If the first Question for Short Debate does not run for its allotted hour, the Committee will adjourn during pleasure until three o’clock. The second Question for Short Debate will start at three o’clock.

To ask Her Majesty’s Government what steps they are taking to support the bus industry during the current economic situation.

First, I want to pay tribute to the bus workers in large parts of the country who have maintained services this week. While that was not the case in the capital, in Oxfordshire, from where I have travelled to and fro this week by bus, the conditions have been awful but the buses have run. Those concerned need to know that people are grateful. I should also declare an interest in that the journeys I made were as a concessionary fare traveller. I want to deal with several issues, but my noble friend Lady Scott will deal entirely with concessionary fares. We would perhaps all agree that they are not satisfactory.

I want to speak first about the bus service operators’ grant, known as fuel duty rebate. The Secretary of State has announced a review of the basic principles of BSOG to encourage fuel efficiency, low carbon buses and the like. It is probably a very blunt instrument for achieving that aim. With the use of modern buses, fuel consumption goes up. That is because when air conditioning, for instance, is built in, more fuel is burned. That does not mean to say that the operator is running inefficiently; it means that he is meeting other requirements. We must also bear in mind that almost all bus engines are derived from lorries, because the bus market is small compared with that for lorries. There is therefore little scope for the bus industry to specify exactly what it wants because in so doing it would substantially raise the cost of new engines.

We must also bear in mind that no operator wishes to waste fuel. I have heard people saying that the big companies are running buses around and making profits, but I do not believe that those which are profitable want to waste fuel. It is a large part of their production costs, fuel, wages and insurance being the main ones. However, I draw the Committee’s attention to the fact that fuel consumption varies from place to place. I have figures showing that the network in Liverpool averages 6.82 miles per gallon, whereas that in north Wales averages 9.36. So the amount of fuel burned depends very much on the terrain in which one is operating. Of course, the advent of free travel for older people has meant that many buses spend a great deal more time stationary. More people are getting on buses more slowly, and while the buses are stationary they are still burning fuel.

I want particularly to ask the Minister whether the consultation on the bus service operators’ grant is technically well informed about what they are asking for and what is possible. Will he also disabuse those people in other departments who seem to think that this is a free good handed to the bus industry, when in fact it facilitates the provision of bus services that are enjoyed by large numbers of people?

I turn to congestion, which everywhere gets steadily worse. At one stage—I go back a long time on this—there were proposals to introduce some form of road pricing which would inhibit the use of vehicles in towns, but that has not happened. As regards the general decriminalisation of parking, in some places parking enforcement might be a bit draconian but in the majority of places it is non-existent. Again, the effect on buses and bus users is severe. Have the Government any proposals, other than those in the Traffic Management Act 2004, to improve the way in which we deal with congestion? As it gets worse, and it assuredly will, bus operation will become more expensive. Not only will buses burn more fuel but more buses and more drivers will be used to provide a worse service, which is the opposite of a virtuous circle, whatever that is.

I draw attention to the situation in Newport not because I expect the Minister to answer for his colleagues in the Principality but because I should like to know the Government’s attitude towards bus priority measures that have been put in place with government grant. I am not talking about bus priority measures that local councils implement but those which the Government have grant-aided and which a council subsequently decides to remove, perhaps following a change of Administration. I am sure that some bus lanes have been put in the wrong place or turn out to be the wrong length but it is a bit like a council asking the Government for money to build a school and deciding subsequently, following a change of Administration, to knock it down or close it. However, once you take out a mortgage on a house you cannot opt out of it unless you put the money back within a few years. Therefore, government grants made to local authorities for properly researched schemes under various pieces of legislation should not be capable of being abrogated by a new Administration unless the latter is prepared to pay the relevant costs. The noble Lord, Lord Snape, will no doubt remind me that the Liberal Democrats have not always been as progressive as they might have been in this respect. Perhaps the noble Earl, Lord Attlee, will comment on the Conservative Party’s attitude to these schemes. However, I feel that where millions of pounds are being spent we need some different rules.

The EU Commission’s proposal to regulate the rights of passengers in the bus and coach industry is a very serious matter. The Minister was not in the department when the new drivers’ hours regulations were introduced, which bore very heavily on rural operators. I do not believe that officials in the department took notice of what many bus companies said would happen as a result of that. The regulation concerning the rights of bus and coach passengers is much more onerous and will lead to greatly increased costs for the industry. This week I received a document concerning the rights of passengers on inland waterways, which mentions the creation of 12,000 to 14,000 new jobs. As I understand it, these are not jobs for people sailing the ships but for bureaucrats administering the measure. I also understand that we are not in the business of creating bureaucrats. Giving the speaking time allotted to me, I cannot go into that measure today, but I hope that I shall be given an assurance that proper consultation will take place not just with the Confederation of Passenger Transport, which tends to represent the large operators more than the small ones, but with a comprehensive selection of operators, and that there will be a very good impact statement. As regards consultation on international routes, given my previous existence I would not like to think that includes the routes between places such as Sligo and Londonderry.

Finally, on the provision of bus services in rural areas, the way in which costs are rising and the way in which local government finance is being depleted means that the amount of money available to provide local bus services—I am talking about deep, rural bus services and not bus services between rural towns—will get smaller. What is more, it is already not very effective at improving the lifestyles of the people in those rural areas. They cannot go to work or go out for leisure. There is just a weekly shopping bus, which is not much use to the community.

In the short time available, I have raised a few issues. I hope that the Minister will be able to give the Committee some reassurance that the Government are actively considering these issues and, if not, will consider them.

I thank the noble Lord, Lord Bradshaw, for enabling us to have this debate on the position of the bus industry in the current economic situation. I should also like to endorse what he said about the efforts of bus staff over the past few difficult days. I shall make a few brief observations and will put some questions to the Minister. The bus industry is likely to feel the effects of the current economic downturn in the same way as other businesses. We do not wish to see bus services being reduced in frequency to a significant degree or routes being withdrawn, particularly as the less well-off and more vulnerable members of the community are more dependent on bus services than better-off sections of the community.

The economic downturn will have an impact on the income of bus companies and on the finances of those local authorities that are paying bus companies to run the services that the community requires but which the operators say are not commercially viable. A significant proportion of bus services are operated by a small number of large operators, which often do not seem to compete directly with each other as enthusiastically as some do with small operators. These large bus operators have become public transport operators running bus and rail services in this country, and sometimes elsewhere in the world, with varying degrees of success.

If a situation is reached—the operative word at the moment is “if”—where bus operators say that they cannot continue with current service and route levels without more financial support from either or both the local and the national taxpayer, I hope that the Minister can assure us that he will seek clarification on one or two points before any additional money is forthcoming. A not inconsiderable percentage of bus operator income already comes from public funds through grants to provide services and through concessionary and free travel schemes, of which I, like the noble Lord, Lord Bradshaw, along with millions of others, am a beneficiary.

I hope that the Minister will resist any significant reductions in levels of service since the money that is being paid to bus operators for concessionary and free travel presumably, in part, reflects current levels of service and the patronage that those levels of service have generated. The value of the service being paid for by the local or national taxpayer risks being diminished, at least in the short term, if levels of service and routes are cut.

I hope that the Minister will also ask what bus operators have done to reduce or check any loss of business in the present climate through selective reductions in fares. Many other businesses are having to reduce prices. Some of the current bus operators were not averse in the past to significant reductions in fares on some routes in their bids to see off competing smaller operators that did not have the same financial resources. Reducing fares to attract more passengers onto their services is not an unknown policy to the current larger bus operators.

I hope that my noble friend will also take the view that the overall adverse financial position and a falling share price for the company in question, which may have arisen because of difficulties with ventures abroad and with running rail services in the UK or in the property market, should not be the basis on which to seek further financial help for the running of bus services. I trust that he will also, if necessary, consider the position of local authorities, including PTAs, which may well find that bus operators withdraw from some current routes on the grounds that they have become commercially unviable in the economic downturn, and that the only way to keep the service going is to provide a subsidy. Will local authorities be provided with any additional resources to enable them to cope with a possible increase in the number of services that they have to support?

The other possibility is that some operators may withdraw from routes, because they are less profitable rather than unprofitable, to maximise their profits in the current climate by reducing their network and concentrating on the highest revenue-raising routes to the detriment of the travelling public. The comparative lack of real competition in the bus industry in many areas could mean that if instances such as these arise, the local authority would have to provide some additional financial support, following a tendering process, if the service was to continue to be provided.

I hope that the Minister can indicate what action, if necessary, could be taken to protect and maintain bus services in this difficult climate. Presumably the Government have some money available for transport, since they will not now be spending the money that they committed themselves to providing if the recent vote on the Manchester area congestion charge scheme had gone the other way. Revenue expenditure is likely to be needed to sustain the bus network. If there are calls for more money, first, how will the Government ensure that such money is justified, and, secondly, how will they ensure that if any additional money is provided without going through a tendering process, it is used solely for the public good through the provision of required bus services when we have a deregulated market with few checks and controls?

I am sure that there are ways to address these issues if the need arises, thus achieving the objective of sustaining our present network of bus services. I hope that my noble friend the Minister can indicate the Government’s thinking on these points.

I, too, congratulate the noble Lord, Lord Bradshaw, and thank him for giving me the opportunity to participate in this debate. I endorse what he said about bus workers, particularly their efforts over the past few days. Whether bus or rail, we are good at criticising in this place and outside. We ought occasionally to pay tribute to those who get up at all sorts of unearthly hours to provide the services that we occasionally criticise.

I declare an interest as a consultant to the FirstGroup group of companies. I know that the noble Lord, Lord Bradshaw, said earlier that he was going to leave the subject of concessionary fares to his colleague, the noble Baroness, Lady Scott. Without pre-empting anything that she says to the Committee, there is widespread concern throughout the country about the distribution of the global amount available for the Government’s welcome and splendid project—I am sure all Members of the Committee will agree—to extend concessionary fares. Is the Minister sure that the global amount is being properly distributed countrywide? I am thinking of parts of the country where there are perhaps a considerable number of people entitled to concessionary fares. Eastbourne comes to mind, as it is seen as a popular retirement spot on the south coast. Are we sure that the distribution of the global amount is proper and sensible and enables these services to be properly provided?

I endorse what the noble Lord, Lord Bradshaw, says about the proposed European passenger rights. I can find no other word but “bizarre” to describe some of the other proposals. Again, I am sure that the Government are doing what they can behind the scenes to prevent some of the more bizarre proposals coming into law. However, as I understand the present situation, if I get on a bus with my laptop and put it down on the seat next to me—I have to be careful what words I use, as I am conscious that words such as “fat” are not permissible in these more politically correct days—and someone of a more obese nature sits next to me and sits on that laptop, it is the bus company’s job to compensate me. If that is correct, one can think only that the number of claims will be enormous and that the number of bus services, whether publicly owned, privately owned or subsidised by the local authority so far as my noble friend Lord Rosser is concerned, will be considerably reduced if these extra overheads are to be piled on to companies countrywide.

My noble friend Lord Rosser talked about the comparative lack of competition, and he expressed understandable concerns about the impact of the current economic situation on existing, and perhaps future, bus services. I am never quite sure what certain people in this country want from bus services. If there is no competition, those running the bus services are accused of running a monopoly, and if there is competition, those for whom my noble friend speaks so ably talk about how wasteful it is. I am not sure what my noble friend’s gripe actually is. I wish that he would be a bit more specific about the problems as he sees them and as some of the people who brief him on these matters see them. I am sure that the bus industry as a whole would be grateful if these anomalies were properly pointed out, so that it could do something about them and perhaps correct them.

The noble Lord, Lord Bradshaw, spoke about the problems of the future of bus lanes. I shall not embarrass him by talking about Birmingham and the Liberal-Conservative coalition there removing bus lanes. I have a question for my noble friend. Once the passenger transport executives are altered—I have forgotten the name of the bodies that will take over from them—and their scope is widened into different parts of the country, will they be given some highway powers? The great problem at present is that whatever decisions and agreements are made between passenger transport authorities and their successors and bus companies, highway authorities have the power not only to countermand them but to remove bus lanes, as is being done in Birmingham and elsewhere.

I apologise for taking up the Committee’s time, but I hope that my noble friend can answer a couple of my questions.

I am grateful to my noble friend Lord Bradshaw for giving us a chance in this brief debate to air some of the concerns that I am picking up from colleagues in local government around the country. I would imagine that they are fairly widespread concerns.

When I first came to your Lordships’ House, the first legislation that I participated in was the Transport Act 2000, which introduced concessionary fares. At the time, we on these Benches suggested that it would be a good idea to have a national scheme rather than one that was operated on district boundaries. We were therefore pleased when the Government rather belatedly took up our idea and developed it. The concerns that I have today are nothing to do with the principle of the scheme, which is a good idea. It is clearly very successful; in fact in some areas I am being told that it is too successful and that so many concessionary pass holders are using buses that fare-paying passengers cannot get on. That is affecting the financial dynamic of the bus industry. It is successful, and we welcome that.

The problem is really with implementation, particularly with funding. It seems that the nub of the issue is the way in which the government grant, which is around £212 million, is getting to local councils. I know that the Government believe that they have a formula that deals with all the important issues, but local authorities are reporting that there are huge shortfalls. It is not unusual for there to be disparities between what local authorities believe is happening and what the Government believe is happening, but it is a testament to the complexity of local government finance that it is difficult to get to the truth of the matter and find out where the facts lie.

I tabled a Written Question to the Minister about a month ago asking for information about winners and losers. The Answer that I got back gave me only the amount that was available in quantum across the country, which was not really the information that I had been seeking. I felt a bit short changed by the Minister’s reply. Interestingly, the website TheyWorkForYou.com, which monitors these things, looked at his reply and said that it was inadequate and unrelated to the question that I had asked. I am still trying to understand why the Government are saying that there is enough and that it is being correctly distributed when local authorities are reporting quite the reverse.

The nub of the problem is that local authorities are paying for the bus journeys not of their residents but of the people who are getting on buses in their district. In my area, popular destinations such as Cambridge and Norwich, and presumably in warmer weather Lowestoft and Great Yarmouth, attract visitors for various reasons. They are paying for all the return journeys of anyone who visits their area. This is not just a tourist issue. Many towns in this country operate as hubs. We go to them to shop and to access leisure facilities and facilities such as hospitals. The host district therefore pays for the return fare of all the people who come in. Some may see that as a subsidy by town dwellers for rural dwellers.

I gather that park and ride is also an issue. If the park and ride site is within the city or town boundary, it pays for all the bus journeys of concessionary fare holders in that area, so there is a sense that there is a shortfall. My honourable friend the MP for Cambridge reports that, since last April, the city council has seen its spending on concessionary fares increase by 177 per cent, which is £1.6 million, but the extra government grant is £600,000, so it must find £1 million. It is not easy for local authorities that have been faced for some years with making year-on-year efficiency savings to find an extra £1 million. They cannot put up the council tax because there are capping regimes and political issues around those, so their alternative is to cut spending. Usually that falls on the transport budget, which may mean that where bus companies operate services that are subsidised by local authorities, the local authorities may withdraw the routes. The noble Lord, Lord Rosser, referred to the fact that if bus companies withdraw services, the local authority will probably be unable to step in and sponsor the services as they have done before because there is simply no money left in the budget.

The margins of bus operators are also being squeezed by local authorities that are trying to negotiate the contracts down, so there is a vicious spiral of decline. The result is that we may have a very successful concessionary pass scheme but fewer buses on which to use them. That is in no one’s interests, and certainly not what the Government are seeking to achieve. This issue does not affect every council. There are clearly winners and losers, but the winners get a windfall. However, they keep quiet about it and it gives them no incentive to improve the bus services in their areas. Some of the losers are in big trouble. I am told that there is a £500,000 shortfall in Oxford, £1.5 million in Norwich and £1.7 million in Chesterfield. These are very large sums of money, so will the Minister say a little in his reply about how these sums are calculated and the negotiations that are going on with local authorities to try to understand better what the situation really is and how it might be dealt with? Will he also say whether, in the long run, the Government have plans for a central reimbursement scheme? If they did, instead of large amounts falling on a few local authorities, the money could be smoothed out across a number of local authorities and would be more manageable.

I have a question for the Minister about verifying the use of concessionary bus passes and the issues that have arisen in connection with this. The issues are, by their nature, anecdotal. One hears reports about people being given tickets for destinations that are much further than they are travelling—that does not matter to the passenger, but it matters in terms of the amount of money that can be claimed back—or that phantom passengers are somehow generated on certain journeys. Given that this is public money, what do the Government believe is the correct level of supervision on the ground of the scheme that is being run?

In addition, what happens about sanctions if bus operators are found to have abused the system? I look forward to the Minister’s reply. I reiterate that this issue gives local authorities considerable concern and they would appreciate some assurances from him.

I, too, am grateful to the noble Lord, Lord Bradshaw, for introducing this Question for Short Debate this afternoon. Given its importance, I am surprised that we have been joined by only the noble Lords, Lord Rosser and Lord Snape, from the Back Benches.

Noble Lords are right to praise the efforts of bus crews in maintaining services, particularly drivers who have to make difficult decisions about whether to keep operating their buses in difficult conditions. If it all goes horribly wrong, they can find themselves in serious difficulties.

I shall not pretend that I could do a better job than the Minister, principally because I do not think I could, given his track record. However, having seen a lot of briefing on the subject, it was difficult to avoid coming to the conclusion that I was looking at a bit of a mess. Worse still, it is unlikely to be fully unscrambled before the next election.

The noble Lord, Lord Bradshaw, talked about fuel consumption and the BSOG. Most of what he said made a lot of sense to me and interested me, but I shall not cover it. The Question posed by the noble Lord, Lord Bradshaw, relates to the economic situation. He is right to ask it, but I am sure that he appreciates that all sectors will be affected and it might be difficult for Government to provide support to one sector but not to all the others. On the other hand, it would be a good start to attempt to rectify some of the mistakes that have been made. Furthermore, we do not know how bad the economy will become, although there is little doubt that it will be bad enough.

A personal friend of mine in the bus industry said that his business has already experienced a noticeable reduction in turnover. On the other hand, there may be some good news and some increase in patronage when some find that they cannot afford to run a car any more. Of course, all noble Lords will recognise that our problems are only just starting.

In addition to a reduction in passenger revenues, there are other problems related to the economic situation. The first problem is the cash flow and finance problems affecting relatively small operators. If they cannot finance their businesses, they may have to cease trading, even if their operations are profitable. The second problem is that the major automotive components and systems of a bus are often made in the eurozone and even in the United States. Therefore, the cost of spare parts and even new vehicles is increasing rapidly with the unfavourable exchange rate. Before noble Lords tease me about joining the euro, let us see whether the eurozone states can avoid severe social unrest due to an inability to adjust their interest and exchange rates.

My briefing covers concerns about the bus service operators’ grant, the EU Commission's proposal for the directive on passenger rights, covered by the noble Lord, Lord Bradshaw, and, of course, the quality contracts issue. I share some of the concerns expressed by the noble Lord, Lord Bradshaw, about the EU directive. We have to get it right.

Like the noble Baroness, Lady Scott, I intend to concentrate on the extension of the concessionary fares scheme so that all eligible people will be entitled to free off-peak travel. We on these Benches support the scheme, although it will be some time before I can benefit from it. Compensation to the operator will be met by the local authority in which the journey began and will be funded by a grant from the department. The noble Lord, Lord Snape, also touched on some of the problems. However, demand for concessionary travel has far exceeded expectations, resulting in increased costs to local authorities. I am being told that the grants provided by the Government are inadequate to meet the increased costs and that the guidance to local authorities on concessionary fares could be better. In addition, apparently there is a disconnect between the incidence of expenditure on the concessionary fares scheme and the distribution of the grant. The timetable is out of sync with local government budget-setting processes.

The grant is supposed to leave local councils no better or worse off, but the reality is rather different. The grant distribution system is also supposed to reflect the likely burden of cost, and is designed to direct funding towards hotspot areas such as coastal towns and urban centres. As indicated by the noble Baroness, Lady Scott, research shows that this has not been achieved, but these are the hotspots that are likely to suffer the most. In Cheshire, for example, this has caused a major headache for Chester City Council, while the other six districts appear to have done very well out of the funding, and apparently Brighton and Hove City Council is among the worst affected local authorities in the country. In addition, I am told that, in Lancashire, Preston is down by £824,000, whereas Pendle is up by £385,000. I am sure that that would please the noble Lord, Lord Greaves, who unfortunately is snowed in at home. I am also sure that he is not keeping quiet, as the noble Baroness, Lady Scott, suggested.

I am sure that the Minister will be well aware of the issues that we have raised, and I look forward to his reply. However, the situation is having a serious effect on local authorities. First, council funding for local bus services has had to be reduced to meet the unfunded cost of the new concessions, and a number of councils have had to withdraw a subsidy from socially necessary bus services for which they were previously paying. The north-east PTA has had to cut concessions to young people and students, and a large number of councils such as Basildon, Cherwell, High Peak, Medway, Chelmsford and Canterbury, which had previously offered enhancements to the statutory minimum such as extended hours of operation and companion tickets for carers, have been forced to consider withdrawing these benefits and to revert to the statutory minimum.

Can the Minister assure the Committee that fare-paying passengers are not suffering because they are left waiting at bus stops while the bus stops are full with concessionary passengers, or that operators are withdrawing services that are full because they are running at a loss? Just how will he put this right? What is his plan for making the welcome extension to the concessionary fare scheme work properly? Many noble Lords have made very good points, and I look forward to the Minister’s reply.

May I make it clear that I did not ask the Government for more money? I asked for much better administration of the resources of which they are disposing.

I declare an interest as a taxpayer with 15 more years to pay for the concessionary travel of the noble Lord, Lord Bradshaw, and I am delighted to be doing so. I am very grateful to all noble Lords who have spoken this afternoon, particularly to the noble Lord, Lord Bradshaw, for opening this timely debate. I echo the noble Lord’s tribute to all those who work in the bus industry and who give such dedicated service.

Let me start with the Government’s role in the provision of bus services. Since the deregulation of buses in the mid 1980s, government, both national and local, has had more of a hands-off role in the running of bus services. However, the Government rightly have a significant role in shaping, and where necessary subsidising, the provision of bus services; I say rightly, because we have clear duties to act on behalf of the public in this area. As my noble friend Lord Rosser said, for many people buses are the only form of local public transport available. For those without access to a car, they can be a lifeline to jobs, family and services. They are also a means of tackling congestion and promoting accessibility and more environmentally sustainable journey modes, all of which are key planks of the Government’s transport policy.

Therefore, despite the fact that the vast majority of the bus network is now provided by the private sector, we have a vested interest in ensuring that we have a healthy bus sector that provides a good quality public service. That is why national and local government provides some £2.5 billion a year to support bus services. That is up from £1 billion a decade ago. Let me stress that that funding is being sustained, not cut back, in the midst of the economic downturn. That is why we have taken the Local Transport Act through Parliament, with all its provisions to improve bus services as well.

Let me now deal with a number of issues raised in the debate: bus passenger rights, concessionary travel, the economic downturn, bus service operators’ grant, and, if I have time, Newport.

On bus passenger rights, the Government support the aim of the European Commission’s proposal to improve passenger rights, but, like the noble Lord, Lord Bradshaw, and the noble Earl, Lord Attlee, we are concerned that certain aspects of the proposal, as currently drafted, do not reflect the differences between international and local services, or that the bus and coach industry consists of a significant number of small operators that have little control over the infrastructure in which their buses run.

The proposed regulation would apply to domestic services as well as to international bus and coach services. While there is an exemption for urban, suburban and regional transport, under the Commission’s current proposal this would apply only if such services were provided under public service contracts that provide a comparable level of passenger rights to that provided by the Commission’s proposal. However, the majority of local bus services in the United Kingdom operate in an open market and so would not meet the conditions of this exemption. The Government therefore believe that the scope of this exemption needs to be reconsidered, and we will seek all stakeholders’ views, not just those of the large operators, to help inform the United Kingdom’s negotiating position when we consult on the Commission’s proposal shortly. As part of the consultation, I can tell the noble Lord, Lord Bradshaw, that we will prepare an impact assessment to guide the debate. During negotiations, we will seek to shape the proposal so that ultimately it is proportionate and realistic.

On the economic downturn, our expectation is that the bus sector will be more resilient than perhaps other transport modes. Unlike rail and aviation, the sector is less reliant on business and commuter journeys. Younger and older people make up a larger proportion of the passenger base, and their journeys are less likely to be affected by wider economic conditions. It is also, of course, an inherently flexible mode of transport, which in fairly rapid order, as my noble friend Lord Rosser indicated, can change its provision of services and its fares to reflect changing passenger demand. During the recent spike in fuel prices, for example, several operators reported a rise in bus patronage as commuters reconsidered their use of the car and chose to try the bus. Some bus operators looked to provide more luxury services to help destigmatise bus travel and persuade the commuter market to use the bus by providing services with, for example, wi-fi, leather seats and air conditioning. The public reassess their means of travel during difficult times, and the bus industry, if it is responsive and imaginative, can develop new business to offset the passengers who are lost due to economic conditions.

As my noble friend Lord Rosser noted, the profit margins in the bus sector have been relatively good. Bus-operating profits of the “big five”—FirstGroup, Stagecoach, Arriva, Go-Ahead and National Express—have generally been enjoying profit levels of more than 10 per cent in their bus divisions, and differences in profit margins between the bus divisions and group profit margins have always been positive. However, we are not complacent, and I know that times are challenging for many in the transport industry.

As was widely trailed in the press at the time, my right honourable friend the Secretary of State recently met the chief executives of the “big five” transport operators and the Confederation of Passenger Transport. Contrary to some press reports afterwards, no requests for government bail-outs or service cuts were made, but it was agreed at that meeting that the industry would keep in touch with Ministers at my department specifically on the impact of the recession on their operations.

Concessionary travel was raised in particular by the noble Baroness, Lady Scott, and the noble Earl, Lord Attlee. The introduction of free off-peak concessionary bus travel throughout England, which took effect on 1 April 2008, offers greater freedom and independence to up to 11 million older and disabled people in England. I was glad to see it so warmly welcomed in principle by both parties opposite. Funding in total to support concessionary fares for older and disabled passengers alone now amounts to £1 billion. I was delighted that the noble Lord, Lord Bradshaw, was not asking us for more as a global sum.

In order to provide for this expansion in the scheme, the Government are providing additional funding of £212 million from 2008-09, and £217 million and £223 million respectively in each of the following years. All Members of the Committee will recognise that these are very large sums. We are confident that they are sufficient in total to meet the additional costs of the new concession. I should also stress that the additional funding is being distributed through a special grant, which is precisely what local government asked us to do.

My noble friend Lord Snape and the noble Baroness, Lady Scott, asked about the arrangements for distributing the funding between local authorities and wondered whether there were iniquities in that. I stress to them and to the other Members of the Committee that the formula used to distribute the extra funding is based on the eligible local population, visitor numbers, retail floor space and current bus use. As such, it takes account of likely demand in areas such as coastal towns, urban centres and other places likely to experience an increase in bus journeys.

The noble Baroness, Lady Scott, specifically mentioned Cambridge, saying that this year it received £650,000 in special grants. I want to put that in further context. That represents a 57 per cent increase on the amount that Cambridge spent on concessionary travel in 2007-08. We believe that that is an appropriate figure, but it does not surprise me that local authorities would like more government money. If there is one sure thing about this job, it is that they always do. Of course, they will use arguments about concessionary fares to secure additional funding.

I also stress that it is for local authorities to negotiate with the bus operators to settle the rate of reimbursements. The Department for Transport provides the total amount of funding, but to some extent it is down to individual local authorities how well they negotiate. I would encourage them to negotiate effectively with their local operators. My department provides guidance to operators and to local authorities on reimbursement, and it also runs workshops to help local authority officers who are engaged in the process of negotiating to do so as effectively as possible.

Finally, in respect of concessionary fares, I stress that the current distribution is part of a three-year settlement designed to provide financial certainty to local authorities. That is an improvement on the regime that often applied previously, where local authorities were subject to annual budgets. We would not wish to reopen the three-year funding settlement and thereby create financial uncertainty for all travel concession authorities that have rightly sought to plan for the entire three-year period.

Is the Minister satisfied that the scheme is working correctly and needs no adjustment?

I am satisfied about that at the moment, yes. If the noble Earl and the noble Baroness want to provide me with specific instances where they believe that that is not the case, I will be happy to look at them. I have already responded on Cambridge. It is our belief that the scheme is working satisfactorily.

I now turn to the bus service operators’ grant to which the noble Lord, Lord Bradshaw, referred. More than £400 million goes to bus operators in that form. This covers 80 per cent of fuel duty on the fuel used by operators and is a valuable contribution towards the provision of bus services. We are currently reviewing the subsidy to bring it more into line with our wider environmental objectives. The BSOG does little to discourage fuel use, so we are considering various options to incentivise better environmental policies and to improve bus services. These include the use of more fuel-efficient vehicles, including hybrids, as well as incentivising the move towards smart cards, which we hope will help to increase public transport use by making it more convenient for passengers.

We know that the industry is concerned about these changes. The noble Lord, Lord Bradshaw, reflected its concerns and its arguments why we should maintain the status quo. I assure him that we will work closely with the industry to ensure that the changes work on the ground and help to deliver the benefits we are looking for. However, I also point out that some of his concerns are not well founded. For example, arrangements with the new scheme will take account of the individual circumstances of each operator. The target is for a 3 per cent per year improvement on that operator’s performance, given the existing starting point of that operator. It does not make arbitrary assumptions about their ability to generate efficiencies in fuel use that are not founded on their actual performance.

My noble friend Lord Tunnicliffe has indicated that I have been talking for 12 minutes. However, since nothing will go on for the next 10 minutes, if the Committee wishes, I am happy to make further remarks.

Good driver training can also help to save fuel. As part of the changes to the bus service operators’ grant, the department proposes to fund a safe and fuel-efficient driving demonstration programme to encourage fuel-efficient driving in the bus and coach sector. The trials of this training consistently show significant improvements in fuel efficiency of, on average, 10 per cent, as well as reductions in accidents.

In respect of rural bus services, as mentioned by the noble Lord, Lord Bradshaw, we provide more than £57 million a year to local authorities in rural bus subsidy grant to help them support rural bus services. That is now supporting nearly 2,000 bus services and in excess of 38 million passengers a year.

I am aware of the proposals to withdraw some bus lanes in Newport—I have read the press cuttings that were made available to me by the noble Lord—and of the concern that has been caused to bus operators in the area. Although it is for local authorities to determine how best to manage the road space in their areas, we encourage the appropriate use of bus lanes and other bus priority measures. If we are to improve bus punctuality and approve the image of the bus as far as the motorist is concerned and deal with the very real congestion issues raised by the noble Lord, Lord Bradshaw, we need to ensure that buses have a clearer run on the roads.

In respect of Newport, I understand that the Welsh Assembly Government are looking into this issue and into grants made by them to local authorities to promote bus priority. I welcome the fact that they are doing so, and I will take a close interest in the outcome.

I apologise for bringing the Minister and the Committee back to a situation in Birmingham where a bus lane, which was agreed between the passenger transport authority and the main bus company, has been temporarily suspended, in the words of the city council, for four years. Everyone knows that the city council has no intention of reinstating that bus lane. Yet the bus company concerned, of which I was chairman at the time, invested a considerable amount of money in a new fleet of vehicles on the basis of the bus lane being provided. Is there nothing that the Minister can do about that sort of situation?

I am not sure, but I am very happy to look at it in response to the concerns raised by my noble friend.

Finally, the department announced last week the start of a new Kickstart competition. We will be providing £25 million to help to pump-prime new or enhanced bus services and look forward to announcing the winners of this competition later in the year. Kickstart contributes to increasing bus patronage, improving accessibility and developing bus services as an alternative to car use. The last Kickstart round in 2005 gave £20 million to 43 new or enhanced bus services, helping to bring these schemes to commercial viability.

In short, we continue to provide substantial assistance to local authorities and to the industry to run a comprehensive bus service nationwide. That service has significantly improved in recent years. Those eligible for concessionary travel have been significant beneficiaries. I am not complacent about the challenges ahead, but even in this economic downturn we can expect to see good quality services provided nationwide.

Lord Taverne to ask Her Majesty’s Government what is their assessment of the prospects for nuclear fusion.

If we achieve nuclear fusion, it will be the best solution to the problem of the world's future energy supply. It would provide a safe form of energy that is environmentally friendly, does not use up limited resources and should be economically competitive. I believe that most scientists would agree with that. However, it is a solution that always seems to be at least 35 years away. Will we ever get there? Is it worth the large investment in capital and science that it requires? There are sceptics who say that it is not. That is why I raise the Question. I want to find out the Government's assessment of the prospects and priorities. In particular, I want to know the view of the Science Minister. I am delighted that he will answer this short debate; a lot of us have very high hopes of him.

I am not an expert and the science involved is way beyond me but, after a recent visit to Culham and after a recent meeting in the Commons attended by a very high-powered group from Culham, which I am ashamed to say was attended by only three Peers and two MPs, I shall draw the picture as I see it. This shows how interested Parliament is in the big scientific issues of our time.

To achieve the conditions of fusion, two isotopes of hydrogen, deuterium and tritium must be heated to a temperature of over 100 million degrees centigrade, 10 times hotter than the centre of the sun, at which temperature they become an ionised gas called a plasma. In a structural device or machine called a tokamak which contains a vacuum chamber, the plasma is held away from the walls of the chamber by magnetic fields. The plasma must be kept away from the walls to protect them from damage and prevent pollution of the plasma. Magnetic confinement seems to be one of the most effective ways of doing so.

At these very high temperatures, the two particles of deuterium and tritium are forced together long enough to bring them into collision, when their nuclei fuse to form helium, and an energetic particle is ejected, a neutron, which is captured in a so-called breeding blanket that surrounds the plasma. This neutron heats the blanket, which in turn provides the heat that generates steam for turbines.

Deuterium is abundant and found in sea water. Tritium is not, and apart from what is required for the start-up, the fusion process requires that tritium is made on site. This occurs because the breeding blanket contains lithium and the reaction between the neutron and the lithium creates tritium.

There are several tokamaks in different parts of the world, but the largest is in Culham, the site of JET, the Joint European Torus. The tokamak has a toroidal shape, hence the title of the machine. One of the many impressive things about JET is that it is a splendid example of effective international co-operation, not only within the European Union, but with China, the United States, Russia, Japan, South Korea and now India; in fact, representatives of more than half the peoples of the world.

China, whose technology in this field is apparently well advanced, is particularly interested and committed, and recently sent a very high-powered delegation to Culham. Their reaction was very positive. As an aside, I might mention that the Chinese seem to think long term in a way that the West often does not. For example, about half the world’s R&D in agricultural biotechnology is now done in China because of the importance that the Chinese attach to it, but that is by the way. The fact that fusion may still be at least three decades away does not put them off at all.

Impressive progress to obtain power from nuclear fusion has undoubtedly been made in recent years. Temperatures of over 100 million degrees centigrade have been attained. In 1991, JET achieved controlled deuterium-tritium fusion reactions for the first time on Earth. In 1997, JET produced fusion power in the megawatt range for some seconds, with a maximum of 16 megawatts.

Constriction has now started on ITER in the south of France; ITER, as I am sure all Members of the Committee will know, is Latin for “a journey”. It will be a much bigger tokamak, twice the size of JET, and is the most ambitious scientific project in the world. It is expected to produce power in the hundreds of megawatts, and emit 10 times more energy than it puts in. However, it will still be an experimental facility. It should provide data which is needed to decide the size of an economic commercial reactor and, in particular, a pilot reactor to be built called DEMO.

I understand that work at Culham is vital to prepare for the work to be done at ITER and, indeed, DEMO. It is not only what we can learn from JET but also from another, smaller, tokomak built at Culham: the Mega Amp Spherical Tokomak, or MAST. This is a more compact device of a different spherical shape, which needs a smaller magnetic field to hold the plasma and keep it stable. I gather that MAST has been in operation since 2000 and a lot has been learnt from it about how plasmas behave.

If that brief, rather inadequate, description of the scene is roughly correct, it suggests that very good progress has been and is being made and that, given the huge prize to be won if we produce commercial fusion power, the world fusion programme needs every bit of support that we and the rest of the world can muster. But what are the obstacles?

It seems that we have achieved the conditions for fusion. But can materials handle the very high transient heat loads that are repetitively ejected on to material surfaces? I gather the main centre for materials testing is in Japan: the International Fusion Materials Irradiation Facility. What is our view of the prospects for developing the right materials? Should we not back the construction of a relatively small components test facility? I gather that an important contribution to this would be more investment to upgrade MAST and a similar spherical tokamak in the US. MAST would require additional capital of some £60 million. Is this being given consideration?

How do the Government view the likelihood that we can achieve continuous operation? How serious is the chance that we cannot? I understand that JET operates for 20 seconds at a time, for about 10 hours a day, about one day in four. ITER, I understand, will take the operating time to about one and a half hours, 10 times a day, while DEMO, it is hoped, will operate continuously.

Will ITER receive sufficient financial backing? Cost estimates have already increased sharply. In the past, enthusiasm for supporting fusion has risen when the price of oil has risen, and dropped when the price of oil has dropped. Can we and other nations provide guaranteed, steady support? Our own national budget for fusion is many times smaller than that of Germany, France or Italy. Should we not give it higher priority?

How can we avoid the usual national manoeuvring in an international body? It took years to choose a site for ITER. What prospects are there that we will not see unnecessary delays in ITER’s work? JET seems to be functioning very well.

The future of fusion is a huge question and we cannot hope to do more than just touch on it in a very brief debate, drawing attention to its importance and raising a few of the big issues involved. I doubt if many will take much notice of what we say. As I said at the beginning, interest in Parliament is not high. Maybe, however, we will encourage others to follow up our debate.

I congratulate the noble Lord, Lord Taverne, on initiating this debate on fusion power. It is a matter of major strategic importance to the UK. I congratulate him on his excellent and complete speech. Much of what I say will parallel what he has said.

No matter how seriously or rapidly climate change impacts on our lives, it is certain that the supply of clean, economical energy ranks third only to the supply of sufficient clean water and food as a top priority for human progress, even for human survival. We have recklessly used our supplies of oil and natural gas at a rate that, if sustained, will mean that economical sources of these easy, but environmentally damaging, resources are used up well before the end of this century. Alternative energy sources including solar, wind, wave and tidal are being developed and may in the next two decades become economically viable, but they are all intermittent sources and will inevitably have to be backed up by continuous, supply-on-demand sources.

To date only two sources of continuous power have been demonstrated at practicably high power levels—that is, powers per facility approaching 1 gigawatt—and at costs similar to fossil fuels—that is, less than 10p per kilowatt hour in today's money—and which have long-term—hundreds of years—potential. They are nuclear fission and hydro power. Hydro power is, of course, only continuous provided that water supplies can be sustained and adequate geographical locations found.

So where do we turn to find the ideal continuous, sustainable, clean, safe and economical source of energy? Nuclear fission may well meet our needs throughout the century and perhaps for longer through the development of fast breeder reactors, but such reactors pose serious proliferation problems and difficulties will remain with radioactive waste disposal which must be dealt with. The only source we have with the potential to solve our problems cleanly and satisfactorily is fusion. Of course, there may be sources that we have yet to identify, although those will no doubt have their own problems—Rumsfeld's unknown unknowns, if you like. Leaving those aside, we are left with fusion.

That reasoning led the committee of the US National Academy of Engineering, of which I was a member last year and which was charged with coming up with the grand challenges for engineering in the coming century, to select fusion as one of only 14 challenges on the committee's final list. Those challenges covered the whole of engineering and included such divergent objectives as developing the means to understand the human brain and the supply of clean water. There was considerable debate about including fusion and scepticism about its practicality, as alluded to by the noble Lord, Lord Taverne, and I shall talk about that briefly in a minute. However, it was felt that fusion was the only known completely satisfactory solution to our energy needs and therefore must be included in the list.

In favour of fusion, as we have learnt, was the international buy-in to the ITER project with the commitment of major nations including the USA, the European Union, Japan, Russia, China, South Korea and India. While there are other attempts to produce fusion on a practicable scale using high power lasers, such as Europe's HiPER project, it is generally accepted that these are a generation, or 20 to 25 years, behind magnetic confinement, such as will be used in the ITER and is used in JET, the Joint European Torus, mentioned by the noble Lord, Lord Taverne, which, of course, is a European-funded project, much to our benefit. I believe we receive more than £50 million a year to run JET. ITER will be the first fusion experiment to produce a long pulse of energy release on a significant scale. The aim is to produce 500 megawatts, which is 10 times the power input, for 400 seconds, or 300 megawatts for several hours.

I spent half an hour this morning on the phone with Sir Christopher Llewellyn Smith, who was until last September the director of UKAEA Culham Division, which is responsible for the UK's fusion programme and for the operation of JET, and with his successor Professor Steven Cowley, getting an update on the UK programmes and ITER. Sir Chris is now chairman of the ITER Council. What I learnt was encouraging but, as I am sure the Minister is aware and as the noble Lord, Lord Taverne, has told us, there will be funding difficulties with ITER, partly because of the expanded international nature of the programme. There were only three partners at the beginning when the original cost estimates were made, and there are now seven. There is also a lack of experience in pulling together such a vast international project on a greenfield site. But the new design for the reactor is much improved, and confidence is high that the aims of the project can be met.

As we have heard, fusion powers the sun through a process in which atomic nuclei are compressed together to form heavier nuclei, typically with the release of a highly energetic neutron. A small mass loss occurs, and this mass is transformed into energy. The process relies on the extreme temperatures and gravitational pressure encountered in the sun. We cannot replicate the high pressure here on earth, except in thermonuclear bombs and perhaps with lasers, because the earth is so much smaller. But we can produce fusion by producing higher temperatures than are encountered on the sun in a magnetically confined plasma. This is how fusion is produced in the JET at Culham, of which the noble Lord, Lord Taverne, has given an excellent description.

There is no point in trying to explain further the physics and engineering of a tokamak here. Suffice it to say that the fuel, which comprises isotopes of hydrogen called deuterium and tritium, can be produced from lithium, which is in vast supply in our oceans. A few tons of lithium would power a 1 gigawatt fusion power station for a year, and the oceans contain trillions of tons of lithium, so there is no fuel problem. Supplies would last for millions of years. From a safety point of view, there is no possibility of a runaway nuclear reaction, as it is difficult enough sustaining fusion in the first place. The problems of radioactive products are minute compared to today's fission reactors.

The practical difficulties arise because of the extreme measures that have to be used to produce very high temperatures and because of the difficulty in extracting the heat from the magnetically confined plasma. These are now engineering and materials problems, and the ITER and the associated materials research facility are designed to solve them. Most of the science has been done. Incidentally, much of the materials research, as we have heard, can also be pursued at Culham using its compact reactor.

Despite the fact that our expenditures on fusion are, as we have heard, small compared to those of our partners—especially Italy, France and Germany—we are in an extraordinarily strong position in fusion development, with UK scientists and engineers playing key roles in the world's leading fusion projects. The Government must not lose their nerve in their support for fusion and underinvest as we have done in so many promising new fields of technology when the running gets hot. Fusion has the potential to become a major source of UK industrial prosperity by the middle of this century.

Like the noble Lord, Lord Broers, I congratulate the noble Lord, Lord Taverne, on bringing this to our attention. He has admirably set out what the process consists of in comprehensive and understandable language; if I can understand it, it must be quite simple. The most important thing is that we move forward. Like the noble Lord, I have visited Culham and found it a fascinating experience from which I learnt a great deal.

It is a great pleasure to follow the noble Lord, Lord Broers, the former head of the engineering department and a former vice-chancellor of the University of Cambridge. I declare my prejudice as a former Cambridge engineering undergraduate some 60 years ago. The noble Lord has defined exactly how this will become strictly an engineering problem.

Culham, about which we have heard a great deal, has proved that nuclear fusion is a known technology, and a virtually unlimited source of energy for power generation. Last week, in an Answer to an Oral Question, the noble Lord, Lord Young of Norwood Green, on behalf of the noble Lord, Lord Drayson, confirmed that funding would continue for the foreseeable future. The stated policy of the noble Lord, Lord Drayson, as skills Minister is that we should back research that has a future. Nuclear fusion clearly has a future, albeit on a long-term basis.

We heard from the noble Lord, Lord Taverne, and my noble friend Lord Broers about what is happening in Cadarache in the south of France. The globally funded consortium aims to produce fusion on a commercially viable basis. As many people have said, it is a long-term project covering 30 years. That has been a rolling 30-year period ever since I can remember, which is one of the problems, but progress could be accelerated if the global consortium recruited more engineers and physicists. That would require massive international funding but would be worth while.

The Chinese are not worried about the long-term nature of the project because in their terms 30 years is merely a twinkle in the eye, but it is a different story in Europe where, unfortunately, politicians tend to think in terms of electoral timeframes, which are rather short. How do we make a long-term project a viable proposition for the United Kingdom? As my noble friend Lord Broers rightly said, engineering will be especially crucial, given that temperatures in the combustion chambers are many times greater than that of the sun. This brings us back to materials science and materials engineering, which will ultimately be the key to the whole problem. That is where the blockage will occur. Are enough people coming into engineering—that certainly has not been the case in the past—to resolve this problem? Many young people have not necessarily considered engineering as a career as they decided that they could do better in the City. The decline of our manufacturing base has resulted in a shortage of engineers. That is a crucial problem. How can it be addressed? It is key to solving the problem.

Whatever happens, Culham must be kept in the loop. On many occasions we have developed inventions in this country but seen them exploited commercially by others. The jet engine and the television are good examples of that; there are plenty of others where Britain has invented something but because we have not stayed with it or had the necessary capital resources, it has gone elsewhere. That is why it is absolutely essential to keep Culham very much in the loop. There is a brilliant team there, as the noble Lord, Lord Taverne, and my noble friend Lord Broers pointed out. Culham’s involvement in the Cadarache development is vital. The two must work in close harmony; otherwise, the development will not happen, and some of us believe very strongly that it should happen. I hope that it will and I very much look forward to hearing what the Minister has to say.

I believe that it is open to me to say a few words in the gap and I warned the Minister that I intended to do so.

I had the privilege of taking the chair for the noble Lord, Lord Taverne—I congratulate him on his speech—at the annual lunch of the Parliamentary and Scientific Committee earlier this week, and I took the chair for the noble Lord, Lord Drayson, at his lecture to the Foundation for Science and Technology only last night. Those matters are very much related. I was pressed by the noble Lord, Lord Taverne, to be present. I had hoped to be in Spain today but I am afraid that I had to cancel the trip.

I have only two questions for the Minister. First, can he spell out the total expenditure by the UK Government on JET and ITER, and over what period is he able to be fairly definite about facts and figures? The noble Lord, Lord Young of Norwood Green, gave one or two figures on 26 January, but that only partly answers the question. Can the Minister fill us in? My second question stems from the noble Lord’s very interesting lecture last night in which he spoke about the need in the present circumstances for the Government to concentrate research spending priorities on those things on which we are particularly good. He asked questions; he did not state a policy. Those questions have huge implications, so I have a second question for him and then I must give way to the Front Benches. Does he regard the spending on fusion, particularly through our investment in JET and ITER, as areas in which the UK has a strong record and a strong competence which would qualify for the priorities that he might eventually bring forward?

I came unprepared for a contribution, but the debate has been so stimulating that I must make one. First, I congratulate the noble Lord, Lord Taverne, on his characteristically thorough examination of the topic before he chose to speak on it. His contribution was well put and in intelligible lay man’s language, and I shall try to emulate him.

Fusion is of course a glittering prize which we must, on the one hand, pursue but, on the other hand, not be hypnotised by. Too many magic solutions in the far distance are imported into present-day policy to the detriment of existing initiatives. I could give many examples, but I digress to point out that we are spending a lot of money on renewable sources. They are intermittent and unreliable sources, much above the average cost of electricity by traditional means. However, as they are so attractive and fashionable, we are failing to replace the 40-plus year-old generating plants which support our system. Due to timescale, the task of doing that has become almost impossible. It is therefore easy to be diverted and say, “That’s a magic solution. Let’s pursue it”, without recognising the timescale.

The timescale for real integration for fusion—

I must remind the noble Lord that an intervention in the gap should be short and that as this is a time-limited debate we are eating into the Front-Bench time.

I will be quick. I thank the noble Lord. I will try to return to the main track. The timescale for fusion of any real contribution is probably 100 years. That may sound a long time, but prototypes take that amount of time to come to fruition. I would be an enthusiast for pursuing it, but not rosy-eyed about its early acceptance.

I want to thank my noble friend Lord Taverne for bringing the subject before us. I looked deeply into areas of Liberal Democrat policy on this and saw that they were not great. This is therefore a good issue on which the House of Lords can make progress. One thing is certain: apart from the current global economic problems, climate change remains the greatest challenge to the planet. Any technology that has the ability to produce large quantities of carbon-free energy cannot be ignored in policy decisions and in pushing it to the point of further evaluation.

There are various approaches to low-carbon forms of large-scale energy generation that have yet to be proven. Fusion is not the only one. There is deep geothermal, which many people feel could power the world if tapped in the right way; there is the difference between temperatures at the top and bottom of the ocean; there are a number of areas of biological power generation; and there are approaches that demand research for longer-term solutions. However, there is no doubt that fusion is an important approach. It is a big science area and has been seen by many—perhaps to its own detriment—as the silver bullet in terms of future energy generation.

One of the things that I feel very personally aware of is that science these days is regrettably so much out of fashion in many ways. I grew up in the 1950s and early 1960s being very excited about the nuclear industry and all the scientific discoveries that were taking place, together with the space race and all those areas. Unfortunately, we are far more sceptical about science now. We see it more as a threat rather than as an opportunity for moving civilisation forward. I very much regret that, and it is perhaps a shame that nuclear fusion can sometimes be seen in that context.

I am struck by the fact that the United Kingdom has a good track record in this area, with the ZETA project at Harwell in the 1950s and the JET project at Culham, which has been mentioned several times during this debate. I am also aware that in the UK and much of the rest of the world, R&D expenditure on these types of technology is very much related to oil price. It is clear that, particularly with the climate change agenda and the peak oil issues around fossil fuels, we must find some way of decoupling basic research on longer-term solutions for energy away from being driven completely by the oil price. That means bringing a greater emphasis on public-sector investment in some of these R&D areas than we have had previously, with the shift towards the private sector, not that that is in any way bad either.

The good points about fusion are that it is zero carbon; unlike renewable energy sources it creates base-load electricity; it has very few of the waste issues that nuclear fission has; and, as already has been described, there is no difficulty with raw materials, whereas uranium can be quite an issue. The main downside has to be uncertainty. We have research that has gone on for many decades that has not brought us to a point of commercial application. That is the big issue. There is also a branding problem, in that probably very few people outside this Room understand the fundamental differences between atomic power and nuclear fusion. Their names are similar, although they are almost opposites in terms of their technology. The fears of one can be reflected in the other, and education needs to take place on that.

As other noble Lords have stated, ITER is coming next as a European-led project with six other partners as part of the European Union’s seventh framework programme. I certainly feel that EURATOM as an organisation has rather gone into the background. It was one of the three important communities of Europe in the 1950s and 1960s. Some 60 per cent of EURATOM’s costs are already expended in the fusion area. Clearly, this is an area where EURATOM can start to move towards a much more positive future. I would have liked to have seen this as part of a longer-term European climate change package. I would like to understand Britain’s part in the core European role in ITER better. Do we have a major leading role in EURATOM and the European part of ITER? I would also like to know when the Government believe that, as part of that programme, we will get to a point where we understand whether this approach to a commercial application will work.

On these Benches we very much agree with research and development over the long term into technologies that will help us on energy security and climate change. Having said that, we need to make sure that it does not act as a substitute for expenditure on those technologies that we need to implement in order to achieve an 80 per cent carbon footprint reduction for the United Kingdom by 2050. Nuclear fusion will not be able to help us with that within that timescale.

I thank my noble friend Lord Taverne for initiating this debate. Along with other Liberal Democrats, I think that nuclear fusion is an important part of the long-term future in which we as a country should invest.

I, too, congratulate the noble Lord, Lord Taverne, on securing this timely debate. His explanation was very informative, and I have listened with great interest to Members of the Committee who have far greater expertise in this area than I do. It has been a most informative and enlightening debate. The world has changed rapidly around us, and our interdependence is more evident now than ever before. The economic crisis that is crippling economies around the globe has highlighted the huge impact of markets that are thousands of miles away. Thus, this is the case when we talk about energy, climate change, conservation and new technologies.

We all recognise that we have finite resources and that many of our power stations are coming to the end of their lives. The global response to alternative energy development has been slower than we would wish, and gaining commitment from emerging economies to tackle climate change remains a challenge. For us in developed economies, cutting carbon emissions, guaranteeing security of supply and providing energy to consumers at an affordable price must be at the forefront of political will.

We all understand the physics of nuclear fusion, but it remains very much at an experimental stage. In 2006, Malcolm Wicks, the then Minister of State for Energy, raised doubts at a Royal Academy of Engineering lecture that the first commercial fusion plant would even be ready by 2050, a point that was made by the noble Lord, Lord Flowers. Therefore, I ask the Minister whether he believes a statement made by the Government in their 2007 energy White Paper, which stated that,

“the technical feasibility of fusion power generation could be demonstrated within 25 years given adequate resources … with full-scale power generation within 30 years”.

Does the Minister believe that current resources are adequate? Is 2034 an achievable date? As the noble Lord, Lord Taverne, and my noble friend Lord Jenkin have asked, what is the current level of financial support? Given the economic difficulties facing the country, will the Minister assure us that funding will not be redirected, stopped and used for other priorities?

The 2007 energy White Paper also stated:

“International collaboration is the best way of addressing the complex science and technology questions and the scale of resources required in order to harness nuclear fusion”.

What discussions has the Minister had with the Foreign Office on the practicality of constructing a European electricity grid and examining the type of infrastructure required to support future fusion power plants?

Currently, the work carried out at Culham feeds into the international project in France, where the ITER has been under development since 2006. Were the construction of a commercial nuclear fusion power station to take place in France, how would it be resourced and managed, and who would have overall control of its activities? How would contributing countries be guaranteed energy security? Who would monitor the systems? When the Minster talks about “continuing collaboration”, does that mean guaranteed continued funding?

To ensure that we remain at the forefront of research and development, we have to ensure that we have the technical and scientific skills required. What are the Government doing to ensure that more young people are being encouraged to take up science in schools and universities? I know that the Minister is very keen on students taking up STEM subjects, so does he share the great disappointment felt by many universities at the lack of young people coming forward to take up degrees in STEM subjects? Does he appreciate that while we have declining numbers, science faculties will continue to close down?

In answer to a question from the Labour Benches in another place, the Parliamentary Under-Secretary of State for DIUS said that those who want to work in so-called “green-collar” jobs would need to take up STEM-related subjects. In many instances, this will hold true, but in responding to the challenges facing students on the employment front, surely that was a lacklustre response to those who genuinely may wish to change career path. Does the Minster have a more positive approach to what students can do in responding to changing global needs? Will the Minister also explain how we will grow our numbers of STEM graduates when the Secretary of State has just issued a moratorium on additional places in our universities? Surely this is a retrograde action that will only fuel future difficulties in keeping Great Britain at the cutting edge of research and development?

Global energy demand is set to rise; figures from Imperial College London show that, without action, 2030 will see the world using 50 per cent more energy than it did in 2005. This shows, very simply, that there is an urgent need for both a demand-side reduction and a supply-side capacity increase. It is hard to see how that will be achieved without more support for energy research and development, noting that public funding for energy research has more than halved globally in real terms since 1980. Many areas of the energy sector are short of critical skills.

Fascinating and promising though it is, the success or failure of nuclear fusion will not be known for quite some time, and we need to ensure that we look at technologies that are available now. In the Energy Act, the Government created a framework for the introduction of a system of feed-in tariffs to support domestic and community microgeneration. This is at the cutting edge of practical, available, low-carbon energy generation, and it is something that we on these Benches have been advocating for some time. Can the Minister tell the Committee what progress has been made with getting this new, widespread system of feed-in tariffs up and running and available to consumers, within the framework enshrined in law last year?

I note that the Government were rather slow to appreciate the possibilities of microgeneration, having to be converted during the passage of the Energy Act. I fear that, without a real push on the underlying policy, the Government will fail to deliver. Before the Minister tells me that these technologies are already being used, I remind him that the scale and mix are far from adequate. Does the Minister also agree that creating an intelligent electricity grid to bring our current system out of the 1950s and 1960s is the way forward in terms of effectively managing input from certain intermittent renewable technologies and demand from consumer appliances, and so cutting overall energy usage by actively matching supply and demand?

On that note, what is the Government’s current timetable for installing smart meters? Does the Minister accept that these will allow consumers and energy companies to monitor usage far more effectively and will make billing much fairer at a time when many consumers fear the arrival of their gas and electricity bills and have a very poor view of the energy companies?

While I reiterate the ongoing enthusiasm from these Benches for the banding of the renewables obligation and the support it provides to emerging technologies, can the Minister tell the Committee why £50 million of the Marine Renewables Deployment Fund remains unspent? Is it because the Government have failed to put in place the infrastructure necessary to connect marine renewables to the National Grid on a wide scale?

Finally, why are the Government not doing more to support the development of carbon capture and storage technology? The one demonstration plant that was operating at Peterhead in Aberdeenshire has closed down, with BP citing a lack of government support. Carbon capture and storage is an emerging low-carbon technology, which could be commercially viable very soon. It is a technology that could dramatically cut our carbon emissions and in which Britain could lead the world. If the Minister wants to create new, highly skilled, green jobs, surely carbon capture and storage deserves more from the Government?

I appreciate that I have at times strayed from discussing nuclear fusion, but our energy challenges will not be solved by one technology alone. Because decisions were slow in coming in the past decade, we must urgently give consideration to our energy mix, not just for the second half of the 21st century, but for the lion’s share of the first half too. I am sure that we could debate the future of energy and all the themes that run with it—energy efficiency, energy security and fuel poverty—for many hours, but I would like the Minister to have plenty of time to respond to the many searching questions put by noble Lords today.

Although I do not think we have time today, I would be interested to hear about the Conservative Party’s policy on nuclear fusion.

We on these Benches support the continuing investment in nuclear fusion, but we do not see it as the only technology in which to invest.

I am hugely grateful to the noble Lord, Lord Taverne, for sparking this debate and for the contributions from which I have had the pleasure of benefiting today. As the noble Baroness, Lady Verma, said, she ranged widely in energy policy. Some of her points that went beyond nuclear fusion were extremely important, and I will write to her giving full answers to the questions she raised.

The noble Lord, Lord Taverne, asked me to focus on prospects and priorities for nuclear fusion and I will attempt to give him and other noble Lords clear answers to those questions. He gave a truly excellent description of the state of the art in nuclear fusion. As he said, it is the energy-releasing process which powers our sun and the stars and, if we can harness it effectively, offers the potential to provide a virtually limitless supply of clean energy. The low-fuel consumption and abundant supplies of the basic raw materials mean that fusion, once working effectively, could be an energy source for many thousands of years. It therefore offers a solution to the problem of global energy demand, the present threat of climate change and the concern, common to many nations, about energy security.

I absolutely agree with the noble Lord, Lord Broers: it is worthy of consideration as a great challenge for engineering. I am pleased to say that the latest scientific advice I am given indicates a good prospect of success. Fusion is environmentally friendly and safe. The fuel consumption of a fusion power station would be extremely low. There is no possibility of runaway reactions or explosions. Moreover, there will be no long-lived radioactive material created by the fusion process. All the radioactive materials could be recycled, if so desired, within 100 years.

So fusion research aimed at developing a new, long-term secure source of energy which produces no greenhouse gas emissions like carbon-dioxide is, we believe, scientifically a realistic prospect. As a result, this and previous Governments have long supported fusion research in this country. The Engineering and Physical Sciences Research Council took over the responsibility for funding fusion research in the United Kingdom in 2003. The noble Lord, Lord Jenkin, asked me to be specific on costs. Our UK support for fusion research increased from approximately £19 million in 2003-04 to a projected total of £34 million in this financial year. Over the four-year period 2006-07 to 2009-10, the EPSRC’s support for fusion will be over £100 million. The JET operating costs are £60 million, of which the United Kingdom provides one-eighth, and the ITER EU/EURATOM budget over the next five years is €1.9 billion.

Discussions about the future levels of support between the EPSRC and the UK Atomic Energy Authority are due to take place next month. The EPSRC also supports fusion research within the wider academic research base, and support to universities now amounts to about £2 million per annum. University involvement in fusion research includes joint training in a wide range of disciplines at York, Imperial, Warwick and Oxford, among others. As the noble Viscount, Lord Montgomery of Alamein, and other noble Lords have highlighted, the vital importance of our ensuring that we have an adequate supply of engineers and scientists is critical to the realisation of the potential of such areas as nuclear fusion but also other technologies. It is pleasing to see that the recent initiatives taken by the Government to reverse the hitherto negative trends in the attractiveness of science and engineering to young people are starting to bear fruit, although we must not be complacent.

Let me focus on what we have achieved in the UK. This is an area where the UK has shown real leadership and where we have a clear strategic advantage in terms of what we have achieved to date, in particular at Joint European Torus—JET—in Culham, Oxfordshire. We can claim real strategic leadership in this area, and that is why it is important for us to maintain our investment in this area, given what we regard as reasonable scientific prospects of success. So far, JET has resulted in the release of significant amounts of fusion energy in a controlled manner, but only for very short periods of a second or less. It is the world’s largest fusion facility and holds the world record for the production of 16 megawatts of fusion power. That is something of which UK science can be justifiably proud.

JET came into operation in the 1980s, and it is still undertaking very important and useful scientific research. The UKAEA operates and maintains JET as a facility for European scientists. It is mainly funded from the EURATOM fusion research programme, which provides about 75 per cent of its operating costs. It also receives support from the European Commission for a programme of refurbishment. Despite the excellent success that has been achieved by JET, we now need to undertake fusion experiments on a larger scale. A fusion power station will have to contain a few thousand cubic metres of hot gas and operate around the clock. The next step is to construct an experimental fusion device on the scale of a power station, known as ITER, which is currently being constructed in the south of France.

The UK strongly supports ITER as the next step in the development of practical fusion power. It could lead to the demonstration of full-scale power generation in a prototype power plant. The noble Baroness asked me whether we still believe in the timescales that we gave in 1997. Yes, we do believe that it will be potentially possible for such a plant to generate power in approximately 30 to 35 years’ time.

The complex science and technology and the scale of resources present this international collaboration with significant challenges. It is pleasing how the international community has come together to do this, and we can be justly proud of the way in which UK leadership is continuing through the international collaboration and the funding that we are providing.

The costs of ITER construction were estimated in 2001 to be about €5 billion, but they have now risen substantially. The costs have risen for a variety of reasons, but mainly because of changes in the ITER design. It is clear that those increased costs will have to be met. The Commission has been asked to explore how best to contain cost increases, in co-operation with other ITER partners. Revised cost estimates are expected to be presented at the ITER Council in November this year. It is clear that, within the new framework programme due to start in 2014, extra funding will have to be found.

In addition to the construction of ITER, there will also be a need for a materials test facility, known as the International Fusion Materials Irradiation Facility. This in itself presents some difficult and important scientific challenges. The results of both ITER and IFMIF will be incorporated in the design of a prototype or demonstration power station, which would take approximately 10 years to build. So, in response to the question of the noble Lord, Lord Taverne, about a component test facility, we agree that there is a need for such a facility but do not agree that we need to decide that now. We must now focus on the construction of the ITER facility, and will have to draw our consideration to components testing in good time.

My key message on nuclear fusion to the Committee is that the scientific community on which we base our judgment, and which ultimately determines the balance of investment across our science portfolio, has judged that nuclear fusion has good chances of success notwithstanding the long timescale and huge investment that will be required to realise it. It is therefore important that the United Kingdom maintains its investment in this area and continues to provide the leadership that it has done. I am sure, as the noble Lord, Lord Broers, has asked, that the UK Government will not lose their nerve in this area. We believe in the potential of this science and hope that, in turn, its potential will be realised.