MEANING OF "FUNCTIONAL WORK"

HC Deb 03 July 1980 vol 987 cc1883-914

Mr. Wigley

I beg to move amendment No. 28, in page 7, line 2, leave out clause 6.

Mr. Deputy Speaker

With this it may be convenient to take the following amendments:

No. 29, in page 7, line 3, leave out 'or maintenance'.

Government amendment No. 30.

No. 31, in page 7, line 19, leave out 'or maintenance'.

No. 32, in page 7, line 28, leave out 'or maintenance'.

No. 33, in page 7, line 31, leave out clause 7.

Government amendments Nos. 34 to 36.

No. 37, in page 7, line 42, at end insert: 'provided that such regulations shall not specify functional work whose estimated cost under subsection (2) above is less than £100,000'.

No. 38, in page 7, line 42, at end insert: (3B) No regulations made under this part of the Act shall in respect of general highway works or works of new construction other than general highway works require a local authority or a development body to invite offers under subsection 4 of this section, in respect of any amount of such works, which in the estimation of the authority or development body will not exceed £250,000.'.

No. 39, in page 7, line 42, at end insert: '(3A) No regulations made under this part of the Act shall in respect of works of maintenance require a local authority or a development body to invite offers under subsection 4 of this section in respect of any amount of such works of maintenance where the value of the works is between £10,000 and £50,000, which exceeds 10 per cent. of the total estimated value of such works to be undertaken by, for or on behalf of that local authority or a development body, in any financial year.'.

Government amendments Nos. 40 to 43, 47 and 48.

No. 60, in page 17, line 13, at end insert— '(3) Notwithstanding anything in subsection (1) above, in this Part of this Act "local authority" does not include any authority which employs less than 100 employees on functional work.'.

Mr. Wigley

The amendment goes to the heart of a major issue covered by the Bill, namely, direct works departments. Amendments Nos. 28 and 33 were tabled in order to achieve a clause stand part debate. My hon. Friend the Member for Merioneth (Mr. Thomas) and I were not members of the Committee, but we have read through the Hansard reports. It was noticeable that, although some amendments to clause 7 were debated, there was no clause stand part debate. It is surprising that there was hardly any debate on clause 6. It is therefore important to facilitate that opportunity on Report so that the issues may be thrashed out in greater detail.

My area is similar to many areas in Wales, England and Scotland in that the direct works departments of local authorities have more than one function. Obviously they must undertake the necessary work, and are responsible for road maintenance and construction. They must ensure that jobs are done. However, direct works departments fulfil another responsibility for which there is no alternative. They maintain a balance in the employment pattern in their areas.

When contractors are employed, they often come from outside the area and use outside labour. That is sad. In global economic terms, that cannot be beneficial to our economy. It must cost more to bring in outside people than to employ local people. It is a "diseconomy" to the economy of the district if people are on the dole because others are being brought in from outside. Not only must responsibilities vested in local authorities be fulfilled, but, on a local level, one must be able to plan manpower employment.

Clearly if a local authority has the responsibility of maintaining its own direct works department it will look ahead and plan its work more effectively in order to utilise the labour at its disposal. Therefore, in areas such as mine there would be a great disadvantage in having a rundown of direct works departments because they are the one means of giving employment at a time when factories are closing all around us.

That is the general background to our amendments, but specific issues arise. Some of the amendments are probing amendments, but we are concerned about whether there will be any implications in the rundown for the highway authority undertakings of routine road maintenance. If there is, that will be highly regrettable. This is something that contractors coming in from outside on a once-off basis cannot plan so well. They do not know the geography or the geology of the area, and in the long term they will not do as satisfactory a job.

The other question I wish to raise arises in the context of clause 7 and the controls that will be laid down by central Government in relation to the powers being taken away. If detailed controls are given to central Government for small levels of expenditure or on small projects —we specify a limit of £100,000—it will be wrong and bureaucratic. It will mean that local authorities must undertake costings and detailed bureaucratic work, which is totally contrary to the spirit of the Government's proclaimed intention of giving local authorities greater freedom in decision taking.

We all agree that local authorities should take decisions on the basis of the best information that they have. From my experience in industry, I know how information can be proliferated merely for the sake of proliferating it, and that does not help anyone.

For those reasons, we feel very unhappy about the provisions in clauses 6 and 7 and we believe that they should be probed more deeply before they are allowed to become part of the Bill.

Mr. Oakes

The hon. Member for Caernarvon (Mr. Wigley) is right to raise this matter. The instincts of the Opposition are to go along with him in his amendments, particularly that which proposes to delete "maintenance". The hon. Member also made the perfectly valid point about labour being brought from outside into an area where there is acute unemployment. That is something with which my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) and I are familiar on Merseyside. It is not limited to Wales.

I wish to concentrate on the amendments standing in my name and those of my right hon. and hon. Friends—Nos. 38 and 60—which are being taken with this group. I hope that the Government will accept these modest amendments, either in principle or in spirit, because in no way do they detract from the Government's intention of making direct works organisations accountable. The aim of my amendments, which is supported by the County Councils Association, the District Councils Association and the Association of Metropolitan Authorities, is to prevent unnecessary bureaucracy. That should commend itself to Ministers.

I turn to amendment No. 38 and the figures in this part of the Bill. I notice that the many Government amendments to the clauses do nothing to alter the figures.

The Bill allows £100,000 for highways and sewerage works and £50,000 for other new works. Those figures were set down by the DLO working party of 1975, five years ago. There has been a tremendous change in the value of money since 1975, and inflation will enlarge the gap day by day, week by week and month by month. Amendment No. 38 endeavours to set more realistic figures.

The associations are also concerned about emergency works. The Bill not only covers direct building for housing or direct works on the construction of highways. It includes such matters as snow clearance, which is a costly item for councils, particularly in Scotland and the northeren counties. When it has snowed heavily overnight, councils do not have time to obtain tenders from three contractors to shift the snow. They need a department available throughout the year for such work. A more realistic limit would be £250,000.

A direct works department is of significance in other emergencies. Any hon. Member who represents a coastal constituency is aware of the damage caused to sea walls through flooding. Lives are at risk, and immediate action is required. The work cannot be put out on competitive tender to private enterprise. I doubt whether private enterprise would even be interested. Our amendments would be of direct and significant help to many county councils and metropolitan authorities.

The Association of Metropolitan Authorities states with regard to the Bill: There are administrative expenses involved in the tendering procedure—it is estimated that a threshold of £100,000 will result in an additional 170 employees in England and Wales. A reduction of the threshold to £50,000 would result in an additional 750 staff simply to administer the tendering procedures. The estimated additional cost to local government of employing these staff would be £1.7 million and £7.5 million respectively. The Secretary of State for the Environment makes much of local government manpower figures. It is sad that he is not in the Chamber to hear that. The Bill will increase manpower not for a useful purpose but merely to further the views of the Government on open competitive tendering.

On the figures alone, I seriously commend our amendments, which are supported by three local authority bodies, two of which are Conservative controlled. The Government's proposals will have a detrimental effect. I particularly ask the Government to update the figures, which are based on 1975 calculations.

Amendment No. 60 is based on the de minimis principle. It would exclude from the operation of the Act authorities that employ fewer than 100 people on functional work. The working party of direct labour organisations stated in its final report in August 1978: We appreciate that for smaller DLOs there is a danger of imposing an elaborate checking organisation which will cost more than it is worth. That is why we have put down that amendment. There is evidence, particularly in many rural areas, that contractors are not prepared to carry out routine building maintenance at a reasonable cost. The district council has no alternative but to rely on direct labour, otherwise the work would not be done.

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The Association of District Councils, which represents the smaller authorities that will be most directly affected by our amendment, has supplied some startling figures. In the association's opinion, a work force of up to 100 would be a reasonable size. On the basis of the December 1979 manpower watch data, 126 district councils in England and Wales would be excluded. The ADC has provided an annex that shows that 44 authorities employ fewer than 50 employees.

It is absurd to bring the rigid bureaucracy of the Act to bear on authorities with only a few employees engaged in this work. The amendment will do no harm to the principle that the Government wish to establish. In a typical metropolitan authority, contracts with a combined value of £16 million a year will be over £250,000 each, compared with an overall budget on new works of £20 million. The limit of £250,000 clearly allows sufficient work to go out to competitive tender. The exclusion of authorities with fewer than 100 employees would not damage the principle of competitive tendering which the Government are trying to establish.

Our amendments are not probing amendments. They are serious and they have the full weight of the three local government organisations behind them. It would be in the interests of any Government who are concerned with saving money and with manpower watch figures to accept the amendments.

Mr. Paul Dean

I hope that my hon. Friend the Under-Secretary will give serious consideration to the points that have been made in the debate so far. I pay tribute to my hon. Friend and to my right hon. Friend the Minister for Local Government and Environmental Services for having spent many hours in consultation with the local authority associations, but I have no doubt that the Government amendments go only a little way to meeting the justifiable misgivings of the associations. I agree with the Government's aims, but, like the right hon. Member for Widnes (Mr. Oakes) and the hon. Member for Caernarvon (Mr. Wigley), I am doubtful about the methods being employed.

I subscribe to the view that direct labour organisations should be properly accountable, that inefficiency should be exposed, that there should not be disguised or unfair competition between direct labour organisations and local small firms and that where accounting methods are slack they should be tightened up. However, we must take into account the fact that those situations do not apply in all local authorities. Many Conservative-controlled authorities believe that they are loyally carrying out the Government's policies, but they are deeply disturbed about the new bureaucracy which they believe is being imposed on them in part II and other parts of the Bill.

I ask the questions that have been asked already. Are all these new regulations really necessary to achieve the objective that the Government have in mind? How much additional work will be involved in local authorities changing accounting methods which they already believe to be satisfactory? What are the staff implications? I hope that my hon. Friend will be able to satisfy the House on those matters.

I do not intend to repeat the arguments that have been made, particularly at this hour of the night. I wish, however, to highlight what seems to me the main theme of the criticisms by the Association of County Councils and the Association of District Councils, of which I have the pleasure to be one of the vice presidents, and by other local authority associations. They are saying, in essence, that substantial changes will be involved in their accounting procedures and that this will mean additional returns and additional staff.

I want to refer briefly to what seem to be two of the most important points. The first is tendering limits. I do not propose to weary the House with the details, which have been gone over before, but it seems to me that the limits proposed are almost bound to lead to additional costs of administration, on professional services and on tendering expenses. Is my hon. Friend sure that he must have the limits laid down to achieve the objective that he has in mind? Frankly, I doubt it. I ask him to have another look at the suggestions made by the Association of District Councils, contained in one of the amendments that we are discussing, to see whether it might be possible, in the proposals that have been made, or in proposals on similar lines, to have the adequate control that he needs without the additional bureaucracy that I feel will be involved.

The second example that I give refers to the small labour forces, particularly in district councils in rural areas such as mine in the South-West. It is surely right and cost-effective for these local authorities to have small labour forces to deal with emergency and essential work when the sewerage system suddenly breaks down or when building maintenance work has to be carried out after a storm.

It is probably not in dispute that these small labour forces in the smaller local authorities are cost-effective and should be retained. As I understand the Bill in its present form, they will have imposed on them the full weight of the returns and the accounting procedures that may well be appropriate for larger local authorities. I hope that my hon. Friend will have another look at this matter. Although the Government have gone some way to deal with the misgivings expressed in the amendments, I do not believe that they have gone far enough.

I shall find it difficult to support the Government on these issues unless my hon. Friend is able to be sympathetic and more responsive to the points that have been put from both sides of the House. In my view, the aims and objectives which the Government, entirely properly, have in mind could be achieved with less cost and less trouble to local authorities, especially those that are efficient and support the Government's policies, and with less of a bureaucratic machine than I fear is being set up by this part of the Bill as it stands.

Mr. Heffer

As a former employee of a direct labour employment department and chairman of a direct labour organisation for a local authority, I must say something in support of amendments Nos. 38, 39 and 60. The Government's attitude to direct labour is doctrinaire and dogmatic. If they had included in the Bill a clause providing that no local authority should negotiate tenders with private enterprise companies, there might have been a case for what they suggest. However, there is nothing to stop local authorities from long-term contract negotiating with Costain, Wimpey, or anybody else. Only local authority direct labour departments are being placed in that position.

The amendments are important for a number of reasons. Direct labour organisations give construction workers continuity of employment. In areas such as Merseyside and Manchester, continuity of employment in the industry is needed. The £250,000 is a limited sum. It is a modest figure. Nevertheless, it would help to establish continuity of employment. We must move towards a system of decasualisation in the industry. It is scandalous that construction workers are constantly in and out of work. Direct labour organisations help.

Unfortunately, the big building companies no longer take on many apprentices. This seed corn of the industry now comes from the direct labour organisations. If they are allowed to run down because of the Government's dogmatic and doctrinaire attitude, one of the most valuable assets that we have in training skilled youngsters for the future of the construction industry will be eliminated. We could end up with no skilled craftsmen if nothing positive is done.

I know all the stories about direct labour organisations overspending, but the Minister must admit, if he is honest, that a number of big construction companies overspend. All types of agreements have to be made to meet overspending. That is legendary in the industry. There are plenty of examples.

What do the direct labour organisations do in the big cities? They have built some of our best flats and houses. The Manchester direct labour organisation, in particular, has a fantastic record for house building. In my own city we have built wonderful flats. They are the best. I do not refer to the ones that had to be pulled down. I am speaking of the ones that are still there, and will remain there, because they were not built with profit as the only motive. They are a good product for the people of the area. Direct labour organisations have also built schools, houses, fire stations and all kinds of public buildings.

I recognise that the key to a good DLO is its management. That is true of any organisation. Private enterprise companies with lousy management can do nothing, and poor management of a DLO means that it cannot do its job properly. Conservative Members say, for doctrinaire reasons, that irrespective of whether management is good or bad measures must be taken to undermine the concept of the DLO. That is not good enough. I agree that DLOs must be made efficient, that they must have good accounting and that they must operate as local government construction companies. That is what we should aim for, and that is the view of the Labour Party as put forward in our document "Building Britain's Future".

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We do not support DLOs that are inefficient. We are not talking in those terms, and never have done. There is, of course, room for improvement in the efficiency of certain DLOs, but to eliminate them merely for their own sake, for doctrinal reasons, is wrong. The Government, however, are trying to do that.

I turn to the matter of maintenance. I wish to see maintenance work in Liverpool done by a good, efficient DLO. That maintenance has been done in the past by such an organisation, though I know that there is room for improvement. I was chairman of the Liverpool DLO, and I used to have arguments with the lads on these matters. Should we really seek to get rid of good, efficient DLOs and allow the ladder-and-barrow cowboys to come in and take over?

What kind of a product would our people get if that happened? We have already seen the result of the type of modernisation that has taken place in the vast working-class areas of the country when the ladder-and-barrow merchants have come in. The condition of some of the buildings was better before the cowboys touched them. People have said to me "Our buildings were marvellous before the cowboys came in to modernise them. Look at them now." The cowboys were not proper craftsmen. That is happening in Liverpool, where the Liberal council is undermining the DLO. [Hon. MEMBERS: "Where are Liberal Members now?"] They are not here to undermine anything at the moment, so interested are they in this matter.

That is what is happening in Liverpool, and the Liberal-controlled council is to some extent supported by the Minister's political colleagues there. We do not want those cowboys doing the maintenance and repair work. They do not do it properly. A good DLO with real craftsmen and skilled workmen gives a good product to our people.

Of course, there are overheads that do not occur in private enterprise, but it is right that there should be sickness benefit and decent conditions for DLO workers. All private enterprise companies in the construction industry should follow the lead given by the DLOs in that respect.

I was delighted at what was said by the hon. Member for Caernarvon (Mr. Wigley). I do not disagree with a word of his statement. It was extremely good. The hon. Gentleman and I both speak the Welsh language—I speak it in a much more limited way than he does—and I found his ideas, apart from the issue of nationalism, first class. I agreed with him entirely.

I hope that the House will support us, although I fear that Conservative Members will not do so. If there were more Members like the hon. Member for Somerset, North (Mr. Dean), matters would be different. This matter is of great importance, because there are many Tory local authorities that have good efficient DLOs, and they are arguing the same case as I have been arguing. I hope that a sufficient number of Conservative Members will support the amendment for it to be carried.

Sir Albert Costain

I am delighted to have the opportunity to follow the speech of the hon. Member for Liverpool, Walton (Mr. Heffer), because I remember him when he used to work for a private firm of contractors in Liverpool. I also remember him when he ran the direct labour organisation in Liverpool. I take no fees or anything else from the contracting industry. If I have any interest to declare at all, it is that I have a sufficient quantity of shares in a firm in Liverpool to cause me to do so.

We have heard the ordinary arguments put forward. Let us deal first with the question of labour relations. I defy the hon. Member—I hope that he will rise to contradict me—to show me that the direct labour employees of the Liverpool corporation are on any better terms than the employees of the private firm that I represent. There are five Members of Parliament who have worked for my company. They can vouch that its terms are equal to or better than those of DLOs. Also, the larger or middle-sized firms train as many apprentices and are able to train them better because such firms get a greater variety of work.

The hon. Member for Caernarvon (Mr. Wigley) used all the usual tactics of saying how local authorities must have a team of men so that if it snows on Tuesday the borough engineer or the controller can pick up the telephone and say "Charlie, there's a snowdrift down the valley. Go and clear it." It is so easy. The chief executive and the people who run things like to have a gang of men. They do not like to have to go through the formalities. As long as they have a gang of men doing nothing, so that they can remove snowdrifts, they are all right; they can do it. But what are those men doing in the meantime?

The hon. Gentleman argued that if authorities put work out to tender they must have a great bureaucracy to prepare the tender, but is he saying that a DLO will not get out any estimate or prepare any costing, and, without knowing about costs, will say" Charlie, go and paint those 50 houses. I don't care a hoot what it costs "? If DLOs are to be efficient, they must have a costing system, and a costing system is related directly to an estimating system.

Equally, the argument is frequently used that there are no contractors in the area to do the maintenance work. I remind hon. Members that what used to be the War Office—I never know quite what it is called now—used to have a day work schedule. It was able to get camps maintained by local contractors by simply ringing up and referring to a day work schedule, which was tendered once a year against competitive tenders. In such circumstances local contractors are able to build up their organisation to cope with the sort of demands they get, but if they have not got that sort of contract they cannot build up an organisation. One gets the chicken-and-egg attitude. There is no contractor available to do the work when one wants it done because one does not give it to him when one has it to give to him. Thus, the orgainsation that is necessary is not built up.

Equally, what is often overlooked on this point is that as long as one uses only a DLO, one is at a disadvantage. I am not saying that councils should not have a small standby force. In my opinion, it ought to be what the larger property companies have—a small standby force of people who are generally foremen and who are capable of repairing the odd lavatory when a crisis arises and Mrs. Jones says "I can't wait. Come and repair my lavatory." They tend to have those sorts of persons around. It need be only a small number. They could act as foremen to supervise the work.

We must realise and appreciate that if we want an efficient organisation, and if we want to use our manpower to the best of its ability, we need versatility—and the contractors are able to give us that. Not only do they work for the local authority; they supply services to the local community. Therefore, not only does the local authority benefit by having small contractors available to carry out maintenance work and build small projects; they provide an opportunity for those who own their own homes to draw on an existing organisation. They are able to spread the work load and make the work more interesting.

I know a number of skilled men who, in times of depression, have felt that they might be better getting a job with a local authority that will employ them come hail, rain or snow. At the time when there was no wet weather pay in the building industry there was a strong argument in favour of that. But conditions in the building industry have changed. It is no longer the casual occupation that the hon. Member for Walton knew when he was an apprentice. It is a more stable organisation. Top-level men are now able to, and want to, join that industry. They are anxious to join contractors' organisations because they have much greater scope. They could eventually be elected to the board.

I can tell the hon. Member for Walton that on the board of the small Liverpool company to which I referred, with a turnover of £3 million a year, all but one of the directors started as an artisan or foreman and rose to board level. They could not do that in a direct labour organisation. That is why they want to join a private firm. They are people of ambition. The hon. Member for Walton could not get on that far in a direct labour organisation. He had to come here for what little success he has.

I hope that my hon. Friends on the Front Bench will resist the amendments. They should do that if contracting organisations are to become more efficient in the building industry.

Mr. Robert Litherland (Manchester, Central)

I think that it is time that we returned to the debate on direct labour. One thing that is characteristic of the Bill is the vagueness of the wording. The Bill does not give any figures about capital works. It says "the prescribed amount"—that is, the amount prescribed by the Secretary of State.

In Committee the Under-Secretary of State for the Environment said: I accept that tendering is a difficult area to get right. On the one hand, we have to make sure that direct labour organisations are regularly tested in fair competition across the whole range of their operations. Equally we have to make sure that private contractors—big, medium and small—get a fair chance of winning local authority work."—[Official Report, Standing Committee D, 21 February 1980; c. 178.] The Minister used the term regularly tested in fair competition". Will that testing be regular? It will not according to the Bill.

Every capital project of any significant size will have to go out to tender. Will the competition be fair? One main flaw in the Bill, and in the assumption of the Government, is the comparison between a municipal enterprise and a private enterprise. They work under entirely different sets of disciplines, rules and regulations. One has to envisage the restraints imposed on a direct labour organisation—having to work within the confines of a local authority committee structure, the financial provisions of that authority, the standing orders, being reliant upon another department even to recruit its personnel, and restricted in areas of performance. In other words, it is able to tender for capital works only within its city boundaries.

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As my hon. Friend the Member for Liverpool, Walton (Mr. Heller) said, direct labour organisations are committed to a decasualised labour force, bringing with it a stable work force and stable working conditions. Apprentice training has always been in the forefront of direct labour organisation policies. My own authority of Manchester is renowned for its contribution to the training of apprentices into skilled craftsmen and even craftswomen.

There are even projects where sheltered accommodation for the elderly is built solely by apprentices who have been trained under the supervision of officers. Where can that be found in the private sector? If the profit motive is imported into direct labour organisations, schemes such as I have described will be discontinued, because no longer will such projects be undertaken, for the simple reason that they are non-profit making. As a result, many school leavers will not be afforded a training and many youngsters will join the dole queues. Manchester takes on about 150 apprentices, but there are 2,000 young people knocking on the door and we cannot afford to give them jobs.

DLOs have commitments with regard to the disabled. Here again, my own authority has a 5 per cent. employment level for registered disabled persons. That ranges over 25 classified disablements. All of the people are employed in beneficial and productive work. Such a scheme is rewarding and has far-reaching benefits, but, like apprentice training, it costs money. DLOs must stick strictly to the letter when it comes to safety, health and welfare, superannuation schemes, and so on.

Those are the social benefits of DLOs, but social benefits are costly. If DLOs are required to tender for every contract, without being able to negotiate at least one in three, the social content in the tender will be cut drastically. In other words, it will not be possible to take on apprentices. They will be unable to have a decasualised labour force or take on the disabled.

Unlike the private sector, where men can be hired and fired with every new building project, where new bonus schemes can be introduced, which has the length and breadth of the country in which to tender, where in an economic decline work can be bought and suicidal tendering can be indulged in, where lump labour can be used, where apprentice training can be cut, and where moral responsibilities to the disabled can be ignored, the DLOs must meet their responsibilities without a rolling programme of work. As a result, the role of direct labour must be limited.

The Government are seeking to impose further limitations on organisations which are already restricted by local government laws, byelaws, and statutory provisions. To subject DLOs to an overriding obligation to compete for every project and to show a profit defeats the whole object of having a department that provides a service. It was never the intention that DLOs would be profit-making sections. The profit motive does not apply to other local departments that provide a service. The prime function of providing a service is completely ignored when value for money or profit appraisals are considered. Profit appraisals disregard the enormous social benefits, all accountable costs in competitive tendering and carrying out the role of a model employer, which are of benefit to the ratepayer. Those factors are ignored by the critics of direct labour.

There are many critics of DLOs, especially when they are successful. I refer to capital works. Manchester has had a massive slum clearance programme. It has provided the work and sites for major house building projects. Manchester direct labour department won most of these contracts in competitive tendering mainly because during the relevant period the private sector was operating in the more lucrative areas. Being successful in competition, the department was allowed to negotiate contracts of comparable size.

Today we are in a completely different ball game, and with the cutback in new house building and other Government financial restrictions the construction industry is at a low ebb. The private sector will be grabbing all the public sector work that it can lay its hands on. The Bill will enable it to do so. In the present economic climate, in which suicidal tendering is the order of the day, contractors can put in ridiculous tenders with which a direct labour organisation cannot compete.

If the Government's intention is not to allow DLOs to negotiate any contracts, the whole nature of DLOs as a municipal enterprise, providing social benefits to the community, will have to be fundamentally altered, or DLOs as we know them today will be forced out of existence.

The figure for capital works of £250,000 is only updating an unrealistic figure of £50,000 that was agreed five years ago. It is really the distinction between major and minor works. If the Government would concede this figure, more items of minor work could be carried out than at present. That, in turn, would compensate for the loss of the major capital works because of the Government's insistence that every contract of any real consequence will have to be tendered for.

As has been pointed out, the disastrous effects of negotiated tenders in new-build must be common knowledge to most local authorities. In Manchester we have some huge monstrosities, which have been system-built, leaving many a scar. The same sort of thing can be seen in other cities and towns throughout the country. The intention to contract out maintenance work—which the amendment also covers—will mean a greater use of subcontractors, but the contractors on maintenance will not be interested in the everyday repairs. They will not want to give a 365-days-a-year service. They will not want to be called out on emergencies. They will be after the more lucrative maintenance items, such as programmed repairs, the house painting of whole estates, re-roofing and re-wiring. They will want the cream, and the mundane jobs will be left for the direct labour sector. Private contractors will not hesitate to cash in on this aspect of maintenance activity.

This was epitomised in the tendering for schools and colleges recently in Manchester. After the recent reorganisation of Roman Catholic schools in the Manchester area, Xaverian college became the responsibility of the direct works department. The direct works department estimated a sum of £22,750 as the cost of painting the college. The lowest tender received from a private painting contractor was £97,480; the highest was £106,250. But unbeknown to the painting contractors, the painter who had previously been responsible, before reorganisation, was asked for his price, and it was £22,700.

If this portion of the Bill goes through, once again the building and maintenance section will be open to monopolies, cartels and so on. It will be the death knell of the smaller direct labour organisations, and once again the public will be taken for a ride.

Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)

I have never heard a worse case put for a direct labour organisation. The hon. Member for Manchester. Central (Mr. Litherland) makes it sound as though a direct labour organisation is part of social welfare—a glorified employment office. But that is not the purpose of a direct labour organisation, and it is nonsense for anyone to suggest that any council should have an organisation that is set up regardless of the costs that it is likely to involve itself in.

The hon. Gentleman talked about training apprentices. Is he not aware that private builders are possibly the biggest trainers of apprentices? [HON. MEMBERS: "Rubbish."] Hon. Members may say "Rubbish", but it cannot bear examination that the only people training building apprentices are direct labour organisations.

Mr. Stan Crowther (Rotherham)

Is the hon. Gentleman aware—I am sure he is not, but I shall tell him—that there have been many occasions in my constituency when the only employer appointing apprentices in the building trade was the local authority?

Mr. Beaumont-Dark

That may be so, but I was responsible for closing down the direct labour organisation in Birmingham when I was chairman of the housing department. I believed that that was the right thing to do.

Mr. Joseph Dean (Leeds, West)

The hon. Gentleman made a categorical statement that private sector builders are the largest employers of trainees in the building industry. Surely the House is entitled to hear figures to justify that claim, because I think it is nonsence.

Mr. Beaumont-Dark

No one who understands the building industry can suggest that without direct labour organisations there would be no apprentices.

Mr. Dean

Answer the question.

Mr. Beaumont-Dark

With respect, may I say that in the city of Birmingham there are at least four builders who have over 20 apprentices each. The direct labour organisations in Birmingham had four apprentices at the last time of counting.

The hon. Member for Manchester, Central mentioned the cost of contracts. Surely Manchester city council cannot have been so badly run that when it put contracts out they were costed by its department. To suggest that a builder was able to get away with charging £90,000 for a £20,000 contract says a great deal about the costing department of the city of Manchester. Under a Labour-controlled or Conservative-controlled council such a thing would not have been able to happen in Birmingham.

With regard to cost analysis, in Birmingham we worked on cost plus—the most dangerous of all fallacies. It seems a good idea to agree to build a house, repair a block of flats or decorate a building on a cost basis. But what is a cost? It depends upon all the costs of an organisation. The hon. Member for Manchester, Central suggested that on top of a normal building and decorating practice we should load all the factors of decasualisation, all the good things about social benefits and all the talk about training apprentices. The result would be that something that should cost £10,000 would cost £20,000. If a private builder is given a contract on the right basis, and if he tenders for a contract for £40,000 or £400,000, that is the sum of money that he will receive.

When I inherited the direct labour organisation in Birmingham, it was said that a building would cost £100,000 against a private builder's tender for £20,000. If, because of mismanagement, the job cost £250,000, the ratepayers had to pay.

This clause is not intended to do away with direct labour organisations as such. It intends to bring them under a proper, sensible control. Conservative Members are confident that, if Socialist councils are left to run riot with direct labour organisations, we shall end up with hugely expensive, inefficient organisations, and the ratepayers will pick up the bill. The cost will escalate, fewer people will be employed, and less work will be done.

9.45 pm

Mr. Reg Race (Wood Green)

The illiterate speech that we have just heard was a good example of the way in which Conservative Members talk about the building industry.

The building industry has a magnificent record. Under private control it has hundreds of thousands of workers on the dole, huge stockpiles of bricks, and few people being trained for skilled work. Many of the buildings erected by private contractors cost far more than was intended, and many have serious structural and architectural deficiencies. That, in essence, is the record of the private sector of the building industry. For Conservative Members to defend that situation and to criticise direct labour organisations is extremely cheeky in view of the position of the private sector of the building industry.

It is about time that we discussed the real reason for clauses 6 and 7. The real reason for these clauses is that the profit that can be screwed out of the building industry in our present economic situation is low. The private sector has to get its hands on the maximum amount of profitable work that is available when the Government are cutting public expenditure as they are. Therefore, they have to take away from the public sector a substantial slice of its business to maintain the profits of Costain, Wimpey, and the other large building contractors. [Interruption.] Of course, people are employed in the private sector, but we need to increase the amount of building work, not to shift a small proportion of it from the public to the private sector.

I want to follow the remarks made by my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) about the consequences of restricting the activities of direct labour organisations. One way in which direct labour organisations will be affected is by part-time casual employment in the building industry being substituted for full-time employment. The building industry is riddled with part-time casual employment. The major contractors are responsible for that situation. They like to employ people on piece work—doing particular jobs on the basis of sub-contracting. That has led to large numbers of people being unemployed for long periods or being on supplementary benefit.

One consequence of these clauses will be that those who have been directly employed full-time in the public sector will be forced, if they wish to remain in their trade, into the private sector to maintain any degree of job security. They will also have to go through long periods of unemployment or under-employment to satisfy their new task masters, and the State will have to pay for that privilege. The State will have to keep those people on supplementary benefit or unemployment benefit during the periods when the industry is not employing them. The cost of shifting people from the public sector to the private sector will be substantial, and the Government have not dealt with these arguments.

Mr. John G. Blackburn (Dudley, West)

I am doubly grateful to the hon. Member for giving way, as I have been in the Chamber only for the last quarter of an hour of the debate. Perhaps he will be aware that in the Midlands some local authorities that have direct labour forces have recently come under the control of the Labour Party. There are people in my constituency who have been employed by the Sandwell authority in its direct labour department for many years, exercising their skills and crafts in the building industry. They have been dismissed entirely on the ground that a closed shop has been brought in. Is that the way to treat these people in the public sector? I have a responsibility to these constituents.

Mr. Race

That raises questions that are more appropriate for the Employment Bill. In some direct labour organisations there is a closed shop, and I do not object to that. I am not clear whether the hon. Member is saying that some individuals have been dismissed because they would not join a trade union. If that is so, I would want to look at the fine print of the membership agreement to see whether the hon. Member's claim is soundly based before making any further comments. I cannot say any more without further information.

Amendment No. 38 seeks to impose a limit below which direct labour organisations could effectively go about their business without having to go out to contract. That is absolutely necessary. Why should every tin-pot repair to a house or school be subject to this bureaucratic procedure? That is the issue in question tonight. The limit that has been placed on the procedure in the amendment is extremely modest. I would like to see that limit increased in line with inflation over a period. Changes would be necessary over the years if that limit were effectively to remain as it is now. Clearly, we would have to change it in order to reflect changes in the retail price index.

The threat to the direct labour organisations is extremely serious. Many hundreds of people throughout the country will be thrown out of work deliberately by these clauses and many will not get jobs in the Private sector because of the pool of unemployment. Ministers have a heavy responsibility, because they will put people into the dole queues at a time when it is extremely difficult to get jobs in the construction industry. I hope that they do not sleep well at nights when they think of that prospect. I believe that the clauses are damaging and irrelevant to the problems of the construction industry.

Mr. Ken Eastham (Manchester, Blackley)

I have found this debate very interesting because on numerous occasions several hon. Members have referred to their experiences in local government. I served for a number of years on a local authority in a major city, and over the years it has become increasingly obvious that the issue of direct works organisations in the building trade is highly contentious.

Conservatives talk about competition, but because this element of competition was introduced into the building industry by a Labour Government, they are suspicious. The Bill puts obstacles in the way of direct works departments, designed to ensure that they are not successful and cannot compete in doing first-class jobs. The Government are probably spending hundreds of thousands of pounds in their campaign against direct works departments. They say they have the ratepayers' interests in mind, but I believe that they are spending that money in their own interests.

It has been suggested that the building industry is stable. The opposite is true. It is the most unstable industry in the country. There are bankruptcies week in and week out. In my constituency numerous firms have gone bankrupt and disappeared almost overnight. The local authority is left with the job of picking up the pieces. Without a direct works organisation it is difficult to complete a job that is left unfinished. Private builders can hold local authorities to ransom. They can demand any figure, and local authorities have to agree in order to complete the job.

The hon. Member for Folkestone and Hythe (Sir A. Costain) talked of local authority commitments as if one man and a wheelbarrow would be sufficient for the maintenance work. Manchester has about 100,000 council houses, which require maintenance by an organised labour force. If a work force is employed that is familiar with the estates and the buildings, it is more efficient, which leads to improved maintenance.

Apprentices have been mentioned. I have been chairman of an education committee. The college of building is located in the centre of Manchester. Had it not been for Manchester's direct works organisation sending apprentices to that college, it would have closed down. The private sector did not send apprentices there. They had very few apprentices to send. It may be different in Birmingham, but an across-the-country examination will confirm what I have said. I should like to quote from report No. 10/1975. It is a report of a meeting held on 24 July 1975. It concerns the memorandum—

It being Ten o'clock, the debate stood adjourned.

Ordered, That, at this day's sitting, the Local Government, Planning and Land (No. 2) Bill may be proceeded with, though opposed, until any hour.—[Mr. Brooke.]

Question again proposed, That the amendment be made.

Mr. Eastham

The report concerns the memorandum of evidence for the Lay-field committee of inquiry on local government and finance. Inter alia, it states: The Association which represents local authorities at both county and district level in London and in the six metropolitan, areas outside London, which between them serve a total population of nearly 20 million people, firmly believes that the properly regulated and controlled use of directly employed labour by local authorities in the fields of new construction and building maintenance brings substantial economic and financial benefits both to local authorities themselves and to the community at large. That has been said by a distinguished body, which is supported by both Labour and Conservative Parties.

Owner-occupiers provide evidence in favour of direct labour. The owner-occupier sees the benefit of direct labour. One often sees an owner-occupier undertaking do-it-yourself work. If a man decides to paint his house, he cuts out the middle man. As a result, he will get a first-class job, and he will save a lot of money. Direct labour was introduced to do exactly the same thing.

Many local authorities do not believe that middle men should be paid when labour can be directly organised and engaged. Conservative Members cannot deny that they use direct labour when they carry out work. Local authorities have often suffered from jerry building. Cowboys turn up. For years, men worked on the lump without any moral responsibility to the local authority. That was disgraceful. Local authorities had to pick up the bill months later, when the contract had been completed. The men could not be found to correct some of the awful work that they had done.

The subject of additional tendering is mind-boggling. If a massive army of estimators is used for tendering, enormous numbers of technical staff will be employed. Buildings and financial support will be needed. As a result, further costs will be incurred. Ratepayers will not want that, because it will not make the job any cheaper. Conservative Members often put their hands on their hearts and say that they are interested in making jobs cheaper. Such tendering will not do that.

An organisation controlled by a local authority can achieve good standards in construction work, which will reduce the legacy of maintenance work. Maintenance bills are often a direct result of shabby building, of which there are scores of examples in many major cities, including Manchester.

Direct labour provides a check on prices and sobers up the private sector. I was told recently about work carried out in a hospital that comes under an area health authority that has no direct works organisation. The recommended list of private builders tendered for about £14,000 for the most minimal adaptations. It worked out at £77 a square foot to build one wall, put a roof on it, and provide a toilet and lighting for a waiting room. I bet that the prices would not have come out like that if there had been a direct works organisation.

My hon. Friends and I have nothing to be ashamed of. We know that people get value for money from direct labour organisations. Conservative Members may titter and chuckle, but they know that they are pursuing this matter in the interests not of ratepayers but of private builders.

Mr. Stanley Newens (Harlow)

As the hon. Member for a constituency in which there is a successful direct works department in Harlow new town, which is run by the Harlow district council, I wish to say a few words on the issues raised by the amendments.

The Government have claimed at various times that local authorities should be locally controlled and that there should be less bureaucracy, less red tape and less outside interference. But the clauses that we are considering provide for exactly the opposite.

Serious problems have arisen in many of the houses transferred by new town development corporations to local authorities. Those properties require considerable expenditure on repairs and the matter is being discussed by new town local authorities and the Department of the Environment.

It is important to point out that the houses that are subject to those faults were built not by direct labour but by contractors. I am not criticising all contractors, but we should recognise that the apparent cost advantages that are sometimes claimed by contractors are illusory, particularly when the quality of work is inferior. Some of my hon. Friends have already referred to the problems with which the lump presented us. In many new towns, we are facing the legacy of those problems, which were not created by direct works departments.

I do not believe that there is any justification for the clauses, even from the Government side, except as a gift to private contractors. That is the motivation behind their introduction. Many private contractors have suffered enormously from reductions in public expenditure forced on local authorities by the Government. In the new towns, large contractors have done very well as a result of the large public schemes that have been conceived by previous Governments, but which the present Government are not prepared to countenance. The bureaucracy to which these clauses will give rise will increase the cost to the public without any advantage to those who foot the bill. I do not see that there is any reasonable argument for placing restrictions on efficient direct works organisations.

I believe that, for these reasons, we should most certainly support the amendments before the House.

Mr. Fox

We are discussing a multitude of amendments. I should like to bring the House back to them. A block of five, Nos. 28, 29, 31, 32 and 33, put down by the hon. Members for Caernarvon (Mr. Wigley) and for Merioneth (Mr. Thomas), are effectively wrecking amendments that would remove from the scope of the Bill more than 90 per cent. of all direct labour organisatons' activity, including virtually all operations of major significance. They cannot be accepted by the Government.

A modest Government amendment, No. 30, is put down in response to a suggestion in Committee that certain arrangements for one council to do work for another, under section 18 of the London Government Act, were not properly dealt with. This is technical. A further Government drafting amendment, No. 34, again put down in response to discussion in Committee, clarifies clause 7(2), which has been the source of much misunderstanding. It makes it clear that DLOs will have to declare in advance the basis on which they intend to charge for their services. That is an obvious and fundamental requirement if they are to operate on a trading basis. We are working out a code of practice for the local authority associations and the Chartered Institute of Public Finance and Accountancy, which will give further clarification and help to councillors who need it.

Amendments Nos. 35 and 36 are again Government drafting amendments as foreshadowed in Committee. They have the same effect in relation to functional work as amendments Nos. 24 and 25 in relation to contract work.

In amendments Nos. 37, 38 and 39, to which the right hon. Member for Widnes (Mr. Oakes) spoke, we come to the major issue, the tendering limits. I shall return to this question in a moment. I shall first finish my description of the amendments before the House by mentioning amendment No. 60, which also deals with an important matter. This amendment seeks to establish a de minimis level and excludes from the provisions of this part of the Bill authorities with only small direct labour organisations.

I turn now to amendments Nos. 37, 38 and 39. I am grateful to the right hon. Member for Widnes for the reasonable way in which he put them forward. The Government suggested in Committee, as a basis for consultation, new proposals for a possible regime for regulating DLO tendering. We have since listened to the arguments from various quarters both for relaxation and for tightening of the proposals. We have decided to make two changes to the February proposals. The first deals with highways work. We have always accepted that there are special problems in connection with winter maintenance, snow clearing and the like. The work is, in essence, unpredictable, as hon. Members have indicated. Authorities need to keep men and plant on standby. We have, therefore, decided to exempt all such work from the need for competition. Otherwise, for highways work we stick to our proposal that all highways work worth more than £100,000 should go out to tender.

Secondly, on sewerage work, we have decided that, in view of the considerable interdependence between routine sewer maintenance and the emergency service provided by sewer gangs, there should be a single category to embrace both new sewerage work and sewer maintenance of all sorts. We shall require all work in that category to be exposed to competition if it is estimated to cost more than £50,000. That is a more stringent requirement than we first proposed for new sewerage work, but it is a significant relaxation in respect of maintenance work.

10.15 pm

We shall make no other changes. New work, apart from highways work, will be subject to tender automatically once a project exceeds £50,000 in value. In addition, one-third of DLO turnover in this category, again excluding highways and sewerage work, will be exposed to the test of competition. Maintenance work will be free from the requirement for competitiion only in so far as it is worth less than £10,000. All the limits will be subject to revaluation in the light of changing building prices.

Mr. Heffer

Are the Government saying that in no circumstances can a local authority enter into a negotiated tender with a private enterprise company? Alternatively, are the Government intending to allow local authorities to continue to negotiate tenders with private enterprise companies?

Mr. Fox

Various other matters are to be discussed. If there have been successful agreements between local authorities and the private sector, our proposals should not interfere with efficient workings.

Mr. Heffer

Why does the provision apply only to direct labour organisations? That proves beyond doubt the dogmatic and doctrinaire attitude of the Government. Only direct labour organisations will suffer.

Mr. Fox

The hon. Gentleman is forgetting what direct labour organisations were set up to do. Before he becomes too excited, I suggest that he should wait until we put the tendering practices into operation and see how efficiently the organisations of which he is so proud perform. We are not saying that there will not be work for direct labour organisations. To listen to some hon. Members, one would think that that was our intention. All we are saying is that they must be accountable, as is the private sector.

The amendments seek to impose requirements which are significantly less stringent than those upon which we are resolved. Efficient authorities with effective DLOs will be able to face competition of the type that we envisage. We are satisfied that the arrangements will spare authorities the burden of excessive tendering on small, essentially repetitive work. At the same time, we shall ensure that the prices of substantial projects are properly tested in competition. I think that that is acceptable on both sides of the House.

Private building firms, particularly the small and medium-size firms, will be given a fair opportunity to compete for public sector work. The amendments should be rejected.

Mr. Joseph Dean

Has the Minister heard of the Bramwell report, which some years ago was adopted by a Conservative Government, under which direct labour departments and private contractors were allowed to tender for one contract and, on the basis of a successful tender in open competition, were allowed to negotiate another two contracts? Why are the Government moving away from that system when it has been so successful?

Mr. Fox

We have examined all the issues carefully. We came to conclusions which are written into the Bill. We are satisfied that we have found the best solution.

I take the point made by my hon. Friend the Member for Somerset, North (Mr. Dean) about bureaucracy and accountability. What I shall say about the final amendment will please him in relation to the smaller DLOs. We are satisfied that in our negotiations with the CIPFA we shall find a simple procedure which will not involve the increase in staff of which some people are fearful.

I am glad to have the support of my hon. Friend the Member for Folkestone and Hythe (Sir. A. Costain). My hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) was right to state that more training is done in the private sector than by local authorities. It is no good Opposition Members shaking their heads, because I have figures from the training boards. In the private sector there is one apprentice for every 12 employees, whereas in the local authority sector there is one apprentice for every 18 employees. My hon. Friend, therefore, was entirely right.

I move now to amendment No. 60. I must advise the House to reject this amendment, which would effectively allow about 230 authorities of a total of 550 entirely to escape the provisions of this part of the Bill. We have, however, considered the matter of de minimis exclusion with great care, as we promised in Committee, and we agree that there is a point at which an undertaking becomes too small to draw the full benefit from the new accounting and management systems provided in the Bill. We think that that point comes when the number of operatives falls below 30. We shall therefore table amendments in another place to enable such authorities to be exempted from all the provisions of this part of the Bill.

Mr. Den Dover (Chorley)

Will my hon. Friend confirm that there is no provision in the Bill to prevent local authorities from giving work to their DLOs even if those organisations are not the lowest tenderers? Will he also give an assurance to the House that if that practice takes place on a grand scale he will require local authorities to advise the Secretary of State which contracts they are giving to direct labour when DLOs have not put in the lowest tender?

Mr. Fox

There are powers in the Bill to prevent that kind of abuse.

Opposition Members must not see in the Bill an attack upon DLOs. We maintain that efficient DLOs have nothing to fear, but for far too long the others have been a drain on the ratepayers. It is about time that there was close accountability. The previous Labour Government spoke in terms of introducing certain measures in this context. They were just as worried as we are about certain excesses that were taking place. I advise my hon. Friends to oppose these amendments.

Mr. Paul Dean

I am reassured by what my hon. Friend said on two points. The first concerns tenders and the second and more important point concerns small labour forces. Do I understand from what my hon. Friend said that there is a firm commitment on the part of the Government to introduce a de minimis rule that will allow smaller local authorities to employ a small number of people on emergency work without having to go through all the rigmarole? Is that correct?

Mr. Fox

My hon. Friend is right. It is our intention to exclude any DLO with fewer than 30 workers from these strictures. Local authorities will not have to set up a new organisation.

Mr. Oakes

I have listened carefully to the Minister. My hon. Friends all said that the amendments that we were moving were modest and that they were desired by all three local authority associations. The Minister has not seen fit to concede even those modest amendments. The hon. Gentleman has given nothing to the House. Even on the de minimis principle it is clear from the attitude of the Government that this has nothing to do with free competition among authorities. It is a matter of malevolence towards building departments and direct works departments. The fact that the hon. Gentleman would not concede even the modest points that we raised is proof of that. When we come to amendment No. 38, we certainly intend to divide the House.

Mr. Wigley

This has not been such a good debate. Many points have not been covered, and if we follow the advice given by the Government we shall follow what is, to a large extent, dogma.

It is somewhat disingenuous of the Minister to say that this is not an attack on DLOs. It most clearly is an attack. If, in a competitive tendering system, there are private sector companies up against the wall putting in tenders that are well below what they would put in in a normal marketing situation, authorities will be forced to take those tenders. That will be the reality if there is an ongoing era of the sort of depression that we have seen in the building industry. As a result, there will not be the work for DLOs and we shall see the rundown of them. Inevitably there will be a substantial erosion of these departments.

The real question is whether DLOs are always run as effectively and efficiently as they should be. Some of them are not so run, and it is right that those should be strengthened. But what we get from the Government's proposals does not achieve that. Whereas inefficient DLOs put an additional cost on the ratepayer, when private building contractors get into difficulties they put off labour and the cost goes on to the taxpayer. Apparently, that is quite legitimate but the other cost is not legitimate.

The advantage of having a DLO on a substantial scale is that one can have planning of the manpower that has the skills to undertake the work rather than the present hotch-potch of having thousands of skilled men unemployed and no ongoing planning in the construction industry. That is the overwhelming argument. It is not an argument for having inefficient DLOs. It is an argument for having well-organised departments.

I was rather encouraged by the Minister when he said that amendment No. 28 would wreck 90 per cent. of the Government's intentions. It nearly persuaded me that it would be worth pressing it. It is important, however, that we project from this debate the fact that the Opposition Benches were putting forward constructive amendments which would have been adding to and making more effective the work of DLOs and that the Government have come out against those amendments. For that reason, I am prepared not to press amendment No. 28 but to support amendment No. 38.

Amendment negatived.

Amendment made: No. 30, in page 7, line 8, leave out 'or agreement' and insert ',agreement or requirement'.— [Mr. Fox.]