HC Deb 14 June 1978 vol 951 cc1002-12

3.40 p.m.

Mr. Michael Morris (Northampton, South)

I beg to move, That leave be given to bring in a Bill to impose conditions on the employment of direct labour by local authorities and other statutory authorities. The purpose of the Bill is threefold. Its first purpose is to preclude any direct labour department of any public undertaking from carrying out any form of new construction work. Secondly, the Bill will lay down that every construction contract valued at over £5,000 shall have to go out to competitive tender, that direct labour operations shall become separate trading services, and that model accounts based on proposals of the Chartered Institute of Public Finance and Accountancy in its documents of 1975 and of last week shall become law. Thirdly, the Bill will specify certain specialist maintenance functions that must be undertaken by approved outside contractors.

This is not the first time the subject of direct labour has been debated in the House. Indeed, Mr. Speaker, you will recall the passage in Her Majesty's speech opening the 1976–77 Session stating: Legislation will be introduced to remove unnecessary restrictions on the powers of the local authorities to undertake construction work by direct labour."—[Official Report, 24th November 1976; Vol. 921, c. 8.] That is one Government promise that clearly will not be fulfilled. Had the House known the true picture of direct labour, as I shall now outline it, I wonder whether even this Government would have had the gall to go ahead with their Bill.

Direct labour is no new phenomenon. There were complaints about its activities as long ago as 1920. Today direct labour accounts for 13 per cent. of the total output of the construction industry and uses about 20 per cent. of the industry's manpower. Its output was valued in 1977 at £1,640 million of which local authorities accounted for the bulk, at £1,265 million—significant sums in anybody's reckoning.

What I am concerned about, first, is new construction work, which accounts for about 20 per cent. of the total. Over time, there have been scandals involving direct labour contracts. In the 1960s there were the horrors of Southwark, including the Sunday when 21 men were recorded as having 574 hours of overtime, most of them being credited with 22 hours or more.

There was Leicester, where the direct labour force was said to consist of just nine men and yet was awarded a contract for a housing scheme at £3.2 million. There was also Salford, with its estimated loss of over £1 million, resulting in its having to close its capital works section in 1967. Those losses and many others in that period and since have run into many hundreds of millions of pounds.

More recently we have had the scandals of Glasgow, with its Darnley housing scheme, where £2.2 million is being written off. There is also Wandsworth, with over £ 1 million of losses in the past two years, despite a forecast by the local Labour Party of a surplus.

Over the past few years I have been collecting data. I have also had the benefit of studies carried out at Durham by Professor O'Brien and at Loughborough by Michael Fleming. Those studies are immensely helpful in giving an objective assessment of direct labour. Their evidence is that it is in new construction work that direct labour is least efficient. In this area the private sector's productivity is at least a third greater, and on many accounts can be as much as 50 per cent. greater. This correlates with my own ad hoc assessment. It is for this reason that I seek to preclude any direct labour organisation from doing any new construction work. Not the least important matter to consider is the fact that that would result in a direct saving to the Exchequer of over £100 million.

I now turn to the case for competitive tendering and model accounting. There are today local authorities, such as Sunderland and South Tyneside, where only contracts of over £100,000 go out to tender, and others, such as Manchester, where the figure is £50,000 and over. It is little wonder that those are the authorities with some of the worst records of direct labour losses.

The case for competitive tendering has been made strongly over the years by the district auditors. Over 10 years ago the District Auditors Society called for competitive tendering, and every year since then there have been reports from district auditors critical of direct labour.

The Layfield Committee was equally critical, stating in paragraph 23 on page 7 of its report: The operations of direct labour organisations were singled out as particularly bad examples of a failure to control costs. That was emphasised by the Government in the Department of the Environment's circular 57/69, but the hard truth is that many councils simply ignored that circular. The evidence is that in South Tyneside the manual of principles is totally ignored, and that authority is not alone. The matter was gone into in detail by CIPFA in its 1975 report and now in its report issued this week.

Given all that evidence, I find it astonishing that the Minister for Housing and Construction has taken no action in four years, except to set up a working party. Few could quarrel over the need for legislation in this area.

I turn next to the aspect of certain specialist maintenance functions. I give as an example lift maintenance, a highly skilled job involving people's safety. There are in this country a number of efficient and respected lift manufacturers who carry out contract lift maintenance. In recent years some of this work has been winkled away by direct labour organisations, which use semi-skilled men —until something major goes wrong with the lifts. The House has rightly been concerned through the Health and Safety at Work etc. Act with problems concerning industry. We should be no less vigilant over the safety of the public in lifts.

This is the first of several Bills that I hope to introduce to control and restore accountability of direct labour. For too long it has gone unfettered, to all intents and purposes unaccountable. The total cost of direct labour in terms of losses and inefficiency has been calculated by others than myself to be as high as £400 million.

Losses on that scale are happening not just occasionally but year in and year out. This is a national scandal, the scale of which knows no precedent. It is no less than a financial disaster. Hon. Members, particularly on the Labour Benches, should put aside party interests and agree to reform direct labour. My modest Bill will make a start. It will save the Government £100 million, lead to more competition and improve the safety of lifts in this country.

3.49 p.m.

Mr. Frank Allaun (Salford, East) rose

Mr. Speaker

Is the hon. Gentleman rising to oppose the motion?

Mr. Allaun

I wish, Mr. Speaker, to oppose this reactionary attempt to stop councils building their own council houses.

The fear of and hostility towards direct labour among directors of building firms and Conservative Members have three causes. First, they hate the check it provides against price rings and monopolies, which are holding the community to ransom, as I shall show. Secondly, they want to grab contracts from direct labour organisations in order to make more money. Thirdly, they are politically motivated by animosity towards any form of public ownership.

There has been a £500,000 levy on building firms to pay for this current campaign. Last year, a similar campaign by a sister organisation also cost £500,000. The building firm chiefs also make hefty donations to the Tory party. Donors include such well-known names as Rugby Portland Cement, Costain, Steetley, Tarmac and Bryant.

Some of those firms are in no position to criticise. Are they so proud of the British building industry today? Consider what is coming to light in the ready-mixed concrete and tarmacadam spheres of that industry. Can one really believe that those scandals are confined to those two sections?

Proof is now coming forward of price rings on a huge scale in this business. In many towns the representatives of the firms meet weekly and decide which of them will be allowed to get a particular contract with a corporation and at what price. The other firms then quote a higher price and the council has no alternative but to accept the selected tender. As a result, ratepayers and tenants have to pay millions of pounds a year more than they should. No fewer than 133 such rings have been revealed in 133 towns, involving some of the biggest firms in the industry. A total of 65 agreements relating to asphalt have also been uncovered. Whatever the hon. Member for Northampton, South (Mr. Morris) says, he can make no such accusation against DLOs. There have been building disasters of the magnitude of Ronan Point.

It goes further than that. Although I would not accuse most building firms of corruption, there has been a remarkable incidence of it in the industry. I could refer to Poulson, Bryant, Murphy and many others.

Direct labour building brings important benefits to the community. It saves for tenants and ratepayers the profits which would otherwise go to the shareholders. [HON. MEMBERS: "Rubbish."] I listened in silence to the hon. Member for Northampton, South and I hope that hon. Gentlemen, will do the same for me. It is an understanding with Ten-Minute Bills that one does not interrupt the hon. Member who has the Floor.

The competition that direct labour provides helps to cut the prices tendered by private builders. Those ardent believers in competition—the Tory MPs—are not over-eager for it when it hits their profits.

The DLOs have a magnificent record in the employment and training of apprentices. Municipalised building has far better safety and welfare conditions. I have photographs of men working with no scaffolding on houses being built by private firms.

I would ask hon. Members to consider the remarkable success, for example, of the Manchester undertaking. It employs 4,500 operatives. In the last 17 years, it has built 19,000 new homes, 56 schools and public buildings such as fire and police stations and has maintained 104,000 council houses. It has saved the city's coffers £4 million. Allowing for interest for 60 years, that means a total saving of about £12 million. There are excellent, strike-free relations between management and workers. That is the kind of undertaking that the Bill would slaughter.

Then there is an awkward fact which the hon. Member for Northampton, South omitted to mention. In case it is not generally known, I would point out that the customary practice in the building industry is for a contract to be allocated by competition to the lowest tenderer. Then that contractor can secure the next two contracts by negotiated tender. That applies equally to DLOs and to private industry. So unless DLOs can compete successfully in terms of price and performance with building firms, they do not get the work.

One part of the Bill is breathtaking in its impudence. That is the provision that in special functions—for example, lift maintenance—it would be mandatory for work to be carried out by specialist outside contractors. Two firms dominate lift maintenance—the Express Lift Company and Otis. In Salford, the tower blocks were supposed to be maintained under a contract with Express. The record was so appalling and there were so many complaints that outside experts had to be called in to examine the lifts. Some were in a positively dangerous condition and others were out of use for months at a time, causing serious hardship to tenants, including young mothers and the aged.

The contract was ended and now the work is done successfully by Manchester DLO lift maintenance department. Rochdale and Conservative-controlled Trafford—the latter represented by the hon. Member for Stretford (Mr. Churchill)—have followed suit and halved their expenses.

That brings me to my final point — [HON. MEMBERS: "Hear, hear."] I have only ten minutes: I could go on for much longer.

Far from restricting building by municipalities, the Labour Party and the trade unions wish to extend it. At present, although building firms may contract to build houses in any part of the country, DLOs may not. They are confined to their own limited council area. That is an unfair restriction. There is no good reason why DLOs should not be allowed to compete for and undertake the building of houses for neighbouring local authorities, as many of them wish to do.

What I have said can be confirmed by such experts on direct labour as my hon. Friend the Member for Liverpool, Walton (Mr. Heffer), a former chairman of the Liverpool DLO, who recently chaired the committee which drew up Labour's construction proposals, and my hon. Friend the new Member for Lambeth, Central (Mr. Tilley), who was also a chairman of a big London DLO. For all these reasons, I ask the House to throw out this Bill.

Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and Nomination of Select Committees at Commencement of Public Business):—

The House divided: Ayes 198, Noes 212.

Division No. 230] AYES [4.00 p.m.
Alison, Michael Grieve, Percy Onslow, Cranley
Atkins, Rt Hon H. (Spelthorne) Grist, Ian Page, John (Harrow West)
Atkinson, David (B'mouth, East) Grylls, Michael Page, Rt Hon R. Graham (Crosby)
Awdry, Daniel Hamilton, Archibald (Epsom & Ewell) Pardoe, John
Baker, Kenneth Hamilton, Michael (Salisbury) Penhaligon, David
Banks, Robert Hampson, Dr Keith Peyton, Rt Hon John
Beith, A. J. Hannam, John Price, David (Eastleigh)
Bell, Ronald Harrison, Col Sir Harwood (Eye) Prior, Rt Hon James
Bennett, Sir Frederic (Torbay) Harvie Anderson, Rt Hon Miss Pym, Rt Hon Francis
Benyon, W. Haselhurst, Alan Raison, Timothy
Berry, Hon Anthony Havers, Rt Hon Sir Michael Rees-Davies, W. R.
Biffen, John Hawkins, Paul Renton, Rt Hon Sir D. (Hunts)
Biggs-Davison, John Heseltine, Michael Renton, Tim (Mid-Sussex)
Blaker, Peter Higgins, Terence L. Rhodes James, R.
Boscawen, Hon Robert Holland, Philip Ridley, Hon Nicholas
Boyson, Dr Rhodes (Brent) Hooson, Emlyn Rifkind, Malcolm
Braine, Sir Bernard Howe, Rt Hon Sir Geoffrey Roberts, Michael (Cardiff NW)
Brittan, Leon Howell, David (Guildford) Roberts, Wyn (Conway)
Brocklebank-Fowler, C. Howells, Geraint (Cardigan) Rodgers, Sir John (Sevenoaks)
Brooke, Hon Peter Hutchison, Michael Clark Ross, Stephen (Isle of Wight)
Brotherton, Michael Jessel, Toby Rossi, Hugh (Hornsey)
Bryan, Sir Paul Johnson Smith, G. (E Grinstead) Rost, Peter (SE Derbyshire)
Buchanan-Smith, Alick Jones, Arthur (Daventry) Royle, Sir Anthony
Bulmer, Esmond Joseph, Rt Hon Sir Keith St. John-Stevas, Norman
Burden, F. A. Kimball, Marcus Shelton, William (Streatham)
Butler, Adam (Bosworth) King, Tom (Bridgwater) Silvester, Fred
Chalker, Mrs Lynda Kitson, Sir Timothy Sims, Roger
Clark, Alan (Plymouth, Sutton) Knight, Mrs Jill Skeet, T. H. H.
Clark, William (Croydon S) Knox, David Smith, Cyril (Rochdale)
Clarke, Kenneth (Rushcliffe) Lamont, Norman Smith, Dudley (Warwick)
Clegg, Walter Langford-Holt, Sir John Smith, Timothy John (Ashfield)
Cooke, Robert (Bristol W) Lawrence, Ivan Speed, Keith
Cope, John Lawson, Nigel Spicer, Michael (S Worcester)
Costain, A. P. Le Marchant, Spencer Sproat, Iain
Crouch, David Lester, Jim (Beeston) Stanley, John
Dean, Paul (N Somerset) Lewis, Kenneth (Rutland) Steel, Rt Hon David
Douglas-Hamilton, Lord James Loveridge, John Steen, Anthony (Wavertree)
Drayson, Burnaby Luce, Richard Stewart, Ian (Hitchin)
du Cann, Rt Hon Edward McAdden, Sir Stephen Stradling Thomas, J.
Dunlop, John McCrindle, Robert Tapsell, Peter
Durant, Tony Macfarlane, Neil Taylor, R. (Croydon NW)
Eden, Rt Hon Sir John MacKay, Andrew (Stechford) Taylor, Teddy (Cathcart)
Edwards, Nicholas (Pembroke) Macmillan, Rt Hon M. (Farnham) Tebbit, Norman
Elliott, Sir William McNair-Wilson, M. (Newbury) Temple-Morris, Peter
Emery, Peter Madel, David Thatcher, Rt Hon Margaret
Eyre, Reginald Marten, Neil Thomas, Rt Hon P. (Hendon S)
Fairgrieve, Russell Mather, Carol Thorpe, Rt Hon Jeremy (N Devon)
Farr, John Maude, Angus Townsend, Cyril D.
Farr, John Maudling, Rt Hon Reginald Trotter, Neville
Fell, Anthony Mawby, Ray van Straubenzee, W. R.
Fletcher, Alex (Edinburgh N) Maxwell-Hyslop, Robin Viggers, Peter
Fletcher-Cooke, Charles Mayhew, Patrick Wainwright, Richard (Colne V)
Fookes, Miss Janet Meyer, Sir Anthony Wakeham, John
Forman, Nigel Miller, Hal (Bromsgrove) Walker, Rt Hon P. (Worcester)
Fox, Marcus
Fraser, Rt Hon H. (Stafford & St) Miscampbell, Norman Wall, Patrick
Freud, Clement Mitchell, David (Basingstoke) Walters, Dennis
Gardiner, George (Reigate) Monro, Hector Weatherill, Bernard
Gilmour, Rt Hon Sir Ian (Chesham) Montgomery, Fergus Whitelaw, Rt Hon William
Gilmour, Sir John (East Fife) Moore, John (Croydon C) Whitney, Raymond
Glyn, Dr Alan Morgan-Giles, Rear-Admiral Wiggin, Jerry
Goodhart, Philip Morrison, Charles (Devizes) Winterton, Nicholas
Goodhew, Victor Morrison, Hon Peter (Chester) Young, Sir G. (Ealing, Acton)
Goodlad, Alastair Mudd, David Younger, Hon George
Gow, Ian (Eastbourne) Neave, Airey
Gower, Sir Raymond (Barry) Nelson, Anthony TELLERS FOR THE AYES:
Grant, Anthony (Harrow C) Neubert, Michael Mr. Michael Morris and
Gray, Hamish Newton, Tony Mr. Tim Sains bury.
Abse, Leo Bates, Alf Bray, Dr Jeremy
Allaun, Frank Bean, R. E. Brown, Hugh D. (Provan)
Armstrong, Ernest Benn, Rt Hon Anthony Wedgwood Brown, Robert C. (Newcastle W)
Ashton, Joe Bennett, Andrew (Stockport N) Buchan, Norman
Atkins, Ronald (Preston N) Bidwell, Sydney Buchanan, Richard
Atkinson, Norman (H'gey, Tott'ham) Bishop, Rt Hon Edward Butler, Mrs Joyce (Wood Green)
Bagier, Gordon A. T. Blenkinsop, Arthur Callaghan, Jim (Middleton & P)
Bain, Mrs Margaret Booth, Rt Hon Albert Cant, R. B.
Barnett, Guy (Greenwich) Boothroyd, Miss Betty Carter-Jones, Lewis
Barnett, Rt Hon Joel (Heywood) Bottomley, Rt Hon Arthur Cartwright, John
Castle, Rt Hon Barbara Howell, Rt Hon Denis (B'ham, Sm H) Richardson, Miss Jo
Clemitson, Ivor Hoyle, Doug (Nelson) Roberts, Gwilym (Cannock)
Cocks, Rt Hon Michael (Bristol S) Huckfield, Les Robertson, George (Hamilton)
Cohen, Stanley Hughes, Robert (Aberdeen N) Roderick, Caerwyn
Coleman, Donald Hughes, Roy (Newport) Rooker, J. W.
Colquhoun, Ms Maureen Irving, Rt Hon S. (Dartford) Rowlands, Ted
Concannon, Rt Hon John Jackson, Miss Margaret (Lincoln) Sandelson, Neville
Conlan, Bernard Jay, Rt Hon Douglas Sedgemore, Brian
Cook, Robin F. (Edin C) Jeger, Mrs Lena Sever, John
Corbett, Robin Jenkins, Hugh (Putney) Shaw, Arnold (Ilford South)
Cowans, Harry John, Brynmor Sheldon, Rt Hon Robert
Cox, Thomas (Tooting) Johnson, James (Hull West) Shore, Rt Hon Peter
Craigen, Jim (Maryhill) Jones, Alec (Rhondda) Short, Mrs Renée (Wolv NE)
Crawford, Douglas Jones, Barry (East Flint) Silkin, Rt Hon John (Deptford)
Cronin, John Jones, Dan (Burnley) Silkin, Rt Hon S. C. (Dulwich)
Crowther, Stan (Rotherham) Kelley, Richard Silverman, Julius
Davies, Bryan (Enfield N) Kinnock, Neil Skinner, Dennis
Davies, Rt Hon Denzil Lambie, David Smith, Rt Hon John (N Lanarkshire)
Davies, Ifor (Gower) Lamborn, Harry Snape, Peter
Davis, Clinton (Hackney C) Lamond, James Spriggs, Leslie
Deakins, Eric Latham, Arthur (Paddington) Stewart, Rt Hon Donald
Dean, Joseph (Leeds West) Lee, John Stewart, Rt Hon M. (Fulham)
Dewar, Donald Lestor, Miss Joan (Eton & Slough) Stoddart, David
Doig, Peter Lewis, Ron (Carlisle) Strang, Gavin
Dormant), J. D. Loyden, Eddie Swain, Thomas
Douglas-Mann, Bruce Luard, Evan Taylor, Mrs Ann (Bolton W)
Dunn, James A. Mabon, Rt Hon Dr J. Dickson Thomas, Dafydd (Merioneth)
Edge, Geoff McCartney, Hugh Thomas, Mike (Newcastle E)
English, Michael McDonald, Dr Oonagh Thomas, Ron (Bristol NW)
Ennals, Rt Hon David McElhone, Frank Thompson, George
Evans, Fred (Caerphilly) MacKenzie, Rt Hon Gregor Thorne, Stan (Preston South)
Evans, Gwyntor (Carmarthen) Maclennan, Robert Tinn, James
Evans, Ioan (Aberdare) Madden, Max Tomlinson, John
Evans, John (Newton) Mallalleu, J. P. W. Torney, Tom
Ewing, Harry (Stirling) Marks, Kenneth Tuck, Raphael
Fernyhough, Rt Hon E. Marshall, Dr Edmund (Goole) Urwin, T. W.
Fitt, Gerard (Belfast W) Marshall, Jim (Leicester S) Varley, Rt Hon Eric G.
Flannery, Martin Mason, Rt Hon Roy Wainwright, Edwin (Dearne V)
Fletcher, Ted(Darlington) Maynard, Miss Joan Walker, Harold (Doncaster)
Foot, Rt Hon Michael Mellish, Rt Hon Robert Walker, Terry (Kingswood)
Forrester, John Millan Rt Hon Bruce Ward, Michael
Freeson, Rt Hon Reginald Miller, Dr M. S. (E Kilbride) Watkins, David
Garrett, John (Norwich S) Mitchell, Austin (Grimsby) Watkinson, John
George, Bruce
Gilbert, Rt Hon Dr John Molloy, William Welsh, Andrew
Ginsburg, David Moonman, Eric White, Frank R. (Bury)
Golding, John Morris, Rt Hon Charles R. Whitehead, Phillip
Gourlay, Harry Mulley, Rt Hon Frederick Wigley, Dafydd
Graham, Ted Newens, Stanley Willey, Rt Hon Frederick
Grant, George (Morpeth) Noble, Mike Williams, Rt Hon Alan (Swansea W)
Grant, John (Islington C) O'Halloran, Michael Williams, Alan Lee (Hornch'ch)
Grocott, Bruce Orbach, Maurice Wilson, Gordon (Dundee E)
Hamilton, James (Bothwell) Orme, Rt Hon Stanley Wilson, William (Coventry SE)
Hamilton, W. W. (Central Fife) Palmer, Arthur Wise, Mrs Audrey
Hardy, Peter Park, George Woodall, Alec
Harper, Joseph Parker, John Woof, Robert
Harrison, Rt Hon Walter Parry, Robert Wrigglesworth, Ian
Hart, Rt Hon Judith Pendry, Tom Young, David (Bolton E)
Hattersley, Rt Hon Roy Perry, Ernest
Healey, Rt Hon Denis Price, C. (Lewisham W) TELLERS FOR THE NOES:
Heffer, Eric S. Radice, Giles Mr. George Rodgers and
Henderson, Douglas Rees, Rt Hon Meriyn (Leeds S) Mr. John Ovenden.
Hooley, Frank Reid, George

Question accordingly negetived.