Buses

HL Deb 25 October 1984 vol 456 cc304-40

4.59 p.m.

Lord Teviot rose to ask Her Majesty's Government what action they are proposing to take following the publication of the White Paper on Buses (Cmnd. 9300).

The noble Lord said: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. At the outset, let me say that I am very grateful for the fact that, as is usual in your Lordships' House, we shall during this debate have the benefit of the wisdom of noble Lords of all persuasions and interests.

Road passenger transport is a very important subject. The White Paper merits a formal debate rather than an Unstarred Question such as we now have before us. Nevertheless we are starting at a reasonable hour, although there were moments when I was wondering whether we were going to. However, there again, your Lordships have been discussing a most important Statement. I should also like to say that I am delighted to welcome my noble friend Lord Brabazon, who is cutting his teeth on a subject to which he is new. I look forward to his winding-up speech. I would add that I am grateful to him for discussing matters beforehand.

There is no need for me to introduce myself on this subject. For many years I have been closely connected with the bus industry. I have also taken account of views expressed by users, local authorities, bus operators and their associations. To add a final note to this brief introduction, I can fairly say that I have been involved with no White Paper arousing such controversy without prior consultation by way of a Green Paper. The fact is that the whole provision of bus services in the country is likely to be stood on its head. This makes it all the more vital for Parliament to consider the White Paper and its implications in some depth.

I would at once like to make it clear that there is much in the White Paper with which I agree. It is right that we should direct our minds to the needs of the public and should strive with compassion and within reason to satisfy these needs. The opening paragraphs of the White Paper clearly demonstrate these objectives. We must also welcome moves to maintain and to tighten control over quality and safety. That is in the interests of bus users and indeed other road users.

It is also important to ensure that available resources are used wisely and that, through striving to increase efficiency, the bus industry should extend the level of service it can provide from the revenue derived from fare-paying passengers. In this respect the introduction of competition is extremely relevant. Concessionary fare schemes were introduced for the benefit of the user, not of the bus company. That, again, is a right perspective. However, it is easier said than done to ensure that all operators will participate in these schemes on an equitable basis. While one believes that a professional bus service is the most desirable way of meeting public need, it cannot be denied that there are areas where this is not possible and the use of alternative transport must here be welcomed.

Having said that, there are aspects of the White Paper that give me cause for concern. Not least is the way in which the historic background has been presented—even distorted—to support policies put forward in the paper. It may be thought that if the premises upon which the arguments are founded are inaccurate, the solutions may themselves be inaccurate. This is something that I should like to consider.

In the first place, the system of road service licensing introduced in the 1930 Act is described as "highly restrictive." I would suggest that it is not nearly as restrictive as the bureaucratic control now applied in the Hereford trial area. Far from leading to neglect of the best parts of the market, the licensing system encouraged operators to look for new and interesting destinations which would not otherwise have been served, rather than to seek to indulge in the undesirable practices of the 1920s when competing on established routes. I put it to your Lordships that this licensing system was the reason why Great Britain developed a network of bus and coach services that became the envy of all other countries.

No system is better than the men who administer it, and the human element has at times been less than perfect. But, from my own experience, I doubt whether any operator who cannot obtain a licence under the present somewhat modified system of road service licensing is really capable of providing the sort of service upon which the public can depend. The rule is that an operator must be given the licence that he applies for unless that is seen by the impartial traffic commissioners to be against the public interest. That is hardly restrictive and the process of preparing a licence application has ultimate benefits for all concerned.

Next, my Lords, I would consider the claims made for deregulation of all bus and coach services, other than local bus services, under the Transport Act 1980. My purpose is not to object to deregulation in the commercial areas of coach operation—although there is danger in making comparison with the bus operations of the industry which are essential for many people and include a considerable element of social service. Many routes, both urban and rural, can never be fully self-supporting. Yet the praise accorded to the 1980 deregulation reflects only a part of the picture. Undoubtedly, more passengers are travelling by express coach now than in 1980. The decline during the second half of the 1970s has been reversed. But the number of passengers carried has only been restored to what it was in 1975.

Moreover, much of this gain has been at the expense of British Rail. That has actually concealed the loss of express coach services from some minor cross country routes and from a large number of smaller intermediate towns on trunk routes. Operators could not commercially justify serving these towns with the revised pattern of operation while their energies were concentrated on the main routes. Let there be no doubt that whatever the gains, the new pattern of express operation did deprive many people of services they had previously enjoyed. That, however, is less important than would be the case with the more immediate needs of bus travellers.

Even accepting the benefits, the claim—or rather suggestion—made in the White Paper that between 1980 and 1983, 700 new express services were introduced is absurd. The figure relates to notifications of express services under Section 3 of the Act, now Section 2 of the consolidating Act. Many notified services were never operated at all; many were soon withdrawn; many were variations of existing routes or timetables; many were changes of operating company within a group. What is the true figure? I would suggest that no more than 10 per cent. of this 700 are genuine new routes opened up since 1980.

Perhaps it is even more important to note that deregulation did not lead to competition between coach operators. As those with experience predicted, the big battalions have dominated the scene to an even greater degree since deregulation. Some new passenger markets, such as the student population, have been developed, but the real competition has been with British Rail. There is a lesson to be learned here.

There are other matters arising from the 1980 Transport Act about which one could be critical—such as the functioning of operator licensing—but time does not permit. However, the third historical area on which I must comment is also the outcome of that Act. This is the way in which the White Paper deals with the trial areas. It is curious that the claims of success in Chapters 1 and 4 of the White Paper are in no way justified by the analysis in Part II of Annex 3 of the same paper.

Moreover, the long awaited survey by the Secretary of State's own Transport and Road Research Laboratory clearly shows that it is too early to use any of these trial areas to justify the major changes proposed in the White Paper and yet claimed to be supported by experience in these areas.

As I have said, we have only just received the long awaited study from the TRRL. One had wondered if it was to be suppressed. So, with a deep thirst for seeing things for myself, I have visited and studied the Hereford trial area—which is claimed to be the gem of the three. In its own way, it is an interesting experiment and, to be fair, my visit to this delightful part of the country upset my preconceived ideas. But, looked at as a prototype for the rest of Britain, scrutiny of this gem shows that it is no more than paste.

I have held discussions with the county council, with the City of Hereford, with representatives of the users and with operators from the public and private sectors. I saw with my own eyes the traffic congestion in the city at the market day peak. Whatever statistics may seem to show, the public has not really gained from two buses running at the same time, from "leap-frogging", buses taking short-cuts on unauthorised roads and other malpractices rife before road service licensing was introduced. There are not enough passengers to justify the number of buses which fill the narrow streets of Hereford, upsetting the shopkeepers and others. It is perfectly obvious that there is wasteful competition. The position is unstable and it must be a matter of surprise that it has continued in this way for so long.

The city council regard the trial area as a disaster and explained their problems to me with great courtesy and in detail. Their concern about safety has been reinforced only this week when one operator had two of his five buses put off the road with brake and steering defects. Three out of the four new operators have at some stage had their licences revoked.

When I met the Hereford Federation of Women's Institutes, the ladies, drawn from all parts of the old county, were grateful for the increased level of service and the lower fares, but they were fearful that city fares reduced from 35p to 10p were rumoured to be on the point of being increased to 50p. Present joy, but future foreboding.

The only others who were enthusiastic about the trial area were the county council, but even there Mr. Carrington, chairman of the transport committee, told me that it was essential that services put out to tender should be controlled by the county. In other words, he denied the possibility of tenders for services being allied with total deregulation. What is more, all operators were of the opinion that this control by the county was bureaucratic and more restrictive than that formerly experienced under the traffic commissioners. In any event Mr. Carrington, with his experience as the pioneer of trial areas, has brought us face to face with the conflict of the White Paper. Tendering for services will not work with deregulation. Both are ways of introducing desired competition, but—as one was taught at school—a positive and a negative make a negative.

Let me take a simple example, the county seeks tenders on the amount of subsidy required to run a particular service seven days a week from 6 a.m. till 11 p.m. It has been paying £5,000 a year in subsidy but I win the contract with a tender of £4,000. Then another operator, who has a vehicle on contract work from 10 a.m. till 4.30 p.m., decides that he can make a profit by running this bus on my route, at lower fares, during the peak—7.30 to 9.30 a.m. and 4.30 to 6.00 p.m. As a result, my revenue falls by £5,000. Either the county must pay me an extra £5,000 to keep going or I must take the service off. If the county has the money—which is also very unlikely—it will be £4,000 worse off under the new system. If it has not, the public will be left with a far worse service.

The example may be over-simplified but it demonstrates the point—a point, I must add, of major concern to the associations of both county and district councils. The result is negative. It is bad. It is a waste of public money, and for that reason it is not to be compared with commercial competition as, for example, between two butchers. We have only one butcher in this case.

Another visit that I made was to Manchester, at the invitation of the Greater Manchester Passenger Transport Executive. This was a valuable experience. Not only was I given a professional overview by the men at the top, but it was arranged for me to be taken around, early in the morning, to see their operation at work.

If I can digress for one moment, if any of your Lordships wish to view a transport or bus operation in action, it is important to see a bus garage going to work and then to be taken around the areas where the passengers are waiting at the bus stops and to come back and view the traffic at the peak period. After seeing that you can with justification have some breakfast—even a large breakfast—and you have deserved it.

The Greater Manchester PTE has a fleet of over 2,000 vehicles and co-ordinates with British Rail. Its statutory duty is to secure or promote the provision of a properly integrated and efficient system of public transport to meet the needs of the area. As far as Manchester is concerned, I can see that they have done exactly that. They must also have regard to town planning, traffic and parking policies. Now, with reorganisation and the emphasis on deregulation, everything seems to be heading full speed astern. What none of us wishes to see is the deterioration of service—that could add even more to traffic congestion. There is another area which gives me great concern; namely, the quality of service. Remember Hereford, my Lords.

I come to the main issue. If we are to have deregulation we must forget all about tendering for meaningless contracts. Services will run only where there is commercial advantage, and the cohesive network—which is fundamental to the very first sentences of the White Paper—will inevitably be put at risk. No, my Lords, we must not sacrifice the co-ordination introduced by a Conservative Government through the Local Government Act of 1972 (1973 in Scotland). Rather, we must follow the White Paper by introducing competition through tenders for subsidised services—but into the co-ordinated network. We must retain a necessary degree of regulation if we are to retain necessary services.

There is just one other major point on which I must dwell. I am referring to what my right honourable friend the Secretary of State describes as the "vice" of cross-subsidy. If it be a vice, then it is one practised—at least—in every service industry. When I stick a postage stamp on an inland letter it has the same value be the addressee one mile or 500 miles or more away. The busy shop assistant has periods standing around in any empty shop. There are many forms of cross-subsidy.

For the bus passenger the problem is that for every £1 of subsidy from central and local government, the industry itself provides some £3 in cross-subsidy. If the Government reduce their support to counties and regions—and they have clearly indicated this intention—that will be nothing to the deficits created by the loss of cross-subsidy in a fully deregulated market. The county losing £2 million in Government support might find it needs £5 million or £6 million to maintain existing bus services—allowing on the one hand for increased efficiency and on the other for "creaming" on subsidised services—we are back to the problems of the predominantly Conservative associations of county and district councils.

What a tragedy it would be if the benefits accruing from some of the proposals in the White Paper entitled, Buses should be put at risk by an excess of zeal. There are many people in the country who inescapably depend on the bus; there are others who would suffer from its loss. Therefore, I appeal to the Government to think again, to look at the points raised on all sides and not leave too much work to be done when a Bill comes before your Lordships' House. Let us all seek genuine improvements in the health of the bus industry, but let us make sure that we do not prescribe a cure based on a false diagnosis—otherwise the patient will get worse, not better.

My Lords, I have spoken for long enough. I have not the time to cover all aspects of the White Paper. Sadly, there has not been time for me to discuss the merits or demerits of dismantling the National Bus Company, which has become a highly efficient and competitive force—that will be for others to do. What I have tried to do, however, is to set a platform for your Lordships to follow your own particular interests. My final message is that, whatever happens, the needs of the public must come first and here I echo the National Consumer Council, in their response to the White Paper, by saying that there are considerable practical difficulties involved in implementing the Government's proposals. If when my noble friend comes to wind up he can answer the queries raised by the untried trial areas and if he can show that the Government are really alive to the practical problems, I shall be a happier man.

5.19 p.m.

Lord Underhill

My Lords, the House will be grateful to the noble Lord, Lord Teviot, not only for having put down this Unstarred Question which enables us to discuss the White Paper—and it may be the only chance that we shall have—but also for the way in which he has presented it. I am certain that he has put forward some very formidable arguments for the Minister to deal with. Frankly, the White Paper is putting back the clock. Proposals for deregulation, the abandonment of the principle of cross-subsidisation, the break up of bus operations of the passenger transport executives and the municipal undertakings and the destruction of the National Bus Company—none of these has anything to do with the provision of effective public transport. They have to do with the regrettable adherence of the Government to their belief that market forces can solve everything, that privatisation can solve everything, and they have little regard to actual public needs. I was very pleased that the noble Lord, Lord Teviot, stressed the matter of public needs. This is to be followed by changes in the transport supplementary grant administration which have a great effect on public transport.

As the noble Lord has said, the Government assured everyone that the changed criteria for granting road service licences under the 1980 Act was what was needed. As he said, it placed a duty upon the traffic commissioners to grant a licence unless it was against the public interest. What would be the position of those operators who were refused a licence on the ground of it being against the public interest? Under deregulation what happens to them? Apparently they can be included, provided that they can fulfil safety and other requirements.

Why are the Government now going for deregulation, in the light of their own provisions in the 1980 Act; or are the Government telling us that their own proposals in the 1980 Act are not working? I wonder whether the real reason is not to be found in the Transport and Road Research Laboratory's own Report No. 1098, which deals with developments from the 1980 Act. I should like to quote two conclusions. Conclusion 4 says: Few new examples of private versus public sector competition had emerged in any of the sample areas"— and there were six areas— and when it had public sector operators had usually retaliated with fares reductions or increased local provision. No major incursions into urban territory had occurred". Conclusion 8 states: Overall it seems fair to conclude that there were relatively few significant changes in fare levels or policies between October 1980 and January 1983 that were directly attributable to the Transport Act". Those are the TRRL's own conclusions upon what happened under the 1980 Act.

The Secretary of State first declared his intentions at a dinner of the Bus and Coach Council. I was present at that dinner, and, frankly, I was rather amazed that a man who had only just got his feet under the table should so soon be making statements as to what he intended to do with bus transport. One can only assume that he had some polemical arguments that he wished to follow. Then, as with other legislation, the White Paper was cobbled together to justify the aims which he wanted to achieve.

The Bus and Coach Council represents 98 per cent. of all bus operators in this country—private, independent, municipal, PTEs, the NBC and so on—and, incidentally, two thirds of the coach operators. What have they said? They have said that, Abolition of route licensing would mean that many people who depend on buses"— and they point out that 39 per cent. of households have no car— might be left with a worse service or no service at all". The noble Lord, Lord Teviot, referred to the views of local councils. Time does not permit me to mention them all, but two of the associations—the AMA and the district councils—strongly oppose deregulation. The county councils are neither for nor against, but they have expressed very great concern at certain aspects of deregulation and of tendering, saying that there seems to be no protection against creaming off. The Association of District Councils said to the Secretary of State: No evidence has been put forward to demonstrate the need for any further general de-regulation of stage carriage bus services. The vast majority of operators … are firmly opposed to what appear to be ill conceived proposals based on flimsy ideas of what is desired or possible". The AMA, of which I am president, expressed similar views, but I have quoted the organisation with which I am not associated.

The noble Lord, Lord Teviot, referred to the consumers. Perhaps we can see what they actually said. The chairman of the National Consumer Council's transport working party said this: There is a chance of very real threats from de-regulation. It has not been thought through: there is a great deal of dogma. Those making the decisions are not in touch with the real needs of the people". The first question must be: will the Government take heed of everything that is being said about the White Paper? As the noble Lord, Lord Teviot, said, it is regrettable that there was not first a Green Paper on proposals before the Government declared their intentions. Also, if deregulation is the panacea for all the transport troubles, why is the whole of the London conurbation being left out? The Government have complete control there under London Regional Transport, and we argued that in the last Transport Bill.

The Government's justification is based on trial areas, and the noble Lord, Lord Teviot, referred to this. He also referred to the fact that the Transport Road Research Laboratory's Report No. 1131 was published on 26th September, after the White Paper, but we understand that the Secretary of State had knowledge of what was in the document before he produced his White Paper. I should love to read out the whole of the document, but I do not suppose that noble Lords would wish me to do so. Perhaps I may quote from two conclusions in the Transport and Road Research Laboratory's Report No. 1131, which was published on 26th September this year. One of them states: Any conclusions drawn from experience in the three Trial Areas must be qualified by the fact that they are based on a limited set of largely rural areas over a limited period of time. Furthermore, the trial areas have not been isolated from economic factors (e.g. pressure on financial resources, declining demand) which have influenced the provision of bus services everywhere". The last conclusion says: It is clearly too early to determine whether the public will benefit in the longer-term. Under present conditions, de-regulation in itself may not be sufficient to allow small operators however efficient, to compete successfully with established operators with greater resources". The Bus and Coach Council's president has said that his council rejects the evidence of the trial areas as a basis for countrywide deregulation.

It must be pointed out that the largest city in any of the three areas was Hereford, with a population of 47,000. Yet because of what happened in Hereford—which we say was a disaster—the Government say that this could be applicable to Sheffield, with a population of half a million, Manchester, and so on.

I wish it was possible to give many quotations, but time will not allow. However, there is certainly not the case for deregulation which the Government claim. The overwhelming majority of subsidised routes are through the networks—either the networks of the passenger transport executives in the conurbations or the regional subsidiaries of the National Bus Company, partly from cross-subsidy from profitable routes and partly from revenue support. It may be useful to quote what the National Bus Company said. It is far better if I give quotations rather than say what I think; let other people who are experienced operators say what they think. The annual report of the National Bus Company, which was published recently, says that the company is, concerned that proposals that would remove the requirements for some form of road service licence"— that is, route licensing— would seriously undermine the established structure of bus networks, particularly in the urban areas". It goes on: Clearly any relaxation of licensing which allowed operators to compete on the profitable routes without any obligation to plough back some of the profits into loss making routes would undermine the network to the detriment of all. A study which NBC commissioned into the subject and carried out in 1983 jointly with the Institute for Transport Studies of the University of Leeds has identified the important role played by cross-subsidy in maintaining networks of bus services". I hope that the Minister will not criticise what I have said about the NBC's report, because all Ministers have praised the National Bus Company for its splendid efforts and the results it has achieved in reaching its financial margins, and everything. But it is to be rewarded by being broken up into small pieces as is suggested in the Government's White Paper, and then it is to be sold to the private sector. No real case is advanced in the White Paper as to why the Government are interfering with the National Bus Company, or why, as the National Bus Company itself says, they are prepared to risk breaking up this network of integrated services.

Without service networks, cross-subsidy is virtually impossible, and that is admitted in the White Paper. In paragraph 5.1 they say that only 8 per cent. of stage carriage mileage is by private operators. In the following paragraph, paragraph 5.2, they say that most of the private operators have only five vehicles or less, and you cannot run a network, you cannot run cross-subsidisation, on five vehicles or less.

Everybody agrees that with deregulation there will be private operators who will try to skim the cream. We know that there are good operators. There are at least one or two good operators in Hereford. The National Bus Company at Hereford recognises there are good operators. But the Government have suggested that all subsidised services shall be subject to competitive tender. If it is desired, there will be no necessity under those arrangements for the National Bus Company to recognise any social obligation to cross-subsidise. That would obviously affect parts of its network.

The policy would also destroy the network of services of the passenger transport executives in the conurbations. Even the White Paper, in paragraph 3.5, recognises that to carry out what they want in the PTEs they will have to change the duties laid on the PTEs under the 1968 Act.

Seven consultation papers have been issued. The one on tendering says that where possible each service should be put out to a separate tender. They suggest that a number of contracts should come up each year, and they envisage contracts of three or four years' duration, although for experimental ones annual contracts may be desirable.

A local authority has to invite the contracts. It may want to invite for a complete service; it may want to invite tenders only on certain days, or at certain times, because there are routes which are profitable at certain times of the day and on certain days but not at other times. Therefore the local authority has a job to do. But how does the White Paper suggest that local authorities shall face up to this? It is thin on the mechanics involved. All it says in paragraph 3.7 is: Some additional staff effort may be required to administer the new arrangements. It is not even admitting some additional staff—just additional staff effort.

The local authorities will have to identify the services for tender. This alone will be a massive task. If they want value for money they will naturally be concerned with the levels of fares; they will be concerned with the frequency of services at peak and off-peak periods; they will be concerned with what is being provided on weekdays and at weekends.

Having selected the services to go to tender, having awarded the contracts, every local authority which does this, if it is doing its job properly, will want to monitor what is happening and to have enforcement. What do the Government say? They say that there may have to be "some additional staff effort" to deal with this. That is all they say. There is no idea as to how the local authorities are to carry out this job at all.

It will mean a lot of bureaucracy and a geat deal of administration. I hope that the Minister recognises that it will inevitably mean that there must be an increase in the inspection staff. Unless there is, then these matters cannot possibly be monitored effectively.

There was criticism in Hereford, which was part of the trial area, that published timetables were being ignored, buses were running short of route, and even turning short. The noble Lord, Lord Teviot, has explained a visit he made to Hereford. He was able to carry out far more inquiries than I was when I visited Hereford, but I too saw the congestion in a small city centre. I also heard the criticisms to which I have referred, that the county council seemed to be unable to enforce even conditions to which they had agreed.

We had the concentration in Hereford on the more profitable routes at the best times. There was concern in the city, as the noble Lord, Lord Teviot, says about congestion in this rather small city area. I went around a housing estate. There was an NBC bus in front of us, a Midland Red; behind us an independent bus was running. We missed him. He disappeared because he had gone off-route. Possibly he had been told that there were two women waiting around the corner and so he decided to go round and take them. If Hereford is a guide, tendering will result in a number of operators coming on the best routes, but off-peak and on Sundays either just a single operator—often a different operator—and, if NBC decide not to carry on services on unprofitable routes and cross-subsidise them, there will be no operator at all.

The Government issued a consultation paper on tendering. I quote what it says on one point: Matters such as wage rates or working practices, or indeed any stipulation not related to the service to be offered would not be permitted. It states that normally the authority must accept the lowest tender.

This is an encouragement to lower standards. I would remind the House of an amendment I tried to move to the provisions of the Employment Bill on contracts for councils, and of what we were told. My noble friend Lord Carmichael moved at Committee stage, at Report stage and at Third Reading, amendments to lay down wages and conditions in tenders that the LRT would have to issue under the London Regional Transport Bill. What were we told by the Government? At Committee stage we were told: "More tests in any way will hinder progress". At Report stage it was said that this, "would frustrate rather than encourage competition" Then, at Third Reading they said, "We are not anxious to insert unnecessary obstacles".

We are likely to have a complete deterioration in standards. I hope that the Minister has seen and read all the words of the three appeals by independent operators in Hereford. I have. I hope that the Secretary of State has read them. As the noble Lord, Lord Teviot, says, over the past two years three of the four independent operators there had their licences revoked. Two were restored on appeal to the Secretary of State, but the number of their vehicles was reduced to three and their periods were also limited.

One operator whose licence was revoked used a layby as the operating centre. There were woefully inadequate and disgraceful maintenance standards. There were 47 defects and 27 immediate defects, which means that the vehicle could not be put on the road until they had been dealt with. These are ageing vehicles. They are not buses, they are coaches. There is also evidence in here of scandalous wages offered to drivers and fitters to carry out some of the work.

I hope that noble Lords saw the Guardian yesterday. Another firm at Hereford is before the Commissioners for disgraceful maintenance conditions. I hope your Lordships all read it so that I can save time by not doing so. There are few maintenance problems regarding the subsidiaries of the National Bus Company; there are few maintenance problems with the passenger transport executive bus operations or with the municipal undertakings because they have other interests.

In July 1982 the Monopolies and Mergers Commission considered the West Midlands PTE buses and the Bristol and Trent buses of the National Bus Company and looked at the Cardiff municipal bus undertaking and, by and large, gave them a clean bill of health on these matters. But if Hereford is an example, the problem of inspection and monitoring will be an immense task and the Minister must tell us how it is to be done.

I must not speak for much longer. We recognise that we can use unconventional means of transport: the minibus, the community bus, the post bus; all these would help. The White Paper seems to suggest that only one third of the minibuses are now used as passenger service vehicles and there might be an increased use of them. I hope that the Minister understands that economic factors and not legislation often prevent the wider use of minibuses on stage bus services. I am not an operator, but I have spoken to operators and I know that reliable operators will say that it is not always economic to run a minibus. A big bus can be flexible; a small bus cannot. One cannot push 50 people into a minibus at peak hours when they are leaving work. Therefore the answer is not only the minibus; there are other factors.

I have mentioned the measures to destroy the National Bus Company. I do not want anything done in Scotland. It is rather interesting that nothing is being done to the Scottish bus group. That is being left completely, and yet it is functioning in Scotland, just like the National Bus Company elsewhere. It is strange that when the Government want to hit the National Bus Company they use certain arguments, but when they want to praise the National Bus Company they compare its costs in the public Passenger Transport Executive with the cost of the PTE's bus undertakings. District undertakings are to be interfered with—those in the municipal areas; some 50 of them. They will be prevented from receiving local council subsidies to meet deficits. In the six metropolitan counties the PTE bus operations are to be broken down into smaller units; turned into companies with the same restrictions on financial support. There is even encouragement in the White Paper for districts to secede from the PTE bus operations.

PTEs are responsible for developing integrated services. That is laid upon them under the 1968 Act. An organisation along the lines of a PTE bus operation as well as PTEs in general are essential if we are to develop the Section 20 grants towards rail services which play a great part in the conurbations. The PTEs, with the National Bus Company, are the base of training in the bus industry, and that will go. Services for the disabled and other special groups are in the main provided by the public undertakings, for obvious reasons. The costs that would fall on a private undertaker would be fairly big. The major public operators in the large conurbations undertake major developments of integrated transport systems. All this is at risk. I repeat what I said before: if London is to be excluded, why not exclude all the big conurbations from the deregulation proposals. The same arguments apply there.

There is no reference in the White Paper to the railways. There is no reference to integration or co-ordination of services. Yet the railways play a big part in the conurbations, as well as elsewhere. There is no reference to planning and land use and the relationship with transportation. There is no word about traffic management schemes organised by the local authorities. There is no reference to the fact that what is proposed is breaking up the transport policies and programmes of the county councils. I hope that all these matters raised in this debate will be considered by the Government. May we hope that they will listen and either drastically modify their proposals or leave this terrible menace to our public bus company out of their next year's programme?

5.46 p.m.

Lord Tordoff

My Lords, I, too, must thank most gratefully the noble Lord, Lord Teviot, not only for having placed this Question on the Order Paper but for the quite remarkable speech that he made in asking his Question. I was deeply impressed by what he said and, coming from the Government Back Benches, although it was addressed courteously to the Government Front Bench, I am sure that the Government ought to take very seriously what he said because it struck me as being a devastating speech from the Government point of view.

May I also take this opportunity, which I have not had before, of welcoming Lord Brabazon of Tara to the Front Bench. I feel sorry for him that he has had to step into this particular maelstrom as his first baptism of fire—to mix my metaphors rather gloriously. May I also take this opportunity of wishing all the best to the noble Lord, Lord Lucas of Chilworth, on his departure for higher things. I am sorry that he is not in his place at present but I am sure he will read what is said. Over the period of time we have trained him in transport matters—or at least the noble Lord, Lord Underhill, has—and we had a really quite interesting three ring circus going. I hope that we can continue it with the noble Lord, Lord Brabazon.

There is a great temptation to make a Second Reading speech on a non-existent Bill on this occasion because the items contained in the White Paper are so provocative. I think that one would like to make a Second Reading speech in order that one does not have to make a Second Reading speech; in other words, so that the Bill will never emerge in the form which appears possible.

One of the worrying things is, as has already been said, the time table for this whole process. Once again the Government have introduced a White Paper immediately before a Recess. Once more there is immense pressure for consultation to take place and when it cannot take place in the very short time scale they extend the period of the consultation. Nevertheless the Queen's Speech is due next week and one suspects—though I do not expect the noble Lord, Lord Brabazon of Tara, to be able to comment on this because I am sure that he has not yet seen the Queen's Speech—that we shall find ourselves with something related to the White Paper in the form of legislation long before the consultation process has been completed. On this issue that would be most unfortunate.

Having said all that and having agreed entirely with what has been said by the two previous speakers, it is probably worthwhile and proper to go on record to say that it would be foolish to suggest that all is well in the stage carriage business in this country. There is no doubt, as the White Paper points out, that while the travel market has increased by 150 per cent. in the past 30 years bus usage has halved; from 1972 to 1982 costs have increased by between 15 and 30 per cent. in real terms and revenue support has gone up by 13 times. I should be the last to pretend that in that situation we can be complacent about the state of the buses in this country, although on the financial side it should be noted that most of the increases in cost were in the 1972–75 period when the system was being set up, and that the increase from 1974 to 1982 was only 15 per cent. in real terms. One can play with statistics and point out that the increase between 1980 and 1982 was 57 per cent., but most of that was in the metropolitan counties and the GLC and we have been round that bit of the track several times already in the past. One can also point out that the support for the English shire counties fell in the 1973–80 period and in 1982–83.

Nevertheless there is a need for review and change. I hope to make some positive suggestions at the end of what I fear will be a largely critical speech. From the doctrinaire point of view there is a danger on the one hand of falling over into a belief in total planning. There may be areas where we have had far too much of that and the whole thing has become extremely bureaucratic and increasingly inefficient. I am sure that some members on the Government side will point to that. Similarly people on this side of the House will point out that the total free run of market forces will not succeed either, and I fear the Government have fallen into that trap in their White Paper.

The whole concept of planning for the future has changed in recent years. I think that I have said this before in your Lordships' House, and I shall say it again, in industry planning is no longer regarded as a question of predicting the future. There was a time when planning was a question of forecasting numbers, putting them into a computer and then the computer would tell you what you have to do. That, fortunately, in industry is no longer acceptable. Industrialists now talk about planning for an uncertain future. The future is not predictable but you can plan for it. And it is the lack of planning in this document which is the worrying thing.

Certainly the sort of unbridled competition which one feels runs as a thread through the document is not the answer to the problems of the buses. There seems to be a naive and pious assumption that market forces alone will provide the services that the consumer needs, will provide information to the consumer, will provide the interchange facilities and many of the other things which the noble Lord, Lord Underhill, mentioned. They will not. But perhaps it is that the Government do not care if they do not.

Let me talk briefly about the situation in the conurbations. We are faced with the abolition of the metropolitan counties, however much resistance may come from noble Lords on this side of the House and in another place; and transport is one of the things which are being put in the hands of joint boards made up of district council nominees. But if we look at paragraph 5.13 in the White Paper we see, set out in black type, a positive encouragement for district councils to secede from those joint boards. How will it be possible, if those joint boards are not composed of all the district councils involved, for an urban-wide service to be provided, for any system of through ticketing to be provided, for any comprehensive timetabling to be provided—and timetabling is something to which I should like to come back—and how will there ever be the possibility again to build the sort of new interchanges like the Bradford bus/rail interchange? And how will it be possible for a single operator to afford to do many of these things?

The problem in the conurbations is that passenger journeys do not fit into district boundaries; 50 per cent. of them are cross-boundary; and that is in a typical PTE. Some 10 per cent. of the journeys are single bus and train journeys across the conurbation. By all means let us decentralise the PTEs but let us keep strategic control over them in the hands of some democratic overall authority. I am not opposed to decentralisation if it provides more creative, more competitive, more efficient operation; but there must be some co-ordination of their activities, otherwise, as we have said during proceedings on the London Regional Transport Bill, this is a recipe for disintegration.

Let me come back to the question of passenger information. The operator is obliged to register timings and routes with the vehicle licensing authority. But some of these vehicle licensing authorities are vast areas. I am sure that the noble Lord, Lord Mottistone, who knows the Isle of Wight very well, and my honourable friend the Member for the Isle of Wight, who is our transport spokesman in the other place, will be aware that it is controlled by an area which includes Oxfordshire and Kent. In a situation where there is going to be a lot of movement, a lot of flexibility, a lot of operators coming and going and a lot of changes of timetable—how on earth in an area as vast as that can the public possibly be kept up to date with the timetabling within their area? And who is to be responsible for publishing those timetables? The White Paper is silent on this. I believe that with so many operators in such large areas, the information to the public is going to be absolutely minimal. We face the same sort of fragmentation to which we referred during the passage of the London Regional Transport Bill as being a danger, and, indeed, the danger here is greater because of the reasons referred to by the noble Lord, Lord Underhill.

The White Paper proposes that large public undertakings should be broken up. I, too, was fascinated to see that the Scottish Bus Group have been left out of this great carve-up and I just wondered in my mind whether this showed that the Scottish Office was a greater centre of power than the Department of Transport. I do not know. I am sure that if the noble Lord, Lord Ross of Marnock, were here he would disagree with me but I think that there is some sinister activity at work there.

Again, to repeat what the noble Lord, Lord Underhill, has said, the London position is now totally inconsistent with what is contained in the White Paper. Under the London Regional Transport Bill, the private operators only receive a subsidy if they enter into an agreement with the LRT. So the Government go some way to believing in integration but apparently only where they are responsible, as in the case of London.

Let me repeat what I have said before: that in a healthy community transport goes hand in hand with a number of other things, with land-use planning, with housing developments, with recreational and cultural activities. Buses link one part of the city with another, buses link one part of the family with another part of the family, they link the villages with the towns, the villages with the railheads, with the hospitals and with the post offices. And when the Government have allowed sub-post offices in rural areas to be removed, then how are pensioners going to collect their old-age pensions if they cannot get a bus to go into the nearest town? These things are all far too important to be left to chance or to be left to market forces. I say again that I believe that it is a recipe for chaos; I believe it is a recipe by which more people will be forced into using motor-cars and we shall have a further downward spiral in the use of public transport. And, of course, those without cars will have to stay at home.

There is no time to deal with many aspects of the White Paper. We have already had a wide-ranging discussion and this is Thursday night and many people wish to get home. My noble friend Lord Attlee will deal with two of the most important aspects which have already been mentioned; that is to say, deregulation and cross subsidy. Suffice it to say from my point of view that I simply do not understand the removal of cross-subsidisation when, at the same time, local government is being controlled by rate-capping. It seems to me that many of the services which at the moment are partly subsidised from the taxpayer and the ratepayer and partly from cross-subsidisation will be squeezed on both sides under the provisions of the White Paper. On the subject of de-regulation the whole conflict between safety and maintenance and many things that Lord Underhill has mentioned are relevant.

In addition, there are the problems of unfair competition, the question of people maintaining in lay-bys, the lack of training for operatives, the lack of unionised labour—all these may reduce costs but they will produce unfair competition. When that is put alongside the tendering provisions, we see what a nonsense it is. The efficient operating of buses depends on the maximum utilisation of those buses over a whole range of different services. Proper maintenance of buses is simply not economical on a small scale; and there is no guarantee that an operator on an unprofitable route would not face further unfair competition under the tendering system. Further, the duration of the contracts is unclear. Short contracts will discourage investment in new buses. Finally, tendering and de-regulation simply do not go together. If the Government take no other message from this debate or from the papers that have been submitted to them, I hope that they will ponder on that which I believe is a fact.

There is another minor item to which I shall refer. It is the commercial operation of bus stations. It is probable that on a cost basis bus stations have never been commercially viable. Therefore, in this situation their existence is threatened. The idea that private operators will construct bus stations seems to me pretty unlikely: the kerbside is an awful lot cheaper.

There are many, many other problems. Like the noble Lord, Lord Teviot, if I correctly heard what he said towards the end of his speech, we on these Benches would favour a different approach, which would be to take the existing stage carriage services as a starting point. Many of them have been tailored to suit needs and fairly closely match what the market really needs. And instead of destroying the bus service network, it seems to us it would be preferable that the services should be open to tender on a network basis so that any reputable operator who has an operator's licence and sufficient financial and management resources should be open to tender for the network or for appropriate parts of the network. I think it is down that route that we should be looking rather than towards the fragmentation which is inherent in the Government's proposals.

I am deeply worried by the White Paper as it stands. I am deeply worried that it is a recipe, as I have said before, to push people back into motor-cars, to increase congestion on our roads and to continue the downward spiral which is damaging bus services in this country. I do not pretend that nothing needs to be done with bus services—clearly it does—but this White Paper is not a starting base. I heard a quotation the other day and I am sorry that I cannot tell your Lordships where it comes from; but somebody said of this White Paper that because it was a recipe for the destruction of the bus network, and because it was a recipe for the imprisonment of people in both urban and rural houses who do not have motor-cars, it should be regarded as a White Paper with black edges.

6.2 p.m.

The Earl of Minto

My Lords, I, too, should like to join with other noble Lords in thanking the noble Lord, Lord Teviot, for providing us with this opportunity to discuss the White Paper on Buses this evening. I should also like to take the opportunity of welcoming, as other noble Lords have done, the noble Lord, Lord Brabazon of Tara, who is to answer our various questions. If I may digress just momentarily, when I was learning to fly many years ago I remember looking with absolute awe at the car of the noble Lord's grandfather which bore the number plate FLY 1—because he held the first licence for flying an aircraft in this country—and thinking how many people had obtained licences from that moment until the moment that I was making my attempt and wondering whether I would in fact pass. I am sure that the noble Lord will do every bit as well as his grandfather.

I should like to start by saying that on many, many aspects I support the Government's overall policy of competition. So long as it remains a principle it may be challenged, and with all good principles, I believe it is important to ensure that the actual application will be for the benefit of our society in each specific case. Thus, I think it is proper that we should interrogate this White Paper since this would appear to be the only point in time that we are going to have the opportunity. Having done so, I am sorry to say that I feel that while in theory it may be academically beyond reproach to some, in practice if it is brought forward as a Bill it may be a total catastrophe.

Unlike the noble Lord, Lord Teviot, who is so well known on transport matters in your Lordships' House, I am not necessarily known in that way and so perhaps I should say that for a good number of years I have in the past been a lay traffic commissioner for Scotland, and within the realms of local government I was responsible for the Border Region Transport Committee's activities from the time of the reorganisation of local government until mid-1980; and in the latter capacity I served during the whole of that period as a member of the Transport Committee of the Convention of Scottish Local Authorities. So it is against that background that I speak, and it is in the knowledge, too, that I have never lost contact over the past two years with those with whom I previously worked.

I speak necessarily from a Scottish point of view and also to a very large extent from a rural point of view, although I have to admit that I seem to have found on investigation that much of what I have to say has common cause south of the border. So within the time available, I would turn now to the interrogation of the White Paper, and first I should like to speak from the point of view of local government in Scotland. A basic difficulty in the proposals appears to be that they will cause inherent instability. The White Paper states that the proposals: will create new stability and confidence in the provision of rural bus services". So perhaps it might be worthwhile having a look at a number of difficulties which may in practice manifest themselves along the road.

First, the services which an operator finds to be viable depend very much upon the activities of competitors. The services which are viable at one particular time may be forced into a loss without warning by the introduction of a rival service. The price that a tenderer may bid for a subsidised route may become wholly untenable if a new service is operated over just a small part of that same route. If I may, I am going to be parochial and use the names of towns in my part of Scotland and I ask your Lordships to accept that there will, throughout England and Wales, be exactly similar examples which your Lordships can draw from your own experiences.

So as an example I shall take the service between Galashiels, a community of some 18,000 or 19,000 people, and Earlston—we call it a village but it is really a great deal larger than that. The service between those two communities is at present just viable to Eastern Scottish, which is a subsidiary of the Scottish Bus Group. But new competition for traffic between any intervening community between those two areas of population would instantly push the service into a loss overnight. The service to Earlston would then require subsidy, and a contract might be let for that route. Then the introduction of any new service between, say, a little village—there is nothing to stop it—and Melrose, which is the first intermediary town, could destroy all the revenue calculations which the successful tenderer had made, forcing him to re-price or, worse still, to withdraw from the contract. Equally, the cost of operating a service may depend upon the existence of other work for men and vehicles. The loss of this work through a lost tender could result in remaining contracts becoming unworkable. So it seems to me that the proposals, very far from creating new stability and confidence in the provision of rural bus services, will introduce a great deal of instability into our own buses in the rural areas.

Secondly, in some rural areas the real competition on tenders may be very limited. In particular, the efficient operation of many long-distance routes will require an operator who has vehicles available at both ends of the route. In these circumstances, one operator may have such a clear advantage over any possible rival as to be effectively free of all competition, which means to say that he could run a service where he wanted and charge what he wanted. At least it can be said at the present moment that the Scottish Bus Group's profit, as determined by the Government, is limited to 4.5 per cent. of its capital assets.

Thirdly, in abandoning the network approach there will be less efficient use of men and vehicles. Of that there is no doubt. At the time of SCOTMAP, many deficiencies were identified in the initial "demand network" and additional services were specified by the council. Instead of simply adding these extra services onto the original proposals, Eastern Scottish, with whom we on the Borders work incredibly closely, redesigned the network as a whole, designating each journey to be operated by the man and vehicle best placed to do it. The marginal cost of covering the council's additional requirements proved very low indeed by using this means. As a result, very few routes in the Borders region are operated throughout the week by only one depot, and there will have to be substantial changes in the services provided if viable and non-viable services are to be separated. The separation could, in our view, lead to much less efficiency.

Fourthly, in creating increased competition the Government explicitly intend to abolish the practice of cross-subsidisation which has already been frequently referred to and which currently takes place. The White Paper estimates that the value of internal cross-subsidy is between three and five times the value of the local authority revenue support. Yet the paper suggests that the disappearance of the whole of this hidden subsidy will be offset by greater efficiency. That is the argument—greater efficiency. It is interesting to me that it comes at a point in the paper where there is the assertion that, in the assessment of whoever wrote the paper, the Scottish Bus Group, thanks to SCOTMAP, is already exceptionally efficient! So we find ourselves a little bamboozled by that. It seems likely that the effect of eliminating cross-subsidy may be a higher subsidy requirement for the remaining rural services, at least in the area for which I have been responsible in the past. I am not suggesting that over the seven years when I was responsible for these matters we were perfect. No, my Lords. But we achieved something which was workable, good and understood—and it still is—and to see it ruined would be a great tragedy.

Fifthly, the White Paper spends some space in analysing the services which may cease to be viable following the erosion of internal cross-subsidy. As well as rural services, the paper identifies evening services, Sunday services and even some peak period school and work journeys as being most at risk. It is more than likely that on many routes contracted journeys would operate in between commercial services, not necessarily both provided by the same operator. There are also bound to be areas of overlap between two services serving different ultimate destinations, as well as services upon the same road in open competition. No operator is likely to choose to provide information about his competitor's services, so a comprehensive timetable is not likely to be compiled unless it is compiled by the local authority.

Similarly, no operator is likely to make his bus station available to his competitors. The Government recognise this problem and are very frank about it. They conclude that: bus stations should be operated whether in public or private ownership on a commercial basis … which will provide for all operators to have equal opportunity of gaining access". In practice, since it is highly unlikely that we would ever be allowed to charge operators landing fees for the use of a bus station, I think that they will use the streets instead and bus stations, except perhaps for the most prestigious bus stations in big cities, may become a charge on the ratepayer or be abandoned.

Finally, on this issue the White Paper recognises that in some areas a network of services is invaluable to the bus user, allowing connections to be reliably provided and through-fares to be offered. It has been an essential aspect of the "social network" of services specified by the local regional councils in Scotland, through SCOTMAP, to secure a large number of connections throughout all and each of the regions. By this means a village, which may have only half a dozen buses a day, may nevertheless have access to a wide range of destinations. The White Paper concedes that through-fares may become impracticable, but suggests that operators might arrange connections for the benefit of their own patrons. There are many circumstances where an operator might well prefer not to do that. For example, an operator who operates his own service from the Borders to Edinburgh once a week may well prefer not to provide connections into a rival's service on the other six days. The experience of my region in recent years is that many important connections have been secured only by the council's insistence that the operators must provide a co-ordinated network.

In conclusion, the White Paper admits that the proposals are likely to give rise to additional work for regional council staff, a point which has been referred to by the noble Lord, Lord Underhill. They will be required to determine local transport requirements not met by the free market, specify routes for tender, evaluate the bids and monitor the services. This will be a continuing process as the pattern of commercial services changes and contracts fall due for retendering. That is going to cost money. I do not know how much, but it is not going to be cheap. Since local government has been told to keep numbers down to the minimum there is not a great deal, if any, spare time on the hands of those whom we employ. How they are expected to take on these additional burdens I do not know.

Those are the local government problems in my region which, I admit, is a rural part of Scotland. I can tell your Lordships that the Convention of Scottish Local Authorities are in agreement with practically everything that has been said on behalf of the Association of County Councils and District Councils in England. They do not like this White Paper. I do not know whether their response has been received in London. However, I have seen a draft of their response; they do not like the White Paper.

In addition to the fundamental difficulties which I have tried to identify, the White Paper raises one or two detailed practical problems and unanswered questions. I should like quickly to touch upon them. The White Paper proposes that operators would be required to register proposed services with the Traffic Commissioners and to give notice of withdrawal, although a licence would not be required. As any routes which are proposed, or any withdrawals which are to take place could affect the extent of services which the regional council finds it necessary to secure through tender, it is in our view essential that the regional council should also have the right to be notified, as well as the Traffic Commissioners. It is also essential that adequate notice should be given as it will not be possible to arrange tenders and publicity for a change of operator without careful planning and costing. It is our belief that 12 weeks—at the very least eight—would be required for such an event, even if local public consultation is deemed to be unnecessary.

The Traffic Commissioners will have the power to withdraw from an operator the total authority to operate local services if he fails to operate a service as notified. The noble Lord, Lord Underhill, very correctly made the point that the Scottish Bus Group have been left as they are at present, but it is a fearsome thought that if one of their short routes happened to fall foul of the Traffic Commissioners, then the draconian powers that are in fact held by the Traffic Commissioners allow them to take one action only: that is, to close down the whole of the Scottish Bus Group, which would mean that there would be virtually no buses in Scotland outwith the three cities and Greater Glasgow PTE. It is therefore a draconian power. I hope the Government will think very carefully about whether or not there should be a modest intermediate penalty for infringement and about whether the regional councils should be able to determine whether or not the operators are at fault, because the Traffic Commissioners cannot be expected to know every single route throughout the whole of Scotland.

In view of all the problems which will arise from the proposed association between local government and the Traffic Commissioners, speaking as one who has been a lay traffic commissioner for a number of years I wonder whether or not it would be more satisfactory to give these particular responsibilities to the regional councils and perhaps to associate with it the right of appeal to the Traffic Commissioners if there is a dispute.

I have one final point to make and I have deliberately left it until last. Chapter 7 of the White Paper deals exclusively with Scotland. Nevertheless, it makes very specific reference to Chapter 3, paragraphs 3.1 and 3.2. Paragraph 3.1 states in heavy black type, under the heading "Safety": This system of supervision will be fully retained and reinforced". Paragraph 3.2 states: For this reason it is proposed to strengthen the law to allow new conditions to be attached to licences of operators of local services … A high priority will also be given to checks of maintenance facilities and mechanical condition. Additional resources will be provided for that". There is an element of déjà vu in that; those words were used identically four years ago and I can tell your Lordships that they are causing the Traffic Commission chairman of the Scottish traffic area the greatest possible concern. Having been guaranteed, as one would assume from the wording of paragraph 3.2, that additional funds and manpower were to be made available, he has received none. If one were to be absolutely frank about it, both he and my late associates are highly conscious of the fact that in Scotland depot vehicles are already running on the roads which have never been inspected. They do not have either the people or the time to carry out inspections.

If we are to take safety seriously, I would ask the noble Lord to ensure that the Government honour this commitment so that if this additional burden is to be placed upon the hardworking staff of the traffic area offices throughout the United Kingdom they will have the opportunity to do their duty, which we owe to society as a whole. There is something absolutely wrong about a public service vehicle carrying fare-paying passengers which has not been inspected in accordance with the law. There is something absolutely wrong about vehicles, having been weighed—as they have been since 1982—and weighed and weighed again never being inspected because it takes too long. Both the National Bus Company in England and the Scottish Bus Group in Scotland are fairly regularly inspected because their depots are known, but where they are not known there is nothing we can do about it. It is placing far too great a burden upon them. We in this House should make sure that it is taken from their backs, for in the end we are responsible for the safety of our fellow citizens.

6.30 p.m.

Lord Mottistone

My Lords, I, too, would like to congratulate my noble friend Lord Teviot both for introducing this Question and for the very careful preliminary work he undertook in order to advise himself on the background to the White Paper. I would also like to welcome my noble friend Lord Brabazon who is to reply, and congratulate him on his new post. I am afraid that I have to say to your Lordships and to my noble friend on the Front Bench that, owing to a long-standing engagement and the delays which have attended this debate, it may be that I shall not be able to wait until the end of it. I hope your Lordships will forgive me.

I have been advised in particular by the Isle of Wight County Council and the National Association of Local Councils—the latter body of which I have the honour to be a vice-president. I must tell your Lordships that my advisers—as have all noble Lords who have spoken so far—fear the worst from the proposals. However, I welcome the broad intentions of the White Paper. In particular, I am impressed by the arguments in Chapter 4 that the road service licensing devised for the 1930s is now outdated, especially since motor-car usage dramatically increased in the 1950s and 1960s. I remember that in the late 1920s, when buses first started running in my part of the Isle of Wight, and up until the war—which were the early days of road service licensing—the bus services we had in those days were infinitely better than anything we have had since. In fact, the bus services are not good now.

Whether this White Paper is the best way of putting that situation right is a matter of opinion. But to go rumbling on the way we do now, because of all the fears which people have about the White Paper, seems to me not to be good enough; something has to be done. This is a good starting point. It seems to me that the experience of de-regulation of coach services leading to a 40 per cent. fare reduction and the addition of new services—and whether they number 700 as the White Paper says or 10 per cent. of that figure, which my noble friend Lord Teviot suggests is a more accurate estimate, does not matter because there are more services—is convincing. My noble friend would not make that particular point, but it is a convincing one.

Although I have not been to Hereford, the benefits as stated in the White Paper of competitive tendering for subsidy in the Hereford trial area certainly seem clear as I read it. The trouble is that noble Lords who have spoken from whatever Benches are all fearful of something new. In some cases, it is distrust and dislike of the market forces; one recognises this fear in the noble Lord, Lord Underhill, although one is perhaps surprised to hear it expressed by the noble Lord, Lord Tordoff. The fact is that in the market place, surely, supply will—given a reasonable hand—automatically meet demand. The fears which everybody has expressed may well be misplaced.

I am conscious that those fears are to some extent inspired by the people who will have to operate the new system. I fear that people have grown so used to the centralisation and regulation we have had imposed upon us for the past 50 years that they will naturally be against any new system and will not operate it as effectively as they should. To that extent, the Government have to think very carefully about how they do things. But I believe the basic principle behind what they are trying to do is the right one.

That is particularly so when one considers the care they have taken to supplement their main proposal of de-regulation with many practical safegaurds. These include tighter quality and safety standards for both vehicles and operators. The noble Earl, Lord Minto, states that for other reasons there is not enough money to pay for that. Maybe, as one sees the situation at the moment, there is not—but if the Government say this is something that will have to be, they cannot make totally irresponsible recommendations without having checked them out with the Treasury in some way. I hope I am right, otherwise they really are into trouble. I have a natural inclination to trust the Government which I support to get that sort of thing right. I would trust any Government to get it right and not just the one I support. It is perhaps over-fearful to assume that safety standards will not be achieved.

There is recognition that some services must be subsidised and that such subsidies should be competitively tendered for in order to make it as economic as possible. That seems also to be reasonable. There is recognition, too, of the need for continuation of concessionary fares. I would agree that there is a need—although naturally noble Lords who like centralisation would not do so—for greater effectiveness; that we need to split up and privatise the National Bus Company. There is a great deal of evidence that over-centralised bodies are naturally inefficient and that large bodies—whether they are private enterprise or centally controlled—are themselves naturally inefficient, too. I would have thought that was a reasonable approach to work to.

Above all, there are to be special provisions to foster rural transport including—and no noble Lords have mentioned this—encouragement of the joint use of services run by educational, health and social services and the post office. All of this is very practical and these proposals make a welcome addition to the points which appear in the White Paper. I personally think that the White Paper is on the right lines.

However, there are some points on which I would like to seek further explanation and which, if not met properly, could be detrimental to the main intentions which the Government express in the White Paper. The first of these concerns the apparent intention that county councils—while still remaining the highway authority and responsible for roads and their safety—will have a reduced role in running the new system. It is not clear to me from the White Paper just where the responsibilities of the licensing authority, the traffic commissioners and the county council will begin and end. It is rather obscure.

Indeed, the noble Lord, Lord Tordoff, made the point that it would be disastrous to have transport in the Isle of Wight run by a body which looked after the mainland, from Oxford to Kent. But I believe that since the White Paper was issued—and perhaps since the noble Lord had that information and I did, too—it has been agreed that county councils will be responsible for bus service registration and not the traffic commissioners. If that is so, it is most welcome. I hope that my noble friend on the Front Bench will be able to confirm that it is so when he comes to reply.

There are two features of transport operation which are peculiar to the Isle of Wight, with its separation by sea from England. First, our county council needs and has the powers to co-ordinate rail, boat and bus timetables; and it has powers to integrate the services of those three transport systems, which operate through four ports. As an example, the county council recently had occasion successfully to use its powers with regard to a proposed new train time at Portsmouth. As a result of the county council using those powers, the new time was not introduced, because it did not match up with the boat times. It will need to retain the same powers for the co-ordination of timetables and for the integration of services in relation to buses as it possesses at present. I should be grateful if my noble friend on the Front Bench could confirm that these sort of powers will be retained in relation to bus services.

Secondly, and this is even more special to the Isle of Wight, or any island for that matter, the bus "market place" in the island is relatively small and, unlike a mainland county, competition from adjacent counties is impracticable. Thus, it is particularly important that a monopoly, unregulated operator does not develop without restraint on charges. If it did, the county council, as the greatest single passenger transport customer by virtue of the transport provisions of the 1944 Education Act, would be the greatest sufferer—as indeed, in consequence, would be its ratepayers.

Currently the overall Isle of Wight network is profitable in the summer and loss-making in the winter. Differential pricing has enhanced summer profits leading to lower winter fares and reduced revenue support. This had led to the cost of school buses being about 66 per cent. of those on mainland counties. It would be paradoxical if the Government's efforts to achieve a more cost effective bus system overall led unintentionally to increased costs in the Isle of Wight due to the development of an uncontrolled monopoly operator because, owing to the sea, it is not possible for competition to come in from outside the island. I should be grateful if my noble friend could ask his right honourable friend to watch this particular point with great care. I do not necessarily expect him to comment now.

In conclusion, by way of illustrating what the White Paper may achieve, a recent report in our local press of the views of the manager of Southern Vectis, which is the Isle of Wight local subsidiary of the National Bus Company, brought out all the fears that he naturally had about the White Paper proposals. However, the report stated that three mini-buses would soon be joining the Southern Vectis fleet, experimentally, as part of the company's moves to combat competition when introduced in 1986. Other moves reported included shutting down a bus station in one town and reducing administrative staff.

All these actions have been taken at the mere sight of the White Paper. How many more economies will result from actual legislation? All this can be only for the benefit of the customers and is a welcome forerunner for the economies that will follow. So I say, "well done!" to the Government for their proposals. There is need for something new, but when the proposals are introduced or turned into legislation I ask the Government not to forget that the Isle of Wight has its own particular problems because it is cut off from the mainland by sea.

6.44 p.m.

Earl Attlee

My Lords, the more one studies this White Paper the more one studies the expert, reasoned and logical arguments against some of its main conclusions and proposals. In fact, in today's debate, with the exception of the noble Lord, Lord Mottistone, as one listens to what your Lordships have been saying there is only one conclusion that can be drawn—that all the Government are doing in this White Paper is pursuing their doctrinaire and blinkered policy of privatisation which in this White Paper is masquerading as deregulation.

This will have the same dire results, I am afraid, as when the Socialists pursued their doctrinaire and blinkered policies of nationalisation regardless. The ideas in the White Paper are, for the most part, ill thought-out. Even the Government described the main document as a White Paper with green edges and my noble friend Lord Tordoff interprets it as a White Paper with black edges. The White Paper even admits that, systems of large-scale, planned public sector networks can indeed produce high quality services and connections". Surely this is an amazing admission to make, especially when the White Paper deliberately sets out to destroy that very system. Does this statement not indicate, at the very least, that there were some differences of opinion within the Department of Transport?

In my view, the linchpin of the White Paper is deregulation in order to achieve the abolition of cross-subsidies. Why? Taking deregulation first, the White Paper claims, or implies, that public sector bus undertakings, and others, are wasteful, inefficient, oversubsidised, and/or artificially protected from competition. Deregulation will, we are assured, encourage and increase competition—as if, apart from that engendered by the 1980 Transport Act, there were no competition at present from private cars, local trains, both surface and underground, taxis, hire cars, cycling and even walking.

What else does the White Paper claim will be the benefits of deregulation? It claims that it will lead to improvements in service to the public and improvements in financial control—things which, given the widely varying operating conditions, will be almost impossible to achieve. The White Paper gives great emphasis to two of the trial areas of deregulation—Hereford and Worcester. It points out proudly that in these two trial areas subsidies have fallen and fares have been reduced. There has even been some innovation. What the White Paper fails to mention is that, as predicted, part of the rural network has ceased altogether to exist, that there have been poor standards of vehicle maintenance and safety and that the much-trumpeted lower fares seem unlikely to last very much longer. Those are the two trial areas that are used to show the benefits of deregulation. If the White Paper had come clean on the other trial areas I wonder how much worse would the picture have been?

Turning to the abolition of cross-subsidies, which is, as I have already said, one of the main aims of deregulation, why are the Government against them? The Government claim that it is because it is unfair that passengers on busy routes should pay more than necessary and have less frequent services in order to support highly uneconomic services elsewhere which are sparsely used. Quite honestly, to make such claims shows an abysmal lack of knowledge, understanding and appreciation of the importance and necessity of cross-subsidies.

If profitable services were open to competition it is true that fares would fall—at least in the short term—but with the result that the availability of cross-subsidies for supporting loss-making services would cease; and if cross-subsidies were abolished fares would vary from route to route and from time to time. This is because cross-subsidies exist even between various sections of the same route; between different times of the day; between weekdays and weekends; and, of course, between different times of the year. With no cross-subsidies children's cheap fares would be threatened, since, unlike old-age pensioners' fares, they are funded by the operator and not from local government contributions. I must admit that I am not quite sure at the moment what is the position with regard to school buses for children. Perhaps the Minister can answer that in his reply.

But these are not the only effects of deregulation and the abolition of cross-subsidies. For instance, where an operator provides a subsidised service under contract to a local authority, he will have no protection against another operator skimming the cream off that same route by operating only in those areas where all the profit is to be made. Operators will be forced to cut costs. One way undoubtedly would be to work a single-shift system, so that the buses would operate from, say, eight in the morning until six in the evening. This will affect a lot of people—and I mean a lot—as some 16 million people travel by bus. How will those people fare?

For a start, there will be no comprehensive timetables—that is if there are any timetables at all! There will be an embarrassing surfeit of competing buses on some routes, or sections of a route—those, of course, that are profitable. But outside these, and especially in rural areas, there will be little or no service, and when there is one it will be spasmodic. On all routes and in all areas a service will almost certainly be restricted in duration each day, especially in holiday and tourist areas—and that was the point which I believe was made by the noble Lord, Lord Mottistone—where the traffic is seasonal.

The travelling public will suffer in other ways. Buses will not be scheduled to fit in with other modes of transport such as trains, unless of course it happens to suit the bus operator for that to be done. The public will suffer, and so will British Rail.

Also because of competition and attempts by competitors to cream off the profitable traffic, the cash simply will not be available for investment in new buses. As a result, old type buses, usually with high platforms, several steps and difficult entry and exit will be retained, especially if their running costs are lower than those of a modern bus. That will adversely affect the elderly, the infirm, the disabled, women with young children and those with shopping to take home from the shops. Equally important, and as has already been shown in the trial area and has been mentioned by several noble Lords, maintenance and safety standards will inevitably fall.

This state of affairs cannot be what the travelling public wants or deserves. The runaway success of travelcards, which provide interchange and through-travel among various modes of transport for a single payment, shows what the public wants. What the public wants is what my noble friend Lord Tordoff and I, among others, stressed time and time again when the London Regional Transport Bill was going through your Lordships' House; that is, an integrated public transport system. If the Government had deliberately set out to devise a means of denying them this, it is most unlikely that they could have come up with a more effective method of doing so than the proposals contained in this White Paper.

6.54 p.m.

Lord Mountevans

My Lords, I, too, should like to open by thanking the noble Lord, Lord Teviot, for creating the opportunity this afternoon for us to debate the White Paper on buses. I found his speech most illuminating. I can only hope that it has the same influence on the Government as it certainly had on my thinking this afternoon. I am a taxpayer, a ratepayer and a fare-payer. I am a non-motorist. I use public transport, and at the end of the day, howsoever the money gets to the bus companies, I pay.

I appreciate that there is a need for the Government to obtain value for their money and to continue to seek to obtain such value, but I feel that the White Paper gives too high a priority to that factor or objective at the expense of the public need, as I conceive it. While duplication and waste exist in our public systems, and particularly in our bus systems, it is right that they should be reduced. It would be meaningless if the system, far from being enhanced, was in fact destroyed by the means which we seek to use or which the Government's White Paper suggests.

The White Paper quotes 39 per cent. of households as having no regular use of a car. I believe that in areas of Glasgow that figure rises to over 80 per cent. It is to the needs of that 39 per cent., or variously 80 per cent., that the White Paper should be addressing itself. Their need is for transport—transport to work, for leisure purposes, for education, for health reasons and for a vast number of other reasons. Their need is for an integrated public transport system, as the noble Earl, Lord Attlee, has been saying and as other noble Lords have said before him, not just today, but on many occasions—a system that interrelates rail and road rather than fragments them (and particularly the latter) by breaking down, as the White Paper proposed, the National Bus Company and the PTEs. Systems should—in fact, must—be marketed as a whole. The product must operate as a whole. It must connect; it must have interchanges; it must be convenient to use; it must be attractive. It must be sufficiently attractive to drive people out of their cars and persuade them to leave their cars at home.

One has only to look—again as the noble Earl, Lord Attlee, mentioned—at the success of the travelcard to realise that, if the system is put together and sold as an entity, it will inevitably attract greater patronage and greater revenue, and thus there will be a lesser need for subsidy. One must be aware of the success that travelcards have been in London. When one thinks of London, one must then think of the guidelines issued this summer by the Secretary of State to London Regional Transport and to British Rail. He urged both those bodies to explore all opportunities for closer co-operation both in services and in fares, integrating and connecting their services and having through ticketing. They were urged to move together. They were not urged towards duplication and disintegration, which is the direction in which, I suggest, the White Paper is leading us.

The White Paper's detail on services, deregulation and tendering has already been severely criticised by almost all previous speakers. I shall not rehearse their arguments. I found myself nodding agreement on a great number of occasions. I should rather put some questions to the Minister. I accept that the White Paper is on buses, but why are there only two references to rail (one on page 13 and the other on page 23) before one gets to the annexures? Are the Government suggesting that rail and road can be treated in isolation, one from another? As they are committed to continue direct or indirect subsidy of both modes of transport—in fact of practically everything that runs on wheels in this country, save the national bus long-distance network—should they not be using their muscle as the largest individual customer to pull public transport together in order to meet the needs of the customer, rather than fragmenting it in order to meet the requirements of political dogma?

I should like to ask the Government whether they have looked at practices elsewhere in Europe. I do not believe that one should argue that what is good for Norway is necessarily good for us or that what works in Berlin will work in London. But if I go to Oslo, I can get a timetable which lists every public transport service provided by the community, Oslo Tramways or by the people whom it employs to provide bus services. All the fares interrelate. If I decide to go outside Oslo, I can obtain a timetable listing every public transport service operating in Norway. I can look at the timetable that relates to trains from Oslo to the far north, to take me to a given station. At that station there will be an entry in the timetable referring to all the buses that serve that given station. If I get off at that station, take a bus to the end of the road and find myself in the fjords, what will I find if I consult the timetable? I shall find that the ferries that run are also referred to. I will not say that all the services run to a common tariff, but they run to tariffs that are broadly based and similar. All services are subsidised by the Government, who can direct the level of service to be provided and also the fares to be charged.

I am not saying that this is the best way to go about things in this country, but I should like to know what the Government have done about looking at the position in other countries. As subsidised bus services must be subjected to competitive tender, I ask myself what happens if there is no tender. I pick this point up from proposal 2.4, which refers to many essential bus routes. Where do we go if a service is essential and there is no tender?

I should also like to know to what extent National will be divided into so-called free standing parts, how many parts there will be, and whether it is really necessary to divide it at all. It is already divided into autonomous regions. I am quite sure that the directors of these autonomous regions will fight their corners with just as much tenacity as the directors of the British Rail sectors are now beginning to do.

I should like to ask the Minister this. Do the Government believe that under proposal 2.7 the PTES, which have been deemed essential by speakers this afternoon and legislated for by the Government not so long ago, have a future, or that rail has any part of that future? Is Section 20 of the 1968 Act to become an irrelevance?

Finally, may I ask the noble Lord the Minister to confirm that the views of professional operators in the bus industry will be fully considered before legislation is tabled? It is they, not I or the Government, who are the experts who will have to live with the eventual Act.

7.3 p.m.

Lord Ferrier

My Lords, anybody who has listened to this debate will appeciate that the problem to which my noble friend Lord Teviot addressed himself is a very complex one. It is extremely complex in every possible way. Therefore, your Lordships will be glad to hear that I propose to make only the shortest possible contribution because I am concentrating on only one point. It is a point which has been touched on already by my noble friend Lord Mottistone. It is the importance to the possibility of saving and improving the service to people in remote areas, of the sharing of the existing transport systems. The noble Earl, Lord Attlee, also mentioned the matter.

I am thinking particularly of Scotland, where there is many a glen in which the little red car coming up with the newspapers and the mail is, other than perhaps the odd shepherd's Land Rover, the only vehicle that passes that way in a day. I urge upon the Government to concentrate on the points they make in this White Paper, particularly in Chapter 7, on providing ahead for the possibilities of sharing with existing transport. By that I mean this. You can look ahead now at the problems of the design of vehicles. If, as I believe, the time is not far off when the postal people will be able to take their passengers, then their existing vehicles must be designed to suit the extra one or two passengers.

The trade unions, and the labour concerned with the operation of such services, and the security of the same, must be consulted. Insurance and the like must be considered. For that reason I make so bold as to say that a lot of ingenuity can be applied to the design of vehicles which will suit the Highland glen and other remote places.

I say this with some hesitation. The day may not be far off when the electric vehicle will be a viable unit. Together with the development of regenerative braking, that might be helpful for use in hilly areas. Perhaps a word might be said to the Hydro Board to see if they can make any contribution.

However, any suggestion in regard to the Post Office is not the only one because, as my noble friend Lord Mottistone said, there are other vehicles that travel that way. So I think it is important that the "powers that be" in remote areas apply themselves to producing a system whereby, whether by subsidy, by authorising the sharing of fares, or by some sort of support to hire cars or the like, the public will be provided with transport so that the fears of the noble Lord, Lord Tordoff, may not come to pass in that everybody is going to be driven back to the motor-car.

The other points that I have in mind have already been made by other speakers but my sole contribution is concerning ingenuity and foresight as to the future of the sharing of transport in rural areas.

7.8 p.m.

Lord Brabazon of Tara

My Lords, I should very much like to thank the noble Lord, Lord Teviot, for introducing this Question. I welcome this opportunity to debate the Government's proposals on buses which were set out in the White Paper published in July. It is a subject to which I do not claim to bring the personal knowledge which my noble friend Lord Teviot and several other noble Lords have on this subject. Nevertheless, in the short time I have held my present responsibilities, I have come to recognise the great importance of our proposals, particularly to the many millions of people in both urban and rural areas who use this form of public transport. As the White Paper said, "Britain needs good bus services". Over 10 per cent. of all journeys are made by bus and three-quarters of those journeys are for essential purposes—work, school, business and shopping. Our aim is to set the industry free so that it can give a better service to the passenger and better value for money to the ratepayer and taxpayer. We are currently considering responses to the White Paper and consulting widely on the details of our proposals on the basis of seven consultation documents. We intend to bring forward legislation at the earliest opportunity.

Before answering some of the specific points raised by noble Lords, may I explain briefly the background to the Government's policy and describe some of our proposals in more detail. Local bus services have been subject to the present highly restrictive licensing regime for more than fifty years. Between them the Traffic Commissioners and the local authorities—with the very best of intentions—have used their powers of regulation and subsidy to shape the services provided in their areas without the benefit of genuine competition. The result has been an industry which has failed to adapt to the needs of the customer. The industry has come to be dominated by relatively few public sector operators, many of which do not even purport to be commercially orientated organisations.

The present system has not served the customer well. Bus fares increased by 30 per cent. above the rate of inflation between 1972 and 1982. Revenue support for the industry increased from £10 million in 1972 to over £500 million in 1982—a thirteen-fold increase in real terms. Total support for the industry is estimated at over £900 million for 1984–85. Yet at the same time services have declined and in some areas have become non-existent.

The present bus licensing system was in fact originally devised for a totally different era. The 1920s were a period of growth for bus services. Fares remained stable and operators made money. Study of the official papers during those years now shows that the 1930 legislation was devised primarily to keep the number of services to a minimum in the interests of safety. But, as times changed, the belief grew up that the way to provide a comprehensive public transport system was to use the licensing system to protect operators on their profitable routes so that these could cross-subsidise the unprofitable ones. The system positively encouraged the development of large public sector operators unresponsive to the needs of the customer and the maintenance of existing patterns of service with little incentive to develop new markets.

Since the mid-1950s the system has in effect prevented the industry making the rapid adjustments which were necessary if it was to continue to meet the demands of the travelling public. The result has been a disastrous cycle of rising costs, rising fares and reducing services. Previous governments have recognised the debilitating effect of the road service licensing system and have tried to do something about it. In 1980 this Government decided that the time had come to deregulate long distance coach services and allow county councils to set up trial areas in which road service licensing for local bus services would be abolished. Many of your Lordships will recall the strength of opposition to those measures. Yet we now know that fares on long distance services have dropped on average by 40 per cent. in real terms and many new services have been introduced.

My noble friend Lord Teviot has described the developments in one of the three areas where local councils took the opportunity to deregulate local services. There has been no massive decline in services in these rural areas as many predicted in 1980. Indeed, the evidence is that rural services in the trial areas have done rather better than in the country as a whole. Nor have the county councils had to provide increases in subsidies to offset the loss of cross-subsidy. In Hereford and Worcester, the council is paying 40 per cent. less subsidy on rural services. Moreover, in Hereford town, bus services have increased and fares have gone down. This is a far cry from the transport deserts we were promised at the time of the 1980 Act.

That is the background. I now turn to our proposals in detail. We intend to abolish road service licensing throughout Great Britain except in London, where major changes are already under way. I want to emphasise that safety standards will be maintained. The system of operator licensing that supervises the quality and safety standards of public service vehicles and operation will be retained and tightened. I hope that that answers one or two of the questions, and particularly the Guardian article, which I had read.

Opponents of our proposals have pointed to problems in Hereford when small private operators have attempted stage carriage work, working their vehicles all day long in urban conditions. But the Hereford situation demonstrates precisely that the present system is working and can ensure that proper standards are maintained. Problems have not occurred in the Devon and Norfolk trial areas nor as a result of deregulation of the express and excursion and tours market in 1980. Operator licensing already copes with some 5,500 indpendent operators of buses and coaches. As a whole, the private sector owns 30,000 vehicles. Over many years the private sector has maintained high safety standards. Only a very small number of operators have caused concern, and the system has dealt with them.

As well as ensuring safety standards, we also propose to protect the public from operators who fail to provide the services that they have undertaken to run. To achieve this, there will be a registration process. It will not be possible for a registration to be refused but all local services will have to be registered and the operator will then be required to run the service registered. This will provide the public with a reasonable degree of certainty. There will be appropriate periods of notice before a service can be introduced, varied or withdrawn.

My noble friend Lord Mottistone and the noble Lord, Lord Tordoff, were concerned about the remoteness of the body registering services, particularly in the case of the Isle of Wight. We, of course, recognise that local authorities will need access to registrations. We are considering whether PTEs, county councils in England and Wales and regional councils in Scotland should themselves be the registration authorities. But no decision has yet been taken. This is something on which we are still consulting.

Lord Tordoff

My Lords, I am sorry to interrupt the noble Lord on his first appearance at the Dispatch Box. It seems to me, however, that the question of registration does not solve the problem of someone who tenders for a service and then goes bust. The fact that he is registered and therefore has an obligation to provide it in no way stops him going bankrupt and having to withdraw the service.

Lord Brabazon of Tara

My Lords, I take the point that the noble Lord has made. I think that I may have a reply to it when I come to my more detailed answers. The effect of removing road service licensing will give the bus industry its head. It will allow operators to test the market by seeing whether people want different services and at what price. It will allow operators to show what they can really do. There will be fare reductions on well-used services and passengers can expect more frequent buses on busy routes. It will introduce the competitive spur to efficiency and lead to innovation. The bus industry will begin to recapture some of the traffic which has been drifting away to other forms of transport. At long last, the best routes will be cultivated and developed.

To come back to the question asked by the noble Lord, Lord Tordoff, it can already happen now that a company can go bust in the middle of its operations. Deregulation will, of course, expose those services which are not viable. This was a point that my noble friend Lord Teviot made. However, under our proposals, local authorities will continue to be able to subsidise services that would cease in a free market. But, instead of subsidising whole networks of services some parts of which are profitable and some parts of which are not, the subsidy will be paid specifically to the non-commercial services. That might be rural services, evenings, Sundays, or whatever. The authority will specify its requirements and invite tenders from operators to provide those services. The authority will then accept the tender which offers the best value for money.

My noble friend Lord Teviot and other noble Lords—in fact, nearly all noble Lords—have raised the question of cross-subsidy. They have argued that, without the benefit of cross-subsidy from the commercially viable services, authorities will have to increase the total amount of subsidy they pay if they are to maintain the level of services in their areas or, in the case that my noble friend Lord Mottistone cited, maintain the level of services outside the peak holiday season. But that is to ignore the major effect of deregulation on costs. The White Paper talks of a potential for cost reduction of up to 30 per cent. While many public sector operators will dispute that figure, there is general agreement that costs will fall, and by a substantial amount, as the trial areas demonstrated. This will mean that many services which are at the moment unprofitable will become profitable and in others the amount of support needed will fall.

In rural areas, operators will be able to start new services without the fear of objection from entrenched subsidised public sector operators. Local taxi and car hire companies will be able to move in and provide more cost effective solutions in some places. Competitive tendering will ensure that what subsidy is available will support more services than before. We shall be encouraging further development of community buses and post buses and the like through our new innovation grant, which will amount to £1 million a year in England with comparable sums for Scotland and Wales. In addition, in recognition of the special problems of rural areas, we shall be providing a new rural grant of £20 million in the first years, reducing by even steps in subsequent years to cover the transitional period when cross-subsidy is reduced and until competition has its full effect on costs.

So I do not accept that loss of cross-subsidy will have the disastrous consequences for the non-commercial services which many now predict. As I explained earlier, this has not happened in the trial areas. Our proposals will ensure that subsidy goes to the route or service where it is needed rather than as part of a blanket subsidy to a whole network. Competitive tendering will ensure better value for money.

The noble Lord, Lord Underhill, and several noble Lords raised the question of concessionary fare schemes. Let me make it clear that we support sensible concessionary fare schemes. We want to ensure that all operators, not just publicly-owned ones, are able to participate in such schemes. Local authorities will be placed under a duty to make the concessions that they provide available on an equal basis to any licensed operator who runs an eligible service and who wishes to participate in the scheme. We are currently consulting on the detailed measures which will be needed to implement this.

The present structure of the bus industry, dominated as it is by large public sector operators—the passenger transport executives, the municipal bus companies and the National Bus Company—is not conducive to the introduction of effective competition. The size and financial strength, and in some cases the blanket subsidy these operators receive, would, unless checked, give them market dominance which could thwart the development of new operators and new services which we want to see. This is why we are proposing that the bus operations of the PTEs should be broken down into smaller units and turned into companies; that bus undertakings of district councils should be incorporated into companies; and that the board of the National Bus Company should have a duty to reorganise the company, in consultation with the Secretary of State, into parts which can be disposed of as free standing companies. We believe these measures—which in many cases simply build on changes already being implemented by the authorities concerned—will provide the right structure for bus managers to operate commercially and take advantage of new opportunities. And they will clarify the operation and financial relationships with the local authorities, so that no one operator has unfair access to public funds.

Finally, I should mention our proposals on taxis and hire cars. First, let me emphasise that we are not proposing to make any fundamental change to the way classic taxi and hire car services are provided. We do, however, propose to relax progressively the restriction on the number of taxis which operate in some areas. It is important to ensure an adequate supply of taxis, and research has shown that tight quantity restrictions on taxis tend merely to encourage the expansion of the private hire car trade.

Our main proposal on taxis and hire cars is to allow them to carry passengers at separate fares. We believe this could result in a much wider use of taxis and hire cars as an integral part of public transport. With the decline in bus use there are simply too few passengers in some areas to support a conventional bus service. Taxis might be used to reinstate services already withdrawn, or to maintain socially desirable services at lower cost to local authorities. It is not our intention to require all taxis and hire cars to enter this field, but simply to remove the legislative barriers to them doing so. No doubt taxis and hire cars will continue to be primarily engaged in meeting the demand for exclusive services, and nothing we are doing will prevent them doing so.

The noble Earl, Lord Minto, and my noble friend Lord Ferrier raised the particular problems of bus services in Scotland. Broadly the same problems exist in Scotland and broadly the same remedies are appropriate. The problems of rural areas in Scotland are particularly acute. The transitional grant to operators of rural services will extend to Scotland, as will rural innovation grant to encourage new ways of meeting rural transport needs. There is particular scope for use of vehicles owned by education authorities—as my noble friend Lord Ferrier said—health and social work authorities, the Post Office and private firms. In urban areas the benefits of competition will be substantial both for the consumer and the ratepayer.

I now turn to a number of detailed points which noble Lords have raised. The noble Lords, Lord Underhill and Lord Tordoff, asked why London was being excluded from the White Paper. We do not say that deregulation would not work in London, only that we should first see through the great changes which have only recently been introduced there. Changes to road service licensing in London will bring a measure of competition there in the meantime.

My noble friend Lord Mottistone—and my noble friend Lord Teviot also mentioned this matter—raised the question of the future role of the county councils in co-ordinating public transport. What we are proposing is that councils will no longer have a duty to co-ordinate public transport—that would not be compatible with allowing free competition. But councils will still have general powers to talk to operators of commercial and non-commercial services, provide information for passengers; and promote co-operation between operators where this is commercially sensible and provided competition is not restricted.

Lord Underhill

My Lords, I am sorry to interrupt the noble Lord, but does that mean that the system of transport policies and programmes is going to be abolished in future? Will that be in the Bill as well?

Lord Brabazon of Tara

My Lords, I shall have to ask the noble Lord to wait and see the Bill. All we have at present is the White Paper, and as your Lordships know, there is a considerable amount of consultation still going on.

The noble Lord, Lord Underhill, and the noble Lord, Lord Tordoff, mentioned the Scottish Bus Group and asked why it was being treated differently from the National Bus Company. The Scottish Bus Group is a very different company from the National Bus Company and it operates in a different market. It is a smaller company; it operates more distinctly in rural areas; and it is currently reorganising itself. However, my right honourable friend the Secretary of State for Scotland will, of course, continue to watch the competitive situation in Scotland to ensure that competition is allowed to emerge.

Several noble Lords mentioned travel cards, through-ticketing, interchange arrangements and timetables. It is too early to say precisely what will be the effect of competition on any particular fare or ticketing scheme. Some will prove to be commercially viable and will continue following deregulation. If their existence attracts custom, operators will wish to go on providing them. But where fare schemes are achieved at high cost to both the taxpayers and ratepayers as well as to passengers paying hidden cross-subsidy, that cost will be exposed by competition.

My noble friend Lord Mottistone raised the question of monopoly as regards the Isle of Wight—a subject which also concerns me. My noble friend argued the case for the Isle of Wight and suggested that operators from adjoining areas may be less likely to compete with the existing local bus service operator. But even in a relatively small market such as the Isle of Wight there must be in existence other bus operators or, for example, taxi firms which would be interested in coming forward. Certainly if the existing operator tried to exploit his position in the market, others would come in to undercut him.

The noble Lord, Lord Tordoff, and the noble Earl, Lord Minto, asked about our proposals on bus stations. I should make it clear that all we are seeking to do is to prevent bus operators who control access to particular bus stations from behaving in an anticompetitive way by deliberately ensuring that other operators cannot gain access to that station. I take the point that to require local authorities to operate bus stations commercially in every case may not be the right solution where local authorities wish to encourage operators to use the bus station to ease congestion on the streets. We are looking further at this matter.

The noble Lord, Lord Mountevans, asked about the effect of our proposals on rail services, particularly in the case of the PTEs which subsidise local rail services. Those powers to subsidise rail services will not be affected by our proposals, but passengers will be free to choose what form of transport suits them best. Rail will no doubt continue to attract passengers and revenue support.

The noble Earl, Lord Attlee, asked about school buses. The arrangements for school buses are not covered by the proposals in the White Paper, but of course many local authorities already go out to competitive tender for school bus services. The noble Lord, Lord Mountevans, also asked whether I could give him any details of the break-up of the National Bus Company. I cannot at this stage give any details.

I hope that I have answered all the questions that have been raised. I hope that I have explained why the Government believe that fundamental reforms are necessary and will bring great benefits. I hope that I have also shown that we have an open mind on many of the detailed questions of implementation. That is why we are consulting. The detailed points that have been made this evening are a helpful part of that process and I know that my right honourable friend the Secretary of State will be studying this debate with great interest.

The time has come to end the 30 years of decline in the bus industry. We must move into a new era in which the main services will not only continue, but the standard of service will improve and fares will be reduced; other services will evolve to meet the needs of the community more effectively; the taxpayer and the ratepayer will get better value for money; and there will be scope for innovation and new types of services. Under our proposals we can look forward to a future where passengers determine the services that they want.