MATTERS NOT SUBJECT TO INVESTIGATION (Hansard, 23 January 1974)

§ Mr. James Allason (Hemel Hempstead)
I beg to move Amendment No. 37, in page 50, line 32, leave out from 'Act' to end of line 34 and insert 'including the carrying out of works of building, construction or maintenance, and the procurement of goods and services necessary to discharge those functions'. What the general public want to know is not matters that are not subject to investigation but matters that are. Happily they are contained in the schedule as 1759 well, which refers to matters subject to investigation by the Commission for Local Administration.
I am sorry that I was not a member of the Standing Committee because I would have sought to make improvements in the schedule, which is couched in a series of confusing double and multiple negatives. I am sorry for the members of the public who need to consult the schedule, because they have to find out what is subject to investigation before they can start submitting complaints to their councillors and so to the commission.
Paragraph 3(2) lays down matters which are not subject to investigation—transactions relating to public passenger transport, dock or harbour undertakings, the provision of entertainment, the operation of industrial establishments and the operation of markets. Paragraph 3(3)(b) lays down that all other transactions are subject to investigation.
So far, so good. Then, however—and this is what I seek to amend—the paragraph contains a further negative: 'other than those'— transactions— 'required for the procurement of the goods and services necessary to discharge those functions'. I take it that "those functions" are 'functions exercisable under any public general Act'. My amendment seeks to bring the procurement of all goods and services within the scope of investigation, and to make clear that works of building construction or maintenance by direct labour forces are also liable to investigation. I am not clear whether the direct labour forces could be held to be covered by the words operation of industrial establishments and therefore exempt, or whether they are excluded from that expression. As it is doubtful, it is much better to make it clear that they are excluded, if that is the Government's intention, and therefore liable to investigation. Also, it must be wrong that the supply of goods and services is altogether excluded from being subject to investigation.
Injustice in consequence of maladministration is what entitles someone to seek redress from the commission.
1760 Private builders may suffer injustice in consequence of maladministration, if a local authority's purchasing procedure is not open to examination, not only to ensure that it is financially fair but to ensure that there is no undue favouritism of particular suppliers or bias against others.
A direct labour department may submit an over-optimistic tender for a contract and so win it. The over-optimism may be based on too low a calculation of overheads, or there may be an insufficient allowance for the probable rise in the cost of labour and materials during the period of the job. The private contractor tendering against the direct labour department must tender on a firm price basis. He is not in a position later to say "I am sorry. I made a mistake, and now I want to increase my tender by 15 per cent." It is important that the tendering should be seen to be fair.
I am told that in one scheme handled by the Glasgow City Council direct labour department only 10 per cent. was allowed for increased costs over a two-year construction period, whereas a 19 per cent. increase occurred in one year alone. On another job that direct labour department applied to increase its estimate by 17 per cent. only three months after the estimate had been accepted. Can this be regarded as fair treatment? Should it not be subject to investigation by the commissioner?
A Ministry of Housing Circular 57/69 recommended "The Manual of Principles of Financial and Management Control of New Construction carried out by Direct Labour". The manual urges that treasurers should produce financial records of the outcome of all direct labour work together with a comparison of the amount that would have been paid to contractors. It also urges the publication of profit and loss accounts for new construction work carried out by direct labour organisations. Repairs, maintenance and improvements are not included. Many local authorities do not observe the recommendations contained in the manual. They are not mandatory.
Many local authorities which have a direct labour force believe that it is doing a useful job. Councillors and officials rely on the argument that direct labour must save money because it does 1761 not have to make a profit. A treasurer's report would show whether that was so. It is no good relying on theory.
It is suggested that the existence of the district auditor is a safeguard, but he operates normally only an a sampling basis and, unless he is alerted, there is no guarantee that he will inspect these accounts. Proper accounts should be provided which truly show the position. The report and accounts should be readily available and in a form that gives sufficient information to permit a judgment of the efficiency of direct labour.
In Monmouthshire recently a ratepayers' representative could not obtain sufficient information from documents available from the county council before audit to enable a case to be put to the district auditor. Some of the information offered to him was in the form of an unintelligible computer print-out.
There is clear scope for investigation to ensure proper impartiality in the opening of tenders and in the measuring of work. An independent judgment will be possible on the basis of a treasurer's report based on an independent valuation. In this way the public will be able to judge whether there is maladministration. Therefore, both in purchasing and direct labour tendering the commissioner should be able to investigate maladministration. That is not achieved by the schedule, but it is achieved by the amendment.

§ Mr. Rossi
I have often had the great pleasure of serving with my hon. Friend the Member for Hemel Hempstead (Mr. Allason) in Standing Committees, and I am well aware of the assiduous way in which he scrutinises Bills of this nature. He is not slow to pick out any tautology or phrase that is less than clear.
Having looked at Schedule 5, I am not surprised that my hon. Friend immediately lit upon its provisions to point to a series of negatives which require a great deal of threading through to obtain the ultimate sense of what is intended. As he has drawn attention to the matter, it behoves me to give a few words of explanation of what is intended by the schedule.
The purpose of paragraph 3(3) in the schedule is to declare that certain types of transaction are open to investigation by local commissioners, notwithstanding 1762 he generality of earlier wording which excludes contractual or commercial matters.
The types of transaction which thus becomes subject to investigation are land transactions and certain transactions carried out pursuant to any public general Act, other than—and this is where we begin to get a little involved—the types of business wholly excluded by paragraph 3(2) as being of a basically commercial nature, for example, public passenger transport, or transactions in connection with the procurement of goods and services, which are also commercial in nature.
The particular object of mentioning public general Acts of Parliament is to make it clear that acts done under specific statutory powers—a situation which applies to most local authority activity—are subject to investigation even if there should be some charging element, such as the making of charges for accommodation in welfare homes. Schedule 5 does not declare all the matters subject to jurisdiction ; it simply states one or two of them where there might otherwise be some doubt.

§ Mr. Allason
Is the Minister suggesting that the words in line 32 of the schedule other than those required for the procurement of the goods and services necessary to discharge those functions refer to transactions falling within "subsection (2) above" or relate to all transactions under any general public Act? If the latter, which is the way I read the provision, surely it excludes all procurement of goods or services—for example any activity by a direct labour force or anybody else.

§ Mr. Rossi
I understand that it relates to all functions connected with the procurement of goods or services.

§ Mr. Allason
Therefore, any investigation into a tender by a direct labour force would be utterly meaningless because it could always say, "The reason that the tender is so low is that we managed to get our materials dirt cheap. We are not subject to investigation on that. Therefore, you cannot look at the tender. AH that you are entitled to look at is the rate we pay our men and the overheads."

§ Mr. Rossi
The area of investigation by the local commissioners is one of maladministration pure and simple. If maladministration exists in the use of a direct labour force or the way that it is manipulated, no doubt that would be a matter for investigation by a commissioner. This part is intended to exclude all procurement functions because they are commercial or contractual.
We must understand that the moment commercial or contractual activities are entered into, a legal obligation arises which is enforceable in the court. That is a better forum for dealing with commercial or contractual transactions because the court deals with legal obligations between a citizen and the local authority concerned. We are not concerned here with contractual obligations subject to the jurisdiction of the court. We are concerned with matters of maladministration that normally cannot come before the court. Therefore, we are creating the local commissioners and giving them powers to deal with those situations.

§ Mr. Allason
I mentioned cases where there was perhaps a refusal to accept the lowest tender and a bias in favour of some particular supplier. That, again, is maladministration because it is unfair to the ratepayers. Yet my hon. Friend tells me that that would be excluded because it is a contractual matter.

§ Mr. Rossi
In the matter of acceptance of tenders local authorities have to take into account many considerations other than the price. One factor would be the commercial viability of a particular firm. It is easy for a mushroom firm to put in too low a price, for the local authority to pass the contract, and for it then to be left with half-finished work because the firm cannot complete it. Considerations relating to the standard of 1764 workmanship must also be taken into account.
Most local authorities—certainly those with which I have had dealings in a previous existence before coming to the House—have an approved list of contractors who have been carefully investigated. Specifications are sent out to those firms and the tenders come in, normally sealed, and the lowest tender is accepted. But, of necessity, there must be some form of pre-selection if a local authority is to discharge its duty to its ratepayers to husband its resources carefully and prudently. This is not an area in which it would be right for too much intervention to take place.
Although I have not satisfied my hon. Friend on the objections that he has raised, I hope that I shall carry the House with me should he feel it necessary to press the matter further.

§ Mr. Allason
As my hon. Friend anticipates, I am not at all satisfied with his reply. I hope that he will look at the arguments that I have put forward and that in another place they will be seen to have the great validity that I may not have demonstrated as well as I might.
In the circumstances, I beg to ask leave to withdraw the amendment.