Second Standing Committee on Delegated Legislation
Tuesday 7 April 1998
[Mr. Barry Jones in the Chair]
Special Grant Report (No. 34): Metropolitan Railway Passenger Services Grant for 1998-99 (HC 656) and Special Grant Report (Scotland): Grant in Aid of Expenditure on Rail Services in the Strathclyde Passenger Transport Area (HC 660)
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The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Ms Glenda Jackson): I beg to move, That the Committee has considered the Special Grant Report (No. 34): Metropolitan Railway Passenger Services Grant for 1998-99 (HC 656)
The Chairman: With this it will be convenient to consider the Special Grant Report (Scotland): Grant in Aid of Expenditure on Rail Services in the Strathclyde Passenger Transport Area (HC 660)
Ms Jackson: This is the first time that I have had the privilege of serving under your chairmanship, Mr. Jones, and I look forward to what I have little doubt will be your firm and fair approach to our proceedings.
Passenger transport executives and their authorities play an important role in securing transport provision in the metropolitan areas outside London. They have a major statutory role in specifying local rail services and act as a joint franchiser with the franchising director. The role gives them funding responsibility for local rail service support in the metropolitan counties.
The special grant report before us sets out the measures that we are taking to ensure that PTEs in England obtain financial support, in 1998-99, for the cost of the local rail services that they secure they secure under the terms of their franchise agreements with the franchising director and franchisees. My hon. Friend the Minister of State, Scottish Office, will respond separately on the Scottish special grant report for Strathclyde passenger transport executive, which is also before the Committee.
The special grant will continue the approach used last financial year in applying a formula that will support expenditure on rail services by PTEs, including some resources for their rail-related administrative costs. We consulted on the report with the PTEs and other parties before it was tabled last month.
I now turn to the special grant report itself. Payments under the Report are to be made to the PTEs through their passenger transport authorities. The special grant, known as metropolitan railway passenger services grant, has three purposes. First, it will pay for the services secured by PTEs under franchise agreements. Those agreements secure local rail services in PTE areas which broadly reflect levels of service prior to franchising. The bulk of the special grant will be paid for that purpose. The second purpose of the grant is to pay the PTEs for some £6 million of direct costs that they will incur in securing those rail services. These costs included expenditure on administration, and on the advertising of rail services in PTE areas. The final purpose is to provide suppoort to Tyne and Wear passenger transport authority, to pay for the deficit of the Tyne and Wear metro and other public transport services; that support will total some £8.6 million. We estimate that special grant in England covering these three purposes, will cost in the region of £228 million this financial year. That is a cash reduction of some £22 million compared with the 1997-98 figure, reflecting both the reducing franchise payments and the increased revenue from passengers.
So far as the calculation of the grant is concerned, the franchise agreement sum payable by a PTE to an operator, referred to in the report as the PTE's relevant expenditure--subject to the calculations--will be met by special grant. Added to that sum will be another figure representing a PTE's direct costs. We then deduct from that total a PTE's deeds of assumption receipts, and, in the case of those PTEs retaining revenue risk on rail services, the estimated revenue from rail services that we have calculated that a PTE will obtain in this financial year. Deeds of assumption repay to the PTEs the outstanding written-down value of their past capital grants to the British Railways Board and Railtrack. In the case of those PTEs transferring revenue risk to the franchise operator, that is Greater Manchester PTE and West Yorkshire, the PTE will not obtain service revenues, so the calculation will simply be the relevant expenditure, plus direct costs, less deeds of assumption receipts. For those PTEs retaining revenue risk, an adjustment will be made in grant in 2000-01 to provide for the difference between the estimated revenues and the actual amounts achieved in the current year.
The report itself sets out its purposes. The first annex sets out the calculations that the Department will make to ensure that PTEs receive the correct sums of money to pay for the costs of the franchised rail services. I would add that the final PTE bills will be subject to audit. The second annex details the conditions surrounding the payments, including the provision of relevant information to the Department, and to auditors. The Secretary of State may withhold grant if a PTE has not used the grant for the intended purposes. The final annex describes the PTE's role, support for rail services in PTE areas, and the method for the grant calculation.
The report covers the financial year 1998-99, and it ensures that English PTEs will continue to receive support for the rail services that they have secured under the franchise agreements signed last year. I commend it to the Committee.
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The Minister for Home Affairs and Devolution, Scottish Office (Mr. Henry McLeish): I shall tidy up the business by briefly referring to the Scottish order.
I am grateful to my hon. Friend the Under-Secretary of State for the Environment, Transport and the Regions for explaining to the Committee the details of the special grant report for PTEs in England. The mechanism of the report covering Scotland is broadly the same.
There is one minor technical difference in that the Scottish report will ensure that the necessary moneys are paid to each of the 12 councils in the Strathclyde PTE area, in a different ratio, based on population. The report obliges those councils to pay the moneys to Strathclyde PTA for onward transmission to the SPTE to pay for rail services.
This mechanism is necessary as Strathclyde passenger transport authority is not a local authority in terms of the Local Government Finance Act 1992, under which this report is made. The special grant will, as per PTEs in England, allow SPTE to obtain financial support, in 1998-99, for the cost of the rail services within its area that have been secured under the terms of the ScotRail franchise agreement with the franchising director and the National Express group, the franchise operator. We also consulted on the terms of the report before it was tabled last month.
I am very pleased to be able to commend the report--for Scotland's only PTA--to the Committee. I do not propose to reiterate the details made by my hon. Friend of the method of calculation of the grant, but simply to say that the formula is the same in Scotland, with the costs of franchise and direct administrative costs being offset by deeds of assumption payments and estimated revenue.
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Mr. Bernard Jenkin (North Essex): I was not sure what to expect when the two reports were tabled because when such reports were tabled in the previous Parliament, much noise was generated from the then Opposition party. In 1995, the hon. Member for Hampstead and Highgate said that the grants were
``not to provide better services to the travelling public, not to support overstretched metropolitan authorities, but simply to fatten up our railway services for privatisation''--[Official Report, 18 July 1995; Vol. 263, c. 1508.].
Yet we have heard not a squeak of those sentiments today. Moreover, I am reminded that the hon. Member for Central Fife (Mr. McLeish) complained that when the Conservative Government paid out grants, they were
``bailing themselves out of a financial situation of horrific proportions''--[Official Report, 18 July 1995; Vol. 263, c. 1495.]
Is it not surprising that now that they are in office and see the success of railway privatisation, they have gone quiet and are using the same mechanisms that they condemned as wasteful under the Conservative Government.
We have no complaint about the grants and we shall not divide the Committee. However, I should like to clarify a few points. The Under-Secretary said that this year's grant was £228 million. In the old days the Labour party would have called that a cut of £22 million, but now it is a reduction. What are the equivalent figures for Scotland?
The Under-Secretary and the Minister said that they had consulted the passenger transport executives about the orders. Have the calculations been accepted by the executives? Are they happy with their allocations?
Will the Government continue to allocate grants based on what was originally a pro tem arrangement? It was intended that these grants should be incorporated into the block grant for local authorities. Have the Government reached the conclusion--which I dare to confess was now reached by the previous Government--that the present arrangement is a more satisfactory method of allocating grant?
The Minister of State may have already dealt with my final point. Are there any material changes in the methods of calculation and distribution of the Committee should be aware? They may be buried somewhere in the report, but have defeated our analysis so far.
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Sir Teddy Taylor (Rochford and Southend, East): I have some brief questions, but they are significant.
I am happy about the new unity that has been established in the Committee. It was appalling that we had so many political exchanges, with hon. Members shouting at each other, when we were discussing important railway services. I am sure that hon. Members of all parties are happy with the present situation, and especially about the remarkable progress made by privatisation.
My first questions relate to the cut of £20 million, which is a major saving for the Government. Are the Government committed to the continuation of that saving? My understanding of privatisation--which I certainly supported--was that government spending on railways would be reduced every year, instead of being increased, as it was in the past. Is that cut part of a general reduction which will be achieved by the efficiency of privatisation?
Secondly, how does the Minister keep in touch with the efficiency or rail services? That question is especially relevant in view of the laughter that followed one of the remarks made by my hon. Friend the Member for North Essex. Southend-on-Sea, which is not covered by these measures, is served by a privatised railway line that used to be called the misery line. As a regular traveller on that line--I travelled on it only yesterday--I can assure hon. Members that the service is now infinitely better. It is more reliable and there has been a remarkable improvement. [Interruption.] It may be that the Southend service is not typical and that the hon. Member for Nottingham, North (Mr. Allen) has a bad service. How do Ministers keep in touch with these matters? Do they think that efficiency has improved in any way?
During my service as Member for a Scottish constituency and then as Member for Rochford and Southend East, I have noticed that expenditure tends to be tighter south of the border. I am sure that no one has heard of the Barnett formula, whereby Scotland is given extra money for everything--which is nice and pleasant. That is covered by local goverment legislation and I understand that the Government intend to re-examine the Barnett formula following devolution. Is it correct that grants for passenger rail transport in Scotland are, on balance, greater than those south of the border?
In the past, Scotland had greater problems than those south of the border. Such problems have been partly removed, but it would be helpful if Ministers could explain whether the grants are decided differently north and south of the border.
Finally, will Ministers confirm that there are no plans to change the present structure? That would help to achieve happiness and unity in the Committee. We had terrible rows over privatisation. People handed out pamphlets telling us that privatisation was disastrous and that all kinds of horrible things would happen. Privatisation has been successful. It would reassure those who are running our railway services to know that the Government had no plans to make changes, and that they can continue to improve passenger services.
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