§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Kirkhope.]
10.20 pm§ Mr. Eric Illsley (Barnsley, Central)I am grateful for this opportunity to raise the issue of the future funding of railways in South Yorkshire. The debate is opportune and timely. I hope that the House will allow me to speak for the bulk of the Adjournment debate and then allow my hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham) to say a few words at the end—of course, with the Minister's permission.
The issue of the funding of railway services supported by passenger transport authorities after the metropolitan railway grant expires in 1996 is a pressing one. The passenger transport authorities are in something of a vacuum when considering their budgets for 1996–97 and, of course, thereafter. The issue is not confined to South Yorkshire but affects all passenger transport executives and passenger transport authorities across the country, but, as my constituency is in South Yorkshire, I shall confine my remarks to that area.
The financial support for local railways dates back to the Transport Act 1968. Under section 20, formal, legal agreements were to be made between British Rail and the passenger transport executives. Those agreements supported local services which, as a consequence, have expanded since 1968. The total number of passengers carried on PTE-supported services is now double that carried by the former InterCity business unit of British Rail and is about three quarters of the number carried on the former Regional Railways, of which, of course, PTEs were a part.
Therefore, in the country as a whole, and in South Yorkshire in particular, these supported services are extremely important. I shall emphasise that by highlighting some of the statistics for South Yorkshire.
It is estimated that the number of passenger journeys is about 6.2 million, which means 115,000 supported trains each year. The supported route mileage is 102.5; 35 stations are supported on the lines; and there are 54 million supported passenger miles and 56 supported staff. It is easy to see that the 6.2 million passenger journeys are extremely important to South Yorkshire.
Those journeys cover routes such as Sheffield to Doncaster, Sheffield to Kiveton Park, Sheffield to Morthen, Sheffield to Barnsley—my constituency, of course—Barnsley to Penistone, the constituency of my hon. Friend the Member for Barnsley, West and Penistone, Barnsley to Darton, the routes from Doncaster to Kirk Sandall and Thorne going out to Scunthorpe, and from Doncaster to South Elmsall.
Those are obviously local routes in South Yorkshire, which involve Sheffield, Barnsley and Doncaster, and they are important for a number of reasons. Doncaster, Sheffield and Barnsley, in the South Yorkshire passenger transport area, are now the major centres of employment. Rail services at the appropriate times are essential to those areas.
Over the past 15 years—this has been well documented in other debates and I shall not rehearse the arguments—tens of thousands of jobs have been lost in the South Yorkshire area. In Sheffield, in the early 1980s, thousands 1645 of jobs were lost in the steel industry. In Barnsley and Doncaster over the past few years, jobs have been lost in the coal industry.
Therefore, the rail routes are in areas of low economic activity. If those rail routes were not supported by Government grant, they would not be viable in the private sector; they would be run down or, at worst, removed entirely. Therefore, those people living in those areas would not have the benefit of available rail travel. Barnsley and Doncaster are major towns and Sheffield, of course, is a city. There is a great concern that some routes are likely to be lost in that area. Some of those smaller towns that I mentioned are not easily accessible via road, especially in winter time, and particularly Penistone, which is an outlying village in a high area relying on rail travel.
The funding arrangements continued under section 20, which was known as the bolt-on initiative, until the Railways Act 1993, when the privatisation of the railways brought a new system and new structures for railways in this country and, of course, a different funding mechanism. It was recognised immediately that the charges paid by the PTEs in support of local services would increase. In fact, they have not only increased, they have gone through the roof. The charges have increased quite dramatically.
As a consequence, the Government were obliged to introduce a support mechanism, which became known as the metropolitan railways grant. That was a one-off grant for two years in 1994-95 and 1995–96, and was designed to cover the increased charges caused by the loss of cross-subsidy and the transparency which was imposed on railway costs. The idea that charges would be levied for the usage of railways and to increase transparency—as the then Minister put it—to ensure that PTEs could see exactly what they were paying for was debated at length throughout the passage of the Railways Act.
The increases, which were listed by the Minister's predecessor, the right hon. Member for Kettering (Mr. Freeman) in a debate on 19 May 1994, were to reflect the full cost of privatisation, to ensure that there was transparency of Railtrack access charges, to reflect the rolling stock lease charges and to ensure that those charges covered the new investment, and to ensure a rate of return for Railtrack and for the rolling stock companies, which have become known as Roscos.
There was one interesting point in that debate, when the right hon. Member for Kettering said:
The expenditure covered by this grant"—the metropolitan railways grant—will fall outside the authorities' budget requirements,the local authorities of Sheffield, Doncaster and Barnsley,so it will not create any problems with regard to capping."—[Official Report, Fourth Standing Committee on Statutory Instruments, 19 May 1994; c. 5.]I mention that because, only today, we have heard that two of the authorities involved in the debate—Sheffield and Barnsley—are subject to the capping arrangements announced by the Secretary of State today in a written answer.I mentioned increased charges, and I shall run through a couple of them.
The increases in expenditure listed by South Yorkshire passenger transport executive are dramatic. Train maintenance, for example, has increased from £2.7 million to £4 million, and infrastructure charges from £1.8 1646 million to £9.5 million, so there have been massive increases in the charges levied against the passenger transport executives. At the bottom of the balance sheet for the 1994–95 budget, a level of funding of about £6.6 million has now increased to about £17.2 million. Charges have increased by about 156 per cent.
That increase has been funded by the metropolitan railway grant. But what will happen for the 1996–97 financial year, when the grant will have expired? I understand that additional funding will probably be available—although the Minister has given no commitment, and I hope that he will be able to enlighten us this evening—but that it will be paid to individual local authorities through the revenue support grant.
The money will be hidden in the methodology of the standard spending assessments—a methodology that I have criticised since 1990, when it was first introduced. Only last year, after the system had been debated in the Chamber over three or four years, the arrangements covering my constituency of Barnsley were altered so that although my local authority's standard spending assessment has been increased, the capping level means that it can spend only 0.1 per cent. above its SSA, compared with an average for metropolitan authorities of 5 per cent. above SSA. The Minister will therefore immediately appreciate the difficulties that local authorities could find in trying to fund passenger transport executives and rail services through the revenue support grant.
As I have said, we are still waiting for confirmation of what funding there will be, what form it will take and what method will be used. There is a sense of urgency now, in that PTEs have to decide by the end of May whether to support local services, because they must give 12 months' notice if they intend to withdraw from funding any of them.
An added complication is the fact that, according to the franchising director, franchises are likely to extend for seven years. How can PTEs decide whether to support local rail services without knowing how the grant funding formula will operate, or what level of funding will be available? It is impossible for them to decide which course of action to choose.
Over the next few weeks, South Yorkshire passenger transport executive must decide whether to support the same services as before or to give the 12 months' notice of withdrawal from the scheme. In South Yorkshire, we now face the ludicrous prospect of losing rail services on uneconomic routes—perhaps running fewer trains, or even losing altogether whole routes that are essential for the areas concerned.
It is vital that the Minister give South Yorkshire passenger transport executive some assurances, either tonight or in the next week or so, about the future funding formula. Bearing in mind the Government's attitude to authorities such as Sheffield and Barnsley, which were mentioned today in connection with capping arrangements, I hope that the Minister will give some consideration to our views on funding through the RSG.
Finally, I shall quickly raise two other related issues—timetabling and the fixing of fares. The PTEs want to retain influence over timetabling. They are paying for the routes, and they want to ensure that services run at times appropriate to the locality. Government assurances, dating 1647 back to 1993, have been given on that subject, but I understand that Strathclyde is now having difficulties involving timetabling.
As for the fixing of fares, on through routes there is likely to be cherry-picking by the larger services, which will be able to undercut the fares set by the PTEs.
§ Mr. Michael Clapham (Barnsley, West and Penistone)I shall confine my remarks to the situation in my constituency. First, I am grateful to my hon. Friend the Member for Barnsley, Central (Mr. Illsley) for initiating the debate, and for his generosity in allowing me a few minutes to emphasise the need to ensure the continuity of adequate funding to keep the rail services in Barnsley, West and Penistone.
My constituency is next to that of my hon. Friend, but it covers an extensive geographical area from the west of Barnsley town up to the Pennines. The railway loops my constituency, and connects Barnsley with Sheffield on the one hand and with Huddersfield on the other. The Sheffield, Penistone and Huddersfield line is particularly famed because of the beautiful countryside through which it runs, and for the magnificent viaducts at Penistone and at Denby Dale, the latter of which is in the constituency of my hon. Friend the Member for Huddersfield (Mr. Sheerman).
There are two issues which are enormously important to the development of Barnsley and South Yorkshire. The first is the rail connection between the rural and urban parts of the region, which is essential for commuters. My constituency has 20-odd villages in a rural area, and that is the local dimension to the major issue. The transport system is essential for the link-up with the national transport system, and it is also enormously important for the economic regeneration of the former mining areas. Many former miners travel to work in Sheffield and Barnsley, and some travel even further afield.
The second issue is that rural services are most important for the development of the tourist trade in Barnsley. My constituency is rich in early industrial sites, which have been made accessible by the heritage trail. The railway links the old industrial villages such as Elsecar on the east side of my constituency with Silkstone in the mid-part of my constituency. Both villages have made important social and economic contributions to the United Kingdom's early industrialisation.
Those two points were emphasised by the local chamber of commerce when it gave evidence in a submission to the Transport Select Committee, which took evidence on "The Future of the Railways in Light of the Government's White Paper proposals" in 1993.
The South Yorkshire transport executive has opened some of the older stations on the route in my constituency—for example, at Silkstone and Dodworth. These allow people who are commuting from the villages and tourists travelling in the area to have access to the villages, because there is a link with the bus service.
What I have said to the Minister emphasises the importance of the railway services to my constituency. As my hon. Friend has said, the current financial situation relates to the revenue support grant and to the metropolitan railway grant. These last only until 1996, but 1648 it has been estimated that the costs after privatisation will rise from £6.6 million to £17.1 million. That is an enormous increase, and we must bear in mind the fact that there will be no mechanism after April 1996 to continue grants.
I hope that, when the Minister comes to the Dispatch Box, he will assure us that adequate finance will continue after April 1996, so that rail services in my constituency can be maintained by the passenger transport executive.
§ The Minister for Railways and Roads (Mr. John Watts)I welcome the opportunity which this debate provides to provide some of the information which the hon. Members for Barnsley, Central (Mr. Illsley) and for Barnsley, West and Penistone (Mr. Clapham) have requested about the future funding of railway passenger services in South Yorkshire.
The hon. Member for Barnsley, Central acknowledged that the whole issue of future funding touches not just on South Yorkshire, but on all other PTEs in England and Scotland which support railway passenger services in their areas.
The PTAs are responsible for drawing up local public transport policies for the metropolitan areas outside London—six in England, and Strathclyde in Scotland. The membership is drawn from the constituent metropolitan district councils, and it is important that the body that sets the broad policy is made up of elected representatives of those constituent authorities to ensure local accountability for decisions taken, and to take into account the local needs that both hon. Members explained to the House.
The statutory powers for funding railway passenger services are set out in section 20 of the Transport Act 1968, which enables the PTEs to enter into agreements with British Rail to support railway passenger services. The PTEs contract individually with BR for the provision of the rail services in their areas. Central Government support to PTEs in respect of the net cost of the services has been channelled through the revenue support grant to the metropolitan district councils.
Before railway restructuring, PTE funding was provided solely through revenue support grant, and PTEs were charged by BR generally on a marginal cost basis for those services. Restructuring of the railways saw the introduction of a revised charging regime, involving the recovery of the full costs of access charges and rolling stock leasing charges. The full costs are much greater than the net costs that were borne previously. Without the full details of the prospective extra costs, it was not possible to feed an appropriate level of grant into the RSG process.
Consequently, to meet the extra costs facing PTEs arising from the change from marginal costs to full cost recovery, the Government introduced metropolitan railway grant as a transitional measure in 1994–95, to meet the funding gap between the bolt-on and the extra costs of the revised charging regime. I use the term "transitional" advisedly, because the Government have always seen MRG as a temporary measure.
The calculation of MRG takes as the starting point the services contracted for PTEs for 1993–94 and represents the difference between the costs of providing those services under the old marginal-cost basis and new full-cost basis. It is paid by my Department directly to English PTAs. Subject to Parliament, we also propose to pay MRG in 1995–96. 1649 Consultation will shortly be under way on the proposed formula for MRG for 1995–96. We are aiming to send out the consultation document before Easter.
Given the temporary nature of MRG, we have been looking closely at the long-term funding for PTE rail services from 1996–97 onwards. To preserve the element of local flexibility inherent in the existing system, we are minded that funding should revert to channelling all support for PTE rail services through an enhanced RSG bolt-on.
The process of bedding down the new charging regime will be nearly completed this year, when finalised access costs for the period until 2001 will emerge from the regulator's review, and when rolling stock leasing charges are made known. That should enable the Government to enhance effectively the support for PTE rail passenger services through RSG, to reflect the net increase in the level of support required to maintain existing services in future years.
I am also aware of the concerns of the metropolitan district councils in respect of capping. We will seek, through the Department of the Environment, to take steps to ensure that the new arrangements for funding PTE rail services do not increase the likelihood of metropolitan districts being capped.
Our general approach on future funding is the subject of consultation with all the PTEs, and the Association of Metropolitan Authorities. We have sought the views of the PTEs on that approach, and look forward to seeing a constructive contribution on the way forward from the PTEs and the AMA.
The hon. Member for Barnsley, Central was concerned that the funding might be lost in the myriad other elements of revenue support grant. We also consider the maintenance of some transparency in the funding mechanism important, and intend that it should be covered as follows. The new bolt-on total will be published in the local government finance report, as at present, and will make the new totals clear to all passenger transport authorities and metropolitan district councils.
The underlying formula will continue to be discussed through the standard spending assessment sub-group, will be determined by Ministers, and will be made freely available to the local authority associations, PTAs and individual metropolitan district councils. The allocation of each metropolitan bolt-on to the constituent district councils will continue to be on the basis of total resident population. We shall be ready and willing to write to individual district councils to confirm their allocation of the bolt-on. We shall also point out that the bolt-on results in a corresponding increase in standard spending assessment, and therefore a corresponding increase in RSG for that authority.
In respect of how the additional funding will work through the system, the overall control total for PTE-supported railway passenger services will be set by my Department, subject to the 1995 public expenditure 1650 survey determinations and the views of the Department of the Environment and, in the case of Strathclyde, the Scottish Office.
We see the overall control total for 1996–97 as reflecting such matters as the projected costs in 1996–97 of rolling stock leasing charges, train operating costs and track access charges. It will fall to PTEs to pay for the cost of any additional services that they may decide to introduce over and above those covered by 1995–96 support. The intention is to ensure that the support available in 1996–97 will be equivalent to the support available in 1995–96.
The provisional distribution formula—based largely on actuals—is intended to ensure, so far as is possible, that PTEs receive broadly the same funding to reflect the net increase in the support required to maintain existing services in future years. That current formula can be revised, if appropriate, to take account of the views of South Yorkshire PTA and PTE, and those of the other PTEs, PTAs and the AMA.
In the franchising process, the franchising director is required to give notice to the PTE of his intention to include, in the franchise agreement, provisions relating to the operation of any stations and light maintenance depots within the passenger transport area, and of his intention to issue an invitation to tender.
The PTE may respond to that notice within 60 days by submitting a statement which will, inter alia, specify the services in that area; the minimum level of quality of services so specified; and requirements with respect to the fares to be charged.
When such a statement has been submitted by the PTE, the franchise director will ensure that those services, and any minimum levels of quality or requirements with respect to fares, are included in the specification of the services in respect of which the invitation to tender is issued. Before entering into a franchise agreement, a PTE must obtain its PTA's approval of the proposed franchise agreement. The franchising director will specify any other services required for that franchise, and provide any payments under the franchise agreement in respect of such services.
I hope that what I have said makes the position clear in terms of the background, our intentions as regards future funding, and franchising. We want the PTEs to continue their valuable work in supporting railway passenger services in their areas, and to continue to play a key role in the new railway era. I hope that what I have said goes some way towards ensuring that they do, and that the consultations that are now under way, both about the future enhanced section 20 bolt-on and about MRG for the current year, will come to a speedy and successful conclusion. I recognise the importance to the PTAs and PTEs of putting an end to any uncertainty about the funding that will be available to them to carry out their important functions in future years.
§ Question put and agreed to.
§ Adjourned accordingly at twelve minutes to Eleven o'clock.