my noble friend’s department indicates that outside London something like 83 per cent of bus passengers are content or reasonably content with the services provided by the “wicked capitalists”—if I might put that phrase in inverted commas—whereas, despite that increase of 1,600 per cent, only 78 per cent of passengers in London are satisfied with the socialist paradise provided by Ken Livingstone, the Mayor of London. That does not indicate—although these surveys are not 100 per cent accurate—that there is massive happiness with the situation in London. As a regular bus user in London, I am very impressed by the system, but whether I would be impressed enough to fork out the money that I am going to be asked for as an occasional council tax payer in London remains to be seen. The bus services are far superior to those before the mid-1990s.

My noble friend Lord Rosser felt that there should be no independent approval for quality contracts and gave his reasons. Again, it is a strange system where one side makes one proposal, another side makes a counterproposal and the side that made the first proposal then says that they are going ahead anyway. There has got to be some fallback position and some independent element that makes that decision. Having met quite a few of them, I am more than happy that the traffic commissioner, some of his staff and other people participate in this decision-making process. Traffic commissioners, by and large, are pretty under-resourced and I hope that if they are going to play this role my noble friend will tell us that there will be much greater resources passed in their direction. Most people in the bus industry would agree that if anyone is capable of making an independent decision on a quality contract or some other controversial aspect of such a scheme, a body chaired by the traffic commissioners is as good as any that I can think of; although I would be interested if the Minister can think of another.

I will paraphrase what my noble friend who replied from the Front Bench said on Second Reading when this point was debated. He felt it was important that an independent assessor looked at these matters before this decision was made. My noble friend Lord Rosser talked about people seeking compensation. Again, I have no wish to add to the so many guineas a word that our learned friends in the legal profession make out of these matters, but it is an inevitable consequence of the quality contracts scheme that someone who loses out will seek some sort of reparation. I am not saying that that is right, sensible or a course of action that I would advocate. But it seems to me that someone would seek some sort of judicial review if they lost out under the terms of this clause.

I return to the point that it needs two to tango and that once they make agreements both sides should stick to them. It has been a justified long-time criticism by local authorities that they had to provide the resources—the highways and the bus priority measures for the private sector which operated the buses—and yet the private sector benefited financially from that provision, in some cases enormously.

In the West Midlands, we, as the major bus operator at that time, sat down with the passenger transport executive to try to agree some system of payment that we as the bus operator could make for the provision of those facilities, because we thought that that was fair, since we were going to benefit from them. We agreed a sum of up to £30 million over a number of years in part-funding. If the executive paid 50 per cent of the cost of the highway arrangements, Travel West Midlands, the bus company that I chaired at the time, would pay the other 50 per cent. After five years in the job, when, somewhat wearied and feeling the strains of old age, I stepped down as chairman, the bus company had spent about £300,000, because getting these schemes to come to fruition was enormously difficult. Despite the best wishes of the Passenger Transport Authority, highways authorities—again perhaps because of a change of political control—were all too often not very keen on bus priority measures in their area. I left in 2000, but even now, nearly eight years later, the National Express Group, the last time I checked, spent no more than £1 million on these facilities because of the nature of getting agreement with the highways authorities and the PTA that were implementing these schemes. It is not a question solely of private bus operators failing to deliver; there are weaknesses on both sides.

I have to say to my noble friends that, without the benefit of a brief provided by someone else, local authorities are not good at taking quick decisions or implementing them. I am sure that one of the reasons why the previous Prime Minister wanted to change the system of local government in this country was that he felt equally frustrated. That is not an attack on councillors—I was one myself—but the system these days does not lend itself to quick commercial decision-taking.

I apologise for detaining the Committee for so long, but that leads me to my last point. It is important that an independent element rules on these decisions, although I do not encourage private operators to go to court. I do understand the fears expressed by many local authorities that the bus services are not as comprehensive as they could be if they had a greater say, but services and fares in many areas are discussed by both sides in this community. It is for the private operator, who after all invests a considerable amount of money in a bus fleet, to take the final decision as to how its assets are deployed. That is how private operators see it, and it is very difficult to argue with that. As for the point that councillors make pledges which independent approvals boards overturn—a sentence that I wrote down as the noble Lord, Lord Rosser, said it—many local authorities would be quite glad when they make these pledges that someone else has to say yea or nay. It is easy to make pledges when seeking election at any level—those of us who have sought election have all been tempted to make pledges in certain areas—but it is not always easy to implement them afterwards, and the fact that there is an independent body that can decide whether those pledges should be implemented might be somewhat welcome, whatever councillors might say publicly.

My very last point—I mean it this time—is about competition. I have listened to this debate continuously since 2000, but I am still not sure what local authorities want. My company in the West Midlands—I had better stick to that area as I know it best—was part of the National Express Group at the time and was accused on the one hand of running a monopoly. On the other hand, when there was competition—the private sector working the way it does, bus drivers whom we had fired for various actions, and who were working quite often for small bus operators, would buy a couple of buses and, under some of the Barnett provisions of the 1986 Act, would turn up on the most lucrative route in the area and invariably run two minutes in front of our buses vehicles that quite frankly would have disgraced provincial Birmingham in the 1930s—we were accused of driving them off the road.

I know nothing about the Stagecoach discussion in Preston, so I cannot comment in detail on what the noble Lord said earlier, but I certainly had enough experience in Birmingham of never knowing what the local authorities wanted. They were against us having a monopoly, then they were against unbridled competition, and I was never quite sure exactly what they wanted. These days, Birmingham has a new chairman who is not me, argumentative as my noble friends might think I am, and a new chief executive of the Passenger Transport Authority, both of whom appear to be united in the view that quality partnerships are the best way forward and that, by working together, they provide a better service for the customer, which is what the Bill and our amendments should be about, rather than about who runs the buses and who does not.

This has been a very stimulating and interesting debate, and I congratulate my noble friend Lord Rosser on tabling amendments that have provoked such a debate. Usually as a Minister you get the amendments listed in your notes, but there were so many amendments in this group that the top of the paper simply reads, “and a group of approximately 30 related amendments”. I congratulate him on doing so.

I have been listening to what has been said over the past half hour or so, thinking that this goes back to issues that were raised as a by-product of what I viewed back at the time, in the mid-1980s, as a rather crazy bus privatisation and bus deregulation Bill put through by the then Conservative Government. That legislation heralded in a time when I thought that we would simply see a continued acceleration of what officials said to me in my local authority was going to be managed decline. Year on year, it seemed that there would be fewer people on our local municipal buses and fewer people on the old green buses run by Southdown. There would be greater irritation as the fares seemed to get larger and larger as a proportion of people’s incomes. I do not think that there were many people who would ever have argued the case for the 1985 legislation in the longer term.

Some imaginative bus operators, whose work came about as a result of the shakedown in the structure of companies that took over services, clearly did see a business opportunity, and I speak as one who lives in an area where it has worked. But it has not worked for the reasons that were set out at the time of the passing of the legislation under Nicholas Ridley. It has worked because in some areas there was a strong desire to see effective, co-operative and partnership working. This legislation and the 2000 legislation seek to build on that concept of partnership to try to improve the quality, standard and variety of services on offer. That is in essence what we are trying to do here.

There has been a lot of criticism this afternoon that the legislation is going in the wrong direction and people have said that the 2000 legislation was a failure. I do not accept that it was a failure in the terms that have been set out before the Committee, because it has played its part in forcing the process of partnership, and we have seen the development of many successful voluntary partnerships. That is to the good, and we should work from that experience and seek to improve on it. No one is saying that voluntary partnership is a bad thing; most people are saying that it is a good thing but that there are circumstances where we need to give it more of a framework and more of a body and encourage and do more to stimulate the bus market. As we know, there is a tremendous amount of capacity in the bus industry, with much greater capacity to move passengers around, and it has tremendous potential for growth. Those are the issues that we should be wrestling with.

The amendments tabled by my noble friend Lord Rosser stimulate some debate about the best way to go. I am aware that, for instance, the question raised on the Approvals Board is an issue that has caused many strongly voiced opinions during consultation. Many are in favour of Approvals Boards and there are also people who are opposed. We have tried to strike a reasonable balance between those competing interests. My noble friend Lord Rosser has opposed the Approvals Board on two grounds. First, he says that it is undemocratic, and, secondly, he says that it will cause delays in what is bound to be a lengthy process to set up a quality contracts scheme. The Transport Committee in another place was fully aware of those arguments, yet it recommended not that the whole idea of a board should be scrapped but that it should simply be modified to amend those concerns as far as possible. That is what we have sought to do.

Let us remember that if Section 126 of the 2000 Act is not amended, a local transport authority in England will still be unable to make a quality contracts scheme without any independent scrutiny; it would need to submit an application to the Secretary of State for approval. That will continue to be the case in Wales, because Approvals Boards would exist only in England. An authority wishing to make a scheme in Wales would, as now, go to the Welsh Ministers for approval.

However, Amendment No. 45 in this group would remove Section 126 of the Transport Act 2000 altogether, removing the approval role of the Welsh Ministers as well as the Approvals Board for England. I do not know whether that was the noble Lord’s intention or whether he has taken any views from our colleagues in Wales on this issue. Our view in England is that giving the approval role to the Secretary of State placed Ministers and officials at the Department for Transport in a very difficult position, because if they so much as discussed a proposal with the local transport authority, there was a risk that it might be seen as a potential fettering of the discretion of the Secretary of State, and thus prejudicial to the Secretary of State’s ability to make an independent and impartial decision about the application. In such circumstances, an aggrieved party would be more likely to mount a legal challenge, which could in turn lead to a costly and even more time-consuming judicial review of the decision. That was why, in England, the Government decided that any scheme should in future be approved by an independent body rather than by a Minister of the Crown.

The local authority that is proposing to make the scheme cannot, by the nature of things, be an impartial judge. It will obviously support the scheme and be keen to get it implemented as soon as possible. The Government therefore believe that the Approvals Board, which would be able to provide the necessary objectivity in weighing up the issues, would be better placed to make such decisions.

It is not the Government’s intention that the Approvals Board will quibble with a local authority on questions of policy. That is rightly a matter for local decision by the democratic process. The notions of manifestos and commitments kick in. The policy issues should be thrashed out in the local authority. The board’s job is to certify that a quality contracts scheme is a reasonable and effective way of implementing that policy and fully satisfies the criteria set out in the new Section 124(1) of the Transport Act 2000 that would be inserted by Clause 18. That is rather more than simply looking at process, but it is a good deal less than interfering in policy matters. I hope that the Committee is reassured on that.

The Government regard it as highly important that the legislation is fully compatible with the European Convention on Human Rights. There is a potential tension here over quality contracts schemes because of the right of natural and legal persons, including bus companies, to peaceful enjoyment of their possessions. Of course, the convention right includes a balancing test that enables the state to make laws as considered necessary to control the use of property where that is in the public interest. In this Bill, particularly Clause 18, we have taken care to define the criteria for quality contracts schemes in a way that will ensure that any scheme is in the public interest, and that any interference with the peaceful enjoyment of property is not disproportionate to achieving those public interest objectives. But a local authority that is, understandably, intent on getting a better bus service out of operators may not give as much weight as it rightly should to the proportionality of the scheme’s effect on existing operators. In sum, the local authority cannot be expected to be totally impartial in this matter, and if challenged it might find difficulty in proving that it was impartial, to the satisfaction of a court of law.

That is why the Government consider that these sensitive matters should be decided, not by the local authority alone, certainly not by the operators, but by an independent third party with the right expertise who can make decisions with an impartial and open mind. This would not be a traffic commissioner alone, but a commissioner sitting with two other appointees. Although not specified in the Bill, we have it in mind that one would be an expert on transport planning, and the other an expert on transport economics. There may be occasions when, because of the nature of the scheme, other forms of expertise are more important. That is why Clause 21 leaves open the precise constitution of the board, so that each Approvals Board can be set up to include the most appropriate people for the particular case in hand.

The second objection about the Approvals Board is that it will cause unnecessary delay in the making of a quality contracts scheme. As no proposed quality contracts schemes have to date been submitted to the Secretary of State or a Welsh Minister for approval, we do not have an easy point of comparison. But it is fair to say that a board that is constituted for one specific purpose is more likely to take a quick decision than a Minister or a government department that always has a host of conflicting priorities coming across its desk at any one time.

We accept the very legitimate comments made by the Transport Committee in another place and others that decisions should be made within a reasonable time. That is why we have made provision in the Bill for the Secretary of State to specify in regulations the period within which the board would be expected to take its decisions. The board would be under an obligation to take all reasonable steps to reach a decision within that specified time. If it failed to do so, the chair of the board would have to write to the Secretary of State and the authority making the application setting out the reasons for the delay. That is all set out in new Section 126B of the Transport Act 2000, which would be inserted by Clause 22.

We have not specified the time limit in the Bill. That might need to be revised in the light of experience, because we simply do not know how complex the decisions are likely to be. But we have in mind something perhaps as short as six weeks as the maximum time between the referral of a case to a board and the delivery of its decisions. That would be shorter than the period normally allowed for consultation, and a great deal shorter than the best estimate of the time it would take to tender for contracts after the scheme has been approved.

This group of amendments goes even further, proposing to dispense not only with an approval mechanism, but with an appeals procedure of any kind. The local transport authority then really would be judge, jury and, I guess, executioner in a way that is totally unacceptable in a modern democratic society. When we are granting powers which have the potential to interfere with private rights to this extent—and whatever some noble Lords may think of bus operators, they do have rights—there has to be some reasonably accessible form of legal redress, for we are talking about the rights not only of the big five transport groups, but of smaller operators.

Removing the Transport Tribunal would not be at all satisfactory from the authority’s point of view either, because there would still be a possibility—we think it is a very strong likelihood—of a bus operator seeking a judicial review of any decision to make a scheme. The judicial review procedure would probably be beyond the means of a small operator, but it would certainly not be beyond the means of a major transport group. The impact on a local transport authority of an expensive and possibly protracted judicial review procedure could be far greater than the impact of an operator appealing—

Can the Minister confirm that a judicial review of the running of the tribunal is a possibility? I cannot imagine that it would be outside judicial review proceedings. I am not sure that relying on that as an argument for having a tribunal is entirely valid.

Of course, if there is disagreement with the decision and if there are reasonable grounds it will be open to do that. We have put tribunals in place in many areas of public law to try to tease out the need to have recourse to a higher court. That is welcome, because it makes the process easier and more accessible and produces a decision at a lower cost. Ultimately, in the circumstances that we jointly understand, a judicial review would be a practical proposition. If we are seeking to resolve issues in the best interests of the public, we do not want to end up going there on many occasions.

For reasons of cost, a judicial review procedure would weigh heavily on a small operator, but less so against a larger transportation group. The impact on a local transport authority of an expensive and possibly protracted judicial review would be far greater than the impact of an operator appealing against a decision to the Transport Tribunal, which should provide a relatively quick and inexpensive form of redress. We can be quite sure that if the decision-making process were entirely in the hands of a local transport authority with no right of appeal to a tribunal, the temptation for those operators who can afford to go to judicial review would be extremely strong.

The noble Lord, Lord Rosser, asked a lot of questions. If I miss any—I am sure I will—we will, as always on these occasions, come up with a letter at the end of the Committee proceedings, which will seek to analyse in some detail what lies behind the questions and provide more information than I can give this afternoon. One of his early questions was how long it would take a local authority to get a quality contracts scheme in place. We recognise the need to ensure that the approvals process does not impose an undue hurdle or delay on implementing schemes. We estimate that a small uncontroversial scheme could go through the statutory processes beginning with the statutory notice prior to consultation in about 15 months. Within that estimate, six weeks is allowed, roughly speaking, for consideration by the Approvals Board.

For a complicated scheme we may need to add up to 10 months for the tendering process, and for appeal to the Transport Tribunal perhaps a further three months. In addition, the approvals board may require a scheme to be modified, which may require some further consultation. We accept the case for inserting time limits into the stages leading to approval by the board. We have made provision in the Bill, but the timings will need to be specified in regulations.

The noble Lord raised the issue of admissible objections, the process for which will be set out in regulations, and he asked about quality contracts schemes more generally. There is a power to hold public inquiries, and there are provisions to protect the confidentiality of financial information, which is right. It would be unusual if that were not the case. He asked whether the quality contracts scheme was possible only when there has been an attempt at a partnership scheme that has failed. The whole point of moving away from the “only practicable way” test is to avoid trying quality partnerships and failing first. It comes back to the point about how best to get improvements in the quality, range, frequency of services, and so on. We all recognise that working away at the quality partnership scheme, whether voluntary or otherwise, is the best way to get there. We need to see how it will work in practice and ensure that any quality contracts scheme is proportional and in the public interest—in other words, improves services.

The noble Lord also asked about the powers of the Transport Tribunal and appeals to court. I can fairly say that appeals against decisions of a Transport Tribunal will revolve round a point of law only. The powers of tribunals will be set out in new Section 126E.

I have covered the point about whether approvals boards can overturn the policies of elected authorities. That is not their primary purpose. It is for the local authority to determine policy, which is distilled from manifestos and commitments of local politicians.

The noble Lord, Lord Rosser, also asked about the costs. That will depend on the nature of the scheme. There probably is scope for cost reduction. A quality contracts scheme could help to avoid overbussing on busy routes, and the tendering process should help to maximise value for money for the local taxpayer, so there are potential benefits.

I think that I have answered most of the questions. The noble Lord, Lord Snape, made a point about bus operators and decisions about what sort of services should run and who should be ultimately responsible for them.

I come back to the point from which we departed at the beginning of this discussion; that is, that the Bill is designed to play its part in the continued development of bus networks across the country. We have seen improvements in many areas in quality, frequency and value for money. That is what we try at all times to keep in our mind. We want to ensure that we provide services for the convenience of passengers, so that we have continued beneficial growth in the number of passengers using bus services and get the evident environmental benefits from the continued expansion of bus networks. Ultimately, it is the passenger whose interests should be paramount. Services should not be designed around the convenience of bus operators, they should reflect patterns of genuine need in areas where we need to do more to improve the range and quality of services.

I apologise for the length of my response. I acknowledge that I may well have missed some points that the noble Lord, Lord Rosser, in particular, made. I hope that I have provided reasonably comprehensive answers. If I have failed to do so, I shall endeavour to pick up those points and cover them in correspondence, which I shall share with the Committee.

Before the noble Lord, Lord Rosser, replies—again, I apologise for detaining the Committee for a moment—may I ask about compensation? I do not want to labour the point. Does my noble friend agree that Parliament has made provision over the years for payment of adequate compensation for dispossessed incumbents who sustain losses as a result of changes in regulatory rules on the application of regulatory policy? Contrary to what the noble Lord, Lord Rosser, said earlier, there are lots of examples of compensation being paid—for example, in the energy market restructuring, in the introduction of retail competition in the water market and in the regulation of telecommunications. Indeed, the PTAs themselves were, quite rightly, the beneficiaries of compensation paid to them under the privatisation process of the rail industry. Financial compensation via a deed of assumption was paid to many PTAs because of the loss of facilities and amenities as a result of that Act of Parliament.

So there is previous provision. Although I do not want to detain the Committee by spending too long on this, as I said, my noble friend did not mention that in his winding-up speech and I would be grateful if he would do so if he replies again .

I will read our proceedings in Hansard to check, but I am not sure that I laboured the point of compensation in my contribution.

Actually, I think that it was the noble Lord, Lord Smith of Leigh. Without wanting to labour the point, I went over the issue at some length. I know that the noble Lord, Lord Snape, does not entirely agree with our position on this. He makes a general point about compensation when assets change hands as a result of privatisation, and so on. I understand the point, but our point here is that assets are still in play and it is open to companies to deploy those assets as best they can. I understand the argument; it is not one on which I entirely agree with him.

My noble friend said that he will respond to the questions that he has not covered in his response—there may be one or two. I will obviously look forward to receiving those responses.

There is a fundamental disagreement between us. I think that the processes will put people off the Approvals Board and the Transport Tribunal; clearly my noble friend does not. I think that he referred to the need to meet the requirements of the European Convention on Human Rights. Have the Government had legal advice that it is only by including the provision for an Approvals Board and a Transport Tribunal, as well as the right—which obviously anyone has—to go to court if he is aggrieved, that the position in respect of the European Convention on Human Rights can be covered?

My argument has been that we do not need the processes of the Approvals Board and the Transport Tribunal and that if a party feels aggrieved by a decision by the local authority—either the decision, the way in which the local authority has carried out its consultation, whether it has listened to responses, whether it has met the criteria laid down in the guidance or whether a party feels that it has been effectively put out of business either completely or in part by the decision of the local transport authority—it has the right to go to court. My point is: is my noble friend saying that, bearing in mind that parties would have as of right a facility to pursue the matter through the court, the Government's legal advice is that that would not be sufficient to meet the requirements of the European Convention on Human Rights? It would be very helpful if my noble friend could reply in very specific terms on that issue.

I will obviously read Hansard carefully concerning what my noble friend said about how long it will take a scheme to go through the process. I am sure that he will correct me if I am wrong, but I think that he said that a non-controversial scheme might take 15 months, although he had said that it would take only six weeks at the Approvals Board and subsequently three months at the Transport Tribunal—at least, that is what I have written down. When he went on to speak by inference about a controversial scheme—one that is being contested—I am afraid that I got a bit lost, because I sensed that on top of the 15 months, we were getting a 10-month period thrown in, and then a three-month period, and I was not quite sure what we were ending up with as the total time that it might take.

My contention was that the quality contracts will be strongly opposed, so that unless the decision by the Approvals Board and the Transport Tribunal goes the way of bus operators—I say this only because I know that they are very much against the arrangements that we have in London—they will pursue it as far as they can, as is their right. If it is not clear in Hansard, I hope that my noble friend will spell out what he thinks will could be the maximum period for a case that is contested right down the line.

I believe that my noble friend also said—once again, I may have misheard him and, if I have, I apologise—that you could end up in the Court of Appeal only on a point of law. Is my noble friend saying that it will not be possible to go to the Court of Appeal and, under the pretext that it is under a point of law, reopen the whole proceedings and effectively have a rerun of what was heard before either the Approvals Board or the Transport Tribunal? In other words, will that be allowed only on a very narrow point of law? It would be very helpful if we could get on record whether that is what my noble friend is saying.

My noble friend Lord Snape made a point about the cost of the arrangements in London. That point is often made in criticism of the franchising arrangements in London. My answer to that is that a political decision to spend X amount of money on the provision of bus services is not a matter for bus operators, it is a matter for local authorities. They should be making those decisions. If they get them wrong and have to increase their local taxes because the amount of money that they get from the Government is not sufficient to cover what they want to do, or if they have to make cuts elsewhere to provide the money, they are accountable to the electorate for that decision. That is as it should be: an elected body should make the decision on how much should or should not be spent on the provision of bus services and is accountable at the ballot box for that decision. That is the purpose of the amendments.

I ought to try to respond to my noble friend’s reiterated questions. It is the case that in Government we would not disclose the nature of our legal advice, which is usually rightly protected, for reasons that my noble friend would properly and fairly understand. On the ECHR point, we believe that the mechanism that we have described and set out in the legislation is the best way of resolving those issues. My noble friend has, fairly, said at the outset that there is a disagreement on this aspect of our policy. My noble friend is right to pursue that, and he has done so vigorously. My understanding is—I have made the point before—that appeal to the Court of Appeal would be on a point of law, and it would have to be on that narrow range of consideration and it could not be to unpick the policy that has led to the way in which the process has been used.

On the time taken to see this process through, I have described it at some length in my earlier reply. I am minded, if my noble friend continues to be unhappy about the way in which I set that out, to try to get officials to construct a timeline so that my noble friend can see how the thing operates over a particular period. As I made plain at the outset, I am more than happy to put some of this stuff down in writing and respond to points that I perhaps have not covered as fully as I should. I always try to do that. I will share the contents of that letter with all noble Lords and put a copy in the Library of the House. I am grateful to noble Lords for having taken part in the discussion, which may not have moved us on a great deal further, but at least we have some greater understanding.

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 25 to 33 not moved.]

Clause 18 agreed to.

Clause 19 [Notice and consultation requirements]:

[Amendments Nos. 34 to 36 not moved.]

37: Clause 19, page 18, line 18, after “newspaper” insert “and one talking newspaper where available”

The noble Earl said: In moving this amendment, I shall speak also to Amendment No. 55. The Committee will be relieved to hear that my amendment addresses a rather simpler matter.

The issue of accessibility of consultation documents is important if the consultation process is to be effective. We have already raised concerns regarding the requirement to consult certain people and organisations. I note that there will be a new requirement to publish a consultation before introducing a new quality contracts scheme and that new guidance will be produced regarding that. It is essential for the guidance to highlight two things. First, there is the need to make the consultation document available in accessible formats and, secondly, there is the need to publish its availability in those accessible formats. The comments on consultation should also apply to other consultation requirements in the Bill.

Clause 19(2) would require a notice to go into at least one newspaper circulated in the area. Most notices in local papers are in the smallest possible print, which is unreadable for anyone with a sight problem. It is essential that legislation encourages the use of talking newspapers, where they are available, to publish the consultations.

The Minister’s right honourable friend Rosie Winterton has said that she believes that it is the representative bodies rather than individuals that need to be consulted, and of course she is right in many cases. However, in many areas there will be a local society representing blind and partially sighted people, which would need to be consulted. The person responding on behalf of the local society or another organisation may well be visually impaired, so it is essential that notices are not just confined to the print media.

In addition, where there is no local society, individual visually impaired people will need to be consulted if an authority is to discharge its duties to carry out an effective disability equality impact assessment. The noble Lord, Lord Low, has drafted an amendment designed to achieve the same effect. Unfortunately, I do not think that he will be able to speak to it today. No doubt the noble Lord will pursue it at a later stage, if necessary. I beg to move.

I am grateful to the noble Earl, Lord Attlee, for the passionate way in which he has put forward the needs of blind and partially sighted people who use buses and who may wish to comment on proposals for quality contracts schemes. As the noble Earl will know, there are other groups who, for one reason or another, are unable to read printed text. Local authorities of course have general responsibilities towards people with visual impairment under the Disability Discrimination Act 1995. We therefore fully expect local authorities to take their particular needs into account. Since December 2006, it has also been unlawful for certain transport operators, including bus operators, to discriminate against disabled people in the provision of goods, facilities or services, or to fail to make a reasonable adjustment so that their services are accessible. Where a local authority wishes to consult all members of the public, or all constituents living in a particular area, it needs to make provision for those who cannot read normal printed matter. A talking newspaper, if there is one in the area, may be an efficient way of doing so.

However, as the noble Earl has said, the Transport Act 2000 does not require the local transport authority to consult all members of the public, but only various representative bodies. These consultation requirements are not being substantially modified by this Bill and there will continue to be a requirement to consult organisations which represent local users. Advertising in a local newspaper—a common requirement in legislation—gives the public a reasonable opportunity to respond. I take on board the point made by the noble Earl about the typeface of that print and the importance of it being easily read. But even doing that is not, and cannot claim to be, a guarantee that it will reach everyone. Many people do not read a local newspaper and those who do may not read them from cover to cover. The primary consultation is with the representative organisations.

The precise way in which consultation is carried out is left very much to the discretion of the authorities. We would not wish to make the requirement more prescriptive than it needs to be. Many, I hope, will want to consult local organisations representing blind or partially sighted people and people with other forms of disability. They also may want to consult representatives of certain minority groups. How best an individual authority does this without going to disproportionate lengths is very much a matter for each to determine, taking into account the particular nature of their local area. All local authorities are accustomed to consulting on all manner of issues and I see no need why the general duties on local authorities in this area should not be seen as adequate.

Nevertheless, we have looked at this amendment very seriously. We have an opportunity to include something relevant in the guidance to local authorities. The important thing will be to draw their attention to the need to consult local representatives of disabled people who may have an effective means of communicating with their members in the most appropriate medium. I accept that this point is not covered in the published draft, but there will be plenty of opportunities to add to that. I shall certainly draw this to the attention of departmental officials working on the guidance document. I hope, with those assurances, that I can persuade the noble Lord to withdraw his amendment.

I know that the noble Lord, Lord Low of Dalston, is not present, but did the Minister reply to his Amendment No. 38? It would be convenient for the Committee if she did. It is grouped.

Yes, in the sense that it will be covered in guidance, the same point applies to the amendment of the noble Lord, Lord Low.

I am grateful for the Minister’s carefully considered response. I was careful not to comment on the amendment of the noble Lord, Lord Low, on his behalf. I will read carefully what the Minister has said, and hope that it meets our requirements. Subject to the usual caveats, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 38 to 44 not moved.]

Clause 19 agreed to.

Clause 20 [Approval of proposed scheme]:

[Amendment No. 45 not moved.]

Clause 20 agreed to.

Clauses 21 to 23 agreed to.

Clause 24 [Appeals relating to applications for approval: areas in England]:

46: Clause 24, page 23, line 23, leave out “who was consulted by the authority or authorities”

The noble Earl said: I shall also speak to Amendment No. 56. The Minister has indicated that the approvals and appeals process has been designed to be as streamlined as possible. Many of your Lordships have raised concerns about how the proposals would work in practice, especially when considering the financial implications of appeals. It is our view that consultation should be paramount when setting up a potentially highly contentious scheme.

In the parts of the Bill that deal with appeals when setting up and continuing a quality contracts scheme, it is curious that there exist provisions that appeals may be lodged only by persons originally consulted during the consultation stage of the proposal. That creates a perverse incentive to consult as narrowly as possible, which is not in the interests of performing a well rounded and meaningful consultation.

The amendment is linked to my earlier amendment, which sought to ensure that neighbouring local transport authorities were consulted when setting up a quality contract scheme. If, for instance, this were not explicitly mentioned, one can imagine that it might be in the interests of an authority to neglect this important consultation. Thereafter, the neighbouring LTA would have no opportunity to appeal against an application. Should this be the case, legitimate reasons why a local authority may oppose or suggest would be entirely overlooked, with the possibility of the quality contract undermining the relationship between neighbours. The need for consultation is therefore evident. In ironing out these issues and collaborating with other authorities, a scheme is more likely to be a success. I suggest that we allow any person or organisation listed in the consultation requirements in the Transport Act 2000 to express their view, regardless of their contribution at earlier stages in the process. I beg to move.

I am grateful to the noble Earl, Lord Attlee, and I entirely agree that neighbouring local authorities should have a right of appeal against a decision by the Approvals Board, whether that is a decision to approve a scheme, to reject it or to modify it in a way that might affect that other local authority. However, my point today is that that is already provided for.

Section 125(3) of the Transport Act 2000 requires the local authority proposing the scheme to consult other authorities that might be affected by the scheme, and any person who was consulted in accordance with Section 125(3) has a right of appeal under new Section 126D. Regarding the continuation of a scheme, this requirement also applies by virtue of new Section 131A(4), to be inserted by Clause 29, with a parallel right of appeal in new Section 131D. A neighbouring authority—that is, one with a common boundary to the authority making the scheme—would normally be affected by it and would fall to be consulted under Section 125(3). It would therefore have a right to appeal. But that might not always be the case, because if the scheme was fairly small, and based at one end of the county, it might have no impact at all on a county bordering at the other end. For example, would Essex County Council be affected by a quality contracts scheme promoted by Suffolk that only affected the area, say, around Lowestoft?

Conversely, a local authority that does not have a common boundary with the one making the scheme might be affected by it, particularly where there are small unitary authorities. Travel-to-work patterns can cross more than one boundary. The wording in the Transport Act 2000 would catch them too. Apart from the specified consultees, there is a general category of,

“such other persons as the Authority thinks fit”.

That could include a local authority that is not directly affected by a scheme, but which might, nevertheless, as the noble Earl has said, have a legitimate interest and valid observations to make. My view, therefore, is that the powers in Clauses 24 and 32 are just as wide as they need to be; to go further would be to risk the appeal process getting out of control. I therefore hope that I can persuade the noble Earl to withdraw this amendment.

I am grateful for the Minister’s response. Of course, experienced parliamentarians know that there are only three types of opposition amendment. The Minister suggests that this one falls into the “unnecessary” class. I shall read Hansard carefully and, subject to the usual caveats, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

Clause 24 agreed to.

Clause 25 [Making a scheme]:

[Amendments Nos. 47 and 48 not moved.]

49: Clause 25, page 25, line 18, leave out subsection (6) and insert—

“(6) In subsection (2), for paragraph (c) (maximum period for which scheme to remain in operation) substitute—

“(c) that the scheme is to remain in operation until such time as the authority or authorities that made the scheme determine that it should not remain in operation”.”

The noble Lord said: My Amendments Nos. 49 and 50 are in the same group. Amendment No. 49 would mean that once a quality contracts scheme was in place, it would remain indefinitely and would allow a local transport authority to renew that contract periodically without having to go through a new approval process each time. There seems to be an appropriate clause in the Bill, which sets out the process for the continuation of such a scheme. It appears to be a fairly lengthy process. My main point in putting forward this amendment is that once we have a quality contracts scheme in place which would remain indefinitely, if I have read the Bill correctly, we should be in a position where, instead of having to renew it after it has been in place for 10 years,

“it would remain in [force] until such time as the authority … that made the scheme determine”,

otherwise. That would seem to me to bring it rather more in line—though my noble friend may correct me—with what happens in Transport for London which, as far as I know, does not have to go through the kind of approval process that is set out in the Bill when contracts are re-let.

The Bill raises the maximum length of a quality contract from five to 10 years. Amendment No. 50, in this group, would remove the absolute restriction on the length of a quality contract and allow it to be governed by general legal principles. I am not a lawyer, but I understand that under EU law such a contract is generally limited to 10 years in duration but may, if the operator has made a significant investment in the service provided under the contract, be extended by up to 50 per cent. Obviously, if my noble friend agrees that that is the case—which he may not—the principle underlying the amendment would be that operators might be more willing to invest in assets such as garages, vehicles and staff development under a longer-term contract than they would under a shorter-term contract. I beg to move.

My noble friend Lord Rosser has made some interesting and valid points, but in the end I am not convinced by the entirety of his argument. A quality contracts scheme must in current circumstances be regarded as something of an experiment. No one has yet tried one, and although the noble Lord referred to London and there are perhaps continental examples where a similar system is in force, we are very much at the experimental stage. Those are places where there has long been a publicly operated network, which has then been franchised out to private operators. A quality contracts scheme would replace deregulated services, and the task of setting up a regulated network from scratch is of a very different order from the task of adapting an existing one.

It could well be that a quality contracts scheme is set up which simply does not work. “Very well”, you may say, “the local authority can always revoke it”, but institutional inertia may set in, and those who have a vested interest in keeping it going may seek to have their way. Other cases will be less clear-cut. The scheme may not be doing very well, not at all well even, but the local authority may still be optimistic that, given a bit more time, it will succeed. In the mean time, bus operators may be champing at the bit, noticing all the mistakes that the authority is making, but powerless to put them right.

Under the current legislation, the local authority would effectively have to start again from scratch if it wanted a scheme to continue in force. In response to comments from stakeholders, the Bill provides a mechanism to enable a scheme to be continued, with a modified process for approval. At the end of the period for which the scheme is approved, which may not exceed 10 years, for it to continue in force it must be reviewed and a further consultation must take place to ensure that it has delivered at least some of what was promised, and is still relevant and likely to deliver more. This new process provides that if the scheme will not expand in scope and not involve new areas or new bus services, it can go ahead without the board’s approval, though with an appeal mechanism. If it will expand, the approval of the board or, in Wales, the Ministers, will still be necessary.

The second amendment in this group concerns the length of individual contracts rather than the whole scheme. In the Transport Act 2000, the contract length is set at five years and the scheme at 10 years. There were many representations from local transport authorities that five years was too short for a large-scale, good-value bus contract, and we tried to respond to those. I understand that my noble friend’s point is that a maximum length is set out in community legislation. That being the case, however, it need not be set in our own legislation. I cannot follow the noble Lord’s argument that local authorities should be able to take advantage of the extra 50 per cent that is allowed in some circumstances under the new EC regulation, which will come into force in 12 months.

A contract to run a bus network, or part of a bus network, is not comparable to designing, building and operating a contract for a light rail system. The Community regulation recognises the difference by specifying a maximum of 15 years for rail contracts and 10 years for bus contracts. The extra 50 per cent on either limit for significant assets is not likely to be relevant in the case of a contract to run bus services, or even a whole bus network.

There are many good arguments why a private company should not be given such a lengthy contract to run a public service. We are not persuaded by the noble Lord’s arguments, and I hope that he will withdraw his amendment.

I want to ensure that I have understood the point that has been made. On the second amendment, I think that my noble friend is saying that the Community legislation would not apply in the circumstances of the bus contract. I took his reply to mean that he drew a distinction between bus and rail. On the first amendment, which would allow a quality contract to continue and not have to be re-let with a lengthy process, as set out in the Bill, I shall paraphrase what I believe my noble friend said. His argument is that the quality contract might not be satisfactory and might not be working as people intended. It might be working adversely against the interests of bus operators, so there should not be the facility simply to renew it after it has expired and then carry on with it in the same form. Is he saying that if you agree a quality contract that does not work as intended, let us say from a bus operator’s point of view, the bus operator has no redress until the 10 years for which the contract was let has expired, if that is how long the contract has been let for?

I will deal with the second issue first. In those circumstances, one would expect the bus operator to enter into discussions and negotiations with the local authority. That may not be quite the same as saying that there is a form of redress, but it would be rather strange if the contract was not working and there was no facility or opportunity to revisit current arrangements and see what they are delivering and not delivering. One would expect that to happen in those terms.

On the noble Lord’s first issue, the Community regulation applies, but there is a difference, which is what I was drawing attention to. The regulation recognises the difference by specifying a maximum of 15 years for rail contracts and 10 years for bus contracts. The extra 50 per cent on either limit for significant assets is not likely to be relevant to a contractor on bus services. This is because of the difference in the nature of the service being offered. I am happy to set out more of the rationale for the noble Lord when we pick up some of these issues in correspondence.

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 25 agreed to.

Clauses 26 and 27 agreed to.

Clause 28 [Extension of maximum period of quality contracts]:

[Amendment No. 50 not moved.]

Clause 28 agreed to.

Clause 29 [Continuation of scheme for further period]:

[Amendments Nos. 51 to 54 not moved.]

Clause 29 agreed to.

Clause 30 [Approval of continuation of scheme]:

[Amendment No. 55 not moved.]

Clause 30 agreed to.

Clause 31 agreed to.

Clause 32 [Appeals relating to continuation of scheme]:

[Amendment No. 56 not moved.]

Clause 32 agreed to.

Clause 33 [Variation or revocation of scheme]:

[Amendment No. 57 not moved.]

Clause 33 agreed to.

Clauses 34 to 36 agreed to.

Clause 37 [Guidance about quality contracts schemes]:

58: Clause 37, page 33, line 35, at end insert—

“( ) Before issuing or modifying any guidance under this section the appropriate national authority must consult—

(a) any local transport authority that may be affected by the guidance; and(b) such other persons as the appropriate national authority thinks appropriate.( ) Any guidance issued or modified under this section is to have effect in accordance with an order made, in the case of guidance relating to England, by the Secretary of State or, in the case of guidance relating to Wales, by the Welsh Ministers.

( ) An order under this section shall not be made unless—

(a) in the case of guidance relating to England, a draft of the order has been laid before and approved by a resolution of each House of Parliament; and(b) in the case of guidance relating to Wales, a draft of the order has been laid before and approved by a resolution of the National Assembly for Wales.”

The noble Lord said: Bearing in mind that the amendment is fairly lengthy, it is straightforward—at least, it is if I have correctly understood the Bill. Clause 37 allows for the “appropriate national authority” to issue guidance to local transport authorities on quality contract schemes. The effect of my amendment would be to ensure that statutory guidance about quality contract schemes was subject to appropriate consultation. My amendment refers to the appropriate national authority consulting,

“any local transport authority that may be affected by the guidance”,

and parliamentary scrutiny. It provides that,

“in the case of guidance relating to England, a draft of the order has been laid before and approved by a resolution of each House of Parliament”.

I tabled this amendment to ensure that that quality contract scheme guidance is subject to full consultation and parliamentary scrutiny, since that guidance could be fundamental to whether quality contract schemes get off the ground or not. I beg to move.

I shall speak to Clause 37 stand part. We are told that the Bill will put power into the hands of local transport authorities, and allow them to decide the appropriate mode of bus operation for their areas. I was therefore interested to see that Clause 37 allows the Secretary of State in England, and the Welsh Ministers in Wales, to issue guidance concerning the performance of quality contract schemes; we have had a lot of discussion about that this afternoon, but this is an additional point. Under the second part of the clause, it is stated that authorities must have regard to such guidance.

What sort of guidance does the Minister expect that national authorities may have to give, and why is it required? In the case of poor performance, how does he envisage this guidance may be of assistance and what could be done? My concern is that this advice could turn into central regulation—we have seen enough of that—which is not what local bus operators need or would benefit from.

I am therefore uncertain that this clause is needed. The Bill already contains measures to consult widely and, although these could be improved by our previously suggested amendments, they should presumably suffice in ensuring a quality contract scheme is fair. Can the Minister justify why this clause is needed, and what would be the effect if it were removed?

I am grateful to my noble friend Lord Rosser and to the noble Lord, Lord Hanningfield. We have two sides of the coin in this set of amendments. We have heard varying views on the subject of guidance documents on quality contract schemes. My noble friend Lord Rosser proposes what we might call an elaborate parliamentary procedure for approving guidance. By contrast, the noble Lord, Lord Hanningfield, wants to remove the guidance clause altogether.

I turn first to the argument of the noble Lord, Lord Hanningfield. I should begin by explaining why we need Clause 37 at all—the thrust of the noble Lord’s argument. The Transport Act 2000 in its present form contains no power for the appropriate national authority to provide statutory guidance on quality contracts schemes. In response to requests from local authorities and others, the Department for Transport issued guidance, which might, I suppose, be described as an advisory document, intended to help local transport authorities in preparing their submissions for approval.

As under the current legislation the Secretary of State himself or herself would be approving the schemes, and could only do so if in his or her opinion the criteria were met and the public interest served, there was no reason then to have a statutory power to issue guidance.

However, the Bill proposes to transfer the Secretary of State’s approval role in England to an Approvals Board independent of the Government. It would be possible, of course, for the Government simply to stand back and let the local authorities and the Approvals Board work out for themselves how best to handle proposals for quality contract schemes. But such is the public interest, and such are the legitimate concerns of bus operators that the system will work to their disadvantage, that we think it would be irresponsible of the Government to take such a hands-off approach. For similar reasons, there is a power in new Section 126B(7) for the Secretary of State to issue guidance to the Approvals Board.

Clause 37 of course gives a power to the Welsh Ministers, as well as the Secretary of State, to issue guidance, as they are the appropriate national authority for a scheme in Wales. As the Welsh Ministers will themselves continue to be the approval authority, there may not be such a pressing need for the provision as in England, but since our Ministers in England found it useful to issue guidance on a non-statutory basis in any case, it seems entirely reasonable to allow Welsh Ministers the option of a statutory power, and they are in favour of having it.

Issuing guidance under a statutory power of course gives it extra weight. There may well be cases where the Committee would see advantage in that. For example, we have been debating earlier today the provision of facilities for disabled people and ensuring that their concerns are taken into account in consultation about local schemes. We came to the conclusion that that might be a suitable matter to include in guidance, rather than in the Bill. If Ministers included advice on that in the guidance document, I am sure that noble Lords would want local authorities to follow it. They are more likely to do so if the guidance has statutory force.

In response to the points raised by my noble friend Lord Rosser’s amendments, we have no objection in principle to the parliamentary scrutiny of departmental guidance. Indeed, a draft guidance document has already been made available for the House—and the Committee in particular—to consider. It forms Volume 4 of the large guidance document that has been laid in the House Library, and copies are available in the Table Office. That volume is a draft of what could become the guidance under Clause 37 if it is enacted. It is very much a preliminary draft, but we hope that publishing it at this stage will help inform the parliamentary debates.

Nor do we have any objection to consulting on the guidance, in particular with the local transport authorities to which it is addressed. Indeed, in this day and age it would be most unusual for a document of this type to be published without a period of formal consultation. The department has not done so formally to date, because it is still an early stage in the Bill process. However, there has been informal consultation with a range of interested parties, and the department has taken account of the views of the various stakeholders, even at this stage. The document is available on the internet, and the department would welcome any comments that noble Lords might have.

We do not believe that it is necessary for the guidance to be made by order and in particular for such an order to be subject to the affirmative resolution procedure. We anticipate that the guidance may need to be amended in the light of experience, and it is important that the Secretary of State and the Welsh Ministers have the flexibility to do that as we learn from the implementation of the process. Requiring a debate in both Houses would be very time consuming for Parliament and might mean that the guidance would be revised less often than would be helpful. That could be counterproductive.

I say to my noble friend Lord Rosser that the department will, of course, go out to full consultation before any guidance is issued in its final form. We hope by then to have had the benefit of many lively debates in this House. I hope that noble Lords who have not already done so will avail themselves of the opportunity to read the draft guidance, which is intended to make things clearer for local authorities rather than to put additional hurdles in their way. My noble friend Lord Rosser asked whether we would consult on guidance. As I have just said, we certainly will consult. We have already published the initial draft, and we will consult fully and formally next year. My noble friend also asked whether guidance would face parliamentary scrutiny. The Delegated Powers and Regulatory Reform Committee did not see the need for an elaborate parliamentary procedure that underpins the view that we have as far as the Government are concerned on not going down that more elaborate parliamentary path.

The noble Lord, Lord Hanningfield, asked a question to which I do not see an answer in my notes. If I have not covered it, I will ensure that he receives an answer in writing.

In the light of that response, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 37 agreed to.

Clause 38 [Quality contracts: application of TUPE]:

59: Clause 38, page 34, leave out lines 4 to 13 and insert—

“(1) Where subsection (2) applies, the cessation of the provision of local services to which a quality contract relates by one person and the commencement of the provision of those services by another (“the new operator”) shall be treated for all purposes as a relevant transfer within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (whether or not those Regulations would apply apart from this section).

(2) This subsection applies where, immediately before the date of the making of a quality contract, one or more persons were employed by a person other than the new operator in the provision of local services in the area to which the relevant quality contracts scheme relates (“the old operator”).

(3) The date on which the relevant transfer shall be deemed to take effect is the day on which the quality contract scheme is made.

134C Quality contracts: compliance with guidance and directions on TUPE

(1) Where section 134B(2) applies, a Local Transport Authority, in making a quality contract scheme—

(a) must deal with matters affecting the terms and conditions of employment of the employees of the old operator as at the date of the relevant transfer, or the arrangements for their pensions, in accordance with any directions given to it by the appropriate person; (b) shall comply with guidance issued to it by the appropriate person on matters relating to the terms and conditions, or arrangements for their pensions, of the employees of the old operator as at the date of the relevant transfer.(2) In subsection (1), references to employees of the old operator are references to persons to whom section 134B(2) relates.

(3) The date of the relevant transfer referred to in subsection (1) shall be determined in accordance with section 134B(3).

(4) The “appropriate person” shall be the Secretary of State.

134D Quality contracts: TUPE directions

(1) The appropriate person shall exercise his power to give directions under section 134C(1) so as to secure that where a local transport authority concludes a quality contract with the new operator, it does so on terms—

(a) that require the new operator to secure pension protection for each transferring employee;(b) that, so far as relating to the securing of pension protection for a transferring employee, are enforceable by the employee.(2) For the purpose of subsection (1)—

“transferring employee” means an employee whose contract of employment becomes, by virtue of section 134B(1), a contract of employment with the new operator.

“pension protection” is secured for a transferring employee if after that change in his employer he has, as an employee of his new employer, rights to acquire pension benefits and those rights—

(a) are the same as, or(b) under the directions count as being broadly comparable to or better than,those that he had as an employee of the old operator.

(3) The appropriate person shall exercise his power to give directions under section 134C(1) so as to secure that where—

(a) a quality contract between a local transport authority and an operator (“the incumbent operator”) governs the provision of services by an operator;(b) the local transport authority concludes a subsequent quality contract under a quality contract scheme with an operator (“the subsequent operator”) other than the incumbent operator; and(c) the application of the TUPE Regulations results in one or more employees (“transferring employees”) of the incumbent operator becoming employed by the subsequent operator in relation to its operation of the subsequent quality contract;the local transport authority concludes the quality contract with the subsequent operator on terms satisfying the requirements of subsection (4).(4) Those requirements are that the terms—

(a) require the subsequent operator to secure pension protection for each transferring employee;(b) that, so far as relating to the securing of pension protection for a transferring employee, are enforceable by the employee.(5) For the purposes of subsection (4) “pension protection” is secured for a transferring employee if after that change in his employer he has, as an employee of his new employer, rights to acquire pension benefits and those rights—

(a) are the same as, or(b) under the directions count as being broadly comparable to or better than,those that he had as an employee of the old operator.”.”

The noble Lord said: The amendment seeks effectively to replace the existing Clause 38, which is inadequate to achieve the objectives that I hope it was intended to achieve. I reiterate that I am not a lawyer, but what I want to say about this issue seeks to reflect a legal opinion that I have seen.

Clause 38 inserts a new Section 134B into the Transport Act 2000. There are three main problems that the clause as drafted appears not to address; namely the application of the Transfer of Undertakings (Protection of Employment) Regulations, the issue of the two-tier workforce and pension protection. Clause 38 gives no guarantee that the Transfer of Undertakings (Protection of Employment) Regulations will apply in any circumstances relevant to the introduction of a quality contracts scheme.

That is obviously important, as TUPE will generally provide the basis of any protection of any employee’s terms and conditions of service. TUPE protects the employment and terms and conditions of existing employees in two circumstances: first, in the context of a business transfer; secondly, in the context of service provision change. In order for there to be service provision change, there must be some end client in place before and after the putative transfer. It is hard to see how the introduction of a quality contracts scheme could meet that requirement. Although there would certainly be a change in the provision of service, there would be no continuing client. Before the change, bus services would be provided on a straightforward private basis by the former operator, not on behalf of the local authority. After the change, the services would be provided by a private bus operator, but now on behalf of the local authority. It is unlikely that the change in service provision in that context would amount to a relevant process for the purpose of the Transfer of Undertakings (Protection of Employment) Regulations 2006.

The possibility of there being a business transfer will depend on the circumstances of each case. The definition requires that there is,

“an economic entity that retains its identity upon the transfer”.

Although it seems likely that there would be a pre-existing economic entity, the real question is whether there was a retention of identity on the introduction of a quality contracts scheme and the change from a service provided by one or more companies to a service provided by a different operator. It is very hard to predict with any certainty whether the circumstances of a particular quality contracts scheme would constitute a relevant “business transfer”, especially given the possible delays in the introduction and implementation of a quality contracts scheme, which we have already discussed, and the very different approaches that may be taken by local authorities in that regard.

What seems most likely is that there will be cases where different operators will tender for a quality contract on a different basis—whether or not TUPE will apply—and that disputes on that issue would have to be resolved by the employment tribunal. Indeed, the less scrupulous operator might even try to evade the consequences of TUPE—the need to take on the staff of the unsuccessful transferor or transferors on their existing terms and conditions—by refusing to employ existing employees of other companies and relying on that fact as evidence in itself of there being no relevant transfer.

Clause 38 does not reduce that uncertainty. Indeed, it may be argued that it positively encourages those bidding for the quality contract to do so on the basis that they will not take on the staff of the unsuccessful operator. After all, it is only if the successful bidder takes on existing staff that it will be bound to maintain their previous terms and conditions. If the successful bidder wished to reduce terms and conditions, it would plainly be entirely against its interest to take on the staff of previous operators. That approach should be contrasted by that adopted by the Government in respect of staff transfers in the public sector, whether at national or local level.

Clause 38 does not provide greater certainty for the workforce, nor does it give them any assurances of any value. By failing to deem that TUPE should be taken to apply or that quality contracts might be tendered out by local authorities on that basis, Clause 38 encourages ambiguity, inconsistency and uncertainty as to the application of TUPE and singularly fails to provide any assurance of continued employment to members of the existing workforce. It is likely to lead to complex and lengthy litigation that may bring clarity only through a tribunal court ruling after several years.

As for the two-tier workforce issue, although the most immediate concern must be for the current employees, who may be refused employment or offered employment under less favourable terms and conditions by the successful bidder for the quality contract, in the medium to long term, issues will also arise about those subsequently recruited into service by the operator in question. Subsequent re-tenders of the quality contract would inevitably fall under the protection of TUPE and the local authority code, because they would be service provision changes in which the end client would remain the local authority. But that protection would be to no avail if the initial introduction of the quality contracts scheme permitted new recruits to be employed on less favourable terms and conditions, thereby diluting the standard of entitlement of the workforce over time.

Clause 38 does nothing to address that issue. The only obligation on a successful service provider under a quality contracts scheme will be to employ the current staff, but it is not obliged to do so on their existing terms and conditions. It is silent on the treatment of any new recruits, and it can only be assumed that the operator in question would be free to employ staff on the least favourable terms and conditions that the free market permits. Once that has happened, any subsequent protection that might be afforded under TUPE or the local government code would effectively be rendered academic.

The concern about pension provision arises in respect of employees currently employed by a service operator that is unsuccessful in its bid or because it does not bid for a quality contract, but is then taken on by the successful bidder. Pension provision is an exception to the normal TUPE rule, whereby rights and obligations under a contract of employment continue in force for the transferee, and any variation by reason of the transfer is rendered void. To ensure that anticipated benefits under occupational pension schemes were to be continued on a “no less favourable basis”, separate provision is necessary. The privatisation of rail services provides a precedent for such guarantees, and further, the local authority code provides similar guarantees when employees are transferred from the public to the private sector. A Fair Deal for Staff Pensions, annexed to the local authority statement, shows that the terms of a transfer should specify that transferred employees must have access to a scheme certified as “broadly comparable” by a professionally qualified actuary unless exceptional circumstances apply. The protections afforded in the local authority code of practice would serve to meet the concerns I have expressed, and would offer a consistency of approach with which local authorities are already familiar in other contexts. My amendments would achieve that goal.

To summarise, as drafted, Clause 38 provides little, if any protection for existing employees’ terms and conditions. It leaves it entirely uncertain whether TUPE will apply in any given case. It is likely to encourage tenders on different bases by service operators, and may even encourage a refusal by those seeking to evade the application of TUPE to take on current staff of other unsuccessful operators. Clause 38 also discourages the maintenance of the existing level of terms and conditions as new recruits may be offered the least favourable terms that the free market will permit. That will, first, encourage the successful operator to seek to avoid taking on employees currently working on the service, but for different bus companies. Secondly, to the extent that such staff might be taken on, it will lead to the creation of a two-tier workforce. Thirdly, it will bring about the lowering of standards recognised by the code of practice on workforce matters in local authority service contracts before that code can have direct application to quality contracts schemes, thereby rendering its subsequent effect academic. Finally, Clause 38 provides no protection in respect of existing pension provision either on a no-less-favourable basis or even, at least arguably, on the minimum standards required under the Pensions Act 2004. My amendments would rectify the inadequacies of Clause 38. I beg to move.

I have tabled Amendment No. 60 in this group. The introduction of the TUPE provisions in Clause 38, following consultation on the draft, seems sensible if it works. The noble Lord, Lord Rosser, has outlined the TUPE problem far better than I could. As I understand it, there has to be both an economic entity transferring and an equivalent job available. In the case of only part of a depot needing to transfer, and the new employer not requiring as many staff, would TUPE automatically apply?

The rail industry had a pension scheme, whereby an individual’s pension rights are protected regardless of employer on the transfer of a rail franchise between companies. The noble Lord, Lord Rosser, touched on that.

Is this not the same principle as that involving the franchise of a bus network, or part thereof? My amendment would similarly protect the pension rights of individuals when setting up a quality contract. That would provide security to employees in the industry, which is surely in the interests of fairness. It would also prevent any unnecessary interference in the process by employees fearful of their pension rights.

We want the costing of including pensioners to be part of the consultation when deciding to propose setting up a quality contracts scheme. Operators would have to take this into account when placing their bid. No doubt the Minister may say that the Government will want local authorities to specify TUPE-style requirements that go beyond the minimum requirements set out in the Bill, but some clarification of where the Government stand on this issue would be helpful and would provide security to employees in the industry.

Both amendments relate to very serious points. For the first time in Committee, I agree entirely with the words of my noble friend Lord Rosser. These matters should certainly be included in the Bill, but the clause does not properly include them. Mind you, this does point out a few disparities in the system that my noble friend seeks to embrace. Indeed, the whole principle of franchising, which is behind the principle of quality contracts, depends on someone bidding lower than someone else to obtain a particular franchise.

For some reason, my noble friend and those who brief him apparently overlooked this point, so we come to the clause. Of course it is essential that pension provision is properly protected. Indeed, reputable companies such as FirstGroup and National Express did so when they acquired companies. National Express provided a mirror-image scheme to the local government pension scheme to guarantee that employees continued to be protected and enjoy the same benefits that they would have enjoyed had the company that was acquired—West Midlands Travel—remained in the municipal sector. Similarly, FirstGroup gave exactly the same mirror-image guarantees to the companies that they acquired.

A great deal has been said about this in our debates on the Bill, but I have to point out that the London experience was based on entirely the opposite premise. The original franchises for London were based on the cheapest operator bidding on the ground of buying out the terms and conditions, including the pension provision, of many bus workers in London at the time. Yet we are told that this is the example that local authorities and those who speak on their behalf before your Lordships should follow. It was not until Transport for London and the current mayor’s present policies were actually followed that many of the working conditions which the London bus staff had been deprived of were restored. I would go so far as to say that working conditions have nothing to do with regulation or deregulation. The London experience, and its admitted benefits, is based entirely on the amount of money that is being thrown at—I choose my words carefully—the London bus industry.

Apparently, people see no contradiction between demanding a franchising system and then saying, “But hey, you’ve got to protect the interests of the workforce”. I agree with them; you should protect the interests of the workforce. The more the interests of the workforce are protected, the less likely it is that there will be quality contracts in the areas in which people are now advocating that philosophy. There is more to this, of course, than wages and pensions. Companies such as FirstGroup and National Express have share-saver schemes for their employees. Under existing Revenue rules, share-saver schemes are available only to the employees of that particular company. If a company such as National Express or FirstGroup—I name those two because they are the ones I have the most experience of—bid for a quality contract and failed, their employees would, under existing Revenue regulations, have to give up their participation in the share-saver scheme. I wonder whether my noble friend and those who brief him have discussed these matters with those employers or whether he would consider adding to his amendment that some provision ought to be made—although I very much doubt whether Revenue and Customs would allow it—for share-saver schemes to be transferred across in the event of a franchise operation.

Both the amendments are eminently sensible and I hope that my noble friend can accept them. I would be delighted to hear his view on some of the other benefits, not just the ones that I have already mentioned. Some people in local government talk about competition and the lack of it. All too often, smaller competing companies—for very good reasons, although I do not defend them—do not provide things such as canteens, proper uniforms or union recognition. Why does my noble friend not write that into some of his amendments? I am sure that it will not come as a great surprise to him that some smaller companies that would take the quality contracts that he and those who brief him are so anxious to include in the Bill would love to be able to derecognise many of the major trade unions in the industry. I hope that he will come back with further amendments to make sure that they do not.

I repeat that if my noble friend accepts both amendments, as the Government should, it will reveal the nonsense of quality contracts and the injustices of the franchising system that lies behind quality contracts.

Finally, if we are to have proper, comprehensive bus services, we should pay the staff properly and give them adequate working conditions, not subject their employment conditions to the lottery of franchising and quality contracts. I hope that my noble friend can accept the amendments and I congratulate those who have tabled them for the common sense that lies behind them.

I am grateful to all Members of the Committee who have contributed to the debate. A vast range of subjects has been raised and I shall not be able to answer all the points this afternoon, but I may in the end reach a position that noble Lords may think is more helpful than it was when we started thinking about these issues.

The TUPE regulations, and the Acquired Rights Directive which they implement, deal with straightforward cases where a workforce employed on a particular public function, such as waste collection, is transferred to do the same work under a new contractor.

As noble Lords have pointed out, the position when a quality contracts scheme is set up is more complex because the starting point is different. Before the scheme is introduced, employees are working for the provider of bus services, in most cases, on a commercial basis by a private sector operator. When the scheme comes into force, those services are instead to be provided under contract to the local authority, either by the same operator or by a different one, depending on who wins the contract following a competitive tender. The end state is very similar to that of a refuse collector employed by a contractor of the local authority, but the workforce is not being transferred from the local authority or from another contractor doing the same work on behalf of that authority.

The transfer of work will not necessarily involve the transfer of physical assets, such as vehicles or depots, although in some cases it may, as we have discussed. The pattern of services to be delivered under quality contracts may differ considerably from what the operators provided under deregulation. Indeed, one of the main reasons for making a quality contracts scheme may be that the authority wants a different, and better, network. Often, too, there will not be a one-for-one correspondence between the old employer and the new one, and some personnel will not have to transfer at all because particular routes will not transfer. Duty rosters may have to be redesigned and staff moved from one depot to another. It is not a straightforward transfer—or at least it will not be in all cases.

Let us assume that the local market is divided by two or three large employers and a handful of small ones. Under quality contracts, the market may be carved up in a very different way, but some of the changes may balance out. So it may be easier for an employer to keep the same drivers and allocate them to different routes than to transfer them to another operator who has taken over the routes that those drivers originally worked on and get some different ones back in exchange. That might also be a great deal easier for the drivers themselves. I am not saying that will happen everywhere, but we need to make allowance for it.

Clause 38 says, in effect, that any employee who is transferred to the holder of a quality contract will be transferred on TUPE terms. It does not require all the contractors to take over all the workforce, but it will apply TUPE to a number of transfers that would not fall under the regulations but for this clause.

Even if I had not been aware before, I was certainly made aware today that the trade unions and some local transport authorities—and possibly even some operators—would like the Bill to go further and require all contractors to take on all their allocated drivers on TUPE terms. This would be in keeping with the general principles of TUPE, but it does beg the question of who would allocate the drivers if their current job is split between two or more contractors and their current shift patterns would simply not fit into the new service patterns of any of the contractors that subsequently undertake the service.

This may be more a matter of practicalities than of principle, but whatever we do here, it is important that we make a provision that will work equally well across the board in respect of a range of different types of quality contracts scheme. We need to ensure that the provision works where all the existing services provided by one incumbent operator transfer en bloc to another single operator, but equally we need to ensure that it would work where services operated by one incumbent operator are split across a number of new operators, perhaps with new routes previously not provided at all. We need to do so in a way that would not overburden operators and unreasonably escalate the costs of a quality contracts scheme. That said, I am happy to take this point away and discuss it further with the Minister of State. At this stage I cannot say more than that, but we are prepared to have more discussions on it to see whether we can perfect what we have.

The amendment tabled by the noble Lord, Lord Hanningfield, as well that of the noble Lord, Lord Rosser, deals with pensions. Like employment rights, pensions are a very complex issue and I do not want to get into that labyrinth without a reliable guide. I am not an expert in those matters, but they are being considered by Ministers and officials in other relevant departments. We want the provisions in this Bill to be as consistent as is reasonably possible with the legislation applying elsewhere. We do not want to go further than that, but again I am happy to go away and ask my ministerial colleagues to give this further thought. I cannot promise that we shall come up with the perfect solution on Report, but our minds are not entirely closed on the issues that have been raised.

I would like to reflect further on the points that noble Lords have raised and I expect to be able to say more on Report. These are complex issues and I have listened carefully to what noble Lords have said. If they would be obliging enough not to press their amendments, I can give a commitment to think some more about the issues raised in them.

As my noble friend has said that he will take the issue away and look further at it—although I appreciate that that is without making any commitments—I am happy to beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 60 not moved.]

Clause 38 agreed to.

Clause 39 agreed to.

Clause 40 [Competition scrutiny of functions and agreements relating to buses]:

60A: Clause 40, page 34, line 42, at end insert—

“(d) agreements between local bus operators for the benefit of local passengers where there is no local authority involved.”

The noble Earl said: I shall be brief, but I should be interested to know the answer to my question. There is an unnecessary and unhelpful conflict between integrated transport and competition policy. The amendment tabled by the noble Lord, Lord Berkeley, would deal with everyday agreements between bus operators “for the benefit of local passengers”. That strikes me as sensible, but there is fear among bus operators that any discussion about anything is liable to get them reported to the competition authorities. On that basis, I beg to move.

I think that the noble Earl meant to say at the beginning, “On behalf of the noble Lord, Lord Berkeley, I beg to move”.

My speaking note does not take account of the noble Earl’s contribution, but I shall deal with the issues raised by virtue of the amendment. We agree that there are a good many circumstances in which the interests of bus passengers can best be served by co-operation between bus operators and, in many cases, the local authorities involved. At this point, perhaps I may also pay tribute to the Campaign for Better Transport, which undertook some work earlier in the year on this aspect of the Bill. That work has been very helpful in reinforcing the importance of ensuring that competition law genuinely serves the best interests of passengers. This is why we have made provision in the Bill for a “tailored” competition test, which would apply to voluntary partnership agreements and certain other agreements involving a local authority, in place of the test contained in Chapter I of the Competition Act 1998.

In taking this rather innovative approach, we have sought to ensure that the interests of bus passengers are well served while also ensuring that our approach does not undermine the Government’s wider policy on competition. I am sure that Members of the Committee will recognise that maintaining healthy competition is an important driver of innovation and growth in our economy. The leading role played by local authorities in developing and negotiating voluntary partnership agreements is critical here. It is this feature of voluntary partnership agreements that, in the Government’s view, justifies the departure from the usual provisions of the Competition Act. We recognise that passengers may benefit from certain types of agreement between two or more bus operators—for example, to ensure that services operate at evenly spaced intervals.

Where such provision is in agreements which support voluntary partnership agreements or quality partnership schemes, the provision in Schedule 2 would provide that, in certain circumstances, they would be subject to the new Part 2 test. Those circumstances are where the local authority certifies that the agreement is in the public interest and that any restrictions which would affect competition are necessary in order to meet the objectives of the scheme or agreement. But where a local authority does not make such a certification, the agreement would need to satisfy the appropriate test in the Competition Act 1998.

The intention behind the agreement is clear. It is right that such an agreement would not by itself fall within the scope of the new competition test, but, in our view, that provides a useful incentive for operators to work in partnership with local authorities. The scope of the proposed new test is intended to encourage bus operators to explore scope for agreement, not in isolation from the local authority’s efforts to improve services but in close partnership and collaboration with them. We consider that this partnership approach is more likely to deliver the best outcomes for passengers than if local authorities and bus operators pursue their own agendas independently.

I hope that Members of the Committee will appreciate that the approach we propose has been given careful thought and that it shows more flexibility on the part of the Office of Fair Trading. We consider that it provides a real improvement on the current situation and preserves the right incentives for bus operators to work not in isolation but in partnership with local authorities.

We do not think that we can accept the proposal in the amendment, namely that any agreement between two operators should automatically fall within the scope of that provision, but we are prepared to consider whether anything more can usefully be done in this area. Without absolutely committing myself to bringing anything back at a later stage, I am prepared to say that we will give it some further thought and see what more we can do. I recognise the importance of the issues that the amendment raises.

I think that I am quite happy with the Minister’s answer. On behalf of the noble Lord, Lord Berkeley, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 40 agreed to.

Schedule 2 [Competition test: amendments of Schedule 10 to the Transport Act 2000]:

61: Schedule 2, page 90, line 30, at end insert—

“(4) After sub-paragraph (3)(c) insert—

“(d) securing improvements in the quality, capacity, usability or variety of transport provision within the area of the authority of benefit to actual or potential transport users within the area generally or to certain categories of actual or potential transport users within the area, in accordance with the authority’s local transport policies.”.”

The noble Lord said: The Bill sets out a competition test for quality partnership schemes and for voluntary partnership agreements. That test, which is as I understand it an amended version of what is described as Schedule 10 to the Transport Act 2000, applies in place of the general provisions of the appropriate chapter, which I think is Section 1 of the Competition Act. Schedule 10 means that, where the advantages of partnership arrangements, such as benefits to passengers, reduced traffic congestion or improvements to facilities or vehicles outweigh the disadvantages of reduced competition, those arrangements are judged to have passed the competition test. A specific competition test, if that is the appropriate phraseology, for the bus sector is preferable to the application of the general competition law and is likely to act as less of a deterrent to co-operation between operators and local transport authorities for the benefit of passengers.

The amendments would broaden the scope of the benefits of voluntary and statutory quality partnership schemes in that Schedule 10 competition test and refer to,

“securing improvements in the quality, capacity, usability or variety of transport provision within the area of the authority of benefit to actual or potential transport users”.

What is in here is rather broader than the terminology that appears to be in the amended version of the Schedule 10 competition test, and it is more appropriate to be able to take into account those rather wider considerations that might be deemed to outweigh the disadvantages of reduced competition. I beg to move.

My noble friend Lady Scott had indicated her intention to oppose the Question that the schedule stand part of the Bill. On her behalf, I indicate that she no longer opposes it.

We are well aware that competition legislation can place constraints on operators and local authorities from acting in what they perceive to be the public interest. Often it is unnecessary as a constraint and arises from an overcautious attitude to competition law. At the same time, there are certain boundaries that must not be crossed.

In the package of draft guidance that we published to inform the debates, the largest single volume is the one that the Office of Fair Trading and the Department for Transport, working together, have provided, dealing with competition aspects of quality partnership schemes and voluntary agreements. While much traditional OFT guidance has been aimed at warning undertakings of what they cannot do, this tries to be far more positive in its approach and encourages bus operators to take full advantage of what they can do. I would like to think that that is a step forward that, I am sure, will be greatly welcomed by local authorities and bus operators.

The main purpose of Schedule 2 is to introduce a new variant of the competition test relating to voluntary agreements and other agreements referred to as supporting agreements. This will become the Part 2 test. The existing test in the Transport Act 2000 will therefore be Part 1. That Part 1 test applies to the exercise of certain functions by a local transport authority, rather than to the actions of a bus operator.

In designing the Part 2 test, we took as our starting point the criteria that were already in the Part 1 test: that the public interest purposes to be balanced against any adverse effect on competition should be as follows:

“securing improvements in the quality of vehicles or facilities used for or in connection with the provision of local services ... securing other improvements in local services of benefit to users of local services, and ... reducing or limiting traffic congestion, noise or air pollution.”

My noble friend’s amendment would add to that all manner of other criteria, which seem to cover virtually anything that could possibly be put in a quality partnership scheme or an agreement, and probably many other things beside. There are two main issues about the amendments. First, I am not convinced that they add anything of substance to the three existing criteria. They are simply examples of things that could be of benefit to transport users, which would be covered by the second and third existing criteria.

Secondly, the amendment text refers to “transport provision” and “transport users”, rather than the users of buses. Those are very broad terms that appear to be capable of covering all forms of transport, public and private. That change would not appear to be relevant to the provisions in the Transport Act 2000, with one possible exception, because Schedule 10 relates specifically to bus-related schemes and agreements. So I cannot see how the power to make such schemes or agreements could, say, be used to improve the quality of train services. The only function to which the revised words might have any application is in the making and varying of ticketing schemes, which may be multi-modal. The majority of such schemes are already subject to different competition rules because of the block exemption provisions.

Nor do I see that the words “actual or potential” users add anything. The schedule applies to the proposed exercise of a function as well as its actual exercise, so by its nature that must extend to potential users as well as actual ones—real ones and virtual ones.

I therefore conclude that there is nothing necessary in the amendments; they could probably be confusing. I have already been pressed today on there being confusion where we need transparency and clarity, in the words of the noble Lord, Lord Hanningfield. For those reasons, I ask my noble friend to withdraw his amendment. We can fairly argue that the objectives that he seeks are already achieved by what is in the Bill.

I note my noble friend's statement that he believes that what I seek to achieve through the amendments is already covered in the Bill. I am not sure that I necessarily agree with that, but my noble friend has put that on the record, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 62 not moved.]

Schedule 2 agreed to.

Clause 41 agreed to.

62A: After Clause 41, insert the following new Clause—

“Reimbursement of bus travel concession authorities

Where a travel concession authority has responsibility for the administration of the national concessionary bus travel scheme, including the reimbursement of operators as defined under section 3(2) of the Concessionary Bus Travel Act 2007 (c. 13) (reimbursement of operators), the Secretary of State shall reimburse the authority the full costs of doing so, including capital and set-up costs.”

The noble Lord said: In moving the amendment, I am fully conscious that we discussed more or less the same amendment, or a similar one, a matter of months ago when the Concessionary Bus Travel Act was going through your Lordships’ House. It is very appropriate that I am moving the amendment today, because everything else that we are talking about is liable to collapse if we do not sort this matter out. In fact, I have been to a crisis meeting in Essex this morning.

If anything, as I have just said, the issues that this amendment seeks to address are even more pressing five months after that last discussion. Things have worsened, and I will explain what has happened, particularly in two-tier areas where district councils administer this concessionary scheme. I say immediately that we all support the principles behind the Bill of allowing more concessionary travel for troubled people across the country.

We must be clear on the whole cost of introducing the national scheme. The Government have moved to a free pass from a half-fare pass without really understanding what the total costs and take-up of the scheme would be. The resources identified nationally for 2008-09 are insufficient to support the additional costs of the bus companies, or for local transport authorities to operate the scheme. The Government have failed to recognise the popularity of the scheme and are refusing to absorb the costs if more people use the scheme than they originally estimated, and have failed to recognise the inflationary pressures within the system. Bus operators are also suggesting that fares may rise during 2008 and that present levels of reimbursement are inadequate. This will lead to even higher bills for local councils.

Under the current arrangements, the financial shortfall of the national scheme will fall on the council tax payer. In Essex, for example, we now estimate that the costs will be an additional £8 million in 2008-09. Indeed, in my own county, the leaders of all 12 district councils—that is cross-party—together with Southend have come together to persuade the Government to take note of the issue and its grave potential impact on other services. That is happening across the country. To illustrate, one district council in Essex will have a shortfall of £500,000. A 1 per cent rise in council tax raises about £70,000, so to raise £500,000 it will have to put 6 per cent or something on council tax, which it obviously cannot do. Another district council has got £100,000 profit from the government allocation. Obviously, it will not put that into the pot to help other district councils. Everywhere in Essex I have been this week there is little talk about anything else.

There are an increasing number and length of bus journeys now being taken. Estimates are that over 40 per cent of all passengers are now using concessionary fare travel, and it is predicted that this will increase even further. The rules of reimbursement of bus operators have become highly complex, leading to disputes between councils and operators which the Government have failed to resolve. This means that when the picture becomes clearer the final costs of the scheme could be even higher in Essex than the £8 million we are predicting for next year.

I have a number of specific questions for the Minister. The situation is grave. What represents an acceptable level of additional costs? What constitutes an appropriate level of reimbursement for revenue foregone by the operator so that they are neither better nor worse off than they would have been? Will the Government, as they undertook to do when we discussed doing this legislation, fully fund it? If a district council or any authority is above the statutory minimum determined by the Department for Transport, it is that council’s choice. Authorities are concerned about the statutory minimum costs.

The situation is grave. It is now leading to continued conflict between operators and local councils, with everyone threatening to sue everyone else. The whole problem threatens to undermine the new programme, which comes out on 1 April next year. It is a serious matter, and perhaps the Minister might think this is slightly out of kilter with current legislation, but it is so relevant because it affects the whole operation of the bus services—particularly where there are two-tier areas and small authorities with no ability to raise any quantity of money. I beg to move.

From the perspective of someone who lives in Scotland, when I looked at the scheme for England, I remember thinking that something like this probably would happen, and it seems to be happening. I am certainly interested in hearing the response.

The noble Lord, Lord Hanningfield, is to be congratulated on his persistence on this issue. I recognise that this is the topic of the moment. Whether everyone in Essex is talking about it, I cannot yet judge.

I am due to go to a 60th wedding anniversary celebration in the new year when I shall test the guests on the noble Lord’s assertion. Given where they live, I guess that they will be more likely than most to be using a bus pass. As the noble Lord said, reimbursement was discussed not long ago and certainly at length during the passage of the Concessionary Bus Travel Bill, which received Royal Assent in July. Operators are reimbursed for carrying concessionaires according to the objective that they should be no better or no worse off. Operators are entitled to reimbursement for certain additional costs over and above the basic operating costs; for example, if extra costs are incurred by providing additional services or larger vehicles to cope with rising demand. We are not afraid of rising demand. We want to see more people using buses.

I agree that the national bus concession should be properly funded. The Government are providing a further £212 million to local authorities in England, through a special grant, from April next year. That is in addition to the existing funding provided by central government through the formula grant process. Following the introduction of the national bus concession next April, the Government will provide approximately £1 billion a year for statutory concessionary fares. No Government have ever been more generous in this regard. I am pleased to hear from the noble Lord that the party opposite shares our enthusiasm for this policy. We consulted with local authorities on the formula distribution of the special grant funding to ensure that it is targeted to meet the extra costs of reimbursement. We are confident that the total to be distributed is sufficient, based as it is on generous assumptions about fares, pass take-up, extra journeys and additional costs.

I fully understand the concerns that arise over any formula distribution of funding. However, this amendment would oblige central government to underwrite fully the cost for deals done by local authorities with bus operators. That would pass all risk to the taxpayer while leaving control with the local authority. I am not sure that that is exactly what my noble friend intended. I know that he is a strong localist, but were he in the position that I occupy, or in the position that the bus Minister at the Department for Transport occupies, I am not sure that he would want to pass over that responsibility in quite the same way. There is no incentive in the proposal to fight fraud or to negotiate hard with bus operators the overall cost of concessionary travel. Inevitably, it would lead to significant increases. Authorities could also use the concessionary reimbursement as a back door for subsidising marginal routes, again at the expense of the national taxpayer. I would question the desirability of that strategy.

We acknowledge that the current arrangements for concessionary fares reimbursement are not perfect, which is why we are working with operators and local authorities to put in place revised and more efficient arrangements for the national bus concession from April next year. It is vital that we secure the best deal for the taxpayer in taking this work forward. Those interests have to be understood and properly represented. I cannot accept the amendment. I accept that there may be difficulties in some parts, but we will continue, as we have throughout the introduction of this policy, to talk to our colleagues in local government and to work with bus operators to secure the best possible outcome and the best possible deal. I hope that the noble Lord will feel able to withdraw his amendment.

As the Minister knows, I am very much a localist, but during the course of the legislation, there was potential for having a national scheme operated centrally. There was the potential, as there is now, for running it through district councils in two-tier areas, but there was also the potential of county councils running it. Obviously, county councils have many more resources for raising money than district councils, because of their size. One district council, my district council of Chelmsford, has a deficit of nearly £500,000. That is the council that is going to refuse to pay and the operator is going to sue the district council. It had a deficit of £150,000 this year and predicts £350,000 next year. Some £800,000 is owing to bus operators in our county, which the districts are refusing to pay, and the bus operators are going to sue.

It is dissolving into chaos. I know that all sorts of letters have been written asking to see the Secretary of State and so on this week as the problem begins to unravel. Therefore, I am not at all happy with the Minister's answer. The whole thing is collapsing in front of us because the district council cannot cope with it. Perhaps we could go back to the solution of the Government operating a national scheme. Although I was opposed to that in the first place, that might be the best way to do it. It was suggested during the course of the legislation. Perhaps the Minister will comment on that aspect.

I did not take the legislation through the House. Although I was tangentially aware of some of those debates, like the noble Lord, I think that it is much better in general terms for these issues to be resolved locally. I am sad that conflicts are arising in the way that he describes. I am sure that if people are wise and sensible, they will seek a reasonable resolution to those issues.

I certainly appreciate the noble Lord’s point about county councils having the size and capacity to manage such budget issues. I have heard the complaints in my county as well, where it is said that councils such as Wealden are making “a bit of a profit” out of this, whereas the more heavily populated urban areas such as Brighton and Hove, and perhaps Eastbourne and Worthing, have similar difficulties to those that the noble Lord describes. I accept that the formula is not absolutely perfect, but it is the mechanism for distribution and it has a long history to it. When the noble Lord’s party was in government, their Government obliged authorities to operate within its rigours, and I guess that that is what we are going to have to do here. We continue to listen to what our friends in local government have to say on the matter and, as I outlined in my response, we seek to perfect the operation of the scheme as it kicks in from April next year.

I am not going to be drawn into making comments about the desirability or otherwise of using a national mechanism. I am sure that powerful arguments were made that it could work locally, for the simple reason that local people are closer to where the service is being used and they probably have a better understanding of how it will operate. For those reasons, I will not be drawn any further into that debate, but I give the assurance that we in government continue to listen to understandable concerns and that we have the opportunity to see how it works out as it is implemented from April next year.

I thank the Minister for that answer. We have talked about partnership today. The problem that I have outlined is that those partnerships are breaking down. I realise that we cannot go any further on the matter today, but I hope that by the time we reach later stages of the Bill, there may be clarity and Ministers may be able to see some way to support some of the district councils that seem to be having enormous problems. With that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 3 agreed to.

Clause 42 [Determination of applications for registration where restrictions in force]:

62B: Clause 42, page 37, line 32, at end insert—

“(d) place minimum period of operation conditions on the applicant”

The noble Lord said: This amendment is further to the discussion that we had in the previous Committee sitting allowing registration restrictions within quality partnerships to include restrictions on the proposed length of operation of a new service.

If a proposed service is questioned because of the disruptive effect that it may have on the market, requiring a service to be operated for a minimum length of time may be an effective means of assuring stability. Giving the traffic commissioner the ability to do this could prove to be an effective compromise in place of rejecting an application.

In response to our Amendment No. 12 last week, the Minister spoke mainly about why he thought this amendment would not work with the variation or withdrawal of services. I can understand that varying a service may be useful, such as when co-ordinating with rail timetables, but I emphasise that what I mean by this amendment is the registration of new services and the period of their operation, with or without minor timetabling variations. I beg to move.

We are a bit puzzled by some of the reasoning behind the amendment. If a traffic commissioner is called on to decide whether a proposed registration is detrimental to a quality partnership scheme, he or she will decide that it is or is not detrimental following consultation with the relevant local authorities and operators. If it is decided that it is not detrimental, the commissioner must accept the application and register the service. If the commissioner is persuaded that it would be detrimental, he or she can either refuse it outright or ask for it to be amended in some other way. I do not see how amending it to require the service to be operated for a minimum period would in most cases be compatible with a decision that the registration would be detrimental in the first place.

The provisions already contained in the Bill, if enacted, will enable an authority to introduce a registration restriction, which stipulates that services within the area of the scheme should be operated as registered for a minimum period. However, there might be services for which a shorter registration period would be appropriate—for example, a tourist service that operates only during the summer holidays. If such a condition were to be in place, the traffic commissioner could accept only an application to operate for a shorter period or to vary or withdraw a service after such a period of time as the relevant authorities and operators were content. Any subsequent failure by the operator to provide the service for the period of the registration could lead to enforcement action by the traffic commissioner.

The other option would be for the Secretary of State to make regulations under the Transport Act 1985 to impose a longer notice period for registrations in the areas where a quality partnership scheme is in place. This is an option that the department will consider in consultation with others in due course, but that would be a rather more rigid approach, which would apply everywhere, whereas the imposition of registration conditions would give each area much greater flexibility.

We conclude that the amendment is unnecessary and that the options that I believe the noble Lord wishes to have available are probably already in the Bill. I hope that that explanation helps the noble Lord, and more particularly I hope that it helps him to withdraw his amendment.

I thank the noble Lord for that answer. I moved the amendment to try to create some stability. We all know that if services are there, people get used to them. Nothing switches people off buses more than when services keep being changed. I was trying to create some stability, but I shall look at the noble Lord’s answer. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 42 agreed to.

Clause 43 [Applications for registration where quality contracts scheme in force]:

62C: Clause 43, page 39, line 25, at end insert—

“(6A) If the traffic commissioner sees fit, guidance can be given to the authority to incorporate the proposed service into the quality contract scheme.”

The noble Lord said: The Bill’s proposals for the registration of new services under a quality contracts scheme are different from the potential restrictions available under a quality partnership scheme. The Bill seeks to make the rejection of such applications the norm and the acceptance the exception, determined by a clearance certificate provided by the relevant local transport authorities. Although I have made it sufficiently clear that I do not think that quality contracts are particularly beneficial, or even that many people will take them up, I can see that barring some applications for registration would make sense under such schemes if things were to work as planned.

In most cases, having new services registered alongside would undermine the network planned by the local authority under a quality contracts framework. However, operators obviously usually make applications for commercial reasons. A route suggested by an operator can usually be expected to have sufficient customers if the operator has done the necessary research. As such, that quality contracts procedure could benefit from having this valuable information fed into the discussion. It would therefore make good sense for local transport authorities to have a mechanism for taking suggestions on board and allowing quality contracts to be made in collaboration with operators.

The initial setting up of a scheme requires extensive consultation, but transport needs change. Having operators as an extra resource to help authorities in subsequent periods to determine their transport needs under a quality contracts scheme would help the scheme to be a success. More people might take it up. I have suggested in my amendment that the role could be taken up by the traffic commissioners, who could give an authority guidance to incorporate a service into their quality contract if they saw fit. The Minister might have other ideas as to how this might be done. I simply wanted to raise the issue of the operator not having much input into the process after a scheme was set up, especially if quality contracts are to be continued beyond the initial 10 years. I beg to move.

This is an intriguing amendment for one or two reasons that I shall illuminate. In a quality contracts scheme, the traffic commissioner in essence has a passive role. The role of enforcing compliance with the terms of a quality contract, for example, falls to the local transport authority rather than to the commissioner. All the commissioner can do under existing legislation is penalise an operator who runs a service in a quality contracts area without the authority’s permission.

Clause 43 was introduced to give operators an opportunity to register services in addition to those provided under the quality contracts scheme. It would be entirely for the authority to decide whether the service could go ahead. The traffic commissioner would merely register any service that the authority was willing to accept. This is a rather less bureaucratic alternative than giving the authority the power to issue permits for additional services, as Transport for London does in London under the Greater London Authority Act 1999. It was never the Government’s intention that the traffic commissioner should interfere in the decision whether a particular service should be part of a quality contracts scheme or be allowed to operate outside that scheme.

What intrigues and surprises me is that the proposal embodied in the amendment would run counter to upholding the right of local authorities to take their own decisions. I am really rather intrigued as to why the noble Lord, with his local government hat on, has come up with a scheme that would provide the traffic commissioner with what some might see as a rather dangerous, interfering role. Is that really what the noble Lord wants? I am not quite sure why he wants to do that.

This is really a probing amendment to consider different ways in which it might work and to hear the Government’s views on how it might be looked at differently.

I do not think that the amendment adds much to the Bill, nor do I think that it will improve it. For those reasons, I hear what the noble Lord says, but it is not an approach that we can endorse. I hope that the noble Lord will withdraw the amendment.

I thank the noble Lord. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 43 agreed to.

Clauses 44 and 45 agreed to.

63: After Clause 45, insert the following new Clause—

“Fees for registration of services

(1) Section 126(1) of the TA 1985 (application of section 52 of the PPVA 1981, which relates to fees, to registration of local services etc) is amended as follows.

(2) In paragraph (a) after “for the variation” insert “or cancellation”.

(3) After paragraph (a) insert—

“(aa) the continuation in force of registrations under that section;”.”

The noble Baroness said: Amendment No. 63 would update and increase the flexibility of the fee regime that applies to the registration of local bus services. This regime has remained unchanged for the past 20 years. It would provide a more equitable fee structure for different types of operator and route. It also would provide the Secretary of State with a further option for funding any additional costs incurred by the traffic commissioners, for example, relating to the proposed punctuality regime, from the industry. It does not mean that we would definitely do so; that debate is for another day.

If, for example, we were to raise fees to cover some additional traffic commissioner enforcement—this is only for argument—under the current arrangements for charging fees in connection with bus service registrations, only a proportion of operators would bear those costs. Punctuality enforcement benefits all operators, yet charges would hit only those operators who have either registered new services or varied existing ones. Cancellation of services has a transaction cost, though there is currently no charge. In addition, it seems reasonable to charge a fee for a registration to continue in force, much in the way that a holder of a PSV operator’s licence pays a regular fee for the ongoing validity of that licence.

It has been suggested on many occasions that if the traffic commissioners are to carry out additional work, they will necessarily require more resources. Clearly, there are two ways of funding that: either through the department and therefore taxation, or through the industry. I understand that the bus industry might be nervous at viewing this new power. However, I stress that further work needs to be carried out on the additional resources needed, and no decision has been taken on how much, if any, of that burden should fall to the industry. A well-run and modern industry should be able to manage the costs associated with competing in the market, including any regulatory or enforcement costs.

I do not currently have an estimate of how much any additional work might cost, but I do not expect it to be excessive. The detailed work on the arrangements for the bus punctuality regime is still taking place, in particular through the Bus Partnership Forum, and that work will consider the level of any necessary traffic commissioner involvement. I also assure Members of the Committee that any changes to the fees regime would be subject to consultation. We are in a position where we are anticipating possible future changes and ensuring that the appropriate statutory powers are available should a particular option be decided on. I stress that the final details have not yet been determined. This is simply an opportunity to bring in some additional flexibility to the fee powers and to make them more fit for purpose in today’s world. I beg to move.

On Question, amendment agreed to.

Clauses 46 to 53 agreed to.

Clause 54 [Powers of traffic commissioners where services not operated as registered]:

63A: Clause 54, page 47, line 10, after “operator”)” insert “consistently over a period of time, with due regard to any exceptional circumstances”

The noble Earl said: I shall also speak to Amendments Nos. 63B and 64A. All these amendments deal with the traffic commissioners’ judgment in determining whether a service is not being operated “as registered” and the measures available to rectify such problems.

We welcome the highlighting of the punctuality issue and its effect on passengers’ perception of local bus services. It seems desirable to allow the traffic commissioner to investigate the root causes of such issues and prepare reports to make suggestions for improvement for both the authorities and the operators.

My point in Amendment No. 63A concerns the initial judgment by the traffic commissioners. It should be remembered that this is one of the commissioners’ quasi-judicial functions, which we have discussed. If the traffic commissioner network is populated by competent individuals who are knowledgeable about transport matters—a point that the noble Lord, Lord Bradshaw, raised—this should provide no problems. However, as it stands, the Bill gives no guidance about the circumstances in which a traffic commissioner can deem a local service to be operated “not as registered”. Specifically, no mention is given of the timeframe that such observances should take. I would like to think that any problem should persist over a period of time, with due regard to exceptional circumstances and other situational details, before action is taken by a traffic commissioner. The Minister may say that this is a matter for guidance but, without provision being made in the Bill, the potential exists for a traffic commissioner to exercise poor judgment.

Where a problem is identified with a particular service, the Bill allows traffic commissioners to publish a report containing remedial measures to be implemented by operators and local traffic authorities. Amendment No. 63B would ensure that this report was consistent with any local transport policy that might be affected by the measures. This will ensure electoral accountability and that any advice is not at odds with the other plans that a local authority may have.

Furthermore, if the advice is to be effective, it should be reasonably practicable to implement and have regard for the other pressures that authorities may be facing. I speak here only for authorities but I am sure that bus operators would like the same considerations to be made from their point of view.

Advice should be in proportion to the problem faced. I am certain that many suggestions can be made to improve punctuality, but there needs to be acknowledgement that they should offer value for money. The traffic commissioner network is perhaps not the best judge of what is affordable to local authorities, and I can envisage that advice might not be sensible in some cases. If recommendations are undeliverable, they will be meaningless.

Clause 55 makes revision to the section of the Transport Act 2000 that deals with penalties, although I believe that these have now been renamed “sanctions” by virtue of the last subsection of the clause. The idea of traffic commissioners fining operators in the event of poor performance seems reasonable, and the Bill allows traffic commissioners a wider range of options than at present. The idea that money can be returned to benefit bus services and passengers is more favourable than simply fining operators, under which passengers might see an increase in the fares that they pay.

However, the revisions to the subsection of the Transport Act that deals with the amounts of such penalties provide no more clarity to the situation. At present, paragraph (a) of the subsection stipulates that operators can be fined up to £550 per vehicle. However, paragraph (b) of the same subsection is somewhat vaguer and allows the Secretary of State or the National Assembly for Wales to specify another amount. I am unclear how this may work in practice, and it would be helpful if the Minister could clarify exactly what it means.

As the Bill revises and increases the powers available to the traffic commissioners where services are not operated as registered, this matter needs to be addressed. I believe that there needs to be some guidance, otherwise the powers could be used in an unpredictable or inconsistent manner. That could have the unintended consequence of passengers thinking that they had received a worse deal in one part of the county compared with another. Guidance could take the form of a penalty policies statement published by the traffic commissioners in advance. This would provide clarity to operators and ensure that the penalty system functioned as intended, with consistency given to traffic commissioners’ decisions. I beg to move.

The noble Earl has made some interesting points about punctuality enforcement, although I do not see a golden thread of consistency of approach in the three amendments. Perhaps we expect too much sometimes.

The first amendment would limit the circumstances in which the traffic commissioner could formally engage with a local traffic authority to cases where bus punctuality had been consistently poor over a period of time. Where a bus operator is faced with a licence sanction for poor performance under Section 26 of the Transport Act 1985, the traffic commissioner has to be satisfied that there is no reasonable excuse and that the conduct involves either danger or frequent failure. The situation here, however, is rather different. The events described in subsection (1)(a) of new Section 27A, which the clause will insert into the Transport Act 1985, will trigger not disciplinary action against the bus operator but engagement with the local traffic authority.

The Government continue to work with stakeholders to develop a robust regime for managing bus punctuality. The stakeholders are keen to encourage such engagement to begin at an earlier stage, for example where operators identify a traffic problem and encounter difficulties in keeping to a timetable without actually failing to meet the punctuality standards. They would like to use the tripartite process of commissioner, authority and operator to nip potential problems in the bud rather than to wait for them to become manifest. The Government fully support that in principle but consider that there is no need to spell it all out in legislation. There is nothing to prevent the three parties meeting to discuss these matters and developing strategies to prevent them getting worse. The existence of stronger legislative powers if the situation does get out of control would spur them to do so. Clause 54 will provide that spur and give the traffic commissioner sufficient teeth to act when appropriate. The amendment, however, would pull in the other direction and would in effect deter the traffic commissioner from taking steps unless things were in a very poor state indeed. In practice, the traffic commissioners will use their judgment and common sense, as they usually do, and the clause gets the balance about right.

The noble Lord’s second amendment moves in the other direction. It aims to limit the type of remedial measure that the traffic commissioner could recommend to the local traffic authority in his report under new Section 27A(4). It is clearly our intention that any remedial measures recommended should be reasonably practicable to implement and consistent with the local transport plan, so far as that plan goes into such a level of detail, or at least not inconsistent with it. However, I am not persuaded that we need these words in the legislation. In practice, traffic commissioners recognise that they are not experts in traffic management techniques and would be most unlikely to make a recommendation that had not been discussed with representatives from the local authority and accepted by them as a reasonably practicable step that they could take that would not have an adverse impact on any of their other traffic management objectives. They are also under a general obligation to exercise their functions in a way that is reasonable and rational. It is not necessary to spell it out in detail in legislation, as the noble Lord suggests.

The third amendment in this group is most odd. It affects an order-making power of the Secretary of State or the Welsh Ministers to amend the maximum penalty which a traffic commissioner can impose on an operator under Section 155 of the Transport Act 2000. At present, that sum is £550 for each vehicle that the operator is authorised to operate under any of the PSV operators’ licences. There will of course be more than one if the operator has operating centres in more than one traffic area.

The order-making power simply enables a Minister to substitute a different figure for £550. The order is by statutory instrument, and any proposed use of the power would be subject to consultation. It would be most bizarre for the Secretary of State or Welsh Ministers to be obliged to issue guidance in advance, setting out how they proposed to use the power, which would be the effect of the amendment. I see no value in that at all. It would appear to be asking Ministers to fetter their own discretion, or that of their successors, in a way which, if the noble Lord sat back and thought about it, would be most unsatisfactory.

The amendments seem to go in different directions. The last amendment is most strange in terms of what it seeks to achieve. Perhaps the noble Lord sees it as a probing amendment, but I am not quite sure what the noble Lord is seeking to find as a result. I am not persuaded by the amendments, and I ask him to think about them carefully and not to press them.

I am grateful for the way in which the Minister gently declined my carefully thought out amendments. I shall look carefully at how Amendment No. 64A works and will read carefully what the Minister has said. In the mean time, subject to the usual caveats, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

[Amendment No. 63B not moved.]