HL Deb 24 July 1985 vol 466 cc1246-64

5.54 p.m.

House again in Committee on Clause 72.

Baroness Stedman moved Amendment No. 229ZA: Page 75, line 25, leave out from ("who") to end of line 29 and insert ("are qualified in accordance with subsection (4A) below. (4A) A person shall not be qualified for appointment under this paragraph unless he is:—

  1. (a) a member of a body of accountants established in the United Kingdom and recognised for the purposes of section 161(1)(a) of the Companies Act 1948; or
  2. (b) a member of the Chartered Institute of Public Finance and Accountancy; and
  3. (c) approved for appointment as auditor by the Audit Commission for Local Authorities in England and Wales;
but a firm may be so appointed if each of its members is qualified to be so appointed.").

The noble Baroness said: In moving Amendment No. 229ZA I should also like to speak to Amendments Nos. 229C and 229E: Amendment No. 229C: Clause 73; page 76, line 10, leave out from ("company") to end of line 14 and insert ("appoints only auditors who are qualified in accordance with subsection (2A) below. (2A) A person shall not be qualified for appointment under this paragraph unless he is:—

  1. (a) a member of a body of accountants established in the United Kingdom and recognised for the purposes of section 161(1)(a) of the Companies Act 1948; or
  2. (b) a member of the Chartered Institute of Public Finance and Accountancy; and
  3. (c) approved for appointment as auditor by the Commission for Local Authority Accounts in Scotland;
but a firm may be so appointed if each of its members is qualified to be so appointed."). Amendment No. 229E: After Clause 73; insert the following new clause:

("Duties of Auditor.

.—(1) The auditor appointed under section 72 or 73 of this Act shall by examination of the accounts and otherwise satisfy himself that the public transport company whose accounts are being audited has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources in carrying out its functions under Part V of this Act.

(2) The auditor shall comply with the code of audit practice applicable to local authorities as for the time being in force.

(3) The auditor shall consider whether, in the public interest, he should make a report on any matter coming to his notice in the course of the audit in order that it may be considered by the body concerned or brought to the attention of the public, and shall consider whether the public interest requires any such matter to be made the subject of an immediate report rather than of a report to be made at the conclusion of the audit.").

This is a group of amendments which, as we see it, raises three issues for our consideration. The first is, which group of accountants is most technically competent to conduct the audit of the new bus companies? If we cast our minds back to 1982, the Audit Commission was then created. It is now responsible for appointing the auditors to the local authorities and to similar bodies throughout England and Wales. What is happening is that some 70 per cent. of the total audit work load is carried out by the district auditors who are members of the Audit Commission's own staff. Some 30 per cent. of the total work load is being carried out by private auditors. As the Bill stands, the Audit Commission has the responsibility of appointing auditors to the new companies, but its own staff are not to be allowed to carry out this work. I cannot see the logic of that.

In Clause 73 the Bill stipulates that the appointed auditors have to be members of an accounting body which is recognised under the Companies Act 1948. This creates the anomaly because the Audit Commission staff are members of the Chartered Institute of Public Finance and Accountancy, or CIPFA as it is generally know in local authority circles. That body is not recognised under the Companies Act 1948. Yet it is the staff of the Audit Commission who are really most familiar with the work and the organisation of the municipal bus undertakings. The Water Act 1973 allowed for the audit of the water companies to be carried out by CIPFA accountants. It would seem that, because of their association with the municipal bus undertakings, they are the people most familiar with that sort of work. In the Water Act there is a legal precedent for their doing it for other bodies.

Therefore would it not be sensible to amend the Bill as we suggest, to enable the audit work to be carried out by an accounting body which is a member of the Consultative Committee of Accountancy Bodies or the CCAB? This would mean that the work was being carried out by properly qualified accountants and would enable the Audit Commission staff to continue to do that work which they are doing at present.

The second issue raised by this group of amendments is that of duplication. We see the possibility of duplication in audit effort and in costing the ratepayers more because both the local authority's auditor and the auditor to its bus company would need to satisfy themselves on some aspects of local authority systems or activities. On this CIPFA have done an exercise, and their estimate of the cost of duplication is that it could amount to anything between £25,000 and £50,000 per annum in audit fees.

Finally, we believe that it is right that the audit of the new bus companies should be broadly similar in content to the audit of the local authorities which own them. In local authorities the audit requirements cover the auditors' opinion as to whether the accounts give a true and fair view of the authority's financial position, and the auditors also have the job of monitoring the authority to see whether it is delivering value for money in terms of economy, efficiency and effectiveness in its services. Our amendments would ensure that the audit requirement covers the financial integrity and value for money in the new bus services. There should be this requirement to demonstrate that the bus undertakings provide value for money. Since the new companies will be subsidised to some extent by their local authorities then they will be spending local authority money or public money. Therefore they ought to be subject to the same degree of public scrutiny as other forms of public spending.

I hope that the Minister has given consideration to these amendments and that he might be prepared to accept them in the light of what I have said. But if not, I hope he will at least take them back and consider them before we reach the next stage of the Bill. I beg to move.

6 p.m.

Lord Tordoff

In rising to support this amendment so ably moved by my noble friend, an amendment to which I added my name, I should like to take this opportunity to make a slight diversion now that the noble Lord, Lord Belstead, is firmly in his place, for I know that he had many other things to do this afternoon. I wish just to go back to a matter which arose on Thursday evening under Amendment No. 211ZD. In column 962 of the Official Report of that day, 18th July last, talking about comprehensive competitive tendering, among a number of people that I referred to as being now in favour of this system I said, and I quote from that column in Hansard: The Association of County Councillors has now come round to the view that this is worth supporting". That apparently is not true, and I wish to make it clear that I misinformed the Committee, and I regret that. I think that either I was misinformed or misinterpreted what had been said to me; but I have to say that I have a letter from the Association of County Councils which says: You may have seen our briefing note which on re-reading it I realise could be interpreted as expressing actual support for CCT. The intention of that note was to express the association's support for your diagnosis of the deficiencies in the Bill without committing us to the particular solution that you are advocating". I regret having misled your Lordships, but I think it is proper to say that I was slightly confused by the references from the ACC.

Let us come back to the matter before us, and let me repeat briefly some of the points my noble friend has made. As the Bill now stands, the Audit Commission is required to appoint auditors to the new companies but would not be allowed to allow its own staff to take part in that work. As my noble friend says, that seems to be illogical, and I hope that the Government on that ground alone would be prepared to make changes—not necessarily the change that we suggest, but perhaps they might like to come back with their own suggestions at the next stage.

As my noble friend said, there is a legal precedent for this under the Water Act 1973. Given that these people have familiarity with the work and that there is this precedent, we believe it would be foolish to allow the duplication of effort and the additional cost to the taxpayer which will accrue from the Bill as it now stands. The amendment has my full support.

The Earl of Caithness

I am grateful to the noble Baroness for so succinctly putting her case. While thanking the noble Lord, Lord Tordoff, for his apologies in getting it wrong the last time we were here, with due respect I think that he has got it wrong again, as I shall try to explain. We have heard it explained that, as the Bill stands, in many cases public transport companies will be audited by different auditors from the auditors of the parent authorities. I confirm that this will generally be the case because the CIPFA auditors, who are appointed by the Audit Commission to carry out the audit of most local authorities, would not be permitted to audit passenger transport companies under Clauses 72 and 73. The broad question of which accountancy qualifications are required for the audit of public companies is a matter for my right honourable friend the Secretary of State for Trade and Industry, and I hope that noble Lords will agree that we shall have to think very carefully before entering into changes to this Bill which effectively provided for exemptions to those qualifications, as these amendments would do.

Let me address myself to the arguments which have been put forward for allowing the same auditor to audit the accounts of both the authority and its public transport company. First, I do not believe we should agree that this would mean the audit being done any less effectively. There can be no doubt that both auditors must, and will be able to, satisfy themselves in carrying out their respective duties. Secondly, on the question of the cost of separate auditors, I think that we must make a distinction between the fact that an audit fee will fall on the company when it is separately established and the marginal increase in that fee which might be caused by appointing a separate auditor rather than the auditor appointed to audit the local authority accounts.

I believe that we are talking here in terms of an increase in the overall cost of the audit for the local authority's company of perhaps 20 per cent. to 30 per cent. of the existing figure for the local authority. That might be of the order of from £3,000 to £15,000 per bus company. Here I differ with the noble Baroness, Lady Stedman, who had a figure of from £25,000 to £50,000. Our calculations show it to be considerably cheaper than her estimation. I will re-check our figures to make sure that we are not wrong. I do not think that we should regard the Government's figures of £3,000 to £15,000 per company as an onerous burden, particularly when it is set alongside the cost savings which will result from competition.

I think it may also be worth pointing out in passing that some 17 of the 44 authorities with bus undertakings are already audited by firms appointed by the Audit Commission rather than by the district audit service. There would be no need to appoint separate auditors in those cases.

I should like to make more general points about the position of public transport companies formed under this Bill and the audit arrangements which are appropriate to them, for I think it is necessary to do so to respond to the arguments put forward, particularly in support of Amendment No. 229E, on the code of practice for the audits. I think the noble Baroness and the noble Lord, Lord Tordoff, in moving the amendment underrate the fundamental change in the nature of these former municipal undertakings. In the future the companies will be competing against other operators. They will not have access to the subsidy except through the tendering mechanism. In our view, that is very important. It will move the undertakings on to a quite different footing from local government or other monopolies, such as the regional water authorities mentioned by the noble Baroness. They are monopoly bodies, they are not subject to competition; so that the analogy that I think she gave is not quite right. The new companies will be operating in a competitive environment, and the competition itself will be the new means by which value for money will be achieved.

I would ask noble Lords whether they really think that the requirements for the auditor to report on economy, efficiency and effectiveness in the public interest as envisaged in the third of these amendments is necessary for a PTC and not for its competitors —that is, the other companies who are not in the local authority's ownership. I would suggest that it is not. Like all the other bus companies, the PTCs will receive payment of public money to support their services only if they win contracts for service subsidy in open competition. They will no longer be an integral part of the local authority for which direct support can be made available through the rates.

In the current circumstances where that is the case, we have the same audit machine for the municipal bus undertakings as we do for the local authorities themselves. But that would not be appropriate once the provisions of this Bill on company formations have taken effect. I would also suggest that this Bill should not be used to make changes for public transport companies alone. There are other local authority companies which have been formed, for example, to run theatre businesses. I must tell the Committee that they have always been audited as companies under the Companies Act, as we propose in this Bill, and not under the régime proposed in these amendments. It would be open to the directors of a public transport company or the local authority's controlling shareholder to commission a value for money audit if they felt that this was in the interests of the company. But I must ask the noble Baroness and the noble Lord, Lord Tordoff, to accept that we are requiring companies to be established under this Bill and the correct arrangements for their audit, as for their competitors, are provided for in the Companies Act without need for special provisions as proposed by the amendment.

On one particular point, if I can take up the noble Baroness, Lady Stedman, she is not quite right in saying that under the Bill as it stands the Audit Commission will appoint the PTC auditors. The position is that the controlling authority controls the appointment of the auditors. It must secure the appointment of qualified auditors, and these auditors must be approved by the commission. That is a small difference from what she said, but it is an important difference. In the light of what I have said, perhaps the noble Baroness will see fit to withdraw her amendment.

Baroness Stedman

I am grateful to the noble Earl for his full reply. I hope I was not implying that the audit would be any less effective if it were not done by CIPFA people. What we are arguing is that it would be a duplication of costs, and there is obviously a difference of opinion between us as to what that cost is—whether it is £3,000 to £15,000 per bus company of £25,000 to £50,000 per annum overall. That is something I should like to take back, as the noble Lord has offered to do, and check on those figures as well.

I do not see why it is less important not to have the same standards of value for money in the audit that is being done for the new bus companies as it is for local authorities as they stand today. I think it is just as important for the public and for the companies to know that they are getting value for money in these new services that are being set. While the noble Earl says they can have a report—pay for a report presumably for CIPFA to do a value-for-money report for them—it is not quite the same thing as having those kinds of auditors who will have those standards to work to and who are normally working to those standards. We were not suggesting that all the auditors who do the work would have to be CIPFA auditors and indeed I would remind the noble Earl that I said they do 70 per cent. of the audit work now while the other 30 per cent. they appoint outside auditors to do now. Presumably the same sort of proportions could very well apply with the new bus companies. But I think it is important that those auditors who are used to working with the local authority and used to working to those standards are the ones that are also available for choice, if wanted, even if they have to be approved by the Audit Commission and not appointed by them. There are some things here I should like to look at again, and that being so, with the leave of the Committee, I should like to withdraw the amendment tonight.

Amendment, by leave, withdrawn.

[Amendment No. 229A not moved.]

The Earl of Caithness moved Amendment No. 229B:

[Printed earlier.]

The noble Earl said: I beg to move this amendment. I spoke to it with Amendment No. 215A.

On Question, amendment agreed to.

Following is the text of the amendment (No. 229B): Page 75, line 41, leave out ("wholly-owned").

Clause 72, as amended, agreed to.

Clause 73 [Local authority financial controls in Scotland]:

[Amendment No. 229C not moved.]

The Earl of Caithness moved Amendment No. 229D:

[Printed earlier.]

The noble Earl said: I beg to move this amendment. I spoke to it also with Amendment No. 215A.

On question, amendment agreed to.

Following is the text of the amendment (No. 229D): Page 76, line 21, leave out ("wholly-owned").

Clause 73, as amended, agreed to.

[Amendment No. 229E not moved.]

Clause 74 [Provision of services for public transport companies]:

The Earl of Caithness moved Amendment No. 229F:

[Printed earlier.]

The noble Earl said: I beg to move this amendment, which I spoke to in connection with Amendment No. 215A.

On Question, amendment agreed to.

Following is the text of the amendment (No. 229F): Page 76, leave out line 27 and insert (", or with any subsidiary of an associated company, for the provision by that Executive or council for that company or (as the case may be) for that subsidiary").

[Amendment No. 230 had been withdrawn from the Marshalled List.]

Clause 74, as amended agreed to.

Clause 75 [Financial backing for establishment and operations of public transport companies]:

[Amendment No. 231 had been withdrawn from the Marshalled List.]

The Earl of Caithness moved Amendments Nos. 231A and 234A:

[Printed 18/7/85; col. 978.]

The noble Earl said: I beg to move Amendments Nos. 231A and 234A together, with the leave of the Committee. I spoke to both these amendments in connection with Amendment No. 211CN.

On Question, amendments agreed to.

Following is the text of the amendments (Nos. 231A and 234A): Page 76, line 42, leave out from ("in") to ("requires") in line 1 on page 77 and insert ("pursuance of any provision made by any scheme or order under this Part of this Act in connection with any transfer of property, rights and liabilities to the company in question for which that scheme or order provides"). Page 77, line 26, leave out ("and") and insert ("or").

[Amendments Nos. 232 to 234 had been withdrawn from the Marshalled list.]

Clause 75, as amended, agreed to,

Clause 76 [Duty of Passenger Transport Authority not to inhibit competition]:

[Amendment No. 239 not moved.]

The Earl of Caithness moved Amendment No. 239A:

[Printed 18/7/85; col. 978.]

The noble Earl said: I beg to move this amendment. It was discussed with Amendment No. 211 CN.

On Question, amendment agreed to.

Following is the text of the amendment (No. 239A): Page 78, line 25, leave out ("and") and insert ("or").

Clause 76, as amended, agreed to.

[Amendment No. 240 not moved.]

6.15 p.m.

Lord Carmichael of Kelvingrove moved Amendment No. 240A:

After Clause 76, insert the following new clause:

("Securing of public passenger transport services by local authorities and Passenger Transport Executives

.—(1) This section shall have effect for facilitating the carrying out by the following authorities (hereinafter referred to as "relevant authorities") of their duties to secure the provision of public passenger transport services (whether or not including railway services and ferry services) for their areas, that is to say—

  1. (a) local authorities on whom duty is imposed under subsection (1)(a) or (2)(a) of section 61 of this Act, in respect of that duty; and
  2. (b) Passenger Transport Executives, in respect of their duty under section 9A(1) of the 1968 Act.

(2) Each relevant authority shall prepare particulars of the services they consider it appropriate to secure to meet the public passenger transport requirements of their area, and shall from time to time, not later than every fifth year after the end of the transitional period (as defined in paragraph 1(1) of Schedule 5 to this Act), review such particulars.

(3) The preparation and review of the particulars of appropriate services under subsection (2) above shall be carried out by the relevant authority for any area in consultation with the relevant authorities for adjoining areas (and, in the case of a Passenger Transport Executive, in consultation with the Passenger Transport Authority for their area) in addition to the consultation required in pursuance of section 61(4) or any other enactment.

(4) As soon as may be after sections 6 to 9 of this Act have been brought into force, and on completion of each review of the particulars of appropriate services under subsection (2) above, each relevant authority shall publish, in one or more local newspapers circulating in their area, notice of the appropriate services within, to or from their area and, not later than the first such publication, send a copy of the notice to the traffic commissioner for their area and to all persons who have notified the relevant authority in writing that they wish to receive it.

(5) On receipt by the traffic commissioner of a copy of the particulars of appropriate services under subsection (4) above, the traffic commissioner shall, notwithstanding any limitation on his power to determine such conditions under section 7 of this Act, determine traffic regulation conditions which must be met in the provision of services in the area to which the particulars apply, being conditions regulating, as provided in section 7(6), the routes of such services, the stopping places for such services and the frequency of such services.

(6) Where a service is registered under section 6 of this Act or any such registration is varied, or cancelled, the traffic commissioner shall send notice of the registration, variation or (as the case may be) cancellation, together with particulars of the service, to every Passenger Transport Executive in whose area the service will or has run, as well as to local authorities in accordance with section 6(9) of this Act.

(7) On the receipt by a relevant authority of notice of the registration of a service, being a registration in pursuance of an application made to the traffic commissioner under section 6 within the period of 42 days beginning on the date of first publication of notice of the appropriate services under subsection(4) above, the relevant authority shall notify the person who has registered the service of any extension or modification of the service which they consider appropriate to meet public passenger transport requirements and may enter into agreement with him for the provision of such an extended or modified service on such terms as may be agreed.

(8) An agreement for extension or modification of a service under subsection (7) above shall not, for the purposes of this Act, be taken to be an agreement providing for service subsidies.

(9) The foregoing provisions of this section shall have effect, notwithstanding section 61(3) of this Act and section 9A(2) of the 1968 Act, and the powers of a relevant authority to enter into agreements providing for service subsidies in accordance with sections 83 to 86 of this Act shall be exercised subject to compliance with this section.").

The noble Lord said: The aim of this new clause following Clause 76 is to provide a mechanism by which services provided commercially and subsidised services secured after tendering can be drawn together by local authorities when considering the public transport requirements of the area of the local authority, looking at it as a whole. It also allows local authorities in the shires and the PTEs in the conurbations to take account of any local train or ferry service.

Perhaps I might give an idea of the philosophy behind the new clause. First, the local authority would state its views on the network required to meet the needs of its area in the judgment of the local authority. Secondly, the operators will respond by registering their commercial services, which may include services which the local authority may not have specified. It still leaves freedom to the private operator to decide whether he wishes to provide other services. Thirdly, the local authority and the operator could then negotiate on any minor amendments to the commercial network which would meet additional needs in a cost-effective manner. The authority would pay for its additional requirements at marginal cost in such areas. Fourthly, services to meet any requirements remaining unmet would be put out to competitive tender, as required in the Bill.

There are some services which are clearly commercial and others which are clearly non-commercial. However, there is another group of services in the middle which can be commercial at certain levels of frequency and at certain fares and the cost of providing them, but which at other levels would not be commercial. The commercial level of service may be adequate to meet the needs of the area, but this interface will be ever moving as the margin commercial services fluctuate. There is a grave risk of instability and of the travelling public not knowing who is going to be providing the service, what the service may be or what colour of bus they may expect to come along. Some kind of standardisation and some investigation of this from the centre is required.

Particulars of the services to be provided commercially or on a tendered-for basis would be published by the local authority as their stab at what they feel the service for the area should be. This could usefully be done in the form of a map and an accompanying schedule of frequency, and so on. In addition, this information would be sent to the appropriate traffic commissioner—or traffic commissioners, if more than one area were involved—to any existing or intending operator who required it. The publication of the map would be a signal to all potential operators of services in the area of the relevant authority's view of the overall requirements of the area as they saw them.

While that might influence the choice of some operators in the service registers, it has to be stressed—and I stress it again—that the idea of the clause is not in any way to inhibit the operators. They would not need to adhere to the map: they could register any service, whether or not the local authority had included it on the map. The map would also draw attention to other public transport services, such as railways or ferries, and the role which local authorities saw for them within their areas.

In effect, the new clause provides a mechanism for small variations in service: for example, to deviate from the main route to serve a hosptial or to extend a route from the town centre to a railway station, to be secured at marginal cost, rather than putting out to tender a full service specification which would be likely to be tendered for on the basis of fully-allocated costs. Any requirements of the area which were not met by commercial services or by negotiated variations on the main commercial services would then be secured through tendering under Part IV of the Bill. That is made clear in subsections (8) and (9) of the new clause.

I believe that the adoption of this procedure retains all the advantages of competitive tendering and of encouraging operators to exercise their own commercial judgments, while at the same time allowing local authorities to make clear at the outset the views they have on the sort of service they envisage for the area. I think that it would also considerably streamline the administration and the running in of the new type of service towards which the whole Bill tends to lean. I therefore hope that the Minister will give it very serious consideration at least in substance, even if some of the wording is perhaps not to his liking. I beg to move.

Earl De La Warr

I think the noble Lord, Lord Carmichael, does very well to point out the need for some mechanism, which does not appear to be in the Bill, in order to enable the commercial and the non-commercial services to mesh in with each other. I can see in this amendment nothing but a helpful suggestion. The local authority traffic departments have immense knowledge of the routes that are currently being run and I should have thought that operators and traffic commissioners would have benefited enormously from the early statements in detail of their views—the map, as the noble Lord, Lord Carmichael, says. Because it is an early statement, surely it means that difficulties which might otherwise arise, or gaps which might occur, will be pre-empted by the existence of this map and by the ability of local authorities—the traffic commissioner—to talk with operators about their plan so that as near as possible we get a smooth operation right from the start.

It seems to me, too, that although these may be on a small scale, if I may use the language of the noble Lord, Lord Carmichael, "many a mickle makes a muckle", and it may well be that this will add up to a considerable minimising of the routes which require to be subsidised, because the maximum use will be made of the commercial routes. It seems to me that this can be described as a mechanism that will do much—as I would call it—to ease the birth pains of this new arrangement.

The noble Lord, Lord Carmichael, said, too, that this would be entirely voluntary. As I see this amendment, it is important to emphasise that. I would say to my noble friend that I am somewhat doubtful about subsection (5) in this amendment because it mentions what the traffic commissioner shall do by way of determining regulation conditions. As I see the rest of the amendments it is essentially helpful and providing suggestions for voluntry implementation. I therefore commend this to the Government as being in every way something helpful in view of the fact that this is missing at the moment from the Bill.

Baroness Carnegy of Lour

I am not sure if I understood clearly what the noble Lord, Lord Carmichael, was saying. I may have misunderstood. It seems to me that this is at any rate in part, an attempt to return to the system which at the present time I think most noble Lords in the Committee agree is not working to the maximum benefit of the public. That is the system where the local authority and the existing operators can get together to make a deal; and then if some routes are left out other people come in.

The noble Lord, Lord Carmichael, said that some routes are clearly commercial and some are not. Looking at the existing system, I would agree that at one time that is how it looked. But, in the light of what the Bill is attempting to do—to provide that, where a route has very few travellers on it, it may be catered for by a minibus, a taxi or a bus operating in a quite different way with a much greater flexibility—I am not sure that the local authority is in a position to know what is commercial and what is not. The person who is in a position to know is the person who looks at it and says, "Can I do this in a way that will be attractive to the public and will leave me sufficient profit?" That is what the Bill is trying to bring about.

With the system which is being proposed now—if I understand it correctly—the local authority sits down at its transport committee and agrees a map. The map is not only the work of the director of public transport; it is also the work of the elected members. I am trying to think how the elected members will react to making that map. They will not want to be proposing a map which does not include routes which their constituents want. So there will be a political process. If I understand correctly—the noble Lord will put me right if I am wrong—there will be some political input into the drawing-up of the map for a start; and the official will be the one who is saying, "This is commercial and this is not," rather than the operators. Therefore the framework on which people come in and say they would like to operate has a political rather than a commercial basis.

Having done that, as I understand it, the operators come in by arrangement with the local authority. It is not simply a desire of those people to run a route because they think it will work. They are coming in to make an arrangement with the local authority to supply what they think they need. I should like to know whether the noble Lord thinks that that is the most cost-effective way of getting new, greatly-improved coverage of routes in the local authority and getting new operators, rather than simply the old discussion between the "big boys" and the local authority after the drawing up of the map. I may have misunderstood and, if so, I am sorry if I have wasted the time of the Committee. But this matter bothers me about the amendment.

Lord Tordoff

The noble Baroness is quite right. This is a complex amendment. It is perhaps not easy to see precisely what the meaning is, although the noble Lord, Lord Carmichael, has expressed it as clearly as anyone could. I wonder if I may be of some assistance to the noble Baroness, because it seems to me that what is being suggested here is a change from the rather black-and-white system which is included in the Bill at the moment and which says, "This is commercial, and this is not", to a process which is more iterative. In other words, there is a discussion period which goes on in the early stages of the formation of a new map—"map" is perhaps the wrong word—:but there is a new group of services, some of which will be commercial and some of which will be supported by the local authorities.

6.30 p.m.

The problem is that it may well be that commercial undertakings will decide that they wish to run a particular route; and one is perhaps thinking of a rural area. The local authority knows from its knowledge, and indeed from its political knowledge—I think that the word "political" is perhaps not the right one to use. But from its knowledge of its constituents, rather than from a political viewpoint in a party political sense, it knows that if a bus route were diverted through a certain village it might make it less commercial, but it might save the council from having to subsidise a much longer route from a totally subsidised service. In other words, a partial subsidy of part of a route might solve a lot of problems.

The object of this amendment, as I understand it, is to allow that negotiating process to take place at an early stage, before the whole network gets set in concrete. It is not an attempt in any way to inhibit commercial competition, but it is a way of integrating the subsidised services into the commercial services in a way which is meaningful. I do not know whether that helps the noble Baroness, but that is how I understand the purpose of this amendment.

Baroness Carnegy of Lour

Apart from publishing a map, what is different from the initial stages at the moment?

Lord Teviot

This is one of the most interesting parts of the afternoon. We are coming back to what one might call an argument. I agree with the noble Lord, Lord Tordoff, but I must turn to my noble friend Lady Carnegy. She will interrupt me if I am wrong, but I think she is saying that if we accept this amendment it will stop the new people coming in. She thinks that the new operator will not be able to look at a map or think up a new service and provide for a market which he thinks is there. On the other hand, she says that if we accept this amendment the members of a local authority will think of their constituents. She says that the new commercial man will think of what the public wants, but then the local authority will look at what the constituents want. I am not sure about that argument.

One point that my noble friend has made about the philosophy behind this Bill is that this is something which is entirely new, but is very speculative and high risk. I do not think anybody is in disagreement that this is a very high risk measure. But the Government have done many of these things in other areas and I absolutely applaud them. However, this amendment has the approval of other bodies which have gone along with the Government.

I can mention the Association of County Councils; and I am speaking on this amendment because my noble friend Lord Monk Bretton is away. The association feels that there is a very strong need for the provision to be inserted in this Bill. The present main statutory—I am sorry, but I am reading the wrong brief. However, I can say that the Association of County Councils is very much in favour of this Bill. Perhaps I can finish there and come back afterwards, because I notice that my noble friend on the Front Bench is raring to go and to tell us all.

Lord Tordoff

May I come back to the noble Baroness? She asked: what is different? As I read the Bill, the situation is that at the moment it is a two-stage process. The first stage is that competition is allowed to have its full play and then, when the local authorities see how the chips have fallen, they look at their area and say, "There are gaps here. There is a service that needs to be provided there, so we will put that out to tender on a supported basis". The danger with that is that you may have more local authority supported services than you need. This is a method by which, at an earlier stage, there can be some integration of the two types of service which will, in the end, save the taxpayer money.

Baroness Carnegy of Lour

If I may come back, my question was not, what is different about the Bill, but, what is different from the old system which does not work? That is what I was asking. It seems to me that this amendment is completely against the spirit of the Bill. Of course, the Association of County Councils would like to have it, because it is making all the decisions. I dare say that the big bus companies would like to have it, because they are making all the decisions. The truth of the matter is that when you start from that premise you do not get an improved service. That is my problem.

Lord Tordoff

The noble Baroness is surely wrong, because within the Bill there is deregulation, and this is not stopping deregulation. That is the difference between what is in the Bill and what went before and what is in the Bill with this amendment.

Earl De La Warr

I can see why my noble friend has some doubts, but may I put these two points to her? First, this is a guide prepared for all operators of the totality of services which the local authority thinks ought to be run and it is prepared, as I see it, without taking a view one way or the other as to what sort of operator is to run a service. As applications for registration come in, the map is, so to speak, marked up and the gaps emerge which can be the subject of fruitful conversations. But there is no compulsion nor, when the map is drawn up, does the local authority consider whether a service will be run non-commercially or commercially. That will emerge when the registrations are done.

So I think that my noble friend is seeing in the amendment something that does not exist. It is totally voluntary and the operator does not have to consult anybody, unless he wants to. If the local authority wants to consult an operator, it is all consultation. There is nothing in this clause which requires the operator even to take account of somebody else's views. It is purely mechanistic.

Lord Belstead

I think we ought to remember in looking at this amendment, which has been very persuasively moved by the noble Lord, Lord Carmichael, that this is a Bill which seeks to give passenger transport executives and local authorities very important functions. But the role of the local authorities is to supplement the market by using public money to secure only services which would not otherwise be available without public support. Authorities will also have powers to co-ordinate both commercial and non-commercial services, but this will be on the basis of free co-operation with operators, rather than on the basis of compulsion.

The exchanges which have been going on in the last five minutes or so have been all about whether behind this clause is the iron fist. If I may say so, it is there, for the purpose of this clause is to stand the main intention of the Bill on its head, by putting passenger transport executives and county councils in the dominant role in determining the pattern of services in their area.

Despite the arguments which the noble Lord put forward very persuasively about the desirability of having a planning map produced by the local authority, the effect of this new clause is that operators who wished to provide commercial services would be required to conform to the map published by the local authority. The authority would then secure the noncommercial services that it considered appropriate by negotiating extensions or modifications to the commercial services, without having to go out to tender at all. My conclusion, therefore, is that my noble friend Lady Carnegy is right to criticise this amendment as being a return to a planned system which has not succeeded.

My noble friend Lord Teviot said that we have come back to the meat of the Bill. Do not let us forget that we are talking about a system which, despite the devoted service of people in the bus industry all over the country, has brought us to the pass whereby the number of passengers has plummeted, the cost to the country has escalated and—my goodness me—fares over the country in the last 10 years or more have gone up by 30 per cent. above the rate of inflation. We are not talking about a system which has succeeded.

What does the amendment try to do? My noble friend Lord De La Warr says that its purpose is to provide a measure of co-ordination with the local authority at the helm, with nobody being forced to do anything and everything being done by agreement. If my noble friend cares to look at Clause 61(7) he will be reminded that there are adequate powers there for the local authority to co-ordinate services for the good of its area in the way that it thinks it ought to. If the proposition is that co-operation under this new clause is voluntary, all I can say is that the new clause is not adding very much to Clause 61(7).

With respect to my noble friend, this is not really the case. This new clause would give a very large measure of control to the local authority. At least under the present system an operator is free to apply for a road service licence, and the local authority can prevent the service only if it can demonstrate to the traffic commissioner that it would be against the interests of the public. That at least allows some scope for enterprise and initiative to operators to meet the needs of the customer.

Let us see what the new clause puts in the way of a man who simply wants to run a bus. First of all, if one looks at subsection (5) of the new clause one finds that this splended map, having been published, is then sent to the traffic commissioner. The traffic commissioner, presumably having regard to the map, will then, determine traffic regulation conditions which must be met in the provision of services in the area to which the particulars apply, being conditions regulating, as provided in section 7(6), the routes of such services, the stopping places for such services and the frequency of such services". So the first hoop is that the poor old operator has to see the map which the local authority has produced going off to the traffic commissioner; and the traffic commissioner, having regard to the map and presumably only to the map and not to the desire of any of the operators whom we want to encourage under this Bill, would then be given a brand new power which is not to be found in Clause 7 of the Bill over which we spent hours earlier on. It is a brand new power. The traffic commissioner would hold up the map and say, "In the light of this splendid map which the local authority has produced, I shall now lay down where the stopping places are going to be, the frequency of the service, and, my goodness me!the routes of the service". So much for voluntary co-operation.

What about the second hoop through which the operator has to go?

Earl De La Warr

Will my noble friend give way?

Lord Belstead

No, not for a moment; not until I have gone through my second hoop.

Back comes the map. What happens then? Let us turn to subsection (7) of this little mouse of a new clause: On the receipt by a relevant authority of notice of the registration of a service, being a registration in pursuance of an application made to the traffic commissioner under section 6 within the period of 42 days beginning on the date of first publication of notice of the appropriate service under subsection (4) above, the relevant authority"— that is the local authority— shall notify the person"— that is the poor old operator— who has registered the service of any extension of modification of the service which they"— that is the local authority— consider appropriate to meet public passenger transport requirements". The local authority, may enter into agreement with him"— that is the operator— for the provision of such an extended or modified service on such terms as may be agreed". It is absolutely clear that what is going to happen is that the local authority on the return of the map will turn to operators and say, "We are sorry, but some of the things which you want to do have slipped past the traffic commissioner and we are now going to come to you and say that there have to be further changes in the services that you wanted to run". If the operator stands up and says, "I don't agree with you", we are not told in this new clause what will happen. But presumably the local authority will go back to the traffic commissioner once again, will hold up the map for a second time and say, "Operator A refuses to agree with us and therefore will you now force him to agree with us by putting traffic regulation conditions on him which you failed to do the first time?" I do not like this clause and I hope I have given the reasons why not.

6.45 p.m.

Earl De La Warr

My noble friend wagged his finger at me as he referred to subsection (5), forgetting perhaps that I had referred him to it. I said right at the beginning that I have some doubts about subsection (5). My noble friend is quite right because in the final analysis that would happen. My commendation of this clause was clearly qualified by the fact that I did not find that acceptable, but I do find acceptable the pre-publishing of a map and all the voluntary mechanism that goes with it.

Lord Tordoff

I should like to pick up the point that the noble Lord the Minister made. The noble Lord raised a tremendous spectre in front of us, but when he was reading subsection (7) I noticed that in the last two and a half lines the word "may" appeared twice. I did not notice that the stress on the word "may" was quite so firm as the stress made on the other parts of the subsection that he was reading out.

As I see it, "may" subsumes the words "may not". There is no question but that that is permissive. It is not a great bureaucratic stick with which the poor owner, poor fellow, to whom the noble Lord keeps referring, will be beaten around the ears. It says "may", and it says "may" twice: He, may enter into agreement", which presumably also means that if he so wishes, he may not enter into an agreement. The subsection also says, for the provision of such an extended or modified service on such terms as may be agreed". The words "may be agreed" also in my view include "may not be agreed".

Lord Teviot

My noble friend will not be surprised if I do not let him get away entirely with his very impressive soliloquy in condemning this amendment. I want to say one or two quite minor things. My noble friend refers to the operator. I talked only this morning with the Bus and Coach Council which serves a large majority of operators. One of its largest groups happens to be the independent operators. Like my noble friend Lord De La Wan, they were a little happy about subsection (5), but only about that.

They felt that if it was in the public interest and the service had to be provided, then that was absolutely fine.

Coming back to the local authority point, they are dealing with the needs of the public as they see them at the moment. They can only go so far with the spirit of the Bill. Now some splendid people are to come in. On the experiment so far, no splendid people have come in. They may come in. I am sure that if they last and are satisfactory then that will be splendid, but it is not going to be today or tomorrow. It might be in two years' time.

Lord Carmichael of Kelvingrove

I am most disappointed with the Minister. The noble Lord made the accusation that we were trying to introduce an iron fist. I had the feeling while he was speaking—and this is most unlike him—that he was using an iron fist on the amendment. He showed an aggressiveness which is most unlike him. I think that the aggressiveness clouded his thinking. Every local authority that is a traffic authority, whether it is a PTE or a county council, will need to produce a map, whether before or after. It is the only way to look at an area and get a picture of it, unless you have a particularly analytical mind and can read all these routes from a timetable. A map is needed.

What we are suggesting in the amendment—and I think that this is also an answer to the noble Baroness, Lady Carnegy of Lour—is that a network, or some sort of idea, would need to be in the local authority's mind. It will know roughly the sort of area it wants to have served. How it is served is a matter for the market. There is no question but that the market would decide it. The people who organise transport, the professionals in the transport business in every part of the country, know their jobs and they know that there are certain routes that must be followed.

I made it quite clear, and the amendment makes clear, that the map is in no way binding. At any time, right from the beginning, an operator can decide not to run a service in a certain way. He can say, "I have a better idea. I think I can serve this area in a different way." I believe that we are trying to be helpful. There is no need to adhere to the map. Anyone who has a private service operator's licence can use it on any route he likes.

The Minister made great play about the bogeyman of the traffic commissioner and the need to go back to the traffic commissioner. The noble Lord, Lord Tordoff, clearly explained that. He made it clear that we use the word "may" on every occasion—that the local authority "may" enter into agreements with an operator. Surely it is commonsense, if an operator is going within one or two miles of a village or hospital, that the local authority should be able to say to the operator, "Let us discuss this. We believe we need a service right to the hospital or right to the village." It is up to the operator whether or not he accepts it. However, the local authority—and this is perhaps where the importance of the power would come in—would then say that it still needs a service to the area concerned and some accommodation would need to be made. Either the operator would have to enter into negotiations or the local authority would need to find someone else to operate the service if it believed it to be necessary.

I refer the Minister, as he referred me, to Clause 7(6) which contains all the powers that the Minister accused me of handing to the traffic commissioner. They are already in the Bill. Subsection (6) states: The purposes for which traffic regulation conditions may be determined are the regulation of—

  1. (a) the routes of services;
  2. (b) the stopping places for services;
  3. (c) when vehicles used in providing services may stop at such stopping places and for how long they may do so; and
  4. (d) such other matters as may be prescribed.".
I think that if the Minister looks again at the Association of County Councils he will see that subsection (7) provides a mechanism for local authorities to do precisely what Ministers have repeatedly argued they should do: that is, meeting social need wherever possible by cost effective augmentation of the commercial services but which, under the Bill as it stands, would be very difficult to achieve in practice. It would certainly be very difficult to achieve within the timescale that the Minister is suggesting. The new clause would streamline the procedure and when the time comes would perhaps get things moving much more smoothly than I fear will be possible if the Bill remains in its present form. I feel that we must test the Committee on this amendment.

6.54 p.m.

On Question, Whether the said amendment (No. 240A) shall be agreed to?

Their Lordships divided: Contents, 97; Not-Contents, 104.

Airedale, L. Grey, E.
Ardwick, L. Grimond, L.
Attlee, E. Hampton, L.
Avebury, L. Hanworth, V.
Aylestone, L. Harris of Greenwich, L.
Bacon, B. Hatch of Lusby, L.
Banks, L. Hirschfield, L.
Barnett, L. Hooson, L.
Beaumont of Whitley, L. Houghton of Sowerby, L.
Birk, B. Howie of Troon, L.
Blease, L. Hughes, L.
Boston of Faversham, L. Irving of Dartford, L.
Bottomley, L. Jacobson, L.
Brooks of Tremorfa, L. Jacques, L.
Caradon, L. Jeger, B.
Carmichael of Kelvingrove, L. John-Mackie, L.
Cledwyn of Penrhos, L. Kilmarnock, L.
Collison, L. Kirkhill, L.
Crawshaw of Aintree, L. Kirkwood, L.
Darling of Hillsborough, L. Kissin, L.
Darwen, L. Llewelyn-Davies of Hastoe, B.
David, B. Lloyd of Kilgerran, L.
Davies of Leek, L. Lovell-Davis, L.
De La Warr, E. McIntosh of Haringey, L.
Dean of Beswick, L. Mackie of Benshie, L.
Denington, B. McNair, L.
Diamond, L. Mellish, L.
Elwyn-Jones, L. Milner of Leeds, L.
Ennals, L. Moyne, L.
Ewart-Biggs, B. Murray of Epping Forest, L.
Falkender, B. Nicol, B. [Teller.]
Falkland, V. Ogmore, L.
Fisher of Rednal, B. Ponsonby of Shulbrede, L.
Gallacher, L. Prys-Davies, L.
Galpern, L. Roberthall, L.
Gladwyn, L. Robson of Kiddington, B.
Graham of Edmonton, L. [Teller.] Rochester, L.
Ross of Marnock, L.
Gregson, L. Seear, B.
Shackleton, L. Taylor of Mansfield, L.
Shepherd, L. Teviot, L.
Silkin of Dulwich, L. Tordoff, L.
Simon, V. Turner of Camden, B.
Stedman, B. Underhill, L.
Stewart of Fulham, L. Wallace of Coslany, L.
Stoddart of Swindon, L. Wedderburn of Charlton, L.
Strabolgi, L. Whaddon, L.
Taylor of Blackburn, L. Wise, L.
Taylor of Gryfe, L. Young of Dartington, L.
Alport, L. Layton, L.
Ampthill, L. Lindsey and Abingdon, E.
Arran, E. Long, V.
Atholl, D. Lucas of Chilworth, L.
Bauer, L. McFadzean, L.
Beloff, L. Macleod of Borve, B.
Belstead, L. Mancroft, L.
Bessborough, E. Margadale, L.
Bethell, L. Marshall of Leeds, L.
Birdwood, L. Massereene and Ferrard, V.
Brabazon of Tara, L. Maude of Stratford-upon-Avon, L.
Brougham and Vaux, L.
Broxbourne, L. Merrivale, L.
Bruce-Gardyne, L. Mersey, V.
Caithness, E. Mottistone, L.
Cameron of Lochbroom, L. Murton of Lindisfarne, L.
Campbell of Alloway, L. Napier and Ettrick, L.
Carnegy of Lour, B. Newall, L.
Cathcart, E. Norfolk, D.
Chelmer, L. Nugent of Guildford, L.
Chelwood, L. Orkney, E.
Coleraine, L. Plummer of St. Marylebone, L.
Colwyn, L.
Constantine of Stanmore, L. Poltimore, L.
Cork and Orrery, E. Polwarth, L.
Cox, B. Rankeillour, L.
Craigavon, V. Reay, L.
Denham, L. [Teller.] Rochdale, V.
Dilhorne, V. Rodney, L.
Donegall, M. Romney, E.
Drumalbyn, L. Saltoun of Abernethy, Ly.
Eden of Winton, L. Sanderson of Bowden, L.
Elliot of Harwood, B. Sandford, L.
Elliott of Morpeth, L. Sandys, L.
Ferrers, E. Savile, L.
Fortescue, E. Selkirk, E.
Fraser of Kilmorack, L. Shannon, E.
Glanusk, L. Skelmersdale, L.
Glenarthur, L. Stockton, E.
Gowrie, E. Suffield, L.
Gray of Contin, L. Swinfen, L.
Greenway, L. Swinton, E. [Teller.]
Gridley, L. Torphichen, L.
Harmar-Nicholls, L. Trefgarne, L.
Henley, L. Trumpington, B.
Hives, L. Tryon, L.
Hood, V. Vaux of Harrowden, L.
Hooper, B. Vivian, L.
Hylton-Foster, B. Whitelaw, V.
Inglewood, L. Wynford, L.
Killearn, L. Young, B.
Kimball, L. Young of Graffham, L.
Lane-Fox, B. Zouche of Haryngworth, L.

Resolved in the negative, and amendment disagreed to accordingly.

The Earl of Caithness

I beg to move that the House do now resume. I also confirm that we shall not come back for further consideration of the Transport Bill until 8 o'clock.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.