§ Mr. Ellisasked the Minister of Transport if he is aware of the financial and other problems facing the National Bus Company; if these will be taken into account in settling the financial target; and if he will make a statement.
§ Mr. MulleyYes. The transfer of the bus assets of the Transport Holding Company to the National Bus Company under the Transport Act, 1968, ended the arrangements under which part of the bus industry's profits were paid to the Government under Section 29 of the Transport Act, 1962. Thus, with effect from 1st January, 1969, any net surplus after payment of interest and taxation earned by the National Bus Company will be used wholly for the benefit of the undertaking.
Against this background, given the terms of its financial duty under Section 41 and Section 27 of the Transport Act 1968 to break even taking one year with another, and given that its capital requirements for bus operations are unlikely 84W to fluctuate markedly, the National Bus Company should be self-supporting on both capital and revenue account. I have therefore agreed that the company should, after providing out of revenue for all charges properly chargeable to revenue account including payment of interest charges on its capital, aim at producing sufficient revenue surpluses to enable it to replace its assets without recourse to new borrowings. Separate arrangements will be made to allow the company to make any further approved acquisitions of other undertakings or for major developments of other activities, for example, the new bus factory in West Cumberland.
To comply with these requirements, in quantified terms the target will be to earn an average surplus of £8 million a year in 1970 and 1971 after providing for depreciation on a historic cost basis but before interest and taxation and before Providing for the difference between depreciation charged on the historic cost basis and the current cost of replacing its assets. Interest charges will absorb rather more than half this surplus and the other two items are likely to absorb the rest. In other circumstances I should therefore have considered a higher surplus as desirable. However I have decided not to press for this in view of the increased costs and other adverse factors which the bus operating companies are likely to have to face. And I have made specific allowance for the estimated losses of £0.6 million in 1970 and £0.5 million in 1971 of the subsidiary company to which the London country bus and Green Line services have been transferred and the losses on the bus services introduced in replacement of closed railway services for which N.B.C. companies will be financially responsible.
Before setting targets for subsequent periods I shall review the position in the light of experience, including progress on eliminating the losses on the London country services.