Local Transport Bill [HL]

I am grateful to noble Lords who have contributed to the debate, and I will try to deal particularly with the points made by the noble Lord, Lord Snape. It is rare indeed for us to hear any words in favour of what has become known as the ““only practicable way”” test. One must concede that at the outset. The noble Lord, Lord Hanningfield, was right to remind us that, as yet, no one has gone down the quality contracts route. One of the main objectives of the Government’s policy document, Putting Passengers First, onwards has been to replace the ““only practicable way”” test with something that is more suitable yet still sufficiently exacting to ensure that quality contracts schemes are not made unadvisedly or without regard to the cost or the consequences. The noble Lord, Lord Snape, is right to pick up on some of those consequences. It is certainly right to understand them, and obviously we have endeavoured to do so. I assume from what the noble Lord, Lord Hanningfield, said that the main purpose and drift of his amendment is in essence to preserve the status quo—I think that that is where he is coming from—where quality contracts schemes are a theoretical possibility but bus operators are pretty confident that they will never be used. The noble Lord, Lord Snape, reminded me that when, back in 2000, Ministers described quality contracts schemes as a last resort, they assumed that they would be an option that could be resorted to in the right circumstances. We have moved on from that experience, and the experience of the past few years suggests that even that may have been a touch overoptimistic. For various reasons, even the local transport authorities that are convinced that only a quality contracts scheme can deliver the improvements in bus services that the public rightly demand are daunted by the task of proving that there is absolutely no other practicable way of making those improvements. Probably, on reflection, the ““only practicable way”” test is somewhat odd in other ways. In theory at least a local transport authority could develop a policy that by its very nature could be implemented only through a quality contracts scheme. A uniform fare structure across the whole area of the authority might be an example. That could never be achieved in a deregulated market or even under a quality partnership scheme. Perhaps it is worth noting that only maximum fares and not the actual fare could be specified under the amendments proposed in Clause 12—at least not without blatant breach of competition legislation. So, on the face of things, the ““only practicable way”” test could be passed by an authority whose public interest case did not have much merit. Rather than relying on that test, Clause 18 will substitute a series of positive criteria that a proposed scheme will have to satisfy, and against which it can be measured when a decision is needed on whether to keep it in force. Without these criteria, against which an independent approvals board can check and evaluate a scheme, much else in this part of the Bill would not work as intended. The additional requirements on consultation and affordability in Clause 19, which we shall come to shortly, would make the whole procedure even more daunting than it is at present. I come close to agreeing with the noble Lord, Lord Snape, in his assertion that we see this very much as an approach of last resort. There may be occasions when it is deemed a sensible approach when all else has failed and when a quality contract—a quality partnership—clearly is not delivering the goods. We need to increase bus patronage and usage. If that is not happening in a particular area, the provisions set out in Clause 18 on quality contracts schemes would be the right approach. I know that there is some enthusiasm for that approach, and understandably so. The noble Lord, Lord Snape, asked about consultation with operator shareholders. I understand where the noble Lord is coming from. We have had several consultations with bus companies, which have been very responsive in telling us exactly what they thought. It is only fair to say that bus companies and their shareholders’ interests will be very much aligned. The noble Lord also asked me about compensation, which has been raised forcefully by bus operators in response to consultation on the draft Bill. In the end we cannot accept their arguments. A quality contracts scheme will not deprive operators of their assets—primarily the buses themselves. Of course, they would be free to deploy them elsewhere on a network that they operate if they do not wish to tender for quality contracts, or fail to win any tenders. Of course, the buses themselves will retain a substantial value if the companies ultimately had to dispose of assets. The same applies to land holdings and depots, which might become surplus to an operator’s requirements. The provisions in Clause 18 mean that a local transport authority would need to satisfy fairly exacting criteria to get a scheme approved. There is still agreement on that point, and that would include a proportionality test. That test is an important protection. Any adverse affect on operators’ businesses would need to be proportionate to the increase in public benefit from achieving the objectives of the scheme. I am sure that Members of the Committee will be aware that the department has published a draft of its proposed guidance for local authorities, which should assist them in understanding how to apply the proportionality test, and encourage them to ensure that all operators have a fair opportunity to compete for quality contracts in the areas affected. The noble Lord, Lord Rowlands, asked about the application of this part of the Bill to Wales. Local authorities in Wales can make a quality contracts scheme at present and still will be able to do so. But, unlike the operation of the scheme in England, Welsh Ministers will continue to approve the schemes as now. In a sense, that it is not a particularly relevant consideration. New criteria will apply in Wales, as in England. I understand where the noble Lord, Lord Hanningfield, is coming from on this. I am confident that we will make nearly all the progress that we want to make through the quality partnership route, which is the major thrust of government policy. There may be occasions when the quality contract route, because all else has failed and because of local circumstances, ends up being embarked upon. But there are important tests and protections in place to ensure that that approach will be proportionate and appropriate, with each party understanding their part.