Clause 6
General powers of Executive
Mr. Michael Heseltine
I beg to move Amendment No. 6, in page 7, line 36, leave out paragraph (m).
At the end of the series of paragraphs giving the powers to the London Transport Executive, there comes paragraph (m) which catches up, so to speak, all activities which are at present being conducted by the London Transport Board and which it would be desirable to transfer to the executive. The discussion in Committee in this connection was directed entirely to finding out where it had been necessary for this undefined and general power to be used in matters not covered by the other paragraphs of the Clause.
On 22nd April, we asked for details, and the Parliamentary Secretary said:
“I do not have them immediately available, but I am prepared to ask the L.T.B. to look into this matter.” —[Official Report, Standing Committee A, 22nd April, 1969; c. 231.]
Up to now, no answer has come.
The House ought to be aware of the powers embraced by this paragraph. Even at this late hour, it would be helpful if the hon. Gentleman could give comprehensive examples showing why they are necessary. The other paragraphs are widely drawn. Although I realise that there are precedents for provisions of this sort, we ought to be told a little more.
The Joint Parliamentary Secretary to the Ministry of Transport (Mr. Bob Brown)
I am sorry that the hon. Gentleman is not aware that my right hon. Friend wrote to his hon. Friend the Member for Finchley (Mrs. Thatcher) about this matter on 15th May. He [column 110]explained that we had checked the question with the L.T.B. and had been told that it was aware of one such contract, and that is with B.E.A. for the provision of emergency airport services which are run from time to time as the need arises. The need would arise, for instance, if in-coming air passengers were diverted from Heathrow to Gatwick, and needed to be conveyed to hotels outside the London area by L.T.B. coach.
After discussion with the L.T.B., my right hon. Friend is satisfied that this is the only contract of any significance which is likely to require to be dealt with under this power.
Mrs. Thatcher
I have received two long letters from Richard Marshthe Minister dated 16th May, but I do not appear to have received one dated 15th May. It may well be that there was another one; he has been writing to me frequently recently. I shall have a look. Perhaps we can pursue the matter on another occasion.
Amendment negatived.
Mr. Marsh
I beg to move Amendment No. 7, in page 9, line 15, at end insert:
(6) If at the vesting date any action has been taken by the London Board for the purpose of promoting a Bill in Parliament in pursuance of the powers conferred by, and with the consent of the Minister under, section 17 of the Act of 1962, the Executive may proceed with the promotion of that Bill as if that action had been taken by them in pursuance of the powers conferred by, and with the consent of the Council under, the said section 17 as applied by subsection (2) of this section.
This Amendment will enable the London Transport Executive to continue promoting any Private Bill which has been initiated by the London Transport Board but which has not passed through all its parliamentary stages by vesting date under the London (Transport) Bill. Where the Minister of Transport has consented to the promotion of such a Bill by the London Transport Board, the consent of the G.L.C. will not be required for the London Transport Executive to continue it.
No issue of principle is raised. It is a formality only. Clearly, it would be absurd if the executive had to start a Private Bill all over again after vesting date.
Amendment agreed to.
[column 111]Clause 7
Financial Duty of Executive
7.15 p.m.
Captain Walter Elliot (Carshalton)
I beg to move Amendment No. 8, in page 9, line 32, at end insert:
‘(provided that such period shall not exceed five years in each case)’.
Mr. Speaker
I suggest that we take at the same time, Amendment No. 9, in page 9, line 45, at end insert:
(c) and where such period as is referred to in paragraph (a) of this subsection shall exceed one year, the Executive shall publish at the beginning of the period a detailed forecast of the principal revenues and expenditures anticipated for that period.
Captain Elliot
This is a most important Clause because it deals with the financial duty of the London Transport Executive, and, in view of the mammoth size of the concern which we are establishing, it is necessary that the matter be closely controlled. We had long and detained discussion on the subject in Committee, but at the end we were still not clear what the position was.
As I see it, the executive is given an accounting period—presumably, by mutual agreement between the G.L.C. and the executive—and at the end of that period it should more or less break even. In addition, there will be an annual statement of accounts. In the first place, we consider that a limit on that accounting period should be written into the Bill. That is the purpose of Amendment No. 8. Our fear is that, although the executive, under subsection (3)(b), has to get out of deficit, it may be able to extend the accounting period so that it never reaches its target.
That is the effect of the argument as it was put in Committee by my hon. Friend the Member for Finchley (Mrs. Thatcher). In reply, the Minister said:
“The Executive has to get out of the red in the year following that in which it gets into it” —
and he added, a few moments later—
“but it might help if I put on record a definition of paragraph (b). … It provides that if the aggregate of the net balance of the consolidated revenue account of the Executive and of any subsidiaries, plus the net balance of the general reserve of the Executive, is in deficit at the end of an accounting period—which would normally be one year—the Execu[column 112]tive must do all it can to make that aggregate positive again by the end of the next accounting period—that is, within one year.” —[Official Report, Standing Committee A, 22nd April, 1969; c. 239–41.]
The right hon. Gentleman seems to assume that the accounting period will be one year, but he is not certain. I shall not repeat all our arguments, but he himself said that it might be two or three years, or, perhaps, as in the case of nationalised industries, five years.
Amendment No. 8, if accepted, would clarify the situation and everybody would know where he stood. In Committee we suggested a shorter period, but we thought that it might be too short. We therefore propose five years, which seems reasonable.
When we were creating this great monopoly, we discussed at length the responsibility of the G.L.C. to the electors. The Minister often stressed that a vital safeguard for the efficient running of this concern would be the sanction of the electors. But the executive has a most complicated task and it will be extremely difficult for the ratepayer, who will have to pay the piper in the end, to decide whether its operations are being conducted efficiently. To do that, he will need all the information that he can get. If Amendment No. 8 is accepted he will have something to go on. It will help him to decide at the appropriate time how he will apply the sanction of his vote.
Mr. Marsh
As the hon. and gallant Member for Carshalton (Captain W. Elliot) said, we had a long discussion on this point in Committee.
Dealing with Amendment No. 8, there is no figure which is the right figure. It can be argued that it should be four, five or six years. We say that it is for the executive and the G.L.C. to reach agreement on the matter in the way which best suits them. The legislation places stringent financial controls and obligations on them, and we do not feel that the Government or the House should lay down this rigorous requirement. There is no reason why the figure should not be four, five or six years. One can pick any figure out of the air.
We say that the best people to do this, given that they have to meet their financial obligations, are the G.L.C., which [column 113]will carry the can, and the L.T.E., who will be operating the organisation. This is a degree of inflexibility which we do not need. The matter can well be left to the discretion of the G.L.C. and the executive to decide on whatever periods may be appropriate for the settlement of a target in the light of the circumstances at the time. They should not be bound by a constraint which must, by its nature, be purely arbitrary.
A very onerous obligation is proposed in Amendment No. 9. I am not sure that the G.L.C. or the L.T.E. would be very enthusiastic about it. It provides that
“where such period as is referred to in paragraph (a) of this subsection shall exceed one year, the Executive shall publish at the beginning of the period a detailed forecast of the principal revenues and expenditures anticipated for that period.”
To place upon them or any commercial undertaking, the task of publishing this amount of detail, say, five years in advance and to expect them to publish what they think are likely to be wage movements five years in advance, would place the executive and the council in an intolerable position.
No organisation is asked to publish this sort of detail, or to say that it believes that wages will rise by £X in one year and £Y in two years. I can imagine that some of my hon. Friends would think this a not unattractive proposition. I know what I would have done in a different situation wearing a different hat. But it would not be fair to hang this requirement round the necks of the G.L.C. and the executive.
Mr. Michael Heseltine
The Minister seemed to argue that the requirement proposed in Amendment No. 8 would be particularly rigorous and that it is not the desire of the House or the Government to impose a rigorous requirement of this sort on the London Transport Executive. But the whole concept of the Clause involves an extremely rigorous financial objective. To say that the executive shall so carry out its functions that, allowing for the possibility of using up its general reserve over a period, it will break even is, in terms of providing public transport, laying down a very rigorous objective. It is not reasonable, therefore, for the right hon. Gentleman to suggest that there should not be a [column 114]refinement of the definition of the sort envisaged in Amendment No. 8.
The reason why the period of five years has been chosen is that, as the Minister rightly said, it is impossible to define these matters with precision. It is arguable that the period should be three, six or perhaps seven years. There will always be a case against choosing a particular period within which the financial objectives must be hit. Therefore, the Minister says, “We shall not define the period” . But the moment we move to that stage we make a nonsense of the provisions in the Bill. Unless there is a fixed period within which certain targets must be achieved, it is open to the G.L.C. at any time to lengthen the period and to say that it will achieve its targets at some time in future.
In this case, there is no time when one will know whether the financial disciplines in Clause 7 are being met. One has to take an arbitrary decision about the time involved. Five years is a perfectly reasonable period. In Committee, the Minister referred to the period of five years in the context of the target which we were discussing. For that reason, we went on the Minister's word and took five years, which was not unreasonable.
When dealing with a financial target spread over a period as long as five years, unless one has a phased budget, it is possible during the first, second, third and fourth years to say that the bonanza will come in the fifth year and that if only people will have patience the profits will come rolling in. The only way in which one can ascertain whether targets are being reached and whether the programme is on course is to have a phased budget in advance.
I am the first to accept that to try to set a detailed fixed budget over five years is extremely difficult. But that is the concept of the legislation. Therefore, that is the definition within which we must operate. It is totally unacceptable for the Minister to say, on the one hand, that it is necessary to have a long period within which certain financial objectives should be reached and, on the other hand, to say that because he has set a financial objective over a long period it is unreasonable to ask for detailed forecasts over that period. The two things seem to be contradictory. [column 115]
It may well be that in Amendment No. 9 there is a precision which makes a nonsense of the safeguards which we were trying to achieve in drafting it. The sort of examples which the Minister gave are not capable of being incorporated in detail in a five-year programme. It is impossible to say that costs will rise over five years by X amount per annum, although the right hon. Member for Belper (Mr. George Brown) was not deterred in producing the National Plan which covered five years, giving the most detailed calculations industry by industry to show precisely what would happen throughout the economy.
At that time, the right hon. Member for Belper was only too happy to argue volubly that this was a reasonable way of running the economy. Now, when we try to do the same in a relatively restricted form, we are told that it is impossible because one cannot take account of the increases in costs which will occur. It is reassuring that the right hon. Gentleman the Minister of Transport has seen the error of his Government's ways, but this objection is easily overcome with by dealing with real costs adjusted for 1969 purposes, thereby disregarding any inflationary elements in the five-year period.
This would be a reasonable course. I am sure that it is not beyond the ingenuity of the Ministry to find a new form of words which would remove “detailed” from Amendment No. 9. But I come back to the certainty, that unless we place a fixed end to the financial period over which the targets have to be met and which is not capable of being adjusted when it suits the politicians to do so, and unless we have a budget to cover the period, the financial disciplines of Clause 7 will, in practice, not be easy for the general public or legislators to follow.
7.30 p.m.
Mr. Lubbock
I wonder whether we should be talking of financial disciplines as though this were a Bill for a nationalised industry. We are discussing a new executive which is to come under the Greater London Council. If we start off by laying down in detail how it is to behave and what financial responsibilities it is to assume, the electors of [column 116]Greater London, to whom this body is to be indirectly responsible, may well ask what is the point of making the transfer if, ultimately, Parliament still lays down the rules.
I would prefer an even more flexible financial arrangement than is contained in the Clause. I disagree fundamentally with the hon. Member for Tavistock (Mr. Michael Heseltine) when he tries to place this restriction on the G.L.C.'s freedom of action. As a Greater London elector, I am satisfied that I will be able to exercise my privilege of voting against the G.L.C. if it acts contrary to my interests.
Mr. Michael Heseltine
I am not trying, and we have never tried, to put tighter discipline into this Bill than is already there. We are trying to make the disciplines built in by the Government and the G.L.C. interpretable to members of the general public.
Mr. Lubbock
What the Opposition are trying to do with Amendment No. 8, and even more so with Amendment No. 9, is to circumscribe the freedom of the G.L.C. in deciding how it is to behave towards the executive and what the accounting period should be. We shall have to agree to disagree on this. It is a matter on which perhaps our judgments are somewhat subjective. The House must make up its mind, since this is the last opportunity we shall have of considering the matter.
As far as possible in the Bill I want to leave the council complete freedom of action in the financial control of the executive. If we begin by laying down what the accounting period should be, we shall be giving them all sorts of rules in advance which it may be inconvenient for them to carry out. Let us leave it to the G.L.C. to decide. If we disagree with the way it conducts its affairs, the remedy is in our hands as London electors.
Captain Elliot
I was disturbed by the reply of the Minister. He said that what we asked would be an onerous task for the executive. I think that it would be but I would have no compunction in giving it to the executive. This great organisation will have tentacles reaching all over the country and will be in a position to establish monopoly conditions over the Greater London area. It is because of [column 117]this that we must surely write into the Bill what the right hon. Gentleman called an onerous task so that the ratepayers can judge how things are going. Does the right hon. Gentleman really expect the ordinary ratepayers to assess whether the executive and the G.L.C. are properly carrying out their duties unless they have some reasonable information to go on?
Mr. Archie Manuel (Central Ayrshire)
I support my right hon. Friend the Minister of Transport. It is nonsense to have a strict period for return on revenue or capital accounts. Does the hon. and gallant Member for Carshalton (Captain W. Elliot) really mean that the period should be five years? Does not he mean, in practice, six years? If he does mean five years, then there cannot be an accurate financial return because there is a lapse of one year before one can begin to get accuracy in the way he wants.
What the Bill proposes is quite common practice among many local authority undertakings because of the breadth of operation, the varying degrees of expenditure and the uncommon difficulties which can arise during the course of any accounting period and which cannot be forecast. The Amendments could not be carried out in practice. I agree with my right hon. Friend and the hon. Member for Orpington (Mr. Lubbock).
Mr. Marsh
I think that there is a certain amount of misunderstanding here. In this part of the Bill we are dealing with two limbs of the same obligation. Clause 7(3)(a) deals with the period for forward targets, which can be any period agreed between the G.L.C. and the L.T.B. This is the right course because any business undertaking must be protected from being forced to take measures which might be undesirable at the time purely to avoid going into deficit for a limited period. It is reasonable, therefore, that the G.L.C. and the L.T.B. should be able to fix the period target according to the circumstances at the time.
The other limb of the argument is Clause 7(3)(b), which lays down the annual period and that any deficit has to be put right in the following year. Since the G.L.C. will have to pay the bill at the end of the day if the undertaking's finances are not right, there will be a limited amount of time in which it can go on running into deficit each year. The [column 118]targeting must be able to take into account, as in any other industry, the circumstances of the time.
To ask a commercial undertaking to publish the detailed assumptions on which it bases a five-year forward plan is to ask it to do something which hon. Members opposite would get excited about if anyone, in their wilder moments, suggested it of private enterprise. There cannot be a valuable forward plan of a large organisation which does not take account of movements—and there are bound to be some—over a period.
Captain W. Elliot
The Minister talks about not asking a private undertaking to do this, but he will appreciate that if a private undertaking calculates wrongly its shareholders will suffer the loss. If the G.L.C. or the Transport Executive calculates wrongly, the ratepayers will suffer, and this will remove a great incentive to the executive to run its business efficiently.
Mr. Marsh
The analogy is a good one. We are here producing a situation where the shareholders can sack the board, the shareholders being the G.L.C., and this is rather more difficult in many private companies. The people who are operating the policy are elected by the shareholders at three-yearly meetings, and it would be a significant electoral issue if large sums of money were coming out of the rates.
I come back to the point that under subsection (3)(b) they have an obligation to put the deficit right in the following year. Hon. Gentlemen and the hon. Lady opposite, all of who are extraordinarily reasonable people, will, I am sure, on reflection, recognise that their fears are unjustified.
Mrs. Thatcher
I refer specifically to Amendment No. 8, about which Richard Marshthe Minister is making a great fuss. Without this Amendment the only obligation on the G.L.C. and the executive is not to run the reserve plus the revenue account into a deficit for two years in succession. In meeting that obligation they could run down the total reserve to nothing, go into deficit for a year and then come back the following year, so that all the reserve which is being built up as a result of the latest increase in fares which the Minister has just approved could go right [column 119]down to nothing in one year, be in deficit for a year, and in the third year would just have to come back to nought. That is the only obligation upon the executive and the G.L.C., and it is an obligation which patently allows them to use up every penny of the reserve which is built up.
All we are saying in the Amendment is that the G.L.C. and the executive must agree a target for their reserves plus their revenue account and, at the end of a period of up to five years, they should then have an accounting, to see how they are getting on. It gives them a great deal of flexibility. They can take as the target period for reserves plus profit from revenue account two, three, four or five years, but they cannot go on moving the period indefinitely without measuring their performance at the end of five years.
This is all we are asking for, and it is eminently reasonable that at the end of five years the council and the executive must be compelled to measure their performance against their target. I am amazed that the Minister should run so hard and so fast away from this. He owes it to those travellers who are building up the reserves which, without this Amendment, may be frittered away.
Mr. Marsh
No.
Mrs. Thatcher
Yes, because if the Amendment is not made the only obligation comes in the other limb. The Minister owes it to the travellers and the ratepayers to see that any body to whom he is transferring such powers measures its performance to its target at least once every five years.
Mr. Manuel
The hon. Lady is suggesting that there would be complete secrecy and the periods could be extended so that the balance or the deficit would never be known, but she will be aware of the government auditors who do their work scrupulously and make returns, and therefore the position which the hon. Lady envisages could not arise.
Mr. Lubbock
The hon. Lady is so obviously reasonable. I agree that the accounting period in subsection (3,a) should not exceed five years but is not it certain that the Greater London Council [column 120]and the excutive will agree on a period which is not more than five years, so why not leave the decision to them?
7.45 p.m.
Mrs. Thatcher
To take the first intervention first, of course we shall know the results in the annual accounts, but we shall not know how far those results fall short of the target and we shall have no means of knowing.
In reply to what the hon. Member for Orpington (Mr. Lubbock) has said, in passing over far-reaching powers to another body, it is up to this House to decide upon the limits of those powers. It is right for us to say to a body to whom we pass over extensive powers that it must look to see how it has exercised those powers at least once every five years. It has been said that the management could be sacked once every three years, but how can that be done if within five years it is not known how the performance has measured up to the target? The facts will not be available upon which to make a judgment. Only the annual accounts will be available.
The Amendment is eminently reasonable. Had we stuck to the direct terms of Amendment No. 8, which provides that the G.L.C. and the executive should measure their performance at least once every five years, I would have thought that almost every hon. Member would have agreed to it. The Minister has given a poor reply, and has tried to swing on to the Amendment which was not moved but which was discussed. Will he consider the essence of Amendment No. 8 in another place?
Mr. Marsh
Since the question has been asked directly, the short answer is, “No.” Any organisation must be given the opportunity from time to time to look at its finances and decide what it wants to do in the light of those circumstances. A commercial undertaking may from time to time, for example, decide to operate on a deficit rather than to take short-term decisions which may be highly undesirable.
For all those reasons, I have more faith in the Greater London Council than has the hon. Lady and, since that Council will be operating this body, this is one phase where Whitehall can stay outside.
Amendment negatived.
[column 121]Clause 11
Additional provisions as to control of Executive by Council
Captain W. Elliot
I beg to move Amendment No. 10, in page 14, line 23, leave out
‘a substantial outlay on capital account’
and insert:
‘an outlay on capital account in excess of such a sum as may from time to time be determined by the Council’.
The Amendment has the effect of giving to the Greater London Council a closer and more specific control of capital expenditure by the London Transport Executive. The word “substantial” is a relative word; “substantial” in a small business is a very different thing from “substantial” in the executive. The Amendment would oblige the executive to set a specific sum, and this would be a discipline to the executive and to the council.
The executive will be an enormous concern which will control and operate a vast transport complex, with a variety of services, many of which, hon. Members who have not been on the Committee will probably be surprised to hear, will be outside the London area.
In those circumstances it would be difficult for the G.L.C. itself, which is concerned with many other great tasks in running the Greater London area, to keep in close touch with the operations of the Transport Executive. The Amendment will ensure consultation and give specific control to the G.L.C. over the outlay on capital account by the Transport Executive.
The Government undertook in Committee to look again at the point. We shall be glad to hear what the Parliamentary Secretary has to say.
Mr. Lubbock
The disadvantage of the Amendment is that it could only be agreed what such sum should be in respect of all capital expenditure by the executive, and different limits could not be fixed to apply to various classes of items.
For example, it might be convenient for the G.L.C. and the executive to agree on certain maxima in respect of buildings and other maxima in respect of the [column 122]vehicles themselves. The Amendment would restrict their freedom, and I hope that the Minister will reject it.
Captain W. Elliot
I do not know that the hon. Member has it quite right. The executive has to refer the sums to the council if a substantial outlay is involved. We are merely defining it more specifically to give greater control to the G.L.C.
Mr. Lubbock
I am not a lawyer, so perhaps somebody else could assist the House on the legal point. But, if I read the Amendment correctly, there could be only one limit placed on the sum since the Amendment says:
“an outlay on capital account in excess of such a sum as may from time to time be determined by the council” .
It does not say that such sums shall be in respect of different classes of capital expenditure.
If the Amendment had used such words, there might have been some force in it. The words which are already in the Bill,
“a substantial outlay on capital account” ,
allow these different classes of expenditure to be treated differently by the G.L.C. and the executive. They give greater flexibility to the arrangement between the two bodies.
Mr. Bob Brown
It is true that in Committee I promised to have another look at this matter but. having done so, we decided not to amend the Bill. There is nothing that the hon. and gallant Gentleman has said tonight which would cause me to change my mind.
If the G.L.C. had had any anxieties, knowing of the discussions which took place in Committee upstairs, I imagine that they would have let us know. The Bill was drafted in consultation with the G.L.C. and the council expressed no concern in this respect. Since the discussions took place in Committee the council has not approached the Minister about the possibility of amending the Bill.
It is the Government's view that none of the fears which have been expressed will, in fact, be realised. There are two responsible public bodies and they should be given reasonable discretion. We see no reason to provide for a different relationship in this matter between the council and the executive from that which is already provided for in Section 15(1)(c) [column 123]of the Transport Act, 1968 in respect of P.T.A.s and P.T.E.s
Mr. Michael Heseltine
There appear to be two points on this Amendment. The first was referred to by the hon. Member for Orpington (Mr. Lubbock) He said that the Amendment would mean a fixed relationship of capital expenditure in relation to all classes of capital.
This point was not discussed in Committee, but everybody's interest would be met if the Government were to agree to consider this matter in another place and to produce a suitable adjustment to cover that contingency. I can only advocate the flexibility which a redraft would achieve. My hon. Friend the Member for Carshalton (Captain W. Elliot) put the nub of the matter, namely, the relationship between the G.L.C. and the London Transport Executive. That relationship is crucial and lies behind the Amendment.
The Minister's letter to my hon. Friend the Member for Finchley (Mrs. Thatcher) on 16th May, in reference to this particular point, uses the following words:
“In general, it seems to me right to leave the Council and the Executive as responsible public bodies to settle these matters between themselves.”
That is the view of the Minister. It certainly is the view which I advocated in Committee, and which I still hold. It is not the responsibility of these two organisations to decide between themselves the level of capital expenditure on each particular occasion. It is the responsibility of the G.L.C. to lay down capital requirements and the criteria which it wishes the L.T.E. to follow. It is entirely the G.L.C.s responsibility.
Mr. Leslie Huckfield
That is what is being said.
Mr. Heseltine
That is not what is being said. It is said that this is an agreement which should be reached in partnership between the two organisations.
This is not the way in which it should be implemented as a matter of managerial intention. What should happen is what would happen in a commercial organisation. The G.L.C., as the board of directors of the L.T.E., should lay down the criteria within which the L.T.E. operate. This undoubtedly would contain a list of the capital expenditure relating to the [column 124]various types of expenditure within which the officers of the executive would operate and to which there their authority would extend. That is the demarcation which should be injected into the legislation.
But that is not what is in the legislation. The word “substantial” in the Bill is imprecise. It leaves it open to the L.T.E. to argue with the G.L.C. as to what the discipline should be and to use its own discretion as to what it thinks is or is not substantial. This will leave an area of muddle in legislation, which tighter drafting would not have permitted.
This is not a monumental point, but I am convinced that, in practice, when the G.L.C. comes to impose its will on the L.T.E. it will feel that what is being advocated on this side of the Committee will be the way in which the whole operation should be conducted. I should like to see it in the Bill at once.
Amendment negatived.
Mr. Michael Heseltine
I beg to move Amendment No. 11, in page 14, line 32, at end insert:
(2A) Where the Executive shall submit to the Council, proposals as to the general level and structure of fares to be charged under subsection 2(d) of this section, and such proposals are approved by the Council, but where as a result of a recommendation of the National Board for Prices and Incomes the implementation of those proposals is delayed by the Minister, then the Minister shall have power to make good any loss of revenue to the Executive which may result.
The purpose of the Amendment is to envisage a situation in which the London Transport Executive, backed by the G.L.C., has applied for an increase in fares and where the increase has been referred to the Prices and Incomes Board. It may be that, for a range of reasons, the P.I.B. would decide that the application should not be granted and that the Minister would intervene to prevent its being granted. In this sort of situation a substantial loss could accrue to the L.T.E., against the wishes of the executive or the G.L.C. There are dozens of different reasons which might attract the Prices and Incomes Board so that the additional revenue which could be raised from a fares increase is withheld.
I am sure that the Parliamentary Secretary will not hesitate to make the point that the Prices and Incomes Board has [column 125]just approved a £8 million increase in fares, but it may not be so well known to the House that at the same time it rejected an application by the London Transport Board to increase its fares on the country buses and Green Line coaches.
Mr. Leslie Huckfield
A Tory Government did it.
8.0 p.m.
Mr. Heseltine
The point about a Tory Government doing it is an argument on my side and not the hon. Gentleman's. I am concerned that where a national Government intervenes, for whatever reason, to prevent the elected representatives of the people of London increasing their fares to balance their books, it should be the national Government that “carries the can” and not the ratepayers of London. This is a perfectly reasonable suggestion.
It is probably arguable in principle in general terms that where the Government intervene they will do so not for local but for national reasons, and if they intervene for national reasons the taxpayer is a more appropriate person to finance any deficit arising in the targets which we discussed earlier, and not the local ratepayer.
There is nothing mandatory in the Amendment making it essential for the Minister to contribute money where he has intervened to prevent a fares increase. It merely gives him the option to make the grants about which we are talking where he feels that he has intervened for this purpose. Therefore, it is in no way compulsory.
Mr. Leslie Huckfield
Is the hon. Gentleman saying that my constituents and his should help out the London Transport Executive in its difficulties rather than the London ratepayers?
Mr. Heseltine
The hon. Member was very happy to accept that situation in Committee. All hon. Members opposite voted for the legislation realising what we are putting on to the backs of the British taxpayer.
It is true that there is capital write-off in the legislation which will hand over from the taxpayer a permanent annual subsidy to London Transport. The hon. [column 126]Gentleman knows this as well as I do. He understands the figures, and accepted them without demur.
Mr. Leslie Huckfield
The hon. Gentleman realises quite well that the capital write-off is a fixed and definite sum.
Mr. Heseltine
I do not think that that makes it any easier for the taxpayer to bear. The mere fact that there is a 90 per cent. write-off on the capital, the interest on which must be transferred forever to the Treasury, in no way lightens the load of the taxpayer who must bear it. I doubt whether the taxpayers of Nuneaton, who, I am sure, will reflect on the hon. Gentleman's intervention, will find it easier to bear simply because it is a fixed and permanent sum.
It is the taxpayer who is “carrying the can” because it has been decided as an act of national policy to transfer the London Transport operation to the G.L.C. I am not arguing the decision, but I am saying that if, as another act of national policy, there should be another intervention the burden of that intervention should fall not on the G.L.C. but on the taxpayer, who would be represented in this House, where we could discuss the matter.
Therefore, the point is quite clear. The Amendment gives the Minister only an option, where he has intervened in the national interest, to make good the costs of his intervention to the ratepayers who would otherwise have to finance it.
Mr. Gresham Cooke
I would like to draw attention to the tragic position of London Transport as it was left as a result of the Government and Transport Tribunal action in 1966. In 1968, London Transport made a loss of £10 million. I believe that unless the Bill had been introduced, and the G.L.C. had insisted on the position being put right, it would still be running at a loss, which would come back to the taxpayer in due course.
Mr. Leslie Huckfield
I hope that the hon. Gentleman will also quote the instance in 1953 when, the Transport Tribunal having approved a fares increase for London Transport, the Tory Government of the day turned it down and put it on the back of the taxpayer because of the local elections.
[column 127]Mr. Gresham Cooke
I admit that this has been done before, and that the position is worse now. But this does not justify its being done again in the future.
In paragraph 16 of its recent Report No. 112, Cmnd. 4036, the Prices and Incomes Board stated:
“An increase to 6d.” —
in the basic fare—
“from the then existing level of 4d. was included in the proposals dealt with in our previous report. The Transport Tribunal, however, limited this fare to 5d. because they thought an increase of 50 per cent. at one time might cause too great a loss of passengers and defeat its own ends. They added that if the fare had been increased from 4d. to 5d. in 1966 or early 1967 the time might have been ripe in 1968 for a further increase to 6d.”
The kindness of the Transport Tribunal in thinking of the interests of London Transport, and the miscalculations the Tribunal made, led to London Transport having a loss of £10 million last year.
We know very well that boards like the Prices and Incomes Board are tremendously sensitive to consumer and public opinion, and do not look at the problems of the supplier. We also know that the G.L.C. has been trying to raise council house rents in the London area, in my view quite justifiably. It has been limited by the Prices and Incomes Board; it wanted an increase of 10s., and this has been limited to 7s. 6d. This sort of action could be taken by the Prices and Incomes Board in the future in relation to London Transport, and if it does London Transport will be forced into the red.
If that is done by Government agencies such as the Prices and Incomes Board, it is the fault of the Government, and the Government will have to stand the racket. That is why it is of paramount importance that the Amendment should be made, to prevent the Prices and Incomes Board from making the kind of stupid mistakes it has made in the past and will very likely make again in the future.
The Amendment would prevent it from making such mistakes and from thus stopping London Transport from being commercially viable. It would make it clear that if such action happens the Government must pay for the mistakes being made by their own boards, just as they are having to pay for the mistakes of the Transport Tribunal in 1966, when [column 128]fares were not put up when they should have been, as a result of which they are introducing the Bill and writing off the losses.
Mr. Leslie Huckfield
The argument the hon. Member for Twickenham (Mr. Gresham Cooke) has just advanced is rather sinister. He has suggested that in certain ways the Prices and Incomes Board is virtually told what to do by the Government. I totally reject this suggestion. Everybody who has read any of the board's reports knows that their whole basis is that the board is entirely independent of anything the Government tell it to do.
But if, on the basis of that suggestion, the hon. Gentleman is to say that my constituents and those of his hon. Friend the Member for Tavistock (Mr. Michael Heseltine) should help to bale out London ratepayers, this is something I am bound to resist. We have had many cases where the London Transport Executive's application for a fares increase has been rejected out of hand or dithered with for political advantage. Both parties have done it. But if we are to have this type of thing in the future I want the results of such decisions to be confined locally and not spread over all the taxpayers.
I am not at all against general taxation making certain fixed and definite contributions to the London Transport Executive's general finances, provided those contributions are fixed and known.
If the hon. Gentleman is coming to the House and saying that my constituents, through their income tax contributions, should help his party, or any party, to win local elections in London—this is what it comes down to—I am totally against it. We are dealing with a situation where fares increases and applications for fares increases are bound to be among the most sensitive decisions with which the new body, which is controlled by the Greater London Council, will have to deal. Other organisations like this throughout the world have had similar difficulties about the fixing of the levels of fares and the way in which, if they are not allowed to go up, they are to be subsidised.
I still say that the essence of this new local transport system ought to be to make it locally financially supported; not supported by taxpayers throughout [column 129]the country, except in very definite fixed circumstances, and certainly not in the general way proposed. For the hon. Gentleman, representing a party which is always advocating cuts in public expenditure, to come forward with a proposal which will increase public expenditure, I find inconsistent, illogical and plain nasty.
Mr. Lubbock
One thing has puzzled me as I have listened to the debate on the Amendment. If a recommendation for fares increases is referred to the Prices and Incomes Board and the London Transport Executive still has to operate within the financial responsibilities that we were discussing on an earlier Clause—
Mrs. Thatcher
It was discussed upstairs.
Mr. Lubbock
The hon. Lady reminds me that it was discussed upstairs. I have not had the opportunity of re-reading that part of the Committee proceedings, so perhaps the Minister will say a word about it.
I do not want to hold up the proceedings, but it seems a point of substance if we have laid down these financial criteria. I argued earlier that it should not be so rigid, but we have passed a Clause which states that the London Transport Executive has to make a profit in one year equivalent to the loss it has made in a previous year. If the recommendation for a fares increase is referred to the Prices and Incomes Board, for reasons of wider public importance, it may well decide that it is not appropriate to make an increase at this time. It could well happen, for instance, that next year the London Transport Executive might find itself in the red again, despite the large increases which the N.B.P.I. is now permitting. But I am sure, having read its recent Report, Cmnd. 4036, that the board would say that it is inappropriate to make any further adjustments to fare levels pending the introduction of decimal currency in February, 1971. It would be correct to reach this conclusion to avoid two lots of fare changes within a short period of time.
I ask the Minister: how will we be able to reconcile the wider aspects of public policy which have to be considered by Mr. Aubrey Jones and his [column 130]Board with the more limited objectives which we have already specified and laid down in the Bill concerning the London Transport Executive? If there is a conflict here I hope that the Government will give it some attention so that, before the Bill goes to another place, that conflict can be reconciled and we will not ask the Prices and Incomes Board and the Executive to do impossible things.
Captain W. Elliot
In Committee, we had a demonstration of the split political personality of the hon. Member for Nuneaton (Mr. Leslie Huckfield). He seems to argue any way that he likes. Is it sad to see this trait developing in one so young. Of course, the Government often give selective help.
Mr. Leslie Huckfield
I am sure that the hon. and gallant Gentleman realises that, in comparison with the youngest Member of the House, I am now comparatively old.
8.15 p.m.
Captain Elliot
I accept that. Of course, the Government often give selective help. I cannot say offhand, but I should not be surprised if Nuneaton is getting selective help for development. Perhaps the hon. Gentleman will confirm or deny that.
Mr. Huckfield
I am grateful to the hon. and gallant Gentleman for giving me the chance to raise this matter. This is one thing that I have long advocated, but have not yet succeeded in getting.
Captain Elliot
That illustrates the hon. Gentleman's split personality. He expects London income tax payers to support Nuneaton, but when the Government interfere, for national reasons, in recommendations for fares increases, thereby possibly imposing a burden on London ratepayers, he suggests that his constituents should not help to make up the difference.
Mr. Gresham Cooke
Nuneaton is fortunate. It gets a very large grant from the Government to the Motor Industry Research Association, which helps to employ—
Mr. Deputy Speaker (Mr. Harry Gourlay)
Order. The hon. Gentleman is getting wide of the Amendment.
[column 131]Captain Elliot
I think that I had better get on. We are getting a little wide.
The Parliamentary Secretary is now in charge on the Front Bench. We know him to be a most reasonable man. I hope that now that his right hon. Friend the Minister has departed we will get a concession from him over this matter.
I would point out one thing. For all the Amendments that we have put forward the burden of nearly all the arguments from the Government Front Bench and hon. Gentlemen opposite, including the hon. Member for Orpington (Mr. Lubbock), has been that we should not interfere or restrict in any way by writing into the Bill such things as might have that effect on the operations of the G.L.C. and the London Transport Executive. It is argued that we must leave it to them to decide.
If we use those arguments rejecting our earlier Amendments, why, if the Government think it desirable to interfere, for reasons of national policy—and I appreciate we cannot go into the details—and that adversely affects the London ratepayers financially, should not the Government of the day make up the difference?
Mr. Manuel
I am at a loss to understand what the Amendment means. I did not have the benefit of being present during the Committee stage of the Bill. I do not know whether there were great debates about the Prices and Incomes Board. I cannot imagine that they would be in order if there were. I cannot find any reference to the Prices and Incomes Board in Clause 11.
Mr. Lubbock
When Clause 11 was discussed in Committee, the board's recommendations on London fares had not then been published, so I do not think much attention would be paid to it.
Mr. Manuel
This is hypothetical. We are looking into the future. It appears that there is a great possibility there will not be any recommendation from the N.B.P.I. when this comes in. But I do not know. If there are so many “don't knows” , it appears to be a hypothetical situation that we are envisaging. Even though this was to come in, I think that it would be wrong to adopt the words in the Amendment which, as my hon. Friend the [column 132]Member for Nuneaton (Mr. Leslie Huckfield) said, would have the result that people in Central Ayrshire would be helping to subsidise London Transport. We may have a few holiday makers coming here occasionally, but their object is not to assist London Members' constituents to run their transport on the cheap.
Captain W. Elliot
The hon. Gentleman was not a member of the Committee, but I mentioned earlier that some hon. Members might be surprised at the ramifications of the London Transport Executive, because it may be working in their constituencies. If the executive is working at a loss, and the G.L.C. is allowed to subsidise certain activities, London ratepayers may be subsidising the hon. Gentleman's constituents.
Mr. Manuel
The hon. and gallant Gentleman is talking about the other extraneous duties to be placed on the executive, and the G.L.C. reaping profits from these various undertakings. I have no fear of that. London ratepayers will be helped. If private enterprise can make a go of filling stations, and so on, as envisaged in the Bill, I am certain that the G.L.C. will make a success of this.
It is not good enough for hon. Gentlemen opposite to underestimate the sagacity and intelligence of the members of their party who are in control of the G.L.C., and not to trust them an inch. They should not try to tie the G.L.C. in this way. They ought to have a little more political faith in these people who work so hard for them in the London area.
Mr. Bob Brown
The implication of the Amendment is that the London Transport Executive should be place in a special position with regard to the prices and incomes legislation, in so far as the Government are to meet any financial shortfall that might be involved as a result of a standstill order. Clearly, this is a preposterous suggestion.
The Amendment accepts that the actual fares charged should conform with what the Prices and Incomes Board recommends, but it goes on to suggest that the Government, rather than the authority concerned, are to take the financial responsibility. If we took the matter to what might be said to be a rather absurd limit, we could have a [column 133]situation where we had the G.L.C. spoiling for a fight with the Government of the day. The L.T.E. could submit, and the G.L.C. could approve fares increases of a quite outrageous nature, contravening completely the terms of the prices and incomes policy. The Government would then have to pick up the cheque when these increases were properly delayed by the board.
The short answer clearly must be that the Government could not contemplate taking on any such liability. The prices and incomes legislation is to apply to fares increases by London Transport which will no longer be subject to control by an independent tribunal in the form of the Transport Tribunal. It is for the G.L.C. and the L.T.E. as responsible public bodies to take account of the policy in formulating and approving fares increases proposals so as to ensure that no occasion for Government intervention arises.
Mrs. Thatcher
Once again that is a bit of a weak answer. Richard MarshThe Minister has a weak case, and it is therefore not surprising that he did not put it very well.
Let us look at the position we have reached. We have said to the G.L.C. “You must not run this outfit at a deficit.”
Mr. Leslie Huckfield
No.
Mrs. Thatcher
We have said in the Bill that the G.L.C. must not run London Transport Executive at a deficit. That is in Clause 7. Under subsection (3)(b) of that Clause we have said that the outfit must not run for two years in succession at a deficit, that in the second year any shortfall must be made up. Perhaps the hon. Gentleman will look at that subsection. We have laid that obligation on the new authority.
Suppose the new authority says, “If we are not to run at a deficit, we must raise fares in a certain way” . The Minister agrees, and then says, as he can do now, “I am going to refer the proposal to the Prices and Incomes Board” .
Mr. Manuel
That is hypothetical.
Mrs. Thatcher
It is not. This year a proposal to increase fares has been referred to the board. Last year a proposal to increase fares was also referred [column 134]to the board. On that occasion the board agreed to an increase, but part of it was delayed by the Minister. This year the board has agreed to an increase to take effect some time in the autumn. We do not know when that “sometime in the autumn” will be, so that is nothing hypothetical about it at the moment. The Minister has power to refer a proposed increase to the board.
Suppose the board says, “If you run the organisation in a different way you need not have these fare increases” , and the Minister then says, “All right. I shall delay the fare increases.” There is here an inherent contradiction. The council has an obligation not to run at a deficit. It then says that if it is to carry out that obligation it must have a fare increase, but the Minister replies that it is not to have that increase.
Mr. Leslie Huckfield
No.
Mrs. Thatcher
I ask the hon. Gentleman to look at the Amendment.
Mr. Huckfield
Will the hon. Lady give way?
Mrs. Thatcher
Not at the moment. The Amendment says:
“… where as a result of a recommendation of the National Board for Prices and Incomes the implementation of those proposals is delayed by the Minister” .
The Minister says, “I shall delay the proposal for an increase in fares” . There is an inherent contradiction. The G.L.C. must not run at a deficit, but the Minister denies the council the increase necessary to enable it to run at a surplus. Therefore at that moment the Minister has power without responsibility. He has power to delay the increase, but he does not have the responsibility of facing the financial implications of his decision.
Mr. Huckfield
Does the hon. Lady admit that though the obligation to be placed on the executive not to run at a deficit will be in the Act, the present difficulties to which she referred are caused basically by the dogmatic insistence of the Conservative G.L.C. that this new body shall make a profit of £2 million?
Mrs. Thatcher
I am sorry, but I did not get the full import of the hon. Gentleman's intervention. As things are [column 135]at the moment, the Prices and Incomes Board has agreed to an increase to come into effect in the autumn.
Equally, as things are, to the extent that an increase is delayed the Minister already has power, between now and vesting day, to make a grant to cover that deficit. He has that power under Clause 19. The Minister has power at the moment to make a grant from the hon. Member's constituents in order to make up the deficit arising from a delay in the implementation of the proposal.
The Amendment provides that if there is a conflict between the necessity to run at a surplus and a refusal to allow fare increases, the Minister shall have power to make a grant—it is not that he must do so, but that he shall have power to do so—and to make good any loss of revenue to the Executive. Doubtless the hon. Member for Nuneaton (Mr. Leslie Huckfield) and other hon. Members would make representations to the Minister whether or not he used that power, but without it the Minister can stop an increase which is necessary for the G.L.C. to carry out its obligations under the Bill. That is an absolute nonsense.
Mr. Eric Ogden (Liverpool, West Derby)
The hon. Lady is basing a great deal of her argument upon Clause 7(3)(b). Does she agree that although the Prices and Incomes Board can make its recommendations the Minister, whoever he may be, in deciding whether to agree to the recommendations, delay them or refuse them, is also bound by that paragraph?
8.30 p.m.
Mrs. Thatcher
The Prices and Incomes Board may be bound by that paragraph, but it may say, “If the L.T.E. ran its undertaking in a different way we do not believe that a deficit would arise.” That is one of the problems that arise in respect of references to the Prices and Incomes Board. The board sometimes makes recommendations on productivity which for many reasons are not easy to carry out. There are many conflicts. It is clear that the hon. Member is really on my side. We are both saying that if there is a resultant decision which prevents a fares increase, which in turn prevents the executive from carrying out [column 136]its responsibilities under Clause 7(3)(b), the Minister shall have power to make good that loss.
To support my argument I point out that at the moment, until vesting day, the Minister has power under Clause 19. I am asking only that the position should be perpetuated, because any Minister should be made to face the consequences of his own decision.
Mr. Bob Brown
I have listened carefully to all that the hon. Lady has said, and it merely leads me to the conclusion that she is now trying to argue a weak case even harder. I find it difficult to get anything out of what she said. Why should the G.L.C. be treated differently from any other major local authority? Other major local authorities run their own passenger transport systems, and when they run into trouble they have to go to the traffic commissioners for a fares increase. If the traffic commissioners say “No,” they have to adopt other courses. The same courses are open to the G.L.C.
Mrs. Thatcher
How many of those authorities are under an identical obligation laid down in Clause 7(3)(b)? That is the relevant point.
Mr. Brown
The same type of thing applies to the passenger transport executives. I ask why the G.L.C. or the L.T.E. should be treated differently from any other passenger transport authority or executive—because they are all charged with breaking even and if they do not succeed they have to impose a rate levy on the constituent authorities. London is in no different position.
I agree with my hon. Friend the Member for Nuneaton (Mr. Leslie Huckfield) about the ratepayers generally. The provincial ratepayers have bailed out London Transport for far too long.
Amendment negatived.