Bus Services (No. 2) Bill [ Lords ] (Second sitting)
(1 day, 10 hours ago)
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The Chair
Before we begin, I remind Members to switch their electronic devices to silent, to send their speaking notes to hansardnotes@parliament.uk, and that tea and coffee are not allowed during sittings.
I understand that we may have some people in the Public Gallery this morning who are visually impaired— I welcome them. For their benefit, as well as the benefit of others following proceedings this morning, when calling a Member to speak or to make an intervention, I will announce the Member’s name and party affiliation. I ask that Members allow me to do so before commencing their contribution. It has also been brought to my attention that those in the Gallery would like, if possible, during the break, to meet some members of the Committee.
Clause 3
Specification of areas
Question (24 June) again proposed, That the clause stand part of the Bill.
The Chair
I remind the Committee that with this we are considering the following:
Amendment 70, in clause 4, page 2, line 10, leave out “or places” and insert—
“, places or Rural Bus Hubs”.
This amendment is linked to NC35 and would allow rural bus hubs to be included in the specification for a franchise scheme.
Clause 4 stand part.
Amendment 71, in clause 38, page 41, line 23, after “England” insert—
“(e) the impact, or potential impact, the establishment of Rural Bus Hubs on services to villages.”
This amendment would require a review of bus service provision for villages to include an assessment of the impact of rural bus hubs, if already established, or the impact which establishing them may have on villages.
New clause 35—Rural Bus Hubs—
“(1) Local transport authorities may consider the construction of Rural Bus Hubs in rural areas which are, in the authority’s assessment, not sufficiently well-served by buses.
(2) Any Rural Bus Hub must—
(a) be a facility where bus users can park vehicles for the purposes of transferring to a bus service for the remainder of their journey;
(b) be constructed outside of town or and village centres, and be easily accessible by road, cycle or walking routes and other modes of transport;
(c) be on newly-developed sites or on sites which have been repurposed;
(d) contain car parking, electric vehicle charging, cycle parking and other amenities as the franchising authority sees fit, at a level of adequacy determined by the franchising authority.”
This new clause would allow local transport authorities to create rural bus hubs in areas to create a hub-and-spoke model of bus service delivery.
The Parliamentary Under-Secretary of State for Transport (Simon Lightwood)
It is a pleasure to see you in the Chair, Dr Allin-Khan. At the conclusion of our sitting on Tuesday, I had begun to address the points made by the shadow Minister, the hon. Member for Broadland and Fakenham, on the role of small and medium-sized enterprises in franchising. I will briefly address the outstanding points.
The Department for Transport understands that there are barriers to SMEs accessing franchise networks. That is why we are listening to the sector about how to ensure that disproportionate paperwork requirements do not hinder SME bids for franchising contracts, and that SMEs are provided with the resources to simplify bidding. My Department has also engaged directly with SME representatives through policy development and the passage of the Bill, including on additions to guidance, such as the Department’s role in facilitating pre-tender engagement between SMEs and franchising authorities.
Already, as part of the consultation on a franchising scheme, an authority must make a statement about how it proposes to facilitate the involvement of SME operators when it conducts the procurement process for franchised services. Moreover, the grant-making powers given to local authorities via the Bill will allow grants to be designed to prioritise SME bus operators, subject to other competition and subsidy controls. I hope that that offers reassurance to the Committee.
Question put and agreed to.
Clause 3 accordingly ordered to stand part of the Bill.
Clause 4 ordered to stand part of the Bill.
Clause 5
Minimum period before provision of services
Question proposed, That the clause stand part of the Bill.
Simon Lightwood
The clause is about mobilisation periods for franchising areas. Existing law states that there must be a period of at least six months between the franchising contracts being made and those services first being delivered on the ground. The clause will enable franchising authorities to set shorter mobilisation periods that work for them and their stakeholders, if they wish. That will speed up the franchising process and ensure that bus passengers do not have to wait for an arbitrary period before experiencing the benefits.
Clause 6 amends references to local services by inserting the words
“which have one or more stopping places”
in certain sections of the Transport Act 2000. That is intended to clarify that the relevant reference to local services includes cross-border services where appropriate. These technical changes support the Bill’s focus on giving franchising authorities more scope to facilitate the provision of cross-border services.
Jerome Mayhew (Broadland and Fakenham) (Con)
It is a pleasure to serve under you, Dr Allin-Khan.
Clause 5 deals with the minimum period before provision of services can be changed. It is not a difficult clause, but it is worth going into some of the subsections in a bit more detail. Subsection (1) omits section 123H(4) of the 2000 Act, which set out that a franchising scheme
“may not specify under subsection (2)(d) or (3)(c) a period of less than six months.”
That meant that at least six months had to expire between the authority making a local service contract and the provision of the local service under that contract.
Clause 5(2) sets out that the transition arrangements in subsection (3) apply where, before the clause comes into force, the franchising authority or authorities have published under section 123E(2) of the 2000 Act a consultation document relating to a scheme or variation of a scheme, but have not yet made the scheme or varied it. Clause 5(3) provides that when making or varying the franchising scheme pursuant to the consultation document, the franchising authority or authorities may specify a minimum period, under sections 123H(2)(d) or 123H(3)(c) of the 2000 Act, that is less than six months.
Although I understand that the Minister and his Department want to smooth out some of the hindrances and streamline the system, and in principle I am supportive of that, the question that begs to be asked is: is there no de minimis period? It may be considered that a six-month period is too long, but what about a one-week period? Is that too short? As drafted, the clause does not provide a de minimis period. What would be the impact on franchise operators if there were an instantaneous change? That is a significant issue that needs to be considered, because we are dealing with operators that are commercial beasts. They have infrastructure, and drivers and staff that have to accommodate changes to these schemes, and yet the Government’s proposed changes would in theory allow there to be no notice at all.
I would be grateful if the Minister could expand on the Department’s, or the Government’s, thinking on this matter. I accept that six months is itself an arbitrary time limit. Why is it not seven, or five? I accept the rationale, which is that we wish to streamline the provisions in order to make it easier for local transport authorities to undertake these changes and take advantage of some of the opportunities that the Bill provides, but it is important for it to be practical and not to have unintended consequences for bus operators and their commercial activities.
Clause 6 amends sections 123E(4)(a), 123N(2)(a), 123Q(5)(a) and 123R(5)(a) of the 2000 Act. Before I go any further, it is worth reflecting that the reason why the clause is so complicated in its nomenclature is that there have been multiple amendments to the Transport Act. Although I have not researched it, some of that presumably came about through the deliberations of this House when the legislation was drafted, but there have subsequently been multiple alterations.
It begs the question of our approach to legislation in this place when an Act is so often amended. It makes it very difficult, one imagines, for people and organisations—local transport authorities, in particular—to understand what their duties and legal responsibilities are. In many instances, these are not recommendations; they are mandatory requirements, with which failure to comply could lead to judicial review and the kind of lawfare that we as a society often rail against, because we feel that the Government—and by that, I also mean local transport authorities in this instance—cannot get anything done because they are being tripped up by incredibly complex legislation with poor drafting that requires multiple amendments. That is how we get to a “section 123Q(5)(a)”—but that was a slight aside.
Clause 6 further amends the Transport Act by adding to all those subsections the words
“which have one or more stopping places”
after the references to “local services”. In itself, it is a wholly good amendment, and I am not seeking to criticise it. It clarifies that the references to “local services” incorporate any service that has a stopping place in the relevant area, including cross-boundary services operating pursuant to a service permit. However, I wonder whether this clarification was necessary in practice. I would be interested to know whether there have been any instances of local transport authorities being misled by the current drafting—I would be surprised if there had been—or any legal challenge to the current definitions that highlighted a need to clarify an ambiguity. Subject to that clarification from the Minister, I accept that there is nothing wrong with the amendment made by the clause. It is a useful clarification of the Transport Act 2000, to avoid doubt in interpretation, if, in fact, such doubt has ever existed.
Mr Paul Kohler (Wimbledon) (LD)
It is a pleasure to serve under your chairship, Dr Allin-Khan. My party has little to say on this group. We are supportive of clauses 5 and 6, although the hon. Member for Broadland and Fakenham made a good point, and we would like to hear the Minister’s views on it.
Simon Lightwood
The hon. Member for Broadland and Fakenham spoke about the removal of minimum mobilisation periods. It is consistent with the aims of the Bill to empower local transport authorities to decide how best to design their bus services, and this will be an issue for franchising authorities to determine. A minimum mobilisation period does not need to be mandated by central Government. This is something that franchising authorities will need to consider, and it is in their interests to make sure that there is a smooth transition to a franchising scheme, if that is the pathway they wish to consider.
Franchising authorities will make their determinations about the duration of mobilisation periods based on numerous factors. The clause provides flexibility for mobilisation to occur in a period shorter than six months, where it is in the interests of stakeholders and passengers. As I have explained, the Government intend to update the franchising guidance following Royal Assent.
Question put and agreed to.
Clause 5 accordingly ordered to stand part of the Bill.
Clause 6 ordered to stand part of the Bill.
Clause 7
Criteria for granting service permits
Jerome Mayhew
I beg to move amendment 46, in clause 7, page 3, line 23, at end insert—
“(1A) In subsection (5), omit from ‘and’ to end.”
This amendment seeks to simplify the process for granting service permits by removing the requirement that the proposed service will not have an adverse effect on any local service that is provided under a local service contract in the area to which the scheme relates.
The Chair
With this it will be convenient to discuss the following:
Amendment 47, in clause 7, page 3, line 26, leave out “may” and insert “must”.
Amendment 48, in clause 7, page 3, line 27, leave out from “there” to end of line 34 and insert
“is a benefit to persons making journeys on the proposed service.”
Amendment 49, in clause 7, page 3, line 36, leave out “may” and insert “must”.
Amendment 50, in clause 7, page 3, line 37, leave out from “that” to “will” and insert
“the proposed service has benefits to the economy of the area to which the scheme relates, or to persons living in that area,”.
Government amendments 4 and 5.
Clause stand part.
Clauses 8 and 9 stand part.
Jerome Mayhew
Clause 7, which is reasonably long, introduces a number of additional tests for the granting of service permits. Subsection (2) inserts a new subsection (5A)(a) and (b) to section 123Q of the Transport Act 2000. Paragraph (a) provides that the franchising authority or authorities may grant a service permit for a cross-boundary service—this is the meat of it—if satisfied that
“the benefits to persons making the journey on the proposed service will outweigh any adverse effect on any local service that is provided under a local service contract in the area to which the scheme relates.”
Paragraph (b) sets out that the franchising authority or authorities may grant such a service permit if they are satisfied that
“the benefits of the proposed service to the economy of the relevant area”—
that is different from paragraph (a), which referred to benefits to persons taking the journey—
“or to persons living in that area, will outweigh any”
adverse effect on the local service provided under a local service contract. The first paragraph refers to the benefit to passengers on the cross-boundary service and the second to the benefit to the area.
I suppose what sits behind this is the abstraction argument, which we are familiar with from the railway. In fact, those lucky enough to be at Transport questions this morning will have heard a brief rehearsal of that argument by the Secretary of State in respect of open access applications on the railway. The essence of the argument is that when a new service is proposed for a particular area, in addition to just saying, “Isn’t this is a jolly good idea? We’re getting further provision, more choice and no doubt price competition as well, and new constituencies and demographics being served by buses”—or, in the other example, by rail—before agreeing to it, we need to look at its impact on existing services. It is argued that it would be unfair if we have already contracted a franchise agreement or service operation agreement for buses, or we have a franchise operator on the railway, such as London North Eastern Railway—actually, that is not a good example, because it has open access competition. Let us take High Speed 1, where Eurostar has its operations, and imagine that we said, “We’re going to provide a new service.” Virgin, for example, is applying for an operating licence for HS1. We would then say, “What would be the impact on the provision of the existing services? Is this new service going to supply a currently unmet need, or is it going to provide two services fighting over the same customer?”
That takes us back, interestingly enough, to the original regulation of bus services in the 1920s. A major argument for the need for bus regulation in the first place was the common complaint that there could be one route with 15 different buses on it, all from different bus operators competing furiously for a key route, and for the less well-travelled routes and perhaps the suburban or rural routes, there would be no bus provision at all. The argument ran that we could not leave it up to the private sector to fight it out and let the market decide where services should be provided; we needed a degree of regulation so that we could have decent provision on the main thoroughfare and provision elsewhere. I think I am right in saying that the term “traffic commissioner” was first created following the review in the 1920s, and those commissioners still exist to this day. As we progress through the Bill, we will see reference to the traffic commissioner, which is a historical overhang from the initial regulation of the bus network in the 1920s.
I return to abstraction. The argument goes that it would be unfair to provide a new service where the impact of that would be negative on existing services or on other factors in a local area. The Secretary of State’s argument—admittedly in the context of rail, but it is relevant to this argument—is that it would be unfair to provide such a new service, but I challenge that base assumption. The person who is being left out of that consideration is the passenger. New services provide new opportunities for the passenger. Yes, it is true that new services may act as de facto competition for existing service providers, but as we know from every other aspect of our lives, competition tends to improve performance.
Before I came into Parliament, I was a businessman running a consumer-facing company. I hated competition, and I did everything I could to stifle it, because I knew the impact it would have. I will not tell the Committee the things I used to do—I should think there would be a by-election—but the point is that existing providers hate competition, because they have got a comfy little operation, they know what their activities are, they know what their likely revenue will be, they know how they deal with their customers, and they do not like change.
When competition comes in, businesses are forced to sit up and say, “Oh my goodness! This is an existential threat to us as an operator. How are we going to respond?” Businesses in aggregate respond in a number of different ways. Some of them are nicer to their customers and improve their customer service to hang on to their customers and ensure they are not tempted across by the new provider. Others reduce their fares to attract custom. Then we get a price war, as we often read about in the press—we get price wars between Tesco and Asda, and Lidl and Aldi. Those who benefit are not the businesses but the customer, who gets either better customer service or lower prices. They certainly benefit from wider provision of opportunity, because they have two services available to them instead of one, and that puts the providers on their mettle.
My submission is that new provision of whatever description is inherently a good thing, even if there is an argument about abstraction from existing providers. I suppose it comes down to the core beliefs of Government Members as opposed to Conservative Members, who at heart—my heart, anyway—believe that competition and the challenge of a competitive market is a good thing. In the vast majority of cases—not always—it brings benefits to the customer and forces a focus on the end user rather than the supplier.
If I were to traduce Labour Members’ political opinions—perhaps I am putting words into their mouths—my criticism of the Labour party more widely and its approach to legislation as demonstrated in this clause is that its instinct is to support the supplier and the operator, rather than the customer, particularly in heavily unionised sectors. We touched on this point a little bit in our last sitting on Tuesday, when I was discussing the Bee Network in Greater Manchester and the decision on whether to increase the hourly rate for bus drivers.
At the time when the contract was being let, the commercial rate was £12.60 an hour. The Mayor for Greater Manchester insisted on an hourly rate for bus drivers of £16 an hour. I rehearsed the arguments both for and against. We can look at it in two ways—we can think it is a wonderful thing that bus drivers are being paid more, but it also means that bus services are considerably more expensive to provide in Greater Manchester than they are elsewhere in the country because salaries—wages—are more than 60% of the costs of running any bus operating business. That is the heart of it. Who are we after? Are we supporting the suppliers or are we supporting the customer—the passenger?
That brings me to amendments 46 to 50, standing in my name. Amendment 46 would have the effect of removing the requirement in section 123Q(5)(b) of the Transport Act that
“the proposed service will not have an adverse effect on any local service that is provided under a local service contract in the area to which the scheme relates.”
Given my preceding comments, we can see why this is so important. As it currently stands, we have a measure that prohibits the provision of a new service if that service were to have any adverse effect on pre-existing services under a local service contract in the area to which the scheme relates. That is a very low bar—it is almost a veto—for the provision of new services, because one can imagine that it is very easy to assert that the provision of a new service may draw customers away from one that is already being provided.
The amendment seeks to simplify the process for granting service permits. Demonstrating that a change will not have any adverse effect is an enormously high bar and is evidentially onerous. Removing section 123Q(5)(b) from the Transport Act, as the amendment would do, speaks to the Government’s desire to streamline the process and make it easier for the supply of new services, for innovation, and for new entrants to enter the market.
Amanda Hack (North West Leicestershire) (Lab)
The shadow Minister raises an important point about competition and the customer being at the heart of bus services. Will he share with us why so many rural bus services have been cut, if the commercial operator is king and the focus is on customers? That is not the experience we feel in rural communities. We have had cut after cut.
Jerome Mayhew
That is an interesting point, and the hon. Member is of course quite right. I did preface my comments by saying that competition is beneficial in most areas, but there are some areas where it is not. The counter-argument is that, in this instance, this is about a new operator, which does not have to be a private sector operator, suggesting an additional service. This is not about cutting services. This is about where, for whatever reason, an analysis has been done that there is additional demand—this is not about cutting a service, but about providing an additional service.
The hon. Member is quite right to raise rural areas, as the hon. Member for North Norfolk has done through a number of his amendments. I represent a rural constituency myself in Norfolk. In bald terms, the rural service in Norfolk is not too bad as long as the destination is Norwich. We have a radial provision of bus services from outlying villages directly into Norwich. If someone wants to go across the county to anywhere other than Norwich on those lines, it is very difficult. The hon. Member for North West Leicestershire is right that if we look to only the passenger ride and the fare box to support usable and sufficiently frequent services, it is highly unlikely that a purely commercial approach will do it. That is why, in Norfolk and many other places, the innovation of an advanced partnership has worked so well.
Joe Robertson (Isle of Wight East) (Con)
On my hon. Friend’s point about rural areas such as his constituency and my constituency on the Isle of Wight, it is difficult to move between towns. On the Isle of Wight, we have a radial system that makes it easy to get in and out of Newport, which sits in the middle of the island, but it is less easy to go anywhere else. I am at a slight loss as to how we get over that fundamental issue in bus franchising—this is geography, and the market for moving between villages is clearly smaller. I am concerned that the entire franchising model and, indeed, this clause are overselling a solution to a fundamental problem. If we are to get over that hurdle, it would ultimately require a lot of public money.
Jerome Mayhew
My hon. Friend is absolutely right; there is no commercial case for large-scale, frequent bus services to every small rural community. I have certainly not come across such a case, even if one does exist. The solution—if there is a solution—will be one of a number of things. Under a franchising scheme, it would be open to a local transport authority to invest in and design a scheme that provides for frequent bus services to every rural community. It would be possible to do that, but it would be phenomenally expensive.
Already, one of the key criticisms of the Bill is that it has no money attached to it, so we are going to spend the next two and a half weeks virtue signalling about how wonderful franchising could be. It is not mandatory, and no one is actually going to do it—outside of the big mayoral authorities that are doing it anyway under the Bus Services Act 2017—because there is no money supporting the Bill. It would be incredibly expensive.
There is an alternative, hybrid solution: a combination of scheduled bus services on the key arterial routes from big villages into their major towns, such as from Norfolk going into Norwich, a rural hub-and-spoke system for the more remote villages, as suggested by the hon. Member for North Norfolk, and demand-responsive public provision.
On Tuesday, I described this as the “Uberfication” of public transport. It still is unlikely to make sense on a purely commercial basis, but it is the kind of focused provision of public sector transport that could work in a highly rural area where the aggregate cost would be less than the blind provision on frequent, full bus services to every community, which would be monumentally expensive.
Siân Berry (Brighton Pavilion) (Green)
Amendment 46 would remove the requirement for the service not to have an adverse effect on local services. Bearing in mind what the shadow Minister said about the impossibility of commercial viability for some rural services or non-radial routes in cities, is it correct that the amendment would allow commercial entities to come in and take away part of the market, even where a local transport authority had built up the potentially profitable part of a wider, well-planned public network? The requirement as it stands is intended to prevent commercial companies from parasitising on a market that has been built up with public money. The Minister is not proposing that it should be easier for commercial entities to come in and develop new markets where there is potentially pent-up demand in rural areas.
Jerome Mayhew
The hon. Lady is right that there is a risk of challenges in some areas, but in other areas there is the opportunity to increase provision for new markets. The difficulty is that the clause as drafted says that “any adverse effect” will be sufficient to prevent the application.
Amendment 47 would replace the word “may” with the word “must” in clause 7(2)—in reality, proposed new section 124Q(5A) of the Transport Act 2000—if a local transport authority is satisfied with the conditions of proposed new subsection (5A)(a) and (b). In such circumstances, why should the local transport authority be given discretion to refuse to grant a cross-boundary permit? It will have accepted that there are no adverse effects; nevertheless, it is given discretion. The clause says that it “may” grant the application, but why? If someone wants to provide an additional service and the local transport authority has satisfied itself that there is no adverse impact, why would it say no?
That is the purpose behind amendment 47. If the applicant—it could be the municipal bus company, given that there is nothing to prevent it from doing this—has satisfied the local transport authority that there is no adverse impact, as set out in the conditions of proposed new subsection (5A)(a) and (b), why should the provider not, as a right, be able to create the service?
Siân Berry
I just want to give an example in which “may” is more appropriate. Proposed new subsection (5A)(a) and (b) talk about a local service that is provided. If a local transport authority is building out a planned network and, in the very near future, a service will be introduced in an area, it may want to prevent disruption of the benefits of an integrated local service there by such an application. I believe it is very appropriate that “may” remains in the clause.
Jerome Mayhew
The hon. Lady is bending over backwards to think of hypothetical instances in which it is possible that something like that could exist. The fact remains that we must ask—this comes down to the philosophical difference between us, perhaps—whether we are looking after the passenger or the supplier. From my perspective, the Bill should have services for passengers squarely in its sights. If passengers will benefit from a new service, the local transport authority should allow it. After all, the aim of the Bill is to maximise general utility for the wider bus service. Amendment 47 would therefore prevent local authorities from sitting on their hands, as the hon. Lady suggests they might.
Amendment 48 goes one step further. If the previous two amendments were red meat to some members of this Committee, this one will send them over the top. It would scrap entirely the convoluted assessments about balancing benefits and adverse effects in proposed new subsections (5A)(a) and (b). The authority would simply take a view on the benefits for persons making journeys on the proposed service—what is wrong with that? If the service has benefits for customers, why should we not just go for it? It is a straightforward process where applicants are in the driving seat. The amendment would provide higher certainty for applicants and therefore encourage additional service providers.
I anticipate that hon. Members may say, “What about the web—the franchise service—that the local transport authority may be trying to design?” But I seek to remind them about the incentives of providers. Again, I speak as a former businessman. We sometimes forget something in this place. We make lots of rules and we deal with processes ad infinitum, and we think that everyone will be incredibly logical. We say, “Oh yes, they have to go through this process, then that process and the other one, and then the local authority may decide to help them or not.” That ignores the basic maxim of private enterprise, which is that time kills deals. If a process is convoluted by design, it is also, by design, time consuming, and therefore expensive and uncertain in its outcome.
Let us think of a potential service provider looking through these provisions. They would say, “I’ve jumped through the hoops of proposed new subsection (5A)(a) and (b), and I’ve demonstrated the evidential basis for this application,” but then there is the discretion at the end where the local authority may, for whatever reason, choose not to award the deal based on some plan for some date in the future that we have not even heard about. Is the provider even going to bother doing it in the first place? This is an important issue of practicality. Commercial organisations respond to incentives, and if we make something long-winded, expensive and complex, they are much less likely to bother doing it. They will employ their capital, their time and their creative energies elsewhere.
Joe Robertson
The more I hear the shadow Minister unpicking all these issues, the more it transpires that the whole franchising model that the Bill offers to local authorities is really rather unattractive. Particularly for smaller local authorities, it is complicated, and there is a huge risk that when the new service is implemented, despite the best of intentions, it will not run in the way that the local authority or commercial provider thought it would. All the while, the local authority—I am thinking in my case of the Isle of Wight council or the potential combined mayoral authority with Hampshire—is taking on that risk of things going wrong. The shadow Minister is getting to the heart of a fundamental problem with the Bill: it will not sort out bus services country-wide, particularly in rural areas. It is really just a model for the big cities.
Jerome Mayhew
My hon. Friend is right. In broad terms, the Bill facilitates additional opportunities for local transport authorities, which is a good thing. As I have said, allowing franchising is in fact a Conservative concept. It goes back to the days of Mrs Thatcher, but more recently, the 2017 changes allowed franchising without consent for mayoral combined authorities. In fact, any local transport authority was allowed to apply for franchising operations, but with the safeguard that it required the consent of the Secretary of State for Transport, because of the huge commercial risks associated with franchising for local transport authorities, particularly smaller ones. That was an eminently sensible safeguard that I have spoken about previously, so now we have that risk.
Even if the local transport authority is capable of managing that risk, of developing the expertise to design these complex systems in-house, as is anticipated, and of starting a municipal bus company on top of designing the franchise operation, we cannot get away from the conclusion that is expensive. Whichever way it is designed, if it is going to improve services, it will be expensive.
Luke Myer (Middlesbrough South and East Cleveland) (Lab)
Does the hon. Gentleman accept that the entire structure of combined authority devolution, particularly in Greater Manchester, which has pioneered much of this work, is about the earn-back or gainshare principle? Early public investment results in economic growth down the line, and higher business rates and tax revenue that then fund some of this work. In other words, in the end, it pays for itself.
Jerome Mayhew
I am grateful for that thoughtful intervention. In principle, the answer is yes, which is why we legislated in 2017 to allow that in principle and why we supported Greater Manchester through the implementation of the Bee Network. That happened under not Labour, but the Conservatives. However, it comes with financial risk. There needs to be clarity on where the costs are and an absolute, laser focus on minimising them, just like in any other business.
The hon. Member did not say that the forecast in the Bee Network’s business case, which enabled it to get the go-ahead, was for it to make a profit. I accept that there will be periods where it makes a profit and periods where it makes a loss, but it should break even overall. Over the forecast period, however, the plan was for it to make a profit of £94 million—that was how it was sold. For it to make a planned loss in 2025-26 of £226.3 million and change, given the huge cost overruns that I hinted at in Tuesday’s sitting, is a disaster. It makes me wonder where that has come from.
I remember the hon. Member watching with interest on Tuesday as I talked about the more than £17 million overrun on agency bus drivers, because the transport authority had failed to provide enough qualified drivers having misunderstood the nature of the TUPE regulations regarding their transfer from the previous operators to the franchise process. There was also the massive cost overrun on the purchase of bus depots because it was the only buyer in the market. There was an explosion in costs for the purchase orders for new buses, with a surcharge of £40,000 on every bus that Andy Burnham’s Greater Manchester combined authority buys because of the design requirements that he has put in, including bits of leather on the seats—we will not go into the detail of that.
If we are not absolutely laser-focused on the costs, that is what happens. The biggest overrun, which perhaps I should have led with, was the increase in wages. There has been an increase in unionised power—which arguably could be a good or bad thing—and an increase in hourly rates for bus drivers to £16 an hour, which is above the market rate. There are not just bus drivers in a bus company; there are all sorts of other roles as well.
I should also mention the failure to be efficient with the application of capital. In a private organisation, having bus washers is important, because having clean buses is part of the service and it affects the customer experience. Since the Bee Network has been in place, and the local transport authority purchased the depots, there has been a rather unfortunate occurrence whereby the bus cleaning mechanism—the washers—have been out of action for over a year.
The processes and the efficiency within the new structure have to date proved inadequate to get the funding to repair the washers, because that is capex rather than opex. I am assuming that is what the problem is—that it is an unplanned expense, so the authority has to go through the rigmarole of a public sector procurement process. No doubt it will get there in the end, but the consequence is that the bus depot is sending out buses that have not been cleaned for a year. Is that an improvement in service? No, it is not.
I say that not to denigrate franchising. Franchising can be done well—it is not a necessary consequence of bus franchising that there are dirty buses—but the evidence that we have at the moment is that even a really sophisticated operator such as Greater Manchester, with a mayoral combined authority and the financial resources, but without the experience of running buses, suffers very significant bumps along the road. That needs to be addressed. If that is happening in a large local transport authority, what is the likelihood of it happening in a small one—for example, in Norfolk county council in my neck of the woods? That is one of our problems with the Bill.
Going back to amendment 49, proposed new section 123Q(5B) of the Transport Act 2000 deals with intra-boundary services. I am applying the same logic as I did to amendment 47. Why should local transport authorities have the power to refuse to grant a service permit if they are satisfied that there are benefits of the proposed service to the economy of the area, or to persons living in that area, and that those benefits will outweigh any adverse effect on any existing local service?
All the amendment requires is for local authorities to act in the wider interests of consumers—the passengers. The proposed service might have an impact, but if we are satisfied that overall the net benefit is in the positive column and not the negative, why would we not agree to it? Let us think of the passenger—the consumer—rather than the supplier.
The amendment would be a particularly important safeguard if the local transport authority was also the owner of a municipal bus company, which was the supplier of the local services contract. There would then be an added layer of opacity in the process, because the contractor and contracted would be the same organisation. A challenger brand could then come and say that it wanted to provide additional services, and it could be assessed to be net beneficial to the economy or the people living in that area, nevertheless the local authority could refuse to grant a permit, even though it is the operator that would be adversely affected—let us imagine how that would look.
The temptation, of course, would be to say that the award was refused for wholly improper reasons: a circling of the wagons to protect one’s own. I hope that the whole Committee would agree that that would be an improper reason to deny additional access to the people living in the area, and/or to deny a benefit to the economy, yet there would be a strong temptation. If the authority has built its bus service network, and a little so-and-so comes in and demonstrates that it can go one step better, but that would have a negative impact on the authority’s cosy plans, people in the authority are going to think, “I don’t want to be troubled by this.”
Siân Berry
The shadow Minister was looking at me while making those points, and I agree that our parties have very different philosophies on this issue. The circumstances that he has just described as “cosy” relationships that are improper, are ones that I characterised earlier as public money being invested in building up a market that should not be parasitised. Those are, very clearly, different points of view, and I want to make sure that is on the record at the right time.
Jerome Mayhew
The hon. Member is absolutely right that there is a fundamental difference of philosophy here. She appears to back what I described as the cosy relationship—but let us not use pejorative language; let us call it the mechanism of state supply. She thinks that that is more important than improving the experience of passengers in that location and/or improving the economy, because that is the hurdle that would have to be crossed for the change made by amendment 49 to take effect. I accept, acknowledge and celebrate that difference. As a Conservative, I stand up for the consumer—for the resident—in my constituency, not for the supplier of services, even if it is the state supplier. Those are the people who I represent, those are the services that I am trying to improve, and that is what amendment 49 would do.
The amendment would require the local authority to act in the wider interest of consumers, not that of its own suppliers. That is particularly important where the authority has skin in the game. If I am unsuccessful—as I have a sneaking suspicion that I might be—in persuading the majority of the members of the Committee to support amendment 49, we should at least expect transparency in any decision-making process where the decision taker, the local authority, is taking a decision that affects a municipal bus company owned by that authority. At the very least—as we will discuss in relation to other amendments—we should insist on absolute transparency in those commercial relationships, so that the disinfectant of sunlight can shine on the exact rationale for a commercial opportunity being refused.
Amendment 50, my final one in this group, goes one stage further. It would get rid of the complex “balance of benefits” argument entirely and replace it with a simple assessment of the application: will the proposed service have benefits for the economy of the area or persons living in the area? If yes, the licence would be granted. The impact would be similar to that of amendment 48: it would simplify the process and give agency to the applicant. If they could prove that their service would deliver benefit, the local authority would grant a service permit.
Mr Kohler
I will be more brief. [Hon. Members: “Hear, hear.”] I have two points to make. I suspect that many of the shadow Minister’s points could be drawn from Hansard 40 years ago when bus deregulation was introduced. The great flaw of bus deregulation was it allowed private providers to cherry-pick profitable routes, leaving local transport authorities no opportunity to cross-subsidise their loss-making routes. That prioritised not passengers, but private providers. I fear that all the amendments would achieve the same end; they would simply allow private providers to cherry-pick profitable routes—often built up by local transport authorities that put effort, time and public money into them—without any provision for the non-profitable routes.
I say to the shadow Minister that equating passengers with consumers oversimplifies the complex issue of rural connectivity, and ends up isolating rural communities. As he admitted, in many rural communities, market mechanisms will not work. These are simply unprofitable routes.
Jerome Mayhew
I fear that the hon. Member and I may agree more than he perhaps thinks. As I said, I accept that rural routes are unlikely to be profitable, but that does not mean they should not be provided. That is why I went on to talk about demand-sensitive transport, as well as to mention the suggestion from the hon. Member for North Norfolk about rural transport hubs. Those can be subsidised, either through an enhanced partnership or through a franchise process. I accept that they will not be part of a purely commercial result, but that is not what I was suggesting in the first place.
Mr Kohler
I heard the shadow Minister say that, and I understand it. However, there is a contradiction in his analysis. He admits that point, but constantly refers to consumers operating in profit-and-loss markets. He is making a very narrow equation, and I fear that allowing public providers in the way he wants would simply undermine the whole rationale behind what we—or the Government—are trying to do with the franchising process. It is too narrow and simply ends up completely undermining what we are trying to do.
Luke Myer
Is it not the case that these are, in fact, not private providers at all? Many are subsidised by other Governments around the world—we see this in our rail and bus networks. Other states are stepping in to make a profit where Conservative Governments have stepped back.
Steff Aquarone (North Norfolk) (LD)
It is a pleasure to serve under your chairship, Dr Allin-Khan.
To refer to the general comments made by the shadow Minister, I am totally up for supporting things that put passengers first and are aligned to that purpose. I was regretful that the Committee disagreed to clause 1, on the inclusion of the overall purpose of the Bill, in our previous sitting.
The shadow Minister gave a long and wide-ranging speech; I was disappointed that it did not extend to his own personal tactics for rope sabotage, given the provenance of his business background—but perhaps that is for a future hearing. I will leave the Minister to respond to the issues of the words “outweigh” and “persons”, because I feel that it is his Bill to defend, but I do not fear the potential to refuse to the same extent as the shadow Minister.
Let us get back to what we are substantially talking about here, which is the cross-border issue. From my perspective—my constituency and that of the shadow Minister share many geographic characteristics—the whole point is that, however it is looked at, bus transport, even in urban areas, does not make a profit. Franchising is a welcome model because it allows the state, which is funding the operations, to contract to the providers who are going to deliver the service most efficiently and effectively. I do not see room for the entrepreneurial business model and profiteering that the shadow Minister refers to.
Jerome Mayhew
The risk of the franchising model, as we are already seeing in Greater Manchester, is that the size of the contract determines the amount of profit. Although the profit percentage is reduced, it is applied to the full size of the contract. Ironically, there is no incentive for the operator to reduce costs—for example, by pushing down wages—because wages are paid as agreed under the contract, and then the operator receives the 3% or 4% on top of that. My concern is that, as currently evidenced in Greater Manchester, we are seeing costs rise despite services being operated by private sector companies.
Steff Aquarone
The shadow Minister makes a valid point, as is always the case, but it takes us into the philosophical domain again. I gently point out that there are other perfectly profitable industries where the cost-plus model is the industry norm, and where it is possible for investors to make a return.
Nevertheless, to bring us back down to earth, I want to mention a couple of scenarios. One is from my own experience—in fact, from the shadow Minister’s constituency, which I travelled through growing up, where we had two providers leapfrogging each other from Aylsham to Norwich on commuter journeys. It was literally the same service, but if someone happened to get on the wrong bus, they could not get the same route back on the other operator. That is a fine example of why it would be appropriate to refuse a cross-border permit.
Equally, my hon. Friend the Member for South Cotswolds (Dr Savage) sent me an example:
“We also have an issue of cross-county boundary bus routes. For example it takes maximum 10 minutes to drive from Malmesbury (Wiltshire) to Tetbury (Gloucestershire) but up to 2 hours on the bus as there is a huge diversion to another big town and then on to Tetbury through the small villages”.
These measures are about the practicalities of cross-border permits. With more rural areas likely to enter into combined mayoral authority arrangements, that will reduce the need for cross-border permits. Although I am grateful to the shadow Minister, I do not see the equivalence with open access in rail. This is, to me, what validates the franchising model overall, as well as providing for necessary moderation in common-sense, cross-border issues.
Joe Robertson
It may be tempting to think that the shadow Minister was particularly detailed, lengthy and comprehensive in his earlier contribution, but from where I was sitting, he was all too brief. There were a great range of issues that he failed to address, and I feel it is my role to address them.
Before that, I will agree with what the hon. Member for North Norfolk said about different companies providing services to similar or the same destinations, where using one service in one direction means that another service in the other direction cannot be used. Unfortunately, the Government are currently unpersuaded that that is a problem for ferry services to the Isle of Wight, which is a shame, given that the Government—I agree with them on this—are reforming public transport. I will, however, save that debate for another time.
It was good to hear some genuine philosophical disagreement between the shadow Minister and the hon. Member for Brighton Pavilion. I am sure that the hundreds of thousands—possibly millions—of members of the public listening to this Bill Committee will have noticed that it was done in a polite and respectful way. I think the shadow Minister almost went too far at one stage, and I was nudging the hon. Member for Brighton Pavilion to intervene—even though she is a Green MP and I am a Conservative—because I think she missed an opportunity to fight back, but maybe she will in a later sitting.
I will make a few brief points on the principle, but they are anchored in amendments 46 and 50. They concern the idea that assessing whether a new proposed service will have an adverse effect on a current local service is slightly academic, contested and possibly futile, especially if we add in the possibility that, although the analysis and conclusion may have been done in good faith, they will not translate when a service is brought into effect and the market is tested.
I therefore completely support the shadow Minister’s amendments seeking to get rid of the analysis of an adverse effect. It is entirely possible that an element of the service could be adversely affected by the introduction of a new service. To some people, that is a net gain; to others, it is a net loss. Who is to say which of those competing groups is more important than the other?
I have a completely hypothetical example. The local economy of my constituency is heavily reliant on tourism, but people also use buses to get to work and my older constituents rely on them for their daily movements, such as going shopping, visiting friends or going to appointments, including at the hospital. We could end up with a bus franchising proposal that has a net positive effect on moving visitors around between the key tourist areas. That may have an overall positive effect on the economy—on paper and maybe in reality—and that effect may trickle down and raise the prosperity of the whole area. However, that proposal could also have a negative effect on the older population, who need bus services to move around year in, year out. They do not need to travel to the key hotspots that drive the tourist economy, but to GP practices and shopping areas, and not tourist shopping areas but those that provide essential goods for residents, particularly older residents.
That example poses a very legitimate question: is it more important to provide a service that leads to a general raising of the economy and wellbeing by improving tourism, which some might say has a trickle-down effect on everyone, including older residents, or is it better to protect people who are more vulnerable and who have fewer opportunities, if any, to use a different mode of transport? People could come to fair but different conclusions about that.
Whether a proposed new service will have an adverse effect on a local service is an unanswerable question, and it cannot be fitted into an assessment. If an assessment can be made at all, it will be entirely reliant on subjective, statist, planned, expert-led analysis. One can only hope that a conclusion drawn from that analysis would translate into the real world and be correct, but it is entirely possible that it would not.
Amanda Hack
The hon. Gentleman’s analogy ignores the passenger transport strategies that local government should already be undertaking, and the fact that local government already does a large piece of work to make sure that those strategies are relevant to the local economy. The Bill gives local government the opportunity to get the funding—that has not been mentioned—to start making bus services feel like what the local population and economy actually need.
Joe Robertson
I agree with the hon. Lady, but of course, it is more complex than that. Obviously, a local strategy will and should sit at the heart of any decision making, but there are great challenges in assessing whether a new service is fundamentally having an adverse effect on an existing service. Even approaching it in that way slightly negates the idea of holistic planning—rather than considering whether a new service conflicts with an existing service, we should be treating them both as one service.
Ordered, That the debate be now adjourned.—(Kate Dearden.)
Bus Services (No. 2) Bill [ Lords ] (Third sitting)
(1 day, 10 hours ago)
Public Bill CommitteesRead Hansard Text Read Debate Ministerial Extracts
The Committee divided: - Ayes: 2 / Noes: 11 - Question accordingly negatived.
The Committee divided: - Ayes: 2 / Noes: 11 - Question accordingly negatived.
The Committee divided: - Ayes: 2 / Noes: 11 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 3 / Noes: 10 - Question accordingly negatived.
The Chair
I remind the Committee that with this we are discussing the following:
Amendment 47, in clause 7, page 3, line 26, leave out “may” and insert “must”.
Amendment 48, in clause 7, page 3, line 27, leave out from “there” to end of line 34 and insert—
“is a benefit to persons making journeys on the proposed service.”
Amendment 49, in clause 7, page 3, line 36, leave out “may” and insert “must”.
Amendment 50, in clause 7, page 3, line 37, leave out from “that” to “will” and insert—
“the proposed service has benefits to the economy of the area to which the scheme relates, or to persons living in that area,”.
Government amendments 4 and 5.
Clause stand part.
Clauses 8 and 9 stand part.
The Parliamentary Under-Secretary of State for Transport (Simon Lightwood)
It is a pleasure to serve with you in the Chair, Sir Desmond.
The Bill recognises that commercial operators can play a key role in providing commercial services that complement franchising schemes and add value to the overall bus offer for local transport users. That includes cross-boundary services, which provide crucial links between communities. That is why we are legislating to introduce new tests that franchising authorities can use in determining whether to grant service permits. The tests allow authorities to consider a much wider range of benefits that services proposed by commercial operators could provide. The new tests will also allow authorities to tolerate some adverse effects to franchised services if they are outweighed by the benefits. Overall, franchising authorities will have greater scope to grant service permits and harness the additionality of the market in delivering great bus networks.
The amendments tabled by the hon. Member for Broadland and Fakenham would, however, undo many of the improvements we are making, and undermine the service permit regime as well as local transport authorities’ ability to franchise. The amendments would largely remove franchising authorities’ ability to even consider whether a commercial service would have an adverse effect on franchised services, while compelling them to grant service permits in the vast majority of cases. In practice, that would mean that commercial services could compete directly with franchised services, undermining the service finances and goals, and ultimately making franchising unworkable.
In direct response to the hon. Member’s comments, the Bill gives greater scope for authorities to grant these additional services. However, as he acknowledged, it cannot be a free-for-all, which is what the amendment would in effect cause. We understand that in Greater Manchester the vast majority of service permits have been granted under the existing test, and the Bill’s measure will allow franchising authorities even more flexibility to grant service permits with applications from operators or in the interest of passengers and local people.
Addressing the claim of the hon. Member for Isle of Wight East that franchising is unattractive to smaller rural local transport authorities, the Bill aims to give local leaders greater flexibility to determine how best to plan and deliver bus services to meet the needs of local transport users. There is no one-size-fits-all approach. Consideration has been given to rural modes of franchising, and there are plans to pilot models better suited to rural areas, as I have touched on in the past.
While it is for local transport authorities to decide the best option to manage their services, franchising can be an attractive option in a rural setting. It can be used to support a fully integrated network, combining core franchise routes with commercial services operating under a service permit awarded by the authority, ensuring strong branch connections to main corridors.
Simon Lightwood
I am going to try and make some progress. We have spent a significant amount of time on this.
The hon. Member for Broadland and Fakenham once again raised Manchester’s experience with bus franchising. He again quoted figures on the cost of franchising in Manchester. On the first day of the Committee I explained that the figures referred to the level of investment being made to improve Greater Manchester’s bus network. The adoption of franchising in Greater Manchester has resulted in little additional cost, and evidence to date shows that the model is more efficient and effective at delivering value for money.
Another franchising model in Jersey encourages both operators and local transport authorities to reinvest into the bus network. The operator keeps fare revenue, and profits that go over a certain set limit are shared between the LTA and the operator. Money is then reinvested by the LTA to improve services. The model adds flexibility and actually supports innovation and draws on the experience of the operator. This model has been tested in other areas through our franchising pilot programme.
The Bill makes some limited changes to the role of traffic commissioners in England, including changing the default position for the registration of services operating under the service permits within a franchised area. The traffic commissioner will also have powers to act against operators who breach the Bill’s mandatory training requirements; we will come on to that later in the Committee’s debates.
The presence of traffic commissioners across the regions and countries of Great Britain means that they are well placed to make decisions about the operation of bus services in different places. The responsibility of traffic commissioners extends beyond buses. To mention just a couple, it includes the licensing of operators of heavy goods vehicles and other service vehicles, and the granting of vocational licences. These responsibilities clearly extend beyond the Bill’s purpose; this Bill is not the place for a wider debate on the role of traffic commissioners.
I reiterate that passengers are at the very centre of this Government’s bus reform agenda. This is about delivering better buses, and people taking the bus more because they offer better connections and are reliable, safe, affordable and integrated into the transport network. Given that, I would ask the hon. Member for Broadland and Fakenham not to press his amendments.
Government amendments 4 and 5, tabled in my name, are intended to provide clarity on the type of services considered “cross-boundary” under clause 7. This means that any service that has at least one stop in an area with a franchising scheme, and at least one stop outside of the franchised area, will be considered a cross-boundary service. This change is logical, simplifies matters for franchising authorities and operators, and will ensure that the benefits of cross-boundary services to multiple communities can be considered, regardless of where the service starts and ends.
Clause 7 gives local authorities greater flexibility in how they access service permit applications from operators. These permits allow bus operators to run services into, or within, a franchised area on a commercial basis, rather than as a franchised service. The Bill introduces new tests that local authorities can use when deciding whether to approve a service permit. These tests allow them to consider a wider range of factors, such as whether the proposed service would benefit passengers outside the franchised area in the case of cross-boundary services.
It is important that franchising authorities are able to benefit from the opportunities that the commercial sector can provide in franchising areas, including for cross-border services, which are those serving a franchising area and nearby areas. These services are important, as the bus journeys that passengers want to make are not necessarily defined by scheme boundaries. This measure aims to give franchising authorities greater flexibility to provide better overall outcomes for passengers.
Clause 8 reapplies the requirement for bus services operating under a service permit in a franchised area to register their routes and timetables with the traffic commissioner. For cross-boundary services, the section of the route outside the franchised area already needs to be registered. The Bill clarifies that the part inside the franchised area also needs to be registered. This keeps the requirements consistent and easier for bus operators to follow.
In addition to the registration requirements, cross-boundary services and any services operated, under permit, wholly within the franchised area, such as sightseeing tours, must also still comply with the conditions of their service permit. This lets franchising authorities maintain control through existing regulations. However, the Bill also gives franchising authorities the power to exempt certain services from registration inside the franchised area if they would prefer to manage them solely through the service permit. Overall, these changes provide clearer rules for operators and authorities, and greater flexibility for authorities, helping to improve service delivery for passengers.
Clause 9 automatically exempts temporary rail and tram replacement services from the requirement to obtain a service permit when operating within a franchised area. As I am sure Members will understand, these services often need to be introduced quickly and to adapt to changing circumstances, so flexibility is essential. By removing the permit requirement, this measure reduces administrative burdens and saves both operators and franchising authorities the time and costs associated with applying for and issuing permits.
Jerome Mayhew (Broadland and Fakenham) (Con)
It is jolly nice to see you in the Chair, Sir Desmond. As I spoke to the amendment before lunch, it falls to me now only to press it to a vote.
Question put, That the amendment be made.
The Chair
As amendments 49 and 50 are almost identical to the previous amendments, my discretion is not to proceed to a vote.
Amendments made: 4, in clause 7, page 4, line 10, leave out “but” and insert “and”.
This amendment and Amendment 5 widen the category of services that are capable of being cross-boundary services.
Amendment 5, in clause 7, page 4, line 11, leave out
“begins or ends, or begins and ends,”
and insert
“has one or more stopping places”.—(Simon Lightwood.)
This amendment and Amendment 4 widen the category of services that are capable of being cross-boundary services.
Clause 7, as amended, ordered to stand part of the Bill.
Clauses 8 and 9 ordered to stand part of the Bill.
Clause 10
Report on assessment of proposed scheme
Mr Paul Kohler (Wimbledon) (LD)
I beg to move amendment 57, in clause 10, page 6, line 6, at end insert—
“(A1) Section 123B of the Transport Act 2000 (assessment of proposed scheme) is amended in accordance with subsections (A2) to (A4).
(A2) In subsection (2)(a) omit ‘and’;
(A3) In subsection (2)(b), after ‘action’ insert—
‘, and
(c) assess the adequacy of central government funding to support the provision of bus services under the scheme.
(2A) The assessment under subsection (2)(c) must include—
(a) an evaluation of whether available funding is sufficient to meet the projected costs of the franchising scheme, and
(b) an analysis of the funding required to maintain or improve service levels across all affected communities.’
(A4) After subsection (6) insert—
‘(6A) An assessment under this section must be made publicly available and submitted to the Secretary of State.’”
This amendment to the Transport Act 2000 would require the Secretary of State to assess the adequacy of central government funding to support the provisions of bus services under franchised schemes.
The Chair
With this it will be convenient to discuss the following:
Amendment 59, in clause 10, page 6, line 37, at end insert—
“(11) The Secretary of State must, no later than three months after the day on which this section comes into force, lay before Parliament regulations specifying the qualifications and criteria required for a person to be considered an ‘approved person’ for the purposes of section 123D of the Transport Act 2000.
(12) A statutory instrument containing regulations under subsection (11) may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”
This is a probing amendment to inquire whether the Secretary of State intends to issue the criteria for the “approved persons” role in the near future. A report from an approved person must occur before a franchised scheme can go ahead.
Clause stand part.
Clause 11 stand part.
Government new clause 4—Miscellaneous amendments.
New clause 15—Franchising scheme: restriction—
“Where a franchising authority, or two or more franchising authorities acting jointly, prepare an assessment of a proposed franchising scheme under section 123B of the Transport Act 2000 but fail, for any reason, to make and publish a scheme under section 123H of the Transport Act 2000, they must not initiate another franchising assessment for the same area, or a substantially similar area, for a period of five years from the date on which the assessment was prepared.”
This new clause prevents franchising authorities from repeatedly conducting franchising assessments for the same or substantially similar areas within a five-year period if they do not proceed to make and publish a franchising scheme.
New clause 36—Franchising assessments to consider integration of public transport—
“In section 123B of the Transport Act 2000 (assessment of proposed scheme), at the end of subsection (3) insert—
‘(g) how the proposed scheme will allow for or facilitate integration across modes of public transport.’”
This new clause would require an assessment of a franchising scheme to include an assessment of the impact on integrated transport.
Mr Kohler
It is a pleasure to serve under your chairship, Sir Desmond. While I am broadly supportive of much of the Bill, we must not lose sight of the fundamental challenge—the lack of sufficient funding and expertise in local authorities to fully take advantage of the powers that it provides.
Steff Aquarone (North Norfolk) (LD)
It is a pleasure to serve under your chairship, Sir Desmond. I rise to speak to my new clause 36, but I will first touch briefly on my concerns about new clause 15, tabled by the hon. Member for Broadland and Fakenham.
I can see the case that the hon. Member and his colleagues are trying to make about the importance of periods of stability for bus operators. However, as my hon. Friend the Member for Wimbledon says, the timeframe proposed does not strike the right balance. Five years would be longer than the term of a metro mayor or local authority, meaning that the bad work of a previous mayor or administration could tie the hands of their successor and, most importantly, could leave residents stuck with the same problems for half a decade. Given the timeframes at play, I think a better compromise could be found. It would be bad news for democratic accountability if a previous administration’s botch job—or even intentional mismanagement, perish the thought—of a franchising assessment could prevent its newly elected successor for taking action over the entire course of its term.
I also have concerns about the impact of local government reorganisation under the current drafting of the new clause. It says that
“the same area, or a substantially similar area”
could be covered by a whole new authority or administration within the timeframe, where a franchising assessment is prevented. That means that a body that has been wholly abolished could leave its successors hamstrung.
I appreciate the intention behind the clause, and I am grateful to my constituency neighbour the hon. Member for Broadland and Fakenham and his team for raising the concerns of the industry about the timeframes. However, I wonder whether a compromise could be found on Report that better balances operators’ concerns with democratic accountability.
My new clause 36 would make a very simple addition to the assessments for franchising schemes, ensuring that we look into how a new scheme can lead to better integration for different modes of transport. People feel that there is a lack of joined-up thinking between our bus and train networks in many rural areas. Arguably, that is down to the current set-up, with two private companies responsible for services but under no requirement to consult or collaborate on delivering more linked-up services.
Joe Robertson
I take the hon. Member’s point about joining up buses and trains. As I am on the Committee, might he also include ferries in that analysis?
Steff Aquarone
I thank the hon. Member for his astute point. I would be glad to include ferries. After all, the new clause proposes better-integrated transport across all modes and modalities. We do not have any ferries other than river-crossing ferries in my constituency.
My constituents have found the issue of lack of co-ordination so frustrating that they have carried out research into it themselves; I thank David and James for furnishing me with the statistics. The first bus to arrive misses the first train of the day from Sheringham by a mere six minutes. For those who are not familiar with the Bittern line, it does not quite have central London regularity, which means that it is roughly an hour until the next possible train arrives. At other points during the day, there is either a 45-minute wait or hoping for a delay so that the bus arrives before the train departs.
A more joined-up approach would benefit both bus operators and train companies, allowing seamless integration of travel and reducing the miles in the journey to be carried out by car. My new clause would add to the franchising assessment the ability to see how franchising could make that transport integration a reality.
I do not think that franchising is a silver bullet to create integrated transport, which is why we will later consider an amendment that I have tabled that would add the enhanced partnership model. However, while we are expanding how franchising works, it would be remiss of us not to add common-sense thinking about integrated transport for those who are embarking on franchising for the first time.
I hope that the Government will accept the new clause. I add my support to what my hon. Friend the Member for Wimbledon said about amendment 57. We have got to fund it, too.
Jerome Mayhew
I will start with clause 10, to which explicit reference has not yet been made, and under which section 123D of the Transport Act 2000, which refers to auditing, is to be amended in accordance with subsections (2) to (8). Subsection (2) sets out that a franchising authority may not proceed with a proposed franchising scheme unless it has obtained a report from an “approved person” on the assessment of the proposed scheme.
The approved person—this is important—will replace the requirement to obtain a report from an auditor. We read, under the new drafting, that the approved person must be independent, but based on that drafting we have no idea what other qualities the approved person may or may not have.
Subsection (3)(c) requires the report to state whether the information relied on in the authority’s or authorities’ assessment is of sufficient quality for the purposes of the subsections, which I will not go into. Subsection (4) will replace section 123D(3); it states that the Secretary of State must issue guidance as to when it is appropriate to appoint an approved person and what the franchising authority needs to take into account when selecting an approved person, including in relation to whether a person is independent. Subsection (7) sets out that an approved person means a person specified in regulations by the Secretary of State.
That raises the question whether the local transport authorities have the technical know-how and/or financial competence to create and then run these franchises. That is the big question that we have been debating backwards and forwards over the past few days. We know that they are expensive; we know that they are complex. I will not rehash arguments that I have made already, which we can take as read. We know that it is crucial that any plans be fully developed, properly costed, stress-tested for viability and generally fit for purpose before we press go on an entirely new system.
The requirements of clause 10 are important in facilitating that stress testing. On the face of it, the clause appears to water down the independent oversight, particularly on financial management. One of the core risks of franchising, as we have discussed, is the transfer of commercial risk from the operator to the local authority. That is a very significant change—one of the most significant changes.
Here we are, having a report on the plans: we no longer need an auditor who is financially qualified. Instead, we have an approved person. It could be an auditor, but we just do not know. The only qualification that we are told the approved person will have is their independence. That is a good thing, but subsection (7) writes a blank cheque to Ministers:
“‘approved person’ means a person specified…in regulations made by the Secretary of State.”
We have not seen those regulations; I assume that they have not yet even been drafted. Perhaps the Minister will clarify the point. What specifications will he seek to put into the regulations?
If the Government want the Committee to vote in favour of substituting an approved person for an auditor, it behoves the Minister to tell us the kind of people who would qualify as an approved person, beyond their mere independence. I look forward to his detailed response, so that members of the Committee can feel satisfied that we are discharging their duty properly by understanding at least the direction of travel of the regulations.
I want to know what qualities, qualifications or expertise will be required. I question why the term is not defined in the Bill, but instead left to future regulations. It cannot be beyond the wit of man to sit down now and decide what kind of person we wish an approved person to be. It is not dependent on future information becoming available. It seems to be slightly sloppy drafting to define a term in reference to a future regulation—that is no definition at all.
Simon Lightwood
I will start with amendment 57, tabled by the hon. Members for Wimbledon and for North Norfolk, which would require the Secretary of State to assess the adequacy of central Government funding to support the provision of bus services under franchised schemes. Under the Transport Act 2000, franchising authorities are already required to undertake a rigorous assessment to determine whether bus franchising is feasible, affordable, and deliverable in their area. The franchising assessment and the independent assurance report must then be published alongside the franchising consultation, ensuring transparency regarding the local transport authority’s decision. That comprehensive planning and assurance process significantly reduces the likelihood of needing central Government oversight and intervention, making the amendment unnecessary.
The hon. Member for Wimbledon asked for an update on my Department’s engagement with relevant stakeholders to identify approved persons. Bodies in the accountancy sector could include the Chartered Institute of Public Finance and Accountancy, the Association of Chartered Certified Accountants and the Chartered Institute of Management Accountants. To identify who else may qualify as an approved person, the Department intends to hold discussions with other stakeholders, including the Chartered Institute of Logistics and Transport, the Chartered Institution of Highways and Transportation and industry bodies such as the Confederation of Passenger Transport.
My Department will also look at whether those with senior and extensive experience in either the bus sector or local government could provide assurance. Guidance will be provided to franchising authorities, setting out considerations to be taken into account when selecting an independent approved person. The reason why the clause is subject to future regulations is that qualifications will change over time, so it is right to have the flexibility to respond to those changes.
The core principle underpinning the Bill is that decisions should be made at the most appropriate level, specifically by devolving to local transport authorities the power to manage bus services within their area. The amendment would undermine the intention of the Bill. For those reasons, I hope that the hon. Member for Wimbledon will withdraw it.
Amendment 59, also tabled by the hon. Members for Wimbledon and for North Norfolk, is a probing amendment on whether the Secretary of State intends to issue the criteria for the approved person role within three months of Royal Assent. The Department intends to introduce secondary legislation defining “approved person” alongside updated bus franchising guidance to facilitate implementation of the new measures. That work cannot be completed within three months of Royal Assent, as it requires thorough engagement with the sector and the progression of a statutory instrument. The existing legislation will remain in force until secondary legislation is delivered; I hope that gives some reassurance. The Bill gives franchising authorities significant flexibility to specify services in ways that are tuned to the needs of local bus users. More detail on how franchising authorities can use that flexibility will be set out in guidance.
The purpose of clause 10 is to broaden the pool of persons able to conduct assurance reports of proposed franchising schemes. Under current legislation, authorities that have developed an assessment of a proposed franchising scheme must obtain an independent assurance report that looks at whether the assessment has been developed with robust financial and economic information and whether the analysis is sufficient. However, the requirement that the report be conducted by an “auditor” has meant that very few people are willing and able to carry out that assurance.
The clause seeks to remove the bottleneck and make the franchising process quicker and less costly and, by enabling expertise to be brought in from the wider industry, increase the quality of the independent review. It will also give a franchising authority more flexibility to decide when to appoint an independent assessor, allowing the assessor to provide informal feedback to the authority much earlier in the assessment process, potentially saving both time and money. The Department intends to set out further qualifications and experience in secondary legislation, which will enable a greater number of professionals to undertake assurance and remove the bottleneck that currently exists.
Clause 11 requires franchising authorities to consult disabled bus users, prospective users or representative organisations before making a franchising scheme.
Dr Allison Gardner (Stoke-on-Trent South) (Lab)
I am really heartened by clause 11 and I welcome it. I am sure the Minister agrees that consulting people who live with disabilities is vital for any future public transport service. Even with the best of intent, one cannot plan accessible services without understanding the lived experience of disabled users and the associated infrastructure.
Simon Lightwood
I completely agree.
The clause is intended to ensure that local transport authorities understand the perspective of disabled people and make franchising schemes that are better informed by the priorities of disabled passengers and take account of their needs more effectively. The clause sits alongside the schedule, which will introduce similar consultation requirements when authorities vary existing franchising schemes.
Government new clause 4 first corrects an issue in the Transport Act 2000. The Act currently states that when preparing a franchising assessment, authorities must consider the local transport plans of any neighbouring Scottish councils, which is unnecessary because Scottish councils do not have local transport plans. The new clause addresses the matter, while maintaining a requirement for franchising authorities to consider bus-related policies adopted by councils in Scotland. It will also require franchising authorities to consider whether a proposed franchising scheme would support the implementation of bus-related policies adopted by neighbouring Scottish transport partnerships, and require franchising authorities to consult Welsh Ministers and Scottish transport partnerships, where appropriate, as part of a consultation on establishing a franchising scheme. Finally, the new clause makes a technical change to define the term “council in Scotland” for the purposes of part 2 of the Transport Act 2000.
The Chair
With this it will be convenient to discuss the following:
Government amendments 7 to 16.
The schedule.
Simon Lightwood
Clause 12, alongside the schedule to the Bill, sets out new, bespoke variation procedures for authorities to follow when they wish to make changes to a franchising scheme. The procedures are clear and simple, to address the difficulties that franchising authorities have faced in interpreting existing legislation. They are also streamlined to enable franchising authorities to make minor changes in a more nimble way, balancing appropriate levels of consultation and transparency. This measure will reduce costs and timescales for franchising authorities in meeting the needs of local bus users.
Government amendments 7 to 10 to the schedule relate to the procedure for varying franchising schemes. Amendments 7 to 9 would have the effect of confirming that the requirements to consider the local transport plans of neighbouring authorities apply only where an authority is required to have such a plan. Scottish authorities are not required to have local transport plans. The amendments, however, clarify that a franchising authority must consider whether expanding the area of their franchising scheme would support the implementation of any other bus-related plans and policies adopted by Scottish councils. Amendment 10 will ensure that franchising authorities consider Scottish transport partnerships’ transport policies when assessing a variation to a franchising scheme, where relevant.
Government amendments 11 to 16 also amend the schedule and will require franchising authorities to consult with Welsh Ministers and Scottish transport partnerships before varying a franchising scheme that would affect them. In the case of Wales, that is in addition to the requirement already in the Bill for Welsh local transport authorities to be consulted, where relevant. It is also appropriate to consult Welsh Ministers in the light of the Welsh Government’s Bus Services (Wales) Bill, which is before the Senedd. The amendments future-proof the Bill, given the Welsh Government’s ambitions to franchise their entire bus network.
The schedule sets out the detailed procedures for varying an existing franchising scheme. There are separate procedures for variations to extend the geographical area of a scheme, reduce the area of a scheme, and other types of variation. There are three parts to the schedule, setting out the specifics of the different procedures, depending on whether a variation is expanding or reducing a scheme.
Jerome Mayhew
Clause 12 amends the Transport Act 2000 to set out the new process for varying a franchise scheme. In particular, subsection (2)(b) removes the minimum notice period of six months before a variation can come into effect. I will not seek to divide the Committee on this, but what assessment has been undertaken of the impact of a reduced notification period on service providers? What confidence can the Minister give current service providers that the impact will be minimised? What was the original rationale for the six-month delay, and what has changed to remove the need?
Government amendments 7 to 10 are sensible clarifications to ensure that the requirement to consider policies under section 108(1)(a) of the Transport Act applies only where such policies are mandatory. I fully agree with them. Government amendments 11 to 16 tidy up the requirement for consultation with the devolved Administrations in Wales and Scotland, where a proposed franchising scheme under amendments 11 and 12, or a variation of an existing scheme under amendments 13 to 16, would affect the devolved area. Again, that is a sensible clarification that needs no further elaboration.
Simon Lightwood
I have already explained our position.
Question put and agreed to.
Clause 12 accordingly ordered to stand part of the Bill.
Schedule
Procedure for varying franchising scheme
Amendments made: 7, in the schedule, page 44, line 29, leave out
“by neighbouring relevant local authorities of”.
This amendment, together with Amendment 8 and Amendment 9, ensures that the requirement to consider policies under section 108(1)(a) of the Transport Act 2000 applies only where authorities are required to have such policies.
Amendment 8, in the schedule, page 44, line 30, before “those” insert
“by neighbouring local transport authorities of”.
See the statement for Amendment 7.
Amendment 9, in the schedule, page 44, line 31, before “other” insert
“by neighbouring relevant local authorities of”.
See the statement for Amendment 7.
Amendment 10, in the schedule, page 45, line 14, at end insert—
“(ba) a Transport Partnership created under the Transport (Scotland) Act 2005,”.
This amendment requires a franchising authority to consider the policies of a neighbouring Scottish Transport Partnership when assessing a proposed variation of a franchising scheme.
Amendment 11, in the schedule, page 46, line 39, at end insert—
“(ea) the Welsh Ministers if, in the opinion of the authority or authorities, any part of Wales would be affected by the proposed variation,”.
This amendment requires consultation with the Welsh Ministers before a franchising authority varies a franchising scheme where the variation would affect any part of Wales.
Amendment 12, in the schedule, page 47, line 13, at end insert—
“(ea) a Transport Partnership created under the Transport (Scotland) Act 2005,”.
This amendment requires consultation with a Scottish Transport Partnership before a franchising authority varies a franchising scheme where the variation would affect any part of the Partnership’s area.
Amendment 13, in the schedule, page 49, line 22, at end insert—
“(ea) the Welsh Ministers if, in the opinion of the authority or authorities, any part of Wales would be affected by the proposed variation,”.
This amendment requires consultation with the Welsh Ministers before an authority varies a franchising scheme where the variation would affect any part of Wales.
Amendment 14, in the schedule, page 49, line 38, at end insert—
“(ea) a Transport Partnership created under the Transport (Scotland) Act 2005,”.
This amendment requires consultation with a Scottish Transport Partnership before a franchising authority varies a franchising scheme area where the variation would affect any part of the Partnership’s area.
Amendment 15, in the schedule, page 51, line 11, at end insert—
“(ai) the Welsh Ministers if, in the opinion of the authority or authorities, any part of Wales would be affected by the proposed variation;”.
This amendment requires consultation with the Welsh Ministers before an authority varies a franchising scheme where the variation would affect any part of Wales.
Amendment 16, in the schedule, page 51, line 39, at end insert—
“(ea) a Transport Partnership created under the Transport (Scotland) Act 2005,”.—(Simon Lightwood.)
This amendment requires consultation with a Scottish Transport Partnership before a franchising authority varies a franchising scheme where the variation would affect any part of the Partnership’s area.
Schedule, as amended, agreed to.
Clause 13
Direct award of contracts to incumbent operators
Siân Berry (Brighton Pavilion) (Green)
I beg to move amendment 34, in clause 13, page 8, line 5, after “operators” insert—
“or local government bus companies”.
This amendment, along with Amendments 35, 36 and 37, would mean that franchising authorities may directly award public services contracts to local government bus companies.
The Chair
With this it will be convenient to discuss the following:
Amendment 72, in clause 13, page 8, line 7, leave out paragraphs (a) to (c) and insert—
“(a) either the contract is a local service contract in relation to a franchising scheme, or
(b) the contract is awarded to a local authority bus company.”
Amendment 35, in clause 13, page 8, line 12, after “operator” insert—
“who is a local government bus company or”.
Amendment 36, in clause 13, page 8, line 27, after “operator” insert—
“or local government bus company”.
Amendment 37, in clause 13, page 8, line 37, after “regulation,” insert—
“‘local government bus company’ has the meaning given in section 22 of the Bus Services (Amendment 2) Act 2025 and”.
Clause stand part.
Siân Berry
It is a pleasure to serve under your chairmanship today, Sir Desmond. I am delighted to present a number of amendments to clause 13. The clause should be in the Bill; I can clearly see why we would want to directly award a contract to an incumbent to keep an existing contract going. This seems to me to be the ideal place to insert the opportunity to make a direct award to a local government bus company, the new type of body set out in clause 22—I believe that would be a really good move.
I have tabled several amendments to add the words “or a local government bus company” in order to make the whole thing make sense. Amendment 34 would add “local government bus companies” to the title of the proposed new regulation in the Public Service Obligations in Transport Regulations 2023; amendment 35 would add the choice of a “local government bus company” to the direct award options; amendment 36 would add the name of the local government bus company to the information required; and amendment 37 would add reference to the definition of a local government bus company as set out in clause 22.
We need these changes to help make integrated local transport planning simpler and less bureaucratic. There are many examples of hugely successful publicly owned bus companies across the UK, including Lothian Buses and Reading Buses. The publicly owned Nottingham City Transport bus service is consistently ranked one of the best in the country.
Councils operate very differently from the wider market. They have strict budgetary restrictions and costly rules of commissioning. That means that, without explicitly making it easier for local authorities to take advantage of the new powers in the Bill, we might just be going through the motions. These changes are necessary in order to really incentivise local authorities to get involved in providing transport, not just in planning for it. To have real weight, the Bill must make it easier for local councils to make direct awards. That would mean that they could transform local services more efficiently for the passengers who need them, which would be of real public benefit.
The tools for local authorities to do this actually already exist in secondary legislation. Regulation 13 of the Public Service Obligations in Transport Regulations states:
“(1) A competent local authority or a group of authorities providing integrated public passenger transport services may—
…(b) award a public service contract directly to an internal operator.”
If we made these amendments to the Bill, I believe that the wording in the regulations would automatically change to include the terminology “a local government bus company”.
I would really like the Government to consider making the amendments, or to take up the point in some other way. In order to plan and deliver local public transport, councils and local transport authorities must be able to act in this way. We should not simply rely on the existing regulations; we should state the powers explicitly in the Bill.
Amendment 72 is not in my name, but I note that it covers much the same ground.
Jerome Mayhew
Clause 13 amends the Public Service Obligations in Transport Regulations 2023 to allow franchising authorities to make a direct award for the first local service contract under a franchising scheme to the “incumbent operator”—that is the important phrasing. The intention, as I read it, is to allow for a smooth transfer of operations to the new scheme, where the qualifying conditions are met. Proposed new regulations 16A(1)(a) and (b) specify that the award must be of a local service contract within the franchising scheme and where no local services are currently provided. Proposed new regulation 16A(1)(c) sets out that the operator must have provided the same or similar services for at least three months prior to the new contract.
I acknowledge the objectives of the clause, but I am concerned that it raises more issue than it addresses. The approach could look like a cosy agreement, which is a theme that I have addressed a couple of times today. Where we are awarding a further contract to an existing contractor, without going to market or tendering more widely, there is a perception, if not a reality, of a cosy agreement. It cuts out competition and favours one operator over the others, and it is not just for a short period; it is for a period of up to five years, as set out in clause 13(3).
The likelihood of a challenge from other bus operators in the area, who are angry about being excluded, may well be quite high, yet proposed new regulation 16A(2) requires the local transport authority to publish information relating to the contract only within six months of granting the direct award. We therefore have a transfer that may look like a sweetheart deal between the local transport authority and the existing service provider, which may be the municipal bus company but could equally be a private provider, while the judicial review, which is the mechanism by which an external aggrieved party can challenge that decision, has an application deadline of three months—12 weeks. Under the clause, the requirement to publish the information on which that judicial review could be based falls fully three months after the judicial review deadline, so there is a problem with the timings set out in the Bill.
What is the point of publishing the information in subsection (3) six months after the date of the award? Other operators cannot go to judicial review, because the deadline has already passed, so what use is it and to whom? I have a simple question for the Minister. What process should operators follow to challenge a sweetheart deal, as they obviously should be able to do? If the information is six months’ old, it cannot be through judicial review, because they will not have been provided with the information before the three-month deadline.
What process do the Government recommend that operators should follow, and what information will be available to them? What is the reason for such a long delay in providing information? The information is there from day one, because the local authority and the existing provider will have signed a contract, so all that needs to be done is publish it. What governance provisions will be in place to guard against improper preference, because it may well feel like that has been involved to excluded competitors looking in from the outside? They need to have extra special confidence that there is sufficient governance in place to guard against that, especially if the provider is a municipal bus company, for the obvious reason that they have skin in the game—I will not rehearse that argument.
Amendment 72, tabled by the Green party, would have an effect similar to amendments 34 to 37 by removing the ability to grant a contract to a private operator working outside a franchising scheme—for example, in an enhanced partnership.
Jerome Mayhew
I am so sorry—it is in the name of the hon. Member for Middlesbrough and Thornaby East (Andy McDonald).
I will therefore address amendments 34 to 37, which would allow for a direct award to local government bus companies. I fully understand the rationale behind the Bill, but looking at clause 13, I do not think that that award is excluded by the current drafting, because the term of art is “operator”, and a public bus company could be an operator.
Siân Berry
For clarity, the intention behind my amendments is not to allow for incumbent operators that are local government bus companies to be added to the Bill; it is to ensure, completely separately, that any local bus company at any time, or an incumbent operator, can be given a direct award.
Jerome Mayhew
That was absolutely not clear from the drafting, and I do not feel able to support such opaque drafting. It would not be right to slip in five words and change the whole meaning of the clause. Perhaps it would be better to draft a new clause; I suspect the hon. Lady has time to do so before the end of the Bill’s consideration.
Simon Lightwood
I thank the hon. Member for Brighton Pavilion for tabling amendments 34 to 37, but the Bill already enables the direct award of franchising contracts to local authority bus companies.
Clause 13 allows for the direct award of franchising contracts to incumbent operators under specific conditions that are set out in the Public Service Obligations in Transport Regulations 2023. It would reduce transitional risks for local government authorities and operators when moving to a franchised network. It applies equally to private operators and LABCos. If a LABCo is an incumbent operator, it could absolutely be directly awarded a franchised contract under the clause, as could a private operator, if that was desired by the franchising authority. Clause 13, therefore, already allows franchising authorities to direct awards to LABCos.
Amendment 35 would allow a franchising authority to direct awards to a LABCo that is not an incumbent operator. For good reasons, clause 13 includes a restriction on direct awards to incumbent operators—that is, that any operator providing local services in an area immediately before a franchising scheme is made has been doing so for at least the three months prior. Those reasons include providing a stable and controlled contractual environment for staff and assets during a transition, while providing continuity of services to passengers. It also means that operators are established in, and familiar with, the area. That greater operational knowledge will help to drive more effective long-term procurement of competitive franchise contracts through data collection and sharing.
Those benefits are most likely to be achieved by franchising authorities working in areas with operators that have an established and reliable presence in the network and with whom they have established effective working relationships. I therefore hope the hon. Member for Brighton Pavilion will withdraw her amendment. Clause 13 already provides most of the powers she seeks, and keeping the incumbent element is an important part of ensuring some of the core benefits of the measure.
Siân Berry
I very much appreciate that my amendments would do different things from clause 13, and I also appreciate that the Public Service Obligations in Transport Regulations 2023 provide the ability to make a direct award to an internal operator at other times. However, I worry that if we do not make sure that we have that ability in primary legislation—I cannot find it elsewhere in the Bill—there is a risk that private companies will issue legal challenges against direct awards. That is the key thing that I would like the Government to address, potentially in a different clause.
Simon Lightwood
I simply do not feel that that is necessary. The way in which it is set out is clear enough.
I thank my hon. Friend the Member for Middlesbrough and Thornaby East for tabling amendment 72. Clause 13 allows for the direct award of initial franchising contracts to incumbent operators under specific conditions that are set out in the Public Service Obligations in Transport Regulations 2023. In doing so, we aim to reduce transitional risks for local transport authorities and operators when moving to a franchised network.
Clause 13 applies equally to private operators and LABCos. If a LABCo is an incumbent operator, it could be directly awarded a franchised contract under the clause. For good reasons, clause 13 includes a restriction on direct awards to incumbent operators only—that is, that any operator providing local services in an area immediately before a franchising scheme is made has been doing so for at least the three months prior. Those reasons include providing a stable, controlled, contractual environment for the transition of staff, as I have mentioned.
Clause 13 enables franchising authorities to directly award the first franchising contracts to incumbent operators. That is not about shutting out competition; it is about providing a stable, controlled environment to manage the transition to a franchising model. Long-term franchise contracts will be competitively tendered in the usual way.
Franchising authorities may wish to use the direct award measure to help to manage the transfer of staff and assets, gather data to inform future franchise contracts, and provide flexibility to stagger the tendering of competitive franchise contracts at different times. It may also help to support small and medium-sized enterprise operators to gain experience in a franchising model.
Direct award can be used only under specific conditions. For example, direct award contracts have a maximum duration of five years and are only for net cost contracts. In many cases, a shorter duration will be appropriate. Further, only the incumbent can receive a direct award contract for the same or substantially similar services.
Siân Berry
I do not; I just hope that the Government realise what I was trying to do. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 13 ordered to stand part of the Bill.
Clause 14
Socially necessary local services
Mr Kohler
I beg to move amendment 66, in clause 14, page 9, line 23, at end insert—
“(4B) When the list of socially necessary local services required by subsection (3)(ba) is reviewed or amended, the relevant authority or authorities must—
(a) assess the overall adequacy of the existing network of local services in their area or combined area in enabling passengers to access essential health settings, education, goods and services, economic opportunities, and social activities;
(b) identify any gaps in the provision of socially necessary local services across the network and where existing services are insufficient, absent or cause a material adverse effect on passengers' ability to access those goods, services, opportunities, or activities;
(c) describe what further action the authority or authorities intend to take to address any identified gaps including, where appropriate, proposals for new or altered services, with timelines for implementation, and consideration of funding or alternative delivery models.
(4C) The authority or authorities must publish any assessment and proposals made under subsection (4B) after consulting—
(a) persons operating local services in the area or combined area;
(b) users of local services;
(c) NHS providers;
(d) education providers;
(e) local employers and businesses;
(f) people with disabilities; and
(g) any other persons whom the authority or authorities consider it appropriate to consult.”
This amendment would insert into the Transport Act 2000 a requirement for local transport authorities to review the adequacy of local services when considering changes to the list of socially necessary local services.
The Chair
With this it will be convenient to discuss amendment 64, in clause 14, page 10, line 34, at end insert—
“(7) The Secretary of State must, at intervals not exceeding six months, lay before Parliament a statement setting out—
(a) the number of socially necessary local services in England;
(b) the number of socially necessary routes that have their whole service cancelled;
(c) the average frequency of buses on socially necessary local services;
(d) the average number of days a week that socially necessary local services are in operation;
(e) total ridership on socially necessary local services; and
(f) the steps the Government is taking to improve the provision and reliability of socially necessary local services, their frequency, and bus ridership.
(8) For the purposes of subsection (7), ‘socially necessary local service’ has the same meaning as in section 138A of the Transport Act 2000.
(9) Each statement laid under this section must include data covering the six-month period immediately preceding the date of the statement.”
This amendment would require the Secretary of State to provide Parliament with a bi-annual statements including information of socially necessary local bus services and steps the Government plans to take to address any identified issues.
Mr Kohler
Clause 14 is a vital provision in the Bill that seeks to strengthen the provision and protection of routes that are deemed socially necessary. I will begin by addressing the amendments tabled by the Liberal Democrats, before turning to others.
Although I fully support the principle behind clause 14, there are several areas where it can and must be strengthened to ensure that it functions as a genuinely effective tool for safeguarding essential bus services. Under the clause, the Transport Act is amended to require that local transport authorities maintain a list of socially necessary routes and review it from time to time. Crucially, there is no detail on how that review should be conducted. That lack of clarity risks rendering the duty vague and unenforceable.
Amendment 66 seeks to address that gap. It sets out how the review process should work, requiring that gaps in network coverage be identified and that changes to improve the network are actively considered. Importantly, it would also ensure that reviews and amendments take place in consultation with relevant stakeholders. That would embed transparency and accountability into the process.
Amendment 64 would require a biannual review by the Secretary of State of the level and condition of socially necessary services across the country. Given that local authorities will already be maintaining those lists, it is not an unreasonable burden. Rather, it would create national oversight and parliamentary scrutiny—something currently missing from the system. Having consistent data on ridership, frequency and cancellations would greatly improve transparency, inform better decision making, and keep socially necessary services at the forefront of Government planning and funding.
Amendment 39, tabled by the hon. Member for Brighton Pavilion on behalf of the Green party—
Steff Aquarone
I rise to speak to clause 14 and amendments 66 and 64, tabled by me and my hon. Friend the Member for Wimbledon.
I warmly welcome the clause’s protection of socially necessary services. I have spoken before about how important local bus services are for our rural areas, and I want to bring that to life because the term “socially necessary” does not do justice to the significance of those services. For many, a more accurate term would be “lifeline” services. They are absolutely vital for many small villages, and they are often far from profitable. Although they may not bring a grand economic boost to the operator or local authority, they bring a huge social benefit to the communities that they serve.
Jerome Mayhew
I rise to speak briefly in support of Liberal Democrat amendment 66, which inserts a requirement for local transport authorities to review the adequacy of the existing network of local services—through proposed new subsection (4B)(a)—and the requirement to identify any gaps in provision, through proposed new subsection (4B)(b). Proposed new subsection (4B)(c) states that what further action the local transport authority intends to take to address the gaps identified must be set out.
Proposed new subsection (4C) would require the authority to publish both the assessment and the resulting plan after the relevant consultation. It is clearly a good idea to identify the scale of opportunity in the local area as well as what is already available. Such good information would inform good future decisions, so I have no hesitation in supporting the amendment.
Amendment 64, which was also tabled by the Liberal Democrats, would require the Secretary of State to provide Parliament with a statement every six months with information on socially necessary services across a county and the number of whole routes cancelled, as well as frequency and days of the week. I am not supportive of it. Although I understand the rationale behind the amendment, and it would be interesting to have that information on a regular basis, it would be truly onerous to require the Secretary of State to provide that every six months for services right across the country. As with all things, when we are trying to design effective government, we have to balance benefit and cost. In my respectful view, such a requirement tips into being simply too onerous.
Assessments are, by their nature, local or regional, and I do not understand the practical utility of national reporting when the people who really need to know the information are in the local transport authority that would be providing the information in the first place. I therefore confirm my support for amendment 66 and my opposition to amendment 64.
Simon Lightwood
I thank the hon. Members for Wimbledon, for North Norfolk and for Chesham and Amersham (Sarah Green) for tabling a series of amendments to the clause. Amendment 66 would ensure that local transport authorities review their current local bus network to identify any gaps. I agree with hon. Members that it is important for local transport authorities to understand and know their networks. However, the desired effect of the amendment is already covered by the Transport Act 2000, which places a requirement on an authority to meet the needs of people living or working in their area. The local transport plan, which must be prepared by a local transport authority, is an important document that establishes the transport needs of local communities. Indeed, the existing measures in the Bill go even further than the 2000 Act by ensuring that members of the enhanced partnership work together to identify key socially necessary services, and to develop a robust plan in case any changes are proposed to them.
I turn to amendment 64. The Department already publishes large amounts of bus data through both the Bus Open Data Service and bus statistics on gov.uk. The Bill provides for even more data collection under clause 24, which specifically ensures that data collected by the traffic commissioner is shared with the Secretary of State. I therefore believe that the amendment is unnecessary. We already deliver a large amount of information to the public that can help them to understand all services operating in their area—not just socially necessary services—and may include many of the details listed in the amendment.
Siân Berry
I beg to move amendment 39, in clause 14, page 9, line 32, after “activities,” insert—
“(iv) health care services, or
(v) schools and other educational institutes,”.
This amendment would include services which enable people to access health or educational services in the definition of ‘socially necessary local services’.
The Chair
With this it will be convenient to discuss amendment 38, in clause 14, page 9, line 35, after “activities.” insert—
“(16) A service which was abolished in the 15 years before the day on which the Bus Services (No. 2) Act 2025 was passed may also be considered a socially necessary local service for the purposes of this section and section 138C.”
This amendment would mean that previous bus services could be considered as socially necessary local services.
Siân Berry
I am pleased to move an amendment that both I and Liberal Democrat colleagues had the idea of. The Liberal Democrats have withdrawn their version of the amendment, but we are essentially aiming at the same thing: to be specific in proposed new section 138A of the 2000 Act by specifically naming healthcare services, schools and other educational institutions as activities that we as a Parliament consider to be essential. I believe that that would really help transport planners to focus their efforts on those particularly essential services. It would strengthen the clause considerably.
In the past, I have worked with many young people who value bus services and feel undervalued when those services are not helping them to get back and forth to school. When they are not able to take part in after-school activities in the same way as their peers at the school whose parents can drive them back and forth, there is a social justice issue that deserves its own bullet point, as part of the clause.
I do not need to tell Members about the importance of public transport access to hospitals and other healthcare services. Later, we will discuss amendments pressing for the timing of older and disabled people’s bus passes to be extended so that they can access healthcare services with their free cards. The actual provision of the services is the absolute bottom line here, and they should be named. There is absolutely no reason for the Government to oppose my amendment.
Amendment 38 was originally proposed by my Green party colleague, Baroness Jones of Moulsecoomb, in the other place. It aims to include clearly in the definition services that have been cancelled. If this aspect of the Bill is to work effectively, it is essential that it works to undo the damage caused by cuts made in bus services, particularly local authority-supported ones since the start of the enormous austerity squeeze on local councils.
The proposed time period of 15 years in amendment 38 is no accident—it goes back to the start of austerity. Many figures show the loss of bus services around the country since the beginning of that period. For example, a Campaign for Better Transport figure shows that from 2012 to the second year of the pandemic, 2021, more than a quarter of all bus services across England, measured in vehicle kilometres, were lost. For the number of regulated services, which is a different measure of service capacity, the loss was 29%.
It will come as no surprise to my colleagues from the east of England that one of the regions with the biggest losses was the eastern region, alongside the north-west of England. The services lost were socially necessary, and they ought to be able to be defined as currently socially necessary, even if they do not exist. I commend both amendments to the Committee.
Jerome Mayhew
Amendment 39 would add healthcare services, schools and educational facilities to the list of socially necessary local services. The hon. Lady is, of course, right that those are important destinations for bus services—so important that they would without doubt come under the services side of the definition. Since the clause as drafted refers to enabling
“passengers to access…essential goods and services”,
the amendment is otiose.
I understand the political point that the hon. Lady is seeking to make through amendment 38 but, as drafted, nothing could be done with that information under the clause. In fact, the amendment would have a negative effect, because it would simply muddy the waters with historical data without being helpful in establishing the future direction of travel for local transport authorities.
Joe Robertson
It is a pleasure to serve under your chairmanship, Sir Desmond. I was planning to say a few words about amendment 39, but the shadow Minister has really said it: it not necessary to include healthcare services, schools and other educational institutes in the definition. Of course, I agree with the hon. Member for Brighton Pavilion that those things are important. I can think of dozens of important and socially necessary places where buses might go, but I would not propose to add them all to clause 14(2)(c), not least because when attempting to make an exhaustive list, it is always possible to leave things out, and there is great scope for argument over issues on the periphery that some people think are important and others do not.
The measure’s wording is broad. A “social necessary local service” is defined as one that allows passengers to access: “essential goods and services”, which is very wide; “economic opportunities (including employment)”, which is very wide; or “social activities”, which is also very wide. Plainly, healthcare services, schools and other educational institutes fall within those definitions, so the amendment is unnecessary. However, I welcome the hon. Lady’s highlighting those things, because healthcare and schools plainly rank very highly.
Mr Kohler
The Liberal Democrats strongly support amendment 39, which was tabled by the hon. Member for Brighton Pavilion. As has been said, it is remarkably similar to, if not the same as, an amendment that we tabled in the House of Lords. It rightly proposes to expand the definition of “socially necessary local service” to include routes that serve healthcare facilities. I recognise the argument that the existing definition already covers them, but we think it is important to explicitly include hospitals, GPs and clinics. Accessing healthcare is a social necessity that should be explicitly recognised in law.
The same is true of education. From conversations with my hon. Friends the Members for Westmorland and Lonsdale (Tim Farron), for Esher and Walton (Monica Harding) and for North East Hampshire (Alex Brewer), to name a few, I know that there are growing concerns about school and college bus routes being cut, leaving students unable to travel independently to their places of learning.
The Government may argue that such services are already included under the definition but, if that is the case, why not make that explicit? Clarifying it in statute would only strengthen the Bill and provide clearer guidance for local authorities.
Simon Lightwood
Amendment 39 is not necessary as this issue has already been addressed during debates on the Bill in the other place. At the time, my noble Friend the Minister for Rail made a statement on the Floor of the House to the effect that the definition of a socially necessary local service encapsulates access to healthcare and schools as “essential goods and services”. I hope that that reassures the hon. Member for Brighton Pavilion about the Government’s intention. That being said, the Government will produce official guidance for local authorities on the issue of socially necessary local services. That guidance will refer to healthcare services and educational institutions as constituting “essential goods and services”.
Amendment 38 would expand the definition of socially necessary local services to include services that have been abolished in the past 15 years. In addressing it, we should consider the practical issues. A service that has been cancelled in the past 15 years may no longer meet the current needs of the community, which change over time. Furthermore, it is possible that previous services may have been folded into newer and more relevant bus routes. For those reasons, the amendment might not yield the expected beneficial outcomes.
That is by no means a prohibition or limitation on the powers of local transport authorities, however. As local transport authorities continually evaluate the needs of their communities, they still retain the power to consider implementing services along former routes, if they believe that doing so would address the needs of their communities. The amendment is therefore not necessary, so I ask the hon. Member for Brighton Pavilion not to press it.
Siân Berry
On a point of clarification, clause 14 adds proposed new subsection (15)(b) to section 138A of the Transport Act. The measure is quite specific that a current service is envisaged—it refers to a service “if cancelled”. Amendment 38 would respond to that by making sure that recently cancelled services were covered. Such services might have been taken away because operators anticipated the risk that they would be defined as “socially necessary”. Can the Minister reassure us on that point?
Simon Lightwood
I did not give way, but I appreciate the hon. Member’s additional comments.
Simon Lightwood
It is fine. I do not believe that the amendments are necessary.
Siân Berry
I do not. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr Kohler
I beg to move amendment 54, in clause 14, page 10, line 26, at end insert—
“(4A) Where a socially necessary route has been identified in accordance with section 138A(15) of the Transport Act 2000, and no alternative operator has implemented the service within a period of six months, the relevant local authority must take reasonable steps to implement a service on the socially necessary route as far as is reasonably practicable.
(4B) Where a local authority has established a socially necessary service in the absence of alternative operators, the local authority must publish a report on the establishment and operability of the service within six months, which should include, but not be limited to—
(a) the scope and nature of the service;
(b) the estimated operating costs of the service and any identified funding gaps;
(c) the impact of the service on local accessibility and transport needs;
(d) a timeline for the operation of the service;
(e) where the local authority is unable to meet the financial burdens of operating the service within six months of establishing that service, a statement specifying the extent of the financial shortfall.
(4C) Where a local authority makes a statement under subsection (4B)(e), the new burdens doctrine applies to the provisions of this section and the Secretary of State must consider providing appropriate financial support to the local authority to ensure the service can be delivered.
(4D) Within six months of the passing of the Bus Services Act 2025, the Secretary of State must publish guidance on what funds will be available for the purposes of subsection (4C).
(4E) A service established under these provisions is a local service operated by a local government bus company as defined by section 22(5).”
This amendment would place a duty on a relevant local authority to implement a socially necessary service should alternative operators fail to do so, with provisions for financial support if needed and the possibility of transferring responsibility to an alternative operator once the service is established.
The Chair
With this it will be convenient to discuss amendment 74, in clause 14, page 10, line 34, at end insert—
“(7) The Secretary of State must, within 12 months of the passing of this Act, lay before both Houses of Parliament proposals for a scheme that would guarantee a service for socially necessary services where—
(a) no operator has implemented the service for a period of six months, and
(b) the local transport authority is unable to run the service.
(8) The Secretary of State must, when publishing their proposals for a scheme under this section, also provide guidance on how the scheme would be funded, including the criteria which would be used for assessing qualification for the scheme.
(9) Within a month of producing the proposals, the Secretary of State must ensure that time is made available in both Houses of Parliament for a substantive debate on the proposals.”
This amendment would require the Secretary of State to bring forward proposals for a scheme that would guarantee services for routes identified as socially necessary where no operator has implemented the service and the local transport authority does not have the capacity to do so.
Mr Kohler
Amendments 54 and 74 would establish a real safety net for socially necessary routes. Amendment 54 would place a duty on local authorities to step in to deliver a service when no commercial operator will do so, while placing a reciprocal duty on the Government to provide financial support to enable it. Amendment 74 would complement that by requiring the Secretary of State to create a formal funding mechanism for such services. The mechanism would include clear eligibility criteria, ensuring that local authorities could not designate routes as socially necessary arbitrarily, but must demonstrate clear social need. Together, the amendments would ensure that essential routes do not disappear due to market failure. They offer a practical, balanced solution to a growing problem, and I urge the Committee to support them. If we believe that these routes are socially necessary, we must find a mechanism to ensure that they are provided.
Jerome Mayhew
The Liberal Democrats’ amendment 54 would place a duty on local transport authorities to identify and then satisfy the need for all—and I stress “all”—socially necessary services, irrespective of supply, under an enhanced partnership. The amendment does not explain how the services would be supplied by the local authority—presumably, there would be a tender process—but it would require the authority to produce a report within six months. That report would identify the need, estimate the costs of provision and associated funding gaps, estimate the impact of a new service
“on local accessibility and transport needs”,
provide
“a timeline for the operation of the service”,
and specify local funding shortfalls. That measure, if adopted, would be a truly revolutionary departure for the identification of local need and subsequent funding, because it would hand demand assessment to the local authority, but the cost of provision to the Secretary of State. What could possibly go wrong? I genuinely look forward to the Minister supporting the amendment and explaining how he will fund that.
The Liberal Democrats’ amendment 74 would require the Secretary of State to advance proposals within 12 months to
“guarantee a service for socially necessary services”,
where that service has been absent for six months and
“the local transport authority is unable to run the service.”
That is a second extraordinary proposal, because it would again place identification of need—according to the highly subjective definition of social necessity—in the hands of the local authority, but would give the Secretary of State a legal duty to supply that assessed need. It envisages the Department for Transport directly running individual routes that have escaped the design of the franchise network or the enhanced partnerships. Presumably, since the Department for Transport has to supply for that need, it will be liable for procuring, right across the country, individual routes that are not part of a wider contractual arrangement. There we have it: the Department of Transport directly running individual routes, spread across the country, independent of wider bus provision. It sounds to me like a recipe for disaster.
Steff Aquarone
Amendment 54 is a really important protection for the safe and necessary services that I described. The shadow Minister’s points perhaps highlight the issue of funding more generally in bus franchising and enhanced partnerships.
The amendment would ensure that steps are taken within six months of identifying a route as socially necessary to ensure that the route actually runs. It would also enable the Government to provide them with support and funding to ensure that the route is available, if the financial burden on the local authority is deemed too great. This is another useful protection for the socially necessary services to ensure that they are not another victim of the funding crisis in local government. I have already made clear how important these services are and why we have to ensure that they are protected.
Looking at the perilous financial position of our county council in Norfolk, I fear that there could come a point where that spectacular fiscal mismanagement means that they cannot afford to keep these services going. In that instance, I do not think that my constituents should be the ones who are punished. The Government should step in to protect their access to all the services and opportunities that a socially necessary service provides.
To conclude, I am pleased that the importance of bus services has been truly recognised in law. I am supportive of the sentiment and much of the drafting of the clause. However, if we accept the importance of these routes, we should not make a half-baked attempt to protect them. We should ensure that all important services are considered when deciding on socially necessary routes, and that there are strong protections for both these services and our communities that they serve.
Simon Lightwood
Amendment 54 seeks to establish a process for local transport authorities to implement a socially necessary service where no operator has decided to do so. However, I believe it is unnecessary, because legislation already exists to address that issue. Under section 63(1) of the Transport Act 1985 and section 9A of the Transport Act 1968, local authorities are already under a duty to secure public passenger transport services that they consider appropriate to meet the requirements of the area, and which would not otherwise be met. Clause 14 also sets out that enhanced partnership schemes must include a requirement to investigate alternatives that can be provided if a socially necessary service is cancelled or varied in such a way as to have a materially adverse effect on the ability of passengers to access necessary goods and services.
The amendment also places an obligation on local authorities to fund specific bus services. However, as I set out before, how local authorities choose to spend their funding is a matter for them. I reflect on previous comments from the Liberal Democrats about being all for devolution, but also liking to stipulate exactly how to do it from the national centre. Local authorities are best placed to make decisions on how and where to prioritise their local bus grant. Restricting the range of choices for how an LTA does so would go against the spirit of the Bill, and it is our aim to give more control to local leaders. I have outlined why I believe that the amendment is not needed, and I ask the hon. Member for North Norfolk to withdraw it.
Steff Aquarone
I am a little disappointed that the Minister did not address the shadow Minister’s accusation of passing the financial buck directly to Government in his response. The measure is fundamentally about funding to protect services. If the Minister is relying on sections in previous Acts of Parliament, the interpretation of those sections is not a given without specific reference, which the Bill does not make. I do not share the Minister’s confidence that those obligations will be upheld.
Simon Lightwood
I think it is sad that the hon. Gentleman does not share my confidence in local areas being able to shape their services.
I now turn to amendment 74, which is the final non-Government amendment tabled to clause 14. It seeks to ensure that there is a Government-backed scheme that will guarantee that all socially necessary local services continue to operate. As I am sure I have mentioned before, this Government have reaffirmed our commitment to bus services in the recent spending review by confirming around £900 million each year from 2026-27 to maintain and improve vital bus services. Allocations for that fund will be made through the bus funding formula, which already takes account of local need. The Department is also committed to review the current formula and ensure that it is allocated as fairly as possible. That will take place in due course.
Simon Lightwood
Again, it is local areas that are best placed to use the resources given to them. We do not have a magic money tree. I know that the Liberal Democrats have a supply of those, but unfortunately we do not. The Department is also committed to reviewing the formula and ensuring that the money is allocated as fairly as possible. That will take place in due course. Once the allocations are made, it is then for local transport authorities to prioritise their funding according to the needs of their communities. It is right that they make those decisions and Government should not be asked to intervene. I therefore ask the hon. Members to seek to withdraw this amendment.
Question put, That the amendment be made.
Simon Lightwood
I beg to move amendment 6, in clause 14, page 10, line 27, leave out subsections (5) and (6).
This amendment removes the requirement for the Secretary of State to carry out an assessment of the impact of ending the £2 bus fare cap and of the level of employer’s national insurance contributions.
Simon Lightwood
Subsections (5) and (6) of clause 14 were inserted by non-Government amendments in the Lords. This amendment seeks to remove those subsections. Clause 14(5) places a statutory duty on the Secretary of State to undertake an assessment of the implications of ending the £2 national fare cap on passengers’ ability to access socially necessary local services, as proposed in the Bill. Assessing the impact of the withdrawal of the previous fare cap on specific routes would be pointless while the current cap is in place. At the spending review, the Government took the decision to extend that cap to March 2027. Moreover, in February 2025, the Department published an evaluation of the first 10 months of the £2 fare cap. That showed that the cap delivered low value for money. Work is already under way to undertake a review of the £3 bus fare cap. Therefore, a legislative requirement for further evaluative work is duplicative and unnecessary. That subsection is also impractical. Socially necessary local services are a new measure introduced by this Bill; they were, therefore, not in place at the time of the £2 bus fare cap and could not, therefore, have any measurable effect on it. It will also take some time for local transport authorities to identify socially necessary local services.
Clause 14(6) places a statutory duty on the Secretary of State to undertake an assessment of how the level of employee’s national insurance contributions may impact on the provision of socially necessary bus services. That includes an assessment of how transport services for children with special educational needs and disabilities are affected. That subsection cuts across existing work of the Department for Education, which has committed to reform the special educational needs and disabilities system. It is also impractical because it is seeking to review three months after Royal Assent. Socially necessary local services are likely to take some time to be identified and agreed, making that assessment premature. I have explained why the Government are seeking to remove both subsections. Having explained why the Government are seeking to remove subsections (5) and (6), I turn to the remainder of clause 14.
Clause 14 introduces requirements in relation to socially necessary local services in areas with enhanced partnerships. Enhanced partnerships are statutory partnerships where local transport authorities and bus operators agree on binding goals to improve bus services in their area. This measure will require local transport authorities to identify the services that they consider socially necessary local services as defined in the Bill, and include them as a list in the enhanced partnership plan. Enhanced partnership schemes will need to specify requirements that apply when the operator of a socially necessary local service proposes to cancel or vary the registration of a service in such a way as is likely to have a material adverse effect on the ability of passengers to access essential goods and services, economic opportunities or social activities. Schemes must also require local transport authorities to consider whether any alternative arrangements may be made to mitigate the effects of cancellation or variation.
This will not require additional funding. In practical terms, local transport authorities and bus operators will be incorporating the measure into their established processes. Once the legislation has passed, we will be working with stakeholders to implement the measure. Local transport authorities must vary their enhanced partnership plans and schemes to comply with clause 14 within one year of its coming into force. We will be publishing guidance in due course to help local transport authorities and bus operators with the implementation of the measure.
Luke Myer (Middlesbrough South and East Cleveland) (Lab)
I support clause 14 and the Government’s proposed measures. Good decisions depend on good information, and in the East Cleveland part of my constituency we have seen far too many decisions made in a black hole of information, which has seen many routes disappear over many years. I now have many villages left in isolation.
It has fallen to local campaigners to step up and make the case that such routes are socially necessary, including through protests, rallies and so on, to try to save them. That is exactly what happened in the case of the Stagecoach 1 and 2 in my constituency, which was created as a result of a sustained campaign. However, that route is not sufficient, because it misses out certain villages and does not go down the high street in Brotton, for example. It also misses out several residents, of which one example is a lady called Norma Templeman who I promised I would mention in the House. She lives in North Skelton and is 87 years old. She said a few months ago:
“You have no idea how isolated this makes us golden oldies feel.”
I would never use such language to refer to her, because I think she is full of energy, even if she is 87. It should not fall to an 87-year-old lady to campaign to save and extend routes like the Stagecoach 1 and 2, or the demand-responsive transport service that she benefits from, which, again, runs out of money every few months, and there has to be a sustained campaign to try to save it. The entire model is inefficient.
I hope that the mayor in our region will seek to use the powers in the Bill and introduce a franchising model. So far, he is resistant to do that, so I ask for some clarity from the Minister on devolution—which we covered in the previous debate—with reference to clause 14. The principles set out in the various pieces of legislation on combined authorities, particularly the Local Democracy, Economic Development and Construction Act 2009, set out that the role of a combined authority is to act as it says on the tin: to be a combination of the local constituent member councils and their leaders. We have an odd situation in Teesside wherein the councils and their leaders want to have a franchising system but the mayor is resistant to doing so.
In the House on 14 May, I asked a Minister from the Ministry of Housing, Communities and Local Government whether the Government accept the principle of subsidiarity, wherein power should sit in the lowest possible tier of government and local communities should have the strongest say. The Minister accepted that principle in his response. He said that devolution should not just be
“a shift of power from Whitehall and Westminster to a regional or sub-regional body that is far away from communities and the local authority.”—[Official Report, 14 May 2025; Vol. 767, c. 135WH.]
He said the transfer of power is a good, but it is not the “whole job”, and communities should be able to “take control for themselves”. I hope that that is also the case when it comes to these powers. We should not have a mayor sitting above the community—above even the local authorities, which make up the LTA—and not using the powers and the funding that this Government are giving him to act.
For Norma’s sake, and the many Normas in all my communities and communities across the country, I support the clause and the Bill.
Jerome Mayhew
With your permission, Sir Desmond, I will deal with this in a slightly different order from that in which the Minister addressed it. I will deal with clause 14 in toto, and then look at Government amendment 6, which removes two subsections from the clause.
Clause 14 amends the Transport Act 2000 by requiring local transport authorities to identify and list services in the enhanced partnership area that are “socially necessary local services”—we have already discussed this at some length this afternoon—and then to specify requirements that must be followed if a bus operator of those services wishes to vary or cancel them. Subsection (2) amends section 138A of the Transport Act 2000, which talks about enhanced partnership plans and schemes, and it requires local transport authorities to identify and list socially necessary local services within their enhanced partnership plans—so far, so sensible.
The term is defined in subsection (2)(c), which inserts proposed new subsection (15) into section 138A and provides a definition of “socially necessary local service” as,
“a local service which—
(a) enables passengers to access—
(i) essential goods and services,
(ii) economic opportunities (including employment), or
(iii) social activities, and
(b) if cancelled, is likely to have a material adverse effect on the ability of passengers to access those goods, services, opportunities or activities.”
That is not necessarily a problem, but it is worth noting that this definition is quite subjective in its application. It is not easily measurable what such a service is, nor is it standardised between local authorities. The Minister will say, “Devolution will allow a thousand blossoms to bloom,” and I conceptually agree. However, I wonder whether, if we have different interpretations of the same term—“essential goods and services”—in different parts of the country, that raises a question about how the provisions will be applied across the board.
I understand the desire to devolve assessments to local need, but the determination does, after all, have commercial consequences for operators. As ever, where commercial opportunities are challenged or threatened, that brings with it a risk of legal challenge. That is why I raise the flag with the Minister—I am not going to do anything about it—that this is a potential future pitfall, where different local transport authorities apply the same definition differently.
If the Minister recognises that the definition is subjective, is he concerned about the risk of challenge? The route to formal challenge within an enhanced partnership structure would typically be by judicial review. Is there another form of challenge that the Minister would recognise as part of this process? What guidance will be given to local transport authorities in the assessment process? He referred to some guidance in his earlier responses; I saw him glance towards his officials. I would be grateful for more detail.
I think the issue can be dealt with through guidance, so it would be helpful to understand what form it will take for local transport authorities. Has that already been formulated? Either way, do we have an indication of when the guidance will be published? It is clearly an important document when looking to turn these concepts into practical policies.
Clause 14(2)(a) inserts new paragraph (ba) into section 138A(3) of the Transport Act 2000, requiring local transport authorities to identify which local services in their area are socially necessary services and to list those services in the enhanced partnership plan. Clause 14(2)(b) inserts new paragraph (4A) into section 138A of the 2000 Act, requiring local transport authorities to keep the list of socially necessary services under review and amend it as necessary. The idea here is presumably to ensure that the list of socially necessary local services reflects any sudden network changes in an enhanced partnership area. So far, so good.
Jerome Mayhew
No, I am pleased to say that I am not, Sir Desmond. Clause 14(6) makes specific reference to this. It was a requirement that was inserted into the Bill by the other place. I will read it to you:
“The Secretary of State must undertake an assessment of the impact of the level of employers’ National Insurance contributions on the provision of socially necessary bus services, including transport services for children with special educational needs and disabilities…and lay it before both Houses of Parliament within 3 months of the day on which this Act is passed.”
As such, this is fairly and squarely in the scope of not just the Bill, but this clause. Government new clause 6 would specifically remove that subsection, so I am setting the scene as to why that is a very bad idea.
We understand the effect, which will be a 15.2% increase in employment costs. If an employee works 780 hours on the minimum wage, they earn around £8,923, which is currently below the minimum threshold. In that instance, following the increase, the employer’s national insurance contribution will go from £0 to £678. That is the additional cost of that employment. Who will pay for that in a SEND contract?
The Chair
We are talking about the impact on the provision of necessary bus services, but you have strayed into taxis.
Jerome Mayhew
Thank you for that indication, Sir Desmond, but exactly the same arguments that apply to the providers of bus services for a fee also apply to taxis. You can insert the word “bus” whenever I have said “taxis”; exactly the same argument applies for both providers.
The additional cost of employing a part-time worker, such as a bus driver, in a bus company would be £1,303 per employee per annum, so we have a real problem. Bus providers—and others—are being swept up in the net of increased employer national insurance contributions. It is simply a fact that a large number of the school contracts will become unsustainable under the current format, yet no payments have been offered, either as part of this Bill or elsewhere, to compensate local transport authorities, county councils or whichever authorities are responsible for the provision of bus contracts for education and special education needs, even though the actions of this Government are making these contracts unsustainable.
Thousands of these contracts around the country will need to be handed back to local education authorities. Staff will be made redundant, causing a further shortage of drivers for passengers, and thousands more schoolchildren will be left without transport unless there is movement on this. There needs to be movement of one form or another. In an ideal world, bus SEND provision would be excluded from employer national insurance contributions. However, in the absence of that, an alternative form of funding must be provided, if it is still the Government’s desire that provision be made by local authorities for bus services for SEND children.
For this reason, subsection (6), which mandates a review of how the increase in national insurance contributions from 6 April will affect socially necessary bus services, including SEND transport services for children, is so important. The provision would mandate that the review be laid before Parliament within three months of Royal Assent. This is urgent. The negative impact has already started. We need movement from the Government, or there will be real problems that affect real people. Again, these are the most vulnerable in our society. I therefore oppose Government amendment 6, which inexplicably seeks to remove this necessary assessment from the Bill.
Ordered, That the debate be now adjourned.—(Kate Dearden.)