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The real question is whether it would be the right policy to do so. I have little doubt that my noble friend could cite precedents where contracts have been let for longer periods than 15 years for the provision of infrastructurelight rail would be one examplewhere considerable investment is needed to get the project off the ground. But one advantage of buses over light rail is that most of the infrastructure is there already in the form of public highway; any improvements that may be desirable are not particularly expensive, relatively speaking, or necessarily difficult to provide. This also means that a bus network can be provided on a more flexible basis and can more easily be varied in line with changing journey patterns, demographic changes, growths in new communities and so on. So there is a real danger that a 15-year contract could create a real disincentive to responding flexibly to change in demand and could undo many of the advantages inherent in buses over tracked systems of public transportation.
A 15-year contract would also place a great deal of power into the hands of the contracted operator. The longer the period of the contract, the more difficult it would be to promote genuine competition for a successor, particularly if contracts are let over a wide area to a single operator. Even 10 years carries that risk and should be regarded as a maximum rather than the norm. It should require the operator to do something more than simply provide a basic level of service over that time.
Nor am I certain whether the difference between 10 and 15 years would be sufficient to persuade an operator to invest in capital projects such as bus stations. Many PFI contracts have been for much longer periods than that, though 15 years would still be the limit for bus services under community legislation. In any case, I can see no reason why a contract to build and manage a bus station should not be left as a separate measure, unrelated to contracts to operate bus services. That contract would then not be subject to the time restrictions in this Bill or the community regulation.
If we were to accept that there could be contracts for up to 15 years, we would have to extend the duration of the quality contracts schemes themselves, either to 15 years or, as in my noble friends amendment, for as long as the transport authority wishes, which in practical terms might as well mean for ever. Again, I am not attracted to that for the same reason; it could create the rigidity and inertia that many of us believe were in the pre-1985 set up.
The Transport Act 2000 has rightly required local transport authorities to make long-term plans for the public transport in their areas, and that was a necessary and long overdue reform. Yet it also obliged them to review these plans at five-year intervals. There may be a stage at which the only way of getting a decent bus service in an area is to go for the quality contract option. The Bill will make this option more realistic than it is at present, but that does not mean it is the right option for eternity. Since this option places a lot of power in the hands of the local transport authority, there will be understandable pressure to keep it in place long after it has served its purpose.
We think it is in the public interest that these schemes should be subject to a formal review process at least once in 10 years, and measures in this Bill will enable a local transport authority to provide for a scheme to continue in force beyond 10 years without having to start again at the beginning where it has been successful. Without a process for review after 10 years, there is a danger that they will simply carry on, for better or worse, because there is insufficient motivation to suggest otherwise.
I am not persuaded by these amendments and hope my noble friend can feel his way to withdraw them. My noble friend asked me to reflect more on the Transport for London position, where there is no 10-year limit. The situation is different in London; its services were never deregulated in the same way as services outside the capital. They have been shaped and configured in a different way, subject to different pressures and demands, as well as pressures for innovation.
Lord Rosser: My Lords, I am not able to fully agree with my noble friend. Nor am I entirely sure about his last point and the validity of it as an argument for distinguishing between what happens in London and in the areas outside London when renewing, as opposed to setting up, a franchise. I did not follow the logic of that, but beg leave to withdraw the amendment.
(2) Any such situation is to be treated as a relevant transfer for the purposes of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) (whether or not TUPE would apply apart from this subsection).
(3) For the purposes of TUPE, the organised grouping of employees that is subject to the relevant transfer consists of those employees of the former operator whose employment is principally connected with the provision of the local services referred to in subsection (1)(a).
The noble Lord said: My Lords, in Committee, my noble friend Lord Rosser moved an elaborate and extensive amendment to Clause 38 which gave rise to considerable debate with useful contributions from the noble Earl, Lord Attlee, and the noble Lord, Lord Snape. Amendment No. 43 will, I hope, address a number of the concerns expressed in that discussion.
In my response at the time to my noble friend, I explained how a transfer from a deregulated bus network to a regulated one under quality contracts would differ from the standard form of transfer of undertaking for which the TUPE regulations were designed. The process could be complex because in most cases we would not be starting with either a service directly provided by a public authority or a service provided under contract to a public authority. I fully accepted that the clause in the Bill did not deal with all possible circumstances and agreed carefully to consider the points made by noble Lords.
No doubt it will be recalled that the existing Clause 38 would provide TUPE protection only to employees who were taken on by a new employer who had won a quality contract. It would not provide for all those employed in providing the existing services to transfer to the new operator. The amended clause would create an obligation so that when an existing local service is discontinued because of a quality contract coming into force, all employees engaged in providing that service would be eligible for transfer to the new operator of that contract on TUPE terms. That change was advocated by nearly all who contributed to the Grand Committee debate.
Another criticism of the existing clause was that it left unclear many details of precisely which employees would qualify for TUPE terms, particularly where there was not a straightforward correspondence between the existing service and the new service. The amended clause contains provisions to address that issue as well, by means of a power to make regulations to prescribe the process to determine who comprises the existing workforce and those who would be assignable to a new contract. It is proposed that the incumbent
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This model depends on a degree of co-operation from the existing operators. First, they will have to supply employment details, suitably anonymised. Provision is made for sanctions if they fail to do so. Secondly, the TUPE provisions will apply only if the relevant services are continued in operation until the transfer date. Noble Lords will be aware that this has difficulties, but it should be borne in mind that an existing operator who will lose its services and employees unless it bids for and wins a contract to keep them going has a strong incentive to play by the rules. An operator that is able to transfer staff on TUPE terms will avoid the redundancy procedures and payments that would otherwise be necessary. We believe that on balance it is worth the risk of some employees potentially losing out in order to create a strong incentive for continuity of service to be maintained. Ultimately, we cannot force operators, in a still deregulated market, to continue providing services that may not be commercially viable.
I am aware that this amendment does not address all the points made in Committee. It would be virtually impossible to please everyone and set up a system that would deal with every contingency. I believe this is a great step forward and evidence that we have been listening hard to representations on this subject, not only from Members of this House but from elsewhere such as within industry at large. There have been a lot of discussions. I beg to move.
Lord Rosser: My Lords, I welcome the fact that the Government are seeking to ensure that TUPE protection applies. I share the view expressed by my noble friend that the amendment represents considerable progress. It is, as he said, a complex issue and it is important for all those concerned to get it right. I hope that the Government will continue, if necessary, to work constructively with those directly affected by the employment issues referred to in the amendment as the Bill progresses through Parliament. I am sure that people will want to raise further issues on this matter.
I trust I am not being unrealistic in hoping that, as the Bill progresses through Parliament, the Government will still feel able to introduce amendments to ensure pension protection. Whether TUPE regulations would apply in the period between the award of a quality contract and its becoming operationalthat is at least six months; it could be longerin circumstances where an operator deregistered a service and the quality contract operator then took it over is one of the issues that may need to be explored further. I welcome the amendment and the genuine efforts of the Government to deal with what could be a very difficult problem.
Lord Snape: My Lords, the amendment illustrates the great problems that arise from the implementation of the quality contract provisions of the Bill. It is significant that the main trade union in the bus industryit was the Transport and General Workers
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The only representation on this amendment that I have received from the trade union movement is from the National Union of Rail, Maritime and Transport Workers, which organises bus workers in various parts of the country, which is a legacy of certain railway companies operating their own buses prior to nationalisation. The letter was signed by the general secretary, Bob Crowhe signed it Robert Crow, which I found impressive; he had obviously decided at least to take his name upmarket, if not some of his attitudes. He said that he was very much in favour of franchising and, a little like PTEG, said that we ought to make sure that it came into being, rather than it being semi-blocked by a difficult government Bill. He went on to say:
I forbore to write back: Well, the problem with franchising is that, all too often, franchises go to the lowest bidder and pensions are not immediately uppermost in their mind when making their bids. He might have thought of that before he wrote the letter, but I do not suppose that there will be much future in pointing out that to him.
However, we are talking not just about pensionsthe noble Lord, Lord Rosser, referred to that. PTEG has belatedly realised that it is not simply a matter, as it is with railway franchising, of ringing the paint producers and having a new livery on the trains; it is a matter also of certain employment aspects of franchising, which is what quality contracts mean, albeit under a different name. I, too, would welcome, therefore, further thoughts from the Minister as the Bill proceeds to another placeI am sure that he will provide themabout proper pension provision for those who are involuntarily transferred from one company to another should the Government, or the traffic commissioners and those who advise them, be unwise enough to accept the nonsense of quality contracts.
However, more matters than just pensions are involved here. I try not to repeat matters that were debated in Committee, unlike the Passenger Transport Executive Group, which appears happy to take advantage of your Lordships rules that there are no rules really, that we make them up as we go along, and that it is up to individual Members of your Lordships House to abide by those unwritten rules. Perhaps the Procedure Committee could look at whether it an abuse of those unwritten rules for any organisation to brief Members, to see that amendments are worded exactly as they were in Committee and to provide exactly the same brief. My opinion is that it is, but I have not been here long enough to try to rewrite the rules of your Lordships House. There are certain other matters aside from pensions that the Minister ought to consider.
For example, many employees of the major bus companies are part of their own sharesave schemes. I know that FirstGroup and National Express have among their shareholders a considerable number of employees. When I was at National Express, all its employees were shareholders. The bus section of National Express was originally an employee-owned company. Employees came with their own shares, which were converted into National Express shares. Under the existing tax regulations, those shares are subject to taper relief. I am aware that the Chancellor of the Exchequer has announced the abolition of taper relief and a flat rate of tax of 18 per cent. I am not sure that the announcement will survive the furore that followed it, but if it does not, what will happen to those employees? After all, under the rules of Her Majestys Revenue and Customs, they get tax relief for shares only in the company for which they work. If under the daft provisions of quality contracts, and through wishes not of their own but those of the Passenger Transport Executive Group, they are transferred, will there be any income tax relief for them? If their transfer is against their will, it will certainly be as a result of this legislation. What representations does the Minister envisage making to the Chancellor of the Exchequer about future tax provision for those who have calculated their worth and benefits under the existing sharesave schemes and who find themselves not working for the company which originally issued those shares and, because of that, subject to a different income tax regime? These are all legitimate concerns. PTEG has largely glossed over them, because it is not interested in them; its only concern is to get its hands back on its buses. However, they are relevant concerns, and are perhaps among the reasons why the trade unions have been less than vociferous in supporting this aspect of the Bill. What provision does the Minister envisage making to protect those employees and their legitimate savings from the ravages of the taxman?
Lord Bassam of Brighton: I am grateful to the noble Lord, Lord Rosser, in particular for his support for our amendments. I am pleased that they were welcomed. I am sure that he and the noble Lord, Lord Snape, are right to say that, as the Bill progresses through both Houses, further concerns will be raised. The noble Lord, Lord Snape, raised proper concerns which I am unable to address today, but I shall certainly read in Hansard what he said and reflect on his points.
Pensions are an important issue. We are committed to continuing discussions on them because we are sensitive to them. People quite properly want to ensure that they have a reasonable pension deal and that it is properly preserved. We accept that there have to be more discussions on that. I am content that noble Lords are generally supportive of the amendments.
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