HC Deb 03 August 1978 vol 955 cc1013-26

3.25 p.m.

Mr. Paul Channon (Southend, West)

I welcome this opportunity to raise the subject of the cost of travel to work. I am grateful to the Under-Secretary of State for Transport for coming here this afternoon to reply to this debate.

This is a topic that is of keen interest to my constituents, as it is to the constituents of virtually every other hon. Member. I contend that the effects of substantial travel costs are far wider and more important than just the effect on individuals on the finances of British Rail or on the local bus service or whatever the form of transport might be.

The implications of fares policy in respect of buses and trains are enormous for the whole community. There are great implications for planning, regional policy, housing policy and the future of the inner cities. All these will be affected in coming years by decisions taken about fares policy and the cost of travel to work.

I wish in my brief remarks this afternoon to concentrate on rail travel. A large part of my comments applies also to travel by bus or by Underground. I am concentrating on rail travel because that is the subject about which I know most. I shall concentrate my remarks mainly on London and the South-East and on travel to work in that area, but the principle remains the same for other parts of the country. When talking of the costs of travel to work, it is not unreasonable to concentrate on London and the South-East, where there is the most acute problem.

I think I am right in saying that there are probably about 7 million people who use public transport for travel to work in some variety or another in this country. That figure has recently been issued. In 1976, 868,000 people arrived in central London in the morning peak hours by a variety of forms of transport between the hours of 7 a.m. and 10 a.m. It is estimated that a further 187,000 came by private transport, mainly by car. Very substantial fare increases have taken place in recent years, as everybody knows.

It is frightening to discover that in 1938 the yearly season ticket from Southend cost less than £25. That is within the lifetime of most people here. In 1962 it had risen to £93, and since then costs have escalated and fares have risen five of the country. Fares in general have more than doubled since 1972, but in times in the past 16 years in that part London and the South-East they have risen by more than 100 per cent. since 1975. That is faster than the retail price index and far faster than people's net incomes, because of a combination of events, such as incomes policies, wage freezes and high levels of personal taxation.

Consequently, the level of rail fares has become an extremely serious burden for many thousands of people. The culmination of the feeling about increases in rail fares came with the proposed increase of more than 16 per cent. last year. Rail fares have an enormous effect on the budgets of many people, particularly young people starting work who find the burden of commuting to London especially severe. Many people are forced to commute because there are no suitable jobs locally. In that sense, they are a captive market and can do little about it. It is an interesting question whether it would be wise to provide more jobs locally or whether that might have a bad effect on the structure of employment in London.

The Under-Secretary will be aware of the great anxiety that was caused some time ago by the Government's consultation document which suggested that the outer suburban services of British Rail should meet their full allocated costs by 1981. On top of the burdens already being faced by commuters at that time, that proposal would have been an intolerable extra burden with incalculable effects on the standard of living of many people.

Those who commute into London on lines which pay their way find it frustrating that it is not possible to find out exactly what those lines are costing. I realise that this is due to a change of policy some years ago, which I regret, but it should be an aim of Government policy to ensure that the maximum information should be given, though I understand that the allocation of costs is extremely difficult and that there must be a rough and ready element in trying to come to a fair allocation of costs for any line.

The Government's original proposals would have meant massive increases in fares. Fortunately, the Government retreated from that proposal in their recent White Paper, but they say that fares are bound to rise and suggest that they should be phased so that commuters can have a period of years in which to adjust to the increases. The Government point out that London commuter fares constitute 40 per cent. of British Rail's pasenger revenue and that there will inevitably be fare increases over the coming years.

Is there any way out of this dilemma? I accept that there is a dilemma between the need to contain the costs of British Rail, the need not to have too vast a sum in public subsidy and the need not to place too great a burden on those who have to travel on public transport.

Recommendation no. 34 of the Select Committee on Nationalised Industries last year should be implemented much more fully than the Government have so far been prepared to do. I urge that the Under-Secretary should instigate a full-scale inquiry into the balance of advantage between users of public and private transport with a view to seeing whether any fiscal concessions are possible. I urge the Minister to take that suggestion back to his colleagues.

I have argued for many years that there should be a measure of tax relief for travel to work. As long ago as May 1962, I moved a new clause to the Finance Bill to that effect. I have tried to get such a system introduced and I have had the support of many of my hon. Friends, including my hon. Friends the Members for Essex, South-East (Sir B. Braine), Southend, East (Sir S. McAdden) and Braintree (Mr. Newton).

I accept that there are arguments against that suggestion, including administrative arguments, but other countries seem to manage such schemes fairly well, although the Under-Secretary was a little vague in his reply to me yesterday about the practice in other countries. Denmark, Germany, Luxembourg and the Netherlands all have systems of tax relief for travel to work and they have not found that to be an insuperable burden. The report of the Select Committee also shows that there is a system of tax relief in Sweden, but there is some confusion about this matter in our Government circles.

I was told yesterday by the Under-Secretary of State that there were no allowances for costs of travel to work in Belgium. I was rather surprised to hear that. In the answer that I received from the Financial Secretary to the Treasury as recently as 16th July, I was told that if the Belgian scheme for relief for travel to work was adopted no fewer than 16 million taxpayers would benefit. There must be some confusion between the Department of Transport and the Treasury. Which is right? I ask the Under-Secretary to tell us. If other countries can give such relief, I do not accept that the administrative arguments are insuperable.

I accept that the cost would be substantial. On introduction, any scheme would have to be limited. I suggest that it should be limited to public transport. Differing figures have been given. The Financial Secretary to the Treasury told me on 16th July that if we adopted a system of tax relief for travel to work by public transport the cost would be about £200 million. In the context of our total Budget, that is a sum that at least could be considered by future Chancellors.

It is said that there are arguments in equity against the solution that I propose. To the fury of my constituents and the constituents of many other hon. Members, it is argued by some outside commentators that commuters are already a rich group and oversubsidised by the Government. On the contrary, I argue that the standard of living of many commuters has fallen very considerably. It was stated in the Government's response to the First Report from the Select Committee on Nationalised Industries of 1977 that between 1974 and 1977 rail fares had more than doubled but that average earnings after tax had increased by about 50 per cent. for a married man with two children.

There are many commuters, including many of my constituents and, no doubt, the constituents of my hon. Friend the Member for Braintree, whose real standard of living has fallen substantially over the past few years. The present users of rail transport, including commuters, are frequently locked in by their homes and their jobs. That applies especially, perhaps, to those who live in council houses. As a result of the residence qualifications that exist in many local authority areas, especially in the South-East and in London, it is almost impossible for moves to be made. It is an extremely expensive operation for owner-occupiers. Any large-scale move back into London because of excessive railway fares would make the pressures on housing in London considerably greater, and they are severe enough even now.

The case is all the stronger because of the recent Inland Revenue ruling in response to Questions tabled by my hon. Friend the Member for Woking (Mr. Onslow) which were answered on 6th June. It has now become clear that if employers reimburse employees with season tickets, they are not liable to tax in certain circumstances. There is some confusion outside the House, and I shall be grateful if the Under-Secretary of State confirms the position.

As I understand the Revenue's ruling, if an employer contracts with British Rail to give an employee a season ticket and the employee's earnings are less than £5,000 a year, there will be no charge on the value of the season ticket. The employee's earnings have to be not such as to bring him within the special legislation bearing on benefits in kind.

If an employer gives an employee a season ticket and the employee agrees to accept a reduced salary in return, he is taxable. There are many anomalies, fiddles and difficulties. If an employer gives an employee a season ticket in the circumstances that I have described, there is exemption from tax. If, on the other hand, an employer pays an employee his expenses of travelling from home to work, there is a liability to tax. We all know of the special situation that applies to company cars and to those who have private and business cars.

The rules relating to tax relief on travel to work have become increasingly anomalous and unfair. In all the estimates of the costs of tax relief for those who travel to work no estimate has been given of the increase in traffic that would accrue to public transport undertakings. They could be considerable. The long-term effects of present rail policy will have profound effects on London and the South-East. It will have profound effects on planning, housing demands and regional policy in general.

I ask the Government to re-examine the recommendations made by the Select Committee on Nationalised Industries 18 months ago. This recommendation has been brushed aside by the Government. In the interests of those who have to travel to work, many of whom face considerable burdens and are likely to continue to do so if there is no change in policy, I urge the Government to undertake an inquiry so that all these matters can be considered.

I hope that justice is seen to be done for all. I ask the Minister to consider with his colleagues the setting up of the inquiry which was recommended by the Committee. That would be a great step forward for many thousands of my constituents and many tens of thousands of people elsewhere who travel to work each day.

3.41 p.m.

Mr. Tony Newton (Braintree)

I am grateful to my hon. Friend for the opportunity to support him in his debate. I cannot claim to have pursued the matter for as long as he since I have been here for a shorter time. But I have pursued the issue. This year I tabled amendments to the Committee and Report stages of the Finance Bill to seek tax relief for travel to work. Those amendments were not selected. I imply no criticism of the Chair, but it is a pity that the House has not had a proper opportunity to debate the matter and to probe Treasury Ministers. I accept that the Transport Minister is in an awkward position because this is a Treasury matter. It is time that Treasury Ministers were pushed hard.

In the Treasury there is the briefing equivalent of an old gramophone record which regurgitates age-old arguments against tax reliefs. There is no evidence that the arguments have been re-examined since shortly after the war to fit a significantly different pattern. Commuting has increased, the balance of advantage between living inside and outside London has changed dramatically and the burden of travelling costs in relation to other living costs has risen.

Ministers have not realised the extent of the hardship and the drop in the standard of living which is caused by increasing transport costs. Ministers have not appreciated the extent to which travel-to-work costs are an important part of the wide work problem.

Some of my constituents have said that they have given up work because the balance of advantage in working disappears, not just because of tax and because unemployment benefit is tax free but because of the cost of getting to work and that no tax relief is available.

Mr. Julian Ridsdale (Harwich)

I have raised this issue on several occasions. My hon. Friend is right. People are becoming more and more frustrated about the problems of travelling to work because of the high cost of travel and the lethargy of the Government.

Mr. Newton

I am grateful to my hon. Friend for those generous words of sup- port. Between us we are proving that Essex Members of Parliament are much concerned about this issue since three of us are present.

My hon. Friend raised two other points upon which I wish to support him. The first is the problem of council tenants. It is often suggested that if people cannot afford to travel to work they should move house. It is sheer unadulterated nonsense to make that suggestion for large numbers of people who live in rented public sector housing. Many of my constituents were moved out of London by the GLC. Now, when they find that travelling costs have made their lives so difficult, there is no way in which the GLC or the London boroughs will take them back. They are trapped in a situation in which they cannot afford the travelling costs and in which it is impossible for them to move back.

In the Regional Affairs Committee the Minister said, in referring to the effect of fare increases that have been made, This is a particularly important piece of work because it is the effects of sudden and unexpected fare increases on the decisions of ordinary people about where they work and live of which are so important. We must get clear what pattern is emerging from the fare increases of the past few years and what we can expect in the years to come."—[Official Report, Standing Committee on Regional Affairs, 26th July 1978; c. 7.] I agree with that entirely, because it confirms my view that the Government do not know what they are doing. They have allowed and encouraged these huge fare increases on the basis of very little research of the effects. We face the prospect of still further fare increases of this kind when the Government still do not know the effects of this policy.

If the Minister cannot say much about tax relief—I do not expect that he will—I hope that he will give a clear and categorical undertaking that the practice of British Rail, encouraged by the Government, of loading fare increases against the commuters of London and the South-East will cease, at least until the Government are clear about the effects of the huge rises that have taken place.

It can make no sense in regional or traffic terms, and certainly not in terms of the social effects on my constituents and those of my hon. Friends, to allow this process to continue when the Government are ignorant of its effect when used in the past.

3.47 p.m.

The Under-Secretary of State for Transport (Mr. John Horam)

Such is the extent of interest in transport in the House, and such is the lot of the Under-Secretary, that I must beg the leave of the House to speak again, bearing in mind that I have already spoken today. I am sure, however, that hon. Members will agree that I should say a few words to conclude this debate. I have every sympathy with the hon. Member for Braintree (Mr. Newton), who said that the Financial Secretary to the Treasury should be standing here now. I wish that he were, because half of what has been said falls within his remit, not mine.

I want to deal with that side of the matter if I have time because all these points should be considered in a coordinated way. They hit the person in the street not as a number of matters which are the responsibility of different Departments—because he could not care less about that. They hit him in his pocket, and he wants a co-ordinated and comprehensive Government view of the matter.

I congratulate the hon. Member for Southend, West (Mr. Channon) on his assiduity over many years in dealing with this subject. I have debated the matter many times also with the hon. Member for Braintree.

Quite rightly the hon. Member for Southend, West said that there was a dilemma. All hon. Members, whether or not their areas face commuting problems, will recognise it. It is that the commuter services are highly labour-intensive and that labour costs have risen faster than costs generally. For that reason alone it has been difficult to maintain fares at a set level and avoid increases. In addition, these services are used in a particular way. There are marked peaks with 400,000 people coming into London every day and going home again at two particular times, and that is bound to lead to an uneconomic service.

I hope I shall be forgiven for putting a mildly political point. Neither of those two factors was helped by the fact that under the last Conservative Government, of which the hon. Member for Southend, West was a member, there was, as a result of pay and incomes policy generally, some tendency to hold down fares. The result was a big increase in the deficits of the nationalised industries such as British Railways which we had to make good. I think that on the whole the Opposition support what the Government are trying to do in bringing some sort of order into the finances of nationalised industries. Certainly that had to be done at some time.

Those have been the problems. But I agree, of course, that the effect on the individual of this very difficult set of problems has been very bad indeed. The hon. Member for Braintree chided me with not understanding or, at least, not being able to measure the effect on the individual. I think that he fully realises that I understand the difficulty from the remarks made by me in the Standing Committee on Regional Affairs when it was discussing the South-East, which he quoted. I well understand the effect on the individual.

But what the hon. Member said is not entirely true. If he had read the White Paper more carefully, he would have seen that in discussing this point we said—I quote again from the White Paper on transport policy— So far as can be judged at present, the effects of fares increases on patterns of settlement and travel will be so gradual and spread over so wide an area that they are unlikely to produce trends which would be damaging to the region's development. I am now talking about the effect on the economy of the whole of the South-East rather than the effect on individuals.

We looked at the matter very carefully in coming to the conclusions that we reached about Government transport policy towards the South-East commuter. That is why we changed the line, as the hon. Member concedes, from that which was put forward in the consultation document published by the late Member for Grimsby, Mr. Anthony Crosland, when he was Secretary of State for the Environment. That had a clear objective by a certain date as regards the subsidy—now about £80 million a year of taxpayers' money—which goes into keeping down fares on the London and South-East region. We reversed that policy. We said that the Government should not impose a specific financial objective on the British Railways Board for reducing the network subsidy in that area. The board has, therefore, more freedom to approach a sensible policy as regards fares in the London and South-East area than it would otherwise have had.

That is a very positive step forward by the Government, and it specifically recognises the upheaval in the lives of ordinary people in the London and South-East region which has followed from previous policy measures. I think that that is something which should be seen as quite an important step forward.

Incidentally, in mentioning that, I should say that it has never really been the case that there has been sufficient information, line by line, about commuters in the South-East. The fact is that even when my right hon. Friend the Member for Blackburn (Mrs. Castle) was responsible for railway policy, it was never possible to know what each particular line in the South-East was costing and what revenue was being received. In the change of policy in that respect, the whole of the London and South-East area has been treated as one whole. It has always been recognised that it would be very difficult to break it down more than that. But certainly the amount of information that the British Railways Board is now bringing forward is very welcome.

On the point raised about the Price Commission report and the remarks about the increases in the South-East by comparison with the increases generally, clearly the board is very well seized of the purport of that report. We have taken the view that it will need to demonstrate very clearly the need for whatever increases it may wish to put forward.

The Secretary of State for Prices and Consumer Protection and the Secretary of State for Transport said in their press notice at that time: The Secretaries of State sympathise with the grievance felt by many commuters at the burden of fares. They will welcome any steps British Rail can take to add to public understanding of the costs and revenues of the London and South-East commuter services and to demonstrate the need for fare increases on these services, especially if they are higher than the average. The Board recognises the need for this. I think that that explicitly meets the point raised—that there must be a clear justification for any increases above the average which may be made in future years for London and South-East commuters.

We should also bear in mind, however, that British Rail's recent performance, following on the policies of my right hon. Friend and myself, has been very much better. The fact is that fare increases are now being spread out, roughly, over 12-monthly intervals. At least the last increase was far lower than increases have been hitherto. I am reasonably hopeful about the next increase, which is now unlikely to be this year. So, following Government policies, the commuter's position has changed considerably for the better in the last two years or so. In addition, a good deal of money is going into investment and in London and South-East rolling stock, which has been a point of complaint, and a number of lines will begin to benefit from that.

Taking on the mantle of the Financial Secretary in the last five minutes of this debate, I should like to take up the point about tax relief for travel to work. First, there is no misunderstanding about the comparison between this country and other European countries. The hon. Member for Southend, West thought that I was giving him erroneous information about Belgium. There is no error in what I am saying. What I told the hon. Gentleman yesterday was that in Belgium one could not set the cost of travel against income tax. That is the case. If there is another scheme in Belgium under which employers can finance travel-to-work costs, that is a separate matter. So my remarks yesterday stand because I was discussing tax relief. The general practice on the Continent as our studies have generally confirmed, is very different from country to country.

Second, there is no discrepancy on the question of the overall cost. The hon. Member for Southend, West quoted a figure that he had been given by the Financial Secretary of roughly £200 million as the cost of a scheme of tax relief for travel to work. My figure—it is also the Financial Secretary's figure, because it was produced by the Treasury—is about £750 million. That is for the whole country, as I think it would have to be. We could not allow this in one part of the country and not another. I would think that the £200 million relates only to London and the South-East.

Mr. Channon

indicated dissent.

Mr. Horam

The hon. Gentleman shakes his head, but there must be some such explanation since both these figures have been supplied by the Treasury.

Whatever the result of that discrepancy—I shall have the matter checked and see that the hon. Gentleman is written to either by the Financial Secretary or by myself—it would certainly be a high cost. That is something that the Opposition should bear in mind. I do not wish to make another political point when we are on the verge of leaving for our holidays, but they have made clear their opposition to public expenditure over the last two or three years. They say, and I accept, that I have a dilemma over London and the South-East, but they, too, have a dilemma in reconciling their desire for schemes of this kind with their desire to keep down public expenditure.

Mr. Newton

Surely the Minister will recognise that this is an income tax relief and not public expenditure, that what we are suggesting is one way of reducing income tax.

Mr. Horam

That is all very well, but it would mean that less money would be coming to the Exchequer. One would either have to have a higher borrowing requirement or raise less money to match that smaller flow. It is very difficult to reconcile that proposal with the Opposition's attitude to public expenditure.

Hon. Members should consider the effect of this. The proposal would be a disguised way of increasing the subsidy for commuters and concealing the true cost of rail journeys. Given their general stance—and ours now —of trying to reveal the true costs of railway operations along with those of any other transport operations, I am not sure that this would be a sensible step forward from the point of view of a reasonable view of what is happening in transport. None the less, I take the point that this is an area that we should look at carefully.

As the hon. Gentleman knows, we have given an undertaking—I think that my right hon. Friend the Secretary of State gave it to him—that we shall look at the Continental practice. We shall continue to study this matter, without commitment, since it clearly has relevance to the problems of commuters.

Forward to