HL Deb 10 July 1980 vol 411 cc1392-9

7.41 p.m.

Lord MOWBRAY and STOURTON

My Lords, I beg to move that the New Bus Grants (Extension of Period and Reduction of Rate) Order 1980 be approved.

New bus grant is currently paid at the rate of 50 per cent. of the approval capital expenditure on a new bus intended wholly or mainly for stage use. The policy on the grant has been largely bipartisan. A Labour Government introduced it in 1968, then at a rate of 25 per cent. and in 1971 the Conservative Government increased the rate to 50 per cent. and extended the period of the grant from seven years to 12. The last Labour Government concluded in their 1977 White Paper on Transport Policy that there was not sufficient justification for maintaining the grant at its present level beyond this financial year and that it should be phased out by 1985. My Lords, to put it simply, we agree—and although we have brought phasing-out forward by one year, it has been left to this Government to implement the decision. This is the purpose of the draft order which is now before the House.

I hope that your Lordships will find the order a simple one. It does two things. The first is to extend the eligibility for grant, which would otherwise expire after 31st August this year, to 31st March 1984. The second is to provide for progressive reductions in the rate of grant payable during this phasing-out period, starting from 1st September this year.

I would like to explain briefly why we think the grant should be gradually run down and ended in 1984. The foremost consideration was not the cutting of public expenditure—nor I think, to be fair, was it our predecessors'. While expenditure constraints obviously make it difficult to argue a case for retaining the grant, there are positive reasons for actually bringing it to an end. First, successive Governments have always regarded this grant as one introduced for temporary and limited objectives. The most important was the rapid introduction of buses suitable for one-person operation, that is with passenger entrances at the front rather than the rear, as was then more common. Because single manning was probably the most significant contribution to greater cost effectiveness, the grant was intended to encourage operators to equip their fleets quickly with such vehicles even ahead of normal replacement. Other objectives were the modernisation of operators' fleets, the improvement of passenger comfort and a measure of vehicle standardisation.

These objectives have largely been achieved. In the 12 years the grant has been in existence, single manning has increased from levels of around 10–20 per cent. in 1968 to typically 70 per cent. and even 100 per cent. with some operators now. Further advances are dependent more on operational considerations than the availability of suitable vehicles. And by 1984 when the grant ends, most operators will have completely replaced their fleets at least once since the grant was introduced.

This leads to the second main reason for phasing out the grant. It was never envisaged as a permanent subsidy for normal replacement of life-expired vehicles and there is some danger of it becoming just that. Running at a current rate of 50 per cent., it tends to distort judgment about the best balance between capital and maintenance expenditure by making buying new an artificially cheap option.

Of course we accept that there are socially necessary bus services which need financial support to survive. But we want help to be given in the most cost-effective way and where it is most needed. An indiscriminate capital subsidy is not the best way of achieving this. We believe that assistance should be channelled through local authorities because local people are best placed to assess the needs and priorities of their areas. Local authorities have power to make grants to bus operators and their expenditure on revenue support is eligible for transport supplementary grant.

Obviously financial assistance of this order of magnitude—it is currently running at just over £70 million a year—cannot be taken away without its impact being felt. That is why—notwithstanding the need to reduce public expenditure—we agreed with the last Government that it should be phased out over a period (rather than end on 31st August this year) in order to allow time for the industry to adjust to the changed circumstances. The draft order therefore provides that the eligibility for grant should be extended until 31st March 1984, almost four years.

It is not for me to predict how bus operators will make this adjustment. But we do not accept that the only way is for them to raise fares. While the industry has already made considerable progress towards greater cost-effectiveness through such measures as single-manning, which I have already mentioned, there is still room for improvement. I have in mind such measures as the market analysis project studies currently being undertaken by the National Bus Company, which have already achieved substantial economies by matching bus services more closely to demand. In addition, the relaxation of the road service licensing provisions, now enacted in the new Transport Act, will encourage smaller operators with lower costs to provide alternatives to the services which the large public sector operators can no longer sustain. And, of course, removal of this very high capital subsidy will lead to a more realistic assessment of the economies of refurbishing older vehicles.

This brings me to the second part of the draft order which is concerned with the way in which the grant is to be phased out between now and 1984. The total amount of money available for the grant in the Government's public expenditure plans reduced progressively from this year to the year 1983–84. In line with this reduction, the order provides that the rate of grant, now at 50 per cent., should be reduced to 40 per cent. starting on 1st September this year and then to 30 per cent., 20 per cent., and finally 10 per cent., on 1st April 1981, 1982 and 1983 respectively. This gradual reduction in the rate of grant should mean that every new bus brought into use before 1st April 1984 will get grants, albeit at a reducing rate. Clearly that statement depends on our calculations of what buses operators will buy in the next few years. But out calculations are related to forward figures of bus orders and deliveries provided jointly by bus operators and manufacturers, so I would suggest to your Lordships that they are well-founded.

I hope your Lordships will accept the twin purposes of this order: to avoid the abrupt termination of new bus grant at the end of next month by extending the period of eligibility to March 1984, and to pave the way for its eventual ending on that date by progressively reducing the rate of grant payable. My Lords, I commend the order to your Lordships and beg to move.

Moved, That the draft order laid before the House on 24th June be approved. —(Lord Mowbray and Stourton.)

7.51 p.m.

Lord UNDERHILL

My Lords, again I would like to thank the noble Lord for his very detailed explanation. Naturally, we on this side of the House welcome the first part of the order, and, as the noble Lord says, it was stated in the Labour Government's own White Paper in 1977 that the bus grant should be phased out by 1985. Naturally, we are very happy with the decision of the Government to ensure that it will continue until 1984. But we are not happy with the second part of the order which is to phase out the whole grant by 1985. Perhaps I should elaborate a little on that.

A great deal has happened since the Labour Government's White Paper of 1977. First of all, the Select Committee on Nationalised Industries recommended in 1978 that the bus grants should not be abolished, that they should be continued indefinitely at what was then the current rate, which I think was 50 per cent. In addition, we have had the effect of inflation and increased running costs. The Secretary of State stated in another place as recently as 25th June that fuel and oil costs had increased by 50 per cent. over the previous 12 months.

Noble Lords will have seen reports about the United Counties Bus Company, which is Northampton based; it is a subsidiary of the National Bus Company. It is facing a £1 million deficit, according to the reports. Some 100 workers are likely to be made redundant. From the reports it appears that a total of some 700 drivers and conductors are to ballot on a trade union proposal for a voluntary £30 a week reduction so as to safeguard the jobs. Apart from the possible loss of 100 jobs in that particular undertaking, which covers a number of counties, if the jobs could not be saved it would be a very serious outlook for the bus services in that area, because undoubtedly the undertaking would have to cut; it would cut the least profitable services, and once again rural areas would find themselves hit very hard. I mention that as an example of what is facing the bus industry in various parts of the country.

In addition, with the pressure by the Government on local councils to reduce expenditure, and cash limits, there will undoubtedly be some tendency by some county councils to reduce the transport grant to operators. If this is to be a growing tendency, and the bus grant is to be gradually phased out, this will place an increasing burden upon bus passenger transport. Inflation means that the cost of replacing buses is increasing, and if the grant towards bus revenues is to be reduced then the future prospect of transport, particularly in rural areas, will become very depressing. As was said in this House in the debates on the Transport Bill, if the networks are to be faced with increased costs and possibly reduced revenue grant, fares will be increased. Undoubtedly some services will be cancelled or restricted. Bear in mind that the Secretary of State also stated on the same date that over the last 12 months bus fares rose by some 28 per cent.

Noble Lords should note that the transport supplementary grant for England for 1980–81, compared with the previous year's, is cut by 5.3 per cent. in real terms based on 1978 prices; with the various categories of acceptable transport expenditure on which the TSG is based it is actually 5.7 per cent. down, even before taking account of inflation. For Wales in real terms the TSG is reduced by 14.7 per cent. So apprehensions of possible lower revenue grant are based on a considerable amount of substance. So, with rising operating costs, possible cut-back in revenue grant, the decrease in the bus grant will be a serious blow to the bus transport industry and also to the travelling public. This will affect all operators of stage bus services.

I have been looking, as no doubt the noble Lord has, at the 1979 accounts of the National Bus Company. I have them here. This is our important bus network covering England and Wales. The accounts were published on 17th June, only two days before the Transport Bill was to receive Third Reading, and 1 did not receive my copy until just afterwards. In 1979 the National Bus Company purchased 1,394 new buses at a total cost to the company of £52 million, which was 15 per cent. up on the previous year. The new bus grant to the NBC was nearly £24 million in their last year. If this order is approved it will mean that the National Bus Company will lose about £5 million in 1980, approximately £9 million additionally in 1981, £19 million in 1982 and the full £24 million in 1983, with, of course, possible increases due to inflation that may be prevalent during those years. I have been looking also at the Scottish Transport Group, the national bus network for Scotland. That group purchased 458 new vehicles in 1979 and their position is proportionately the same as that of the National Bus Company. Other operators are going to be similarly affected. In 1979–80 the total bus grants paid by the Government to all the operators amounted to £65 million.

While appreciating what has been a policy of both the Conservative Party and the previous Labour Government, I would say that the situation has changed considerably since 1977. For safety reasons, and bearing in mind the facilities required by the public, I think it would be generally agreed that there should not be any slow-down whatever in the replacement of buses. While the noble Lord the Minister refers to the fact that it is undesirable to have these sort of firm revenues going into bus undertakings, I am certain that no one at this stage would suggest any cancellation of the reimbursement of fuel duty costs, which again is a most valuable asset for the bus operators.

For all these reasons we feel that the order is one that should not be approved at the present time. Naturally, it is pointless for us to decide to divide against it, because there are only six noble Lords who know what I am talking about; it would be a sheer waste of time. But I would like to know the views of the noble Lord the Minister on the points I have made, which I believe are constructive, because with all the consideration of the present position and the change since 1977 it could well be important that the bus grant should be continued. The bus undertakings are going to find this an additional heavy blow. We do not want to get into arguments on the Transport Bill but, whatever else it will do, the Transport Bill will not help the big networks, and the big networks are the people on whom our passenger transport to a great extent relies. It is not only the networks which will suffer as a result of the cancellation of the bus grant, but all operators, in replacing their essential buses.

8 p.m.

Lord MOWBRAY and STOURTON

My Lords, I do not know whether I am quite so grateful to the noble Lord, Lord Underhill, this time as I was for his kind words last time. However, I accept that both he and I are not addressing a very wide audience tonight. On the matter of general principle, I do not think that there is much between us. At the end of the day the noble Lord's party and my party want to see a successful bus operation. We differ as regards the method, the means by which to go about achieving that.

The noble Lord asked about the decline in new vehicles, and I think I answered that point in my first statement. I suggest that the question which arises is whether demand should be maintained at a level higher than necessary to meet operational requirements. Stage mileage operated services seem likely to continue to decline in the foreseeable future—I do not say that that is a good thing; I just say that it is a fact—partly because of decline in patronage and partly because of service reviews to match provision more closely to needs. Operators should not be encouraged to purchase more vehicles than they need, or the manufacturing industry to plan for a higher level of demand than can be economically sustained.

We on this side of the House in particular are always very susceptible to any suggestion as regards transport in rural areas. We have traditionally always had a great wish to help rural areas. But I suggest that in effect most grants go to benefit urban areas because that is where most buses are used. Indeed, it is common sense, because most of our population lives in urban areas. However, the Government are highly alive to the needs of the rural areas—for example, in the last TSG settlement we favoured revenue support in shire counties.

However, support for conventional bus networks is not necessarily the best use of resources in thinly populated areas. Cars, minibuses and sharing schemes can often provide services more effectively. The Transport Act which we have recently passed makes it easier to organise such services, and we shall continue to encourage experiments with help and with advice. The noble Lord, Lord Underhill, is a very good man. He wants to see the community helped to the best advantage and those people who do not have cars helped to get to the shops and so on. I have the same views as he has on this matter. Believe me, we are trying to do our best. I suggest that noble Lords opposite have tried to do things their way but I do not say that they have had a 100 per cent. success. Let is try now to do things our way. I do not suppose for one second that we shall have a 100 per cent. success, but let us see who has the better balance of the argument.

We are entering a new phase. Let us give the Transport Act a chance to work. This order is mainly something about which both the Government of the noble Lord, Lord Underhill—which has just been phased out—and our Government are in agreement. I take his point about the second part not being quite so agreeable to him, but the intention on both sides is to make it workable. Therefore, I hope that the noble Lord, Lord Underhill, will not hinder the passing of this order because, at base, we both want the same thing.

On Question, Motion agreed to.

[The Sitting was suspended from 8.5 to 8.15 p.m.]