HL Deb 18 June 1996 vol 573 cc237-43

(". The determination of claims for, and payment of, housing benefit and council tax benefit shall not be defined activities for the purposes of Part I of the Local Government Act 1988 (Competition).").

The noble Baroness said: This amendment relates to the interlocking of housing benefit with some changes introduced by the Department of the Environment on compulsory competitive tendering.

A few weeks ago the DoE Minister issued a consultation paper which, if adopted, will dramatically affect local authority work that goes out to CCT. Financial services, which in most local authorities include housing benefit and council tax benefit administration, will have to expose 65 per cent. of their work to CCT. That is truly very foolish. Housing benefit in particular is under strain. We have already debated half a dozen amendments today relating to that.

First, the Government rightly want—and tenants rightly need—to have housing benefit paid more speedily than in the past. Otherwise, as already made clear, tenants will risk eviction by impatient landlords who have not received the rent. It is essential to prevent that and to avoid adding to the problems of homelessness. So local authorities must speed up the delivery of benefit.

Yet at the same time, as we discussed in relation to an amendment some 10 minutes ago, the Government rightly want and encourage local authorities to prevent and detect housing benefit fraud, often of a fairly sophisticated sort. Therefore, local authorities should not cut corners, but should take enough time to be fastidious.

Thirdly, at the same time, the Government are continually changing the regulations under which housing benefit is allowed. There were regulation changes in January; there will be further changes in October. This is a system in which we need to speed up payments, while simultaneously decreasing fraud, while at the same time coping with government changes to regulation. This is the system that the Government propose to put out to compulsory competitive tendering. The prospects are horrific.

My first objection is a management one. Housing benefit is a stressed system. Rightly, there are conflicting objectives. Yet to these strains will be added another one; namely, exposing the work to CCT. That means not only asking hard-pressed staff to draw up the specifications of their work for CCT, but expecting those same staff to go through the trauma of bidding for their own jobs while continuing to run a department. Precious energy and effort will be diverted away from the job in hand. If they themselves win, they will be likely to have done so by cutting their own staffing costs and thus reducing their ability to pay benefit on time and without error or fraud. If, however, they lose and the administration of housing benefit is handed over to an outside company, because housing benefit is so complex we are likely to see errors, delays and fraud mount while the staff of the new company start from scratch and learn the system.

Look at the difficulty that the DSS is currently experiencing in moving over from IS to JSA. It has had to slip six months because the systems could not deliver. Look at the problems the DSS had when part of its most routine work in handling order books was privatised. People went without money for weeks. Has the Department of the Environment talked to the DSS about the implications of imposing CCT'? I cannot imagine a worse time at which to throw all local authorities' housing benefit administration up into the air by imposing CCT. I find it quite unbelievable.

Where local authorities wish to use private companies, that is fine. The staff will have geared up to that and will have worked out a partnership which may now be of several years' standing. But I predict that where an outside company wins against the local authority's own in-house bid—in other words, where privatisation is imposed on housing benefit administration—there will be chaos. Systems will break down; giros will be lost, delayed, underpaid, over-paid. Every time the housing benefit regulations change—and at the moment they are changing every six months or more frequently—the entire contract has to be renegotiated with the local authority at considerable cost and effort. Who will be held accountable when landlords start evicting tenants because the housing benefit cheques have not arrived and the rent goes unpaid? Will it be the councillors who have had CCT forced upon them, or senior housing and treasury management staff who have had CCT imposed? It is appalling.

I accept that housing benefit adjudication will not be put out to tender. But in practice that is not a distinction that can hold, especially when dealing with fraud. So our first objection is that there will be management and administrative chaos.

Our second objection is that housing benefit and council tax benefit administration is extremely sensitive, just like income support or disability payments. To administer correct benefit staff will need to handle sensitive and confidential information about a couple's marital situation, when for example a pregnant woman may expect the birth of a child; their finances; their employment; their relationship with their children; their domestic life; their debts; their relationship with the landlord; and any arrears they may have. It is some of the most confidential and sensitive information that local authorities ever handle. Local authority staff are well trained to handle such information sensitively and professionally and to regard confidentiality as of the utmost importance.

What confidence can we have that a company that wins a bid merely because it has submitted the cheapest, lowest tender will apply the same professional standards in handling such sensitive questions? We know what happens. We have had experience of what happens when local authorities do as the Government require and accept the lowest tender. They pay the staff least; therefore the staff turn over rapidly; therefore little is invested in training. We know that customer complaints then mount and systems collapse. Those are the facts.

My third objection is that, as late as November 1995 (six months ago), the DoE confirmed by circular to local authorities: given the sensitivity [of the administration of revenue services and benefits] Ministers have undertaken that authorities will not he compelled to market test any of this work, and the competition requirement has been set at a level to take this into account". Only six months later, without publishing any supportive evidence, the Government have gone back on their word. Following consultation, local authorities may be forced to expose this most sensitive work to CCT. Why is that? As the entirely impartial and professional Institute of Revenues, Rating and Valuation says, the only explanation can be that the DoE is responding: to private briefs from a group of disappointed contractors". That is interesting. I wonder what the Tory Government hope to get in return. I beg to move.

7.30 p.m.

Lord Mackay of Ardbrecknish

The noble Baroness rather ingeniously added that argument to this part of the Bill, although it has little or nothing to do with the four clauses and schedules that we are discussing now. Nonetheless, she seized the opportunity to run one of the Labour Party's favourite hobby horses—its objection to any competitive tendering within the services of local authorities. In this case, it is the financial services of local authorities. But, frankly, the position is the same regardless of the service of the local authority. Whether it be in the collection of dustbins or any other service, the noble Baroness's party believes very firmly that the private sector has no part to play and cannot teach local government anything in regard to efficiency or effectiveness.

Baroness Hollis of Heigham

Did I hear the noble Lord correctly? Is he suggesting that collecting rubbish in dustbins is the same as administering housing benefit claims? Does he believe that there is any comparison between the two?

Lord Mackay of Ardbrecknish

I did not make that suggestion at all. I simply pointed out that it was an objection to the whole contracting-out policy and that encompassed services such as the collection of dustbins, which is done very efficiently indeed in many local authority areas by the private sector. We are discussing now what I might call a sub-set of that policy, which affects the financial services of local authorities.

The noble Baroness advanced arguments of which my ministerial colleagues in the Department of the Environment are very well aware. They understand and have examined them. They have concluded that there is no special case for benefit work not to be taken into account when local authorities calculate whether they have fulfilled their competition requirements.

We believe that there are substantial savings to he made in the administration of benefit work. With that in mind, as the noble Baroness knows, we have recently proposed increasing the competitive requirements for financial services work (into which this activity falls) from 35 per cent. to 65 per cent. We believe, however, that there are some elements of benefit work—mainly determinations—where the functions cannot be transferred to another party and we have no intention of forcing local authorities to do so.

It is very unlikely that an authority could not meet its competition requirements without exposing work to competition where it has no power to do so. In other words, there is enough headroom, so to speak, in the 35 per cent. which remains to accommodate work such as the determination work. But if that were to occur, we should certainly be prepared to examine the case and provide an exemption if the case were shown to be justified.

I suspect that the noble Baroness was referring to a little more than determination in the adjudication officer definition and that she was thinking about the day-to-day administrative processes used to assess and pay claims on housing benefit or council tax benefit—the collection of information and subsequent payment of the benefit. Her amendment, if accepted, would simply mean that all aspects of benefit administration carried out by local authorities would be outside the scope for the exposure to competitive tendering. That is certainly not the Government's intention.

The point about competitive tendering in this and every other field is to deliver a more efficient service in the most cost-effective manner. There are clear specifications laid down in all those contracts for the delivery of the service—for the outcomes achieved—so that whoever does the work, whether it is in-house or a private contractor, he is paid not just for processing the claims but paid on the basis of the outcomes. The outcomes are well described as "paying the right money to the right person at the right time". I should have thought that those were specifications that we should demand from everybody, whether it is an in-house person or a private contractor.

There are local authorities which already use private companies for part of the housing benefit work. The experience of those who have already contracted out is not one which I recognise from the noble Baroness's description. CCT is about getting the best services for the local charge payer at the best price. The policy is about ensuring that the service is delivered well to the customers who need it and costs as little as possible to the taxpayers and the council tax payers who have to pay for it. I am afraid that the noble Baroness's amendment is designed to remove the need for local authorities to expose large amounts of their financial services to competition, thereby ensuring that we do not gain the competitive and financial advantages that we believe come from competitive tendering.

I hope that, with those remarks, the noble Baroness, having aired her point of view very clearly, will feel able to withdraw her amendment.

Baroness Hollis of Heigham

Before I comment more fully and decide what to do about the amendment, perhaps the Minister will tell me how I should understand the quotation that I gave. Why, six months ago, in November 1995, did the DoE say in a circular: Given the sensitivity [of all this area] Ministers have undertaken that authorities will not be compelled to market test any of this work"? Would the Minister like to explain to me what that sentence means?

Lord Mackay of Ardbrecknish

I do not have the circular to hand and so I am not sure of the context from which the noble Baroness took the quotation. But I have made it clear, and my ministerial colleagues at the Department of the Environment as well as my right honourable friend at the Department of Social Security have made clear, that the determination—the adjudication work—is work that cannot be transferred to another party. As I made perfectly clear, we have no intention of forcing local authorities to contract out that part of the housing benefit work. The other parts of the housing benefit work are perfectly capable of being contracted out, as has already happened in certain local authorities.

Baroness Hollis of Heigham

The quotation was in reference to the administration of revenue benefits and services, not to determination. Clearly, the Government's word lasts for six months. Six months ago local authorities were assured that the 35 per cent. rule would remain in place and that housing benefit administration would be protected from CCT. Six months later, we have a volte face. I give way to the Minister.

Lord Mackay of Ardbrecknish

It is not a volte face at all. It is simply ensuring that the policy is succeeding in those areas in which it has been started and therefore it is sensible to expand the area over which the benefits can be sought. I should have thought that it was perfectly sensible to start slowly and simply expand further in order to gain maximum benefit for the council tax payer and best service for the customer.

Baroness Hollis of Heigham

If the ties on parliamentary language did not preclude me, I would use the word "rubbish" to that, but it does, so I will not, except when talking about the dustbins that the Minister is so fond of quoting. The point is that throughout all CCT work, ever since Government first initiated this, going back now some 10 years—and many of us on these Benches have been involved in those debates over those 10 years—Government have always allowed local authorities, given that commitment, to ring fence that work which is particularly sensitive in handling confidential information. That position which applies to housing benefit was reconfirmed by the Government in November.

The Minister talks airily about increments and learning from experience; it is simply not true. It has never applied to this area of work. He is pulling arguments out of the air in the hope that because it has been done in dustbins we are now ready to apply it to housing benefit and confidential material. That is not the case. This work has always been regarded and recognised as sensitive and therefore not appropriate to go out to CCT, where it would perhaps go to a company who has gained the work simply because they have put in the lowest bid. The lowest bid to the specification has to be the one that is accepted. We had debates on that subject when we introduced that Bill many years ago. The cheapest bid is the one which pays its staff the least; it pays its staff least because it trains them least and, as a result, there is the fastest staff turnover and the lowest level of staff reliability. If the Minister knew, as would the Department of Environment Minister, about the workings of CCT he would recognise that what I am saying is a faithful and accurate description of what has happened to wide swathes of white collar CCT work.

The Minister made a couple of other points. He said that the Government were protecting the determination of housing benefit claims. It was only the administration that was going out, as though somehow in local government work one can make a clean distinction between the two. One cannot do so. The collecting of information is a crucial part of the determination of the final result. Only then will one know what additional information one will want in order to make a determination. The determination will be done by one set of officers, apparently, in-house to the local authority; the collection of information, which is essential to that determination, will presumably be done by a private company outside. How service standards can be specified under this, I really do not understand. It is an absurd distinction which cannot, in practice, be held or delivered. I promise the Minister that; it will not work.

Secondly, the Government emphasise efficiency and say that the whole benefit of CCT has been in relation to efficiency, but the whole problem of housing benefit is the risk of fraud and error that occurs. The very management problems that will occur in the switch from the existing system to one going out to CCT will encourage inefficiency rather than reduce it. There will be very high lead-in costs indeed.

Where such CCT work is voluntary, I was very careful to say in my opening remarks that that is fine. It is for the local authority to decide and develop partnership schemes. However, I repeat that housing benefit, as we know, is a stressed system. Fraud is increasing. Errors are high. Take-up is inadequate. This is a system where, at the same time that the Government are continually changing the structure within which it works, the Government are throwing it out to CCT, having reversed something like a decade's commitment to protect sensitive work away from commercial considerations. The Government have sought to reverse 10 years' policy in the last six months and, as the IRRV, an independent professional body of rating officers said, the only explanation they can come up with, and I quote, is that: the [Government] is responding `to private briefs from a group of disappointed contractors'". I just wonder whether the approach of a general election and the necessary finance for that has anything at all to do with this decision. None the less, with the permission of the Committee, I withdraw this amendment.

Amendment, by leave, withdrawn.

Clause 109 agreed to.

Schedule 11 agreed to.

Clauses 110 to 112 agreed to.

Lord Lucas

I beg to move that the House be now resumed. In moving this Motion I suggest that the Committee stage on this Bill be resumed not before 8.45 p.m.

Moved, accordingly, and, on Question, Motion agreed to.

House resumed.