Transport Bill

HL Deb 11 June 1985 vol 464 cc1131-221

3.12 p.m.

Lord Brabazon of Tara

My Lords, I beg to move that this Bill be now read a second time.

I believe that this is something of an historic occasion. It is rare for the House to have before it a Bill designed to change so fundamentally the basis on which a whole industry has operated for over 50 years. The structure of licensing and control is substantially the same one which has governed the provision of local bus services since the passing of the Road Traffic Act 1930. Within the period of regulation we have seen two distinct phases: for the first 25 years demand for bus travel rose fast. Profits were made, fares were low and subsidy was unknown. By the end of the 1950s that growth had turned into a decline which has lasted into this decade.

Over the past 30 years the proportion of travel accounted for by bus journeys has dropped from 42 per cent. to 8 per cent. There is no doubt as to its chief cause—the popularity of the private car. In the 1960s and 1970s the operators and Government sought to cope with this enormous loss of demand in their different ways. First, operators used the protection of their road service licences to cross-subsidise heavily between their services in an attempt to keep running as wide a network as possible. That was what the system of regulation encouraged them to do, and at a superficial glance it may seem a laudable reaction. But it meant in the long-term that operators were neglecting their market, keeping fares artificially high where demand was buoyant to help less-used services, making bus services less attractive to their best customers and thereby deepening that spiral of decline.

The reaction of governments both after the war, and again in 1968, was to look to a solution in further nationalisation and restructuring to reinforce the local monopolies which the licensing system had created. This was a part of that era of faith in the planned economy whose results have proved to be so damaging. In the past decade alone, fares have gone up by 30 per cent. more than the rise in the cost of living. The costs of public sector operators have risen by between 15 per cent. and 30 per cent. above inflation. Levels of services have been reduced. Across the country bus services have continually been withdrawn. I fear it will sound familiar to many noble Lords if I say that in many areas each year has seen more villages cut off, more communities isolated and fewer services in the early morning and late evening: and all this despite the growth of subsidies to keep socially necessary services in being. I feel sure that noble Lords of all political persuasions would agree that the introduction of subsidies was necessary and must continue to maintain mobility for those many people who do not have available their own means of transport. But we are not, under the present arrangements, obtaining good value for the money that is being spent. Revenue support to the bus industry has risen alarmingly, from £10 million in 1972 to well over £500 million today. That is a thirteenfold increase in real terms. Yet it seems not to have produced a satisfactory result.

The conviction on which this Bill is based is that there is no need for this decline to continue. Indeed, it would be unacceptable to let that happen. In spite of the visible increase in car ownership to which I have already referred, nearly 40 per cent. of households still do not have access to the car; in many households only one person can have regular use of the family vehicle. Even for people with cars it is still sensible and convenient very often for many of their most important journeys to be undertaken by bus. The demand for buses obviously still exists. Indeed, in broad terms demand is probably at about the same level as it was in the 1930s. So I put it to the House that the question we have to ask ourselves today in considering this Bill is: does the existing system meet the needs of people who want to use buses to travel? The only answer to that question is, no.

Surely we cannot be satisfied with the pattern of decline which I have described. I think the House would be particularly reluctant to suggest that we should leave things as they are when the people who most depend on bus services are the poorer members of society, the elderly and the young. Change is needed if we are to reverse trends which are there for all to see, and to see the industry successfully encouraging more people to use buses. This Bill seeks to make those changes.

It may be helpful to the House if, before I describe the Bill in a little more detail, I say something about the way in which the Government's proposals have been developed. In July last year the Government published the White Paper, Buses, in which it set out proposals for this legislation. My right honourable friend the Secretary of State then published seven consultation papers on some of the principal questions raised by the proposals. He and his colleagues in the Department of Transport have met many of the groups representing the users of bus services, operators and local authorities. The proposals have also been the subject of inquiry by the House of Commons Select Committee on Transport: the Government hope to publish their response to that Select Committee's report very shortly so that it will be available to noble Lords during the consideration of the Bill by this House. In the course of the consultation there have naturally been many representations made to the Government, particularly by people in the industry. All of these have been considered in preparing the Bill which—as amended in the other place—is now before this House.

The principle which runs through the whole of this Bill is that the way to provide passengers with better services, more services, and better value for money is to introduce competition into the bus industry. The present system, based on road service licences, gives operators a virtually exclusive right to operate particular services or networks of services. In other words, we have what amount to local monopolies. Clause 1 removes that system of protective licensing.

In the Government's view it is inevitable that in monopolies of this sort the operators and their staff are protected from the normal pressures which force businesses to consider what their customers want, to think of new ways of meeting that demand, and to control costs and operate efficiently. In saying that, I do not criticise the bus drivers or managers who have always dedicated themselves to providing their local service. I only say that the existing system—based on monopoly and restrictions—is not the one designed to meet the changing needs of today's travel market. One of the problems in the bus industry is that under the existing system services which obtained licences many years ago—when the market was much healthier—have been protected from competition. They are not necessarily the right routes today; nor are they necessarily being operated in the best manner.

The first object of this Bill is therefore to see that more operators provide a greater variety of services at competitive prices. That is the key to stemming the flow of passengers away from public transport. Competition is the best way of introducing pressure on the industry's costs, so that more routes become viable, more services can be run, fares can come down and the fare payer and ratepayer both get better value for money.

This is what happened with express coach services, which were opened up to competition by the Transport Act 1980. All of us know that since 1980 there has been a visible increase in the quality and frequency of services between our major towns and cities; that fares have come down; that operators have invested in vehicles with greater comfort and facilities; and that more people are now using the services. The number of passengers using the National Express network increased by 45 per cent. between 1980 and 1983. This is precisely because the services which existed in 1980 became subject to competition. They were forced to think harder about what their customers wanted and to redouble their efforts to meet the demand. I congratulate many operators on the way they responded to that challenge.

The trial areas which were set up under the Transport Act 1980 provide a little evidence of the effects of competition in local services. In three areas—Devon, Norfolk and Hereford—route licensing has already been removed. The most populous of the three areas, Hereford, has indeed shown the characteristic effects of competition—more services, lower fares, more people travelling and better value for subsidy. There have been lessons to be learnt, too. But the passengers in Hereford are in no doubt that they prefer the services which they now have to the ones which existed under the licensing system. They like the fact that there are more services, that fares are lower and that drivers are more obliging. These are the benefits which we want to offer to all bus users.

I should also like to mention one striking example of the scope that exists for developing markets and why the Government are optimistic about the future for local services provided we can supply the right environment. The National Bus Company in Exeter has started a system of minibuses running at high frequencies; and what has the result been? It has been a doubling in the number of passengers. Different solutions will be needed in different places, but they are more likely to emerge in a competitive environment, when new operators can come forward to provide new services, than they are under the present system where innovation is not encouraged but must be battled for in the traffic courts.

The great change from regulation to competition will not take place overnight. To make a success of the free market we have to tackle the structure of the industry, the dominance of the large public sector operators and the system by which subsidies are paid. We have also to ensure that change does not become an opportunity for lower standards. The remaining clauses of the Bill are all about establishing that framework for fair competition with careful safeguards for the protection of the public.

The first safeguard is provided by Clause 6, which establishes a system of registration of local services. The clause provides that all services must be registered with the traffic commissioner. It also provides that they must be operated in accordance with the details of the route, stopping places and frequency which the operator registers.

Registration has two purposes. First, it provides a means of ensuring that everyone who needs to know about services has the relevant information at their disposal, in particular the local authority, which will have the responsibility for formulating its general policies on transport in the area and providing appropriate subsidies, and other bus operators, so that it is possible for them to see the shape of the market and decide more easily where new services might be welcomed.

Secondly, it commits the operator to running reliably what he has said he will run. If he fails, clause 25 provides the traffic commissioner with new powers to prevent incompetent, unsafe or unreliable operators from running either particular services or any local service at all. There is a further sanction against the unreliable operator in Clause 97, which provides the Secretary of State with power to withhold payments of fuel duty rebate to any operator who is the subject of a determination by the traffic commissioner that local services are not being operated reliably as registered under Clause 6. This is an important sanction. It demonstrates that the Government intend to see the registration system properly enforced.

These sanctions are additional to the quality controls on all bus operators embodied in the existing licensing system. This system has been tried and tested for both the bus and road haulage industries, and already it oversees nearly 6,000 private bus operators working mostly in the unregulated parts of the bus industry—in contract and private hire, excursions and tours and express services. Anyone wishing to operate a service will still be obliged to have a PSV operator's licence, which requires him to satisfy the traffic commissioner that he is fit to run bus services, that he has adequate maintenance facilities and that he is of sound financial standing. This system will continue and is, indeed, to be strengthened not only by a number of legislative provisions in Part I of this Bill but also by the commitment given by the Government in another place to provide the necessary resources to ensure that safety standards are maintained. There has never been any suggestion that the regime of quality control should be relaxed. That would be quite irresponsible, and indeed in these provisions the Government recognise that with the introductions of competition it is right to strengthen supervision.

Much of the remainder of the Bill is directed at establishing the framework for fair competition. One vital element here concerns access to subsidy and the role of local authorities. It is, as I have said, a firm principle of the Government that the free market is the first means of providing services. Clauses 57 and 61, which deal respectively with the functions of passenger transport authorities in the metropolitan counties and county councils, contain the vital duty for authorities to secure services which they consider are needed in their local area by the payment of subsidy supplementing the services the market provides. The Government realise that there will be unprofitable services which will be vitally necessary to the communities who depend on them. These clauses give authorities clear duties to secure such services.

Clauses 82 to 86 require local authorities to seek competitive tenders before letting service contracts, giving all operators the chance to compete for these contracts. This will ensure that local authorities get the best value for their money and that local passengers get the best available service. But the Bill does nothing to reduce the importance of the role of local authorities in subsidising services. Nor is it the intention of this Bill to influence the amount of money which local authorities make available to services.

Clauses 57 and 61 also give local authorities wide power to promote the availability of services generally; and this would allow them, for example, to talk to operators about the best way of meeting the demand for unsubsidised services, to suggest ways in which services by different operators might be co-ordinated and to publish information about services. I am sure that local authorities will continue to have a very important role both in securing subsidised services and in promoting bus travel more generally.

Parts III and IV of the Bill restructure the public sector operations to ensure that they will compete with private sector operators on an equal footing and provide for the return of the various parts of the National Bus Company to the private sector. Part IV requires bus undertakings of passenger transport executives and local authorities to be transferred into separate companies, which must stand on their own feet, competing for subsidy alongside other operators. These structural changes are an essential element of the strategy to introduce competition into the industry. We cannot expect the benefits of competition to emerge if some operators have greater access to public funds than others or if their sheer size and strength are enough to supress competition. That is one lesson we learnt from the dominance of the local NBC subsidiary in the Hereford trial area. The Bill therefore provides not for the disposal of the NBC as a single entity, but for disposal in a number of operating units. Clause 48 spells out the main objective for the board of the NBC in preparing its proposals for disposal of its operations and in the conduct of its business meanwhile to promote sustained and fair competition.

This is a long and complex Bill and I do not wish to detain the House longer than necessary, for I can see from the names of noble Lords who have indicated their desire to speak that we shall have an interesting debate. There will doubtless be many points for my noble friend Lord Belstead when he comes to reply to the debate. But it may be helpful to the House if I briefly mention some of the other clauses in the Bill which will be particularly important for our debate this afternoon.

Clauses 10 to 17 of the Bill make it possible for passengers to hire taxis for shared journeys while paying separate fares to the driver. They also provide for an increase in the number of taxis where demand exists by defining more narrowly the grounds on which taxi licences may be refused. These clauses do not purport to be a full revision of the legislation governing taxis and hire cars. But their relationship to the rest of the Bill is important. The provisions for shared journeys will bring down the cost per person of travelling by taxi, and so for the first time it is a realistic proposition for many people. It will be of particular value, I suggest, in rural areas, where larger vehicles cannot always operate effectively along some of the routes on which services are needed, and a shared taxi might well fill the gaps.

Part II of the Bill deals with London. It is largely re-enactments of existing legislation, with minor modifications. It does not, therefore, abolish road service licensing in London for the time being, for the capital must first settle down after the changes which your Lordships debated last year in the LRT Bill. This Bill, however, gives the Secretary of State power to repeal by order the clauses relating to London. The order would be subject to approval by both Houses of Parliament and could apply to London the new system which is created by the rest of the Bill. The Secretary of State has made clear that he fully intends to do this before long.

The clauses relating to travel concessions, Clauses 87 to 94, do not, as some people have feared, restrict the concessions which local authorities provide for travellers in their area. Indeed, these clauses provide a new right for every operator to participate in a local scheme and following debate in the other place there is also provision for local authorities to oblige any operator to participate in the local scheme, subject to appeal under Clause 90. I hope the House will agree that the eight clauses now before us on this subject provide a full demonstration of the Government's commitment to provide ample powers for local authorities to organise and enforce the scheme which they judge to be suitable for their area.

Finally, I should like to draw attention to Clause 95, which provides a new power for the Secretary of State to make grants to operators of services in rural areas. It is in rural areas that the effect of the decline in the bus industry has been felt most acutely. The Government believe that this Bill offers much better prospects for rural services in future, but the benefits of competition may not flow through immediately. The grants which the Government intend to pay will both help to sustain existing services and foster new initiatives.

Before concluding I should like to say a few words on a personal note. While I look forward to the battle to come with the noble Lords, Lord Carmichael of Kelvingrove and Lord McIntosh of Haringey, we on these Benches are sorry that the noble Lord, Lord Underhill, is not in his place this afternoon. As we know, he would have made a valuable contribution to the debate today. We send him our best wishes and our hopes for his speedy recovery. We hope that he will be able to rejoin us for the later stages of the Bill. I should also like to wish my noble friend Lord Zouche of Haryngworth best wishes for his maiden speech, which I very much look forward to hearing.

I have not been able, in the time available, to take the House through this long Bill clause by clause, but I hope I have referred to all its main elements. I also hope to have demonstrated to the House that this substantial Bill provides a strong framework for the future of bus travel, which will allow new services to develop to meet the demands of the travellers of this country. The Government believe that this Bill is the right solution for the problems which have been growing in the industry over the past decade. We badly need to address those problems. My Lords, I beg to move.

Moved, That the Bill be now read a second time.—(Lord Brabazon of Tara.)

3.33 p.m.

Lord Carmichael of Kelvingrove

My Lords, perhaps I may first thank the noble Lord, Lord Brabazon of Tara, for his kind remarks about the noble Lord, Lord Underhill. We all wish to be associated with them. He is greatly missed and I know that he will be following today's debate with great interest. He has been reading all the material covering the fields in which he was involved while he was active in the House, and I hope that he will be able to rejoin us very soon, perhaps even for the Committee stage of the Bill.

In his opening remarks the noble Lord, Lord Brabazon, spoke of the decline in public transport. It is true that it has been steadily declining over the last 30 years. The bus sector has declined most sharply. The Commons Select Committee tried to find an explanation for this and concluded that the cause of the decline was complex rather than simple. However, it stressed that the answer was not to be found solely, or even largely, in the matter of the regulation of buses. It suggested a number of other causes.

One suggested cause was obviously increased car ownership, which is a factor which leaps to mind. Now that there are between 16 million and 17 million motor-cars on the road, there must be a reduction in the number of people using buses. Another suggested reason was the lack of investment, particularly in terms of the provision of common change points and proper kinds of depots for buses. That has also had some effect.

Another suggested cause was high fares. As traffic was reduced, the fares had to be spread over fewer passengers. Fair enough, the failure to meet market needs is due in some respects to regulation. However, the committee stressed that although regulation may have led to some additional decline in some places, it had not, in the view of the committee, been the major cause of decline.

Another factor which the committee mentioned was the demographic and social changes that have taken place over the last 20 or 30 years. Nineteen-fifty is rather an interesting year to look at because that was when television began to become popular. Television alone has meant fewer evening journeys. Many noble Lords will remember how in the early evening there was a mini peak, as people went out to visit fiends or go to cinemas, and another mini peak as the) came back at night. The growth of the suburbs has meant that fewer and fewer people go home for lunch, whereas previously in many of the smaller towns there had been another small peak in the middle of the day which contributed towards the viability of the buses.

Other causes of the decline are examined in the report. However, the Secretary of State has decided that there is only one overpowering reason, and that is the fact that since 1930 there has been regulated entry into the field of public transport. In the debate on the White Paper on buses, and again today, the noble Lord, Lord Brabazon, stressed,—though this time perhaps in different words—that Britain needs good bus services. He went on to say that over 10 per cent. of all journeys are made by bus and that three-quarters of these journeys are for essential purposes—work, school, business and shopping. He also said that he wanted to set the industry free so that it could give a better service to passengers and better value for money to the ratepayers and taxpayers, which was to be the object of the Bill. He said this when discussing the White Paper.

The method that the Secretary of State has chosen for this highly laudable aim, which we should all like to achieve, is now in the Bill before us. It is called "deregulation". I am certain that a great many noble Lords in this House who will be speaking on this Bill will have a great deal of knowledge, understanding and personal experience of the bus industry. I am sure that they will want much reassurance before they are satisfied that deregulation is the way forward.

It is both surprising and, I believe, illogical, that a different framework is being proposed for the PTEs in the provincial metropolitan areas compared with London. Although the Minister said that London would be brought in at some point, I am rather surprised that it has not been brought in on this Bill. Over the last 10 to 15 years the PTEs have implemented integrated public transport systems in their areas designed to meet the needs of those areas. It is not a case of having failed to look at the markets. They have made surveys and tried to discover what people in their areas need. The solutions adopted, though different in detail, have all depended on the PTEs being in a position to take an overall view of the public transport provision in their areas. The different modes, operators and services have been brought together to achieve the following features: coordinated services; through ticketing and travelcard schemes; better interchange between bus and rail services; improved infrastructure, including purpose-built interchanges; better use of assets; facilities for the disabled—a very important factor which I do not think is really catered for in the Bill as we should wish: and no wasteful duplication of services. These innovations have all been introduced, in particular by Tyne and Wear PTE. Incidentally, the number of people travelling on public transport in Tyne and Wear has increased very markedly, due to this integration and the good service which is provided.

Other PTEs have certainly followed the same system of integration, although none quite so fully, in all the ways I have spoken about. The Transport Bill puts these ventures at risk. It is also noteworthy that the Secretary of State for Transport, in setting targets and objectives for London Regional Transport, has set out almost exactly the requirements that have been operating in the PTEs. If the benefits of co-ordinated public transport are seen as being correct and necessary for London, there can be no doubt that a similar situation should exist in the provincial metropolitan areas. It can be argued, I believe, that the example of some of the metropolitan areas led to the Minister or the department deciding that this was the way forward for London.

The basis of the Bill is that competition will solve the public transport problem at much cheaper cost than the existing system. To test this theory, a number of trial areas were set up. Although too much, almost, has been said about the various trial areas over recent months, particularly during the Committee stage in another place, the conclusions drawn from a general examination of the trial areas enable us to make a few observations that must at least be studied. In Hereford—one of the trial areas-25 per cent. of the population are without a car. But in Merseyside and Strathclyde, where the same standards will be applied and the same system will operate, something like 75, per cent. of the population have no car. In the trial area, only 10 per cent. of the people take the bus to work. Yet the city surveyor of Hereford still deplored the "totally unacceptable" pollution brought about by deregulation. I shudder to think of the situation in an area like Strathclyde where far more people—something like 100 times the number of people—depend on public transport.

The Bill seems to be aimed at encouraging small businessmen. In fact, the Secretary of State, in a much earlier speech, talked about people using their redundancy money to buy a bus. I am not concerned here about the small businessman and the small firm. There are many well-established small firms in the country which have an interest and an investment, perhaps a family investment, going back many years in the bus industry. I am talking of the people who, according to the Secretary of State, might use their redundancy money to buy a single bus. He actually spoke about one-bus firms being a possibility. These would almost certainly be secondhand buses, perhaps pretty well clapped-out, with a new body fitted, costing between £30,000 and £40,000, if it is indeed possible to buy a decent bus at that price. How long they would last and how safe they would prove can be guessed from some of the trial area results.

Although there might be a temporary direct transport saving in this situation, there would be great potential for loss in other ways. I take, for example, our own indigenous bus manufacturing industry. Fewer new buses would be bought. The bus manufacturing industry that has already seen home output down from 6,000 in 1979 to 2,500 last year and its export market down from 5,000 to 800 in the same period could hardly survive. We could find ourselves, after about 10 years, importing all our buses. And we used to have a proud record in exporting buses all over the world. Surely these figures cannot be ignored. It is perhaps a side issue, but nevertheless a negative spin-off that I do not believe can be ignored.

No one connected with public transport whom I have met—even the few who believe that there might be just a grain of wisdom in the Bill—believes that the measure should be implemented on the basis of an idea of the Secretary of State and the doubtful results of a few unrepresentative trial areas. At least one reasonably sized town should have been used—a town, say, of a quarter of a million people or 100,000 people. It has been suggested to me that a real trial area would have been Bradford or Nottingham. Most of my noble friends, I believe, would be happy if a solution could be achieved on the basis of using a proper trial area. To use the areas chosen by the Secretary of State is quite unfair.

I believe that Bradford, Nottingham, or some similar town, would have been much more representative of the types of problem that are likely to arise on deregulation day. As things stand, the Government are embarking on a high risk approach to unknown territory. After all, Hereford is less than one-twentieth the size of Greater Manchester. That shows the measure of the problem.

I should like to speak briefly on the subject of cross-subsidy, to which the Minister referred. A great deal has been made of this and the Select Committee dealt with it at some length. The National Bus Company estimates that at present it provides about £120 million to the bus industry through cross-subsidy. Figures for the rest of the country are not easy to estimate. But including Scotland, the municipal operators and the PTEs, the total figure is probably around £180 million. However, the only new money—the Minister made quite a lot of this when introducing the Bill—to be introduced by the Government is £20 million in 1986–87 reducing by £5 million a year until it disappears altogether in 1990–91. Therefore at least £180 million will have to be made up.

The Minister believes that efficiency in the new setup could perhaps save 30 per cent. Again, the industry, the consultants to the industry, the academic consultants, those practising within the industry, and the local authorities all believe that this is a considerable overestimate. They believe that, at best, 5 to 10 per cent. may be possible over a three- to five-year period. The shortfall can be made up only by operating cost savings. This means either higher fares, which will lead to lower passenger usage, or the loss of services. With the abolition of cross-subsidy, we shall have two classes of local services—a commercial service and a non-commercial or subsidised service. Both classes of service are subject to deregulation. I should like to say a word about this, and particularly about the time-scale allowed in the Bill for its implementation.

The Bill has transitional provisions in Schedule 5 to move from the present network based on subsidy to open tendering. The Minister of State in another place has outlined these as starting in January 1986 when operators have two months to notify county councils of the services that they might provide on a commercial basis. In the following two months, they can reduce their list but they cannot add to it. Then, on 30th June 1986, they have to register what they will actually provide. That will be the first time that councils will know for certain the routes and the timetables which are to be run commercially. It is interesting that this does not have to be duplication of existing routes. It can cover any routes from any part of the area to another—totally new routes, devised, invented or worked out by the proposed operator. This gives an idea of the incredible amount of work that will be involved in the evaluation of such a situation.

The county councils have July, August and September in which to assess the situation; draw up details for tendering—that is, proper, hard tendering; issue tenders; obtain a response; validate the answers and see whether or not they are really serious tenders; assess the "best buy"; and issue a contract. Deregulation day is to be the nearest Sunday to 1st December. Therefore, in three holiday months the counties have to implement the largest change in bus services for over 50 years. More time and a more sensible date is needed if there is to be any hope of keeping existing rural services and local town services running before the new services are brought in.

I could speak for a great deal longer because there is a great deal more to be said about the Bill. However, we shall have a fair amount of time to discuss the matter in Committee. I should like very briefly to conclude by referring to some of the matters which I am sure other noble Lords will mention and which certainly I intend to raise on this side of the House when we reach the Committee stage. There are many matters that we should like to raise. Some of the very important implications of the Bill were not dealt with in the other place because of the time difficulty. I hope that during our Committee stage we shall be able to deal with those matters. I am thinking, for example, of concessionary fares which were dealt with in the other place but which in my view require a great deal more probing than they were given in that place. Travel for the disabled was almost glossed over in the other place for a number of reasons.

Another very important matter which is causing great unhappiness and great problems for many people, as I am sure our postbags tell us, is the pension rights of employees and ex-employees of the National Bus Company. Another matter which I thought the noble Minister in his introduction of the Bill rather glossed over, although I accept at the moment time is the enemy of us all, is the very difficult question of taxi regulation. That is not a matter that will be easily dismissed. I hope that that and all the other problems will be fully debated when we reach the Committee stage of the Bill.

I am sure that we can be constructive in Committee and, who knows? perhaps the arguments in this House will persuade the Minister to take a little more time, to give a little more thought and perhaps to carry out a few more tests before he rushes into something that is fundamental to so many people in this country.

3.53 p.m.

Lord Tordoff

My Lords, the first note which I have on the piece of paper in front of me is, "Lord Underhill". Like the two previous speakers I greatly regret that the noble Lord is not here and were it possible through the wonders of modern electronics for him to be looking in on our Chamber today and were it proper, for me to do so, I would say, "Hurry back Reg, we need you". I say that without any disrespect to the noble Lord, Lord Carmichael of Kelvingrove, because I am sure that he understands what I mean.

I do not think that I have ever in my short period in this House received so much correspondence on a subject. There has been a mass of correspondence not only from professional lobbyists or people who are described by Mrs. Kellett-Bowman in another place as "vested interests", but from ordinary people the length and breadth of the country. Therefore, we need to take the Bill extremely seriously and I am glad that for once a transport debate in this House is well attended when it normally boils down to about four or five people who have an interest in the matter. However, perhaps we shall get to that by the Report stage.

Like the other speakers who have spoken so far, clearly I accept the need for change. It is not an easy thing to do, but there is a need to increase efficiency. There is a need, while doing that, to guard safety; to improve reliability, which in my view would improve the bus services enormously, particularly in urban areas; and also to stimulate new ideas. Nothing that I say this afternoon will go against that view. Above all, we wish to encourage more use of buses. The more we can get people back on the buses and out of their private cars the better it will be for all of us, particularly those in the centre of major cities and big urban areas.

As has already been said, there are many people in this country who do not have access to a motor car even if there is one in the family. It is often the case that the husband goes off with the company car and leaves the children, the elderly relatives and the housewife without a car and having to go on the buses to school and to do the shopping, and having to go to collect their pension from the post office, which may be somewhat distant if they happen to live in a rural area. We have to judge the Bill by its effect on those people—by its effect on the elderly, the school children, the housewives and both the urban and suburban communities.

I believe that this Bill fails to deliver what the Government want and what we on this side of the House also want. Yes, we believe in competition as a stimulus to improving efficiency and ideas, although I reject the analogy the noble Lord drew with the competition between the express bus services and the National Bus Company. We must really talk about like and like. In that case there was a totally different problem where they were competing also with British Rail and where the express bus company, by reducing their fares, took a considerable amount of traffic away from British Rail in order to produce the results which they have produced. I am not saying that it is wrong; I am merely saying that it is not applicable to this particular Bill.

I do not believe that there should be a totally free rein in the area of buses, because at the end of the day the net result will simply lead to another monopoly. I do not believe that that will he prevented even by the Office of Fair Trading with the Monopolies and Mergers Commission behind it, and I shall come back to that matter when I, like everyone else, say a few words about Hereford. If we get back to a monopoly situation, it will again lead to increasing costs; to loss of services; and to lack of investment.

The central problem has already been set out before your Lordships: it is the contradiction of trying to have deregulation and tendering at the same time. I agree that cross-subsidies should be transparent. If cross-subsidies are concealed there is a danger that they will become phoney and the whole system will become more expensive than it should be. Indeed, that is probably the case today. However, we must think about the ways of doing that. It seems to me that the Government's obsession with cross-subsidies is leading them down a blind alley, because it is, frankly, an obsession to want to remove cross-subsidies at all costs. I believe that it is necessary to make those cross-subsidies transparent and to decide whether or not we want to retain them.

If we remove cross-subsidies the result will be inevitable—it will lead to an increase in public subsidy or to a loss of services. I am talking specifically, of course, about the unprofitable routes. However, it might also damage the profitable routes, because we should not forget that cross-subsidy covers routes and parts of routes, and certain days and certain parts of days. Part of a route may be profitable and the rest of it may not be profitable; certain days may be profitable and certain days may not be profitable—for example, Sunday and night services. However, some of the unprofitable services actually feed the profitable services and provide customers for the network. Therefore, in many cases it is necessary to keep them going and that is why cross-subsidy has worked to a degree in the past. However, I say again that it needs to become transparent.

Therefore there is a basic contradiction between deregulation and tendering with no protection for the subsidised routes at all. We shall have a position where somebody can go out to tender for a contract for a subsidised route and then find himself undercut by somebody operating in the free market. The net result of that, of course, will be that people will put that into the calculation when they are submitting their tender in the first place, because if they do not they will go out of business, with the result that the average price of tendering will be inflated. The benefit from the tendering system is lost, and therefore the local subsidy must go up to cover the lack of cross-subsidy; but it cannot because the Government are controlling local government expenditure. At the end of that long chain of reasoning, we come to a loss of services, particularly in rural and suburban areas, and especially at certain times of the day.

The Government rest their case, as they have done this afternoon, on the efficiency which arises from competition as a means of reducing the overall cost. The theory is that you remove cross-subsidy and you have competition which leads to lower fares in urban areas, and at the same time the competitive tendering is going to reduce the unprofitable areas and reduce costs in those areas. But I do not believe that this is going to happen.

The fear that we and others on this side of the House have is that there is not sufficient control mechanism. The only control is by the traffic commissioners, and frankly they are not going to be in a position to exercise the control at present exercised over the system by the PTEs and the county councils, because there are too few of them. Presumably, unless the Government are going to increase their staff remarkably, there are not going to be enough people about to police this complicated system.

The fear is that we shall have urban traffic jams; we shall have them fighting it out on the streets; we shall have extra bus stops. There is also a genuine fear about falling safety. I know that the Government genuinely believe that they have put in sufficient safeguards to maintain a safe bus service, but I ask them to look again because I believe that in the large number of cases they are going to be dealing with safety is in danger, particularly where they are going to have a lot of small operators working. It is much easier to police a system where you have a small number of large operators who have been in business for a long time and you know where to look for problems, rather than a great upspringing of large numbers of smaller operators with too few safety inspectors to police the system.

The basic problem is the danger of a decline in rural areas as a result of the decline in bus services. The decline has gone on too long, as the Minister said, and it has to stop. I do not believe that this is the way to stop it. In another place, whenever this was raised and whenever they were asked what will happen when rural areas say, "We want buses", the Minister seemed to take a Marie-Antoinette line and say, "Let them have taxis".

Certainly one is pleased at the deregulation of taxis which is going on in the sense of people being able to share taxis and share fares. That is a step forward. But there are an enormous number of problems in the taxi area to which we shall undoubtedly come back at later stages of the Bill. Certainly taxi drivers are worried about it. You might well say. "Yes, they would be", but there is the worry about things like shared taxi stands where people have put money into setting up organisations for taxi drivers which are now going to be open to any Tom, Dick or Harry who comes along with a taxicab.

There are genuine worries among the licensed taxi drivers that the standards of safety are going to be relaxed in favour of the hire-car operators. There is a genuine fear of a move away from licensed taxis to hire-cars. I do not want to go into that in detail today. However, although I welcome the idea of taxis being given a freer range, particularly in rural areas, I do not believe that it provides an answer to many of the problems caused by lack of buses. I am not against flexibility in taxis or in minibuses, but there must be fair trading whether it be in the taxi field or in the bus field.

The Exeter experiment has been referred to. I think that is an interesting experiment. It seems to be working reasonably well, although in a limited way. I understand that it works on what was already a profitable route, and not a very widespread route at that. I hear disturbing rumours that perhaps the overheads are not altogether being costed in the way that an eagle-eyed cost accountant might like to see them costed, but I do not want to knock that experiment. It is something which ought to be examined and ought to be developed wherever possible. Certainly in the Lake District the Mountain Goat service, for instance, has proved very useful for people in that part of the world. All I would say about minibuses is that what will take a lot will take a little, and there is an argument that larger buses can often do all the things that minibuses can do, and more. That is an area where we ought to be experimenting more.

Now we come to Hereford. I suppose we have to talk about Hereford today. It has been talked about a lot by those of us close to this Bill and who have read what went on in another place. But it is important that those who come fresh to it today understand what is happening in Hereford. The Government take a rosy view of it and the rest of us take a poor view of it.

As I have said before, and as the noble Lord, Lord Carmichael, has said, it is criticised for being in the wrong sort of area. Frankly I think that a dispassionate observer would believe that it was a flop. It may be that some of the stories that one hears are apocryphal. One has heard stories of servicing buses in laybys, of racing to stops in the city, and turning round halfway and going in the other direction because there were more people on the other side of the road. This may not be totally true, but at least the Select Committee in another place believed quite a lot of it. It is perhaps unfortunate that the Goverment have rushed ahead with this before they have seriously considered the report of the Select Committee in another place and made a response to it, because it was an important input.

Certainly there was an improvement in bus availability save, I understand, on those days when the Hereford football club was playing away from home and then the private operators turned their buses to running football excursions. Certainly there were cheaper fares, but at what cost? The leader of the Liberal group on Hereford City Council—Hereford is one of these few fortunate places in the country which has a Liberal, or I should say an Alliance administration—described it as being like a Glasgow ice-cream war. The cost to the city is put at some £50,000 extra for bus stops and so on. The cost to the environment is incalculable.

What, at the end of the day, do we have? We have Midland Red having used its clout, and most of the private operators have now gone out of business, some via the courts and some because of safety reasons. The situation is, if anything, slightly worse than it was before the experiment started. The Minister understandably said that that is one of the lessons from which we must learn in the Hereford experiment, and the fact that Midland Red used its heavyweight monopoly is something which will be sorted out by the privatisation of the National Bus Company and its breaking down into small units. I doubt whether that is true, unless the Government intend to break it down into much smaller units than they have given an indication of so far.

In another place the Minister was asked on many occasions whether he could give any evidence of any cities or towns in which this system would work. He said no, he could not, but that he did not mind being a pioneer. The only evidence that we have is from the trial areas, and I submit that the trial areas have failed. The other matter on which I believe we have to look to the trial areas for illustration is concessionary fares. There has been a lot of alarmist talk, and members of the Government are right to complain that certain people have been stirring up this sensitive area for purely political purposes. But we have received a large number of letters from people who are extremely worried.

In response to that sort of thing I have said, "Look, I believe that at the end of the day something will be sorted out. Concessionary fares will not totally disappear". But we have to look at how they will be put into operation. It is clear from the Hereford experiment that the pressure is all the time to move on to the use of tokens. Tokens are not as good as some of the bus passes which have been in existence in areas such as Lancashire, which has a highly integrated system of bus services where virtually the whole of the country service operates on the basis of a single bus pass system. It is hoped to extend that arrangement into Greater Manchester and Greater Merseyside in the future. In the deregulated situation I fear that will be extremely difficult to achieve. People will have tokens in the future because, I am afraid, that is the only way that the system will work. Tokens are not as good either for the user or for the operator, and they are more expensive for the local authority than bus passes.

Like the noble Lord, Lord Carmichael, I could continue for some considerable length, but I am aware that I have already been doing that. I shall come towards the end of what I have to say. One of the major problems we have is the lack of co-ordination that goes with deregulation. But what can we expect when the Under-Secretary of State for Scotland in the other place (at col. 944 of Hansard on 21st May) said: There is nothing wrong with co-ordination as long as it arises out of the transport requirements shown in the market place". It is this market place approach and the lack of understanding of what public transport is about that is the worrying aspect. The needs of the public do not necessarily equate with the profit of the individual operator. In the case of the interchange with British Railways that Manchester has at Altrincham, one can see that they virtually had to rejig their timetables in a way which was not the most profitable for the bus section but it was the optimum for the integrated service. One cannot do that with a disintegrated service if it is a totally competitive situation. Those opportunities for encouraging people into an integrated transport service will go.

The pensioners served by the bus companies are extremely worried about what will happen. I believe that we shall have to consider this point in considerably more detail at Committee stage. This concerns not just the pensioners but some of the existing organisations. For example, Burnley and Pendle have run a delightful little bus service very efficiently and competently, but they are extremely worried that the overheads they may have to carry after they are privatised will break them because they have continuing costs of pension funds for people who have already been made redundant and other long-serving employees.

Similarly, there are concerns about the overheads being carried by the Maidstone undertaking which have about 35 buses; but the overheads of the management are shared over a much broader spectrum than just buses. They undertake the purchasing of fuel oil for heating swimming pools, and so on. There is a whole series of details that we have to go into at Committee stage which do not seem to have been thought out or understood by the Government.

My noble friend Lord Banks will be returning in detail to the subject of pensions, and we shall be pressing the Government to accept their responsibilities on pensions. The Secretary of State seems to have washed his hands of this matter. When the Government shout, as they rightly do, against renationalisation without compensation it seems to me that denationalisation without safeguards for the employees in their pension rights and their future welfare is something which is perhaps even more deeply offensive. The Government must accept the moral responsibility which they undoubtedly have on behalf of the nation for seeing that these people are treated properly. There are many other defects: there is a lack of consumer protection. However, we shall return to all these matters at Committee stage.

It will not be easy to change this Bill especially as we have a Secretary of State who says that he regards public transport as a commercial undertaking and not as a social service. On these Benches we do not regard it as merely a social service. The fact is that there is some of both in it. It should be a service to the public but it should also be run commercially. That is what we are trying to achieve, and we shall seek to achieve that at Committee stage. Undoubtedly this Bill will be given a Second Reading. But I wish the Government would take the Bill away, think again and come back with something which is more constructive and less destructive to the bus services of this country.

4.15 p.m.

Lord Zouche of Haryngworth

My Lords, I rise to address your Lordships for the first time. I have to admit that I find the task most daunting. I understand that the tradition of your Lordships' House requires that a maiden speech should be non-controversial. In choosing to speak to this Bill I could hardly have selected a more controversial issue, but I shall take this opportunity to speak on an aspect of transport provision that must surely ride above the level of politics.

My concern is with transport provision for the aged and disabled. I must declare an interest. For the last 12 years I have been a director of the Multiple Sclerosis Society of Victoria in Australia, where I was living for the past 19 years. I am currently serving as a committee member of the International Federation of Multiple Sclerosis Societies. Therefore the subject of disabled people is very close to my heart.

This Bill contains proposals that will result in a complete overhaul of bus provision. Such opportunity for reform is unlikely to take place again for many years. We have this marvellous chance to make sure that the needs of the elderly and disabled people are given serious thought, and provision made accordingly in the Bill. During the last decade much has been done to improve the general transport facilities for the disabled, but we still have a long way to go. Whatever comes out of this Bill, we must ensure that at least the current improvements are able to continue. My own fear is that the elderly and disabled may well be forgotten and then they may end up with a worse deal.

With the increasing number of small operators the needs for the elderly and disabled people may well become neglected. Smaller operators will be less able to find out how they might make their transport more suitable for disabled people. Currently large companies, such as the National Bus Company, can afford to employ a full-time consultant on disability and buy the best advice. That is all very well for the national companies, but what about the small operators? Will they be able to afford consultants to advise them on the needs of the aged and disabled? Will they be able to commission expensive study reports? I doubt it.

There is no mechanism under the Bill which will make information available to operators on how transport can be improved for disabled people. Information is needed on how both existing vehicles can be adapted and how new vehicles can be designed for disabled and elderly people. Their needs must be accounted for at all stages of transport provision. Manufacturers and operators alike must be made aware of how this can be done.

In fact, there is so much that can be done for relatively small outlays, but there needs to be a national advisory body to educate operators on what can be done. For instance, it is inexpensive to have thick handrails in the right position, split-level steps, tactile symbols for blind and partially-sighted people and also tactile symbols indicating seating layouts. The West Midland Bus Company has done this most successfully on 2,000 buses. Pads of paper can be supplied for people with communication difficulties. This has been done most successfully by the Bristol Omnibus Company. It goes without saying that driver training and many other aspects can be covered which do not cost a great deal of money.

All these facilities which I have mentioned are cheap but are remarkably beneficial to many people. I am not talking about a small minority of disabled people. For a moment, disregarding those people in wheelchairs, it must be recognised that it is estimated that between 30 and 40 per cent. of bus users require the types of aids I have just mentioned.

The problems for wheelchair users are different in that facilities cannot be provided on mainstream transport on a commercial basis. Very largely, therefore, there is little provision for wheelchair users on public services, though there are some notable exceptions. For instance, wheelchair access is provided on certain routes in Doncaster, Plymouth, Leicester and Nottingham, to mention but a few. Despite the fact that these vital services are totally uneconomical, we must ensure that private operators do not put them in the "too hard" basket and do not close them down because of their non-commercial viability. Perhaps assistance could be given through a system of grants or funding aimed specifically at this area.

The Government are obviously most sympathetic to the needs of the aged and disabled. They have already said that they will amend the construction and use regulations to make provision for the disabled. This is a most welcome development, but of course it affects only new vehicles, which will not be on the roads for a long time yet. There is no provision to modify vehicles currently in operation. The Government have also said that they will consult on the possibility of amending the drivers' regulations. This, too, is a most welcome move, but it is also limited. It is limited to the extent that driver training is of little use unless people can get on to the buses in the first place.

I support this Bill. I am a firm believer in the free enterprise system, but I should like to see some further provision in the Bill to protect the elderly and disabled people. I hope that your Lordships will support me at Committee stage when I may ask for some uncontroversial amendments to the Bill to cover some of the points I have outlined today.

4.24 p.m.

Lord Shepherd

My Lords, one thing is certain: that I can speak in complete unanimity with all quarters of this House in congratulating the noble Lord, Lord Zouche of Haryngworth, not only on making his maiden speech but on the quality of the speech that he has delivered today. It is a clear message to this House that when one talks about business—and I shall be talking a good deal about business—and the commercial aspects of bus operation one has to recognise that there are many within our society who require special understanding and assistance. The noble Lord referred to the consultant that my old company employed, Mrs. Claudia Flanders. I well remember one thing she said to me: that if you can improve the quality of service to the disabled and those in need you have the repercussive consequences of raising the standards for all your passengers. Therefore when one is doing it for the disabled one is not doing it out of a sense of charity; one is doing it in a straight business commercial sense.

I think I should declare an interest. For six years until the end of December I was chairman of the National Bus Company. I should like to make it clear at the outset that I do not speak on their behalf today; nor, for that matter, at other stages of the Bill. But that is in the past. In the present, since the noble Lord, Lord Tordoff, himself referred to it, there is a very grave question of pensions. I therefore may have a present interest since I am a small pensioner within the National Bus pension fund.

I view this Bill with mixed feelings. There are some parts which follow very closely a paper that the National Bus Company produced about the future of road passenger transport in the United Kingdom. I then shared with my colleagues the sense of a need for change within the present system. But certainly we never had in mind the sort of radical approach that is being proposed in this Bill. We are not against change. My anxiety, I suppose, is about timing. My noble friend Lord Carmichael himself drew particular attention to the very short period during which some major adjustments will have to be made and what may be very severe financial problems arising for those shire counties which today have a statutory duty in the provision of road passenger transport.

I suspect I shall be in difficulty with the Government; but that is not unusual. I have to say that I think I shall be in difficulties with some of my noble friends because there are some parts of the Bill which I certainly support in principle, I should need further reassurance on them in Committee. Perhaps it might be wise to get those out of my system, and then deal with my major anxiety in terms of the Bill itself—that is, the question of deregulation.

I support the introduction of private capital into the National Bus Company but, I suppose, for very different reasons from those the Government themselves have in mind. Some three or four years ago, as I say, I had as chairman to give consideration to what was the proper interest of the National Bus Company, its management, its employees, and those we served. I took a view that the National Bus Company no longer needed to be a public sector company. We no longer had to borrow from the Government. We were turning in fair profits. In the last two years we have had an operating profit of the order of £46 million; and, after interest and charges on capital, we had a net profit of some £22 million. Put in another way, we had some 17 per cent. return on shareholders' funds. Such financial strength made it possible to consider a new financial structure.

I took the view that the National Bus Company, if it was to serve the general travelling public, had to have the ability to maximise all its assets, both physical and in manpower, and to use all its resources in a flexible way. I came to the view, most reluctantly, that the only possibility of achieving that lay in freedom from the restraints of present legislation, freedom from the Treasury view, and freedom from the changing moods and attitudes of successive Secretaries of State for Transport. I therefore reached the view, and I still retain it, that it would be right in the interest of the employees, the management and the people we serve, that the National Bus Company should go into the private sector.

The National Bus Company is not a monoply. It represents only some 24 per cent. of the total of the road passenger transport industry. It is a sizeable force, but I do not believe that, even in its present situation, if the Bill itself is passed one could not so structure the balance sheets of the subsidiary companies that it would be possible to achieve competition not only within the industry as a whole but between the subsidiaries of the National Bus Company. As an illustration, I may say that during my period of time we had competition within the National Bus Company as to the servicing of vehicles. A general manager is not required to send his engines to be rebuilt and repaired to his own central works; he can send them to any central works if he wishes if they can quote cheaper or quicker delivery. So competition is not a problem in that respect.

I also support the view of the Government that the transport organisations of the PTAs and the municipals should be further removed from what I may call political control. I passionately believe that the executives of organisations who are providing services such as buses should be free to develop their own professional expertise; that they should have a remit, a direction, from their political masters as to what is wished to be achieved but that the professionals should be free to get on with it and to provide it. I support that.

I also support the view of the Secretary of State that there must be an increase in the powers of the traffic commissioners over quality control. I have no doubt at all that the Secretary of State believes that. However, I have to say to the House that I do not see within this legislation enough assurance that that will be provided. I think that I can remember a debate some time last year. I am glad to see that the noble Earl, Lord Minto, is speaking today because, if my memory is right, he had been an assistant traffic commissioner. There was, in his knowledge, shortages of staff and difficulties in the terms of inspection of vehicles, and I know that from my own experience. If you are going to have competition and far more companies, many of them very small, some of them running with rather antiquated vehicles, as we saw in Hereford, then if you are going to maintain the quality standards which I am sure this House would require to be maintained, full resources have to be available to the traffic commissioners. As I have said, I do not find enough assurance in the legislation. That is something that we shall need to look at in Committee.

I now come to deregulation, because this is really central to the Bill. The noble Lord, Lord Brabazon of Tara, when he was referring to competition and what it would bring in terms of innovation, was kind enough to mention the National Express, a great symbol of success of the National Bus Company, and of course the minibus operation in Exeter. There are many other innovations within the group and, if I may say so to the noble Lord, under the present régime, under the present legislation. All this was done in the existing situation.

I think that the Government ought to be careful in relying upon coach operation as a case for deregulation of stage carriage. That is not comparing like with like; they are very different. For one thing, although there was anxiety on my noble friend's Benches as to what would be the consequences of the 1980 Act, I have to say to the House that the National Bus Company were rubbing their hands with glee. We perceived an opportunity which I do not believe the Department of Transport themselves had perceived. I think that they saw the 1980 Act solely as a means by which competiton could be created between coach competitors and others. We, however, saw British Rail as the target, because it was British Rail who had always objected to the traffic commissioners prior to the 1980 Act when a coach operator asked for permission to run a service from, shall we say, Brimingham to London or from Glasgow to Manchester.

Deregulation in 1980 set the coach business free of the restraints of British Rail. It is a very different-sized market. It is an increasing market of leisure that made possible the success of the 1980 Act. Perhaps I may say to the noble Lord, since I like patting my own back, that there would not have been that success if it had not been for the understanding to use all the resources of the National Bus Company, with some 1,400 vehicles, to use all the booking offices and facilities so that we could market nationally. If someone wanted to go from London to Truro and he lived in Edinburgh or Newcastle, he could book his ticket in his home town.

The failure of the private operator in this field arose because he did not have those resources. We had them, and we used them. But coaching is very much a horses-for-courses situation. Where National Express did well on coaches, the private operator did better than we did in hire and excursion business. So we all did well. But the 1980 Act cannot be used as justification for saying that similar success would follow automatically for stage carriage.

My anxieties over deregulation are these. I shall put aside until Committee stage and leave it for others to talk about the PTA areas and the municipals. I shall direct my thoughts more to the shire counties. The National Bus Company estimate, very conservatively, that they cross-subsidise by perhaps £120 million or £150 million a year. This is based upon examinations by transport consultants and is a conservative figure. If you have deregulation and you are a manager of a bus company, you will have decided already to break up or will already have broken up your operational base into broadly three groups. One group will be your highly profitable services. They are services mainly between towns and major villages and towns, but not the network. It is the network that has proved its great success in the provision of transport within the shire counties.

The second group is a more marginal one. It is a group of routes which is not exactly profitable but which makes a contribution to what I call the poor routes, that is, the first group. The third group consists of the services which are socially desirable but are completely uneconomic and make no contribution to the company. Those are the services that are largely provided by Section 1 grants. The National Bus Company received last year some £65 million under that heading.

I should like to say this to the Minister, because it rather appeared that subsidies were easy to obtain. I can tell your Lordships that negotiating with shire counties is like getting blood from a stone, and I suspect that shire counties probably get far better services than their moneys actually provide. The services that are being provided within the shires, so far as the National Bus Company is concerned, are largely obtained by that element of crosssubsidy—£125 million and £150 million. On deregulation, I have no doubt whatsoever that a manager will say. "Those are the services that I shall run—those poor services—and I shall fight against anyone who seeks to intrude upon that route."

There is nothing immoral in that. That is a straight commercial approach. What it will mean is very much lower fares and far greater frequencies. That is what, in a sense, happened in Hereford. Overnight from £120 million to £150 million of cross-subsidy on which services in the shire counties have been absolutely dependent will be siphoned out. It will not be siphoned out over a long period. It may even be siphoned out before deregulation, because a prudent manager may say, "I shall establish what fares I shall charge and what frequencies I shall operate prior to deregulation", and there is nothing to stop him because the 1980 Act removed from the traffic commissioner any control over fares.

I beg the Government to appreciate the vacuum that can be created—a vacuum which I believe will be created. The shire counties, even if they have the resources, will have very great difficulty in matching the timetable, to be able to ensure that the services that are now being provided will continue to be provided after deregulation.

There is one other factor, When I was the chairman of the National Bus Company and I heard of deregulation for the very first time, I asked the general managers of six companies to undertake a desk study on what would be the consequences of deregulation. As general managers, they were given the responsibility of running a commercially profitable organisation. I have to say to the Government that I was absolutely shocked at what I saw in the results from the desk study of the services that were going to disappear. So my next question to my colleagues was: "If that is so, and you withdraw, what will be the cost?" That is the cost of closure and the cost of redundancy. I do not think the Government have given any thought to this aspect, but I shall give a conservative estimate. What I believe will happen is that in order to maintain a commercial base and to do it quickly, the National Bus Company will be faced with a situation quite different from what it faces now in repaying its capital debts. It will have to go back and borrow probably between £60 million and £100 million to cover the cost of redundancy and closure. My Lords, is it necessary?

We have heard from the Minister that the bus industry has declined. We all know why it has declined. One had a feeling from the noble Lord, Lord Brabazon of Tara, that the bus industry was in a parlous state. One fact is very clear: compared with Europe the bus provision in Britain comes out extraordinarily well, and in terms of subsidy Britain and Greece are at the lower end of the list of the provision of subsidy for the provision of road passenger transport. So, what do your Lordships make of it? I hate to say it, but I believe that the Government acted for doctrinaire reasons, I believe that this Bill did not really emerge in the Department of Transport, but emerged in some earlier exercise in one of these rather strange organisations that look at the economic health of the country. Given the state of the industry, with all the fears that are expressed by all the professional busmen that I know and all the shire counties that I have had any connection with—they all had unanimity of concern, the only difficulty being what would replace that of the Government—although change is necessary, I do not believe that this high risk policy, this radical policy that is being adopted, is the right approach.

I live in Kent, and we have fruit trees. I see little point in tearing up a fruit tree by the roots when, by careful pruning, you can improve the quality of your fruit and increase the yields. I would have taken a much more pragmatic approach to change based upon my experience within the bus industry, and I believe that I would be supported by all the professionals within the bus industry. If the Government find themselves at loggerheads, as they do, can they not say to themselves, "Have we really got this right?"

My own wish would be that this Bill should be delayed. I doubt whether that is possible, but I sincerely hope that in Committee we shall make a real effort, right across party harriers, to see whether it is possible to bring this Bill into a better order. This will not only be for the benefit of the ratepayer and the taxpayer, who have a right in this matter, but, above all else, for the proper provision of bus services, particularly to the people in the counties. And, if I may say so, to the noble Lord, always remembering the disabled for whom the bus is usually their only means of transport.

4.48 p.m.

The Lord Bishop of Durham

My Lords. I hope it will not be thought impertinent of me, as a very new boy in your Lordships' House, if I add my respectful felicitations to the noble Lord, Lord Zouch of Haryngworth, for the very powerful and moving maiden speech which he has just made. It is something on which we shall clearly all have total unanimity, although it is a unanimity which I fear may not continue with regard to other details.

I have been asked, both publicly and privately, "What have Bishops to do with buses?" I suppose that could be turned more grandly into the question, "What has theology to do with transport?" The only obvious statement linking the two which springs immediately to mind is a recollection of a song of my youth in which it was asserted that you cannot get to Heaven in a Chevrolet. Whether one would have a better chance on a subsidised PTE bus is perhaps a point which I should refer to my backroom boys for disputation.

But in a practical and political forum, the connection between Bishops and buses is obvious. It is people. It has been represented to me by a wide range of persons and interests in Durham and the north-east that this Transport Bill, enacted without some fairly radical amendments, will have the immediate effect of making very many people who are now badly off, worse off, and the longer-term effects are also viewed with the utmost distrust and disquiet. People expressing this worry to me include members of all the county councils in my diocese, a number of the district councils, various trade union bodies, community associations, old-age pensioners and a variety of persons who have made studies of the deprivation and difficulties of the north-east and who also are concerned with producing innovations and enlightenment in it. The concern is very widespread and the documentation backing this up seems to be very impressive and disturbing.

So as someone who believes very deeply that my Christian faith obliges me to be concerned with all the factors that affect people, and not just the so-called religious ones, and as a person who seems to have been appointed to an office which places me in a certain sort of representative position in my diocese and area, I could not avoid getting involved in the debate and therefore in the politics of the debate. But I assure your Lordships that the point of entry for me is not politics or even buses, but is actually people.

However, when I came to investigate the details I found that not only are the proposals in the Bill about buses likely to have a very great effect on the quality of life of a large number of people but also that the Bill is based on something which might reasonably be called a faith—a faith which I think has been indicated by the noble Lord, Lord Brabazon, in introducing the Bill. It is a faith about the nature of our society and the forces at work in it. I fear that it seems to me, on further consideration again, that this faith is very probably a false one and quite possibly verging on idolatry.

So there are two levels of disquiet about this Bill. The first is about its likely effect on people, especially on people who are already badly off—that is to say, the unemployed, the old, the underpaid, all those who find themselves without a car, and so on. In my part of the world, there are at least 50 per cent. before you even start having a one-car family. But the second level of disquiet is to do with the grounds on which this very probable threat to the already precarious and limited lives of so many people is being presented. I was alerted to this second level by two things, principally. The first is the way in which the supporters of the Bill, at any rate at one stage, talked about groceries, and the second is the way in which they talk about risks.

It is argued that bus services should be completely deregulated, so that these services can be organised and sold like groceries. As the Bill makes plain, that is not what is actually proposed. What is proposed is that all regulations which prevent a particular form of what I can only call atomistic and individualistic competition should be abolished. All those regulations should be abolished, but any regulations that are necessary to preserve and protect that form of competition should either be in the Bill or at the discretion of the Secretary of State.

In passing, I think it is worth noting that it is precisely this sort of internal contradiction—though this may be rather academic of me—which strengthens one's suspicion that this Bill is an exercise in theory determined by an ideological faith, rather than a considered pragmatic approach to the undoubted practical difficulties involved in both the cost and the organisation of a public transport service. The Bill has far more in it about regulations than about deregulations, and also far more in it about centralisation than about setting local initiatives free. It is only one sort of freedom and initiative—and that a very fragmented and atomised one—with which the Bill is concerned, and if this form of competition needs so much protection and so many regulations, either proposed or at discretion, then I should have thought it was a pretty bad candidate for acts of faith, anyway. But that is only in passing.

The really diagnostic item is the repeated comparison, which I have heard again and again, of the provision of bus services with the provision of groceries. As this comparison is used to justify a system which will ensure that each single route is in isolation the subject of uncontrolled competition or of competitive tendering, it is clear that the sort of grocery-selling operation, which is in the minds of those who want the provision of bus services to be like the provision of groceries, is the single local or corner grocery shop.

This is a very pleasant idea. We all long for the good old days of small, viable and intimate communities. But I wonder whether anyone has informed the proponents of this view that groceries nowadays are largely supplied by multiple stores, with highly co-ordinated marketing policies and with provisions coming from an immense range of food-producing and processing corporations. The grocery comparison, besides begging the whole issue of whether bus services should be regarded as largely a social service and a public utility, is in an out-of-date form, anyway.

That puts me on to something that has bothered me about the Bill, which is the quaintly archaic air of romantic unreality which pervades the whole Bill, with a rather fragrant but faded nostalgia. There is a nostalgia for the great days, if they ever existed, of hordes of busy little men and busy little women ready, if given the chance, to set up little local enterprises, whether of the one-family grocery store type, or of the one or two man or one or two bus type. Surely that is a romantic dream, and a dream which can be introduced and legislated for only by persons in the grip of a strong but over-simplified faith. Your Lordships will know that I am not in favour of an over-simplified faith.

In this case, however, it is the faith in the market, conceived of as that which is produced when little men are set free from all constraints in strictly localised and divided units. This does not correspond to any existing reality or to any reality which we are likely to be able to cause to exist. Similarly, we are told that it is worth risking everything to enable this setting free of the competitive market for the provision of strictly local services. But why is it worth taking this risk and not, say, the risk of letting local authorities continue to wrestle with the provision of services, which they and their constituents judge to be locally required and possible within the constraints of money, not only money made available to them but also money which they can raise either by rates or by revenue?

It is true that many local authorities do not do as well as they might, but entrepreneurial competition on its own is by no means the most efficient way of doing many things, especially if you take into account social costs as real costs, along with economic costs. Why risk deregulating and destabilising everything, including serious attempts which have been made to get co-ordinated services going, like the Tyne and Wear co-ordinated system and others in other counties, and not risk trying to negotiate with and improve these local efforts built up painstakingly over a number of years? The answer seems to be: because we believe in competition as we define it.

Given the complexity of life as it has built up over the last 150 years, this seems to me to be a naïve and almost certainly a false faith, and when it is used to refute, or more often to ignore, very many serious arguments about transport as a public and social service, about the proper use of cross-subsidies for properly designed networks and about the need for local co-ordination and local sensitivity placed in the hands of, and in the reach of, local people and so on, it begins to look dangerously like an idolatry. And because of the expectations that are invested in a mistaken god, there is danger that people are determined to ride fiercely over objections and genuine requests. This is very dangerous, especially when it is accompanied by an alarming amount of centralisation of regulatory powers which goes with this Bill, as with so much of other Government activities.

Surely it is proper to ask the Government to think again, and we should assist them in this by the promotion of and, I would hope, insistence upon serious amendments, at least in the areas of the timing of the implementation of the legislation, of the provision of possibilities for more local authority influence, together with the opportunities for more co-ordination and, quite possibly, comprehensive tendering, and in the area of allowing local enterprises such as those in Tyne and Wear and Yorkshire to continue through negotiating an experimental period.

There are grave grounds for disquiet about this Bill, a disquiet which is moral, political and practical, and all are focused on people. The moral disquiet—I venture into this area in fear and trembling, but I feel obliged to do so—lies in the valid question which can be put to the proponents and the principles of the Bill. Are you not putting your faith in a simplified view of the market and asking that faith to hear far more than it could or should bear, not least in the risks you take with people for the sake of a very doubtful principle? It seems to me that this may well be a typical example of a common form of idolatry which is that people promote that which is good to the role and status of gods.

Personally I believe that competition is a necessary element in all our lives, and the proper and responsible promotion of competition is therefore a necessary good. But by making it an overriding element you get a destructive god. Moreover, in the pursuit of it, you are choosing, I think without sufficient reflection, whose freedom you promote and which risks you take without considering sufficiently the bonds of poverty and deprivation which you thereby tighten on some other people. How can people in an area of 20 per cent. or even 30 per cent. unemployment produce sufficient purchasing power to benefit from the deliberately liberated play of entrepreneurial competition for a public service which they desperately need in order to get out and about?

That brings me to the political disquiet. Surely to rush on with this rather theoretical Bill is singularly untimely. Our society is deeply divided and everything so far, although there may well be hope for the future, seems to bear more and more hardly on the already "have nots". It will be said—of course it has been said and it will be said again—that subsidies are still possible. Yes, indeed, they are still possible—but under conditions which will make them more 'and more expensive and less likely to appear; first because the competitive creaming and so on makes it certain that the remaining routes will be as expensive as they possibly can be; and secondly, because of the general climate and many other Government measures which are making less and less money available to those who must subsidise. Surely, then, it is verging on cheating to say, "you can still get your subsidised routes and your concessionary passes, and you will". The chances are surely that you will not. But this is not time to further marginalise those who are already handled very hardly by our society. Why harass them by one more measure which is being rushed through on such insufficient principles and with such determination not to listen to other points of view? Could the Government not risk holding up another and further threat to the poor for the sake of a contribution to pulling our society together—a pulling together which we certainly need if we are to face the very tough economic climate and the demands for innovation which our community as a whole has to face? Surely it would be more politically prudent on a wide front to compromise and negotiate about this Bill.

That leads me, finally, to the practical disquiet. If the Government would set aside their ideological blinkers, they might very well see that there are very considerable arguments on a number of sides and on a number of issues. Why not negotiate about them therefore and consider substantial amendments to the Bill, including a slowing up of its timetable? This is a point at which serious consideration for people, especially the people who are suffering most from our economic, social and political problems, makes toughness and determination to pursue a previously announced programme become very close to bullying and stubborness, I fear.

I hope, therefore, that your Lordships' House will be able to assist the Government to think again about many of the provisions and processes of this Bill and that the Government will show themselves ready for a more pragmatic approach so that it can be, even in very difficult circumstances, a more caring approach not only for the sake of the half of the population of my area who are wholly dependent on public and co-ordinated transport, but surely also for the sake of the country as a whole.

The Earl of Lauderdale

My Lords, before the right reverend Prelate sits down, can he say whether in the material he has been using he has drawn on anything provided by Church Action on Poverty?

The Lord Bishop of Durham

No, my Lords. It arrived today, but I had already made the points for myself.

5.5 p.m.

Lord Peyton of Yeovil

My Lords, perhaps I may first join your Lordships in offering very sincere congratulations to my noble friend Lord Zouche of Haryngworth on a very distinguished and able maiden speech. I am sure that all of your Lordships will look forward to hearing him again regularly and even during the Committee stage of this Bill, though I am bound to say that my own enjoyment of speeches during Committee stages is severely limited. Nevertheless, I say to my noble friend how much we all enjoyed his speech on this occasion and how much we look forward to hearing him again.

I do not want to make too many comments on the speeches of noble Lords who have spoken before me, but I should just like to observe that the noble Lord, Lord Tordoff, surprised me somewhat by his apparent enthusiasm for controls and by his experience of being altogether more comfortable with large operators and finding small ones really lacking in credibility. His comment that Marie-Antoinette might have said, "Let them have taxis", seemed to me to be very wide of the mark. Had that lovely queen offered the people of Paris taxis or something similar, I very much doubt that she would have had her head cut off.

The noble Lord, Lord Shepherd, if I may refer to him briefly, made a very interesting speech. Some of the comments he made on the National Bus Company and deregulation will I hope receive the very serious attention of my right honourable friend the Secretary of State.

I now come to the speech we have just heard from the right reverend Prelate the Bishop of Durham. I hope he will allow me to say that it left me in a state of considerable confusion, as indeed have some of his other previous utterances. When he came to a faith bordering on idolatry, I was eventually driven to the conclusion that idolatry consisted of those things in which he was unable to entertain an energetic belief. The right reverend Prelate compared the transport of passengers with the selling of groceries. I was left in a state of very great uncertainty as to who else besides him had made that comparison. I am quite unaware of any spokesman in Government—my right honourable friend or any Minister—who has so far likened the problems of selling groceries to those of conveying passengers on buses.

The right reverend Prelate seemed to reject everything which he did not find acceptable. Competition was regarded as quite an unreal force. What distinguished the speech of the right reverend Prelate, if he will allow me to say so, was the lack of any real attention to the serious problems of the industry or any indication whatsoever as to what he would actually do if he were faced with the heavy responsibilities which Ministers of the Crown carry. Like the right reverend Prelate, those who oppose this Bill, who resist it and even appear to resent any serious attempt to bring about change, give me the impression that they actually believe that we in this country are the happy possessors of an adequate bus system at reasonable cost, giving general satisfaction.

Such is their dedication to the status quo that they seem altogether unconcerned with some of the unpalatable and eradicable facts; fewer services, higher fares, fewer passengers and spiralling costs. Even the right reverend Prelate is under some obligation to grapple with these, the stern facts of the situation.

So many spokesmen for the industry—some of them being on the verge of politics—seem protective of themselves and their industry. I believe it is necessary to remind your Lordships of just a few figures. They have been much deployed but they are still as frequently ignored. In the past 30 years, journeys by bus—and my noble friend on the Front Bench quoted some of these figures in his opening remarks—have fallen from 42 per cent. to 8 per cent. of the total. In the past 10 years, fares have increased by 30 per cent. more than inflation. Revenue support has increased from £6 million in 1971 to a total of £575 million in 1983. Total support has risen from £71 million in 1972 to more than £1 billion in 1984–85.

The system of road licensing is now 50 years old. Times have changed and the world has moved on. Are we to be altogether surprised that the system is beginning to look a bit frayed at the edges? The Government now seek, as I understand it, to ensure that those who support the industry by means of fares and taxes get value for money, and that those who require a service will not be denied it simply because of a great complex of old, outdated rules to which some people are unduly dedicated.

We have been told so many scare stories. The general view and purpose of the Government seems to be brushed aside by the opponents of the Bill in their hurry to stir up anxiety. Children, old people, shoppers, those who live in the country, those who have weekend visitors, and even those who are having their cars serviced will, we are told, be put to very great inconvenience as a result of this Bill. It is said that vehicles will become dangerous and that services will be unreliable. What are they today?

There is then the treasured phrase, although I am glad we have not yet heard it in your Lordships' House and I trust we shall not; the threat that the "cowboys" will be everywhere. Whenever anyone cannot think of any other argument and their mental state is bereft of thought, they resort to the idea of cowboys on the rampage, destroying everything and embarrassing everyone. I ask whether your Lordships would not be well advised to apply your minds to replacing a system the costs of which have grown and the usefulness of which has diminished, rather than to oppose wholeheartedly, root and branch, any proposals which come from the Government.

Brevity requires that I concentrate my remarks, as I have done, on the road licensing system. But I should like also to take a few moments to welcome the decision to leave London alone. Last year, London was visited with a great wadge of legislation from Parliament. There must be time for the digestive process to be carried out. I should like to say how much I welcome the decision—I suppose it is such—of the Secretary of State not to tamper with the London taxi service. In an age when the customer's needs are very frequently disregarded and put on one side, the service which the customer gets from the London taxi driver is equal to anything he will find anywhere else in the world—and probably a good deal better.

I will end by commenting briefly upon what seems to me to be the extraordinary way in which we handle our affairs. We cherish a belief that the world will wait while we quarrel. Only too often, with the encouragement of the media, we allow discussion to degenerate into confrontation. We adhere to the convention that change and innovation may be good for other people but are what we ought to resist ourselves. Finally, there is that long and awful process of legislation—the long, and, winding lanes of protest and often unprofitable argument along which any important measure has to be dragged before it is allowed to reach the statute book.

I am sure it is unnecessary to remind your Lordships that we have just endured the protracted Committee stage of the Local Government Bill. I ask myself with some dread whether we are going to repeat that experience again over the next few weeks.

Noble Lords

Yes, my Lords!

Lord Peyton of Yeovil

My Lords, is it too much to hope that those with real anxieties about the possible effects of this Bill may recall that many parts of the country do not have buses at all; that in others, services are scarce and unreliable; and that in most, they are too costly both for passenger and for taxpayer? Is it too much to hope that they will also reflect upon the fact that no responsible government can continue for ever to stand aside from problems just because they are difficult, just because they are thorny, and just because they are intractable?

Now that I have come to the end of my remarks, I hope that the right reverend Prelate will not think that anything I have said is intemperate or malicious. All I want to say is that I find this endless business of protest, criticism and destructive comment thoroughly unacceptable when no alternative is readily put forward.

Lord Donaldson of Kingsbridge

My Lords, before the noble Lord sits down, may I ask him one question? I appreciate that he did not agree with what the right reverend Prelate was saying. But at the very beginning of his speech, the noble Lord said, in an attacking way, that the right reverend Prelate seemed to reject everything that he found unacceptable. Does not the noble Lord do so? It seems to me that he does exactly the same.

Lord Peyton of Yeovil

My Lords, perhaps I should have used the word "incomprehensible".

Lord Donaldson of Kingsbridge

That would have been much better, my Lords.

Lord Peyton of Yeovil

My Lords, I am obliged to the noble Lord for his kindly correction; I take it that it was meant in a kindly fashion and I am grateful to him. The noble Lord tempts me to prolong my answer. I was saying that the right reverend Prelate gave me the impression that anything he does not find comfortable, acceptable and comprehensible he tends to reject. That is an attitude which I do not share.

5.19 p.m.

Lord Davies of Leek

My Lords, I found myself engrossed by that piece of artistry. I remember the days when the noble Lord was concerned with transport in another place. Having worked with him on the possibility of getting a bridge constructed between Britain and France, I think I had better leave the matter there and get on with my own speech. I may say that, out of kindness to myself as well as the House, I shall not take more than about six minutes. That should please your Lordships, no matter how bad it may sound to others.

The point I make is this. We were told that the country was going adrift. I consider that its people have drifted further apart since this Government came into power—and I make only this one political point—than they were before. I object to that. The Transport Bill is yet another example of where the voice of the people is completely overwhelmed. We are confronted in England with an and philosophy of government that has no relationship with the historiacally compassionate attitude of the old Conservative Party, which I remember when the right honourable Winston Churchill introduced wages councils way back before World War I. All that has been destroyed by the present Government.

We were told by the lady who now leads us—and she probably meant it—that the country was divided and that she wanted to reunite a divided and disillusioned people. Looking at Britain now, we can see, so far as I am concerned, that the screws are being turned tighter on the underprivileged. If the Bill goes through as it stands—I am sure the House will want to make some progressive changes—the poor and the underprivileged will suffer. We now face a period of total turmoil and commotion through the policy that we are asked to accept in the Bill; namely, the deregulation of services and enforced privatisation.

There are moments when I think that the Conservative Party of today—I do not like to use the word "conservative" because the party is not conservative—is more ideological about privatisation than is the Soviet Union about communism. The Conservative Party is more emphatic that the problems of the world will be solved by privatisation than the Russians are emphatic that communism will save the world. It is an interesting point. What is happening to us?

The Government's proposals will not ease life. The needs of the old and needy in rural and remote areas will be increased if the Bill is unamended, but I am sure that the Bill will not be left as it is because there will no doubt be many amendments from all parts of the House. The Bill proposes the most draconian effects on underprivileged human beings. As usual, the whole thing has been rushed upon us without thought. A hundred years of know-how in transport will be destroyed in one lumpen fell swoop.

A number of municipal undertakings have carried out studies into the potential effects of the Bill's provisions on their local services. They have found, for example, that six of the largest city undertakings will need £2.6 million more in subsidy to maintain existing service levels; or else they will need to make extensive evening and weekend cuts in services and cross-subsidise bus journeys to make them profitable. An independent consultant's report on Plymouth's bus services has found that the most likely effect of the Government's proposals will be to increase the costs to the city council of maintaining the local desirable level of bus services by some £392,000 a year. This would result in an increase of 22 per cent. in the district rate. If similar results occur throughout the rest of the country then it is possible that bus services as we know them will collapse as a consequence of one piece of, in my estimation, unnecessary legislation.

To summarise, I would say that local democratic control over transport services will be considerably weakened. The loss of £100 million in cross-subsidy and of a "network" approach means that many routes will be under threat unless councils spend more to maintain them. The National Bus Company has warned in an annual report that there is little room left for increased efficiency and that deregulation will force it to cut services by some 30 per cent. The Bill will cause massive job losses in the industry, in addition to those already faced in bus manufacture. There is no protection for the existing pension rights of current employees. There is no protection for the welfare of long-established family firms. The main desire of bus users is for a regular and guaranteed service upon which they can rely in the future.

I fear—and I am sure the House will fear and will, therefore, make some amendments—that the Bill will provide confusion rather than clarity. The effects are likely to be muddle, waste and uncertainty, with chaos in many of our city centres. I sincerely hope that when the Bill is before us in Committee we shall have constructive amendments from all party points of view so that, ultimately, we send the Bill from this Chamber a better Bill than when it came in.

My Lords, I have taken seven minutes!

5.27 p.m.

Lord Harris of High Cross

My Lords, as a professional economist of a strong market tendency I was held fascinated and almost hypnotised by the oration which fell from the lips of the right reverend Prelate the Bishop of Durham. His central objection seemed to be that the Bill was treating the sale of bus services like groceries. Before he sat down it was clear that he did not really think that groceries should be sold like groceries but rather be an extension of the social services. When there is time I should like to give the right reverend Prelate a refresher course on economics. Economic theory has long since abandoned the vision he held up of atomistic competiton and has adopted the more robust concept of workable competiton and contestable markets, with which this Bill is in full accord.

Although I personally prefer to repeal legislation rather than acquiesce in new laws, I strongly support this Bill. Among its many considerable merits it has the effect of removing the mischief—however well intended—of many of the 50 transport Acts that have come to clutter up the statute book since 1919. I do not contemplate the prospect of the protracted debates on detail at Committee stage with any great anticipation or eagerness and I venture to make a special appeal to some of my noble friends on the Cross-Benches that they should be alert to resist the temptation to join in those jolly rebellions that we can expect to be got up for party purposes from the Labour Benches. We shall no doubt be blinded by the grinding of axes, as I shall show in a moment.

Much of the factitious propaganda with which we have already been bombarded is no more than a rhetorical smokescreen to conceal the fear of freedom and competition which is needlessly felt by many of the entrenched interests in the trade unions, in the protected taxi services, in the local authorities and among their less enterprising bureaucracies.

Lord Tordoff

My Lords, the noble Lord said that we would be blinded by the grinding of axes. I think he probably means that we shall be deafened, does he not?

Lord Harris of High Cross

My Lords, the sparks coming from the axes might also blind, but I thank the noble Lord for that correction. I shall try to abate my later remarks about the Liberal Party as a small reward.

I have to be fair and say that the opponents are guided to some extent by reference to a sort of principle. That principle seems to me to be the strictly paternalist view that the critics and their political friends know best. They rather immodestly assume to know better what is good for the customer than the dispersed judgment of entrepeneurs and managers whose livelihood will depend directly on serving the travelling public and catering for their changing needs.

It seems to me that the central question is as follows. If the concentrated sectional interests have their spokesman on the Labour Benches and beyond, who is to speak up for the wider but often inarticulate interests of the taxpayer and the consumer? On transport, as on many other economic issues, I detect in recent years a reversal of political roles. At one time, in its proud heyday, the Liberal Party could be relied on to champion the classical economic principle of competition and open entry against the old fashioned Tory defence of vested interests and the status quo. I shall say no more than that we can no longer rely on that happy confrontation.

But I am glad to say that more recently the modern Conservative Party has, often with some hesitation, followed the advice of R. A. Butler 30 years ago by leaning against what he then called, an excess of bureacracy … and towards individual enterprise and personal liberty". If that was true 30 years ago, the need to lean is all the greater at the present time.

I congratulate Her Majesty's Government on what I regard as a bold and liberalising measure which deserves support from all who wish to check—if possible, even to reverse—the progressive decline of the once great bus industry. Despite the touches of complacency from the noble Lord, Lord Shepherd, it must be admitted that the prospects for the bus industry are not very good. We have heard that from carrying approaching half of the rapidly growing passenger traffic in 1953, buses and coaches have now come to account for less than a dwindling 10 per cent. That decline has not been checked over the past decade despite a morass of subsidies rising from under £100 million to around £1,000 million. The nationalised and municipal buses now look to taxpayers and ratepayers for more than a quarter of their total income on average, and in some cases for a half or more; and yet still their fares to the customer have risen much faster than average prices. As we have heard, profitable routes have been recklessly destroyed by overcharging in the supposed interests of cross-subsidisation to keep empty buses on vanishing routes.

The paradox familiar to all economists is that open-ended subsidies to a monopoly are less likely to reduce prices than to inflate costs above their competitive level. The widely differing efficiency among existing operators confirms the finding of the Commons Select Committee that revenue subsidies are more likely to be frittered away by inefficiency or to be captured by employees than to keep fares down so as to maintain the volume of business.

It seems to me that restriction on entry was perhaps a plausible strategy for a new industry poised on the brink of an historic expansion in the earlier days, when the aim was also partly to protect the railways and the old municipal trams. But, faced with an increasing challenge from private motoring, bus services needed to be flexible, adaptive and innovatory—in short, to be revitalised by competition. Instead we have the bleak verdict of one whom I regard as being among our leading economic specialists on this matter, Dr. John Hibbs, who is Director of Transport Studies at Birmingham Polytechnic. At a conference as recently as last week he said: The 1930 system has been responsible for the decline in the bus industry since 1960. It has encouraged mergers and permitted giantism. It has inhibited innovation. It has encouraged standard charging and thereby given rise to regressive transfer payments. It is responsible for the failure of the industry' to develop a sophisticated understanding of costs". The opening of long-distance coach operations to new entrants in 1980 has shown how even the threat of competition compelled previously entrenched monopolists to reduce costs and fares dramatically, as well as to improve services. Now the mere shadow of this Bill is already awakening the National Bus Company and, as we have heard, others in Exeter and elsewhere, to seek more urgently ways of better serving their customers.

On my assessment, the Bill is welcome for ending restrictions on the entry of new bus services. It is welcome for ending the evil of deficit financing and putting subsidised routes out to open tender. It is welcome for strengthening the only necessary regulation—that is, of safety—by stipulating and enforcing standards which, it must be said, have not always been maintained in recent years even by the nationalised and other public sector operators. The Bill is welcome not least for preparing to sell off in smaller units those monolithic public undertakings which the right reverend Prelate the Bishop of Durham must understand are ideally suited to small scale private enterprise and even employee cooperatives on the model of the National Freight Consortium.

I would say in conclusion that the predictions of disaster that we shall hear from the Labour Benches as the debate proceeds can hardly be taken seriously when we recall their blindly doctrinaire opposition to the liberalisation of coaches back in 1980. Among the phantoms then conjured up by the Front Bench spokesman, Mr. Albert Booth, and by others, were the following prize quotations which I have taken from Hansard for 27th November 1979: "a cowboys' charter", "a licence to the moonlighter express", "fly-by-night operators", "back to the jungle", "unbridled and cut throat competition", "anarchy in its crudest form", "irreparable damage", "higher fares", and "a recipe for disaster". One MP sponsored by the TGWU decided to earn his fee by excelling himself with the following prediction: In five years' time nothing will remain of the existing public transport systems". That was six years ago, since when the 1980 Bill has proved a conspicuous success. When I hear the same speeches against the present Bill it suggests to me that the Government are on the right lines.

The Countess of Mar

My Lords, before the noble Lord sits down, I hope he will forgive me, but I thought this was primarily a revising Chamber and a Chamber for debate, and yet he is suggesting that perhaps his fellow Cross-Benchers and noble Lords on the Benches alongside me should not participate in the debate on the next stage of the Bill because it would be a waste of time. Can he please put me right?

Lord Harris of High Cross

My Lords, I can only say that I have no ambition to try to silence the noble Countess, and I look forward to her contributions later.

5.38 p.m.

Lord Teviot

My Lords, some noble Lords will know that I am an old bus hack, and this Transport Bill is almost as controversial as the one on which I made my maiden speech 17 years ago. It was on the same day of the week and the same date in 1968. I must say that I am very pleased that it is my noble friend Lord Belstead who is leading on this Bill. He had just then been promoted to the Front Bench in opposition, assisting my noble friend Lord Nugent of Guildford, whose wisdom we shall enjoy later this afternoon. Furthermore, on that occasion we listened to the noble Lord, Lord Shepherd, for 50 minutes. I must say that I was in more agreement with him today than I was then. Lastly, I gather that the noble Lord. Lord Carmichael, was working on that Bill for the Government of the day in another place. On 11th June in the year 2002 I shall hope to be joining all those noble Lords again.

Following those remarks, I join all other noble Lords who have spoken with conviction about the excellent maiden speech of my noble friend Lord Zouche. It is difficult to find another word to describe the speech. It was delivered with great confidence and clarity and one looks forward to hearing him again.

I shall not fall into the trap of criticising what other people have said so far this afternoon, or even commenting on it. I am very tempted to deal with the speech of my noble friend Lord Peyton of Yeovil in the way he has dealt with other people's speeches. However, as I have said, I shall continue with my own speech and try to talk about this Bill.

A noble Lord

Help yourself.

Lord Teviot

Indeed, I shall, but not at this time; there are 29 speakers.

Lastly in these opening remarks I declare an interest in that from time to time I accept a fee and expenses as a consultant in this field.

Your Lordships may recall that I introduced a debate here last October on the Buses White Paper. In fact it was the one and only occasion when it was considered in either House of Parliament. My views have not changed since then. In fact, my warning about the Hereford trial area has been proved to be accurate, with the virtual collapse of competition in the city. Just one competitive service remains—and that under the watchful eye of the traffic commissioners, who have clearly issued their final warnings to the operator.

I do not wish to cross swords with my honourable friend the Parliamentary Under-Secretary of State for Transport, Mr. David Mitchell, but it is problems with the quality of operation which have for all but one good operator defeated the competition in Hereford. My honourable friend suggested in another place (at col. 892 of the Official Report) that it was predatory pricing which was the problem. That just is not true. From my own researches I know that it was the corner-cutting operators who started a price war and Midland Red (West) did no more than match their fares. Only in one instance were they lower than their competitor; in a number of other cases their fares remained higher. This fact can be verified by reference to the Transport and Road Research Laboratory report on trial areas (Laboratory Report 1131, Appendix 5).

I was interested to read comments on this point by a very good private operator, Mr King, of Tillingbourne Bus Company, in the magazine Buses, for June 1985. Questioned on fair competition by NBC operators, he said: The incoming operator has no right to expect that the incumbent will not take reasonable commercial steps to protect his business". The outcome in Hereford was to be foreseen and it is a clear indication of what can be expected under deregulation. The same picture emerged, as I explained, when express coaching was deregulated in 1980; a free market does not help the underdog.

First and foremost I would remind your Lordships that I am not opposed to the introduction of greater competition in the bus industry—a major object of this Bill and foreshadowed in the White Paper. However, I am concerned that the package of proposed legislation will leave many people without bus services on which they depend. Both the National Bus Company and the Scottish Bus Group have already given clear warning that the Bill will lead to 30 per cent. of the bus services they provide being discontinued. Some of these will not disappear entirely, but there will be a major loss of service to the public, as in the Norfolk trial area. Let us not deceive ourselves with false optimism.

As I explained last October, there will not be sufficient money available to local authorities to secure necessary services and competition on tendered routes. That will lead to waste of the limited resources that are available. This is something on which bus users, local authorities, and bus operators are all agreed. One must take note of such a powerful and united voice.

Here I must criticise the Government for the way they tend to disregard the real fears expressed by the professionals in this industry, which has served our country so well for so long. Yet, as I say, it is not only the operators and trade unions who have expressed concern, but also local authorities and many consumer groups. In some quarters the criticism may be exaggerated but, by and large, it is fair because there are so many unknowns associated with this legislation. I can report the critics' feelings at first hand because I have visited quite a few of them up and down the country, some, I am pleased to say, with my noble friend Lord De La Warr, in the last few months. I should not like to think that the Government are being cavalier in their approach to this matter.

I must now turn to some of the specific clauses of the Bill which give me cause for concern. My greatest concern is that change should come about smoothly and that competition on the roads should be fair. With so much change coming all at once, this will not be easy. However, I believe, my Lords, that the position would be improved if, following the initial registration of commercial services and those contracted under the tendering system, for a period of, say, two years, further registrations could be refused if they were seen to be against the public interest. This stabilising period would form a bridge to the total freedom envisaged in the Bill. It would not be against the spirit of the Bill, but rather would be intended to make it more successful. I shall hope to see amendments to cover this transition.

Next I am concerned about the control over semi-commercial mini-buses. My concern is heightened by recent tragic events in the football world and steps to be taken to tighten up on public transport to football matches. The fact is that as in recent years coach operators have found ways of keeping drunks and hooligans off their vehicles, these undesirable elements have resorted increasingly to the use of mini-buses, including self-drive-hire mini-buses, to travel to away matches. That is a loophole we now have an opportunity to block. For this and a variety of other reasons I believe that we should make further provision for the necessary and proper control of such passenger vehicles.

So, too, should we ensure that professional bus and coach operators maintain high standards. Experience in Hereford sadly underlines this point. Therefore, I hope to see strengthening of the provisions relating to financial standing in considering applications for PSV operators' licences. Lack of proper finance leads operators to cut corners, to skimp on maintenance and to chance their arm with speculative services. Relaxation of service licensing, as Ministers have recognised, demands improved quality control. Finance can be at the root of this.

It is a matter of deep concern that some people of my own political persuasion see, or, rather, overemphasise the potential of, this Bill as a way to create new jobs in small businesses, with people using their redundancy payments to buy old buses and to set up in business running local bus services, filling the gaps left by the withdrawal of the professional operators. This is not realistic. The noble Lord, Lord Carmichael, mentioned that one could set up such a business for £30,000 or £40,000 but, in fact, I think one would probably do it for £3,000 or £4,000. It is nearer that figure than his. Even if they have enough money and a suitable vehicle, operators must also have a certificate of professional competence. This certificate is acquired only after study and is a requirement of our own and European law. Maybe some will be able to enter the industry in this way, but let us not talk of improved quality control for PSV operators unless it is sincere. Replacing professionalism with mere enthusiasm is not an answer.

Apart from a number of technical amendments which will improve the Bill, my remaining concern is in respect of time scale. I do not believe the Government or their advisers have begun to recognise the immensity of the task that they have set for completion by 30th September next year. Most people will say, "If we are to have change, let's make a start; there's no point in hanging about". That is very true, but let us face the reality of the situation. Unless change comes in logical sequence, there will be unnecessary problems. There will be unfair competition, whatever the Bill says. There will be waste of public money. Worst of all, there will be even greater loss of bus services for the public. When your Lordships meet in Committee serious consideration must be given to this problem of timing.

One regrets the need to place so much emphasis on the danger spots in this Bill, though they have to be examined. So let me conclude by welcoming the underlying intentions of the Bill and only stress that here, in your Lordships' House, it is our role to take what is good and try to improve it in a friendly, yet frank, manner. A few months ago I heard my right honourable friend the Secretary of State say: We will try and fashion a better Bill even than the one that was read a second time". He was, of course, referring to the other place. But, my Lords, let us do just that, please.

5.50 p.m.

Earl Attlee

My Lords, I shall try not to confuse your Lordships with statistics. When we debated the Government White Paper on Buses on 26th October last year, of the eight noble Lords who spoke, there was only one, I believe, who spoke in favour of the White Paper. That was the noble Lord, Lord Brabazon of Tara, who was speaking for the first time from the Government Front Bench. Am I wrong?

Lord Mottistone

My Lords, I also spoke in favour of it.

Earl Attlee

My Lords, I was merely mentioning that the noble Lord. Lord Brabazon of Tara, was speaking for the first time from the Government Front Bench. Since that time, eight months ago, opposition to the Bill has grown. This is principally because when it was debated in another place the guillotine was used with the result that many important amendments were never reached. I hope that when we discuss the Bil in Committee noble Lords opposite will not accuse those who are against the Bill of saying that we are going against the spirit of it, because the Bill was not fully discussed in another place.

Those noble Lords who have a particular interest in transport matters, such as my noble friend Lord Tordoff and myself, have received countless pleas from many people all over the country asking us to put down amendments. It is true to say, I believe, that almost every sector of the road passenger transport industry has been against the Bill. One such plea that I received was from the Association of District Councils, which represents 333 district councils. The chairman of the association's transport committee wrote: While agreeing completely with the objects of providing better and more cost-effective bus services for the benefit of the travelling public, our practical experience convinces us that the proposed measures will fail entirely to achieve this and, in the long term, will have quite the opposite effect". What a damning indictment from an organisation that is dominated by Conservative district councils!

Why such a damning indictment? Well, my Lords, I have to quote again from the same letter. It states: The weaknesses of the Bill stem from the fact that its basis was founded on theory with no input from those with practical experience of bus operations". It must be remembered that this practical experience stretches back for some hundred years. It seems to me that this indictment, really, is accusing the Government of indulging in nothing more than high Tory political dogma which, to my way of thinking, is to privatise everything regardless, in exactly the same way that the loony Left says, "Nationalise everything regardless", whether it be banks or people's private houses.

The main thrust of the Bill is deregulation, competitive tendering, and free, unrestricted competition, allowing market forces to take control. What are these market forces? They are simply the introduction of unfettered, uncontrolled, inexpert, inexperienced operators with only one aim—profit seeking and profit-making, with little or no thought being given to the needs of the travelling public. Oh, sure, there will be some benefits. There will be more services in inner cities and fares will probably come down—but only for a time. Even here the chances are that these services will be operated only during those hours and on those days when there is sufficient business to assure the operator of enough passengers with which to make a profit. Outside these hours there will probably be nothing.

What of the buses themselves? Why should operators water down their profits by buying expensive new buses? Why should they spend unnecessary money on servicing? Why should they provide a service for the old, the infirm, the disabled and schoolchildren if to do so would cost money? Market forces rarely have a social conscience. I hasten to add that I am not against profit. I do not consider "profit" a dirty word. Far from it. But there are some services where profits should not and must not be the prime, not to say, the overriding consideration.

Would we wish to see in this country the introduction of the United States' style of medical care where being hospitalised can, and sometimes does, bankrupt all but the very rich? I agree with most people, I believe, in saying that we would be happier if our National Health Service cost less and was less wasteful. But would anyone, including this Government, want to see the National Health Service making money out of the sick? I do not believe so. Yet, my Lords, unless we radically change this Bill, certain people will be making money at the expense of the travelling public, condemning countless thousands, tens of thousands and even hundreds of thousands, of people to living in communities without ant public transport.

Even in towns and cities the public will be poorly served. There will be no research, no co-operation between different modes of travel, probably no liaison between the police and highway authorities, no co-operation across district and county boundaries and no possibility of an integrated transport system. There would be nothing, except probably chaos. This chaos will extend—the noble Lord, Lord Carmichael, mentioned this—to the accrued pension rights of the employees of bus undertakings. I understand that these are not legally protected up to the time of privatisation. I would be grateful if the Minister, in his reply, could deal with this question.

In case noble Lords think that I have been exaggerating my picture of doom, I would add this. A few months ago, I was in Manchester, where I chaired a seminar laid on by the Bus and Coach Council. We were addressed by technical experts, men who have been in transport all their lives. They showed us several maps. One contained criss-crossing lines showing all the existing bus services. When this overlay was removed another map showed the probable bus services in future. All that was shown were bus services in the inner cities and their environs and practically no other services whatever. A terrifying reduction in services is bound to occur because of the abolition of cross-subsidy. If operators cannot make a lot of money on popular routes and without competition, they cannot afford to operate uneconomic ones. That is market forces at work in reality.

I should like to ask the Minister a few more questions. Is there any truth in the claim that moves are afoot to license private hire in London? A noble Lord has mentioned this. I gathered from what he said that he thought this was not so. But the Licensed Taxi Drivers' Association is afraid that this will be done as, indeed has already happened outside London. Those noble Lords who have seen the television film "The Knowledge" will know that it takes two or three years to train a taxi driver. It is very expensive. If licensed hire cars are allowed in London, there is a very great danger that taxi drivers will leave the taxi-driving business. They will get away from the stringent controls of the hackney carriage laws and move from the supervision of the Public Carriage Office under the Commissioner of Police into the free market economy of private hire. Everyone will lose, because we undoubtedly have the finest and most knowledgeable taxi drivers of any major city in the world.

Secondly, we have heard already about Hereford and Worcester. A report from the local members of the Association of District Councils states that off the main routes, services to villages are virtually nonexistent, as are pre-8 a.m. and post-7 p.m. weekday services. In the city of Hereford itself, private competition has diminished, leaving a state of near-monopoly. Those are not my words; they are the words of the local people. I shall be very happy to hear that that is not so, because when we were discussing the White Paper a great deal was said about Hereford and how successful Hereford had been. At that time we were saying that we believed that, however rosy things were at the beginning, they would become worse and worse.

Finally, I am sure that everyone will be familiar with the famous words of Robert Louis Stevenson: To travel hopefully is a better thing than to arrive". I have always thought that that was a load of poppycock. My daughter is a student midwife in Derby and she came home last weekend. She travels by coach. When she sits in the coach she is hopeful that she will arrive. It is not much consolation if she does not arrive—in fact, it is the exact opposite.

Unless the Bill is amended hundreds of thousands of our countrymen who do not have personal transport and who live in rural areas will be saying: To wait for a bus hopefully is a better thing than for one to arrive", and that also is poppycock. Therefore, I hope that when we come to discuss the Bill we shall make the necessary amendments.

6.1 p.m.

Lord Nugent of Guildford

My Lords, I listened with interest and attention to the noble Earl and I sympathise with his anxieties. However, I think that he is unnecessarily gloomy—to use his own word—in the picture that he paints. I am so happy to see the noble Lord, Lord Shepherd, back in his place because he was referred to by my noble friend Lord Teviot in connection with the spectacular part (although only a brief one) which he played in the Transport Act 1968. My noble friend Lord Teviot reminded us that the noble Lord, Lord Shepherd, introduced the Second Reading of that Bill with a major speech of some length. My noble friend said that the noble Lord spoke for some 50 minutes—

Lord Shepherd

My Lords, I suspect that I did better today!

Lord Nugent of Guildford

My Lords, the noble Lord did extremely well today and made a very interesting speech. I may not agree with it all, but I recognise his authority. The noble Lord charged the Government with pursuing with this Bill a high risk policy. I ask the noble Lord to cast his mind back to 1967 when that Bill was introduced, because that Bill also followed a high risk policy. As the noble Lord will remember, the policy behind that Bill was to introduce a system of comprehensive planning and control for every aspect of transport. Mercifully, with time, it has all disappeared and the sooner it went the better. Indeed, I think that the noble Lord rather agrees with me on that point.

However, maybe we do not have the Bill entirely right and if that is so then no doubt in Committee we shall be able to improve it. It certainly gives me great pleasure today to support my noble friends Lord Belstead and Lord Brabazon. Indeed, today I have a supporting role, which is the reverse of the situation in 1967 when I was leading for our side in that majestic piece of legislation which was introduced by the noble Lord, Lord Shepherd.

The Bill makes a fundamental change from the tightly-controlled licensing system to a free market. However, I well remember some 30 years ago when I was in the Ministry of Transport that we were operating the 1930 licensing system which had been introduced, as the noble Lord rightly said, originally to protect the railways. It was subsequently maintained and developed in order to protect the weak services by virtue of the strong, and so the system of cross-subsidisation gradually grew up.

I must say that 30 years ago I had no doubt whatever that this was a thoroughly sound system. Although we often had complaints that a private operator would like to start but was unable to do so, on balance I felt sure that the system was serving the interests of the community. However, in those far off days both private and public undertakings were profitable. Indeed, in the 1950s the situation was beginning to change with the advent of the universal motor car. The fact is that, as the White Paper tells us—and I refer to table 17 because it makes the point that I want to make, although it has been made before—in 1972 the total of grants and subsidies for buses was £7 1 million. In other words, a great deal of unprofitable operation was already increasing. By 1982 the subsidies and grants had risen to £897 million and last year they were in excess of £1,000 million. In my opinion that is the major justification for the change.

I do not believe that any Government could preside over that situation with that enormous sum rising every year accompanied, as it is (as the White Paper tells us), by a sharp decline in the passenger kilometres travelled by bus and coach from 42 per cent. in 1953 to only 8 per cent. in 1983, bearing in mind also the continuing growth of private car ownership. It has created a situation where we have not only those factors to bear in mind, but also fare increases, to which reference has already been made. Stage coach fares, despite the huge subsidies, have increased by some 30 per cent. above the rate of inflation in the last 10 years. In my view that is the reason the Government must act.

It is evident to me that the long-suffering British taxpayer, to whom my noble friend Lord Harris of High Cross referred, is getting very bad value for money and that the 50-year-old system of regulation and control no longer serves the public good. The noble Lord, Lord Shepherd, conceded that change was needed, but lie was not prepared to say more than that he would like a pragmatic approach. Pragmatism can cover almost everything, and just what that would mean in practice is not easy to see. I shall deal with the point in a little more detail before I finish my speech.

The benefit for which the Bill is striving is the benefit of a free market, and there really is a benefit there despite what any noble Lords may say. The difficulty is to try to find a halfway measure in the way that, for instance, the Select Committee in the other place tried. Indeed, that committee made several shots at it, but in my opinion each one of them would so restrict the working of the free market that we would, to a large extent, lose the benefits that can come from it.

I turn to what the picture will be in the future. I think that no one can doubt that there will be plenty of private operators in the urban areas operating at lower fares. I should think that the private bus traveller would get a jolly good deal for his money. However, when we come to the rural and the semi-rural areas the problems begin. The question is whether or not the cost of subsidy in the tendering process in which the local authorities engage will be so heavy that it exceeds the cost of the present subsidy; in other words, whether the burden of the loss of the cross-subsidy will be so severe.

I should like to make a few remarks about the question of the cross-subsidy. I believe that there is substantial scope for increased efficiency. The noble Lord, Lord Shepherd, did not discuss the passages in the White Paper on the scope for increased efficiency, but the scope is undoubtedly there.

I have referred to 30 years ago when private operation and public operation were at a profit and the cross-subsidy came out of the revenues of the operating companies. But as that has disappered and the total operation of buses has gradually shrunk and become less viable, the business has shrunk, profits have gone, and subsidy has been needed.

We all know from many experiences that with the establishment of a system of deficit financing invevitably commercial incentive is lost. It does not matter how hard the managers try, the spur to enterprise and innovation is not only weakened but in most cases it actually goes. I again speak to the noble Lord, Lord Shepherd, because he speaks with such authority, and he spoke with some favour of the operation of the National Bus Company. All the figures show that the National Bus Company operates a great deal better then the PTEs and the municipals, but even so, according to the Transport and Road Research Laboratory study which the White Paper gives, it costs some 30 per cent. above the average of private operators' costs.

Lord Shepherd

My Lords, would the noble Lord give way? First he talked about a billion pounds in terms of subsidy. I think he will accept that at least half of that arises from concessionary fares, which I think is not a subsidy to an operator but a subsidy to the general community. That is one factor.

The noble Lord then went on to speak about efficiency. Today efficiency is being achieved. Within what was my own group comparing 1978 and 1984 we now operate 93 per cent. of the road mileage service with 78 per cent. of the staff and 68 per cent. of the vehicles. That is a considerable improvement in efficiency.

The noble Lord was saying that the NBC had done well and that the others had not done as well. The regime under which they have operated has been different. We have a financial target and they have not. This is what I meant earlier: if you prune, as opposed to tearing up the roots, what has been achieved in the NBC field could be achieved elsewhere.

Lord Nugent of Guildford

My Lords, I thank the noble Lord for assisting me. I do not disagree with his analysis of the total cost to public expenditure. A large part of it of course is subsidy to the disabled But the figure I quoted is the total given in the White Paper. Even if we are speaking of only £500 million a year, that to me is a great deal of money. The Government have a duty to try to reduce it and make sure that the taxpayer and ratepayer get good value for money. This is the main point that I am concerned with.

Again I am quoting from the White Paper, which has not been refuted, that the Transport and Road Research Laboratory study indicates that the private sector was operating at a 30 per cent. lower cost than the National Bus Company. It indicates that when a man is operating buses, or anything else, to get his living out of it he will be more enterprising, keener, and more economical in his operations than one who is not.

Again I quote from the White Paper that in their observation the main points of wastage observed were the less efficient use of platform staff and vehicles and the general lack of innovation in bus services—although I concede some of these to the noble Lord. There is a good deal of scope there when there are many small operators going into action. I speak now particularly of rural services where there will be many small operators—and I live in a rural area myself—who will come in with smaller vehicles and flexible operation. They will operate a good deal more cheaply than anything we have seen to date. They will give good service, and in many cases they will give a service where we do not get one now. There is certainly not very much of a service in my village.

We shall see this picture develop satisfactorily in the towns. Outside the towns, in the rural areas, nobody can tell for sure just how much it will cost in terms of subsidy to get the rural services that the local councils will want. I believe that we shall find a great deal better picture than has been predicted. We have all been receiving a massive volume of canvassing, and piles of pamphlets have poured through my letter box from all the existing operators and interests.

After all, this is human nature. It happened to us all in the Local Government Bill as well. People do not like change. I do not like it very much myself. I understand that. But that does not mean that in the Government's thought there is not a sound concept. There will be a benefit to the whole community if there is a free market here, and the private operators are allowed to go in and make a living out of it by offering services that they are able to, and directing the subsidy of public funds specifically to the point where there would not be a service otherwise. To my mind that makes good sense.

As I look around I believe that not just for the groceries that the right reverend Prelate brought in, but in the whole range of services by which we live, private enterprise in a free market produces very good results. There is scope for it here. I support my noble friend. I wish him well with what is going to be an arduous Committee stage. He will certainly have my support in it.

6.16 p.m.

Lord Hatch of Lusby

My Lords, many years ago I was a candidate in the notable constituency in the far north of Great Britain, Caithness and Sutherland. On my first visit to Wick and Thurso I took the train from Inverness, and I was surprised to find that there were two parallel lines. When I met my friends in Caithness I asked why it was that on this remote railway there should be two railway lines. They told me, "This is from the old 'cowboy' days". These were the days before railway nationalisation when there were competing private railway companies. The trains used to run at the same time. They used to race each other to the stations, and there were often fights between the drivers and the guards. This was in the ancient days.

I was reminded of that experience when I read the Government's own Transport and Road Research Laboratory report on the experiment—to which the noble Lord who introduced this Bill paid such tribute—in Hereford. The Government's own report on this experiment found that competing operators ran buses at the same time and raced each other along routes to get the most passengers. This is Lord Nugent's free market; a free market in services; in services which are essentially public services.

There have been a lot of statistics and technical terms this afternoon; but like the right reverend Prelate I want to talk simply about people. I was brought up in a remote rural area in Yorkshire. I live in another remote rural area in Lincolnshire, and I am in the process of moving to another remote rural area in Derbyshire.

I spent a lot of time in the right reverend Prelate's own area of Durham, in Northumberland, and in Scotland. I have no doubt that my experiences with the people of rural areas are duplicated in other areas that I have only visited, but visited quite extensively, in North Wales, and indeed in Brecon, on which we shall soon be fixing our attention; in Wiltshire, Dorset, Devon and Cornwall. I am sure that noble Lords all round the House will have had similar experiences.

I am concerned about the people that I know. I am concerned about the mothers of two or three children who want to go shopping. They do not have cars. If there is a car in the family, the husband takes it to work. It is the only way to travel. How do they go shopping? How do they go to the dentist? How do they take the children to the dentist? How do they go to the doctor or visit friends, who may be in hospital? There is no way for at least half the rural population to do that.

Figures have been given this afternoon that 40 per cent. of the population do not have cars and that most of that percentage is in the rural areas. But those who have cars are one-car families and for the rest of the family there is isolation.

Let me give another personal anecdote. Some years ago my mother, who was then over 80 years old, lived in a beautiful North Yorkshire seaside village called Robin Hood's Bay. I remember the Beeching cuts which removed the beautiful scenic railway that ran from Middlesbrough through Whitby to Scarborough and through Robin Hood's Bay on the way. I remember, when that railway was to be cut off, going to see Barbara Castle and asking her to look into this especially. The population of that very wide area, which encompassed not just Robin Hood's Bay but the whole of the rural area across the moors to Pickering and all the villages around, were told, "We are going to put on a bus service". They did; the following winter there was a heavy snow storm and the buses could not run. Anyone who has been up the road from Whitby to Robin Hood's Bay and Scarborough will know why they could not run. There was no possibility of buses running, and so the population was isolated.

Eventually my mother suffered the worst consequences of that restricted mobility that comes with absence of transport, the fear of isolation, and she had to move into a town where people were on hand to help her in need. That is only one instance of the thousands and thousands of cases of people whose lives are deprived by the absence of that mobility which is necessary just to preserve the ordinary decencies which we all expect and take for granted.

Like other noble Lords, I have been lobbied and sent documents. It is the responsibility of Members of this House who have particular local connections to represent those connections in the best way we can and so I shall make two references to representations which have been made to me to support what I have been saying about the deprivation of people. The first is not from a county council, but from the Community Health Council for South Lincolnshire. I take just two extracts. The health council writes to me saying that: as a whole their chief concern was for people who already face considerable difficulty in attending GP surgeries, clinics and hospitals for in- and out-patient treatment". The letter goes on to meet what will undoubtedly be put forward by the Government as their defence against the risk, which has been seen on all sides in this House during this Second Reading debate, of a reduction in the uneconomic but socially necessary rural area bus services by stating: The promised national subsidy of £20 million reducing over four years offers nothing more than a stay of execution for rural services, especially when it is considered that for the coming financial year 1985–86 Lincolnshire County Council anticipates providing in excess of £½ million towards maintaining existing routes and services". There seems to be little doubt in the minds of those who have this responsibility that this Bill will reduce still further the already inadequate rural bus services of the country.

My second quotation comes from a document which has been sent to me from Nottinghamshire County Council, the City of Nottingham, Derbyshire County Council, Derby City Transport and Chesterfield Borough Council, all of which have united in writing: In rural areas which are particularly vulnerable, the Government will be providing an initial grant of £20 million, reducing by £5 million a year, to ease the transition. This sum represents only about one-seventh of existing bus subsidies outside the metropolitan areas and will be paid from Whitehall, not by the local authorities who are best placed to assess local needs". I suggest that in country areas, in the shire counties right across rural Britain there is considerable concern and fear about the consequences of this Bill.

I conclude by quoting the summing up which the same group of councils sent to me in the same document: we regard the Government's present plans as ill-conceived and potentially disastrous. Most local authorities, bus operators and consumer organisations believe that the Transport Bill's proposals are defective or totally unworkable. Like the Select Committee, we believe 'that the Bill will require considerable amendment if it is to prove acceptable'. I suggest that that is a judgment which will have been heard by and possibly will have been reached by noble Lords from rural areas on all sides of this House. I believe that this House represents in particular the rural areas. There is a wider representation of the rural areas in this House than in the other place. I believe that it is our responsibility to represent the interests of the people who live in those rural areas and it may be that this House is the last protective bastion for rural Britain.

6.28 p.m.

Lord Mottistone

My Lords, almost for the first time in this House it is a pleasure to follow the noble Lord, Lord Hatch, as in the earlier part of his speech he took us around the countryside, mostly to places which I have visited. I was entirely with him and I loved every minute of the journey he described to us. I did not quite like the end, but that will become clear as I proceed with my speech.

The noble Lord remarked that a train service had been removed from a small part of North Yorkshire and replaced by a bus at, I suspect, just about the same time as I was living in the Meon Valley where we had the same kind of experience. It perhaps temporarily arrested the decline of the bus services, having had our train taken away, we were given an extra bus.

I congratulate my noble friend Lord Zouche of Haryngworth. I put this on the record as I see that he is not in his place. I thought that his speech was absolutely first-class as other noble Lords have said, and I hope that we shall hear that type of speech again. I should also like to congratulate my noble friend the Minister who introduced the debate. He did so with great clarity and reasonable firmness. I look forward to his tackling the opposition when we reach Committee stage, alongside my noble friend who is to wind up. I might also say to my noble friend and indeed to one or two of the speakers at the end of the list that I hope that they will forgive me if, because of a long-standing engagement, I may not be able to stay for as long as I would wish.

It seems to me that there is some agreement—it could not be contradicted—that the bus industry has been in decline, certainly for the last 30 years. In that time it has dropped from 40 per cent. of journeys by bus to 8 per cent. I think there is also argeement that this must be arrested, especially in the interests of the old, the disabled, the poor and the young. On the other hand, although there has not been objection to each and every part of the Bill, it seems that the main opposition is to deregulation. The clearest opposition to that was put by the noble Lord, Lord Shepherd, with his great knowledge, and, to my surprise, also by the noble Lord, Lord Tordoff, who spoke from the Liberal Benches.

I was surprised at the negative attitude of the noble Lord, Lord Tordoff, because I have always thought that on the whole the Liberals were keen on free enterprise. But perhaps they have changed their tune now that they are lined up with the SDP. It was sad to hear a Liberal speaker clearly not liking free enterprise. It was of course understandable that the noble Earl, Lord Attlee, should not do so; but then he would not be expected to do so.

The point therefore is whether deregulation is a bad thing. We have had all sorts of assessments that deregulation is hound to have adverse effects, especially for the very people for whom we require the improvements to which I was referring earlier. But these assessments have been made by people nearly all of whom know only how to work with regulated bus services. They have no knowledge of the situation which obtained 50 years ago and before. Why is it that they are so implacably certain that deregulation will not be a success? When I talk about those people I mean not only the operators but the local authority officials as well, all of whom only know about regulated bus services.

Regulation protects the providers of services. However, we know from all sorts of other enterprises and services that protection encourages inefficiencies of all sorts. Indeed, my noble friend Lord Nugent of Guildford spelt out very clearly some of those inefficiencies. Of course the providers who are protected are fearful of change that removes their protection. But what about the users? So far the providers have frightened the present users of bus services and seem to me to have frightened several of your Lordships with their gloomy forecasts. Without knowing any better, therefore, several of those so frightened have gone along with the objections to deregulation because they take it for granted that things will get worse; but that is difficult to see.

The noble Lord, Lord Hatch, was telling us, and quite rightly, about the deprivation there was for people in the rural districts if they do not have an adequate bus service. In my part of the country the bus services are now so inadequate that they cannot get any worse. We are all told by the "frighteners" that they may be removed in the winter. I suspect that somebody will come along and provide them to meet the need. The fact is that this 8 per cent. of journeys by bus is as low as you can go.

My noble friend Lord Nugent of Guildford talked about the appalling increase in the subsidy, which is getting out of hand. I would say that the appalling imposition is that of regulation which prevents the flexibility which would allow the needs to be met by the services that are required. What about the potential new users? They do not seem to have been consulted. The figures one reads seem to refer mostly to the answers to questions put to the present users, they having been told to expect the worst. But new users may come along, because there will be freedom to tender for those services, many of which are currently not available. This competition will be a spur to efficiency and will provide an opportunity to meet the needs of both the current users and those users who would use the buses if the services were satisfactory. Real experience has shown that this opportunity is not present in the regulated system.

I hope very much therefore that when we come to the Committee and later stages of the Bill we shall take great care not to read too much into the gloomy forecasts which have been made by people who do not know how to exist without regulations.

Lord Hatch of Lusby

My Lords, will the noble Lord allow me—

Lord Mottistone

My Lords, I am about to finish. The noble Lord can speak when I sit down. As my noble friend the Minister said in introducing the Bill, the customer can now have better and more services and better value for money with more operators providing greater transport variety at competitive prices. That is the aim of the Bill. I do not see any reason whatsoever why it should not achieve that aim. I trust therefore that we shall not "muck it about" at Committee stage and spoil it. I hope your Lordships will take that view right through all stages of the Bill.

Lord Hatch of Lusby

My Lords, before the noble Lord sits down, he referred to my assumption that there was going to be a cut in rural bus services, and argued that there could not be a cut in total numbers below the present 8 per cent. I would be with him if I thought that this Bill, or any other measure, will improve the facilities of public transport in the rural areas. What I cannot see—and perhaps he can explain it—is how, with services which we know are uneconomic, which have only been sustained even on their present inadequate level by cross-subsidisation, we can attract small operators to run them and keep them going. Is it going to be for social or ideological reasons? It is not going to be for profit.

Lord Mottistone

My Lords, we could go on with very long speeches, but there are a lot of people to speak. In my part of the world we have large double-decker buses on rural routes. In the winter time and in all the months except for half of June, July and August and a bit of September, they are not necessary. The noble Lord, Lord Shepherd, has said to me in the past that these buses are necessary because one has to have the big buses for the town use and it is more economical in the big company to have the same sort of bus because there is a lot of advantage that way.

It seems to me perfectly reasonable that if—and I hope that it does not happen—the major operator removes the line altogether, there will be people who will come up with smaller buses which they will run more economically because they will have much less overheads. They will be able to provide the service in lieu and provide more of a service. One of the problems is that the moment the buses do not run at convenient times a lot of people make other arrangements not to use them. If it were possible for a local man who knew the district to run more buses, he would get more traffic and he could follow his market. I am quite certain that there is a very reasonable chance of that working. In fact, my Lords, I am seriously tempted to go to the Isle of Wight and do this; but then, of course, I should have to abandon the pleasure of addressing your Lordships from time to time, and that would be a great hardship.

Lord Shepherd

My Lords, the noble Lord referred to me. I am sure that he would agree that in the case of the Isle of Wight you have double-deckers in order to carry the peak service during the summer months. If you have small vehicles and no large vehicles, you will not be able to carry the number of passengers in the Isle of Wight during the summer period. Therefore, balancing one period of the year with another a decision has to be taken as to what is the right vehicle. It has nothing to do with size; it is a question of the number of passengers to be carried.

Lord Mottistone

My Lords, if your Lordships will allow me—this will be the last intervention—the answer is that because it is one operator in virtually a monopoly position, he has to look at it from that point of view. But if there were several operators, some of them would provide small buses for the winter, others would provide extra small buses for some of the summer, and you would not only have to have big buses because you had to deal with the summer traffic.

Lord Shepherd

My Lords, what happens to the large vehicles when they are not in use?

6.42 p.m.

Lord Monk Bretton

My Lords, I hope that we do not find ourselves going simply from the Isle of Wight to East Sussex. I should like to say first to my noble friend the Minister that I support the main thrust of the Bill. I have a few matters to deal with which I hope may improve the Bill, and a few reservations. I am by no means as gloomy about the situation as was the noble Lord, Lord Hatch. I feel that we must build on the Hereford experiment and others, keep the best, deal with the bad; and that that is what the Bill in the main is doing. I must confess to a hankering for what is known as on-the-road competition where possible as being the best way to test the market properly and to improve the quality of service offered. I believe that it does that.

I should like to welcome the relaxation of rules for taxis and mini-buses, which I believe will be of great help in rural areas, although certainly that will not solve everything. I myself will be anxious to resist any attempts to make the operation of mini-buses more difficult because they are so vital to our villages. I may say that I put down my name to speak because I am primarily interested in rural transport. We must remember that these services that we are talking about are essential services and that there is no room for mistakes. The matter is politically highly sensitive by comparison with long-distance routes, and we must keep that very well in mind.

I think that the subject of buses is one upon which one must think very much from the particular to the general and not vice versa, and I believe that theory can be dangerous. Hence you will find that I shall have a tendency to refer to our county council's experience in East Sussex. I know that it is only one county and that there are others with different problems but I think that it is illustrative. Their officials' views and mine largely coincide and so do the current views of the Association of County Councils.

Regarding the Bill, there are really three matters that I have to raise. I raise the first two very briefly because I think they can be dealt with in Committee. One is about registration and the need for counties to know quickly what is happening about the changes in services, and the other is about traffic regulation, where, again, counties feel that they are very much on the spot. 'What is more controversial is the third item, which is the desire for a reserve power to be held by someone—and I shall say no more about it than that—a power to protect subsidised routes from competition where public money will be wasted or the service lost. I will return to that.

Perhaps I may now say a few words about what has gone on in my own county, where the cross-subsidy element is probably average for a shire county and where the county council transport department has been more active than most. It established the East Sussex Co-ordinated Rural Transport Scheme (known as ESCORT for short). I could tell your Lordships a great deal about that in around 20 minutes, but I shall refrain from doing that. It has been an important movement.

The first effort after the 1980 Act was to have a look at the situation in Brighton. I may say (and I should have said this before) that these activities prove the point that there tends to be more scope for economies in the urban areas than in the rural ones. In Brighton, the transport co-ordinators went transport broking in a big way and on the inter-suburban routes, the subsidised ones, they studied and co-ordinated the demand from the public, the education service (a very big spender) the health service and the social services. In our part of the world there is a high percentage of elderly people.

They replanned those routes and put them out to tender. The result was a subsidy reduced from £750,000 to a quarter of a million, a saving of 66⅔ per cent., and usage increased by 17 per cent., demonstrating the popularity of the new routes. They further reported no worries about competition upsetting the finances of these subsidised services and no worries about loss of cross-subsidy.

The rural position was definitely harder going. The subsidy was £1 million a year. The ESCORT scheme, co-ordination and tendering and the use of some experimental vehicles (bearing in mind the elderly and disabled) got off to a sticky start Here I should like to say how glad I was to hear the maiden speech of my noble friend Lord Zouche of Haryngworth, who mentioned the disabled, and to congratulate him upon his speech.

As I have said, the ESCORT scheme got off to a sticky start financially but the county council now appear confident that when it is fully in place it will save getting on for a quarter of a million pounds. It is so far showing increased passenger use, and several more villages are being served. Tendering tear this service has not "seen off" the National Bus Company subsidiary. They have lost one route and they nearly lost another, but they kept the rest. From this, I conclude that the possible actual operating economies may prove to be quite small. There may be organisational planning of route economies and increased traffic, but they are going to be more important. Our county council is not worried about the loss of external cross-subsidy from the few main routes which pay. What they are worried about is time-of-day competition on parts of the subsidised ESCORT routes affecting the degree of on-route or internal cross-subsidy inherent in the routes themselves. They estimate that this could cost the whole ESCORT saving that is, getting on for a quarter of a million pounds. That is enough money to damage and reduce rural services very considerably. That is my concern.

The Minister, I think, will suggest that the county council is in difficulty because it is subsidising too much of the routes. I think he takes the view that private enterprise should first establish where it can reach, and that subsidy should then apply only after that divide. I hope he appreciates that the exact position of this divide will never be stable for long. It will also vary even according to the time of day.

From that comes the dilemma that county councils are in over these services: whether their subsidised service should carry over the divide into the private enterprise area to a reasonably popular destination, or whether the service should be less convenient and the passengers be dropped off to await another bus, possibly at a rather inconvenient spot—in this connection, I think rather particularly about our elderly, and I do not like the position. Either way, I think it is likely to cost just about the same in subsidy, whichever of these two courses is pursued. It is for this reason that the Association of County Councils wants some fallback regulatory machinery selectively to protect subsidised services where the shoe pinches, and I support that.

It is right to point out that in the Hereford scheme the county council retained this power and, I believe, used it. In the Bill as drafted it would not be available from anywhere. An amendment about this, possibly too wide an amendment, which was moved in another place and was rejected, was very unkindly nicknamed "Trojan Bus". I very much hope that in this House we may have another more careful and kinder look at it.

I have an important comment from the Association of County Councils about the withdrawal of cross-subsidy which I feel I should quote. I have made a slight précis of it. In the metropolitan counties with 40 per cent. of the population but 80 per cent. of bus subsidy spending, withdrawal of cross-subsidy and improved efficiency from competition may well produce substantial savings. But in non-metropolitan areas, the arithmetic does not work out. Spending only 20 per cent. of national subsidy for 60 per cent. of the population, the shire counties have kept a much tighter rein. Hence cross-subsidy has been far more important (in maintainng unprofitable services). Internal cross-subsidy, i.e., subsidy within an individual route rather than between different routes, in the shire counties is very difficult to estimate but appears well in excess of the £96 million they spent on revenue support. The Government appear not to have denied this. There is then appended a list of 20 counties affected.

To me, this says, "Proceed with caution". I believe Herefordshire was less affected by cross-subsidy than many other counties. I think we must recognise that, beyond the divide, co-ordination or, if the word may be forgiven—it does not ring very favourably in some people's ears—rationalisation has to be the order of the day. The interface between the two systems requires reserve powers of some sort, or we risk wasting public money and/or losing services.

6.55 p.m.

Earl De La Warr

My Lords, the intent of this Bill is set out extremely succinctly in the last two lines of the introduction to the White Paper, on page 3. It says: Legislation will make major changes to arrangements for the bus industry so that it is set free to give better service to the passenger at less cost to the ratepayer and the taxpayer". I think one could say that that is very well summed up indeed. It is absolutely clear, and it is an unequivocal undertaking by the Government. As a statement of intent I think we could all agree that it is admirable, if it can happen. Because of that I feel we should be looking at this legislation not so much in the way that we normally look at legislation, but in the way that, as businessmen, we would look at a business plan that had been put up by some large company, or even some large industry, where there was deemed to be, as there is here, a need for total restructuring. Alas, the financial forecasts that are normally associated with a business plan are not available. It may be that the Government have done them, but if they have, I think they would have produced them, and so I assume that they have not been done.

I should like to say at this point that I am critical of the Government for coming up with such a radical set of suggestions without giving us the benefit of their figuring on the result. So our job is made more difficult. It is quite simply to assess whether this plan will work in commercial terms.

This business plan rests on two related measures, but though they are related, they are in fact quite separate. The first one is deregulation in order to encourage "on the road" competition. Deregulation is what everybody seems to have been discussing this afternoon. Perhaps they have not paid enough attention to the second leg—the related leg but the second leg—upon which this plan rests, which is the removal of external subsidy from existing undertakings. These two taken together will have two effects. First, they will force—the Government will welcome it—existing networks to abandon their non- paying services, which are now supported in some cases by internal or cross-subsidy and in some cases by external or Government or rate subsidy. What will follow from that is that the authorities—that is, the shire counties or the joint boards, whichever it may be—will be required to use the external subsidy that they receive to procure the running of these abandoned services by putting them out to tender.

I think we ought perhaps to have a look at the nature of these services which are likely to be abandoned by the networks and will thereafter be looking for different parents. They are not only the rural services, and perhaps there has been a tendency to concentrate over much on that. There will be semi-urban services. There will be the end bit of many routes. There will be early morning services and evening services. There will be weekend services, and particularly Sunday services.

Perhaps what is more important is that even some of the peak morning and evening services will go. I know that one big undertaking has already planned to remove a number of its peak services, such as special factory services where the factory is not on the main route, and even special school services. The reason for this is that the easiest way for a bus undertaking to save money is to have fewer buses and therefore fewer staff. So these routes that are to be abandoned cover a very wide spectrum, and many undertakings are already on record as saying that they will cut up to 30 per cent. of their mileage—a very formidable mileage, indeed.

The key question that we have to ask is this: will the local authorities have the money, or be able to find the money, to pay the tenderers for the services that they, the local authorities, require on behalf of their citizens? Cross-subsidy will have disappeared. This is something which, as has been said before, is largely a factor in the National Bus Company and is normally regarded as being worth about twice the external subsidy. As a result they will have only the external subsidy from the Government or from the ratepayers to use. It is no part of this Bill, but it is a fact that the Government have already announced their intention, to take effect this year, of cutting what is still called the revenue support grant by a figure which, I think, amounts to some 15 per cent.

So we have this situation to face—that there will be many routes of great social importance that will be able to operate only if the local authority has sufficient funds to offer to those who tender for them. This is where the whole danger rests. Deregulation will come into this, because it will make the job of the tenderer much harder, as he will not know whether he is likely to put in a tender and then have some other entrepreneur come in so as to send his figures awry.

The White Paper claims that there are a number of counter-factors here. First, it is claimed that there are potential savings of up to 30 per cent. and therefore, presumably, that those chaps could tender that much cheaper. I wonder how many people really believe this. I wonder how many people in industry have ever come across a business that has 30 per cent. of fat on it. Certainly, in looking at this industry the Monopolies and Mergers Commission did not accept that contention. I think it is widely accepted that probably 10 per cent. is the highest figure to which it would be safe to go.

We are also told that competition will provide more services where they are wanted, but let us remember that we are talking about these non-viable routes. Where do your Lordships think the entrepreneurs, who are coming in to compete, are going? Are they going to the little route from Plumstead Episcopi to Hogglestock, or are they going to Barchester which these days is surrounded by rich electronic factories? Are they not going to ply for hire there, and what good will that do to the routes that have been abandoned by the networks? The Government have talked about a rural fund. It has been described by the noble Lord, Lord Hatch of Lusby. As I understand it, it has been calculated to be of the order of 5p per bus mile and reducing, which is peanuts.

So I find that the conclusions to which the White Paper has come, which make the Government believe that deregulation, useful as it may be, will help the services that will be in danger, are totally false and I believe that this view is shared by 100 per cent. of those who are in the industry. Certainly, it is shared by the many busmen to whom I have had the honour of talking in the last few months.

So I have come, I am afraid, to a melancholy conclusion. I conclude that in vain are we going to carve up this industry? I conclude that in vain will the great sense of public service that motivates the existing networks be lost? Paternalistic, somebody has called it, in what I thought was a mildly derogatory way, but it is a loss that I regret very much indeed.

I finish by reminding your Lordships that many services will be at risk and that uncertainty will be with us not for months but for years to come. We may be able to put this Bill to rights, to some extent, in succeeding stages. I myself doubt it, because it is fundamentally so wrong in its concept. However, the attempt will no doubt be made. But on the assumption that it stays more or less as it is, I can only advise the Government that they should find some way of backing off altogether from the Bill, and I warn them that if they do not, they will come to rue the day that they presented it to Parliament.

7.8 p.m.

Lord Beloff

My Lords, we have listened to a powerful exposition from my noble friend Lord De La Warr, not for the first time in this debate, of what might be called the producers' view of transport services; the view of those who are professionally or governmentally engaged, or who have been engaged, in providing these services. One must assume that for such people—and it would be true in any other industry—there is an inbuilt preference for the way in which things have been done so far.

I venture to address your Lordships' House from the opposite point of view. I am not, and never have been, engaged in the transport industry. I am the kind of person who has been referred to in the course of this debate, when noble Lords have said that this debate is about people. I am an old-age pensioner, not the owner of a car; and in case there are any generous noble Lords, I would not know how to drive one if I were given one. I am dependent on public transport now and have been all my working life and I have seen it wholly from the point of view of a consumer. From this point of view, when I look at the figures—no one has questioned the figures, with the falling off of our bus services over recent years; no one has questioned the fact that they have become more expensive than would be allowed by the rate of inflation—I then have to ask, "Would a Bill along these lines possibly produce a remedy, or must we assume that we should continue with the present system and find some reason for believing that the decline would somehow come to an end?"

It seems to me that if we are to answer this question we have to take a rather different look at what is the nature of the problem. It has after all been pointed out by many noble Lords that a very large proportion of the population of this country is in my position—they either do not own cars or they have no access to cars. There therefore must be a great potential for a public transport service if these people are to have access to work, to shopping, to amusements and to each other. We have to ask, "Why is it that we are unable without increasing the vast expense to confer the blessing of mobility?"

It is argued—it was argued by the noble Lord, Lord Shepherd, and it appears in the report of the Select Committee in another place—that you can put this down to the rise in car ownership. I would say that we must look at what I can only call from the general national point of view the abuse of car ownership. It is absurd. What would our arrangements for transport look like to someone coming from another planet? I stand at a bus stop on Monday mornings waiting for the bus to take me to the railway station in order that I may join your Lordships in our deliberations. There passes along by me car after car, usually with a single occupant going into the middle of the town, cluttering up the streets with parking from quite a range away from the station, or taking people not to the station but to work. It is the most inefficient system which can ever have been devised for taking people from one place to another, whether one takes it in terms of the environment or in terms of the cost of energy.

I agree with the people who talk about coordination. One ought not to distinguish unnecessarily between buses, coaches, railways, underground railways, rapid transit systems and public transport. Therefore, it seems to me that the essentials of a policy for public transport ought to be to find ways in which people can be attracted to use public transport and leave their cars at home except for those things for which a car presents advantages which no system of public transport can—such as taking the family and its luggage away for holidays.

The merits of this Bill seem to me to lie precisely where the noble Earl, Lord De La Wan, sees its demerits. It is going to blow up the present system; it is going to start people looking for new ways of providing service because they will have an incentive; it is going to make people challenge whether the double decker bus with its capacity is the proper instrument to serve an ill-frequented route; it is going to try to persuade people to experiment. I find this talk about Marie Antoinette and taxis very peculiar; there are a number of developing countries with low incomes where the shared six-seater or eight-seater motor car is normally the only form of public transport available.

There is therefore the opportunity for experiment. No doubt some experiments will fail. Some operators will fail. It is important—and the Bill seems to provide for this—that these experiments should not be made at the expense of safety. No doubt there will still be a point where the necessity of social provision will be such that Government or local authorities will say, "This service is important and must be paid for", though there is no reason to believe that it can be on the scale which would justify a private entrepreneur. All these things will come about, and at the end of it we will get I hope a different system.

I therefore find it very difficult to understand why the noble Earl, Lord De La Warr, thinks that the Government should have done more sums. When you are undertaking a revolution in a method of transport or in a system of transport, I do not see that you could possibly forecast to a degree that would make forecasting worth while the exactitude of what would happen. Imagine somebody saying to George Stephenson, "Suppose we replace the stage coaches with your railway engines. Can you give me the rate of return on investment in railway stock in the 1850s?" That is the kind of question which is being asked; and for a change of this magnitude that question cannot and ought not to be answered.

Similarly, I regret both the Government's reliance on the Hereford and Worcester and Exeter experiments and the attempt to say that the shortcomings which these have thrown up prove that no change is possible or desirable. It is not the kind of thing that can be demonstrated in a particular place because no two places are of the same kind. I take as an example the present system. I have lived in two cities very unlike each other. One of them provides under the present system a rather good bus service though, from looking at empty buses at parts of the day, it is a somewhat extravagant one. The second has gone to the other extreme and over the 50 years that I have known it the bus services have been so far as I can remember in constant decline and are poor. So even under the present system there is a great deal of inequality.

No doubt we could improve this Bill. There is no Bill which your Lordships do not believe they could improve. I have a feeling that if the Ten Commandments had come before your Lordships' House they would have looked very different by Report stage. That having been said, I think that the Bill gives the opportunity for a new start. Though risks are there, and the Government must be vigilant to see that those who pay for the risks are not the poorest in the community, I still think that the Bill is worth supporting and I hope that in the end we will enact it and give a new start to the system of transport. If we do it again—and I agree with the noble Lord, Lord Shepherd, that Britain is in many respect in the forefront still in public transport—we shall have made a great contribution to the civilised world.

7.20 p.m.

Baroness Fisher of Rednal

My Lords, it gives me great pleasure to follow the noble Lord, Lord Beloff. I, too, am a bus user and so the noble Lord has no special privilege that I do not have. But I can drive, and I drive a car, though if one lives in a city, it is often better and easier to use the bus service, because of the lack of parking spaces. And if one can park, one has to pay extravagantly for the facilities of the car park, which is privately owned more often than not.

I could imagine the noble Lord, Lord Beloff, standing in the rain waiting for his bus, with all the cars going past each carrying just one person. There is no need to have just one person in each car. The noble Lord's Government introduced car sharing under a previous Transport Bill, whereby owners of private cars could take passengers and charge them. So there is no need for cars to be travelling along almost empty in that way. It proves that the car sharing scheme which the Government thought was going to be very popular just does not work, as the noble Lord has seen with his own eyes.

We have heard about the experiments in Hereford, but its bus services are totally different in nature from the bus services operating in the metropolitan counties. There can be little similarity between the needs of the travelling public in a market town and those in large urban areas such as Liverpool, Manchester or Birmingham.

I am sorry that the noble Lord, Lord Peyton, has just left the Chamber because I want to describe an area which has recognised that the world has moved on. I shall use as my example the West Midlands, and I shall give some figures regarding bus usage there. I have heard it said today—I believe by the noble Lord, Lord Peyton—that there are no buses at all in some areas. I do not know why that it so, but those who come from rural areas must know. Perhaps the noble Lord, Lord Sandford, when he speaks, will tell the House why there are no buses in the ADC and the county council areas.

In 1983–84, which is the last year for which complete figures are available for the West Midlands, 503 million passengers were carried. The transport executive operated over 8,600 bus miles per member of staff and carried 56,900 passengers per member of staff. I remind the House and the Minister that in 1982–83 the West Midlands traffic executive and the PTA were subject to the Monopolies and Mergers Commission. The commission spent a great deal of time examining the West Midlands transport executive and its workings. Afterwards the PTE was congratulated by the commission on its working relationship with the private operators in its area, pointing out that in the West Midlands the joint system worked very well indeed. We have to accept the commission's findings.

Stability has been maintained, as was wished for by the Secretary of State. Since 1982–83 passenger figures have increased by 16 million in the West Midlands. Given the high unemployment in the West Midlands—up to 18 per cent. of the population—for passenger figures to have increased in that way is an achievement which should be recognised.

The authorities in the metropolitan counties and the executives have a duty at present, to secure and promote the provision of a properly integrated and efficient system of public transport to meet the needs of the area". This Bill specifically seeks to abolish that duty. That is being done in the hope that the amount of public money spent on the bus industry will be reduced, as borne out by the Government public expenditure plans for 1985–86 to 1987–88.

Many noble Lords and the Minister himself quoted subsidy amounts. Perhaps the Minister would care to tell us the corresponding total subsidy paid through tax allowances for company cars. I have received information—and I stand to be corrected—which suggests that the amount of money given through tax allowances for company cars is roughly equivalent to the total amount given to public transport. Only a few months ago there might have been a change in company car tax allowances, but for some reason or another the Government decided that it would not be a very popular course to follow.

We talk about respecting the time scale. I listened with great interest to the noble Lord, Lord Teviot, when he spoke about the limit on the amount of time that will elapse before all these radical changes come into operation. We also have to remember that all the Government's proposals are being made at the same time as they are pushing through their legislation to abolish the metropolitan counties. The metropolitan counties are currently the public transport authorities. Next year their powers will be passed to a transport joint board. All this is taking place when the people with knowledge of this area, through the passenger transport authorities and executives, are experiencing a change of some significance with the abolition of the metropolitan counties.

I am particularly concerned about the loss of integration between bus and train services. This integration has been achieved with a great deal of success in all the metropolitan areas. I was very privileged to visit Tyne and Wear with my noble friend Lord Underhill, who we are all sorry has not been able to join us in this debate. Much money has been spent also on providing car parking spaces adjoining railway stations in all the metropolitan county areas. In the West Midlands 2,600 spaces have been provided at 29 railway stations, so that one can park and ride. This obviously means that there is less traffic congestion in the inner cities.

There is no doubt that the measures taken in the metropolitan areas to revitalise their rail networks have been a success. They have kept down increases in traffic congestion in crowded city centres and have reduced pressures on parking, thus making life much easier for the inhabitants of those large conurbations and for those who have to travel within them.

I remind your Lordships that only two or three weeks ago there was a Question in this House concerning the situation which is arising in London due to the number of coaches coming into the capital. The noble Lord, Lord Brabazon, gave an explanation. But if this Bill is passed in its present form, what is happening in London will obviously happen in all the large cities.

There will now be a two-pronged attack on the local rail links. Any suitably qualified bus operator will be able to run a service directly competing with the railway. Cuts in public expenditure could well leave the passenger transport joint boards without enough money to pay for the local rail services because loss of revenue to competing bus services would increase their net cost.

If bus competition is significant then more than the current £65 million spent on Section 20 grants will be required, or services will have to be reduced. There is also the need to take into consideration the vast investments which have been made in the past 10 to 15 years in electrification, new rolling stock, new stations, road-rail interchanges, and car parks in the metropolitan county areas. The Bill ignores all this and could produce a situation where much of the investment is wasted or underused.

Loss of integration could well mean the loss of joint bus-rail ticketing in the form of the travelcard. These low-cost tickets, used by 42 per cent. of bus travellers and 45 per cent. of passengers in the West Midlands, not only improve the situation for the passengers involved in a bus-train or bus-bus change but result in quicker boarding times at bus stops, which helps car users. If the bus moves on much faster, obviously cars will get along faster. Perhaps I may say again in praise of the West Midlands—and I am not a paid PR for the West Midlands; I just live in the area and I am proud to do so—that it was also the first major operator to switch entirely to one-man operation buses.

I come now to a point on which I am very keen—concessionary fares. Although it is true that the Bill allows for concessionary fares, including children for the first time, the Government's public expenditure plans show a reduction in provision from £245 million in 1984–85 to £197 million in 1985–86 and subsequent years. That is a quite dramatic decrease. If we are to consider concessionary fares, I feel sure it is going to be a matter of mathematics: what the new passenger transport boards, which will be taking over after the authorities have gone, will spend their smaller amount of money on. Therefore in my view it is imperative that there should be a guarantee in the Bill to protect concessionary fares for the elderly. At present there are over 400,000 senior citizens who have lifetime passes issued by the West Midlands transport executive, giving free travel on buses and local trains. As my noble friend Lord Hatch said, any curtailment of the bus validity or any changing of the scheme would have considerable adverse effects on the mobility of old people.

I have concentrated on two aspects of the Bill but, as other noble Lords have said, there are other problems. I shall not go into them. They include children travelling to school, housewives doing their shopping, special services for the disabled, and special buses laid on to go to hospitals. All in all, the Bill will disrupt the lives of the millions of people who rely on buses and trains to get them out and about.

In conclusion, I feel that it is important for the Government to recognise that they have in the Bill a direct contradiction. For London they have set up London Regional Transport. They give LRT and British Rail the following objectives: a better match between demand for services and their supply: better interchanges between rail, bus and Underground; and better coordinated services, routes, and timetables.

All I want to say is that those are the objectives that, over the past 10 years, the passenger transport executives have been operating in the metropolitan areas. Those objectives are now laid down for London but the Government are proposing the abandonment of most of those achievements in the provincial conurbations. What a direct contradiction that is. What the Government are doing for London they are saying is no-go for Manchester, Liverpool, Birmingham and Newcastle-upon-Tyne. It is yet another example of how the Government are trying to make this a two-nation country.

7.37 p.m.

Baroness Vickers

My Lords, as an elderly disabled person I was delighted to hear what the noble Lord, Lord Zouche, had to say and I am looking forward to being able to get on the buses again in the future.

I support the need for a change in legislation for transport. However, I dislike to be told that one is tied to a manifesto following a general election. The general election was two years ago, and in my opinion it is unfortunate that although conditions have changed one is considered to be a traitor to one's party if one decides not to vote on certain occasions. I suggest that we do not tie ourselves to manifestos. We believe in what they say but should not use it as a threat to people if they do not entirely agree.

The reason I mentioned that is because there have been many changes since the last local government elections and their polices may not always agree with the Government's policies. We shall find out when the new councils are formed and their chairmen are elected. Already, in the Devon area, some quite different opinions have been expressed on many points since the councils have changed.

Many local councils welcome the benefits that this Bill will bring but are also aware of the disadvantages if competition is not within a controlled framework. I hope that will be found in the Bill. For example, if the city of Plymouth wishes to maintain the present fares and service levels the cost of replacing the subsidy from the rate fund is likely to be £750,000; that is, to provide services at unprofitable times and concessions such as children's fares. There is of course one major difficulty with the royal dockyard. This has people going in at various times. When they leave the buses are full, but at certain times the buses run comparatively empty. If the city of Plymouth wishes to maintain present fares and service levels the cost of a cross-subsidy from the rate fund is likely to be £750,000 per annum—more than twice the level of the rate subsidy. However, the effect is magnified by grant penalties causing a 22 per cent. addition to the rate demands. So the city will be in some difficulty in settling its affairs in the future.

Although there is much political opposition to the Bill the ADC, which represents 333 district councils, is Conservative-dominated and thus no political motives or bias can be attributed to its views, which reflect only its anxiety over the interests of the travelling public. The enemy of commercial bus operation is institutionalised cross-subsidy. Those who have followed the public pronouncements of the NBC over the past few years will know that it has been saying this for some time. However, the arithmetic of cross-subsidy has become so daunting that any proposal to remove it other than gradually and, I think, thoughtfully will be fraught with danger for those who rely on bus services.

The noble Baroness opposite mentioned car sharing. That is not very easy in rural areas. Regrettably one is now rather frightened of picking up people—which I once used to do quite a lot—because of the unfortunate happenings that have taken place in cars in such areas.

When the services are registered we shall probably find that the established operators will be prepared to run substantially fewer services than they now run and will concentrate on their viable core. There may be considerable problems for those passengers who rely, as mentioned by the noble Baroness, on buses on unprofitable routes and who travel at less popular times of the day.

The importance which the Government attach to the safety of passengers and other road users is strongly endorsed by the operators. However, in the interests of both safety and fair competition there should be a single high standard applied, regardless of ownership or size. I wonder whether adequate resources, at considerable additional cost, will be made available to that end.

The question of fair competition is a broader issue and one which applies not only to small operators competing with larger ones, or established operators competing with newcomers, but also between types of operator—independent, National Bus Company, local authority and passenger transport executive.

The Government intention is that on the day of deregulation operators of all provenances shall be in a position to compete fairly one with the other, but the legislation as presently drafted gives considerable cause for concern. I believe that no operator should have a head start over any other when deregulation occurs, and it is important that the changes should be coordinated to come into force at the same time so that no one transport provider starts with a financial or legal advantage over another.

The Bill deals with the privatisation of the National Bus Company. I understand that the employees do not take exception to the proposal, but they are concerned, as has been mentioned by one or two noble Lords already, as to the position of their accrued pension rights and with the rights of deferred and existing pensioners. The privatisation proposals may disadvantage both classes of employee.

The NBC does not take issue with the aims of the Bill. But these are major changes and care must be taken in implementation in order to avoid serious reductions in services.

As it is so late, I am not expecting an answer from my noble friend tonight, but perhaps he will write to me about any points that he considers worth dealing with.

7.43 p.m.

Lord Sandford

My Lords, it seems to me to emerge from this debate that the less one has to do with buses, the easier it is to support the Government! But, alas, I am president of the Association of District Councils—Tory-controlled—which, as my noble friend Lady Vickers says, has 333 members spread across England and Wales, and 48 of them operate bus services—a total fleet of some 4,000, as compared with the fleet of 5,000 in Greater London, 6,000 in the PTEs and 14,000 in the NBC. Small as we are compared with those. I think that we represent the citizens of town and country, users and operators, and I like to think that we are an association well able to represent the views of all those affected by the fortunes of this declining sector of our economy and the Government's consideration upon it.

Certainly something needs to be done to manage that decline better. Her Majesty's Government are right to attend to it. Their pledge in 1983 was very sensible. It was to the effect that they would further relax bus licensing. My noble friend Lady Vickers need not worry about having to stand pat on manifestos. That is that the Whips have been instructing us to do on the Local Government Bill. Now we can all relax and forget about the 1983 manifesto pledge that we should further relax bus licensing. We are not going to do that at all. This Bill now says quite categorically in the explanatory memorandum that the Government will abolish road service licensing altogether. That is quite a different thing.

I must say that it is difficult to find many people among those really involved in the industry who share the brimming confidence of our Secretary of State in his radical approach and his high risk policy; and I share a number of the misgivings that have been expressed. They start from three points. First of all, I do not believe that this legislation has been sufficiently thoroughly prepared. I shall just give the House an indication of how it feels to us in the ADC. Early in 1984, with the election manifesto ringing in our ears that the Government would further relax bus licensing (which was very welcome), the chairman of our transport committee detected the Secretary of State at lunches and dinners that he was attending making remarks very different from those which we had been expecting, and we asked for a meeting with him so that we could discuss what was going on. That was arranged on 25th April. The views of the association were sought following the meeting. That was very welcome. There was no mention of a White Paper at that stage and no mention of a deadline.

Our members were canvassed. Their views were forwarded on 22nd June, and the reply then was, "Oh, too late for that. The White Paper is at the printers", and it was published on 13th July. That is the way in which friends and colleagues were consulted. If my noble friend on the Front Bench can tell us that anyone else was treated better, I shall be glad to hear of it. But that is how it struck us, and that is how it was.

We then came to the question of whether these theories have been properly tested. I cannot agree with my noble friend Lord Beloff that we are in the same situation as they were when Stephenson invented the steam engine. We are dealing with a form of transport which is already with us, and we are trying to manage, or possibly halt, its decline.

I have spoken of consultation. The trials, I think, are even flimsier. We have already heard about the one in Hereford and I do not want to go into the merits or demerits of it, but whether it was good or bad, conclusive or ambivalent, it can have no possible application to the great cities, which is the point that the noble Lord, Lord Carmichael, made; and it is in the great cities where great things are expected of this legislation and where great changes are certainly needed.

My noble friend Lord De La Warr also mentioned consultations, trials and studies. Then we come to cross-subsidy, which is the key factor in the present system and which is said to be wasteful. Where are the studies to substantiate that? It is an absolutely critical point, and perhaps when my noble friend comes to wind up he will tell us where those studies are. My noble friend who opened the debate said nothing about them.

Certainly it is true that in Plymouth, which is one of my very best authorities—I shall tell your Lordships the criteria by which I judge that in a moment—the increase on the rate burden if cross-subsidy is phased out, as it will be, would be something of the order of 22 per cent., and that is very high. Cross-subsidies certainly have a very useful part to play, as the noble Lord, Lord Shepherd, from his experience in the NBC told the House.

One of the more immediate reasons for the need for this legislation which I think we can all agree about is the way in which the call on external subsidies of various kinds has escalated. The White Paper at Chapter 1 makes much of that. The grants and subsidies have risen, as more than one noble Lord has said, to quite unacceptable levels—around £500 million. Table 19 in the White Paper makes it quite clear—and this was a point that the noble Lord, Lord Harris of High Cross, glossed over—that four-fifths of that unacceptable figure occurs in the PTEs. It is concentrated there.

The powers available to the Secretary of State to deal with excessive expenditure and overrunning of expenditure in the PTEs has been available to him ever since the 1983 Act was put on the statute book. Nevertheless, it was originally left to the borough of Bromley to deal with the excesses of the GLC. Thereafter the Secretary of State took power to himself. But he has not used it. Perhaps my noble friend on the Front Bench can tell me and tell us why he has not and why he still does not use these powers. Why can he not rely, for the purposes of dealing with this overrun, on rate capping the new metropolitan joint transport authorities when the new local Government Bill is in force? It is cities like Sheffield which call for 68 per cent. of their operating costs to be borne by external subsidy and grant that are causing the trouble. Why clobber everybody else, large and small, profligate or thrifty, in the same way and all at once?

It is claimed, and a number of noble Lords made the point, that all municipal bus undertakings are inefficient, and that they cannot be efficient unless they are spurred on by competition; that somehow they cannot survive without large grants. Well, the Commons Select Committee dealt with that point. It showed that, despite the profligacy of cities like Sheffield, on average United Kingdom bus operators rely more upon their fares, as to 75 per cent., than any other country in Western Europe. West Germany pays for only 63 per cent. of its bus operating costs from fares, France 43 per cent. and Italy 18 per cent. Thus our operators are among the most fare-reliant, or self-reliant in Europe, as the noble Lord, Lord Shepherd, has said.

There is a still more detailed analysis from Jane's Urban Transport, 1985. There is analysis city by city of how bus undertakings are financed. This produces an interesting EC league table, starting with those which rely least on subsidy and fares. Top of the list comes Plymouth with 95 per cent. of its company's operating costs met from fares, then Cardiff, Leicester, Southampton and Bristol. Up in that group, there is only one other EC city and that is Munich. We are way ahead of all the rest of the whole of the European Community.

Therefore is it any wonder that this association is really very cross at its members, all of whom are in the top half of this league and half of them Tory controlled, being lumped together for treatment with cities like Sheffield which are among the most profligate cities in Europe in the use of other people's money? It is not necessary, in order to deal with those excesses, to impose this legislation upon the rest of us.

Finally, I want to ask the House, and particularly my noble friends on this side, to consider two possible repercussions. Can the Tory party really be said to have so many electoral assets in local government as to be able to afford this high risk policy? The Association of Metropolitan Authorities is already socialist. Abolishing the metropolitan counties will not make it any less so. Nothing short of introducing some accountability into local government finance will ever put that right. The Association of County Councils now has only 11 out of 47 authorities left in Tory control. My own association is still Tory controlled, 200 out of 333, in town and country, large and small.

We are now one year off the next set of district council elections and two years off the second set of district council elections and a general election. Is it really sensible to alienate so many of our supporters in local government with legislation of this kind at this stage?

Finally, I should like to turn to another set of repercussions in the bus industry. The noble Lord, Lord Shepherd, gave details—and so did the noble Lord, Lord Carmichael—but he did not produce the full results of what happened when coaches were deregulated in 1980. That was entirely beneficial to the National Bus Council. The reason it was so beneficial was that it was able to pinch business off British Rail and did so to the benefit of its own operations and its users. However, in the process of that deregulation, the import penetration from abroad of foreign makers of buses was increased from 21 per cent. to 40 per cent. Can we really call that a success from the point of view of British industry?

This legislation has so far cast some unfortunate shadows ahead of it. The uncertainty that it has introduced to the whole of the bus industry—I am talking chiefly of the manufacturing industry—has reduced new registrations this year to a third of what they were in 1980. It does not require much imagination to realise what that is doing to unemployment and what it will do to unemployment in the bus manufacturing industry. Yet there has been much talk from both sides of the House, but notably from my noble friends, about all the new buses and mini-buses that are now going to come in to pick up new business. Therefore, I ask my noble friend on the Front Bench if he will give us the details of these new orders for new mini-buses, which I am assured the prospects of the legislation will produce. It will be particularly interesting to hear the way in which these new orders are spread between the British, Japanese and German industries.

This is an industry in decline. That is the melancholy fact which we cannot escape. It is a decline that we have to manage and that we have to manage better. Its problems certainly need to be addressed, but with very much greater care and discrimination than is shown in this legislation. The remedies need to be worked out with much greater care, applied pragmatically and timed judiciously. It is amendments to achieve this that are the ones which we must go for in Committee.

7.57 p.m.

Baroness Carnegy of Lour

My Lords, it was interesting that at the beginning of this debate there was what to me seemed a very encouraging acceptance from both the Front Benches opposite that something has to be done to arrest the decline in bus travel. There seemed to be acceptance of what my noble friend Lord Brabazon said: that the potential market for the bus industry might be much larger than at present, that the potential ability of the industry to transport many more people is greater than we imagine. The right reverend Prelate indicated that in some way the radical approach of the Bill to this intractable problem is evil. I was going to answer that but it was very much better answered than I could answer it by the noble Lord, Lord Harris of High Cross. Therefore I shall not do so.

Others during the debate have based the argument on the premise that all is in a sense well, as if the present rural bus services were in fact reasonably good and that they were capable, within the present system, of improvement. They talked as if people in cities are in fact getting a fair deal at the moment, as if keen people who would like to help can enter the market if they want to. However, most speakers have accepted that the truth is very different; that rising subsidies and declining services simply cannot go on; that rural services are in continous decline.

I do not think a Back-Bench Peer from Scotland has spoken so far. It is interesting that in Scotland we have over the period of eight years had a reduction in the number of journeys made by passengers on stage carriage journeys, from 891 million to 694 million. Thus there were 197 million less journeys made, and that in a country where, as the noble Lord, Lord Carmichael, said, we have a very high proportion of people who do not possess a car—and in some parts of the country that figure is as high as 75 per cent.

My noble friend Lord Sandford defined what was going on as the management of decline. I think he said we have to manage this effectively and, if possible, stop it. I think that if I had been speaking in your Lordships' House five years ago, I would have been saying many of the things that my noble friend was saying. My noble friend was speaking for large numbers of people who are involved. They have put enormous energy, ingenuity and expertise into making the best of a very difficult job in managing buses. It is very easy for them to fall into the trap of explaining difficulties. It is necessary, all the time, to explain difficulties to one's constitutents. They find it hard to accept that it is possible to do anything but manage decline.

It is very difficult to face radical change which means totally different ways of working and a totally different role. All the local authority associations—not only the Association of District Councils—are saying this. The Convention of Scottish Local Authorities is saying it. So is the Association of County Councils. The bus operators are saying it. We have heard my noble friend Lord De La Warr express their view. Many of those to whom the right reverend Prelate has, I am sure, been talking—trade union officials, officials in local government and many others involved in trying to find a way through this problem—are saying these things.

I am reminded, at this moment, of what happened when the youth training scheme was originally floated as an idea. That proposal, too, was in a sense taking a lead in Europe. That, too, was a very radical, totally new idea. It was very shocking to people who were accustomed to the old declining system of apprenticeship and who felt that their task was to prop it up. Then, councillors, officials and employers were all saying the same sort of things that people have been saying in this debate. Yet now people are seeing that with adequate safeguards and as public understanding accustoms itself to the new ideas, that particular idea can work and will be very important.

Likewise, this is a proposal for radical change, even more radical change, I would suggest, with essential safeguards. It may, and I am pretty sure does need refinement. I would, however, ask noble Lords to stand back from their own experience in local government, from the views that are expressed to them so fervently and with the utmost sincerity by people very much used to the present system and resigned to its problems. I ask your Lordships to look from the point of view of bus travellers in the least privileged places like Tyne and Wear, like Dundee, near where I live, and like Strathclyde. I ask you to take the point made by my noble friend Lord Brabazon that there is perhaps a great deal more that we could do than we are doing at the moment. Is there, in fact, so much wrong with the Government's proposals?

There has been a lot of talk about cross-subsidy. That is one aspect on which I should like to say a word. I would ask your Lordships, "Is hidden cross-subsidy arranged by a local authority a good thing?" The noble Lord, Lord Tordoff, said that he thought that it was not, and that it should be transparent. I agree with him. Is it a good thing that those living in the least well-off areas who, because they are not car owners, travel mostly by bus and so ride on profitable routes, should be paying for buses to run to better-off areas in order that those people, not necessarily well off but who do not own cars and who need the buses in better-off areas, should have those buses? Is it a good thing that the frequency of services and fares should be fixed in relation to that hidden cross-subsidy within local government councils? Is that not mixing the political and the commercial too much? Is it not better that subsidy of rural routes should be open for all to see, and done for social reasons, as the Bill suggests? Is it not better that hidden cross-subsidy should be limited to commercial cross-subsidy, that which the companies do because they are prepared to make the ends of routes more profitable, because the middle is profitable and because they want to attract new customers who live on the ends and who will ride across the middle of routes? Is it not better that the hidden cross-subsidy should be confined to them?

It is interesting that while the Bill is moving towards "small is beautiful" and away from people's fate on buses being decided by politicians and the big companies netotiating together, the Friends of the Earth condemn it on 10 counts, pretty well wholesale. On the other hand, Rural Voice, which represents nine genuine rural organisations with three-quarters of a million members among people who live in the country, many of them depending on buses, welcomes the Bill on the whole and makes only some constructive suggestions.

I should like the Government to think about four matters. Doubtless, these will arise in the Committee stage but it is important at this point for the Government to pay attention to them. First, is the commissioner, if he is to be the registration authority as the Bill proposes, going to be able to respond quickly enough should a bus operator suddenly cease the service for some reason? Will he be able to supply information, fully and speedily, that local authorities need? This is a question that Scottish local authorities—all the regions, I think, and they are the only ones involved—are anxious about. It is something that requires attention.

Secondly, how, in the Scottish regions, will the coordination of school transport and other transport be achieved in practice? In my own region of Tayside, the public and school children use the same buses, some chartered and some not. This works very well. It is important that this advantage should not be lost. Thirdly, is the provision in the Bill sufficiently adequate to promote integration of rail, airport, harbour and bus that, again, in Strathclyde and in Tayside, is excellently done? Fourthly, when the Secretary of State is making regulations to do with registration, will he consult the local authority associations, and notably in this case the Convention of Scottish Local Authorities?

Finally, may I quote from an article in The Times of 1st February this year which said among other things: the Bill is opposed not only by those who doubt the capacity of the market to respond to real needs, but also by vested interests which fear the loss of administrative empires". I would express it as "vested enthusiasm" and not "vested interests". It continues: There will be a pressure to water down the provisions that seek to ensure that real competition can occur, especially in metropolitan areas. These pressures must be resisted, if effective monopolies are not to reappear, perhaps no more efficient than their predecessors and less socially aware". I believe that the aspirations of many noble Lords expressed in this debate will in fact be better met by this Bill than by continuing what my noble friend called the "management of decline".

8.10 p.m.

Lord Mountevans

My Lords, at the outset I should like to say that I agree wholeheartedly with the ends which the Government seek to achieve by means of the Bill before us tonight. Usage, as the noble Lord, Lord Brabazon, demonstrated, has declined, while costs, fares and subsidies have increased alarmingly in the bus industry. It is only right that the Government should take steps to try to bring supply more into line with demand and to ensure that service is provided at a cost which is acceptable to farepayer, to ratepayer and to taxpayer alike.

That said, I wish that I could agree as strongly with the means which the Government propose to use to achieve these laudable ends. However, I cannot accept the validity of the argument that the success of the 1980 Act deregulation shows that competition is the road to follow in local transport, nor that results in the three trial areas support the merits of the competitive case.

In terms of the 1980 Act consumers had a multiple choice between British Rail, National Express and private enterprise. However, on the local services it seems to me that the trial area experience indicates that the choice, if it exists at all, may blossom briefly but may then well disappear. National subsidiaries are already planning which routes to shed and in some cases—such as United and Northern—they are trimming their costs by shedding management staff. Any future manager of a National subsidiary would, I feel, be in dereliction of his duty if he did not concentrate on profitable routes to the exclusion of unviable ones which might well subsequently disappear for want of cross-subsidy.

Parenthetically I should like to ask the noble Lord the Minister what is so wrong with cross-subsidy. Is it not part of the way of life of the Post Office, and is it not enshrined in the Telecommunications Act? Public transport is about integration. We rely—those of us who are non-motorists—upon the availability of a number of facilities as, for example, I do when I use a bus to get to Waterloo, a train to get to Hampshire and another bus to get to my cottage.

A better example of integration and one closer to hand, is perhaps London Regional Transport, which is under direction to co-operate more closely with British Rail in respect of interchanges, co-ordination of routes; timetables and information; in respect of the avoidance of wasteful duplication of services; and in respect of through ticketing.

I have summarised the directive issued by the right honourable Secretary of State to London Regional Transport and to British Rail on 24th July last—an utterly rational directive, but not one which I can see being issued elsewhere in the country under the Bill that we are discussing this evening.

Tyne and Wear's public transport system anticipates in all respects the directive which I have just summarised. The metro does the trunk hauls while the buses feed into it. It is said that the metro has reduced the number of buses crossing the Tyne bridges by 1,200 a day and yet usage of public transport within the Tyne and Wear metro public transport area has increased considerably and is continuing to grow in spite of the desperate economic circumstances prevailing in that part of the country. Tyne and Wear believes that competition will replace the 1,200 buses that have been shed with 1,800 which will now return to the city centre per day. Indeed, a director of National's subsidiaries up there unwittingly advised me that his staff, as I suggested earlier, are already assessing the opportunities open to them to maximise profits by going back into the city centre business at the expense of the surrounding outer suburbs and shire counties.

National's subsidiaries are already beginning to establish their identities in preparation for the steps envisaged under the Bill. Quite possibly district councils in Tyne and Wear are considering their options as to secession from the successor bodies to be established in transport terms under the Local Government Bill which has been before your Lordships on other occasions this week.

An integrated system in which £270 million has been invested feels, not without good reason, rather vulnerable. Its consumers do likewise because they realise that service will certainly be provided along corridors where operators can perceive profit. Elsewhere, the tendering procedure—and I am a little surprised that the Bill makes no particularly detailed specifications as to the tender documents to be issued—allied to the pressures of rate capping, penalties and the abolition of transport supplementary grant as a means of subsidising public transport, mean that services become very much more a matter of things which may be provided rather than which will be provided. I wish that I could be certain that they will be provided in terms of meeting people's needs.

I have mentioned the interrelationship between this Bill, the Local Government Bill, TSG and current Government policy on rates and rate support. Although this Bill is largely devoted to buses, it is a Transport Bill and I am concerned also about its implications for British Rail, particularly in terms of Section 20 support. As the noble Lord, Lord Shepherd, said, negotiating with shire counties is like getting blood out of a stone. From BR's point of view I am worried that council assessment of local needs will have to be such that Section 20 agreements will begin to fall by the wayside. The noble Lord, Lord Shepherd, referred to the bus agreements falling by the wayside; I am worried that the train agreements likewise will do so.

Investment in metro-urban transport—if that is not an appalling word—will have to take its chance with all the other projects which British Rail considers for submission to the Ministry. Services which often cross county boundaries may well be reduced or even abandoned if they cannot be funded by a falling PSO grant. This is a microcosm of what I might call the disintegration of public transport. Alternatively, is the London situation, as detailed in the right honourable Minister's letters which I have paraphrased, the urban trial area for which several noble Lords have asked today? It certainly seems to me to be the correct way ahead and I wonder why we are not following it tonight.

8.17 p.m.

Lord Geddes

My Lords, one of the great advantages of being this far down the list of speakers is that virtually everything that one thought one was going to say has already been said and almost certainly much more ably than one could ever have done oneself. I shall, therefore—I am sure to your Lordships' relief—be very brief.

First, like some other noble Lords, I must declare an interest. I am a director of a company which uses the services of the National Bus Company.

Secondly, I must apologise that I inadvertently missed the first 10 minutes or so of the opening speech of my noble friend Lord Brabazon. That was not only very impolite, but also most unfortunate, since I understand from the speeches of subsequent noble Lords that my noble friend and others highlighted the success of National Express, on which subject I wish to concentrate. If, therefore, I cover ground already well beaten, I beg the pardon of my noble friend and the House.

I welcome the spirit of the Bill, but like other noble Lords I am somewhat concerned at the proposed timetable on such a complex and highly commercial subject. In Clause 47 two specific time scales are mentioned—three months to submit proposals for the disposal of companies within what is called the "bus group", and three years to implement such disposal programme.

Three months is a very short period of time, during which the NBC must come up with proposals for disposal—almost certainly to a number of different purchasers—of in excess of £200 million worth of net assets. Leaving timing on one side, however, the thrust of the Bill and particularly Part III is, as I read it, to give the optimum value for money. That, as a principle, I warmly applaud.

In this context, however, there may well be a problem in disposal of National Express itself unless there are safeguards. National Express is of course first and foremost a marketing division of the long-distance coaching activities of NBC. It effectively has no assets whatsoever. Coaches are subcontracted in and terminals, and/or coach stations, are owned by other NBC subsidiaries, PTEs, and others.

It is perhaps worth reminding your Lordships yet again that a large proportion of the National Express market is made up of the students and other less well off groups whose absolute requirement for speed is secondary and who therefore use the slower than rail coach services on grounds of price. The unique features of National Express are that it has a nationwide network serving convenient city centre coach and bus stations, operating frequent services on virtually all major routes, at certainly the lowest rates for long-distance scheduled passenger services, and that its services are sold through an extensive network, a nationwide network, of sales agencies.

But what will happen after the breakup of the NBC? One would imagine that privately owned coach owners could, and would, still hire out vehicles. But what of the terminals? When long-distance coach services were deregulated by the Transport Act 1980 British Coachways was launched. It has been discontinued. It failed, I suggest, primarily due to lack of national facilities, and particularly lack of a national terminal network. Here I think I reinforce a point made by the noble Lord, Lord Shepherd, much earlier in the debate.

Part III of the Bill, as it stands, makes no provision that National Express, or its reincarnation—whatever it might be called—shall have guaranteed use of, at the very least, the eight major coach terminals of England; I stress "England". Without such guaranteed use this unique and successful marketing organisation performing, I suggest, a most valuable public service will surely fail, just as British Coachways failed. No one, I suggest, in those circumstances will be the winner.

8.23 p.m.

Lord Kirkhill

My Lords, in commenting upon this Bill I want to say something on the Scottish dimension, of which I have some experience, and at the same time express a view about the general tenor and thrust of this proposed legislation. Therefore, it will come as no surprise to your Lordships when I indicate that I am dismayed by the Government's continued belief that where there are ills to be cured privatisation is the most efficacious medicine.

It appears to me that the proposals in the Bill before your Lordships' House are designed to return the nation's bus services to the chaotic situation of the 1920s. Sanity arrived with the Road Traffic Act 1930, which provided 50 years of public transport coherence. It was supplemented in 1975, so far as Scotland was concerned, by the coming into operation of the Local Government (Scotland) Act 1973, the results of which have seen 10 years of responsible coordination by Scottish local authorities giving rise to a stemming and, in some cases, reversal of the downward trends of bus patronage. This not inconsiderable achievement, if the Government have their way, is to be thrown away as a major sacrifice to the god of privatisation.

How, therefore, will the private sector respond to transport demands? In heavily urbanised areas this is by no means difficult to forecast, as we have the model of Hereford, frequently mentioned by earlier speakers in this debate today. But paradoxically Hereford was the prototype on which the Government at first claimed to be basing their proposals, where even in a medium-sized town, with a population of around 50,000 people, during the period of the experiment operators were behaving grossly irresponsibly in their quest to scavenge the fare-paying public.

The result was that chaos prevailed, with passengers not knowing when a bus was due to appear, or what sort of information display it would have—assuming that they knew where it was going in the first place, which many did not. It should be said that for a period fares plummeted, though they have since risen, more or less, to their former levels. Further, all but one of the new entrepreneurs has left the scene; one following the loss of his operator's licence arising from the appalling condition of his vehicles.

This scenario will no doubt be repeated in other urban areas. The more densely populated, the greater the likely confusion. Of course there will be plenty of buses. They will be racing each other along the road for passengers in accordance with the pre-1930 regime, and there will be anarchy in major town centres with operators vying with each other for the optimum loading and setting down points.

The question has therefore to be asked: will the passenger get a better deal? Possibly he will in purely financial terms for a time, though this will be paid for, in my view, by unreliability, bunching of vehicles, and a real possibility of accidents and general instability.

What, however, of the poor rural dweller? For example, over the past 10 years a basic rural framework has been maintained in most parts of Scotland by the assiduousness of the regional and islands councils which, in terms of the co-ordination responsibilities placed on them by the Local Government (Scotland) Act 1973, have gone to great lengths to ensure maintenance of a basic network over virtually all parts of their regions.

What has been their principal initiative in this? Naturally finance cannot be discounted, and direct financial support to unremunerative services has to be provided by the local authorities. However, this support has been at a level substantially less than would have been the case had there not existed the one ingredient which was so frequently referred to earlier today; namely, that of cross-subsidisation.

On this time honoured basis, as my noble friend Lord Shepherd most clearly earlier illustrated, the profits from a profitable service are used to compensate to some extent for the losses on unremunerative services, which means that the tab to be picked up by the local authorities in revenue support at the end of the day is much less than would otherwise be the case.

But, my Lords, what of the future? Cross-subsidy is now to be outlawed, and in any event if operators are to be permitted to compete freely, they will do so only on profitable routes, and profits will thereby be reduced. What therefore of the rural services which do not make, cannot make, and possibly never have made nor ever will make a profit? Is it an objective of the present Government to encourage further rural depopulation?

"But look", say the Government, "our proposals will give rise to competition, and by the very nature of that prices will be reduced". But can this really be so? The Scottish Bus Group constituent firms have already been lauded by the Secretary of State for Scotland for being highly efficient. It is for this reason, we are given to understand, that they are not to be privatised. If they are so highly efficient, how can they reduce costs further by the mere stimulus of unbridled competition? In my view there is a lack of logic inherent in the Government's case contained in the Bill at this point, and it certainly is a question which the Government have not answered.

Most responsible operators, including the Scottish Bus Group, have in recent years embarked on sensible cost pruning exercises, such as conversion to one-person operation and the purchase of flexible vehicles, and in many cases joint operations, taking account of the needs of education authorities, health boards, and the like. Are such initiatives likely to be practised by the private sector without local authority stimulus? Of course there are other ways in which costs can be cut; for example, by the use of part-time drivers who are wholly employed in other demanding duties during the rest of the day but who may nonetheless perfectly legally drive buses in their so-called leisure time.

There is the worry that vehicle maintenance standards may be reduced. It will be interesting to see if the Government are serious in their pledge that standards of vehicle inspection will not only be maintained, despite the fact that these have deteriorated over a number of years, but will be augmented. What about local authority contract services? That point was mentioned earlier by the noble Baroness, Lady Carnegy. Will the local authority be required, as it appears is the case under the Bill, to put each unprofitable but socially desirable service out to tender on an individual basis? Does this mean that where services are interlinked and coordinated by virtue of local authority initiatives such economically sensible measures are likely to continue to be undertaken by the private sector? It would surprise me very much indeed if that were to happen.

Although in terms of the Bill local authorities will still have subsidising powers, their resources are already strained because of central Government limits on expenditure and in my view will be totally insufficient to meet the new requirement for revenue support once cross-subsidisation is no longer allowed to enter into the equation. In my opinion, therefore, large-scale service cuts will be an inevitable result, allied to increasing transport difficulties for the rural population, which is a very real worry in Scotland, inherent in the main provisions—or perhaps I should say lack of provisions—contained in the Bill. In my view this legislation should not be supported in your Lordship's House without very serious and careful amendment.

8.34 p.m.

Baroness Elliot of Harwood

My Lords, as the twenty-sixth speaker tonight I shall be very brief and to the point. I shall speak now, following all that the noble Lord, Lord Kirkhill, said, about Scotland, because he and I and the noble Baroness, Lady Carnegy, know about Scotland. So far we are the only three people who have mentioned the importance of transport to Scotland. It is very important. There are two areas in particular that I wish to mention. One is the border area where, with all the railways having been removed, there is no public transport except buses, and therefore the bus services are absolutely vital.

The noble Lord, Lord Kirkhill, mentioned the Highlands and Islands, which are equally important. These are areas where, unless there are proper bus services—which must be subsidised because the population is scarce—the people will be completely isolated unless they have private motor cars. We all know about private motor cars. Many people have them—far more than ever had them in all my lifetime—but there are still a great number who do not have them. It has been mentioned that old people and young people who cannot get driving licences are among those who cannot travel other than by public transport.

I beg the Government to consider particularly the areas which are absolutely isolated. The two I have mentioned are those I know best, but there are other areas in Wales and the north of England which suffer from the same problem. I should also like to mention a point which has been made by one or two people who stressed the importance of the link between bus services and railway services, because if one cannot get to a railway (in my case, I am 50 miles from any public transport) the only way one can travel is by buses which must be run in conjunction with others.

There is one other matter I should like to mention; it has been touched on before. It is a subject about which I know something, as I was chairman for many years of the education committee in Roxburghshire county on the Borders. I am referring to school transport. If school transport can be shared, well and good; that is fine. But if the children who come to the schools are isolated, clearly there must be special bus services. At the moment education authorities pay, but some education authorities are now threatening not to pay and to make children walk.

In the case I know, three miles is suggested as a possibility. In my view it is an impossibility. In the old days rural areas used to have little transport, but nowadays if they do not have transport they have masses of agricultural machinery, vans that bring food to farms and rural areas, post buses, and so on. Those vehicles make it very dangerous for children to walk any distance even on a rural road. We simply must not underestimate the importance of school transport. I hope that under the Bill we shall be able to have school transport extended or shared so that it will be more important and better in those outby areas.

The other matter I should like to say a word about—I congratulate the noble Lord who made his maiden speech on the subject—concerns transport for the handicapped. Some buses will have room for wheelchairs and some will not. Access rails for handicapped people going in and out of buses are essential. We must see that handicapped people are not left out by the public service, although obviously this cannot apply to every bus. When bus schedules are being put out for given areas it should be compulsory that some of the services have accommodation for the handicapped.

Much has been said about people being able to get to shops, hospitals and so on. I agree entirely with it. That would be helped by the Government's proposal for the sharing of transport. Mini-buses, taxis and post buses will help rural areas and I am optimistic that this system will succeed and will prove very useful. However, these services will have to be subsidised in rural areas and some people are worried that the transport authorities will not realise the needs of these rural areas. Some people have said to me that they think it is a mistake that county councils will no longer be the licensing authorities. I do not think that is a mistake as long as co-operation between the transport authorities and the counties remains close, and I hope the Government will see that it does.

There is no doubt that the long-distance buses have been a great success. Other noble Lords know more about them than I do. But as your Lordships know, I support the railways very strongly. Every week of my life I spend two nights on a train. Therefore I do not want the long-distance buses to interfere with the trains. I do not think they need to do so, but that could be helped by co-operation between the bus and the railway services. I beg the Government to see that that continues.

One of the organisations with which I have been in touch is the Bus and Coach Council, which deals with the independent sector. It has asked whether the Office of Fair Trading, to which the controversial issues are to be referred, will be able to cope quickly. There is a suggestion in the memorandum I was sent by a large bus company that to refer something to the Office of Fair Trading means a wait of at least a year. That would be absolutely hopeless. Decisions about such matters must be taken quickly. I hope that the Government will see that the Office of Fair Trading deals with these issues as quickly as possible; otherwise it will be disastrous for all the hopes they have about the new services. I hope that the Minister can assure us about that.

Another question that has been raised with me and other Members is: why change the registration of bus services from county councils to the traffic commissioners when the county councils supposedly know more about local needs than the nine traffic commissioners? I believe the answer is that the cross-country routes and the necessary co-operation over large areas will be better done by nine commissioners covering very large areas than a great many county councils and regions. I hope we are right about that. I think that is one of the things which the Government have to look out for. It would be a disaster if everything was slowed down because of these larger areas. Again the need is for co-operation between the county councils and the traffic commissioners.

I support the Second Reading of this Bill. I reserve the questions of discussion in Committee and possible amendments to improve the Bill. I do not want to do away with it. I think there has been too much pessimism expressed here. Where there is a will there is a way. If the Government want to make this a success they can do it; but they will have to work jolly hard to do it.

8.42 p.m.

Lord Pender

My Lords, it is late and I like to think that most points have been covered by your Lordships, so I shall be very brief. While I agree with the broad principles of the Bill, there is one aspect that causes anxiety to those of us who live in Kent. Kent, demographically, is highly populated and its requirements may appear far removed from, say, the Highlands or the Borders. I live in East Kent. Apart from the city of Canterbury, Dover and Folkestone, we are very much a rural area.

The pitfalls following deregulation must be avoided. There will inevitably be a period of instability whilst bus operators indulge in unfettered on-the-road competition, including destructive attacks on individual route patterns. It is, however, unlikely that real competition will continue. Two or more buses operating where there are only sufficient passengers for one can only lead to financial losses. Only one operator can survive in such a situation. There are many precedents to show that it will be the operator with the greatest resources who will win. In Kent, even after privatisation, it is likely that the National Bus subsidiaries will be the dominant operators. They will establish their own areas of interest for local bus services and will compete agressively with any other operators attempting to operate in those areas. By the simple technique of operating additional buses on the same route as any new operator and accepting a short-term financial loss for that service, they can force the new operator to incur heavy financial losses. Few, if any, new operators will have the financial resources to accept such losses and to maintain a challenge, and when this situation becomes generally known, new operators will not enter the arena. Inevitably deregulation will lead to dominant operators establishing monopolistic positions in the viable local bus service network. This is a position they will be able to exploit against the interests of the passengers, with many services needing more subsidies or ceasing to operate.

I believe—and this is the point I want to make—that the public can be provided with a more comprehensive network and a greater variety of bus services at no extra cost to the passengers within the existing levels of subsidy if comprehensive competitive tendering is adopted. This method offers the advantage of sustained genuine competition, improved productivity and reduced costs, better use of resources than deregulation, stability and reliability, cross-subsidy restricted to realistic commercial and, frankly, necessary levels, retention of "statutory schoolchildren" on local buses where cost effective, and the cost to education authorities for transporting "statutory schoolchildren" minimised.

There is a sincere belief among country councillors that hard off-the-road competitive tendering will ensure stability of services to the public while providing efficiencies of competition. I hope that the Minister will be able to consider this suggestion sympathetically.

8.47 p.m.

Lord McIntosh of Haringey

My Lords, this Bill has been described as a high risk Bill by Members on all sides of your Lordships' House. I imagine that the Government are used to that accusation and are not particularly worried about it.

I must confess that I rocked back somewhat on my heels when I heard Lord Harris of High Cross comment wryly that it seems to be Conservative party on the whole that is prepared to put forward radical measures and to take high risks whereas the Opposition is affecting the conservative (with a small 'c') stance and resisting high risks. I can only say to that that, if that were the case, then I should feel very strongly that serious changes would have to be made in the policies of the Labour party, but I believe that that is a misrepresentation of the issues as we have them before us today.

I believe that we have here not a genuine, radical experiment, but a fumbled and inadequate piece of analysis of an extremely complex issue. What is wrong with the present situation of buses?, asked Lord Brabazon in opening the debate. He said that we must ask ourselves—and he is clearly quite right—whether the existing system meets the needs of the moment. It is certainly true that the bus share of travel in this country has reduced over the years from something like 40 per cent. to a figure now of 8 per cent. That has been commented on as though it was some sort of disaster. Of course it is not a disaster in the real sense because the decreasing percentage is reflected by the increasing mobility of those who have cars and the great increase in the numbers of journeys being made. The purpose of maintaining a bus industry is not necessarily to try to drive back that percentage on to the buses—that would be seeking to go backwards—hut to ensure that we have the kind of mobility for those without cars that is already available to those with cars. That seems to us not only a matter of social justice but a matter of economic necessity and a matter which should be a social and economic objective for all of us.

A number of noble Lords in looking at these figures and at the decline in bus services had very different prescriptions for the cause of the decline. A number appeared to think that it is the subsidy which is the main problem. The noble Lord, Lord Nugent said that the size of the subsidy was the major reason for the proposed change. In fact, if you compare the United Kingdom with other European countries, our subsidies on bus services are at the bottom of the list: 75 per cent. of the cost of our bus services are met by passenger fares. To take a middle country, the figure for Germany is 63 per cent.; the figure for Italy is 18 per cent. I am not suggesting that we should follow Italy, but I am suggesting that there is some failure of analysis if we have not looked at these differences.

A number of noble Lords suggested that the cause of the decline was regulation. Lord Peyton of Yeovil referred to a complex of outdated rules as being the significant element in what is wrong with our bus system. Again, if one makes European comparisons, or comparisons with almost anywhere in the world, that does not appear to relate to the economic health or size of the bus service or the bus industry. A number of noble Lords who are much better connected with the bus industry than I am have with some authority denied the idea that it is regulations imposed on buses which are the cause of their decline. Other noble Lords have suggested—and I think that here we come much closer to the heart of the matter—that the real cause is the increase in car ownership. That is the one element which is consistent across all Western developed countries. The one thing which can be found consistently throughout the world is that the size of bus services is in inverse relationship to car ownership.

I would submit that to seek remedies which either depend on the abolition of subsidies or on a reduction of subsidy or on the abolition of regulations is to be looking for a cause which is not the true cause of the present state of our bus industry. Surely, we must be looking for a business analysis of the bus business. I welcome the noble Earl, Lord De La Warr, saying that what was required here was a business plan. As a moderate and not a revolutionary Socialist, I am pleased to associate myself with him rather than with the noble Lord, Lord Beloff, who said that our requirement was for a revolution in the bus business.

After all, running a bus is not simply a matter of using your redundancy money to buy a bus and to hire a driver. In order to have a bus service which really serves the public, you have got to be concerned with the interchange with rail and other services, as the noble Baroness, Lady Elliot, has said. You have to be concerned with providing a service for schools and hospitals as well as for commuters to work and for shoppers. You must have ticketing arrangements which are comprehensible to everybody and which permit interchange without financial penalty and which encourage regular passengers to feel that they have a service which can meet all of their needs.

You have to have some sort of information system and marketing to make use of the bus service at a time when it would otherwise be less used, to increase, in the electricity supply industry's phrase, the "system diversity" of the bus industry. And you have to have passenger facilities which will be attractive to the passengers—not just the seats on the buses but the places where passengers wait or can get information.

None of these things is really possible with a rag-bag of the kind of small bus operators which appears to be the objective of the Government in deregulation. Even beyond that. it is not just a matter of the full range of services which has to be provided by an efficient bus business. The bus business does not operate in isolation; it is part of our transport system. Buses have this relationship to rail, to the car, to the taxi. They use the same roads as the cars and the taxis. Their road and track costs have to be compared with those of the rail system. It cannot simply be assumed forever that British Rail must pay its track costs where the bus service does not.

Here, the example of the 1980 deregulation of Express Buses I thought was one of the most prized examples. My noble friend Lord Shepherd gave the game away when he said that the National Bus Company's target was BR. That is a perfectly proper commercial target for the National Bus Company. But, from the public point of view, of course it was a disaster because it meant immediately that British Rail was losing £7.5 million, which was either a loss made up by the taxpayer or a profit foregone. It was a real cost which did not come to the passengers on the Express buses, quite apart from the congestion of buses coming into Victoria Coach Station and all the other coach stations in the other cities.

You cannot put these things on one side and think that the bus industry can operate by itself in the way that I am afraid a number of noble Lords who are supporting this legislation appear to think is possible. They appear to think, as the Government appear to think, that deregulation is the unique answer to the problems of the bus industry. I believe that that view has been adequately and forcefully contested by a number of speakers in this debate.

Then we must turn to the whole issue of cross-subsidy. Here again the financial effects of such legislation as this have to be analysed much more carefully than they have been if we are going to give this Bill an easy passage through your Lordships' House. The noble Lord, Lord Harris, again gave the game away by referring to the cross-subsidisation "to keep empty buses on vanishing routes". That was his exact phrase. Clearly, Lord Harris is not worried by the abolition of cross-subsidisation leading to the abolition of empty buses on vanishing routes. But the Government are trying to pretend that there will be no diminution of services which are socially necessary but financially not desirable. I do not think that they can be thankful to have the noble Lord as their candid friend in this matter because he is really exposing the inadequacy of their own thinking.

The Association of County Councils in a brilliantly written little pamphlet gives an effective example of what happens with the abolition of cross-subsidisation. It posits a route in the country of Barsetshire which goes from the town of Barchester to the housing estate at St. Ewold to the suburb of (I think) Episcopi—

Earl De La Warr

It is Plumstead Episcopi.

Lord McIntosh of Haringey

My Lords, I am glad to be corrected by the noble Earl. Then the bus goes on to some place called something like Canonicorum. This route is in three parts. The first part, to the housing estate, is highly profitable at all times. The second part, to the suburb, is profitable at peak hours only but not in the early mornings or evenings or week-ends. The third part is never profitable.

Under existing arrangements, Grantley's Bus Company has provided a service with a subsidy of £5,000 and this has been a mutually acceptable deal whereby, through cross-subsidisation—let us be quite honest about it—the people who live in St. Ewold are subsidising the people who live in the rural village, just as those of us who send letters with a 17 pence stamp to our neighbour in the next street are subsidising those who have the same-priced stamp on a letter going to Scotland. We do not enormously object to that because we are aware of the administrative costs which would be involved in a more heavily-graded system.

But as soon as you have deregulation of the sort that the Government propose, you then get the situation where there is competition for the profitable routes, the first stage; it is possible to persuade somebody to undertake the second one in conjunction with the first. And the third route can only be operated on a complete subsidy which comes to £15,000 in the ACC example and at which the subsidy required from local authorities is therefore trebled. The pamphlet gives a number of examples of the way in which variations of Government policy would still come in the end to the same thing. As the noble Earl, Lord De La Warr, asked and as my noble friend Lord Kirkhill asked; from where are the local authorities going to get the money? Because this is in the context of a deliberate attempt to decrease subsidies through the rates, in the context of penalties for overspending and, in some cases, even of rate capping.

It cannot be argued that deregulation is the answer to the subsidy problem. Indeed, it can be much more effectively argued that from the local authorities' point of view and from the people's point of view it is actually the opposite. And if it could be argued beside that that there is still some case for making these financial changes as a good business proposition, then perhaps we could be less wholeheartedly in opposition to deregulation. But in fact the financial high risks for the operators themselves, as well as for the local authorities, are very great. The administrative costs of the tendering procedure are going to be very high and protracted. There is going to be the probability—nay, the certainty—that from time to time operators will withdraw. Sometimes they will become bankrupt. There will be a cessation of services which will have to be made up in some way; it cannot be left alone.

There will be the complete, hopeless weakness of the local authorities in bargaining with the operators for the residual services, the third route in Barsetshire that I gave as an example before. No, my Lords, the financial risks of deregulation as well as the bad social effects of deregulation cannot be doubted and it cannot be said convincingly that deregulation is the answer to our problem.

Lord Tordoff

My Lords, I wonder whether the noble Lord is aware in this catalogue of extra expenses of the increased cost of audit which arises from deregulation.

Lord McIntosh of Haringey

My Lords, I am grateful to the noble Lord and I am glad to add that to my list of criticisms. My Lords, I have concentrated on the deregulation issue mainly because your Lordships have done so over the past six hours and because it does seem to me to be the central and most controversial issue. But I think I must say that there are a number of other aspects of the Bill where we, on this side of the House, will be looking for significant change. We are not satisfied with privatisation as a procedure. I know that my position is somewhat weakened by the views of my noble friend Lord Shepherd, who was perfectly content with privatisation for the National Bus Company, but I think that even he would agree that there are examples of transport operations which ought not to be privatised and where, at the very least, we ought to be thinking of management buy-out or co-operatives as an alternative, if we are looking for something less monolithic than central nationalisation.

There is the issue of democracy; the question of the role of local authorities; the question, as a number of speakers have said, of who does the registration. What is the relative position of the traffic commissioners as opposed to elected local authorities? The noble Lord, Lord Brabazon, in his opening speech, said that local authorities would have responsibility for formulating the general policies on transport for the area. My question to him and to the noble Lord, the Minister, must be: how? I ask that because all of those responsibilities are being taken away, and specifically local authorities are being denied the key responsibility for securing the co-ordination of services in their own area. That is a responsibility which we believe, and we shall seek to ensure, must remain a popular, democratic decision of the people living in any one area.

There is the whole question of safety. It is only too well-known from recent experience that the safety standards regarding construction of coaches are not as effective as those of stage-carriage buses. The issue ought to be to extend the safety standards to all passenger-carrying road vehicles, not to run the risk that the numbers of vehicles which are so protected is actually reduced. And if we are talking about extension to mini-buses, fine, but let us see that they are safe mini-buses, at the very least.

There is the question of the timing, which a number of noble Lords, such as the noble Lords, Lord Teviot, Lord Geddes, and others have raised. There really will be huge problems for the local authorities and for the operators in the setting of budgets, in the analysis of tenders, and in bargaining on the residual services; and there will certainly have to be an attempt at Committee or later stages to see that a more realistic timetable is set for this Bill.

There is the whole question raised by my noble friend Lord Shepherd and others of the rights of the staff in the bus industry concerning their pension rights and their continuity of employment. I have to say that there is the question of concessionary fares. Despite the concessions made at Report stage by the Government, there are still questions about the amendments which were put forward. There is in one of them the phrase, unless the operator gives notice of withdrawal from concessionary fare arrangements", and we will want to know what that means. There is the Secretary of State's power to remove or add to the conditions that the local authority seeks to impose on concessionary fares. Again, we believe this should be a matter for local, democratic decision and not for the Secretary of State. Finally, there is the inescapable conclusion that the penalties on rates, involving high rates and rate capping, will affect the ability of local authorities to provide adequate concessionary fares.

The right reverend Prelate the Bishop of Durham said, in a speech which went beyond my theological capacity, that this is an exercise in theory determined by faith. That is perhaps a more offensive remark for me to make than it is for him, but I am reminded of the great painter Francisco de Goya, who was also a great thinker, who said: The sleep of reason produces monsters". I believe that we have here a Bill which arises from the sleep of reason. I think it might be going too far in your Lordships' House to call it a monster, but it is a Bill which contains a great deal of bad and sloppy thinking. It is also a Bill which contains a great deal of bad analysis, and it has had a deservedly critical Second Reading here in your Lordships' House. I believe that it requires a searching and critical passage and I hope that it emerges in a much more rational, economic, thoughtful and democratic form than it is in now.

9.5 p.m.

Lord Belstead

My Lords, I should like to add my congratulations to those of others of your Lordships to my noble friend Lord Zouche on his excellent maiden speech in today's debate. My noble friend spoke from the standpoint of a close interest in disabled people and I am sure it is the hope of all your Lordships that he will be taking part in the Committee stage of this Bill and also in many other debates in your Lordships' House in the future.

In addition to my noble friend's speech, this long debate today has produced a variety of different views on this Bill, but on two issues I think there has been a wide measure of agreement. The first is that bus services are important to the people of this country, and indeed my noble friend Lord Beloff explained that, for him, as for many other people, buses are an absolute necessity. Secondly, there has also been considerable agreement that all is not well with the bus industry. While the bus share of total travel has declined considerably, fares and particularly the costs of supporting services have now risen dramatically to well over £500 million a year for fare support alone. All this, of course, has been happening in recent years, at a time when one-man services were being introduced. It is not surprising that rural services have become costly and sparse in some cases, and that the weight of subsidies for urban transport has become almost unacceptable.

I must say I was most grateful to two of my noble friends who speak with very great experience of transport matters, my noble friends Lord Nugent and Lord Peyton. Both of them clearly said that surely the time had come when the Government, and indeed Parliament in your Lordships' House, really had a responsibility not just to sit there and say that it is all very difficult, but to do something to try to help the industry arrest the spiral of decline, so that it can increase its share of passengers and we can all take pride in the service in which it is so right that pride should betaken.

The Government are saying in this Bill that we believe the answer is to put the emphasis first and foremost on the interests of the customer, the passenger travelling, and that the way to do this is to encourage competition. So this is a Bill which will extend to local bus services the freedom from restrictions which has proved successful both in the trial areas and also for express coaches.

I was particularly grateful to the noble Lord, Lord Harris of High Cross, for reminding your Lordships of the outstanding success of the 1980 Act, which I believe I am right in saying has produced a 60 per cent. increase in passenger carryings on express coaches for the National Bus Company alone—testimony, I am sure, to the energetic chairmanship of the noble Lord, Lord Shepherd, when he occupied that chair.

Lord McIntosh of Haringey: My Lords, the difference, surely, between the national express experiment and the experiments with local buses which are now proposed is that the total available market for inter-city travel is divided between rail and buses. That 60 per cent. was in part new business, but there were also very considerable losses to the rail service. This would not be the case under the provisions of this Bill.

Lord Belstead

My Lords, that is a skilful argument hut, if I may say so, both the noble Lord and the rest of the House are proceeding into the unknown, as has been made very clear by the Exeter experiment—

Lord Nugent of Guildford

My Lords, there is the additional point that this improved coach service has taken a good many private cars off the road. The owners now come into London in coaches when they used to come by private car, and that is a considerable gain.

Lord Belstead

My Lords, I am grateful to my noble friend for making that point. That shows that the noble Lord, Lord McIntosh, who, I suspect, has a great deal more expertise than I have in this matter—though how we shall all be in a few months' time when we have been working on this Bill is another matter—has overlooked a point which has been made by my noble friend. He is possibly overlooking the fact that we none of us can be sure about the future. The noble Lord smiles, but the experiment in Exeter produced—which from the noble Lord's speech I do not think he would have predicted—a 100 per cent. increase which was achieved by great enterprise using a different form of service in a well-known provincial cathedral city—

Lord McIntosh of Haringey

My Lords—

Lord Belstead

No, my Lords. I shall not give way again. I am simply saying that the 1980 Act, which was passed five years ago, and which was greeted by a whole list of condemnations which the noble Lord, Lord Harris of High Cross, read out to the House, has proved an overwhelming success and has brought a splendid increase in business to the National Bus Company and to private operators as well.

Lord Teviot

My Lords, I do not want to disturb my noble friend's train of thought, but he talked about the 1980 Act and I should like to remind him that there were some excellent cross-country services which went nowhere near London and which have disappeared. There was one operated by a private operator of great repute in Cambridge. The service was called the Eastlander, and it ran near my noble friend's native Suffolk. There were two spurs, one from Felixstowe and another from Harwich, which went straight through to Cheltenham and connected with everywhere in the country. The National Bus Company has certainly been very successful, but there are many important services which have disappeared because of that Bill.

Lord Belstead

My Lords, if I may reply to that long intervention from my noble friend, he and I have worked together on transport matters for a very long time, as he reminded the House, although perhaps I stopped in the intervening period. The fact of the matter is that the 1980 Act—let us be absolutely clear about it—has, on the overwhelming balance of advantages, been a great success, not necessarily for the operators but for the travelling public. Those are the people whom the Government want to serve and I know that the bus industry wants to serve them as well.

Therefore, the first point that I make is that we believe that competition can give the customer a better service. Secondly, I should like to make the point that this is a Bill which retains a framework of safety controls and provision for social needs which I realise is absolutely essential to the bus industry. This is a Bill which will not mean an end to subsidies for uneconomic services in rural areas, or indeed anywhere else; it will not threaten the continuation of concessionary fares and it will certainly not allow dangerous or unreliable services. Considerable trouble has been taken to write in provisions so far as that is concerned. But we believe it will mean new services and lower fares for passengers and better value for money for ratepayers and taxpayers.

The noble Lord, Lord Shepherd, cited a desk study by six local managers of his at the time, which suggested that there would be major service withdrawals under a deregulated system. It seems to us that the study did not appear to take account of three vital factors: first, the continued existence of local authority subsidy; secondly, the effect of competition on costs; and, thirdly, the effect of competition on patronage. So it was hardly surprising that the study produced the picture that it did.

If the noble Lord will forgive my saying so—because I realise that both he and the National Bus Company are exceedingly forward-looking so far as the future and the question of acting commercially are concerned—this is an example of a point which was put forward by my noble friend Lord Mottistone: it is not always easy for those who have been operating in a wholly regulated system to envisage the opportunities of freedom to operate—

Lord Shepherd

My Lords, the noble Lord is aware of the desk study and he may have seen the maps. I wonder whether between now and Committee stage, taking the supposition that he has made, we could have a discussion as to what could be put into the maps to relieve what I believe will be the disappearance of the services. The noble Lord has made the suggestion that there is a resolve in it. I should like to know what it is.

Lord Belstead

My Lords, let us come to the disappearance of services in just a moment or two. I realise that I have much to learn from the noble Lord, and of course I should be delighted to sit down with him and discuss this aspect.

Perhaps I may turn next to a point made by the noble Lord, Lord McIntosh. In a speech which, if I may say so, I very much enjoyed and which covered a very wide field he suggested as I understood it that regulation is very probably not an ingredient in the cause of decline. I realise that other noble Lords believe this. I would only say that we have reached the point in the fortunes of the bus industry in this country where, if we were to retain the system of road service licensing, we need some justification of what is a very elaborate system confronting a small operator trying to start a service with a lengthy and expensive contest against the lawyers of existing operators. It is a system which, despite the best of intentions, has really gone quite a long way now to fossilising bus transport and preventing gains from efficiency and innovation which are so much needed if the industry is to prosper.

I enjoyed the noble Lord's speech very much but I was a little sad that the noble Lord made it very clear when he talked about the ragbag of companies which would result from the Bill that the Labour Party still cannot abide the idea of smaller businesses being allowed to provide employment and being able to give a service to the general public. Surely our objective has to be to encourage competition so that more operators provide a greater variety of services.

A good deal has been said today about the trial areas, and doubtless we have a good deal still to learn from the experience of them, but what is certain is that deregulation of services in the Hereford area has resulted in more services with lower fares. After all, at the end of the day, that is what matters for the individual customer.

Perhaps I may try to answer some of the individual points which your Lordships have made during this debate. The noble Lord, Lord Carmichael, in his opening speech, suggested that unsafe operations might start up as a result of the bill. The noble Lord, Lord Tordoff, and other noble Lords also referred to the safety aspect in different ways. It is important that I say that the existing law already gives traffic commissioners, as many of your Lordships well know, powers to refuse or revoke a public service vehicle operator's licence or to limit the number of vehicles that an operator can run. In addition an operator's maintenance arrangements must be approved, and buses and coaches have to undergo a special annual bus MOT-type test. But the Bill will add to the existing safety factors.

The traffic commissioners will be able to prevent an operator from running a local service if there is evidence that it has been operated incompetently or unreliably or that the operator has behaved foolishly. We also intend to introduce provisions under which the driver of any vehicle adapted to carry 17 or more passengers will have to have a special driver's licence. Under the Bill all buses, not just public service vehicles as at present, will be subject to spot checks and can be prohibited from further use until defects are put right. I would repeat the undertaking which was given at the beginning of the debate by my noble friend Lord Brabazon that whatever resources are necessary to maintain standards in the future we intend to see that they are made available.

My noble friend Lord Pender, in his speech at the end of the debate, spoke about the theory of comprehensive competitive tendering. If my noble friend will forgive me, as this really arises from the report of the Select Committee to which my right honourable friend's department has not yet replied, I think perhaps that at this stage of the evening at any rate and before the reply is issued it would be better if I did not reply in detail to my noble friend. But I have no doubt that we shall come back to this point again in Committee.

My noble friends Lord Pender and Lord Monk Bretton were both really on the same point in drawing particular attention to the importance of subsidised routes in rural areas. The Government recognise that there will be services which operators cannot run profitably, as has happened in the past, which are vital to those people who count on them. The Bill gives local authorities a clear duty to secure such services by the payment of subsidies.

As to competition with subsidised routes, I think it is fair to point out that where a route is clearly unprofitable it is highly unlikely—is it not?—that someone would come along and compete unsubsidised against the subsidised operator. If there is a profitable time of day on that route or a profitable section of an otherwise subsidised route, then almost certainly someone will be offering that service already as well. In a competitive system, that operator will be not only working with subsidy but, we would hope, will be working more efficiently than he otherwise would have been.

We know that in Herefordshire the Midland Red Bus Company improved its productivity by no less than about 25 per cent. I am saying that in a deregulated system the possibility of a subsidised service contract being undermined by the unforeseen appearance of a competitor is I think going to be rare unless the subsidised route operator is not meeting the needs of passengers.

Nonetheless, my noble friend Lord Monk Bretton, who I know has studied this subject closely, spoke this afternoon of the admirable ESCORT system, as it is called, in his own county of East Sussex. He suggested that in Hereford the county council was able to protect the subsidised services. He asked that a similar protection should be extended in the Bill to all local authorities.

My noble friend is not quite correct about the Herefordshire system. There were no powers of the kind which he attributed for county councils in the trial areas. In Herefordshire and Worcestershire, the county wrote into subsidy contracts a requirement for each operator not to compete against any other operator who was receiving subsidy. Quite apart from the rights and wrongs of doing that, it did not amount to protection. It did not apply to other commercial operators. Indeed, in the first round of tendering for subsidy, it forced the local NBC subsidiary to decide not to compete for tenders at all.

I shall put briefly the other side of the competition in rural areas because I believe very strongly that it has not been as appreciated by some of your Lordships as the Government hoped that it might have been. We know that in the trial areas there has been an improvement in services at less cost to the ratepayers so far as rural areas are concerned. The noble Earl, Lord Attlee, asked about the situation in Herefordshire. The answer is that in the rural areas there was an increase of 2 per cent. since the Hereford trial began. This was at a time when services were being withdrawn on a wide scale in many other parts of the country.

We have heard a great deal today about the loss of cross-subsidy. The trial areas have shown that at any rate some rural services must have been getting precious little benefit from cross-subsidy. I make that assertion because, as my noble friends Lady Carnegy of Lour and Lord Nugent of Guildford said, there really is an opportunity for increased efficiency in a freer system. After all, we have the evidence from the trial areas of the benefits of uneconomic services being put out to tender.

I know that we are talking about only a small area of evidence but it is fair to address ourselves to the fact that Hereford, on its first round of tendering in 1981, made a saving of 38 per cent. on its previous subsidies. There is also the well-known story of Norfolk, where a group of services were put out to tender and obtained for £150,000 instead of the £500,000 originally asked for. I am simply saying that those of your Lordships who have dismissed the effects of being able to reduce costs through the system which this Bill is seeking to introduce are being less than fair in respect of the opportunities that may exist.

In addition to the references to the traditional bus services under the Bill, there is also the whole complex of mini-buses, community buses, school buses, taxis and hire cars which can contribute to a better service. As your Lordships may know, the Government are committed to providing a transitional grant for the first four years of deregulation while the benefits of competition are emerging, in order to get the new pattern of services off to the best possible start. There is also to be a £1 million innovation grant for the development commission to encourage new types of rural services, with similar arrangements to be made for Scotland and Wales through the Scottish and Welsh Offices.

Lord Sandford

My Lords, may I interrupt my noble friend before he leaves the issue of cross-subsidy? The department must have done some studies as to the effectiveness of cross-subsidy and what it has achieved. Plymouth has carried out studies which indicate that if cross-subsidy is eliminated, or phased out, another £392,000 will have to be found from the rates. Therefore it is possible to do these studies. I asked my noble friend to tell us what studies the Government have done, and I should like to have an answer so that we can look at them before the Committee stage.

Lord Belstead

My Lord, I will see what I can find, and I cannot give my noble friend a better answer than that this evening. However, if I may say so, my noble friend has gone down precisely the route which two minutes ago I begged him not to go down. My noble friend simply says that a local authority—a great local authority, Plymouth—has simply said that under a new system it will need more money. So far as I know it has not gone deeply into the saving of costs. That does not reflect on Plymouth because nobody knows about the saving of costs until one turns to the operators themselves to find out what they can save.

What we do know—and I accept that it is on very slim evidence—is that in the two pieces of evidence which I have given to your Lordships this evening, in regard to Hereford and Norfolk, there were very considerable savings in costs. It is that factor to which my noble friend is not addressing himself. Indeed, if my noble friend will forgive me for saying so, he does not like the whole idea of the Bill.

My noble friend Lord Sandford asked one direct question. Why, he said, do the Government not just rely on rate capping in order to reduce subsidy? That expresses a basic misunderstanding of the Bill. The Government have consistently said that the Bill is not attempting to control or reduce levels of local authority subsidy. It will tackle the underlying problems of the industry to tap the potential for increased patronage and thus ensure subsidy is spent where it is really needed. In some areas authorities may, as a result, choose to spend less on public transport, as was the case in Herefordshire where a slightly higher rural mileage is being run for less cost. Other authorities may choose to maintain expenditure and provide more services with it. But where expenditure is at reasonable levels in the shire counties the Government certainly have no quarrel with that.

I shall just say a brief word, as quickly as I can in literally just a couple of sentences, about concessionary fares. I believe that the Bill provides a firm basis for the continuation of travel concession schemes for the elderly, the disabled and children. Indeed, Clauses 89 to 92—to answer the question put by the noble Baroness, Lady Fisher, who wanted some guarantee—give local authorities new powers to secure the participation of operators in concessionary fares schemes.

As regards disabled passengers, we listened to my noble friend Lord Zouche with great attention. He very fairly recorded the commitment which the Government have already given in another place for disabled passengers. Incidentally, in addition to what my noble friend said, the Bill has already been amended to require the transport commissioner to have regard to the interests of the elderly and disabled when determining traffic regulation conditions. However, there were other points mentioned by my noble friend Lord Zouche and I am sure that we shall be coming back to them in Committee.

The right reverend Prelate the Bishop of Durham said that the Bill will damage poor people. It is a central feature of the policy which we are putting before your Lordships in this Bill that what we seek to achieve is a system of transport in which public funds are directed towards real social needs. One of the greatest criticisms of the present arrangements is that local authorities who provide the funds do not know precisely on what the money is being spent.

It is never clear in a cross-subsidised system, as my noble friend Lady Carnegy made very plain in her speech, exactly who is gaining at the expense of whom. It seems more likely that it has possibly been poorer passengers on busy routes who have paid more in fares than they might have done to keep other less used services going perhaps in just those areas where car ownership is relatively high. I would only say at this stage of the Bill that surely with a more flexible approach and more competitive spirit better services could be provided for the same amount of expenditure.

I was particularly interested in the point made by my noble friend Lord Peyton about the London taxi trade. I agree with him that it provides an excellent service, equalled in few, if any, other places in the world. I would just remind your Lordships that the London taxi trade, though it is subject to stringent quality control, has no limitation made on entry. In other words, there is no quantity control. We believe that a bus industry subject to quality control but with no barriers to entry will be able, like the taxi trade in London, to provide the travelling public with an excellent service, the envy of the world.

The noble Earl, Lord Attlee, asked me a direct question about the licensing of private hire cars in the Greater London area. There are no provisions contained in this Bill that will introduce any form of licensing of private hire in London. However, as I think he knows, we have undertaken completely to review all taxi and hire car legislation once the Bill is out of the way, and that matter will of course form part of that review.

I think that both the noble Lords, Lord Carmichael and Lord Tordoff, suggested that the arrangements in the Bill for transition are inadequate because there will be too much pressure on time. The proposals in Schedule 5 for transition are designed specifically both to ease in competition by relaxing licensing for a period before deregulation and to give as much information as possible to local authorities for their task in organising tendering for subsidy contracts. If there are ways within the timescale provided in the Bill of improving Schedule 5 to give authorities better information at an earlier stage, we shall be most willing to look at that again.

My noble friend Lord Teviot and the right reverend Prelate the Bishop of Durham made similar points about small operators. But the Bill is not about creating or preserving the smallest operator, as I think the right reverend Prelate suggested; nor is it designed to help the under-dog, as my noble friend suggested. The point about competition in the Bill is to improve services to the customer. If a larger operator can do that best, not because of his historic advantages but because he is more efficient or more imaginative, good luck to him. It is the customer in the end who is going to benefit.

Perhaps I may penultimately come to an important point which predictably was mentioned, but only mentioned, by the noble Lord, Lord Shepherd, and spoken to also by the noble Earl, Lord Attlee. It is the position of NBC and local authority staff and pensions. So far as local authority and PTE staff are concerned, the position is that accrued pension rights earned up to the time of transfer will be protected by existing legislation. In the case of NBC staff there are several possibilities for the future of pensions. As the noble Lord, Lord Shepherd, well knows, the main concern in debates in another place has focused on the arrangements which will be made if it was decided to close existing pension schemes. My right honourable friend the Secretary of State gave a clear assurance that the Government would ensure that those schemes were adequately funded at the time of privatisation to the satisfaction of the Government and trustees so that the assets were sufficient to meet the accrued liabilities. This evening I cannot go further than that, and of course I quite appreciate that the noble Lord, Lord Shepherd, will be wishing to return to this matter, which is very much one of concern to him.

Finally, let me say just a word about Scotland. My noble friend Lady Carnegy asked me a direct question as to whether the commissioner as registration authority was going to be able to respond quickly enough when the registrations were sent so that the local authorities would know what the registrations were. Indeed, my noble friend Lady Elliot asked the same question. We are confident that a system can be devised which will achieve that. Work on it is already in hand. My noble friend Lady Carnegy asked me whether the Secretary of State wil consult local authority associations before making regulations to do with registration. The answer to that is most certainly, yes.

Both my noble friends the noble Baronesses asked me about school transport so far as it is affected by this Bill. As my noble friends know, education authorities in Scotland, the regional and islands councils, have a duty to make educational provision for children in their areas; and, in order to discharge this duty for pupils who do not live within walking distance of school, they may provide home-to-school transport.

Both my noble friends outlined the way it happens in Scotland. It is not envisaged that the Bill will alter the way it happens. The use of public transport to take pupils to and from school will be a matter for cooperation between the education authority on the one hand and the transport authority on the other. I hope my noble friend Lady Elliot of Harwood will be pleased to hear, however, that the difference between what has been going on so far and what is provided for under the Bill is that there will now be a duty on these authorities to co-operate with one another so as to achieve value for money in carrying out their functions. I am therefore very glad that both my noble friends raised this particular point.

I know I have not answered all the questions. It is not entirely my fault. There have been one or two interruptions, about which I make no complaint, because there will be much across-the-Chamber debate before we are through with this Bill. However, I suggest to your Lordships that this Bill is a positive Bill. It is not a Bill which is content merely to manage a continuing decline in public transport. If I may say so to your Lordships, it is not a Bill about cutting. It is a great pleasure to be able to stand up and say that. We believe that there really are good prospects for local bus services, provided operators are free to put their energies as much into seeking new customers as into serving the existing ones.

At the beginning of this debate, my noble friend mentioned the new NBC mini-bus services in Exeter. I just say again, look what happened there. There was a doubling in patronage. I wonder who really would have thought that such latent demand could have been so readily tackled. Just think what that result could mean for bus services in the rest of the country, provided operators are encouraged by removal of the barrier of regulation. Thus at a difficult time for the bus industry, we believe it is competition 'which will open up this market for the benefit of passengers. That is why it is competition which is the guiding principle of this Bill.

On Question, Bill read a second time, and committed to a Committee of the Whole House.