Speeches, etc.

Margaret Thatcher

HC Standing Committee [Transport (London) (recommitted) Bill]

Document type: Speeches, interviews, etc.
Venue: House of Commons
Source: Hansard HC Standing Committee A [101-124]
Editorial comments: 1030-1140. Extract from the Third Sitting. The debate on the amendment to which MT spoke is reproduced in full. She spoke at c.115.
Importance ranking: Minor
Word count: 8398
Themes: Privatized & state industries, Transport
[column 101]




Tuesday, 15th April, 1969

[Sir Beresford Craddock in the Chair] Clause 6

General powers of Executive

10.30 a.m.

Mr. Michael Heseltine

I beg to move Amendment No. 21, in page 6, line 6, leave out from beginning to end of line 15 and insert:

‘(a) to carry passengers by stage carriage or express carriage on any road within Greater London, and with the consent of the Minister on any road outside Greater London, but the Minister shall not give his consent under this paragraph unless satisfied that there are exceptional circumstances which make it desirable that the Executive should carry passengers by stage carriage or express carriage on a particular route outside Greater London;

(b) to carry passengers by contract carriage on roads within Greater London, and, where the passengers consist of a pleasure party of persons employed by the Council, with or without their families or friends, within a radius of one hundred miles from Charing Cross;

(c) to carry passengers by any from of rail or water transport (including hovercraft) within, to or from Greater London and, so far as is requisite in connection with the exercise of their powers under this paragraph, between places outside Greater London.’

The Chairman

I suggest that we take at the same time Amendment No. 22, in page 6, line 17, leave out ‘or (b)’ and insert ‘(b) or (c)’.

Mr. Heseltine

In coming to Clause 6, we are considering the general powers of the Executive. These Amendments are intended to challenge the Government's ideas on the extension of powers proposed to be transferred to the G.L.C. in terms of the area over which it shall be entitled to run bus services of one kind or another in the future.

There is a long history of dispute and discussion about the operating powers of the various statutory bodies which have been responsible for London's transport. Basically, the history began in 1933. At that stage, a monopoly situation was [column 102]created, the London transport special area, within which the London Transport Board enjoyed monopoly powers for certain services. Outside that, there was a slightly larger area known as the London passenger transport area, within which the London Transport Board was free to compete with the private sector and did not enjoy the same monopoly powers. Those two statutory areas have existed ever since that time, although the powers within them of the Board or the private sector have changed, depending on the legislation prevailing at the time.

The first relevant legislation is the Transport Act, 1947, under which delegated powers were given to the Transport Commission enabling it to empower the London Transport Board to operate in the excursion tour business and the stage carriage business within 100 miles of Charing Cross. This, it was felt at the time, had never really been the intention of the original Act, but it turned out to have been incorporated in it. Those powers were removed in the 1953 Act, and the arguments as to the relative strength and operating powers of London Transport were all tabulated carefully at that time.

Basically, the argument for restoring the 1933 position in 1953 rested substantially on the need to achieve a balance between the public and the private sector and to control the public sector, which had the immense advantage of operating from a substantial monopoly position in Central London. Thus, in 1953, the stage and express carriage provisions of the 1933 Act were restored, the effect being that the London Transport Board could operate with no road service licence inside its special monopoly area, and it could operate with a road service licence outside, but within the wider London passenger area. It could operate under a special agreement with private operators within 10 miles of the London passenger transport area or within five miles into Kent. That was the legal position restored to control the powers of London Transport in 1953.

In 1962, there was a certain dilution of the monopoly situation in order to grant consents to private operators to run special services. We shall be dealing with these special consents under Clause 23. A certain number were granted, and they were granted largely to cope with the new demands which had arisen: for instance, [column 103]the siting of airports outside the statutory limits of London Transport, where it was felt that the private sector could play a part. By and large, I think that only small use was made of these new consent powers. I have quite a list of them here, but they never played a major part in transport operations within London. The operation was much larger within the stage carriage service, and these particular operators only nibbled at the fringe of it.

The situation now is that we have proposals before us which completely change the basis of the statutory controls on London Transport. First, the proposal is that the two statutory geographical limitations, the London passenger transport area and the London Transport Board special area, shall be replaced by the area which is controlled by the G.L.C. The effect of this is to draw into the G.L.C. area the monopoly provisions which have been enjoyed over a wider area. That is, one might think at first sight, a concession to the private sector. However, there are two main arguments which clearly show that this is not really a concession at all.

In stage and express carriage operation, the areas being vacated, so to speak, by the monopoly powers of the London Transport Board are largely left in the hands of the National Bus Company, which has such a head start there over anybody else in the operation of such services that it would be difficult for anybody to make any headway in applying to Traffic Commissioners to try to set up business. But even more impressive than that is the result of our investigation to see what, in terms of population, is affected by this diminution of the monopoly area. In fact, while the geographical area is being contracted by as much as 50 per cent., the population using public service vehicles is being reduced by only 10 per cent. So, from the point of view of the operators of buses in stage and express carriage, it is a formula for great success which is proposed in this legislation. If one halves the area over which one has to operate, and reduces by only 10 per cent. the number of people whom one has a monopoly right to carry, one is likely to be in a much more profitable position than before.

That is the notional benefit available to the private sector, but it is very notional indeed. On the other side of the coin, the [column 104]disadvantages for the private sector are very real. Over the years, the private sector, realising that the London Transport Board enjoyed its monopoly powers within these defined areas, naturally expanded on the outside, in areas where the monopoly powers did not exist, and where the London Transport Board was largely precluded from operating. It is in these areas, on the outside of the London area, that the private sector has built up its own profitable areas of enterprise—and quite rightly so. However, under the proposals which we are now considering, there are to be no limitations on the right of the new London Transport Executive to operate excusions, stage carriages and tours into this area. All the restrictions which have hitherto always been built into our legislation, simply because it was considered that the monopoly position had to be weighted by certain concessions and restrictions to the private sector, are now to be removed. The London Transport Executive now, from its strong central base—if anything, a stronger and more profitable base than it has had up till now—will be allowed to extend its operations into fields in which the private sector has until now enjoyed its compensating advantages. The only restriction on the London Transport Executive which I am able to detect is that it will not be able to operate in Scotland. I do not understand why that is so, but under Clause 47(3), it appears that virtually all the provisions of the Bill do not apply to Scotland. It therefore appears that the London Transport Executive might find itself precluded from that one attractive market for the long-distance coach operator. If that is the intention, we shall welcome it as a small concession to the private sector.

Mr. R. Gresham Cooke

Perhaps my hon. Friend might like to inquire whether the London Transport Executive could operate in Northern Ireland.

Mr. Heseltine

I am grateful to my hon. Friend. The exclusion applies also to Northern Ireland. At this rate, we need only Wales, Devon and Cornwall, and we shall have achieved more than our wildest ambitions. Perhaps the point could be clarified.

One of the arguments which, I have no doubt, will be advanced is that, while [column 105]there is a certain sympathy for the indignation which we on this side feel, we ought to catch up with the facts of life and accept that the sort of powers now envisaged for the London Transport Executive have long since been given to municipal authorities elsewhere in the country, and they are similar to the powers given under the Transport Act, 1968, to the passenger transport authorities. It could almost appear that we were being unfair to the G.L.C. and London Transport Executive in trying to prevent their having powers which are now enjoyed by the other public bus authorities.

There are two arguments which I advance against that. First, we opposed as firmly as we were able the extension of those powers to the other municipal organisations when the proposal was made. Simply because mistakes were made last year, largely at the instigation of another Minister of Transport, there is no good reason why this Minister should perpetuate them.

If I may say so, the right hon. Gentleman has been diligent in undoing a great number of mistakes made by his predecessor, and we always welcome the modifications which he is continually making, not to legislation introduced by the Tory Government but to that introduced by his predecessor. In that endeavour, we wish him well. Simply because his predecessor had some wild and reckless ideas for extending the public sector in any direction under her control, there is no reason why this Minister should perpetuate that sort of activity.

The other important factor is that in every discussion on public transport which has gone on in the last 30 or 40 years, an exception has always been made in respect of London simply because of the monopoly position which the London Transport Board enjoyed in the central and most profitable areas. It was always felt that, as this monopoly position would always be denied to the private sector, which would be unable to use the very profitable central area to cross-subsidise its exterior activities and build them up, it should receive some compensating rights outside the area. That consistent determination to safeguard the rights of the private sector should now be upheld in this legislation.

Finally, as we argued very strongly on the passenger transport authorities, the principal purpose of this Bill is to give to the London Transport Executive power to [column 106]concentrate on London's transport, and power to operate up and down the land, overseas, or wherever it may be, in the way it envisaged in this legislation is monumentally irrelevant to the real problems of London transport. It can have been included only on a doctrinaire determination to try to extend public ownership—unnecessary in any terms, but particularly unnecessary at this moment. Undoubtedly, there would be a challenge and temptation for the people operating London Transport to go for pastures alongside their own, believing that there was a quick killing to be made in that sort of operation and that in some way or other they could pick up extra revenue in order to subsidise the services which they were expected to run in the centre.

The controls in the hands of the Minister to ensure that there is protection will, we believe, be quite unworkable in practice. I do not want to anticipate future debates, but what we think will happen is that when the powers which have restricted the operations of London Transport over the years have been removed by the Bill, there will be a temptation to move out into fields on the outside where it has no experience and no knowledge, which will fritter away both its management priorities and the restricted financial resources at its command.

The Minister of Transport (Mr. Richard Marsh)

I am sorry that the hon. Gentleman the Member for Tavistock (Mr. Michael Heseltine) has made such heavy weather of what is a perfectly reasonable provision for London Transport. I am even more surprised, because one regards him, possibly wrongly, as one of the more progressive members of a very unprogressive and regressive party, that he starts his story in 1933.

Mr. Heseltine

I was born then.

Mr. Marsh

This is the whole point. The hon. Gentleman was born in 1933. I had reached the mature age of five. To pray in aid today something which took place in 1933 is to go back rather a long way. The whole situation has changed, quite apart from the fact that we are engaged here on a totally new approach to London Transport. There have been several Acts, as the hon. Gentleman [column 107]rightly said, in the intervening years. We had the Transport Act in 1947 which gave unlimited powers for the Transport Commission to operate public service vehicles throughout Great Britain. Then, as he said, in 1962 the Commission itself was abolished and the London Transport Board was established. While one can argue about how far Governments are committed by the decisions of their predecessors, I do not think that one can make a strong point that the Government in 1969 are to some extent committed by views which were expressed in 1933. 10.45 a.m.

There is a degree of worry here in the industry, which I think unjustified but which the hon. Gentleman has deployed. If the Amendment were accepted, the London Transport Executive would be restricted to an extent greater than any of the passenger transport executives or local authority operators. The hon. Gentleman expressed most unfair doubts about the Transport Act, 1968. That Act was a major step forward which changed the whole picture of public transport in Britain. Whether the hon. Gentleman likes it or not, it is impossible now, against the background of the Transport Act, to ignore its existence. The Greater London Council's own transport cannot be treated differently from that of everybody else in the country.

It is not intended that the London Transport Executive should run bus services all round the country, but it has a duty, in the light of policy guidelines laid down by the Greater London Council, to provide such services as are designed to meet the needs of Greater London, and Greater London's needs extend outside the boundaries of Greater London. The commuter belt for Greater London is very large. It would be absurd to suggest that Greater London has no transport needs outside its own area. The catchment area is very wide indeed. Therefore, if it is to cater for the needs of London the London Transport Executive must have the ability to operate some of its services in an area outside London. I do not think that that is disputed between us; the argument is only as to how far.

Clearly, as I say, it is not intended that London Transport should run all over the [column 108]country. I do not see the need to have London Transport buses operating an external service in Blackpool or anywhere else, but from time to time, and in some particular services, there will be a need for them to run across the boundary. Who, then, should be the body to determine where that should be? I am surprised that hon. Members opposite should want to inject Ministerial intervention into this. I thought that one of their objections was to Whitehall interference in things which were better left to the bodies actually concerned.

The ideal body to decide which services the Executive should seek to develop is the Greater London Council, which lays down its policy guidelines, a body for which we all have great respect—politically sympathetic at present, for a short time, to the views of hon. Members opposite. This elected body lays down the policy guidelines. The Executive of London Transport is charged with day-to-day management of the organisation. It is for those two bodies together to work out exactly where the lines are drawn. It is a matter of common sense. I do not believe that the Greater London Council will lay down policy guidelines and agree with the London Transport Executive that it should operate bus services all over the country. It will be operating some outside, but there need to be some restrictions. Parliament cannot today draw the lines and specify exactly where these services should be run. One is entitled to assume that the intelligence of the Greater London Council and the managerial expertise of the London Transport Executive will combine together to produce a reasonable arrangement; it is for them to determine where these services should operate, not the Minister of the day.

Reference was made to the stage and express services, the London Transport Executive having, like the P.T.E.s, a monopoly position in its area. Outside Greater London, it will be on exactly the same footing as any other operator. I do not believe in giving special privileges to publicly owned or municipally owned industries; nor do I see any reason why they should be expected to operate at a disadvantage.

Mr. Heseltine

Surely, the Minister appreciates the vital difference between the stages which existed immediately prior [column 109]to the establishment of the London Transport Executive here and the passenger transport executives in the country. Here, there was a monopoly position. There, there was a free market, though, perhaps, strangled and ossified. It is very different in London where the private sector never had a chance to build itself up.

Mr. Marsh

But progress is the very essence of our view of these things. The situation, as the hon. Gentleman says, has changed now, and the only point which I am making as a point of principle is that outside Greater London the L.T.E. will be on exactly the same footing as any other operator, and services which are picking up or setting down outside Greater London, excluding the cross-boundary services, will be subject to control by the Traffic Commissioners under the road services licensing system.

Under Section 135(2) of the Road Traffic Act, 1960, the Commissioners, before granting a licence, have to take into account the extent, if any, to which the needs of the proposed routes are adequately served. By this provision the commissioners have a duty to take into account the question of undesirable competition and fare levels. Given that London Transport will be treated in exactly the same way as the other operators, and given that the Traffic Commissioners, before granting approval, will take into account whether it represents undesirable competition and examine the extent to which the proposed routes are already adequately served, and will also be involved in the question of fare levels, this is a perfectly fair, clear safeguard for other operators. But the Bill goes even further than that, because in Clause 12 there are provisions specifically aimed at ensuring that contract carriage work is carried out commercially without undercutting rates.

We hope to place upon this body a statutory obligation to run such services as are necessary for the transport needs of London. We ensure that the Executive can operate only within the guidelines laid down by the Greater London Council. We ensure that, if it wishes to operate outside London, it will have no preference and no advantage over other operators. We ensure that it is subject, in the same way as other people, to the Traffic Commissioners. We ensure that the question of how far the routes are already being adequately served is taken into account, [column 110]that fare levels can be looked at and that undesirable competition is not permitted. There is a safeguard in Clause 12 specifically aimed at ensuring that contract carriage work is carried out commercially and that there is not an uncommercial cutting of rates.

I agree that on this issue feelings run very strongly and about which there are very strong views. I am in no doubt that there is great doctrinal pressure behind the emotions on this matter. But, on the evidence, the doctrinal pressures do not come from this side of the Committee. All that we say is that the Executive should operate in the same way as other operators. The doctrinal pressures come from the Opposition, because hon. Gentlemen opposite, even when a transport undertaking is about to be passed over to the control of a municipal authority controlled by their own party, find that any form of public ownership sticks in their gullet to such an extent that they seek not to protect the private sector but to place the public sector at a disadvantage. That is a view which I understand on the basis of their own beliefs but which we on this side of the Committee could not accept.

Captain Walter Elliot

The Minister said that the Greater London Council is the ideal body to lay down policy guidelines. Perhaps it is the best body in the Greater London area to do that. But we should remember the great monopoly powers which it has over all transport facilities, including the use of the roads. The right hon. Gentleman went on to say that, in operating these services outside London, the Council would be on exactly the same footing as private interests, with no advantages and no preference. I question that.

I turn to Clause 3(1), which empowers the Council to make grants in respect of passenger transport services or other passenger transport facilities. In my speech on Clause 3, I expressed concern as a ratepayer in Greater London, and for all other ratepayers of Greater London, about how the Greater London Council would make these grants and for what purposes. I was backed up by the hon. Member for Nuneaton (Mr. Leslie Huckfield), who agreed with what I said about the difficulty of identifying these subsidies and to discover how they are being used, how inefficiency is allowed to flourish because there is an overall [column 111]subsidy and we cannot identify where it has gone or the discontent which it has caused. The hon. Member for Nuneaton quoted the case of the railways, which we all know about.

If the Greater London Council is to run services outside Greater London, will the Greater London Council make grants for these services, and how shall we identify these grants as being used for these services? If they are used for these services, how can the Minister argue that private interests are on exactly the same footing and that the Greater London Council has no advantage? I do not believe he can. Therefore, when he made this point, I think that he was wrong, and, as a result, we shall make the same mistake as we made in the past over the railways. If a general subsidy is given and nobody can identify where it has gone, a great deal of money is wasted.

My suspicions and objections to this provision are increased because already in the Committee the Minister has used the words “wasteful competition” . That is a phrase often used by right hon. and hon. Members opposite, not only in the Committee but in the House.

Mr. Marsh

I do not wish to be mis-understood. I referred to “undesirable competition” . There can be competition, as I am sure the hon. Gentleman would agree because it is the basis of his argument, which is undesirable. It might well be subsidised competition.

11.0 a.m.

Captain Elliot

I do not think that there is a great deal of difference. In the short term, competition sometimes seems undesirable, but if we eliminate it, in the long term we pay for it. If the Minister did not use the phrase “wasteful competition” , he used the expression “undesirable competition” . In the vast area of Greater London, no doubt the Minister is glad to eliminate what he calls “undesirable competition” . I have already voiced anxiety that under the Bill the G.L.C. will control not only the buses and the tubes but the use of the roads. When I said this, I think on the Floor of the House, the right hon. Gentleman objected. If the Greater London Council is to give, for services outside the Greater London area, grants which cannot be identified, [column 112]thereby giving an advantage over private interests, and if all private interests are to be eliminated with the cry of “undesirable competition” , we shall be back to where we were with the railways and the waste of a great deal of money.

I view this provision with the greatest suspicion, and I hope that the Minister will say how we can identify a grant, should the Greater London Council make a grant, as it is empowered to do, in support of certain services.

Mr. Gresham Cooke

The Minister mentioned the commuter belt in relation to the activities of the London Transport Executive. This is an enormous part of England. The commuter belt stretches anti-clockwise all the way from Southend to Luton, Reading, round to Guildford, Sevenoaks and Chatham. It comprises about half of South-East England. We are giving the Executive tremendous powers to operate into these towns, 40 miles from the centre of London. It can even operate by water and, therefore, run sea trips to Margate in the summer.

Therefore, we are giving, without any control, very wide powers. I say “without any control” , because the Minister has said that London Transport will be subject to commercial considerations. I hope that it will work out like that and that the grants will not be used for any fringe services. There are plenty of private enterprise companies which would be grateful for the chance to run some of the services that have been mentioned. We are dealing with a very large area, stretching over several hundred square miles of the country. The London Transport Executive will now be able to operate practically over the whole of South-East England.

Mr. Anthony Berry

The Minister took exception—I cannot understand why—to my hon. Friend the Member for Tavistock (Mr. Michael Heseltine) going back a little in time and discussing earlier Acts which affected this Bill. We spent an important part of last year in the Transport Bill discussing the Railway and Canal Traffic Act, 1888, which was extremely relevant to that Bill. I should have thought that my hon. Friend's reference to the 1933 Act was not only relevant but essential to our understanding of this matter. [column 113]

The Minister has not convinced me why we must give these infinitely wide powers to the London Transport Executive. He made a passing reference to Blackpool. Does he seriously consider that London Transport will organise excursions to Blackpool?

There are certain needs in the Greater London Area. My hon. Friend the Member for Tavistock (Mr. Michael Heseltine) mentioned airports. Obviously when the new London Airport is decided on and built, something may have to be done about that. But that is an exception. It does not give the Minister the right to vest in London Transport these wide, infinite powers. I do not understand why he should mock us by saying that we do not usually like giving Ministers powers.

In this instance, the Minister's responsibility is important and should be written into the Bill.

The Minister said that last year passenger transport executives were set up in four areas of the country and that, therefore, London Transport cannot be different. But if he has a long, cool look at the situation now that the excitement of the discussions on last year's Transport Bill are over, surely he will realise that the powers given to the executives were much too great, and that, in due course, if he has the opportunity, which I doubt, he should bring in a Bill to limit those powers and to bring them into line with what we seek to do in this Amendment.

Our approach is not, as the Minister says, due to doctrinal pressures. We approach this matter with the interests of the public of London at heart. We think that the public will benefit to a large extent from this Bill, but, in certain parts, we think that they will suffer, and this is one of those parts. The London Transport Executive will have a job to do for Londoners. That is the limit of its responsibility, and that is what it should spend its time on.

Mr. Marsh

Hon. Members have made a number of further contributions, but I do not think that they have changed the basic proposition. The hon. Member for Southgate (Mr. Berry) raised the main point. He said that the job of the London Transport Executive is to cater for the needs of London. That is the point. The needs of London extend outside the boundaries of the Greater London Area. [column 114]Therefore, it cannot be disputed that there is a need for the London Transport Executive to operate outside London.

Mr. Heseltine

I have here a whole list of contingencies which were catered for, when there was need outside London, by the private sector, all of which have been introduced since 1962.

Mr. Marsh

If it is suggested that the London Transport Executive has no right to operate outside London at all, that is an extraordinary argument, because the commuter belt extends beyond London. We cannot suddenly erect a wall around London in transport terms. The hon. and gallant Member for Carshalton (Captain W. Elliot) drew attention to my point about undesirable competition which is what worries him. One could have a system in which the competition of the London Transport Board was undesirable because the services were already being provided, because it was being heavily subsidised, and because it was grossly undercutting fares. This is the sort of undesirable competition which I had in mind and which I think is at the back of the hon. and gallant Gentleman's mind.

But take, for example, contract carriage as it is affected by the Bill. There is protection in Clause 12(2), which provides:

“If, where the Executive or any subsidiary of theirs carry on such business as aforesaid, it appears at any time to the Minister that, having regard to all the circumstances appearing to the Minister to be relevant, the charges made for the services aforesaid provided by the Executive or subsidiary are unduly low in comparison with the cost of providing them, the Minister shall, after consultation with the Council and with the Executive, either—

(a) direct the Executive to make, or, as the case may be, to ensure that the subsidiary makes, such modifications in their or its method of conducting that business as may be specified in the direction; or

(b) direct the Executive to discontinue, or, as the case may be, to ensure that the subsidiary discontinues, that business.” Here there are very strong, Draconian powers which provide a double check—the G.L.C. with its policy guidelines, and the Minister's right of intervention.

As regards stage express services, the position of the outside operator is covered by the obligation upon the London Transport Executive to place its case before the Traffic Commissioners, and by the statutory obligation upon the Commissioners to take into account the extent to [column 115]which the needs of the proposed routes are already adequately served and to take into account fare levels. Therefore, there is protection there. If we start from the basic assumption—if this is the difference between us, obviously there is no point of agreement—that, given an area the size of London, with its peculiar ramifications, there is need for the London transport service to operate to some extent outside of those boundaries to serve the needs of London itself, we are brought up against the question: Is the position adequately safeguarded to ensure that such competition as is provided by the London Transport Executive is fair and not undesirable? The provisions in both the Bill and the Traffic Acts are sufficient to ensure that that is so.

Captain Elliot

With all the experience we have had in the past of trying to identify subsidies and where they are to go, does the Minister really think that we shall be able to identify some sort of subsidy to a service run out of Greater London to anywhere he cares to suggest? It is not a question of being “unduly low” ; if it eliminates competition, it may be rather high. But does the right hon. Gentleman think that he will be able to identify the subsidy on a particular service?

Mr. Marsh

I was coming to that. The hon. and gallant Gentleman made his point about the powers under Clause 3 to provide grants. The body providing the grant will be an elected local authority. It will not be able to hand over taxpayers' money or ratepayers' money in vast quantities without having to answer questions about where the money has gone. There is nothing to prevent the Greater London Council requiring the London Transport Executive to show accounts of country services and to show what the element of subsidy is. If there is any subsidy coming from the Greater London Council, it will be only for specific purposes. There will not be an open purse. Moreover, the Traffic Commissioners will be able to go into it if there is a fear that there is a subsidy.

Mrs. Margaret Thatcher

It is not only a question of subsidies under Clause 3. The Richard MarshMinister himself quoted Clause 12(2), and the relevant words there are: [column 116]

“… the charges made for the services aforesaid provided by the Executive or subsidiary are unduly low in comparison with the cost of providing them …”

There having been an enormous capital write-off, the cost to London Transport of providing those services, even on the basis of accounts provided to him, would not be a true costing at all. This is quite a different point from direct subsidy, since it is a marginal costing with a capital write-off. The point is fundamental. The competition would be unfair.

Mr. Marsh

If the hon. Lady takes that point, we are in very considerable difficulties——

Mrs. Thatcher

The right hon. Gentleman took it. He is in difficulty.

Mr. Marsh

—because the decision to write off the capital, and the position as we have it now, was at the request of the Greater London Council.

Mr. Heseltine

With respect, what the G.L.C. insisted was that there should be financial viability. The means of providing the financial viability were the Minister's.

Mr. Marsh

How to achieve viability and what viability involved was agreed with the Greater London Council. I do not think that it would be seriously considered that one could have a fares increase equivalent to both the increase which is likely to be necessary and a fares increase equivalent to the capital write-off. If one were to do that, the amount of traffic left for the London Transport Executive to carry would be small indeed, because the fares would be extremely high.

If we have a capital write-off, and if we have acceptance of the need for London Transport to operate outside the boundaries of London for some services, with recognition that there are these built-in safeguards, the fears which have been expressed cannot be justified. The operations will be carried on under a local authority and with guidelines laid down by that authority, with a great deal of public interest shown and represented. The only answer to hon. Gentlemen opposite would be to say that London Transport can operate only within the geographical boundaries of London, and that, in transport terms, would be an absolute nonsense.

[column 117]

Mr. Heseltine

It is in these wide-ranging debates that the truth emerges in its most naked form. Now that I have listened to the Minister's explanation, my doubts are stronger than at any time since the Bill started its passage some time ago.

The right hon. Gentleman contended that it was unfair of us to try to put the London Transport Executive in an unfavourable position vis-à-vis the private sector operating outside the London area, because, as he put it, this Bill sought only to put the London Transport Executive on all fours with the private sector. This was the nub of his case, that there was nothing to worry about because the L.T.E. would not be in any way preferred or given privileged treatment; it would simply be able to compete on all fours, and what could be fairer than that?

Superficially, if that were all, one would wonder what could be fairer than that. But, as his speech went on and as the questions from this side were put to him, so the enormity of the Minister's assumption was revealed. The first and significant point is that the London Transport Executive will continue to have an immense monopoly home base from which to conduct its operations. In this area and in the commuter area on the fringes, it is impregnable. Everybody knows it. It is not only impregnable in terms of its size; it is impregnable in terms of the commercial advantage now given to it because it has virtually no capital injected into its organisation. The L.T.E. is an immense organisation, with a monopoly in the very centre of its operating area, giving it a commercial advantage with which no small, medium-sized or even large private concern could begin to compete. That is the fact inside London.

Then, if this legislation goes through, we shall allow this organisation to spread its tentacles outside London. We are told that, despite its monopoly area in London, it will be competing fairly outside London. Anybody who has the remotest concept of the scale of industrial organisation and the advantages of a firm monopoly home base knows that there can never be fair competition in those circumstances. It was precisely for that reason that in 1953, in 1962 and in 1933, the monopoly situation in London was always recognised, and it was always considered that it should not be permitted to extend outside the London area. The case is as valid today as it was in 1933. [column 118]

Now, the question of the capital write-off. This is crucial to the whole competitive structure of London Transport. It is staggering to me that the hon. Members opposite sit silent through all the immense financial jiggery-pokery which is going on, apparently totally indifferent to the sort of money being committed on the behalf of the taxpayer this morning, and without any real interest in what is happening to London Transport now, in the future, or in the past. I hope that we shall hear whether there are other views on this particular matter among hon. Members opposite.

The capital injected into London Transport is now to be written off to the extent that the London Transport Executive will be using its assets at a totally unrealistic written-down value to compete outside the London area with the private sector. “Never mind” , says the Minister to the private sector, “I shall be looking after you because, under Clause 12, 18 months, two years or two-and-a-half years after you have been driven out of business, I shall have an opportunity to look at the accounts of the London Transport Executive, and I can rectify the whole thing by saying that they should stop running these unremunerative services” .

The Minister knows as well as anyone that he is not competent—I mean it in no personal or abusive sense—to protect the private sector in the way which he envisages.

Captain Elliot

After what the Minister has been saying, he may well consider it a good thing to eliminate what he calls undesirable competition.

Mr. Heseltine

I entirely take that point. To many hon. Members opposite, any competition is by definition undesirable. To people in the private sector, a great deal of competition is undesirable as well. It depends on where one is sitting when the competition comes. But the point is that nobody can monitor a system of competition in the excursion and tour business 18 months to two years after it has happened.

I realise that we shall be having a detailed debate when we come to it, but may we look for a moment at Clause 12? All that it does is give the Minister the power to look at the accounts a year or 18 months after the activities took place to [column 119]see whether the cost of the services bears some relation to the revenue from them. If 50 per cent. of the services in the excursion tour business outside London were run at a profit and the other 50 per cent. at a loss, the accounts would show a break-even. I dare say that this, after incorporating the capital write-off, would be acceptable to the Minister, but it would be totally unacceptable to the private operators who had been driven out of business on that side of London which had been chosen by the London Transport Executive to eliminate the private sector; and the Minister would never know. He has not the staff to know, and, even if he did know, it would be 18 months after the little men had been driven out of business anyway. So what the right hon. Gentleman says is nonsense.

I challenge him on the point which was rightly raised by my hon. Friend the Member for Finchley (Mrs. Thatcher). If he really believes that there should be some sort of fair competition on the outside, and if he really understands the severe restriction under which the private sector suffers as a result of this 90 per cent. write-off of capital, will he be prepared to insert into Clause 12 an Amendment to the effect that the cost of providing the services had to reflect not the written-down value of the assets but the real asset depreciation which should have been charged if the assets had not been written down?

The Chairman

Order. We are going a little too far. We cannot anticipate Amendments to Clause 12 at this stage.

Mr. Heseltine

Sir Beresford, I think that the point will have got to the Minister, and he will have plenty of time to consider it between now and Clause 12.

Sir Beresford, the Minister did refer to another point on Clause 12, and I hope that you will not rule this out of order. He challenged us on the wording of our Amendment to give the Minister power to withhold consents. It was the general nub of his argument that it was wrong to have the Minister interfering in this way, that the Minister should have no part to play, that it should all be handed over to the democratic control of the municipal authority. Then, waxing eloquent, and, perhaps, not reading the text of the legislation as carefully as we had, he said that [column 120]we should not worry, because Clause 12 would protect the little man. “Uncle Minister” now comes back to protect the little man. So, when it suits the right hon. Gentleman to say that the Minister should not have powers, he said that; and then he calls the Minister in aid to show how cleverly he will step in to protect the little men in the future.

There is no principle involved here at all. It is simply a question of whichever side one happens to be arguing on when the word “Minister” comes up in the legislation. Therefore, it is perfectly reasonable that we should argue on Amendment No. 21 that the Minister should have the control which we seek. The Minister says that it is inconceivable that the demand for these services will not arise, and that it is inconceivable that London Transport should not be allowed to run them. Under our Amendment, London Transport can run them, but only if the Minister knows and agrees, prior to the decision to do it—not 18 months or two years later—that it is to be done for the right commercial reasons, that is, that the need exists and nobody else will provide the service, or that it will be genuinely profitable taking into account all facets of the matter. Within the framework of this legislation, defective though it be, the Minister should have that sort of power at that stage.

If there were such a demand, it would be easy to establish it and arrange for it. I have here a substantial list of private companies which have come in since 1962. I shall not bother to name them. The Minister knows about them as well as I do. They have come in to run special services over the frontiers and into London when there has been a demand. One of the great illusions on the other side of the Committee is that there is a latent profitability in the economy which no one in the private sector has noticed and that the public sector will now come in and find little wells of profit into which it can put its tentacles in order to draw revenue for the public sector.

The fact of the matter, as we have always said in transport debates, is that by and large, where there is a commercial demand, there is somebody satisfying that demand. There will be no possibility for the London Transport Executive to go out into the “sticks” and find great areas which it can exploit. It will have to go and fight for business. In fighting [column 121]for business, it will find itself losing at least as much money as it makes. This is the nub of the argument. Our concern is that, having written off 90 per cent. of the capital involved in the business, one has, to put it mildly, established for the London Transport Executive a totally privileged position. It is admitted that the whole thing is bankrupt and, therefore, one has to give not no subsidy but an immense subsidy from the taxpayers to keep it going.

Mr. Marsh

The hon. Gentleman keeps coming back to the question of the capital write-off. He will accept that a very large part of the capital write-off was concerned not with the bus services but with the very expensive underground rail services.

Mr. Heseltine

It is a very big and complex undertaking, and I fully appreciate that the £240 million written off does not all relate to the buses. In bus terms, £240 million is money beyond anyone's dreams. But even 10 per cent.—I do not know what the figure is—in bus terms is a substantial sum of money, because the bus industry is generally relatively small in its utilisation of capital. What counts is the percentage of capital one is writing off. If one is competing with a private operator, whether he has paid £4,000 or £40,000 for his bus, is not relevant; what matters is the charge, the percentage of that capital which he has to write into his annual accounts. If the public sector starts off with a bus written down to 10 per cent. of its capital value, and the private sector starts off with a bus at 100 per cent. of its value, that is not fair competition. That is the point, not the question of the global write-off involved here. 11.30 a.m.

We are concerned here with what is now publicly accepted as a bankrupt organisation. In Parliamentary language, one calls this a capital write-off, but bankrupt is what it amounts to. By this Bill we are giving this bankrupt organisation vastly extended powers of trading. It is our contention that, when one declares a nationalised industry bankrupt in that way, one has then no right to arm it with unfair powers to go out and extend its operations in distorted competition with the private sector. In the first place, there will be a [column 122]wrong use of capital investment, because there is no sanction of the market. Because of the effect of the accounting mechanism within which it is controlled, there is no way by which one can tell whether people really want the services which are to be provided. The disciplines of the market have ceased to exist for this organisation. Second, there are the immense pressures from politicians to demand services for which the public are only questionably in support. There is no way in which the discipline of the market could stand against the political pressures of elected representatives who, time and time again, will make the wrong decisions for purely political reasons. We have seen it in the nationalised industries. Organisations which should be run for commercial benefit and for commercial reasons are being run for a whole range of quasi social and political ends which have very little justification in terms of the benefit that they yield to the economy.

There is a desperate need for this country and the politicians to realise that the result of a nationalised sector has been to extend a vast distortion throughout our economy. This proposal extends the distortion a little further, because, instead of demanding a return from investments, one is prepared to pretend that a return is not necessary because a whole range of notional political concepts and social costs are allowed to enter into one's calculations which enable one to justify allowing the concern to trade on a break-even basis, or, worse still, at a loss. This power is one more step in that direction.

We should have liked to see a much more commercial, much more realistic, appraisal of the needs of London, with a much freer type of licensing system, as opposed to the restrictions of the licensing system which has been accepted in this country for 30 years. The Government should be considering, not the dictates of the politicians, but the provision of services which the public genuinely want and will pay for.

Captain Elliot

Reference has been made to people living outside Greater London who travel into Greater London. At an earlier sitting, the hon. Member for Nuneaton (Mr. Leslie Huckfield) referred to commuters coming from Rugby and Reading. I know that they come from Bournemouth, Portsmouth and even Swanage. Surely we should consider not [column 123]only the service which they give to Greater London, but the service which is given to the areas in which they live, because they work in London. Speaking again for the ratepayer in Greater London, may I ask why he, through the system of grants, should take the weight of all this? Why do not places like Southampton, Reading, Rugby, Bournemouth and Portsmouth shoulder some of the burden of providing grants for services running into and out of Greater London?

Mr. Marsh

I am not quite sure what grants the hon. and gallant Gentleman is talking about. The Greater London Council has not taken any decision to give any grants for anything. The bus operators will be entitled to the bus grants, but so will bus operators throughout the country. The G.L.C. may or may not decide to give grants for services if there are none at the moment. If it does, it will presumably do so as the elected body [column 124]for London on the basis that it is a useful way of using the ratepayers' money for the benefit of Londoners.

The Chairman

I hope that hon. Members will not pursue the question of grants too far, because we have already dealt with it. It does not arise on this Amendment.

Captain Elliot

I do not want to belabour the point. The Minister was rather contradictory just now. He seemed to imply that grants would not, or might not, be given. But they will be given. Why should all this burden fall on to the Greater London ratepayer? Admittedly, commuters from outside London serve Greater London, but they serve themselves and the areas in which they live and do their shopping. Why cannot those areas take some of the burden?

Question put, That the Amendment be made:—

The Committee divided: Ayes 7, Noes 8. Division No. 3]


Berry , Mr. Anthony

Elliot , Captain Walter

Grant , Mr. Anthony

Gresham Cooke , Mr. R.

Heseltine , Mr. Michael

Rossi , Mr. Hugh

Thatcher, Mrs. Margaret


Boston , Mr. Terence

Brown , Mr. Bob

Coleman , Mr. Donald

Fletcher , Mr. Raymond

Lewis , Mr. Ron

Marsh , Mr. Richard

McBride , Mr. Neil

Ogden , Mr. Eric