HC Deb 15 October 1969 vol 788 cc405-10
The Chief Secretary to the Treasury (Mr. John Diamond)

With permission, Mr. Speaker, I should like to make a statement on public sector purchasing.

As the House will recall, in May 1967 the Government published a White Paper—Cmnd 3291—on Public Purchasing and Industrial Efficiency. Among the objectives outlined were the use of public sector purchasing to promote standardisation, including the improvement of British standards and their alignment wherever possible with internationally acceptable standards; reduction in the number of similar varieties of products purchased in the interests both of economy and efficiency in production; and, where appropriate, increased co-ordination of purchasing in the public sector.

The White Paper was primarily concerned with purchasing by the central Government, but it also indicated our intention of seeking the co-operation of other public sector bodies, particularly the local authorities and the nationalised industries, in achieving these objectives.

Following the White Paper, my right hon. Friend the Minister of Housing and Local Government invited representatives of the local authorities to form with central Government Departments a joint review body to examine local authority purchasing practices. The views of the local authorities on the Report, which was published towards the end of 1968, are being discussed between my right hon. Friend and the local authority associations. The Government have already announced their intention to introduce legislation, as soon as time can be found, to enable local authorities to co-operate more closely with one another in this field by purchasing goods and providing services on behalf of others.

The nationalised industries have carried out, within their own separate spheres of influence, a great deal of work on standardisation and rationalisation of the products they purchase. Following the publication of the White Paper, discussions were held between representatives of the nationalised industries and Government Departments and it was agreed that pilot studies should be undertaken where it appeared that further benefits might be obtained through concerted action. These studies were carried out with the trade associations representing the supplying industries as well as the users of the products concerned, and the experience gained from them has led us to the conclusion that work of this kind is worth extending and putting on a more formal basis.

The Government and the chairmen of the nationalised industries have agreed to the setting up of a joint high level group for this purpose. The tasks of the new group will be to co-ordinate existing activities; to identify candidates for further attention on the basis of detailed statistics provided by the purchasing authorities; and to arrange for the necessary detailed work to be carried out under the leadership of the predominant public purchaser of the products chosen. Teams for this deeper study will consist of those with the necessary expertise at the practical working level.

The objective of each study will be to secure the agreement of the purchasing authorities to buy the standardised products resulting from the study. Anyone who is familiar with the subject will know that it is not one where spectacular results can be achieved quickly. A great deal of patience and detailed work in co-operation with the representatives of the supplying industries is needed to arrive at agreement on acceptable standards and varieties. But there is no doubt of the rewards to be obtained when this agreement can be achieved. There has been a substantial reduction in the variety of Government purchases and a considerable advance in the field of national and international standards, and as a result great economies in production are being achieved.

The establishment of the new group has been welcomed by the National Economic Development Council, and I believe that it will prove to be an important step in ensuring that public purchasing makes its contribution towards greater all-round efficiency.

Mr. Iain Macleod

I have three short questions on that exciting statement. First, the White Paper of May, 1967, was fathered by the D.E.A., with the Treasury as junior partner. Can the right hon. Gentleman tell us now where Ministerial responsibility rests? Obviously, there is a considerable interest for the Secretary of State for Local Government and Regional Planning. Is the main responsibility there, or with the Treasury?

Secondly, on the question of legislation, we are a little near the Queen's Speech for the usual euphemism about whether time can be found. Can the Chief Secretary tell us whether he expects legislation in the next Session of Parliament?

Lastly, on the joint high level group which he has announced, is it intended that representatives of local authorities should join that group or have links with it, or that they should form a group of their own?

Mr. Diamond

The right hon. Gentleman asked, first, about the fathering of the scheme, and where responsibility now lies. He is correct in his recollection that the White Paper was put forward in the names of my right hon. Friend the then First Secretary and my right hon. Friend the then Chancellor of the Exchequer. Responsibility for the policy of co-ordination of purchasing throughout the Government has always been within the Treasury. I am the responsible Minister to answer on behalf of the Treasury.

As for legislation, the right hon. Gentleman will shortly be hearing full details of what is proposed. I do not think that it would be proper for me to go further now.

As for the joint group, I take the right hon. Gentleman's point. He will be aware that we have not yet completed our discussions with the local authorities, who form a very large and varied body, with whom discussions move rather slowly. Although we hope that at the earliest possible opportunity they would join the group I cannot say at the moment that they have representatives who are authorised and willing to join.

Mr. Maxwell

I congratulate my right hon. Friend on this good progress report on public sector purchasing. Although it is not exciting, it is a vital issue for British industry. Will public sector co-ordinating be under the Treasury? Will there be a more interventionist policy in future than there has been in the past? Finally, have Treasury directives to Departments of State about purchasing been amended in any way, or does he intend to amend them, to give effect to the policies enunciated in his statement?

Mr. Diamond

As my hon. Friend will be aware, the main purpose of the statement is to announce the machinery being set up to encourage co-ordination. The word "intervention" is a term that I would not wish to use lest it should be misunderstood. To get co-operation between local authorities, the Government and nationalised industries requires good will and understanding on all sides, and is not helped by the kind of intervention which might be understood by the use of that word unadorned.

My hon. Friend will also know that the Treasury has been pursuing this policy. If I had the time, and the House were interested, I could give a most exciting account of the economies which have been achieved and the number of varieties that have been reduced as a result of our activities over the past three to five years.

Mr. Richard Wainwright

The Chief Secretary referred to international standards, which cover only a small part of our export trade at present. Will the new group have a definite mandate to consider the pattern of export demand, and in those cases where a slight adjustment of home purchasing specifications would enable a common run of manufacture will it be able to make recommendations?

Mr. Diamond

I am happy to be able to say "Yes" fully to the hon. Gentleman. Rather than giving detailed specifications to manufacturers and asking them to manufacture to those specifications the new policy has been to invite a number of manufacturers to say how certain requirements could be satisfied within their own specifications, particularly having regard to their own sales and export prospects. This has been working successfully and will be encouraged.

Mr. Barnett

I appreciate that my right hon. Friend does not like the word "intervention", but would he say whether he intends to use this new, welcome and substantial central purchasing power to ensure that the companies who receive the orders will at least co-operate with the Government in their economic and regional policies, in particular?

Mr. Diamond

That is something which will be very much in all our minds.

Mr. John Page

Would the right hon. Gentleman ensure that from the beginning the group takes notice of the use of technologists and technology in the manufacturing firms which they may be using in future as suppliers?

Mr. Diamond

Of course it will do so, and it will be anxious to hear suggestions made by them.

Mr. Dickens

In view of the great effects of the immense purchasing power of the public sector on the pricing policy of the private sector of the economy, would it not be much better to co-ordinate all these activities in a central public sector purchasing agency?

Mr. Diamond

That has been given very, very careful consideration. We must set against the advantages of a centralised purchasing agency the disadvantages of, first, the cost of providing for a large number of co-ordinators, and, secondly, the fact that no individual can have sufficient knowledge of the whole field. Government purchases, excluding special cases like trunk roads, run to about £1,100 million—over a billion pounds—a year. Co-ordination has already reached such a point that two-thirds of what every Government Department buys is bought not for itself, but for others.