First Standing Committee on Delegated Legislation
Monday 29 March
[Mr. Bowen Wellls in the Chair]
Special Grant Report (Scotland) on Grant in Aid of Expenditure on Rural Public Passenger Transport for 1999-2000
4.30 pm
The Parliamentary Under-Secretary of State for Scotland (Mr. Calum Macdonald): I beg to move
That the Committee has considered the Special Grant Report (Scotland) on Grant in Aid of Expenditure on Rural Public Passenger Transport for 1999-2000 (HC 283).
The Chairman: With this it will be convenient to consider the Local Government Finance (England) Special Grant Report (No. 45) (Metropolitan Railway Passenger Services Grant 1999-2000) (HC 305) and the Special Grant Report (Scotland) on Grant in Aid of Expenditure on Rail Services in the Strathclyde Passenger Transport Area (HC 329).
Mr. Macdonald: Hon. Members will recall that, in the 1998 Budget, the Government earmarked additional support of £4.5 million per annum for rural public transport in Scotland. The measures demonstrate the Government's committment to improving the accessibility of transport in rural areas and, in so doing, combating social exclusion in rural areas.
In the first year of funding, local authorities invested £3.5 million in providing new transport services. The Government have recently received reports from councils detailing how that funding has been used. Improvements and enhancements range from additional bus services in Aberdeenshire and the Borders to increased inter-island ferry services in Shetland.
Local authorities have made a good start and so, in considering the distribution of funds for 1999-2000, we recognised the need for stability and continuity in the level of funding provided. The Convention of Scottish Local Authorities lobbied for such stability and continuity during our initial consultation exercise last year.
We therefore propose in the grant report for 1999-2000 that the total amount to be distributed to local authorities and individual council allocations remain the same as for 1998-99.
We wish to help scheduled bus services, but our funding package also targets other aspects of travel in rural areas. We are contributing £600,000 per annum to community transport projects; £400,000 per annum is being targeted at channelling assistance to remote rural petrol stations, in recognition of the financial difficulties that they face. That £400,000 is to assist with matters such as the cost of groundwater protection or replacing old fuel tanks. Such assistance was a distinctively Scottish feature in the application of funding from last year's Budget, which recognised that public transport may not be a viable option in some remote areas of Scotland, where car ownership and use is a necessity rather than a luxury.
I turn to the detail of the report. Paragraph 7 sets out the purpose for which the grant may be used. We have defined that purpose in a way that leaves local authorities considerable flexibility to apply the grant in ways that best meet their areas' needs. A clawback provision is included in condition 6 to cater for circumstances in which grant needs to be taken back by the Secretary of State.
Hon. Members will note that the report enables grant relevant to the Strathclyde passenger transport authority's area to be passed on to it, as the passenger transport authority is responsible for securing public transport services within that boundary. That approach is used because, under the Local Government Finance Act 1992, the Strathclyde passenger transport authority is not a local authority and therefore cannot receive grant directly.
Annex A of the report sets out the amount of grant to be paid to each local authority, and annex B sets out how grant paid to councils whose area is wholly or partly within the Strathclyde passenger transport authority's area should be divided. Annex C lists the conditions for issue of grant, and annex D describes the main features of how the amount of grant for individual local authorities was determined.
Our method for grant distribution involved excluding the four city councils and allocating a base amount of £25,000 to each of the remaining 28 councils. That was increased by a further amount determined by a council's share of Scotland's rural population, and by a measure of how dispersed a council's rural population was from the nearest town or village that could reasonably provide services for the community.
The report follows the format on which we consulted widely for the first report last year. COSLA has indicated that it is content with our proposals for the coming year's distribution. We shall monitor the effects of the grant, and a research project to evaluate the rural transport funding package will be commissioned shortly; an interim report is expected to be produced in October. That will help the Scottish Parliament to gauge for future years whether any changes need to be made to the grant distribution process, its effect on individual local authorities, and whether it wishes to rebalance spending in the fund.
The two railway services special grant reports set out the measures that we are taking to ensure that passenger transport executives—PTEs—obtain financial support in the coming financial year for the cost of the local rail services that they secure under the terms of their franchise agreements with the franchising director and franchisees.
The special grants will continue the approach used in the previous financial year by applying a formula that will support expenditure on rail services by the PTEs, including some expenditure on rail-related administration. We consulted PTEs and other parties about the reports before they were tabled earlier this month.
The English special grant report sets out the purposes for which the grant is to be paid. The first annex sets out the calculations that the Department will make to ensure that PTEs receive the correct sums to pay for the costs of franchised rail services. The second annex details conditions surrounding payments, including the provision of relevant information to the Department and auditors. The Secretary of State may withhold a grant if a PTE has not used it for its intended purposes. The final annex describes the PTEs' role and the method for grant calculation.
The mechanism of the report covering Scotland is much the same. There is a minor technical difference, in that the Scottish report ensures that the necessary moneys are paid to each of the 12 councils in the Strathclyde PTE area based on population. The report obliges those councils to pay the moneys to the Strathclyde passenger transport authority for onward transmission to the transport executive to pay for rail services. That is necessary because the Strathclyde PTE is not a local authority under the Local Government Finance Act 1992.
As with PTEs in England, the special grant will allow the Strathclyde passenger transport executive to obtain financial support in 1999-2000 for the cost of the rail services in its area that have been secured under the terms of the ScotRail franchise agreement with the franchising director and with National Express group, which is the franchise operator. We also consulted the Strathclyde PTA and others on the terms of the report before it was tabled earlier this month.
We estimate that the special grant payments for the Strathclyde PTA will add up to about £88 million in the coming financial year, which compares to payments adding up to £93.8 million in 1998-99, a saving of £6.8 million. Similarly, in England, the special grant will cost about £214 million for the coming financial year, compared to £220 million in the financial year coming to an end. Those reductions reflect the reducing franchise payments and the increased revenue from passengers. At the same time as the reduction in payments, one would expect there to be continuing improvements to the quality of services.
I hope that the Committee will accept the reports. I thank hon. Members for their patience, and I commend the reports to the Committee.
4.39 pm
Mr. Oliver Letwin (West Dorset): I do not intend to detain the Committee long. I have questions, some of which are minor, about the report on rural public transport in Scotland.
I may have misunderstood, but I believe that there is a minor error in paragraph 7(2) of the report. It states that
``a population of less than 10,000''
is required. The figure should presumably read ``1,000''. I am sure that there is a mechanism covering the correction or errors.
I turn now to the more important matters in annex C and, more specifically, in paragraphs 2(1)(a) and 6(b). Last year, I was involved in discussions with the Minister for Home Affairs and Devolution when he introduced an equivalent report. Our exchange concerned the question of annuality. Most of my remaining questions are related to that subject.
The Minister for Home Affairs and Devolution said at the time that the intention was to keep sums that councils had been unable to spend. He said:
``The intention is to keep that money hypothecated to rural public transport. There has always been concern in central Government that if money is lost it can be redistributed. That is the generality at present . . . we hope that local authorities will spend but, if they indicate to us their good intent, and a timetable, we should, we believe, allow them the flexibility that they seek.''—[Official Report, Second Standing Committee on Delegated Legislation, 29 July 1998; c. 9.]
In annex C, paragraph 2(1)(a), there again appears to be an annuality condition: the sum is to be given only if an authority can show that it intends and believes that it is able to use it within the year. Paragraph 6(b) states that a local authority must repay
``any special grant . . . not used in accordance with this Report.''
That, I understand, complies with the condition set out in paragraph 2(1)(a).
There would seem to be a strict annuality rule. Is that correct? If so, what has happened to the assurances given last year by the Minister's colleague? What happened last year? I understood the Minister to say that about £3.5 million was spent last year. Was that the total of what should have been spent last year, or was there an underspend? If there was an underspend, what has happened to it? It would be good to know that, not only because it relates to today's report, but because many of us are concerned about annuality. That includes the Minister for Education, Scottish Office, to judge from what she has told hon. Members serving on European Standing Committee B. Many of us are concerned that annuality should not prevail as the general rule for grant aid in the Westminster set-up, and there may be people of a similar persuasion in the Scottish Parliament.
With the report on the arrangements for the Strathclyde passenger transport area, I fear that I have hit the narrow limits of my intellect, and I am genuinely seeking guidance. A formula is given in paragraph 4(b) of annex A that seems to refer to the exposure of a transport authority's executive to revenue benefit and risk in 1999-2000. Those words warm the cockles of my heart at least, as they are presumably intended to offer an incentive to a public transport area to ensure that revenues are maximised.
I freely confess that I have probably not spent long enough on the matter to understand how annex C of the report on the Strathclyde PTA is articulated with annex A. However, on page 13, annex C says:
``In broad terms the amount of special grant which the Authority will receive will be equal to''
the equivalent of X, Y and Z and then
``its estimated revenue (that is to say, an amount equal to the revenue likely to be generated by fares charged to the public . . . minus''—
and this appears in paragraph (e) on page 14—
``an adjustment to convert from the figures for estimated revenue . . . in 1997/98 to actual revenue in 1997/98''.
That appears to be a classic K factor that adjusts back to actual revenues and does not lay revenue risk on the PTA. It ensures that the amount of its grant increases if revenue is less than expected and falls if revenue is more than expected.
Annex C continues:
``the adjustment . . . results in an increase in revenue . . . that will be deducted from the first payment''.
Therefore, it appears that payment of grant has been reduced because actual revenue is more than expected revenue. I am hard put to understand how the mechanism for adjusting to actual revenues described in annex C is consistent with the assertion in annex A that revenue risk will be placed on the PTA.
I favour the proposition that is in annex A. If one calculation relates to last year and a different system relates to this year and the difference between them is that some revenue risk is being placed on the PTA this year, that approach is welcome. I do not quibble with it, but I would like to understand it.
Finally, may I make a plea to the Minister? He told the Committee that £88 million will be spent, and that sum is immensely helpful. However, it would be even more helpful for those who do not have the benefit of being present in the Committee if the reports, which deal with reasonably large sums of money, stated how much money will be spent. That might not be a matter of the utmost importance, because one can always ask the Minister—and, in this case, he would always tell us. However, for good order's sake, it would be helpful if the reports contained such information.
4.47 pm
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