LOCAL AUTHORITIES (RESTORATION OF WORKS POWERS) BILL

HC Deb 17 May 1977 vol 932 cc245-312

Order for Second Reading read.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

On a point of order, Mr. Speaker. I wish to draw your attention to the fact that the Explanatory and Financial Memorandum says that the Bill will not have any additional financial or manpower effect on local authorities and that no additional Exchequer expenditure is involved. It clearly will have an additional manpower effect on local authorities, because additional men will be employed to deal with the additional works outside the boundaries of the authorities concerned.

It will almost certainly result in additional financial effects as well, because it is well known that operations of this sort result in considerable losses being made and, in due course, they will attract rate support grant. Consequently, there will also be considerable Exchequer expenditure as a result of the Bill.

I know that the memorandum has no statutory force, but, as there will be additional Exchequer expenditure, it is unreasonable that there should not be a Money Resolution on the Order Paper, and it would not be in accordance with precedents if the Bill proceeded until there is such a Money Resolution. No such resolution appears on the Order Paper today and no preparations have been made for one.

I seek your guidance, Mr. Speaker, as to the statutory effect of the words on the front of the Bill. It is clear that they are thoroughly misleading, and it is wrong that a Bill should be presented with the claim that there will be no manpower and financial effects when clearly there will be. I know that these words have no statutory force, but the House should be protected from straightforward misrepresentation of this sort. The House should not proceed to give a Second Reading to the Bill until these matters are put right.

Mr. Speaker

I am obliged to the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) for the way in which he put his point of order. It is similar to one that we had a few weeks ago, and I ruled then that a Money Resolution was not necessary on Second Reading. This is a matter for the Chairman of Committees when the Bill goes to Committee, and the matter can properly be raised at that time.

I am not responsible for the words on the front of the Bill, but those who are will have heard what the hon. Gentleman has said.

4.8 p.m.

The Minister for Housing and Construction (Mr. Reginald Freeson)

I beg to move, That the Bill be now read a Second time.

The purpose of the Bill is to restore to 25 district councils in England and Wales power to do certain kinds of work by direct labour. When the Local Government Act 1972 was passed, these authorities, quite by accident, were prevented from doing work within their boundaries on functions which were transferred to county authorities—mainly highways and education. When the problem was discovered, Statutory Instruments were made temporarily restoring the works powers of these authorities under Section 254 of the Local Government Act 1972.

The temporary orders expired on 31st March this year and none of the 25 authorities may continue to carry out work that it had previously been empowered to do. The only exception is the completion of agreements signed before that date.

The substantive clause of the Bill simply makes permanent the temporary orders. It would make no sense to disrupt working arrangements.

I believe that the whole House will recognise that this is a necessary and sensible measure. Unless it is enacted speedily, there might be unnecessary redundancies in these organisations, and their efficiency could be impaired.

While the Bill is essential, it is far from being a comprehensive measure of the kind needed to produce the proper framework within which direct labour organisations should operate. The Government had intended to introduce such a measure. The parliamentary situation prevented our doing it, as hon. Members know, and gave rise to the statement from my right hon. Friend the Prime Minister on 23rd March in which he undertook on behalf of the Government that The Local Authorities (Works) Bill will be confined to the provisions that are required to protect the existing activities of direct labour organisations, in the light of local government reorganisation"—[Official Report, 23rd March 1977; Vol. 928, c. 1308.] It is sad that some Opposition Members should have opposed our original intentions without really knowing what the proposed Bill contained. It would have removed unnecessary restrictions on undertaking new construction work by direct labour organisations for neighbouring local authorities and for housing associations and new towns in the locality. I say "unnecessary" because it seems to me ludicrous that a local authority or another public body should be precluded from using a local DLO if that is the most efficient way of getting the work done.

In a similar vein, we would have allowed DLOs to do improvement and maintenance work on private houses in the housing action areas and general improvent areas in neighbouring authorities. It often makes sense for rehabilitation to be carried out by one organisation in such an area. We would have allowed them to work for other public bodies for the same reason—efficiency.

The extension of powers would have been tied closely to new arrangements for accounting, charging and tendering. These would have implemented statutorily the recommendations in the Chartered Institute of Public Finance and Accountancy report of June 1975 and, indeed, would have gone further. We intended to include repairs and maintenance in the accounting requirements. The DLO accounts would have been separate.

Mr. Norman Tebbit (Chingford)

On a point of order, Mr. Speaker. I do not know whether you have been following what the Minister has been saying, but he is telling the House about a Bill that is not before the House. He is going on at great length about a Bill that he wanted to introduce but that the Prime Minister would not let him introduce. The Minister is saying absolutely nothing about the Bill that he is introducing.

Mr. Speaker

Perhaps I was not giving the full attention that I ought to have given, but on a Second Reading debate we are allowed to go a little wider and state our feelings about what should be in and what is not in a Bill.

Mr. Freeson

Thank you, Mr. Speaker. What is more, if I may say so, the hon. Member for Chingford (Mr. Tebbit) could not have been listening as closely as you were, Mr. Speaker, or otherwise he would have heard me describe the objective of the Bill in my introductory remarks.

Mr. Ridley

Further to the point of order, Mr. Speaker. The Minister is saying what he thinks should be in the Bill, but he is the person who has introduced it. Surely it is wrong for a Minister to introduce a Bill and then criticise it strongly for not being the sort of Bill that he wants to introduce.

Mr. Speaker

Order. The right hon. Gentleman does not lose his rights as a Member by being a Minister.

Mr. Freeson

I am much obliged, Mr. Speaker. Indeed, if I may say so through you to the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), I was not complaining about what is in the Bill before the House today. I was describing in outline the kind of Bill that the Government would have liked and had intended to introduce to the House had it not been for the parliamentary situation preventing us. If I may say so, such a Bill will be introduced in due time into this House. I shall come to that point later on.

As I was saying, we would have gone further than the Chartered Institute of Public Finance and Accountancy report of June 1975 and included repairs and maintenance in the accounting requirements. We would have required that the DLO accounts would be separate. We would have enabled charges to be made on a firm price basis—rather than being linked to actual costs as at present—so that the extent of profits and losses would be known. We would have ensured that all appropriate overheads were taken into account, including a return on capital employed. A local authority would have been under a duty to avoid making a loss, and we would have taken powers to close down activities where an organisation failed consistently to meet the financial objective.

Mr. Stephen Ross (Isle of Wight)

Will the Minister tell us whether the Government intend to introduce these sorts of conditions into the Bill by amendment or by statutory order? There are fears about the inefficiency of some direct labour organisations.

Mr. Freeson

I shall deal with that question, but let me say straight away that the Bill before the House, in implementing the undertaking of my right hon. Friend the Prime Minister of 23rd March, precludes any such move, because it is confined to the simple issue that was announced to the House in that statement and cannot cover any other matters. It is my regret, as I am indicating, that we have not been able to introduce the broader Bill, but I live in hope that we shall have the good sense to deal with such legislation in due time.

I was referring to the ideas with which we should have liked to deal.

Mr. Ridley rose—

Mr. Freeson

I shall complete this passage, if I may, and then I shall gladly give way in due time, if the hon. Gentleman will keep a close eye on me and listen carefully and attentively to what I am saying.

We would also have required local authorities to produce a report each year on the activities of their direct labour organisations so that their performance could be judged wisely. We would also have enabled DLOs to be set up as separate trading bodies so that their competitiveness could be demonstrated without the difficulties in comparison which would remain even if the CIPFA recommendations were implemented. This provision would have been the basis, too, of sponsoring building workers' co-operatives on a commercial basis, which I believe to be essential to the future health of the construction industry and, indeed, industry generally in our country.

Mr. Ridley

These things are not in the Bill. The Minister regrets it, but he appears to be in dispute with his right hon. Friend the Prime Minister over this. Has the Minister tendered his resignation to the Prime Minister as this Bill is totally out of sympathy with his own publicly declared intentions and views?

Mr. Freeson

The hon. Gentleman has got it wrong again. I am fully in support of what is before the House, and it would have been included in the more broadly based Bill had we had the opportunity. I am not out of sympathy, obviously, in wishing to make sure that the accident of the Local Government Act 1972 is avoided, which is what we have done by the temporary provisions and orders in the last 18 months to two years, provisions which this Bill seeks to make permanent. The hon. Gentleman has got it wrong again.

I hope that I have said enough about the ideas that we had intended to incorporate in the more broadly based Bill to demonstrate that what we had proposed was sensible and reasonable. That could hardly be said of the attitude of some Opposition Members and some of their colleagues who control some of the local authorities in the country. They seem to have only one attitude to DLOs—to close them down, to destroy established organisations and to sack their staff.

I say to them that even if they are correct—and some of their criticism of DLOs is undoubtedly correct to a degree, but nowhere near the degree they have expressed—they have a responsibility when they are in local government. If they claim that their DLOs are inefficient, it is their job to make them efficient. Whatever their party, councillors are elected to do that, and it is the responsibility of their colleagues in this place and elsewhere to express that view.

For our part, in Government we shall go on, through my Department's working party, to work out sound procedures for direct labour organisations, some of which already, partly through our influence, have begun to adopt good accounting and tendering practices. The working party has so far concentrated on procedures for new construction, for publication of reports on performance and for competitive tendering. I hope that this part of the work will be completed by the summer.

By around the turn of the year we expect to complete similar work on repairs and maintenance which the Chartered Institute of Public Finance and Accountancy has also been studying. The institute hopes to publish its findings in the summer. Had the original Bill to which I have been referring been introduced and passed, we would have phased in the new powers with the new disciplines. Action will be limited without legislation, but we shall take whatever action lies open to us to improve the scope and efficiency of DLOs.

Direct labour organisations account for about 8 per cent. of all construction output. Most of it consists of repairs and maintenance. They employ about 173,000 people. Thus, although they are not by any means a major part of construction, the promotion of efficiency and sound practice in them would be a useful contribution to the efficiency of the industry as a whole.

Many DLOs have already given good service to their local authorities and have been of great financial benefit to the ratepayers. Such matters never reach the Press. Successful DLOs do not make good journalistic copy. District auditors' reports, for example, are often quoted to point out failings. But district auditors often point out savings that DLOs achieve. That is not to be seen published in the Press or debated or mentioned in this House. There are frequent examples of DLOs having to take over jobs when firms have gone into liquidation and the authorities have been unable to find others to take their place.

I shall give one or two examples to illustrate what I have said. On two major road contracts in the North-East, worth £4½ million, the contractor went into liquidation with the work barely started. The county DLO stepped in and completed the contracts within the original competion dates, thus avoiding a delay of at least six months if another contractor had been engaged. Not only was there no additional cost to the Department, but at least £400,000 was saved by not employing another contractor.

In another case a district auditor found that the final costs on 25 highway maintenance projects carried out by a DLO averaged 5 per cent. more than the estimate. That is the kind of figure that would have appeared in the Press. But acceptance of the next lowest tender from a private contractor would have cost another £500,000, or 19 per cent. more than the final DLO cost, including the 5 per cent. overspent. That kind of information does not get published in its proper context.

In yet another instance an authority did not have sufficient finance to accept the lowest tender of £200,000 from a private contractor for a school project, so the DLO undertook the work and completed it at a cost of £110,000; thus the authority saved £90,000. Incidentally, in that case, if the private contractor had done the job, it would have appeared that his operatives were twice as productive as those of the DLO as this type of calculation, which appears in official and published statistics, is based on the valuation of output rather than on the actual quantity of work done.

Mr. David Mitchell (Basingstoke)

Can the Minister tell me how many direct labour organisations make a commercial return on the capital invested in them?

Mr. Freeson

I am not sure whether the hon. Gentleman was present when I described the kind of legislation which we had originally intended. If so, he will recall that I said that that was one of the points with which we wished to deal in the Bill that we were unable to introduce because of the parliamentary situation. There are no requirements to impose conditions for a return on the capital invested. However, we wished to do just that, among other things, in the Bill that we could not introduce at this stage.

Mr. David Mitchell

I was not asking whether there were any requirements, but whether the Minister could indicate any such commercial success.

Mr. Freeson

The hon. Gentleman has not taken my point clearly enough. There are no such requirements, so examples cannot be quoted. We had intended to take action to remedy that situation in the Bill that Opposition Members and their colleagues in the industry and the Press opposed so vigorously, despite the explanation that we sought to give. However, I agree with the hon. Gentleman's implication. I regret that, as a result of the sustained campaign over many years, which aroused great prejudices about our intention's, we were unable to do what the hon. Gentleman would have liked us to do.

The instances that I have quoted are not exceptional. There are many examples of efficient DLOs in addition to those I have mentioned and there is plenty of evidence that they give good value for money. Direct labour organisations also have a creditable record as good employers, especially in providing training opportunities and, like the better private contractors, maintaining continuity of employment even when times are difficult.

It ill becomes certain people in the construction industry to criticise DLOs for inefficiency in the way that the rather wild campaigning has suggested in recent months. As I said in the Supply debate on the construction industry on 2nd May, there is enormous scope for improvement in the efficiency of the industry as a whole, in its building operations and in its financial structure. I forbear to list examples of the industry's failures, but public sector clients are often left picking up the pieces. I do not gloat over these failures. They are exceptions. They are not the general rule, but they are significant failures. I want something done about them. In the meantime, perhaps certain people in the industry might do better to concentrate on putting their own house in order than to waste vast sums on expensive advertising campaigns against DLOs.

I remain convinced that it is right for us to provide DLOs with a framework which allows closer comparison between them and private contractors by not only proper accounting and tendering procedures, but more freedom to use their valuable resources more flexibly and thus more efficiently. It remains our intention to legislate on these matters, but the parliamentary situation means that we must wait for another day. Today we are confined to this small but essential measure. I commend it to the House.

4.26 p.m.

Mr. Keith Speed (Ashford)

First, I declare an interest. I am a consultant to a group of construction companies in the West Midlands.

I listened with interest to the Minister for Housing and Construction, who has advanced some way towards our point about the CIPFA recommendations, although he still has a long way to go.

I should point out that Conservative-controlled local authorities—they are now very much in the majority—which have direct labour organisations will see that they are efficient. I am urging upon them, and receiving a constructive response, that they should as far as possible adopt the CIPFA recommendations. The Minister will know better than I do that some of them need legislation. In certain circumstances, where authorities deem that the direct labour organisations are not doing a reasonable job, they may choose to close them down. That is their prerogative. I should not wish to stop them doing that.

The Minister quoted some examples of efficient direct labour organisations. My hon. Friend the Member for Basingstoke (Mr. Mitchell) was trying to make the point—I am sure that the Minister appreciated this, because he referred to a 5 per cent. return or whatever the figure was—that unless there is an ongoing CIPFA accounting procedure, unless we know the proportion for the chief executive, the personnel officer and everyone else, it will be difficult to get any meaningful figures of efficiency for DLOs. That is the problem facing all of us.

The Federation of Civil Engineering Contractors has made its views on the Bill perfectly clear. It says that the Bill is a step in quite the wrong direction. The fact that it is a very small step ought not to be enough to save it. The National Federation of Building Trades Employers says that the members of the NFBTE feel that the Bill must be defeated and they are adamantly opposed to this Bill. I have a letter today from the Opposition Leader on the Burnley Council, one of the districts affected by the Bill. Councillor Wilson writes: My overriding reaction to the Bill is an emphatic 'No': more especially until a method of realistic commercial accounting is introduced to the Works Department. Time and time again when a 'tender' has been received, and accepted by the Labour Group, we are subjected to estimates for extra items of equipment required for the project. Our direct works spokesman is at present preparing a detailed brief on one current contract with a view to obtaining the true cost to the Authority upon its completion. The obvious concern regarding the right to work outside the Borough boundary is again fiscal. Should one group of ratepayers subsidise or receive support from another group? The history of this measure is interesting. A more comprehensive Bill, about which we have heard a great deal today, was promised by the Minister on 14th July last year. We certainly had a pretty clear indication of what was in it, because the Under-Secretary, whom I am glad to see present, gave a good trailer on 19th September in Scarborough, in a speech which was widely reported in the construction and building Press. Therefore, all of us had a very fair idea long before the Queen's Speech, about what would be in the Bill. I do not think that the Under-Secretary would retract a word of what he said then.

The Bill was forecast in the Gracious Speech on 24th November. As the Minister said, there were to be major extensions of powers for direct labour organisations. Certainly at that time there was very little talk about the CIPFA recommendations or much tougher accountancy. I read the hon. Gentleman's speech, and I recall many times in the House when I urged the Minister and the Under-Secretary even simply to endorse the CIPFA recommendations and was comstantly referred back to the working party that had been set up.

On 25th February a Press conference was fixed for the introduction of the comprehensive Bill, the bigger Bill. I understand that invitations were sent out but were suddenly cancelled on the evening of 24th February. That Press conference was cancelled because the Government at that stage had abandoned the Bill. I am sure that that is right and that the Minister knows that it is right.

That was a full month before the Lib-Lab pact and the Prime Minister's statement. As the Minister was honest enough to say, the parliamentary situation then was such that there was no majority in the House for that comprehensive Bill. The Liberals, the national parties and one or two Labour Members, as well as my own party, were adamantly opposed to the Bill, and so it died then. Let this point be quite clear. It was nothing to do with the Lib-Lab pact, which was perhaps the funeral rites over a Bill that had already been killed.

Mr. Ridley

Does not my hon. Friend think that as well as he and I, and all our right hon. and hon. Friends, the Liberal Party would not have objected to adding on to the Bill the implementation of the CIPFA proposals? Is it not rather strange that the Bill we are considering does not contain powers for tightening up financial discipline? I stand to be corrected by the two Liberal Members present, but does not my hon. Friend feel that the Liberals would have welcomed the introduction of the disciplines and would not have objected to their being in this Bill?

Mr. Speed

I am grateful to my hon. Friend, who has anticipated something I intend to say in a few minutes.

As there appears to be agreement among the Minister, myself, the hon. Member for Isle of Wight (Mr. Ross) and, I suspect, most hon. Members, that we need at least the CIPFA disciplines, would it not be possible to introduce them? I can promise a safe passage on behalf of my party, and I believe that the Liberals would do the same. This would be extremely helpful. Perhaps we can explore that in a few minutes, but the grunts coming from the Under-Secretary make me suspect that it does not meet with his entire approval.

Mr. Robert Mellish (Bermondsey)

They are my hon. Friend's normal way of speaking.

Mr. Speed

I am grateful to the right hon. Gentleman for putting me right on that.

The House will have to consider this matter. In the meantime, it should note that it was on 14th October 1975, some time ago, that the working party was set up by the Minister to review the operations of direct labour organisations. I have consistently criticised and shall consistently criticise that group. I have described it as a hung jury. That is what it was. If it had had on it representatives of outside interests, the construction industry and free enterprise people, it would have been more worth while.

When we have consistently questioned the Minister about CIPFA, that group has been called in aid. The right hon. Gentleman and his hon. Friend have said that we must wait until it has reported. If I understood the right hon. Gentleman correctly today, he said that it will report in the summer, and I believe that that is correct. I presume that the report will be published and be available for all to see, but I do not know, for we have never had that matter cleared up. Does this mean that the possibility of having legislation to improve the accounting will be delayed to take account of what the group says? Will what it says have any effect upon the larger Bill, which is at present dead and buried but which might be resurrected one day?

As for the Bill, I must first tell the Minister that it was presumably possible to extend by further Statutory Instruments what were interim arrangements under the Act reorganising local government. Indeed, if there were particular problems it was possible for any one of the 25 authorities to bring forward a Bill under the Private Bill procedure. Having looked at the Statutory Instruments, I see no obvious connection between the 25 local authorities concerned, except that a majority of them are still Labour-controlled. In the current local government scene, that is remarkable.

In addition, it is clear that the Statutory Instruments and the Bill do, albeit in a small way, extend, or continue the extension of, direct labour in those 25 authorities. There is a problem when we are talking also about former county borough boundaries. These are nearly dead and gone and will be more nearly dead and gone in the years ahead, so I question whether it is wise to refer to them in such legislation.

The extension of construction powers for local authorities outside their own boundaries is certainly now finally established in a Bill, as opposed to a purely interim order. That was mentioned in the letter to me by the councillor from Burnley.

For these reasons alone we should be unhappy about the Bill, but it goes much further. There is the whole question of the accountancy, which the Minister dwelt upon at some length and which other hon. Members will no doubt wish to mention. Here at least was an opportunity for something to be tidied up. I question the way in which the Government have done their tidying up in relation to direct labour. Apparently all hon. Members agree that the present accounting principles and procedures are totally wrong. The building industry has said that in many cases fair competition is not the order of the day and that local authorities award considerable contracts without having any other kind of tender.

There are also all the various CIPFA recommendations—the importance of the contracts being put out to competitive tenders; the importance of adopting the same standards in dealing with contracts carried out by direct labour and those carried out by independent factors; the importance of valuation by an independent quantity surveyor of the value of work performance; and, something which the Minister mentioned and about which I agree with him, the importance of establishing direct labour departments as separate trading organisations so that the ratepayer and the local people can see—and, I hope, quickly, not having to wait two or three years—exactly how efficient or inefficient the organisation is.

The Minister was right to deal only with new construction. We still await the maintenance proposals. I believe that the above items and many others mentioned by CIPFA could have been introduced in this Bill. I see no reason why not. After all, there is a fair degree of time. The devolution talks are going on, and the House is not exactly overburdened with legislation. All parties are agreed upon the need for proper and fair accountancy. The vast majority of local authorities are Conservative-controlled, so it can be seen that we are not trying to be beastly to the right hon. Gentleman's party. I ask him to ask his right hon. and hon. Friends whether it is not possible, on this measure if nothing else, to have this element of agreement about accountancy, and then at a later stage we can look at the question of accountancy procedure for maintenance. This is a fair and reasonable offer which I hope the other parties may be prepared to go along with.

Mr. Freeson

Why is it, then, that the hon. Gentleman's party—not so much the hon. Gentleman, but his party and others associated with it—spent so many months campaigning vigorously against our proposals when we had placed clearly on the record in speech, correspondence and statements in various quarters what our intentions were in the original Bill in relation to CIPFA? We could have had the common ground then. Why is the hon. Gentleman now, having campaigned against that Bill and having virtually compelled us to withdraw it, calling on us to join him on common ground?

Mr. Speed:

The common ground was CIPFA. It was not on the major extension of direct labour proposed in the Bill and as outlined by the Under-Secretary of State at Scarborough. Such common ground will never exist. The common ground between us is on accountancy, as it is between the Government and the Liberal Party. We were asked to find common ground, and we found it on the accountancy aspect. Let us limit it to that. The Conservatives and, I believe, the Liberals, and also some hon. Members opposite, felt that the extension proposed in the Bill could not be supported. I ask the Minister to bear in mind also that two of the three local authority associations are on record in recent weeks as being opposed to any extension of direct labour at present. I am not speaking in total isolation. The Association of County Councils and the Association of District Councils are on record with their opposition.

Mr. Mellish

Let us assume that we lived in a perfect world and had an accountancy system which made certain that direct labour was efficient, competitive and everything else flowing from that, and that by every yardstick possible it was shown that direct labour was worth while; would the hon. Gentleman still oppose it?

Mr. Speed

There is perhaps a fundamental philosophical point between us. The first thing to remember, as I am sure the right hon. Gentleman does, is that we have an interest as representatives of the ratepayers, who may have to pick up the tab if things go wrong. I understand that the Government wished for a major extension of direct labour powers by authorities of all kinds, including—although it has not appeared in the Bill—power for the Minister in certain circumstances to allow direct labour organisations to do all kinds of things for the private sector. We oppose that because we take the view that, at the moment, local government has more than enough to do with the things that no one else can do.

Mr. Mellish

Oh.

Mr. Speed

The right hon. Gentleman says "Oh", but the fact is that, under the present Government, the local authorities have more than enough to do. They are being denied resources. Yet there are great pressures on them to carry out all sorts of statutory duties and obligations. We do not believe that there is a great abundance of talent in local government waiting to do jobs that the private sector can not only do itself but in most cases can do very much better. That is the first and fundamental point on which we disagree.

Secondly, we are not naive enough to suppose that the Government's proposals are designed merely to get more efficient direct labour organisations. I have quoted on various occasions Labour spokesmen and Labour documents showing that the main aim of extending direct labour is to get a major public stake in the construction industry. We happen to be opposed to that. That is another important reason for opposing such a comprehensive Bill. No doubt that is also the view of the Liberals and other parties, but they must speak for themselves. We are not to be taken down that path.

We shall, however, at any stage, join the Government on the question of improved accountancy. But the Government have never shown us their proposals. It was rumoured that there were to be skeleton proposals which would be filled in by order later. Their proposals may be introduced in stages, but we simply do not know. I shall be happy to have discussions about the matter. It is not unknown for me to have discussions with Ministers in the Department of the Environment and to improve Bills thereby. It happened last summer.

Mr. Stanley Newens (Harlow)

Is the hon. Gentleman prepared to say that he is opposed in principle to all direct labour organisations on ideological grounds, whatever the merits and however well difficulties could be overcome?

Mr. Speed

I am not prepared to say that. I have never said it, as the hon. Gentleman knows. I am opposed to any extension of the present system, which is one of the reasons why I shall vote against the Bill. I am in favour of much tougher accountancy procedures because fair competition is essential for the free enterprise industry, and we ought [...] have proper accountancy procedures in the interests of the ratepayers, the people who have to pick up the tab at the end of the day.

Mr. Tebbit (Chingford)

Does not my hon. Friend agree that, while direct labour organisations have the ability to raise capital—and working capital, too—at non-commercial rates and with a total guarantee, buttressed by the Government at the end of the day, they can never in reality be fairly compared with other organisations in the private sector that do not have those advantages?

Mr. Speed

I accept that point, which is important. I was interested to hear the Minister say that the Government have in mind something that we, too, have in mind—the power to close down direct labour departments consistently making losses. As my hon. Friend has hinted, local government cannot go bust as such. There will always be someone, be it the Government, through the rate support grant, or the ratepayer, to bail it out. That is the difference between direct labour organisations working for local government and nationalised industries, and free enterprise contractors.

We have been talking about these CIPFA recommendations for two years. The Government say that they are prepared to do something about it—but not apparently in this Bill. We do not know when they will do something about it. They had their opportunity to do so in this Bill or in a separate measure with all-party agreement. Such proposals would take relatively little time to get through the House. That opportunity is still open to the Government.

Of the 25 councils covered by the Bill, a number have unfortunate records in recent times with direct labour. I am not sure that we shall achieve a lot by swapping experiences. The Minister gave examples of where direct labour organisations were doing well. I have pointed out the difficulty of knowing whether they are doing well unless there are proper accountancy procedures.

I can quote the example of Liverpool, where a landscaping and road-widening scheme valued at £450,000 went to Liverpool's direct labour organisation without any kind of competition. Surely the right hon. Gentleman cannot accept that sort of situation. There is another example in Gateshead. There, a housing improvement scheme by direct labour, with an agreed completion period of 80 weeks, actually took 156 weeks. Surely that is not something that the Minister would wish to go along with. These are examples taken from some of the 25 districts. There are many horror stories about direct labour. There may be success stories. But until we have proper accountancy, we shall not know the true extent of just how bad or good they are.

Therefore, we believe that the Bill, although admittedly in a marginal form, puts on a permanent basis an extension of direct labour. We believe that the Minister has forgone a good opportunity to bring in new accountancy procedures. Had he done that, the Government would have gone some little way towards restoring the vast amount of ground that they have lost with the construction and building industry. As they are not prepared to do that, we believe that the Bill in its present form is unwanted, unnecessary and unhelpful, and I ask the House to reject it.

4.48 p.m.

Mr. Robert Mellish (Bermondsey)

I was Minister of Public Building and Works in 1968, and, therefore, the sponsoring Minister for the construction industry. I take that industry seriously, and I got to know it well. I certainly do not condemn—and I do not know any hon. Friends who do—the building and construction industry in a wholesale way. The vast majority of the people in it are honourable men. The firms are desperately anxious to ensure good relations with the Government of the day, whatever their political persuasion. They are crying out for long-term planning of work.

I learned some interesting figures at that time. I shall always remember them, and I think that they more or less still apply today. Over 50 per cent. of the entire output of the building industry is obtained from the Government and over 90 per cent. of the entire output of the civil engineering industry is obtained from the Government. If, then, the Government of the day are by far the largest client of the entire building industry, it behoves the Government to be a good client, and if they want the building industry to work for them, their contracts must be of the sort that will bring out the best in the industry.

Mr. Speed

I am trying to assist the right hon. Gentleman. He should be talking of the public sector, which is slightly different from the Government as it involves other clients, including local authorities.

Mr. Mellish

I agree. The Government do not build a single house. That is done through local authorities and county council which go to Government for various aids, such as the rate support grant. Therefore, the Government have the final word.

I always wanted to see a universal construction system which brought out the best for the client and for the local authority. For example, the Government are bad payers—or I should say that local authorities and county councils are bad payers. They do not pay as quickly as they might. Half-way through a contract they should hand over 50 per cent. of the sum due and settle their bills soon after a contract is completed.

One of the biggest problems for private enterprise is a shortage of money. I know that I might appear to be dealing with mundane matters. I am not anti-private enterprise. That would be foolish. There are some famous firms in the private sector that none of us could do without. They are honourable firms and employ trade unionists. This is why I find the attitude of the Opposition to direct labour bewildering. They are so bitter about this subject.

It has come shining through that the Opposition, if they had their way, would introduce a Bill to make it illegal for any local authority to employ direct labour. That came out in the speech made by the hon. Member for Ashford (Mr. Speed). Anyone who was not a Member of the House would find it hard to believe that the hon. Member thought that there was any good at all in direct labour.

Mr. Tebbit rose—

Mr. Mellish

If the hon. Member for Chingford (Mr. Tebbit) intends to say anything good about direct labour I shall be frightened to death. The Opposition challenge the concept of the accountancy system.

Mr. Tebbit

Let it be clearly understood that there are few people who believe that local authorities could exist without some direct labour workers. It would be absurd if all minor maintenance involved calling in private contractors. The right hon. Member must accept that it is difficult to organise fair competition between a public sector organisation that cannot go bankrupt and a private sector organisation that can and that has only one chance.

Mr. Mellish

I understand that the hon. Member for Ashford argued that the ratepayer had to pick up the tab. I respect that argument. If it can be shown that a local authority, by the advent of direct labour, can do a particular job cheaper and better than private enterprise, I sincerely say that that local authority should be allowed to employ direct labour because in that instance direct labour has been proved to be cheaper and better. I see that the hon. Member for Chingford is nodding his head in agreement. We are coming nearer to what I want to see established.

I have lived in that part of London where direct labour matters a great deal. I was also Minister of Public Building and Works and I have seen the situation from close quarters. Direct labour began in the early 1920s. One of the pioneers was that great predecessor of mine, Dr. Alfred Salter. He began to employ people to relieve his own local employment problem. No one could work for direct labour unless he lived within the boundaries of the borough. That direct labour organisation made its own paving stones, for instance. But the idea of any local authority starting from scratch and trying to implement a direct labour force is dangerous today. No direct labour force can be efficient unless it has full use of the machinery that is essential for any good building work. Cranes, cement mixers and the whole paraphernalia of construction work machinery are required. The capital expense of setting up such equipment is enormous.

I am not one of those who say blindly that all local authorities should go for direct labour, willy-nilly, when there are many qualified building constructors who are willing and able to do the job. How ever, it is unfair that local authorities who possess all the necessary machinery should not be allowed to develop direct labour.

I find it hard to understand what the Tories are thinking on this matter. The hon. Member for Ashford said that local authorities have enough to do in coping with the terrifying cuts in public expenditure made by this Government. He said that they were unable to do a number of things because of that. But if the Tories were in power I believe that the cuts would be more severe. Everyone knows that they are completely dissatisfied with the cuts and say that the Government have not gone far enough. Some of my hon. Friends have also attacked the Government for going as far as they have gone.

Looking back at the activities of the Department of the the Environment, I believe that it has done well to salvage what is left. It comes ill from the Opposition to talk about cuts in public expenditure.

Mr. Speed

The right hon. Gentleman must not misinterpret me. I was not criticising the Government for cuts in public expenditure. I was saying that at a time when local authorities are grappling with so many difficulties because, for instance, the rate support grant has been cut back, it is a bit much to expect them to use their expertise on activities that the private sector can handle better than they. I was saying that they should concentrate instead on trying to make the social services work.

Mr. Mellish

If the hon. Member is saying that it is unwise for local authorities without the necessary machinery, and because of the problems caused by the cuts, to set up direct labour organisations, I agree with him. At this moment that is right. However, I am not talking of that type of authority. With so many authorities under the control of the Tories I doubt whether any direct labour organisation will get off the ground.

My experience of direct labour is that it has been a credit. It has done a first-class job, not only on maintentance but on construction work. I know that the Opposition view is that direct labour should do all the rough work. All that the Opposition can do is to criticise and sneer at direct labour and slam it if a wallpapering job is not well done. When direct labour has been allowed to build new construction, it has done it well.

When I was Minister, one or two direct labour organisations were shut down because they were inefficient and incompetent. Many private enterprise organisations are inefficient and they lose contracts. We told the local authorities concerned that they would not be allowed to build new buildings under direct labour as long as their methods remained inefficient. In the original Bill there was no intention by the Government of the day to compel local authorities to set up direct labour departments. This Government's intention is to allow local authorities to have direct labour organisations if they can prove that they are justified and that their accountancy procedures are good.

The hon. Member for Ashford is whistling in the wind if he thinks that there will be any move towards direct labour because of the Bill. The Explanatory Memorandum states: The Bill restores, and gives permanent effect to, provisions in three orders under the Local Government Act 1972…". In other words, the provisions were already there prior to 1972. We are now allowing local authorities to do what they were allowed to do previously.

What are we making all this fuss about? It is absolute rubbish. Once again, the Tory Party and Tory Members have hung their hats on this one sort of peg, to make a deliberate attack on direct labour, as though it is some foreign element from abroad.

I know that one may go fairly wide on the Second Reading of a Bill, Mr. Speaker, but I promise not to go too wide. However, why do the Tories so hate State ownership? It is something owned by Britain.

Mr. Tebbit

It does not work. That is why.

Mr. Mellish

I make my point that State ownership means something owned by Britain, and it is sneered at and jeered at by Tory Members, who wrap themselves up in the Union Jack, almost choking themselves to death with it, when they go to bed and on every public platform. State ownership means that which is owned by Britain, but they sneer and jeer at it in principle. If it is not efficient, I am all for saying "Let us have a change where that is practicable." Of course that is right. But I shall never know why the principle is attacked in the manner in which it is attacked and why there is not a greater intent to make State ownership, and so on, work better.

I do not know what this fuss and do is all about. This is a piddling little Bill. It is only a little tiddler of what was originally in a Bill about which many people seem to know more than I have ever known. I do not know why this attack is being made—although, of course, I do really know. It is because the Tories hate direct labour in principle. They say that they will oppose the Bill. It is so unfair of the Tory Party, which used to be a great political party, to oppose simple principles that cannot be denied.

5.2 p.m.

Mr. Stephen Ross (Isle of Wight)

I shall not keep the House for more than a few minutes One good reason is that I have a cold, and it would be unfair were I to do so.

Like the right hon. Member for Bermondsey (Mr. Mellish), I have no great philosophical objection to direct labour organisations. I speak as one who represents a constituency that tends to have rather monopolistic situations in regard to its construction industry. I assure hon. Members—I have said this in the House previously—that four or five years ago I should have been sold on an extension of direct labour, because at that time we could hardly get anyone to do work for the local authority. We were getting cowboys coming in and doing atrocious jobs, and it fell to direct labour afterwards to put things right.

Having said that, however, I do not think that it would have been right at this stage for the Government to bring in a Bill, such as the Minister was describing, to extend these activities into a vastly wider range. First, there is the huge unemployment situation in the construction industry generally—about 200,000. Whether that figure contains many genuinely skilled men, I do not know. At any rate, I suggest that something over 100,000 is probably nearer the mark for those with experience who are unemployed.

Undoubtedly, firms are tendering extremely competitive figures. One has only to ask local authorities and they will confirm that most tenders today are extremely competitive. In many cases they are coming from firms that are losing over the contracts that they are taking on purely to keep their work forces together.

Therefore, if the Government had brought in a Bill vastly extending direct labour, their timing would have been very bad. I am almost sure that, in his own mind, the Minister tends to agree about that.

However, I see no reason why I should not honour the agreement that the Liberal Party has with the Government, and I shall do so this evening if there is to be a Division. I support the Bill.

When one is describing the situation in the construction industry as disastrous, with so many people out of work, why should the House, if it refuses a Second Reading for the measure, take part in closing down certain direct labour organisations and putting more men out of work?

Mr. David Mitchell

Will the hon. Gentleman explain how the size of the demand for the labour will be altered? Surely what would simply happen is that instead of something being carried out inside local authority organisations, it would be carried out in the private sector.

Mr. Ross

If the hon. Gentleman is suggesting that we should now impose conditions on some 25 authorities and that they should make a start in sacking their labour forces, I do not agree. If he is suggesting that we should give the men concerned the traumatic experience of trying to find another employer after some have worked for 30 years or more for one authority, I do not agree. I have had representations from people concerned with direct labour in my constituency. They have come to see me with lists of work that they have had to carry out. They were fearing that, because we had made clear to the Government, as a party, that we could not continue with the extension of direct labour, their jobs would be at risk. I say to the hon. Gentleman in all seriousness that that is not a proposition that I am prepared to go along with at this stage.

Mr. Tebbit

I should like to be sure in my own mind that the hon. Gentleman is not under the impression that a decision not to enact the Bill would cause the closing down of some of these direct labour organisations. Even if the Bill were not enacted, that would not be the case. In any case, the Minister could bring forward further orders for a further temporary extension. He does not need a Bill to make it permanent, which the hon. Gentleman is supporting.

Mr. Ross

I accept that we could go along with merely an extended period, but I do not think that it would be very satisfactory. I do not understand the quibble into which we are entering, because these are old-established direct labour organisations that were previously with the old county boroughs. I happen to think that the county borough was one of the finest forms of local government. It was a great pity that it was wiped out.

I have had the facts and figures from the accountants who have been examining this matter in relation to North Country direct labour organisations. Although I accept that there are those that do not come out very well, others come out quite well. Therefore, there are both sides to the equation.

However, I support the Conservative Opposition in their request to the Minister that the CIPFA basis of accounting should be written into the Bill. We ought to have taken the opportunity already to do that. We cannot do it on Second Reading, but perhaps it can be done in Committee or on Report. The working party appointed by the Institute of Municipal Building Management, in its summary of recommendations at paragraphs 5.10 and 5.11, wishes to see this written in. After all, that is a local authority based inquiry and one that I should have thought that we could take on board now. It seems a great pity that we cannot do it at this stage. Of course, I support that call. I think that all hon. Members, on both sides of the House, would support it. It seems that it is an opportunity that is about to be missed, if we do not take it now.

Apart from those few comments, I shall be honouring the agreement that we have with the Prime Minister, and I shall be is to be a vote later this evening, which supporting the Bill in the vote, if there I think would be a pity.

5.9 p.m.

Mr. Stan Crowther (Rotherham)

I do not wish to take up more than a few minutes. As an old county borough man and one who was involved in local government for many years before becoming a Member of this House, I warmly welcome the Bill. I share the unhappiness about the fact that we are debating only such a limited measure and not a measure that will extend the scope of direct works departments, as many of us had hoped earlier in the Session.

The hon. Member for Ashford (Mr. Speed) spoke about ratepayers having to pick up the tab, as he called it, when anything goes wrong. I could tell him of a good many occasions when the tab has had to be picked up because of the bankruptcy of private companies and when the job has had to be taken over and the contract finished by a corporation's direct labour department. In my experience, they have finished these jobs in a most efficient way, and they have generally done a better job than those who started it.

The hon. Member also spoke at considerable length about the need for fair competition. I want to mention a few points that make competition unfair to the local authority, rather than unfair to the contractor. For one thing, it is the habit of local authority works departments to try to maintain a stability in their labour forces. They do not go in for the hire and fire policies that are so common among private contractors. That in itself creates additional costs for them.

I accept what the hon. Member for Isle of Wight (Mr. Ross) said about certain reputable firms now tendering at under-cost prices to keep their labour forces at work. I do not dispute that many firms in the industry have good industrial relations and adopt that sort of policy. However, there are many that do not. It is no good trying to hide the fact that among the smaller firms in the industry—I think that there are far too many small firms in it—the hire and fire policy operates. Local authorities are not able to do that. They do not go in for the casual labour approach. Furthermore, there is no lump in local government. The lump still lives in private enterprise building, and let us not pretend that it does not.

When it comes to talking about fair competition, the dice are loaded against the local authority rather than in its favour. It is my experience, and the experience of many others who have been in local government, that when a corporation's department has won contracts in open competition, which has happened on many occasions, it has done a good job. My authority employs tradesmen of the highest possible standard. What is more—perhaps this is the most important point that I make—it is still taking on apprentices.

Throughout the whole of 1976 the only building organisation in Rotherham that took on any apprentices was the local authority building works department. If we are concerned about the long-term future of the building industry and the training for skills, without which it cannot survive, any restriction placed upon the responsible authorities that are still appointing apprentices and training men for the future will be extremely damaging.

I suggest that the future of the industry requires an expanding and successful public sector. If we leave matters to the private sector, and if the example of 1976 is anything to go by, we shall be desperately short of skilled tradesmen for the next generation and the generation after that. I hope that the Bill will receive the support that it deserves. I hope that one day we shall have the pleasure of voting in favour of a Bill that I am sure my right hon. Friend would have loved to introduce today instead of this much more restricted measure.

5.14 p.m.

Mr. David Mitchell (Basingstoke)

This is a Bill to make permanent the powers of certain district councils to carry out the construction of buildings or other works of certain other local authorities. It is not to extend for two years or three years but to make permanent. I was horrified to hear that, notwithstanding that fact, the Liberals have been forced to become Lobby fodder with the Government because of their new voting agreement.

Mr. Stephen Ross

It was not a matter of being forced to vote with the Government. I happen to think that the Government are taking the right course. We must not keep people in limbo. We must remember that we are talking about people who have been employed in the same job for many years. They should know whether they are to be employed permanently. It is time that we introduced permanency.

Mr. Mitchell

The hon. Gentleman has said that there should be permanency. I find myself unable to agree with him. As the argument develops I think he will find that there are many others who do not agree with him.

Mr. Tebbit

Does my hon. Friend think that the hon. Member for Isle of Wight (Mr. Ross) is worried about the permanency of his job rather than of anyone else's job, bearing in mind that he has been singularly unsuccessful in persuading the Government to live up to their part of the bargain and introduce the direct elections Bill, for example? Therefore, he is Lobby fodder, and nothing more than that.

Mr. Mitchell

I do not wish to detain the House with the obvious parallel of two drunks trying to prop up each other, both terrified of what would happen if the other withdrew his support. However, we have before us a Bill that is designed to continue permanently something that was originally introduced on a five-year experimental basis. Since then we have had the Layfield Report. That is a new factor that has not been properly taken into account and has not been raised in the debate.

In page 7, paragraph 22 the Layfield Committee states: The complaint most forcefully made to us about the control of local authority spending was a simple one. It was said that local authorities decided first what they intended to spend. Only thereafter did they consider what rates they must levy to meet the bill. This process was not considered to be budgeting in the sense that individuals understood it. Local authorities were accused of being concerned primarily with the expansion of services, and only secondarily with the means of financing that expansion. Large projects were said to have been undertaken in many instances without adequate thought for the effect that the capital debt incurred would have in increasing future current expenditure. I go further into the report and quote most damningly from page 90, under the heading "Value for Money". The committee states: Unlike most commercial undertakings there are for most of their services no objective standards of performance or output against which costs can be measured. That seems to be a clear indication of the situation being changed by the findings of the Layfield Committee. I return to page 7, where the committee states: The operations of direct labour organisations were singled out as particularly bad examples of a failure to control costs. It is against the background of wholly changed circumstances as a result of an independent report that the House should be considering whether it should make permanent the powers contained in the original experimental Bill.

I noted with interest the examples given by my hon. Friend the Member for Ashford (Mr. Speed). I add to them the examples that the Small Business Bureau has brought to my attention. Abuse of the bonus scheme by the Manchester direct labour organisation, often held to be one of the most efficient, was said by the district auditor to have cost £680,000 in two years. In Sunderland the direct labour organisation was given, with competition, a leisure centre to construct. It increased its estimate by £1.4 million within weeks of starting the contract. I am sure that my hon. Friend the Member for Folkestone and Hythe (Mr. Costain), who has great experience of the construction industry, would not feel able to submit a tender as a private enterprise firm and then increase the price by £1.4 million when he started.

I am sorry that the right hon. Member for Bermondsey (Mr. Mellish) is no longer in the Chamber. In Southwark one of the projects that was engaged in by the direct labour organisation, in the absence of competition, escalated by 147 per cent. from £890,000 to £2,200,000. Against that background how on earth can the Minister blandly ask us to extend permanently this section of direct labour powers?

In addition to the examples that I have given from the Small Business Bureau's research and briefing there is the example of Camden, which is known only too well by many hon. Members, some of whom live in the borough. I see that one new recruit to the House, my hon. Friend the Member for City of London and Westminster, South (Mr. Brooke), is nodding in agreement. My hon. Friend is only too aware of the disastrous state of affairs of the direct labour organisation of the Camden Borough Council.

Another example is that of Glasgow, where it cost over £21,000 to build an equivalent house to others alongside that were built by private enterprise for £16,500. I am not surprised that Glasgow changed hands in the recent local elections. We have a situation in which there are endless examples of unsatisfactory direct labour organisations.

I entirely accept that some are efficient, particularly those which do undertake major construction work. Both sides of the House will agree that there is a case for retaining a limited staff for maintenance work on local authority equipment and buildings.

Mr. Stan Crowther

Would not the hon. Gentleman agree, however, that it would be difficult to keep tradesmen of high quality working for a direct labour department if all they could do was maintenance and they never got a go at new capital building?

Mr. Mitchell

I take that point, which is important, and I will deal with it in a moment.

I agree with those who have said that if certain work can be done most efficiently by direct labour, it should be done in that way. The question is how one measures that efficiency. What is deplorable about the Bill is that the Government have not taken this opportunity to accept the known common ground between the parties and include the CIPFA recommendations.

There are three immediate things upon which we could get agreement. First, whenever a contract is awarded, it should be in direct competition with private contractors. There is nothing sacrosanct about someone who happens to work for a local authority and no reason for him to have priority over another equally skilled man, belonging to the same union, who works for a private company.

Second, the local authority direct labour department should be established as a separate trading service. Third, its accounts, itemised and including overheads, should be properly submitted within a defined period so that we may know whether it is covering its costs, making a return on the capital investment, or simply whittling away the resources of the ratepayers.

It is important to use this opportunity to bring about changes because the extension of direct labour operations is damaging in three ways. First, it damages the ratepayers. I have given examples already of colossal losses and overspending on contracts. This causes suffering to ratepayers who are often already hard pressed.

Second, it damages the large contractor. As I have said, a member of the appropriate union, whether his employer is a private contractor or a local authority, has an equal right to opportunities for work. Equally important, most large contractors are working in the export field as well. They can tender for major export contracts, thus earning overseas currency that the country needs, only if they have a sound home market. The direct labour organisations do not take up contracts in the Middle East or in Europe, yet companies which are seeking world-wide contracts have the ground cut from under their feet by artificial and subsidised contracting by local authorities.

Third, the extension of direct labour is unfair to the small business. We all know how difficult it is to find a small contractor to do work at the moment. The number of small businesses in the building industry has been declining rapidly. Bankruptcies are an all-time record. The number is greater than at any time since the war, greater than it was in the depths of the depression, greater than it has been since records were first kept in 1914.

The number of liquidations has doubled since this Government came to office. Many firms have simply given up. These small firms are under acute pressure and they have as much right as anyone else to a fair share of the bread available.

Mr. Ivor Clemitson (Luton, East)

If they are efficient.

Mr. Mitchell

Yes, if they are efficient. That is why it is essential to include in the Bill a requirement for proper and separate accounting and not to make this proposal permanent until that accounting has shown, over a further experimental period, whether direct labour departments are efficient.

This proposal links with the other attack on the building industry, the licences to work for small builders under the 714 certificate procedure. I should have thought that the Minister would by now be aware of the enormous damage which is being done to thousands upon thousands of small businesses. I expect that we all receive two or three examples a day in our post of these certificates to work having been withheld, without right of appeal and sometimes without the reasons being given.

They are often withheld for reasons which have nothing to do with tax. The Government contended that the 714 certificate was intended to prevent tax dodging, but they have imposed so many conditions which have nothing to do with tax that it has become a licence to work.

When the industry is squeezed by the proposal in the Bill and by the licence to work system, it is not surprising that builders, small builders particularly, are crying out for protection against unfair and oppressive treatment by this Government.

There are practical reasons for not making this experiment permanent. There are also broad and strong reasons of philosophy why we on this side do not believe in concentrating power, wealth and decision-making into the hands of the State, whether it be the Government or local authorities. We believe in spreading those things throughout the community. The Bill is a further obstacle to doing so.

All those in the building industry will note the threat in the Minister's speech, when he made it clear that he intended to extend direct labour activities at the first opportunity and made grave references to his own leader, the Prime Minister, for not having unleashed that proposal at this time.

5.28 p.m.

Mr. Eric S. Heffer (Liverpool, Walton)

I am not certain whether the hon. Member for Basingstoke (Mr. Mitchell) was arguing that direct labour departments should be allowed to compete overseas with private companies or whether he was so opposed to competition that he wanted it to disappear altogether. I did notice that he argued that there were many bankruptcies among small builders. I have news for him: there have been bankruptcies among small builders ever since there has been a construction industry.

At times of crisis, small construction businesses are among the first groups to go bankrupt. I am not surprised, and anyone who is surprised does not know the first thing about the industry. One of the troubles is that everybody—I mean everybody—believes that he can be a builder. People think that it is the simplest thing in the world. We used to refer to these people on Merseyside as the "ladder and barrow" merchants. They think that if they have a ladder and a barrow they can go into construction.

As a matter of fact, during the period of the home improvements boom far too many ladder and barrow merchants, who thought they could build, made an absolute mess of the situation. One has only to think of the legal battles that have taken place about incompetence and the dreadful conditions constituents were left in after these merchants appeared on the scene. I am not surprised that people eventually got round to not employing them. Because of their inefficiency and lack of ability and knowledge of the construction industry these people went to the wall.

Mr. Michael Latham (Melton)

The hon. Gentleman knows a great deal about the industry. I do not dissent from some of the things that he has said, but does he not agree that some of the greatest companies in the country started exactly on the basis that he is describing?

Mr. Heffer

Of course, because they decided to employ highly competent craftsmen. The craftsmen they employed were sufficiently able and intelligent to lift them out of the nonsensical position in which they started. If they had not employed those craftsmen they would obviously have been unable to get beyond a certain stage and would have gone out of business. It depends upon whom one employs.

I am glad that the hon. Member for Melton (Mr. Latham) raised this matter because it is a fundamental question with regard to direct works departments. We can have efficient direct works departments and inefficient ones, just as we can have efficient private enterprise companies and inefficient ones. As the hon. Member for Melton rightly says, I do know a lot about this industry. Let no one suggest to me that only the direct labour departments have come out at the end of the contract well above the price that they went in for in the first place. The number of construction companies that have gone well beyond the original price, and have had to go to the local authorities or to their clients and ask for more money, is legion. The hon. Member for Folkestone and Hythe (Mr. Costain) knows that this goes on all the time. He is nodding his head. Of course he has to agree, because he knows it happens.

For example, let us take the question of negotiating contracts and tenders. I do not know whether hon. Members are aware that for many years in the city of Liverpool, under various local political administrations, we negotiated tenders, agreements or contracts with the Unit Construction Company for two reasons: first, because the Unit Construction Company was already doing the job and had the work force; second, we felt that it was giving us a good price.

It was not unique that we actually negotiated contracts with private labour. Local authorities can and do negotiate contracts with big companies like Unit Construction and others. As a matter of fact, the money that went into building the prefabricated units by Unit Construction was underpinned by the local authority. There was a hell of a row about it because Labour people at the time objected most strongly, saying that the Tories were advancing millions of pounds in order to assist a private enterprise company. That is the reality of this sort of thing.

Mr. A. P. Costain (Folkestone and Hythe)

I only interrupt because the hon. Gentleman said that I nodded at his remark. I was nodding because I was about to say that when a private enterprise firm gets an increase over the original contract it is because the plans were wrong. The increase is not given out of charity. But a direct labour department has to be paid out of charity, otherwise something goes wrong with the rate fund.

Mr. Heffer

The hon. Gentleman is surely not suggesting for a moment that the plans are never wrong with regard to direct labour departments and that they can only be wrong with the private enterprise builder. That is the most remarkable suggestion that I have ever heard. The plans can be wrong whoever the builder is. One of the problems in the industry is the rôle of the architect. That is a real problem and it is about time that we dealt with it.

The whole question of architects, surveyors and engineers is one that we need to look at. Other countries deal with this matter in a totally different way from ours. Their costs are much lower than they are in this country. It is about time that we had a look at this aspect of the industry, but I do not want to go into that matter because we are not discussing it this afternoon.

Let us look at direct labour. We can have an efficient direct labour department and an inefficient one. Believe it or not, I was chairman of a works department in Liverpool and was actually responsible for its creation. When I was chairman it made money, but when I came to the House of Commons, for some unknown reason it began to lose money. The same thing happened when I worked for the Merseyside Docks and Harbour Board. It made money, and, when I left, it went into the red. That proves beyond doubt that some of us have the ability to make money for others but no money for ourselves.

The point I am making is that we need to organise direct labour departments in an efficient way. We need the right type of management and supervisors. We also need buyers to be separate from the local treasury. If that does not happen one gets tied up with the local treasury and is unable to act independently. We are not always able to get the type of material that we need at the cheapest cost. I know much about this sort of thing. We have to be competitive, and we must run direct work departments, as far as it is humanly possible within our society, on a competitive basis, but we cannot entirely do that. Why? Hon. Members know that under local authority agreements one has to pay for sickness benefits, whereas if one is in the construction industry one gets sickness benefit on the basis of national health insurance and that is all. There are also many other overheads.

I agree with my hon. Friend the Member for Rotherham (Mr. Crowther) who pointed out that the difficulties for direct labour departments are much greater because one quite rightly has to give workers better conditions. They ought to have been a model for the whole of the construction industry. That is the truth of the position. Therefore, direct works departments are in a worse competitive position than they would have been if they had been purely a private enterprise companies. There are many other aspects as well.

Mr. Tebbit

Surely the hon. Gentleman is not suggesting that giving the best conditions to one's workers makes one uncompetitive? I thought his argument would have been the opposite—that by giving employees the best conditions one is competitive.

Mr. Heffer

I find that an amazing argument as well. I have yet to work for an employer in the construction industry who comes along to me as a worker and says "We are going to give you the best possible conditions and this will make us more competitive than the rest of the construction industry". That is absolute rubbish. The hon. Gentleman knows that within the capitalist system, which he supports, the situation is precisely as I have said. It is the opposite. It tries to cut down wages and conditions because that makes companies more competitive than their neighbours. The point about direct labour is that one has higher overheads because one cannot compete in that way. If the private enterprise companies want to give the best possible conditions by way of full sickness benefit and so on, let them do so. Let them go to George Smith of UCATT and offer to provide all these advantages, instead of George Smith, the rest of the UCATT members and the other unions having to use their strength to wring better conditions out of the employers.

We must extend the direct labour system as quickly as possible. Why should not direct labour be able to compete with the private enterprise companies? Why should it not be able to go in for the bigger jobs and, if it has a good department, take work in other parts of the country? Direct labour departments should certainly be able to do work in neighbouring boroughs, counties and regions.

The Conservatives believe that any suggestion for setting up direct labour departments signals the end of the world. What rubbish! The same thing happened when the old-age pension was introduced. It was said that the economy would collapse, but the pension was introduced and the economy did not collapse. The economy of the construction industry will not collapse through any extension of direct labour. I wish that the Conservatives would abandon their narrow sectarian philosophy on this matter. I am glad that they are laughing because their laughter proves my point. Their outlook is so sectarian and narrow that they cannot see the wood for the trees. They cannot see when something might be good; automatically they say that, because it is direct labour, or because it is public ownership, it must be bad. I say that it could be good or bad, just as private industry can be good or bad.

I want the system extended because the time is coming for workers in the construction industry to be given greater continuity of work. We must eliminate the unemployment that constantly plagues them. We have to ensure that they have decent working conditions, and we want to eliminate the days of the ragged-trousered philanthropists once and for all. We must do that on the basis of extending direct labour.

I cannot understand the Conservative approach to this matter. The Conservative Government accepted this idea in their 1972 Act. The Labour Government now have a small majority with the support of the Liberals and so the Conservatives see their chance to embarrass us. That is political opportunism of the worst kind. I am ashamed of the Conservatives for that, although I do not know why I should be since they are only acting in their normal way. I only hope that the Bill will be passed and that later we can bring in the other Bill as soon as possible.

5.44 p.m.

Mr. A. P. Costain (Folkestone and Hythe)

It is a great privilege to be able to speak after the hon. Member for Liverpool, Walton (Mr. Heffer). I think that I have known him for 40 years. I have seen him work in private enterprise and direct labour departments. My interest in the building industry is well known, but I have no directorships now to declare. I suppose I shall be guilty of advertising if I tell the hon. Member for Walton that he worked for the wrong firm in Liverpool. I can assure him that another certain firm gives all the privileges which are available to workers under direct labour, and more—full sickness benefit and so on—but it does so at the expense not of the ratepayers but of the shareholders.

The hon. Gentleman's comments would have been germane 50 years ago. All this talk about grinding down the workers would have been appropriate then. I told him in the Tea Room the other day that the executive directors of the company that bears my name, the men who are now controlling the company, all worked as foremen. One of them, the chief executive was the hon. Gentleman's charge hand on one of the Liverpool contracts. I know a great deal about the hon. Gentleman in that way, so let us get that out of our system.

We heard a most extraordinary speech from the Minister. He appeared to me as a fisherman describing the big fish that got away but declaring that, by gosh, he would get it next time. We have also seen a wonderful example from the Liberals, who came into the debate but have now gone. They have been laying ground bait for future occasions. As I explained to a meeting of builders with whom I was lunching the other day, it is quite clear what will happen in this Parliament. If the Liberals think that by their voting with the Opposition, the Opposition will win, they will always vote with the Government. Conversely, every time it appears that in that situation the Opposition will lose, they will cast their vote with us.

In an incredible speech the hon. Member for Isle of Wight (Mr. Ross) bent his principles in such a way that he went out of the door. He talked about private enterprise and how efficient it should be. Let us get down to what is basically involved here. It will surprise the hon. Member for Walton and perhaps even the Minister himself if I say that, as one who has been in the construction industry and has built up two firms, I am in favour of direct labour in certain circumstances. It is stupid to involve all the machinery and paraphernalia that is necessary for putting work out to tender in dealing with a small maintenance contract.

It is necessary, therefore, to have a direct labour organisation to do maintenance work, but now we follow that through. The fact that the engineer or other person in charge of the contract does not have to write out a specification or go through the tender procedure makes him lazy. He has only to pick up the phone and say, "Charlie, put a new roof on that house. The old one has fallen off. I do not want the bother of going through the tender procedure".

The hon. Member for Rotherham (Mr. Crowther) says that direct labour organisations must be given more specialised work. In other words, he says that instead of getting a direct labour department merely to fix hinges it should be given the job of building a town hall, and so it goes on. As a result, glorious lavatories are built in certain areas if only to retain the tradesmen. The hon. Member for Walton said that once a direct labour department had a crane it wanted to play with it. The same goes for a concrete mixer. In that way the department builds up and up. That is how the whole concept of direct labour goes wrong. The Minister is smiling one of his happier smiles. He is not the most popular Minister in the building industry, but that will not be news to him.

We heard a most interesting speech from the right hon. Member for Bermondsey (Mr. Mellish). He was a Minister, and from time to time the sun shone and he praised private enterprise as a wonderful show. Then he would go back to his old form and get worried about the situation in which direct labour organisations did not have enough work.

I believe in direct labour where it is doing a maintenance job for a specific client. Once direct labour organisations start working for another authority they are in exactly the same position as an outside contractor. They have to be given better instructions and they should be given specification, or some sort of drawings, for larger jobs. This may not happen. If they are to do that they will be involved in direct competition.

My hon. Friend the Member for Basingstoke (Mr. Mitchell) made a very fine speech in which he set out clearly his feelings about direct labour organisations. He said that they would stop other firms from building for export. I saw the hon. Member for Walton licking his lips at that stage. Maybe he envisaged direct labour organisations in Liverpool going to the Isle of Man, Dublin or even New York.

Let us get this matter right. The Bill must be opposed. If it becomes a permanent fixture it will give direct labour organisations the opportunity to engage in direct competition with private enterprise firms. Once a direct labour organisation is working for a local authority it is working for the referee. In that event the referee and the builders are the same people and they can alter the rules without anyone else knowing. Where there is direct competition there is an independent referee who is a fair judge. We shall never get fair competition unless a direct labour department is a completely separate trading organisation with its own overheads, office and so on. In those circumstances there is a slight excuse for proceeding with direct labour organisations, but basically it is wrong, and the Bill should be opposed.

5.53 p.m.

Mr. T. W. Urwin (Houghton-le-Spring)

I welcome the opportunity to join in this debate, albeit briefly. I have listened to the comments from both sides of the House with deep interest if only because of my own personal connection with the construction industry. That connection goes back some 51 years, since I first began my apprenticeship as a bricklayer. It continued until I became a Member of this House. I was a full-time officer in the Amalgamated Union of Building Trade Workers prior to 1954, and I have had experience of working in direct labour departments. Until 1965, I was a member of a local authority, having the great honour to be chairman of the housing and planning committee with responsibility for running and organising a highly successful direct labour department.

Because of my lifetime commitment to the principle of direct labour, I welcome the Bill. However, I regret deeply the necessity to withdraw the previous Bill, which would not only have consolidated direct labour, but would have given great opportunities for expansion in the field of more intensified competition with building contractors. As representatives of the Conservative Party have always claimed that they believe in free competition, I fail to understand why they are so fearful of competition from direct labour departments.

It is a tragic fact that in my connections with the construction industry I have found that private enterprise has from time to time failed abysmally to measure up to the responsibilities. I have had the misfortune to be working for private building contractors at the time when they have gone bankrupt. Although the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) may laugh, that is a fair indictment of Conservative policy. As a full-time trade union official I spent many long hours trying to recover wages for employees of firms that had gone to the wall, largely because of their own inability to organise a building site which they had won by competitive tender.

I have always believed that the principle of direct labour is absolutely right. Equally, I do not believe that inefficient direct labour organisations should be encouraged. They should be encouraged to become efficient, as efficiency is the keynote. It is well within my knowledge that there have been a great number of highly efficient direct labour departments up and down the country, particularly in the North-East.

Mr. Kenneth Lewis (Rutland and Stamford)

What about Sunderland?

Mr. Urwin

I could tell the hon. Member a lot about Sunderland. I suppose he has read what Aims of Industry put out, and what Mr. Malcolm Hoppe, former Lobby Correspondent of the Sunderland Echo, has written; but he only tells people what he thinks people should believe. I could tell the House a lot more about that situation, but there is no time.

The direct labour department in my old urban district, which became part of Sunderland under the Local Government Act 1973, actually came into being as a direct labour organisation because of the failure of a private firm, which left a site mid-way in a contract. The local authority decided to set up a small direct labour organisation to complete the contract. From very small beginnings an eminently, highly successful direct labour organisation has evolved. Until 1973 it was tending in competition with private builders and it never lost a contract.

I simply cannot see—providing the direct labour organisation is being run efficiently—how it can ever fail to obtain contracts in competition with private contractors. This is the way it has happened in my urban district. The enlarged borough of Sunderland, with the exception of Easington, has taken in the old urban district of Hebden. They have their own direct labour departments, all of which have had a large measure of success.

The hon. Member for Rutland and Stamford (Mr. Lewis) made a jibing remark about Sunderland, but Sunderland started its direct labour department far too late. When small authorities were working very successfully with direct labour departments Sunderland was still totally dependent on private enterprise, even for its own council house building. Once it established the department it quickly became successful, and is successful now. Recently it succeeded in obtaining the contract for the leisure centre—the biggest it has so far undertaken. Many accusations have been made against the Sunderland direct labour department because of alleged failures over the leisure centre in the city, but the problems faced by the direct labour department equally would have faced a local building contractor who had won the contract in open competition. There were delays in delivery of steel, which is not uncommon in the construction industry, and the local authority had no control over that situation. These are matters which Aims of Industry and Malcolm Hoppe did not bring out as they should have done.

Mr. Kenneth Lewis

I was not making a jibe at Sunderland. I was merely citing it as an example. There are-other towns and boroughs and authorities in the same situation. How does the hon. Gentleman measure the success of a direct labour department if such a department is losing a great deal of money? If it is costing the ratepayers money, it is surely not successful.

Mr. Urwin

I thought that I had made clear that I would not in any circumstances support an inefficient direct labour department. Nothing I have said should be taken to indicate that Sunderland direct labour department is inefficient or unsuccessful. It is on record that in the last five or six years Sunderland has saved its ratepayers several hundred thousand pounds both in contracts in open competition and under the old two-for-one system.

There are many faults in the private sector of the construction industry. I am not referring to the all too frequent bankruptcies, but I wish to draw attention to an incident in Peterlee New Town in 1962–63 when a somewhat adventurous firm from Lancashire came to Peterlee and obtained the first contract with a ridiculously low tender price, beating all the local firms. That organisation grew like Topsy; it obtained more and more contracts, but finally it suffered an almighty crash, when many thousands pounds of deficit were incurred, and when several hundred building trade operatives had to leave without having received their wages and without having had access to holiday credits.

The private sector of the construction industry—and I echo what was said by my hon. Friend the Member for Liverpool, Walton (Mr. Heffer)—surely should not be afraid of competition with direct departments. It should now begin to put its own house in order in organisational terms.

The time is riper than ever before for a major move to decasualisation of the construction industry and towards registration of employers as well as of employees. This is one major advance for which the industry is crying out, and that opportunity should be grasped.

I look forward to the time, in the not too distant future, when my right hon. Friend the Minister for Housing and Construction will come forward with the Bill that has been dropped, but in a strengthened form, so that healthy, efficient and successful direct labour departments can exist and expand even further to the advantage of the ratepayers and people in the community generally.

6.5 p.m.

Mr. Michael Latham (Melton)

The House has just had the pleasure of hearing three very experienced contributors. We heard the hon. Member for Houghton-le-Spring (Mr. Urwin), who said that he worked in the industry 50 years ago. That means that he worked in the industry 16 years before I was born, which is a sobering thought. We also heard the contribution of my hon. Friend the Member for Folkestone and Hythe (Mr. Costain), who had experience of building an oil refinery in Persia before I was born, and that contract involved many millions of pounds in investment.

The hon. Member for Liverpool, Walton (Mr. Heffer) again spoke with great knowledge, and I always enjoy his speeches. Knowing that the hon. Gentleman is a tough fighter, I was surprised that he accused the Opposition of being political and ideological. If ever I knew somebody who was both political and ideological, it is the hon. Gentleman. That comment came somewhat oddly from a fighter such as the hon. Gentleman has always been.

The House knows that I have an interest in these matters as I am a director of Lovell Homes, part of the Y. J. Lovell Group, which may be said to be in direct competition with direct labour departments.

Let me seek to outline why I think the Bill should be opposed and why it is unfortunate that this legislation should have been brought forward. I would have been even more appalled if the original Bill had been brought forward rather than dropped, as it was, following the Lib-Lab agreement.

The Minister set up a working party to consider the subject of direct labour following a number of incidents that caused trouble in earlier years. I did not disagree with the setting up of the working party, although its membership left something to be desired. Since a number of its members had a vested interest in maintaining direct labour in certain forms, I was not happy about that feature. Nevertheless, the working party was set up.

It has not yet, as I understand it, reported. Its views may be known to the Minister, but they have not been made public. It would surely have been better if the Minister had made an order in respect of the 25 authorities for another year maintaining the existing position until he was in a position to bring before the House the results of the working party's deliberations.

What has happened since the war on the subject of direct labour? For a long time we had the one-in-three rule, which meant that one in every three contracts went to competitive tender. That rule was originally set by the post-war Labour Government. It was Aneurin Bevan who once said that direct labour was an "expensive luxury". Therefore, he brought in the one-in-three rule as part of a Ministry of Health circular after the war.

That operated until 1965 when Mr. Richard Crossman issued a circular withdrawing the one-in-three rule and allowing direct labour departments to take work on a negotiated basis whenever they wanted it. It was significant that the one-in-three rule in 1965 was followed a couple of years later by some of the most deplorable scandals, such as that in Salford to which the right hon. Member for Bermondsey (Mr. Mellish) referred, and of which he had experience when he was in the Ministry of Housing. Then Mr. Anthony Greenwood, or Lord Greenwood as he now is, produced the "Manual of Principles" for direct labour departments in 1968 and issued a circular saying that there should be more competition.

Therefore, what has happened is that the position has changed every few years. I hope that by the time the working party comes up with a clear report, firm rules will then be promulgated and will be adhered to. Unfortunately, this Bill has been brought forward before those deliberations have been completed, and the fact that no temporary order has been laid to cover the matter is good enough reason for opposing the Bill tonight.

Let me examine the wider issues. I do not deny that this is a difficult philosophical problem for both sides. The right hon. Member for Bermondsey asked whether we wanted no direct labour departments or efficient ones. My hon. Friend the Member for Ashford (Mr. Speed) gave a clear answer. He suggested that he wanted to see efficient direct labour departments, but he thought that there was no reason for increasing the scope of such departments now. I agree with my hon. Friend. We cannot ignore the direct labour departments which are now in existence; nor can we ignore the fact that tenders were difficult to obtain between 1971 and 1973.

I do not blame the building industry for that situation. It was caused by the economic position of that time and by the monetary policies of the then Government—which I have criticised in the House and which I shall continue to criticise. I hope that those policies will not be repeated. It was not the industry's fault that it became overheated, and that must be prevented from happening again. That situation has given those who believe in direct labour in principle a strong argument. They say that tenders could not be obtained at that time and that only direct labour departments could do the work. That is an argument that cannot be ignored. If, on the other hand, we say that we want not no direct labour but efficient direct labour, that assumes that direct labour departments must be on all fours with the private sector—and must be seen to be so—and have the same commercial and statistical basis.

The hon. Member for Houghton-le-Spring said that he could not understand how a direct labour department could help but have a lower price than a contractor when a contractor was trying to make a profit. However, profitability is the test of efficiency and the need to make a profit motivates a contractor in keeping his costs down to the absolute minimum and to organise production on site to the maximum effect.

It is significant that the CIPFA report says that unless there is a 4½ per cent. return by a direct labour department and unless that department shows a saving compared with the contractors, the department cannot be efficient. The test of efficiency is the profit made, because that represents a real command over resources. The hon. Member for Houghton-le-Spring has views about the statistical differences in productivity between direct labour departments and independent contractors. Many people have pointed out that there is a great difference in that productivity, but the Minister has said that statistics are misleading because relevant considerations are missing from them. That would be a more impressive argument if the Government had not changed the basis of the figures a few years ago so that they are unlike and not comparable. I am not suggesting that the basis was changed for political reasons, but it has made comparison difficult.

The overall test of efficiency in the construction industry is profit—or, in the word used by the Prime Minister at the Labour Party Conference, "surplus". It is the difference between the tender price and the eventual outcome.

Mr. Heffer

The hon. Member for Melton (Mr. Latham) must know that that cannot be the entire test, because it may well be that a contract says that there should be, for example, three coats of paint and that the original paint should be burnt off. The hon. Gentleman must know that such specifications are not fulfilled on many occasions because there is a great deal of skimping. That might be regarded as quick, efficient and profitable, but it is bad for the efficiency of the work and for the end product.

Mr. Latham

I am absolutely amazed that the hon. Member for Walton has given such an example, because he must know well that those who argue against direct labour claim that the way that it produces notional savings is by changing the specifications during the course of the job. He must also know that the view has been expressed that direct labour departments use the notional benefits from their maintenance sections to offset construction losses. One needs a properly identifiable trading fund, as the CIPFA report suggested, and works committees should receive real information immediately—not years later—so that they can make direct comparisons. Certainly the Bill does not provide for that and nothing else will until the CIPFA report is implemented.

So there is a dilemma for Opposition Members about whether there should be no direct labour or efficient direct labour. There are also dilemmas for the Minister and his party. The view of the hon. Member for Walton and the right hon. Member for Bermondsey is that direct labour departments should be efficient and, presumably, that if they are not efficient, they should be closed down, just as civic restaurants were closed down, according to the provisions of the Civic Restaurants Act, if they made a loss on their trading activities for three years running. That is one point of view and it is a fair one. However, I am sure that Labour Members will not deny that not every Socialist or every person involved in direct labour thinks in that way.

Many of those people believe that direct labour should be a social service and that it therefore does not matter whether such departments make a profit. Such people claim that it is a social service to employ the men. There have been instances where this has happened, such as at Sal-ford. Some people forgot that after the critical report that was made by the district auditor about the Salford direct labour department in 1967, the then Labour authority nevertheless proposed to continue with the department because the authority was in favour of it in principle. It was only as a result of pressure from the Government and the defeat of the Socialist local authority in the 1967 elections that the closure was brought about.

There are plenty of Labour Party members who feel that an attack on direct labour is an attack on Socialism. They see direct labour as an extension of State ownership. They believe that it is a good thing in principle and do not see it as strictly a matter of efficiency or inefficiency—as apparently the hon. Members for Bermondsey and Walton see it.

Mr. Heffer

I agree totally that if there is competition for new work with private enterprise, there must be a construction firm of a similar kind. However, in maintenance there is a major difference, because any sensible local authority will carry out a policy of planned maintenance: that is, an authority will decide, for example, that certain blocks of houses or flats will be painted over a period, not haphazardly but the whole work being done so that in the long run money will be saved in spite of the initial high capital cost.

I am sorry to intervene at such length, but one cannot have a profit in every aspect of direct labour work, because even if such work were put out to private enterprise, although there might be a profit on the planned maintenance initially, savings would not be made in the long run, because future costs would be high.

Mr. Latham

I am surprised that the hon. Member has made such a point. I can understand and sympathise with the argument that direct labour departments should be able to compete to undertake major planned maintenance, such as the external painting of council houses in Liverpool, which would be a planned programme over many years. That is exactly the sort of work that can be put out to contract, and this should be tested because there are plenty of painting contractors who would be perfectly able to undertake such work in competition with the direct labour department on a job-by-job profit basis. If the work is done on a job-by-job basis, such firms can tender and make a profit. The same can be done if the work is carried out over a planned period.

No doubt the hon. Member for Walton will correct me if I am wrong, but did not Liverpool City Council change politically and was not the planned painting of council houses put out to contract for the first time in many years? Did not the contractors do the job well below the price given by the direct labour department? If I am wrong, I shall withdraw that.

Mr. Heffer

The future maintenance costs were higher because of it.

Mr. Latham

No doubt the hon. Member for Walton can produce the figures on a later occasion. If we are both on the Committee that will consider the Bill, perhaps we can argue about it. My general point is that such work should be put out to contract on a regular basis, and that was said by the CIPFA report.

The building industry has several basic needs. There must be a firm and coherent flow of work. That is extremely desirable but it is also extremely difficult to achieve. We are not now debating the problems of the construction industry, as we did last week, but, rightly or wrongly, when the axe is swung, it tends to hit the construction industry and when there are cuts, a firm flow of work is difficult to obtain.

The industry also needs honest and above-board tendering on a selective basis. Many reports in the past 10 or 15 years, including the Banwell and Emmerson Reports and the 1967 EDC for Building, have said that open tendering is a waste of money and that we must have selective tendering. There is nothing between us on that and successive Governments have put out similar circulars on this matter.

I know that there is sometimes negotiated tendering in the construction industry and that some people would like it to take place more often. I do not share that view. Ratepayers, particularly in the present climate of concern about corruption and scandals, have a right to be assured that jobs have been tested in proper competition with a reasonable number of firms able to put in sensible quotes for the work. It is not proper competition if tenders are invited from one firm that is capable of doing the job and seven that are not.

The trouble with negotiated tendering—and this is also an argument against the increased use of direct labour—is that the firm gets slack. It has the job and has the prospect of others to follow. The motivation falls, and that is bad for the ratepayers, the clients and the building industry. I am not satisfied with the concept, except on very similar jobs and in closely controlled conditions. The existence of negotiated tendering in the construction industry is not an argument for the increased use of direct labour.

Finally, the building industry needs the flexibility to adapt to changing situations that may occur, whether on the contracting or speculative side. Labour Members said when building controls were introduced in 1965 that it was not possible to get houses built because resources were being used up in office building. Labour in the construction industry is not all that interchangeable, but there is a certain amount of interchangeability that can be achieved swiftly and efficiently by private enterprise. For example, when a council house contract runs out and the possibility of speculative housing arises, a builder will quickly switch men from one to the other.

The same is true of the much-criticised hiring and firing that has been mentioned by the hon. Member for Walton, and the fact that there are so many small firms, as the hon. Member for Houghton-le-Spring has said. Hiring and firing and the small firms are essential to an efficient building industry. Building industries all over the world are mainly comprised of small firms that can react best to local circumstances. The fact that they are small is no criticism. It is a reality of the industry all over the world, and it is the way that it works best.

The Phelps-Brown Report of 1968 dealt with labour-only subcontracting and found that two-thirds of the hiring and firing at the end of jobs involved men who left voluntarily and were often subsequently taken on for another job by the same contractor or a nearby firm. That is how the industry works. Ratepayers should not be asked to keep on people for whom there is no work and to provide benefits such as pensions and sick pay—however desirable they may be—unless they can be justified by productivity.

There has been much talk about the lump and labour-only subcontracting, but productivity under these systems is much higher. The reason that two-thirds of the workers in the building industry do not belong to trade unions is not that they are not allowed to join unions but that they have worked out better deals for themselves on a labour-only basis.

Mr. Urwin

The hon. Gentleman is paying a glowing tribute to the lump and its higher productivity, but will he not also acknowledge that labour-only subcontracting has been directly responsible for the enormous wage drift in the construction industry? If the National Federation of Building Trades Employers had seen the warning signals 10 or 15 years ago, conditions on the bona fide side of the industry would be far better now.

Mr. Latham

We could argue about that all night, but we can establish as a matter of fact that labour-only subcontracting has been so prevalent in the building industry for hundreds of years because the men concerned have preferred to make their own bargains and to have the flexibility and higher wages involved.

Mr. Urwin

And the shoddier work.

Mr. Latham

It is all very well to say that direct labour departments offer men pension schemes and sick pay, but the productivity is not necessarily commensurate with those benefits and we cannot necessarily afford to provide these benefits unless profitable work is also available.

It is a shame that the Minister brought forward this unnecessary Bill in advance of the report of the working party. If the report had been published, we could have settled this matter once and for all.

6.27 p.m.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

I declare my interest as a director of a building company. Before I came to the House I spent many years in the industry, finally running a company in the North-East.

I had a happy early part of the afternoon listening to the Minister and the hon. Member for the Isle of Wight (Mr. Ross), because neither appeared to like the Bill very much, despite the fact that it is a product of the Lib-Lab pact. The Minister was quite strong in his condemnation saying that it was not the Bill that he wanted, and the hon. Member for the Isle of Wight said that he would not welsh on the deal with the Government, although he did not like the Bill very much, either. They were reluctant sponsors of the Bill.

I enjoyed hearing the Minister eat humble pie, although he does not do it very gracefully. There are a strong crackling noise and a lot of crumbs flying around the Chamber when he does so, and he will have to do so increasingly. He has already had to eat humble pie over rent restrictions, and again over this Bill, and it is a pleasure to watch him.

No one has yet spoken who does not believe that the CIPFA rules should be in the Bill. Hon. Members opposite say they are in favour of efficient direct labour, but they should have said efficiently monitored direct labour. The rules do not make direct labour efficient, but they make the analysis of its performance efficient. There is not an enemy of implementation of the rules. Indeed, they have friends on all sides, and I am surprised that they are not the subject that we are debating. The extension of direct labour later would have followed logically from having introduced the rules first and seen that direct labour organisations were performing satisfactorily under them.

Mr. Urwin

The hon. Gentleman speaks about efficiency in direct labour and qualifies it by saying that it should be monitored efficiently. He should know from his experience as a building employer that there is a great deal of inefficiency in the private sector, and I believe that the construction industry has the highest rate of bankruptcies in all British industry. Surely that is not a cause for expression of joy by the hon. Gentleman or his hon. Friends.

Mr. Ridley

I shall be coming to the questions put by the hon. Gentleman in the course of my speech.

It has been alleged that we on the Conservative Benches are in some way doctrinally opposed to direct labour, and it is alleged by the Minister and others that they are doctrinally in favour of it. I do not think it is a question of doctrine. I entirely take the point of my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) that there is every advantage in using direct labour for one's own maintenance operations. But we are moving out of the field of maintenance with this Bill and the question, surely, is whether direct labour organisations operate as efficiently as private sector building companies. I do not think the issue is employment. For every 100 jobs lost by the private sector, 100 go into the direct labour organisations, and vice versa. The question is where the employment takes place.

We must first have sure ways of measuring who is efficient. Secondly, we must have clear and unequivocal ways of removing from the scene those who are not efficient. This is the answer to the question by the hon. Member for Hough-ton-le-Spring (Mr. Urwin).

In the private sector we have efficiency because we know that private sector companies have to publish fully audited accounts. They have no way of subsidising themselves from the rates or the taxes. If they can make a profit, they are operating efficiently. We do not even know that about direct labour, because these rules have not been implemented.

The hon. Gentleman, therefore, with his great belief in direct labour, should have used his speech to demand the introduction of the CIPFA rules so that he could demonstrate the truth of what he has said—that direct labour is efficient. He did not do anything of the sort. Let us first get an impartial analysis of the state of efficiency by having these rules instituted. It is easy to cheat by sharing overheads and having all sorts of blurred lines between what goes in one account and what goes in another, but let us try to get it right for a start.

Mr. Urwin rose—

Mr. Ridley

I will not give way any more. I have only a short speech to make.

My next point concerns what happens if any building organisation is not efficient. Government Members—I have heard all but one of their speeches—have said that DLOs should not continue to exist if they are inefficient. I entirely agree with them. What would happen to a direct labour organisation that after three years had demonstrated that it could never make a profit? It would have to be closed down. The hon. Member would be making the same complaints about the inefficiency of the public sector, dumping men and causing unemployment. There is no difference between the private and the public sector in this connection except for the fact that the public sector has concealed its inefficiency and has failed in nearly every instance to take the appropriate action when the appropriate action should be taken.

Let us assume that, with these rules, public sector operations show themselves to be efficient, and that there are many DLOs in the country that continue to make profits and do well. The final question, which we have every right to consider as politicians, is whether the capital of the State should be employed, even efficiently, in this type of operation.

Admittedly, there is much of doctrine in what answer is given to that question, but there is also much that is more important than doctrine. There is an economy of scale in building. There is a specialisation. I was a piling contractor, dealing with heavy foundations. The work there is almost of world-wide and certainly of country-wide specialisation. Building is not all one trade. It is everything from civil engineering to a painting maintenance contract.

The firms that prosper will not be tiny ones based in one town in Durham or another. They will be large, specialist, highly capitalised firms, down to the smallest self-employed builder, who is mobile and flexible. I do not really believe—and I do not believe the hon. Gentleman would believe—that that is really the sort of activity in which the State's capital is best employed, because the State's capital is in fact money taken from taxpayers by taxation and may well be better employed in building schools, hospitals, roads and every other sort of infrastructure of communal living.

That is why I think that the Bill is not necessary and that it is the wrong Bill at the wrong time. That is why I shall join my hon. Friends in opposing it.

6.36 p.m.

Mr. Michael Morris (Northampton, South)

This may be a small Bill but it is still, nevertheless, another piece of fairly insidious legislation that the present minority Government are trying to get on the statute book. I say "insidious" because the original orders for the named 25 councils were temporary in order to allow those councils time to adjust to reorganisation. The Bill would make the orders permanent. Worse still—as my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) spent some time explaining—it would extend their powers in terms of geographical dimensions.

Everyone in the House fully understands the reason behind the Bill, namely, that it is the start of the Labour Party's nationalisation of the building and construction industry—[Interruption.] Labour Members may laugh, but it is in Labour's programme for 1976 and it is in Labour Party propaganda. The Labour Party made quite clear what it wanted when it talked about developing and exploiting direct labour across a much wider front. We have listened to Back Bench Labour Members this afternoon who look forward to the day when they see a great extension of direct labour. They want to see the drive towards it becoming very fast indeed.

If we look at the statistics on the output of the construction and building industry we find that the Government have been quite successful already in their direct labour objectives. In 1973 just under 10 per cent. of the work was accounted for by direct labour. In 1976 the figure was about 13.4 per cent.

It is little wonder, therefore, that the builders and sub-contractors oppose the Bill so vehemently, as do Conservative Members. The builders and sub-contractors have watched, as we have, the Government's hesitation and procrastination over the CIPFA report on accounting principles, published in June 1975. This independent report—it is agreed on all sides that it was an independent and a good report—was wholeheartedly endorsed by my hon. Friend the Member for Ashford (Mr. Speed) very soon after it came out, but the Government were pretty cool about it at Question Time all through the summer of 1975, and we have only this afternoon had a firm indication that the Government would like to see these accounting methods and principles applied.

Even so, we have not had a statement from the Government Front Bench that these accounting principles are so important in regard to direct labour that the Government will bring them forward at an early date. Indeed, we are bound to ask—as my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) did—why on earth they are not a part of the Bill. I speak for my hon. Friend, I think, when I say that we hope that when we put down an amendment to the Bill in Committee for them to be included, the Government will welcome it and we shall be able to move forward jointly in getting these methods included as part of the schedule to the Bill.

As Labour Members know, many of us are opposed to large-scale direct labour, and I have been searching for some positive evidence in its favour. I was particularly delighted to see recently the Institute of Building Management's report on "Value for money in public building". I took the opportunity of reading that report in great depth. In its conclusions, in paragraph 6.1, it says: Perhaps the most outstanding performance by a municipal direct labour department is that achieved by the City of Manchester Direct Works Department over a period of 15 years to April 1976. I thought "Hurray, at last we have found a successful large-scale direct labour organisation". But I was equally amazed when I looked at the district auditor's report for the year ended 31st March 1975 for, lo and behold, it was bitterly critical of the performance of that direct labour organisation, stating: The abuses of the bonus system are firmly established and have existed for a number of years. The report went on to criticise at considerable length the quality control, performance, lack of financial control and heavy losses.

I think that one is bound to draw a certain conclusion. If, in a published report, that is quoted as being the best, what on earth are the rest like?

We know how some of the 25 have performed on the ground. It is a pity that the hon. Member for Liverpool, Walton (Mr. Heffer) is not in the Chamber. Liverpool is concentrating on rehabilitation and improvement work after closing its new work section for overspending. In March 1976 we learned that on a rewiring contract in 1974, split 50-50 between direct labour and private contractors, the private job was done on time and the direct labour job was only 50 per cent. done.

Mention was made of tap washers. The most frightening small example which I have found in my research is that in Liverpool the replacement of a tap washer by a private contractor cost £2.20, which seemed to be excessive, but by direct labour it cost £12.00.

I turn now to Sheffield, which tries to avoid competition. In December 1975 the Sheffield authority voted that any work could be allocated to the direct labour department without competition unless the Department of the Environment insisted on competitive tendering.

Then there is dear old Sunderland, which the hon. Member for Houghton-le-Spring (Mr. Urwin) complimented in his speech. Sunderland also does not believe in competition. It has raised its non-tendering figure to £100,000. Its leisure centre, built by the direct labour department, is 21 months late, which is quite a time. If it is so wonderful, why was Sunderland's direct labour department hauled over the coals in the district auditor's report? I do not think that it is one of the jewels in the crown of direct labour.

Mr. Urwin

Clearly, the hon. Gentleman's researches into the activities of Sunderland's direct labour organisation have not carried him far enough to examine the enormous saving that it effected against the tender prices of outside contractors for house building over the past three or four years.

Mr. Morris

I was frightened off by the answer that I got from the Minister, when I asked how many district auditors' reports had been critical of direct labour organisations in the last 12 months and found that Sunderland was amongst them. I checked and found that the district auditors were highly critical of Sunderland. I believe that district auditors are well respected in local government. If they are critical of direct labour in Sunderland, there would appear to be something wrong with direct labour in Sunderland.

So it goes on through all these 25 authorities. Newcastle has lost £700,000 since the beginning of 1975. Then there are Wigan, South Tyneside, and others. It is little wonder that we are now seeing increasing numbers of district auditors' reports complaining about various aspects of direct labour organisations and how they are operating on the ground.

It is not just that the vast majority of large direct labour departments are a failure or less efficient than they should be and cost the ratepayer a great deal of money, which they do, and that, as my hon. Friend the Member for Basingstoke (Mr. Mitchell) made clear, they deprive good experienced builders and contractors, large and small, of genuine work. The problem goes deeper. As was pointed out by my hon. Friend the Member for Folkestone and Hythe, it affects industries other than the building industry.

For example, it affects lift manufacturers. There is a lift manufacturer in my constituency. Lift maintenance, as anyone who knows anything about the industry knows, is its bread and butter, but slowly and surely this base is being eroded by fictitious costings and dubious skills, all of which undermines the home market, which is the basis of export expansion. There is a serious danger there. I suggest that the Department of Environment's export group should look at that aspect in addition to direct labour.

The Bill also forgets that local authorities exist to serve their own electors, for it purports to make them into authorities with general trading powers outside their own boundaries. Why do the Government believe that these 25 authorities should be selected to continue permanently in business? Why are they using the old county borough boundaries, not more up-to-date boundaries? Why do they not tell the housing and construction industry the truth—that this is part of their programme for nationalisation and that they have managed to hoodwink hon. Member on the Liberal Bench to buy this Bill?

I find the Liberal Party's stance on this Bill most surprising. The original Bill was withdrawn on 24th February because it did not have support from both sides of the House. A month later we had the Lib-Lab deal. We understand that the Liberal Party supports this Bill tonight, although the hon. Member for the Isle of Wight (Mr. Ross), in a brief speech, criticised it. I think that Liberal Members should sort themselves out a bit.

In any case, where is the evidence that these increased powers are needed by these local authorities or, indeed, are wanted by the majority of them? My hon. Friend the Member for Basingstoke asked Why the Government flew in the face of the Layfield Report which, on page 7, paragraph 23, made it clear: The operations of direct labour organisations were singled out as particularly bad examples of a failure to control costs". Finally, why will the Government not understand that the building and construction industry is facing a very severe slump at this time and that all that the Bill does is to ensure that there will be more unemployment and bankruptcies in the private sector? I believe that this Bill is an abuse of legislation. It is not well thought out. It is out of date. It is a holding operation.

I believe that the Minister should take the Bill away and come back with the Bill in which he believed, or bring back this Bill with the full CIPFA recommendations. As it is, I believe that the House should reject the Bill, and I hope that all the Opposition parties will reject it.

6.48 p.m.

The Under-Secretary of State for the Environment (Mr. Ernest Armstrong)

In many ways this has been a disappointing debate. This afternoon we have once again heard the whole range of doctrinaire arguments that we have grown accustomed to hearing over the past year from those who are completely opposed to any form of public enterprise in the construction industry. Having listened to Opposition Members, I wonder whether they have bothered to read the Bill at all.

Perhaps I can bring the House back to earth by recalling what my right hon. Friend said at the very beginning of the debate about the purpose of the Bill. By any standards, it is a modest measure. It is virtually a one-clause Bill which has the intention simply of restoring to a relatively small number of local authorities the power to undertake new construction work for other authorities through their direct labour organisations. Problems had arisen because a number of functions newly became the responsibility of county authorities as a result of the Local Government Act 1972. Interim orders were made under a provision in the 1972 Act to give 25 authorities the necessary works powers to deal with these problems, and the necessity for the Bill arises from the expiry of those temporary orders on 31st March this year.

Much has been said by Opposition Members about making these powers permanent. We have been repeatedly asked why we did not merely extend the orders. I am advised by the legal authorities that temporary means temporary. Transitional orders are transitional. If we had merely tried to bring in the orders again, they could well have been succesfully challenged in the courts. That is the reason for the Bill.

These are the facts about this small Bill. When originally preparing our legislation on the subject last year, we were anxious to have a constructive debate about direct labour organisations and the rôle of direct labour in the construction industry as a whole. But, of course, we got nothing of the kind, nor have we had it this afternoon. The debate has always been much more closely related to political philisophy than to economic fact.

Despite all the extravagant language used by Opposition Members, the Bill deals with a sector of the construction industry that is responsible for approximately 8 per cent. of national construction output, mainly in the area of maintenance and repairs. It is therefore regrettable that the employers' organisations that are responsible for by far the major part of construction in this country should have spent so much time, energy and money in a campaign designed to pillory all direct labour departments.

The hon. Member for Ashford (Mr. Speed) spoke about horror stories. The Tory Party has aided and abetted this campaign by the builders' organisations. When there is such a constant tirade against municipal enterprise it is only natural that those who are attacked should spend a little time highlighting the failures in the private sector. There are plenty of examples. I could talk until midnight giving examples of the failures in the private sector. When the construction industry is facing the most serious recession since the war, constant emphasis on failures in both sectors gives a distorted picture of what is happening throughout the country and causes irreparable harm to the standing of this vital industry.

Of course, we need to recognise failures wherever they occur, but we have to bear in mind also that there are plenty of examples of competent management and hard-working, skilled craftsmen with pride in their job, working on improving and changing the environment in a way which brings credit to all concerned. Precious little has been said about that by Opposition Members.

Much of the propaganda in national advertisements and pamphlets produced on behalf of the private sector has been much more concerned with political ideology than with any kind of constructive debate. The campaign has been responsible for giving currency to many of the distortions, exaggerations and misconceptions that we have heard this afternoon from the Opposition. I do not claim, nor have I or my right hon. and hon. Friends ever suggested, that direct labour organisations in this country are perfect or that there is no room for improvement in their operations. We recognise that there have been examples of inefficiency among them. Nevertheless, there are many direct labour organisations throughout the country which pro- vide an effective and efficient service for authorities and their ratepayers.

Those who have been so ready today to criticise direct labour organisations have been rather quiet about the failings of private contractors. We were told by the hon. Member for Folkestone and Hythe (Mr. Costain) that private contractors are put to the test by having to sink or swim according to their own performance, but he knows that this is not the whole of the story. There have been numerous occasions when private contractors have failed to deliver the goods at the right time and at the right price and have put public sector bodies to considerable difficulty and expense as a result. We should not forget the cost to ratepayers when a contractor goes bankrupt in the middle of a job or when ex gratia payments have to be made to enable completion.

Nor is it any use for those who have over the past months opposed the Government's proposals for a far more wide-reaching Bill than the present one to complain now about the absence of provisions on direct labour organisations' accounting and charging. The Government consider that there should be a sound financial and legal framework for the operation of all local authority direct labour organisations.

The hon. Member for Northampton, South (Mr. Morris) said that for the first time this evening my right hon. Friend had stated that we agreed with CIPFA. I remind the hon. Gentleman and his hon. Friend the Member for Ashford that I gave full details in a speech at Scarborough. I quote from the periodical Building of 29th October 1976: Ernest Armstrong. Parliamentary Under-Secretary at the DOE went further than any other Minister has done in accepting the main recommendations of CIPFA which would bring DLO accounting procedures more in line with private contractors. That was our statement about the intentions of the Bill, a Bill which was rejected by the Opposition before they even knew its contents.

Mr. Speed

I thank the hon. Gentleman for giving way. He is always courteous in these matters.

I agree that the hon. Gentleman said that. If that is so, if the preparations were all made and the provisions were to go into the Bill—and presumably they are sitting in Marsham Street now—and if there is all-party agreement in the House about the desirability of the CIPFA provisions, which is what we are talking about, why cannot the Government bring them forward this Session? On behalf of my hon. Friends, I can guarantee them a swift passage.

Mr. Armstrong

I shall come to that. A doctrinal position was taken up by the Opposition. The hon. Gentleman should consult his friends in the Shadow Cabinet about that. It was for them to decide. I am coming to the kind of provisions of which the hon. Gentleman is talking.

We hope to provide the sound financial and legal framework, but it must be done as part of a comprehensive measure. It would be illogical for us to attempt to introduce a comprehensive, new financial system applying to all local authorities in the context of a Bill to remove an anomaly which affects only 25 of them. That is what this Bill is about. If the hon. Gentleman would only bother to read it, he would know that it is concerned with new building and 25 authorities. In a Bill which sought to make a fundamental change of this kind we should also want to include provisions to free DLOs from the present excessive restrictions, which create employment problems and impede efficiency [HON. MEMBERS: "Oh."] We heard a great deal about unfair competition this afternoon. In fact, the restrictions placed on DLOs, the restriction on the work that they can do, are unfair to them.

We have also heard it claimed, both today and on other occasions, that our original proposals for legislation on direct labour would have undermined the private sector. In fact, the proportion of total

construction output undertaken by direct labour organisations is very small, as hon. Members well know, and there would have been no more than a gradual expansion of efficient undertakings.

Of course, if direct labour organisations are as inefficient as some hon. Members claim, and if the horror stories that the hon. Gentleman has in his book are all true, the private sector would have little to fear, because client bodies would not want to engage them.

Mr. Ridley rose—

Mr. Armstrong

I shall not give way, because I am pressed for time.

In answering the debate, I have had to go much wider than the scope of the Bill. This measure, like the transitional orders, has been necessary only because those on the Opposition Benches failed to deal adequately with the position of direct labour organisations in the Local Government Act 1972. They failed to deal adequately with many other matters in that Act as well.

We are simply asking the House to restore powers which have applied to a very limited number of authorities for several years. The powers expired at the end of March. We are concerned to keep the gap in the powers as short as possible in order to avoid unnecessary problems for those authorities. I trust, therefore, that the Bill will be given a speedy passage through the House and that it will not be delayed by doctrinaire arguments such as we have heard this afternoon.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 186, Noes 161.

Division No. 141]	AYES	[7.00 p.m.
Abse, Leo	Boyden, James (Bish Auck)	Crowther, Stan (Rotherham)
Anderson, Donald	Bradley, Tom	Cryer, Bob
Archer, Peter	Butler, Mrs Joyce (Wood Green)	Cunningham, Dr J. (Whiteh)
Armstrong, Ernest	Callaghan, Rt Hon J. (Cardiff SE)	Davidson, Arthur
Ashton, Joe	Callaghan, Jim (Middleton & P)	Davies, Denzil (Llanelli)
Atkins, Ronald (Preston N)	Campbell, Ian	Davies, Ifor (Gower)
Atkinson, Norman	Canavan, Dennis	Davis, Clinton (Hackney C)
Bagier, Gordon A. T.	Cant, R. B.	Dean, Joseph (Leeds West)
Barnett, Guy (Greenwich)	Carter-Jones, Lewis	Dempsey, James
Barnett, Rt Hon Joel (Heywood)	Clemitson, Ivor	Doig, Peter
Bates, Alf	Cocks, Rt Hon Michael (Bristol S)	Dormand, J. D.
Beith, A. J.	Colquhoun, Ms Maureen	Douglas-Mann, Bruce
Benn, Rt Hon Anthony Wedgwood	Conlan, Bernard	Dunnett, Jack
Bennett, Andrew (Stockport N)	Corbett, Robin	Eadie, Alex
Blenkinsop, Arthur	Cowans, Harry	Edge, Geoff
Boardman, H.	Cox, Thomas (Tooting)	Ellis, John (Brigg & Scun)
Boothroyd, Miss Belly	Craigen, Jim (Maryhill)	Evans, Ioan (Aberdare)
Bottomley, Rt Hon Arthur	Crawshaw, Richard	Faulds, Andrew
Fernyhough, Rt Hon E.	Lewis, Ron (Carlisle)	Silverman, Julius
Fitch, Alan (Wigan)	Lipton, Marcus	Skinner, Dennis
Flannery, Martin	Loyden, Eddie	Smith, John (N Lanarkshire)
Fletcher, Ted (Darlington)	Lyon, Alexander (York)	Snape, Peter
Foot, Rt Hon Michael	Lyons, Edward (Bradford W)	Spriggs, Leslie
Ford, Ben	Mabon, Rt Hon Dr J. Dickson	Stallard, A. W.
Forrester, John	McCartney, Hugh	Steel, Rt Hon David
Fowler, Gerald (The Wrekin)	McDonald, Dr Oonagh	Stewart, Rt Hon M. (Fulham)
Fraser, John (Lambeth, N'w'd)	McElhone, Frank	Stoddart, David
Freeson, Reginald	MacFarquhar, Roderick	Stott, Roger
Garrett, W. E. (Wallsend)	Madden, Max	Strauss, Rt Hon G. R.
Gilbert, Dr John	Marks, Kenneth	Summerskill, Hon Dr Shirley
Ginsburg, David	Marshall, Dr Edmund (Goole)	Taylor, Mrs Ann (Bolton W)
Gourlay, Harry	Marshall, Jim (Leicester S)	Thomas, Dafydd (Merioneth)
Graham, Ted	Maynard, Miss Joan	Thomas, Jeffrey (Abertillery)
Grant, George (Morpeth)	Mikardo, Ian	Thomas, Mike (Newcastle E)
Grocott, Bruce	Miller, Dr M. S. (E Kilbride)	Thomas, Ron (Bristol NW)
Hamilton, James (Bothwell)	Mitchell, Austin Vernon (Grimsby)	Thorne, Stan (Preston South)
Harrison, Walter (Wakefield)	Molloy, William	Tierney, Sydney
Hatton, Frank	Moonman, Eric	Tinn, James
Heffer, Eric S.	Morrison, Charles (Devizes)	Torney, Tom
Hooley, Frank	Murray, Rt Hon Ronald King	Tuck, Raphael
Horam, John	Newens, Stanley	Urwin, T. W.
Howells, Geraint (Cardigan)	Noble, Mike	Walker, Harold (Doncaster)
Hoyle, Doug (Nelson)	Oakes, Gordon	Walker, Terry (Kingswood)
Huckfield, Les	Orme, Rt Hon Stanley	Ward, Michael
Hughes, Mark (Durham)	Palmer, Arthur	Weetch, Ken
Hughes, Robert (Aberdeen N)	Pardoe, John	Wellbeloved, James
Hughes, Roy (Newport)	Park, George	White, Frank R. (Bury)
Hunter, Adam	Parry, Robert	White, James (Pollok)
Jackson, Colin (Brighouse)	Pavitt, Laurie	Whitehead, Phillip
Janner, Greville	Richardson, Miss Jo	Whitlock, William
Jay, Rt Hon Douglas	Roberts, Albert (Normanton)	Williams, Alan Lee (Hornch'ch)
Jenkins, Hugh (Putney)	Robinson, Geoffrey	Williams, Rt Hon Shirley (Hertford)
John, Brynmor	Roderick, Caerwyn	Williams, Sir Thomas (Warrington)
Johnson, James (Hull West)	Rodgers, George (Chorley)	Wilson, Alexander (Hamilton)
Jones, Alec (Rhondda)	Rodgers, Rt Hon William (Stockton)	Wilson, William (Coventry SE)
Jones, Barry (East Flint)	Rooker, J. W.	Wise, Mrs Audrey
Jones, Dan (Burnley)	Rose, Paul B.	Woodall, Alec
Kaufman, Gerald	Ross, Stephen (Isle of Wight)	Woof, Robert
Kelley, Richard	Ryman, John	Young, David (Bolton E)
Kilroy-Silk, Robert	Sedgemore, Brian
Lambie, David	Shaw, Arnold (Ilford South)	TELLERS FOR THE AYES:
Latham, Arthur (Paddington)	Shore, Rt Hon Peter	Mr. Joseph Harper and
Leadbitter, Ted	Silkin, Rt Hon S. C. (Dulwich)	Mr. Donald Coleman.
Lestor, Miss Joan (Eton & Slough)
NOES
Adley, Robert	Fairbairn, Nicholas	Langford-Holt, Sir John
Atkins, Rt Hon H. (Spelthorne)	Fairgrieve, Russell	Latham, Michael (Melton)
Baker, Kenneth	Farr, John	Lawrence, Ivan
Banks, Robert	Finsberg, Geoffrey	Lawson, Nigel
Bennett, Sir Frederic (Torbay)	Fisher, Sir Nigel	Le Marchant, Spencer
Benyon, W.	Fookes, Miss Janet	Lester, Jim (Beeston)
Biffen, John	Forman, Nigel	Lewis, Kenneth (Rutland)
Biggs-Davison, John	Fry, Peter	Loveridge, John
Blaker, Peter	Gardner, Edward (S Fylde)	Luce, Richard
Boscawen, Hon Robert	Gilmour, Rt Hon Sir Ian (Chesham)	Macfarlane, Neil
Bottomley, Peter	Goodhart, Philip	MacKay, Andrew James
Bowden, A. (Brighton, Kemptown)	Gorst, John	Macmillan, Rt Hon M. (Farnham)
Braine, Sir Bernard	Gray, Hamish	Marten, Neil
Brittan, Leon	Grist, Ian	Mates, Michael
Brocklebank-Fowler, C.	Grylls, Michael	Mather, Carol
Brooke, Peter	Hamilton, Michael (Salisbury)	Maude, Angus
Brown, Sir Edward (Bath)	Hampson, Dr Keith	Maudling, Rt Hon Reginald
Bryan, Sir Paul	Hannam, John	Mawby, Ray
Bulmer, Esmond	Harrison, Col Sir Harwood (Eye)	Maxwell-Hyslop, Robin
Butler, Adam (Bosworth)	Hawkins, Paul	Meyer, Sir Anthony
Carlisle, Mark	Hayhoe, Barney	Miller, Hal (Bromsgrove)
Channon, Paul	Heseltine, Michael	Miscampbell, Norman
Clark, Alan (Plymouth, Sutton)	Hodgson, Robin	Mitchell, David (Basingstoke)
Clark, William (Croydon S)	Holland, Philip	Moate, Roger
Clarke, Kenneth (Rushcliffe)	Hordern, Peter	Molyneaux, James
Clegg, Walter	Hunt, David (Wirral)	Monro, Hector
Cooke, Robert (Bristol W)	Hunt, John (Bromley)	Montgomery, Fergus
Costain, A. P.	Hutchison, Michael Clark	Moore, John (Croydon C)
Dodsworth, Geoffrey	Irving, Charles (Cheltenham)	More, Jasper (Ludlow)
Drayson, Burnaby	Jones, Arthur (Daventry)	Morgan, Geraint
Durant, Tony	Joseph, Rt Hon Sir Keith	Morris, Michael (Northampton S)
Eden, Rt Hon Sir John	Kershaw, Anthony	Morrison, Charles (Devizes)
Elliott, Sir William	King, Evelyn (South Dorset)	Morrison, Hon Peter (Chester)
Evans, Gwynfor (Carmarthen)	Kitson, Sir Timothy	Mudd, David
Eyre, Reginald	Knox, David	Nelson, Anthony
Newton, Tony	Roberts, Wyn (Conway)	Tebbit, Norman
Oppenheim, Mrs Sally	Rossi, Hugh (Hornsey)	Temple-Morris, Peter
Page, Rt Hon R. Graham (Crosby)	Rost, Peter (SE Derbyshire)	Thatcher, Rt Hon Margaret
Page, Richard (Workington)	Sainsbury, Tim	Thomas, Rt Hon P. (Hendon S)
Parkinson, Cecil	Shaw, Giles (Pudsey)	Trotter, Neville
Pattie, Geoffrey	Shepherd, Colin	van Straubenzee, W. R.
Percival, Ian	Silvester, Fred	Vaughan, Dr Gerard
Powell, Rt Hon J. Enoch	Sims, Roger	Viggers, Peter
Price, David (Eastleigh)	Skeet, T. H. H.	Walder, David (Clitheroe)
Prior, Rt Hon James	Smith, Dudley (Warwick)	Walker, Rt Hon P. (Worcester)
Pym, Rt Hon Francis	Speed, Keith	Wall, Patrick
Raison, Timothy	Spence, John	Weatherill, Bernard
Rathbone, Tim	Spicer, Michael (S Worcester)	Whitelaw, Rt Hon William
Rawlinson, Rt Hon Sir peter	Sproat, Iain	Wigley, Dafydd
Rees, Peter (Dover & Deal)	Stainton, Keith	Winterton, Nicholas
Rees-Davies, W. R.	Stanbrook, Ivor	Wood, Rt Hon Richard
Rhodes James, R.	Steen, Anthony (Wavertree)
Ridsdale, Julian	Stewart, Ian (Hitchin)	TELLERS FOR THE NOES:
Rippon, Rt Hon Geoffrey	Stradling Thomas, J.	Sir George Young and
Roberts, Michael (Cardiff NW)	Taylor, R. (Croydon NW)	Lord James Douglas-Hamilton.

Question accordingly agreed to.

Bill read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).