§ 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.1003 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 1004 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.1005 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—
1006§ Mr. SpeakerIs the hon. Gentleman rising to oppose the motion?
§ Mr. AllaunI 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 1007 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 1008 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):—
1009§ The House divided: Ayes 198, Noes 212.
1011| 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. |
| NOES | ||
| 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.