London Regional Transport (Amendment) Bill

HL Deb 04 March 1985 vol 460 cc1122-31

4.49 p.m.

Second Reading debate resumed.

Lord Carmichael of Kelvingrove

My Lords, until the repetition of the sad Statement which we have just heard we were discussing the London Regional Transport (Amendment) Bill. It has been said by a number of noble Lords that the Bill has been made necessary because of the wrong directions given by the Secretary of State following the passage of the London Regional Transport Act 1984. The Act received Royal Assent on 26th June, and on 29th June, only three days later, the Secretary of State directed the GLC to pay London Transport £281.3 million. The GLC took the Secretary of State to court on this direction and Mr. Justice McNeill gave a judgment in January of this year which incorporated what must surely be one of the most severe reprimands any Secretary of State has ever received from the High Court. I will refrain from reading the actual words but they are extremely sharp and extremely to the point.

Most noble Lords have spoken about the retrospective nature of this legislation and I certainly agree with the noble Lord, Lord Diamond, when he says that there is no doubt that it is retrospective legislation and that we should say so. I know that all of us in the whole Palace of Westminster look on retrospective legislation with great suspicion. It is an offence to parliamentary democracy and should never be considered except in most special circumstances. I am sure that in this House there must be many noble and learned Lords who will be aware of the previous uses of retrospective legislation and of the instances where it is acceptable to Parliament as a whole. This is usually because the law, as it stood, perhaps had been quite happily interpreted and generally accepted for many years before a deeper examination of the wording revealed a flaw.

I remember, as a Member of a Committee many years ago, being told by the then Minister—who is now ennobled and sits in your Lordships' House—of an example (which, I think, fills the bill very well) of the type of retrospective legislation that I am thinking of. I understand—and I am relying on my memory, so I may recall incorrectly one or two of the titles—that the Wireless Telegraph Act under which the old ten shillings radio licence was paid came into the category of an Act which, although it had been working apparently well for over 20 years, was suddenly discovered to be flawed. A Bill was brought before Parliament to clear up this mistake. I understand that it met with general approval because the alternative, had there not been an amendment, would have been that the Post Office would have been required to pay hack ten shillings a year to all who could prove that they had paid their ten shillings over the previous 20 years. This was a very reasonable example where Parliament as a whole accepted that there had been a genuine mistake so that people had been paying the ten shillings believing that it was reasonable to do so.

But this is not the case with the Bill. The legislation which it seeks to bring in is not retrospective in form, as was the Act to which I referred. But it is retrospective in effect. With this amendment Bill, we are not tidying up some drafting error discovered by the courts; we are being asked retrospectively to make lawful what were unlawful administrative actions taken by the Secretary of State. Mr. Justice NcNeill found against the Secretary of State primarily on grounds of the Secretary of State's exercise of the law; first, in getting his facts wrong; secondly, in failing to take account of all the relevant facts; and, thirdly, in failing to consult the GLC.

The Secretary of State was not found against on the grounds of his interpretation of Section 49 of the London Regional Transport Act. The original intention of Section 49 of the LRT Act could still meet what was assumed during all the stages in another place to be the intention of the Secretary of State: that is, to provide London Regional Transport's operating needs in 1984–85. Both the Secretary of State and the Minister of State said frequently that no surplus in 1984–85 was intended to be produced by the Act. The Secretary of State could still issue a new, and this time lawful, direction after consultation with the GLC and provide (under the existing law and without the necessity of this amendment Bill) for London Regional Transport's operating needs in 1984–85. This would not harm the travelling public and would be in the best interests of the ratepayers.

But this is not enough for the Secretary of State. He wants to go well beyond the promises that he made many times in another place. He has so drafted the amendment Bill that he will be deliberately creating a surplus for London Regional Transport at the expense of the ratepayers of London. What is in dispute is a sum of about £50 million which, it is contended, is more than the operating needs of London Transport. One of the reasons why the ratepayers of London will then be defrauded, if this Bill is accepted and if there is actually a surplus, is that if there was a surplus carried forward by London Regional Transport it would mean that they would have £50 million of London ratepayers' money to offset costs and charges next year; whereas, if they merely had enough to carry them through this year with their operating costs and they had to raise £50 million next year, they would get under the Act only two-thirds of that from the GLC. Therefore the ratepayers of London will be that two-thirds (that is, about £16 million to £17 million) out of pocket if this £50 million is actually going to be a surplus.

The Secretary of State claims that the £50 million extra for which he is asking is made up of a number of elements which he believes he is quite entitled to ask the GLC to provide. For example, he deducts £20.8 million for the leasing reserves on buses. This has been dealt with by a number of noble Lords, including my noble friend Lord McIntosh of Haringey and the noble Lord, Lord Diamond, who is extremely well qualified to deal with this type of subject. It should be noted I think (and it was said frequently in another place) that on the question of leasing the Department of Transport urged and encouraged the Greater London Council to lease buses in 1983–84. So this is not something which some fancy accountants at London Transport themselves got up to; it was suggested and encouraged by the Department of Transport.

In any case, surely, in terms of the London Regional Transport operating needs in 1984–85, there is no need to establish a leasing reserve such as this. I understand that the leasing will not be fully realised until 1996; so that we are really jumping more than 10 years ahead with the reserves that have been put aside for leasing—which, surely, is well outwith the range of expenses and costs of running London Transport in 1984–85. The Secretary of State has also claimed that £30 million is needed to meet London Transport's accrued liabilities and that these include a provision of £21 million for future redundancy payments. Again, this could not be considered part of the needs for the year 1984–85, although in fact, one of the problems is that we have not been able to get any figures from the Secretary of State or from the Department of Transport as to what the redundancy level is likely to be and what costs will be involved in the redundancies.

There is no doubt that this sum of £50 million which is involved goes beyond what could be lawfully directed by the Secretary of State under the Act as currenty drafted. The actions of the Secretary of State and his statements during the debates in another place make it clear that London Regional Transport—and many of us were afraid of this during the passing of the principal Bill—is no longer accountable to any elected body. That is irrespective of whether London Regional Transport is doing a better job than the previous set-up—and I do not make any comment one way or the other. All I am saying is that there is no accountability now for London Transport. It was said, I think very cruelly, during one of the debates in the other place that had a measure such as this been brought before the GLC, there would have been open debate, all the figures would have been published in advance, the press would have been there, the Opposition would have access to all the figures and been able to discuss them fully, and of course all the arguments would have been available to the general public.

At present we do not know anything about the detailed calculations on which the leasing reserve is based. We do not know the full details of the redundancy and other sums that the Secretary of State referred to in another place. We do not even know whether it will be possible to have audited accounts and that the GLC will get money back, if all their subvention is not used in the year, as has always happened before. What happened before was that, although the GLC perhaps budgeted so much for London Transport, London Transport only got what they actually required, whether it was under the budget or, in some cases, over the budget.

The Bill is a poor reflection on the Government, and particularly on the Secretary of State. I agree wholeheartedly with the noble Lord, Lord Diamond, when he says that, irrespective of the statements that have been made about it being a Money Bill, it comes before us and we have to make some comment on it. The obvious comment we must make is that the Bill is retrospective. I agree with all those who have said that, it being retrospective, we should say quite clearly that it is.

5.2 p.m.

Lord Brabazon of Tara

My Lords, we have had a thorough and perceptive debate on the issues raised by this legislation. I have listened carefully to the contributions which have been made, and I shall try to respond on as many points as I can. But before I do, I should just like to stress once again the main points of principle which lie behind this Bill.

I set aside the point about the £10.2 million paid by the GLC to LRT before 29th June and the £12.9 million reduction in the GLC's Money Act, because these sums are no longer at issue. As I explained in my opening speech, we have conceded this money to the GLC, and LRT will have to absorb the consequent loss of grant. The sums at issue are the £20.8 million leasing reserve and the expected £30 million cash surplus for 1984–85; some £50 million in all. The principle at issue is whether the GLC should be required to fund LRT's liabilities and leasing commitments for 1984–85 or whether any money which is surplus to LRT's strict cash requirements for the year should be refunded to the GLC.

Let us consider first the cash surplus of £30 million. This extra money has been generated by LRT since 29th June, when the GLC lost control. In part, it is extra money paid by passengers, attributable to increased tourism and buoyant sales of Travelcards. Seen from another angle, it is grant which ratepayers have contributed for 1984–85 through the GLC's precept, with a contribution from taxpayers in the form of transport supplementary grant. Either way, it is certainly not the GLC's money.

The question is: should the GLC retain the money which it has raised from ratepayers to spend as it wishes, or should it pay the money to LRT? If the money is paid to LRT, as required under this Bill, it will be set against the liabilities which LRT has accrued and which would otherwise fall as costs on passengers and ratepayers in future years. I said in my opening speech, and I shall repeat now, that there is no question of the Exchequer benefiting in any way at the expense of ratepayers or passengers.

The GLC may nevertheless object to the principle of providing for liabilities. There are three things to be said about that. First, we are not dealing with a normal year, in which the GLC could adjust its grant payments to London Transport as between one year and the next, and might choose not to make provision for liabilities until they actually fell due for payment. We are dealing with a situation in which responsibility for financing LRT is being transferred from the GLC to the Government; and it is right, and in the interests of passengers and ratepayers, that there should be a fair settling of accounts at the end of this financial year.

The second point is that it is normal commercial accounting practice to make provision for liabilities. LRT themselves have done so in previous years. The third point is that a substantial part of the liabilities—£21 million—is for voluntary redundancy payments, which arise as a direct result of the efforts of LRT's management to bring forward cost savings. I ask your Lordships: would it be reasonable for the GLC to receive a rebate of grant payments, partly because LRT have made cost savings, and yet not be held responsible for any part of the transitional costs which flow with those savings? I put it to your Lordships that that would be quite unreasonable.

I now turn to the question of the leasing reserve. As I have said, the GLC habitually financed London Transport's capital programme by means of grant. This year, uniquely, the GLC decided that a substantial proportion of the capital programme should be financed by leasing. The £27 million worth of assets which were leased are principally new buses; they are an important, indeed essential part of LRT's capital investment requirements for this year. Instead of paying for these buses with grant, as it was accustomed to do, the GLC attempted to frustrate the system of controls on its overall capital programme by deciding upon leasing after its capital allocation had been fixed on the assumption that LT's capital programme would he grant-funded. Indeed, the GLC sought to evade paying for this part of the capital programme altogether, since the whole cost of the leasing deals—apart from the first year's payment—would be landed on LRT, after the GLC had lost responsibility for it.

Lord Diamond

My Lords, would the noble Lord give way? Is he suggesting to the House that, because the GLC has acted in a way which he or the Government do not like, that justifies the Government bringing in retrospective legislation?

Lord Brabazon of Tara

My Lords, I shall come to the question of retrospective legislation in a moment, but I am just suggesting that it is odd that the GLC, in their last year, should suddenly do something which they had not done before and should try to get round the capital programme which they had had imposed upon them.

Lord Carmichael of Kelvingrove

My Lords, may I ask the Minister whether he can confirm or deny that the Department of Transport actually urged the GLC in 1983–84 to start leasing buses? Perhaps the noble Lord would write to me.

Lord Brabazon of Tara

My Lords, I may have to write to the noble Lord on that point. My understanding is that they did in 1983–84, but that in 1984–85 they made it very clear that the GLC should not go outside its capital budget. However, I shall write to the noble Lord.

The Government quite reasonably take the view that the GLC should not be allowed to evade its normal responsibilities and saddle LRT with debts in this way. Ministers have made this clear all along. They said in terms that the GLC would be expected to cover the cost of the leasing commitments when what is now Section 49 of the LRT Act was being considered in another place. Subsequently, the courts ruled that the direction made under Section 49 should not have included the leasing reserve. It is clear that the Act, as interpreted by the courts, did not properly reflect the Government's intentions, as expressed to Parliament. But that in no way affects the argument about whether it is right in principle that the GLC should cover the leasing commitments. The amount provided in this Bill for setting up a reserve to help pay for the leases is no more than Ministers have given notice all along that they would expect the GLC to provide. So there is nothing unexpected in the requirement.

The noble Lord, Lord McIntosh, asked why the Bill was necessary at all, instead of our making a legal demand. I made clear in my opening speech that the courts took a different view of the way in which the powers of Section 49 should be exercised than that which the Government intended when they brought the legislation before Parliament in the first place and explained it to Parliament. I have explained the arguments as to why the leasing reserve and the cash surplus are needed by LRT, and why the demand on the GLC is reasonable. The noble Lord was wrong to suggest that there is a dilemma about the Bill. There is no dilemma. It is clearly right that the GLC should not leave LRT with unfunded liabilities—

Lord McIntosh of Haringey

My Lords, since the noble Lord has referred to the judgment, I wonder whether he will confirm or deny that Mr. Justice McNeill said specifically, in so many words, that the department's officials seemed more concerned with creating a surplus in 1984–85 to be carried forward, to enable much smaller revenue to be required in 1985–86, than with a careful appraisal of all the relevant facts. Does that not give the lie to the Minister's claim that this is a matter of providing for liabilities?

Lord Brabazon of Tara

My Lords, I do not see how the noble Lord can argue that, if the GLC makes a surplus of £30 million on the one hand and has liabilities of £37 million on the other, it is not going to be £7 million worse off. However, various noble Lords have argued that the Bill effectively taxes ratepayers, because any cash surplus carried forward to 1985–86 will go to reduce the Exchequer contribution for 1985–86 under the one-third/two-thirds split, as specified in the Act. As I have said, there is really no substance in the claim that this Bill effectively taxes ratepayers to the benefit of the Exchequer. First, we did not simply fix the Exchequer contribution to LRT's grant for 1985–86 at one-third of the total. The Exchequer contribution was fixed at £111 million, which is more than one-third of the total grants of £323 million. The Exchequer contribution was derived using the same principles as are applied to the calculation of Exchequer grant towards the cost of local authority services generally on the basis of LRT's projected public support requirement for 1985–86. It was set at the maximum level that would be fair to ratepayers in London and elsewhere, since the amount of Exchequer grant set aside for LRT affected the amount available for distribution to local authorities in London and elsewhere.

There is therefore no question of the Exchequer contribution having been reduced on account of any cash surplus which LRT may have for 1984–85. On the contrary, the Exchequer contribution is £35 million higher than it was in 1984–85 on a pro rata apportionment of the grants which the GLC received. If there were insufficient funds available to meet LRT's cash requirement and liabilities for 1984–85, there could be no question of increasing the Exchequer contribution for 1985–86. Any additional costs would fall on passengers or ratepayers in future years, though the ratepayers' contribution for next year has now, of course, been fixed. So the fact that refunds will be available under this Bill to meet LRT's liabilities is wholly to the benefit of ratepayers and passengers. Furthermore, we should not just look at this question purely from the ratepayers' point of view. The additional cash which LRT has managed to generate has come largely from passengers, through increased sales of Travelcards and the 6th January fares increase. It is therefore right that passengers as well as ratepayers should benefit, and that is exactly what will happen, as I explained.

I now turn to the matter of retrospection, which was raised by all noble Lords but particularly by the noble Lords, Lord Diamond and Lord Tordoff, who claimed that because the Bill covered the whole of 1984–85 it was retrospective. It could equally be said that the original Section 49 direction, and indeed Section 49 of the London Regional Transport Act, were retrospective because they were brought in part-way through 1984–85, at the end of June, to deal with the financing of LRT for the whole of the financial year, starting on 1st April. This Bill in no way makes it lawful with retrospective effect to require the GLC to pay a certain amount of grant to LRT. It introduces a demand now, but that demand is consistent with what the GLC has been on notice all along that it might be expected to provide. This Bill will make no unforeseen demands on the GLC, nor does it seek to make lawful the original Section 49 direction which has been quashed by the courts.

In fact, the GLC's liability under this Bill will be £23 million less than it was under the original Section 49 direction. It is true that the courts ruled that Section 49 did not cover future liabilities in respect of leasing. As I have explained, the question of liabilities is the principal respect in which the court's interpretation of the statute differed from the Government's express intentions, and that is why new legislation is needed to clarify the law. But the GLC has had the clearest possible warning of the Government's intentions since before Section 49 was enacted, and the Bill now before us imposes no new liability which the GLC has not been given to expect. It will provide for the establishment of a reserve of £20.8 million towards the cost of the leases, which is the same figure as the GLC was led to expect at the outset.

In summing up, I acknowledge that this Bill has had controversial aspects. I said at the end of my opening speech, and I reaffirm now, that the Government did not lightly bring this legislation before Parliament. It was brought forward to ensure that the financial arrangements between the GLC and LRT for this financial year were settled, and settled satisfactorily, from the point of view of passengers and ratepayers. I hope that what I have said today will have convinced your Lordships that this Bill is indeed necessary and that it seeks to secure a reasonable outcome for all the parties affected. I therefore hope that we can put the controversy behind us. I ask for your Lordships' agreement that the Bill be now read a second time, and I urge your Lordships to reject the amendment standing in the name of the noble Lord, Lord Tordoff.

5.16 p.m.

Lord Tordoff

My Lords, I shall be very brief, but I should just like to deal with one point which was raised by the noble Lord, Lord Boyd-Carpenter, since he suggested that I have in some way acted improperly in putting down this amendment to a Money Bill. Were it that this amendment detailed some item within the Bill, were it to attempt to change the sums in the Bill or to alter it in any other way, then I would understand what he has said. Were I to put down an amendment at Committee stage, which any noble Lord would be entitled to do because a reading of the Companion shows that it is within the power of this House to move an amendment—indeed, amendments have been moved to Money Bills in the past and have, on very limited occasions, been accepted in another place—I would also understand. But that is not the point.

The point is that we have a choice here of allowing this Money Bill to go through on the nod, as it were, having had an interesting Second Reading debate, or we have the important duty, as my noble friend Lord Diamond said, of demonstrating not only to this Government but to future Governments that this House does not like retrospective legislation. It seems to me that that principle is by far the more important one, and therefore I feel no sense of impropriety in putting down this amendment. I only—

Lord Boyd-Carpenter

My Lords, will the noble Lord allow me to intervene?

Lord Tordoff

No, my Lords. I am sorry—

Lord Boyd-Carpenter

My Lords, the noble Lord referred to me. If the noble Lord has not the guts to give way—

Lord Tordoff

My Lords, I am replying to something that the noble Lord said, and I would rather get this over with now.

Lord Boyd-Carpenter

I am sorry, my Lords, but the noble Lord has referred to me. He has not the guts—

Lord Tordoff

My Lords, that is perhaps an unfortunate phrase. May I deal with the situation referred to by the noble Lord the Minister in relation to the new Bill? As I said earlier, what the new Bill does is retrospectively to remove a section from an Act that was brought into this House less than a year ago and to replace it by a single sum. That, to me, is a retrospective piece of legislation. I believe that noble Lords on all sides would wish to regret that. That is why I put down the amendment, and I ask for your Lordships' support.

5.18 p.m.

On Question, Whether the amendment to the Motion for Second Reading shall be agreed to?

Their Lordships divided: Contents, 91; Not-Contents, 110.

DIVISION NO. 1
CONTENTS
Allen of Abbeydale, L.	John-Mackie, L.
Amherst, E.	Kilmarnock, L. [Teller.]
Ardwick, L.	Kirkwood, L.
Attlee, E.	Leatherland, L.
Aylestone, L.	Llwelyn-Davies of Hastoe, B.
Banks, L.	Lloyd of Kilgerran, L.
Barnett, L.	Longford, E.
Beaumont of Whitley, L.	McIntosh of Haringey, L.
Bernstein, L.	McNair, L.
Beswick, L.	Mais, L.
Birk, B.	Mayhew, L.
Blease, L.	Melchett, L.
Bottomley, L.	Meston, L.
Brockway, L.	Mishcon, L.
Brooks of Tremorfa, L.	Molloy, L.
Burton of Coventry, B.	Molson, L.
Carmichael of Kelvingrove, L.	Morris of Kenwood, L.
Cledwyn of Penrhos, L.	Mulley, L.
David, B.	Murray of Epping Forest, L.
Davies of Leek, L.	Northfield, L.
Delacourt-Smith of Alteryn, B.	Ogmore, L.
	Oram, L.
Denington, B.	Phillips, B.
Diamond, L.	Ponsonby of Shulbrede, L.
Elwyn-Jones, L.	Raglan, L.
Ennals, L.	Rathcreedan, L.
Evans of Claughton, L.	Ritchie of Dundee, L.
Falkender, B.	Seear, B.
Falkland, V.	Serota, B.
Fisher of Rednal, B.	Shepherd, L.
Foot, L.	Shinwell, L.
Gaitskell, B.	Simon, V.
Gallacher, L.	Stallard, L.
Gladwyn, L.	Stedman, B.
Graham of Edmonton, L.	Stewart of Fulham, L.
Grey, E.	Stoddart of Swindon, L.
Grimond, L.	Stone, L.
Hampton, L.	Strabolgi, L.
Hanworth, V.	Taylor of Blackburn, L.
Harris of Greenwich, L.	Taylor of Gryfe, L.
Hayter, L.	Tordoff, L. [Teller.]
Heycock, L.	Wallace of Coslany, L.
Houghton of Sowerby, L.	Wedderburn of Charlton, L.
Irving of Dartford, L.	Willis, L.
Jacques, L.	Wilson of Langside, L.
Jeger, B.	Wilson of Rievaulx, L.

NOT-CONTENTS
Ailesbury, M.	Buckinghamshire, E.
Airey of Abingdon, B.	Caithness, E.
Alexander of Tunis, E.	Cameron of Lochbroom, L.
Allerton, L.	Campbell of Alloway, L.
Atholl, D.	Campbell of Croy, L.
Auckland, L.	Carnegy of Lour, B.
Avon, E.	Cathcart, E.
Bauer, L.	Chelwood, L.
Belhaven and Stenton, L.	Coleraine, L.
Beloff, L.	Colwyn, L.
Belstead, L.	Constantine of Stanmore, L.
Bessborough, E.	Craigavon, V.
Blake, L.	Cross, V.
Boyd-Carpenter, L.	Cullen of Ashbourne, L.
Brabazon of Tara, L.	Davidson, V.
Bruce-Gardyne, L.	De Freyne, L.

Denham, L. [Teller.]	Mersey, V.
Dilhorne, V.	Middleton, L.
Ellenborough, L.	Mottistone, L.
Elliot of Harwood, B.	Norfolk, D.
Elton, L.	Nugent of Guildford, L.
Faithfull, B.	Onslow, E.
Fortescue, E.	Orkney, E.
Fraser of Kilmorack, L.	Orr-Ewing, L.
Gainford, L.	Pender, L.
Glanusk, L.	Penrhyn, L.
Glenarthur, L.	Peyton of Yeovil, L.
Gowrie, E.	Quinton, L.
Gray, L.	Rankeillour, L.
Gridley, L.	Reigate, L.
Hailsham of Saint Marylebone, L.	Renton, L.
	Rodney, L.
Halsbury, E.	Runciman of Doxford, V.
Hampden, V.	St. Davids, V.
Home of the Hirsel, L.	Sandford, L.
Hornsby-Smith, B.	Seebohm, L.
Hylton-Foster, B.	Skelmersdale, L.
Iddlesleigh, E.	Soames, L.
Kaberry of Adel, L.	Somers, L.
Kilmany, L.	Stamp, L.
Kimberley, E.	Strathspey, L.
Kinloss, Ly.	Sudeley, L.
Kinnaird, L.	Swinton, E. [Teller.]
Kitchener, E.	Terrington, L.
Lane-Fox, B.	Teviot, L.
Lauderdale, E.	Thomas of Swynnerton, L.
Lawrence, L.	Thorneycroft, L.
Long, V.	Trefgarne, L.
Lucas of Chilworth, L.	Trumpington, B.
Lyell, L.	Vickers, B.
McAlpine of Moffat, L.	Vivian, L.
McAlpine of West Green, L.	Ward of Witley, V.
Mancroft, L.	Westbury, L.
Margadale, L.	Whitelaw, V.
Marley, L.	Wilberforce, L.
Marsh, L.

Resolved in the negative, and amendment disagreed to accordingly.

5.27 p.m.

On Question, Bill read a second time; Committee negatived.