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Concessionary Bus Fares

I can think of no good reason in principle. I suspect that as I go through the details of my speech, practical problems that any Government would face in introducing such a scheme will be raised. What I really wanted to say is that the scheme is a good idea that everybody supports. I want to use the debate to ask the Government some questions and to air some issues, so that we do not have another example of the law of unintended consequences whereby good ideas result in bad and poorly thought through outcomes. I shall not go through all the examples, but I think of the money that has gone into GP services, which has resulted in a huge increase in the number of people attending accident and emergency units at weekends. The Government did not intend that, but the initiative has resulted in extra costs at both ends and a poorer service for many of my constituents. We want to avoid another situation like that. I hope that my hon. Friend the Minister will provide answers to some of my questions, either in her summation at the end of the debate or in writing. Her responses will help when we consider Second Reading of the Concessionary Bus Travel Bill on 14 May. I have three areas of concern. The first is about how the Government intend to disburse the money to the 291 local authorities that will administer the scheme, because that will be difficult to do fairly under the current rules. Secondly, I have concerns about the appeals system and some of the perverse incentives in the scheme for bus companies to put up fares and increase the public subsidy. Thirdly, I have concerns about the implementation of the scheme and how it will work in detail, and I would like to ask some practical questions about whether pensioners will have the passes in their hands by 1 April 2008. Under the 2006 scheme, which is now in operation, the Government used the normal local authority grant system to hand out support. I am sure that my hon. Friend the Member for Tyne Bridge (Mr. Clelland) will refer to the consequences in his constituency of using that formula—there were £3.5 million of cuts because the Government underestimated the number of people in the north-east who had concessionary passes. It is not very important, but there are also anomalies such as the Scilly Isles getting part of the grant even though they do not have a bus service. Furthermore, of very pound spent on the scheme a percentage goes to Scotland and Wales, so that when the Government properly say that £250 million will go into the scheme in 2008, in fact England will probably get some £212 million after the disbursements to Scotland and Wales. However, that is part of the wider debate on the Barnett formula. What does all of that mean? As I said, when the national scheme comes into effect in 2008, someone from Newcastle will be able to use their pass in St. Ives. If at that time the money is paid out under the grant scheme, things may work very well in areas where few tourists go. However, there will be much larger consequences for councils such as Blackpool, which has millions of visitors every year, as visitors from England will be able to use their passes on the local buses. The problem will affect virtually all passenger transport authority areas that have cities with shopping and tourist centres. Quite simply, the way in which the local government grant is disbursed is not subtle enough to cope with such variations. There will be real winners and losers in that situation. I have three questions on this part of my speech for my hon. Friend the Minister. Can she give an assurance that the subsidy for the scheme will follow the passengers and that no local authority or passenger transport executive will be underfunded? A much better principle is for the money to follow the passengers rather than be distributed to local authorities on an historical basis. Secondly, can my hon. Friend provide an assurance that concessionary fare schemes for children and young people will not have to be cut because of Government underfunding to local authorities or passenger transport executives for the national concessionary fares scheme for pensioners? Thirdly, can she give assurances that the introduction of the new national free scheme will not lead to withdrawal of local authority-supported bus services, thereby undermining the value of the scheme to its users? People want reassurance on those three important questions. The second area of difficulty is appeals by operators. I know more about PTA areas than I do about other areas. When the 2006 scheme came in, there was a huge number of appeals by bus companies saying, in effect, that they were not getting the right level of subsidy, even though local concessionary fare schemes had been accepted by both sides for many years. If I understand it properly, the point of difference was that the bus companies wanted 100 per cent. repayment for every fare, whereas the PTAs and local authorities quite reasonably said that some elderly people would pay anyway, so that the bus companies’ claims did not represent their real loss or the real subsidy that was required. The adjudicators seem to have taken a purist view of the matter. They awarded the bus companies in Greater Manchester £3.4 million more than was expected, and the consequence was a 70p increase in the fare for schoolchildren. I am sure that that is not what the Government wanted, but it was inevitable once the scheme had started. That brings me to perverse incentives. If the Government are giving 100 per cent. subsidy in respect of pensioners and disabled people, there is an incentive for a bus company to put up fares and to attract more and more pensioners on to the buses at the expense of the fare-paying public, who would be much more likely to find another way to get to their leisure activity or work if the fares went up. They might buy a car or go with a friend; however, they could also lose their job if they could not afford the fare The easiest way in which I can illustrate that point is to ask hon. Members to imagine a virtual bus that is travelling down a radial route with 100 passengers on it—buses do not normally have that many passengers on them, but this is only an illustration. Let us imagine that half of those passengers receive concessionary fares paid by the local authority and half pay a £2 fare. If the bus company doubles the fare, it is likely to have more pensioners and fewer fare-paying passengers on the bus, which makes it easier for the bus company to make a profit. We have monitored the decline in bus patronage since the second world war. Patronage increased when buses were deregulated, but since then it has declined. There has been an improvement in patronage in London, and in other parts of the country there has recently been improvement, but that has been caused mainly by elderly passengers and other concessionary fare users. In future, to compare like with like, how will the Government compare statistics on fare-paying passengers with the statistics that we have from the second world war? It would indeed be perverse of the Government to claim an increase of 2 or 3 per cent. a year in passengers if that was masking a real decline in fare-paying passengers and it was only pensioners and disabled people who were using public transport. We all want them to use public transport, but not at the expense of people going to work or to the shops. The real solution is quality contracts, which I will not discuss in detail because we have had a number of debates on the subject and the Government are to introduce another Bill later in the year on it. If we had quality contracts, we could specify the concessionary fare and all fares at a particular time. That would remove the problem of perverse incentives and of appeals being decided outside the system. I will start the next part of my speech with a series of questions because they illustrate how difficult it will be in practice to make the system work. Will the Minister guarantee that the national scheme will be secure? What measures will the Department for Transport take to minimise the dangers of fraudulent passes and applications? Will the Minister provide an assurance that pensioners will have a new nationally valid pass in their hands by 1 April 2008? That will involve the administration of more than 9 million passes by 291 authorities—a tall task. Will the Minister provide an assurance that the scheme will continue to be locally administered, so that local authorities and passenger transport executives can offer a more generous scheme if they wish? For example, they might wish to extend the hours to before half-past 9 or to extend the scheme to other categories of people. I would like assurances on those questions because the Government have been late in providing guidance on the scheme to passenger transport authorities and local authorities. I understand that it has been issued only in the last week. I also understand that it is too late to move straight to a smartcard scheme. However, it is important that we have a consistent and coherent scheme that can be administered locally, and that local authorities understand the scheme so that they can distribute the passes to those who have been awarded one. I will conclude with a number of questions and points. Some £250 million—less the amount that will go to Scotland—is being put aside for the scheme in 2008. I shall be grateful if the Minister explains where that figure has come from and assures us that the amount will be adequate. Judging by what I have seen in Manchester and heard from colleagues, there has been a terrific take-up of passes and a real increase in bus usage following the start of the local free pass scheme. I can only see take-up increasing by large amounts. I know that the Minister has heard me say this on a number of occasions, but the scheme is open to abuse by bus companies. I have made the case that there are perverse incentives in the scheme, but what action can she take to stop bus companies from exploiting the scheme? Their business plans do not relate to obtaining extra passengers and improving public transport, but to maximising the public grant. I have previously given examples of that to the House. First Group is the main operator in my constituency—it runs a virtual monopoly. When First Group drives a bus out of the depot, half of the basic costs of that bus have already been paid for by the taxpayer, which is an extraordinary situation. First Group is withdrawing from less profitable routes and putting more pressure on the public purse for subsidised routes. Now, it is putting more pressure on the level of fares and on the public purse. The result is higher fares and fewer passengers. Evidence to support that scenario can be found in Wales, where a national scheme is in operation. In Wales bus companies’ profits and fares have gone up by a greater amount than in England, where there is not a national scheme. They have increased by 12 per cent. How will my hon. Friend stop avaricious multinational bus companies from effectively ripping off the public sector? The profits of bus companies are increasing and so are subsidies from the public sector. In addition, deep in the statistics there is a decline in the networks of bus routes and in the numbers of fare-paying passengers.