HC Deb 10 June 1980 vol 986 cc518-28

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Cope.]

1.35 am
Mr. Chris Patten (Bath)

There is hardly any hon. Member I should less like to keep from his bed at this hour of the morning than my hon. Friend the Under-Secretary of State for Defence for the Royal Navy. We have known one another man and, in my case, boy for 13 or 14 years. I received a good deal of my initial political education at his hands, so he has a great deal to answer for in that respect.

More recently, my hon. Friend was extremely understanding when in Bath we were resisting—happily, successfully—the ill-judged pork barrelling scheme that he inherited from the previous Labour Administration for relocating jobs from Bath to Glasgow. My hon. Friend has my condolences for the fact that this thorny problem has landed in his "In" tray after passing like a hot potato through several pairs of ministerial hands.

While I have certain qualms about keeping my hon. Friend up tonight, I have no qualms about raising this question again on the Floor of the House, but in greater detail than I achieved in the debate on the Defence White Paper. I do so principally for two reasons. The first is that it affects 67 of my constituents who feel that they have been unfairly treated. The number was 68, but one of the ladies concerned left her job before the redundancy notices were issued.

The second reason is that I believe this question touches a wider principle—namely, how we can best improve efficiency, reduce manpower and generally get better value for money throughout the Civil Service. I should make it clear, because I want to return to this point later, that I wholly support the objectives for the Civil Service which were set out by my right hon. Friend the Prime Minister a few weeks ago and which have been set out from time to time by my hon. Friend the Minister of State, Civil Service Department. I have also made that clear to the Civil Service unions in my constituency where the Ministry of Defence is the largest single employer.

But that is not at issue. At issue is whether the proposal that has come from the Ministry of Defence will save any money and whether the Ministry's approach is most likely to carry employees in the years ahead as the Ministry and other Departments attempt to get better value for money. I remind the House of the facts. As part of its cost-cutting plans, the Ministry of Defence last year instituted a number of surveys covering a wide range of work from research and development to quality control. The first of those surveys to be finished was the report on contract cleaning and catering.

We have been assured on a number of occasions that, wherever possible, cuts in Civil Service manpower will be achieved through natural wastage rather than redundancies. In this instance, clearly there was a good deal of pressure on the Ministry of Defence to cut numbers, partly because it employs about one-third of the total number of civil servants. Against that background the cleaners may seem to be an easy target. After all, in the Government's statistics, as in the divine plan, one Mrs. Mopp counts the same as one permanent secretary. In this instance the axe was not spared, and it fell not on a single deputy secretary, under-secretary, assistant secretary, senior principal or principal, but on just under three and a half score cleaning ladies. It is not surprising that one or two of my constituents have suggested that the whole episode sounds as though it comes from the television programme—which I have not managed to get home in time to see—called "Yes, Minister".

The contention was, and the contention remains, that the change to contract cleaning will save 5 per cent. of the cost of cleaning. That cost was given in a parliamentary answer before Whitsun, by my hon. Friend the Under-Secretary of State for Defence for the Royal Air Force, as totalling £299,700. Against that, the cost of redundancies amounts to £27,000. Even if we accept the figure for the total cost of cleaning, and even if we accept the figure for the alleged saving, it is still clear that it will take at least a couple of years to recoup the cost of the redundancies. The position is not as simple as that. First, let us consider the figure for the cost of cleaning the establishment. I do not accuse the Department of sleight of hand, but as I understand it, the figures given in the parliamentary answer actually covered all the Ministry of Defence establishments in Bath, including those that have already changed to contract cleaning.

It has been suggested that if we consider the figure for those establishments where the change will be made, it amounts to less than half the amount given in the answer. That suggestion is confirmed if we gross up and annualise the weekly wage costs, national insurance costs and bonus payment costs which have been given to the staff side of the local Whitley council. On those figures it would not take two years to recoup the costs of redundancy but at least four years. More important, the Ministry of Defence has refused to give any figures to prove that the saving of 5 per cent. will be made. We have to take that on trust. I find that slightly strange. When we consider the White Paper on defence, paragraph 732, we see the cost for a nuclear-powered submarine, a type 42 guided missile destroyer, a Tornado GRI aircraft, a Puma helicopter, a Milan anti-tank missile, and so on. Yet, a veil of secrecy is drawn over the costs of contract cleaning. I commend the Department's openness in the one case, but in the other its reticence slightly surprises me.

Even if we accept that the tenders that have been put forward by the contract cleaning companies should remain secret—and I do not find the arguments for that overwhelming—there are some other facts that the Civil Service Union and the employees generally are entitled to know. For example, how many cleaners will be employed by the contract companies, and what hours will they work? Was a comparison made with the notional establishment, or was it made with the actual number of cleaners employed? The two figures are not the same. Is it true that the comparison was made on August 1979 pay rates? What would the comparison be if it was made on present pay rates? What rates of pay will the contract cleaners receive? Does the comparison take into account some allowance for the administrative forces that will be needed to monitor the contract?

As I understand it, there is no dispute that the present cleaning staff do an efficient job. I am told that their hourly work rate of 1,898 square feet is extremely good by any standards. Nor is anyone suggesting that they are well paid or highly paid. Actually, I think that I am right in saying that their rates of pay are rather less than those of their counterparts in local government. If that is the case, how can the job be done for less? Where will the savings come from? Will we see them come from a reduction in overheads? Will the contract cleaning companies be able to achieve a higher hourly work rate? Will the pay which they give out be lower? Will less be cleaned, or will it be cleaned to a lower standard? That is what worries a large number of people—that the savings, if they are made, will not be achieved through greater efficiency but through a I lower standard of work.

I do not want to criticise the contract cleaning companies. They may well beable to achieve the savings about which J we have heard. If so, good for them. What I am saying is that we are entitled to receive the facts on which that contention is based. After all, the Governmcnt have been commendably open about such things as the Chevaline project. One is entitled to ask that they be a little more open about something which is perhaps of less importance.

Mr. Gavin Strang (Edinburgh, East)

I congratulate the hon. Gentleman on the diligent and assiduous way in which he has pursued this matter on behalf of his constituents, not only because of his commitment to them but because the Government are particularly vulnerable J on this issue. He is reluctant to criticieise the contract cleaning firms. Does he accept that there is evidence in the past of a clear inadequacy on the part of many of those companies, although perhaps not all? Does not the failure and refusal of the Government to provide the basic data—as the hon. Gentleman has clearly brought out—on which they are basing their decision, totally undermine the credibility of the assurance which Ministers have given in the House time and time again to the effect that they will make these changes only if they can justify them on cost-effective grounds?

Mr. Patten

The latter point is one which concerns me. As for the former point, I understand that the standards of cleaning by outside companies have been a source of concern in a number of the departmental Whitley councils. I am sure that my hon. Friend will confirm that.

It is an open secret, if it is a secret at all, that at the Foxhill establishment in Bath a good deal of work is going on in regard to Polaris, and that classified work which is almost as important, is also undertaken at that establishment. For that reason, the existing cleaning staff has had a security clearance before being employed. That will not happen with the contract cleaners. Indeed, one cannot see how it possibly could. Is the Ministry now saying that security clearance is no longer necessary because the nature of the classified work has changed? Is it saying that the rules for security clearance have changed? Is it saying that other security checks will be applied? If it is saying that there will now be less security clearance, why did we spend so much on it in the past? Have we been wasting money? Are we still wasting money by operating security checks on some groups but not on the new contract cleaning staffs?

My last point is the one about which I feel most strongly. I think that everyone accepts that this group has done a first-class job. Do the Government intend to help them secure jobs? In making them redundant, we are not shedding the Government function. We are not saying that the taxpayer will no longer have to pay for this. What we are saying is that the taxpayer will go on paying for this service, but that he will get better value for his money. We know that for two years at least, and arguably for four, he will be the loser. The figures on which we can reach the conclusion that at some stage in future he will get a better bargain are being withheld. I think that is a pretty rum way of proceeding. I do not think that it is a reasonable reward for the effort and loyalty of the cleaning staff which has now been made redundant. It also provides a bad precedent for future attempts to cut costs in the Civil Service, which if they are to be successful should be carried through, as far as possible, with the full-hearted consent—I pick up a phrase which might have been used in the previous debate—of those who are concerned. The Department has much larger plans in the pipeline for cutting costs and increasing efficiency. I hope they will not be jeopardised by the ham-fisted way in which the Department carries them out.

I conclude by reading a letter from one of my constituents, who was a civil servant last March. He said : Personally, I have a lot of sympathy for the overall aims of the present Government, even where the policy is one of optimising the resources in the Civil Service. However, I cannot and will not ever agree with any action of any Government which executes policies based on the ill-informed and biased views of public opinion, regardless of the effect and regardless of the fact that by so doing only a cosmetic result is achieved. I sympathise with that point of view, and I hope that my hon. Friend the Under-Secretary will be able to allay the anxieties of that constituent and other constituents as well as my own.

1.52 am
The Under-Secretary of State for Defence for the Royal Navy (Mr. Keith Speed)

First, even at this late hour, I should like to congratulate my hon. Friend the Member for Bath (Mr. Patten) on raising this human problem. He is properly concerned about the jobs of his constituents, and I appreciate that concern.

He mentioned the problems, with which we dealt last year, of the possible move of many of his constituents out of Bath to other parts of the country. I am glad that that problem has been solved. I hope that if I explain the procedures and what lies behind the problem, that will go some way towards allaying his fears and answering some of his legitimate questions.

As my hon. Friend is aware, the position at Bath stems from a Government decision in June last year not to extend the moratorium, which had been imposed by the previous Administration, on the transfer of cleaning Government offices by directly employed labour to cleaning by contract services. In essence, that represented a reversion to the previous practice of deciding the most appropriate method of cleaning on the basis of cost comparison. I stress that this is nothing new. It went on long before the moratorium. It is entirely consistent with the Government's search for every reasonable economy in public expenditure.

My hon. Friend is also aware that this moratorium applied only to headquarters offices but that the Ministry of Defence took this opportunity to review the cleaning arrangements in all its establishments. During my speech to the House in the defence debate on 29 April I said that this exercise was in its first phase and that we v/ere concentrating on 80 or so establishments with the largest cleaning staffs. Those where a review is in progress were identified by my hon. Friend the Under-Secretary of State for Defence for the Army in an answer to the hon. Member for Thornaby (Mr. Wrigglesworth) on 2 June. A copy of the consultative document that was prepared to cover the possibilities of both contract cleaning and catering has now been placed in the Libraries of both Houses.

In each case relative costs are being assessed by means of inviting contract tenders as well as a detailed examination, largely at local level, of the non-financial implications. It is our intention to proceed to contract where financial savings are indicated, but only if there are no other over-riding considerations to prevent this.

The exercise is still not complete. However, at those establishments where a full evaluation has been made, the indications are that contract services will be able to offer a comparable service at lower cost than a directly employed work force. So far the potential savings indicated are very encouraging, with the average savings for a number of disparate buildings and cleaning costs running at about 20 per cent. of the directly-employed labour costs.

I turn to the specific issues raised by my hon. Friend. Ministry of Defence headquarters at Bath are housed in 10 locations. Of these, five are already cleaned by contract services and the other five are cleaned at present by a directly employed work force. My hon. Friend the Under-Secretary of State for Defence for the Royal Air Force, in answer to the hon. Member for Thornaby, told the House on 23 May that the cost of cleaning all 10 Ministry of Defence establishments at Bath, together with an element for administration costs, was just over £299,700. The current cost of cleaning those establishments where we shall replace the directly employed labour force is £175,400.

The Ministry's final selection of contractors indicated a 5 per cent. saving against the cost of direct labour, even after the inclusion of 15 per cent. VAT in the tender prices. My hon. Friend will realise, of course, that VAT will accrue to the Exchequer. It was decided, therefore, to extend contract cleaning to the whole of the Ministry of Defence's Bath complex, with the result that 67 staff will be made redundant.

The savings identified are based on a comparison of the costs of the number of staff needed to achieve a specified standard of service—the complement—with contract tenders to achieve the same standard and cover the same area. Present restraints, such as the recruiting ban now in force, mean that the current work force at Bath is below the complement. In any case contract cleaning would still be cheaper than the current directly employed labour. The comparison was made in August last year at the then rates of pay on both sides, and the updated costs still show the same order of savings in changing to contract services. Furthermore, it also includes an allowance for the administrative resources needed to monitor the contracts.

Unfortunately, I am unable to give details of the number of cleaners who will be employed by contractors or the hours that they will work, as this would allow a fairly accurate estimate to be made of the contract tender prices. The normal rules governing commercial confidentiality must apply here.

Although I took my hon. Friend's point about the White Paper, the cost of Type 42 destroyers, Milans and so on, that is not germane, because here we are talking about a commercial tender made in confidence to the Ministry, and in the White Paper we are talking in broad-brush terms about the cost of items of equipment rounded to the nearest £1 million or £100,000. The two are not directly comparable.

The matter of commercial confidentiality was one of the questions referred by the Civil Service Union to the Central Arbitration Committee, an independent body, which endorsed the Ministry's stand. Subsequently the union approached the Divisional Court for a judicial review of the committee's findings, but its application was turned down.

I appreciate my hon. Friend's point and the point about trying to be as open as possible, and I should like to go a long way with it. But commercial confidentiality, which arises not only in this context but in others, is very important. The need for it has been upheld by an independent committee and upheld again by a court on appeal in recent weeks.

Contractors will use all their own material and equipment. The savings identified are attributable to a number of factors. A major saving lies in the fact that contractors' employees tend individually to work fewer hours a week. Therefore, the contractors are often not liable for national insurance contributions—quite legally. Their staff will be paid at least the current local authority rate. In practice, the wage movements of Ministry of Defence staff and those of the contractors we engage follow each other closely.

In addition, shorter periods of working, generally rather higher work rates and the use of more up-to-date equipment, which has capital expenditure the MOD can less well afford, also result in savings to the benefit of the contractor. I assure my hon. Friend that they will not be achieved by a lowering of standards. All 28 of the central London MOD headquarter buildings are cleaned currently by contract cleaners, and standards in most of those that I have been in are pretty high, as I am sure my hon. Friend would agree. In order to achieve this end, the contract tenders selected were not necessarily the cheapest of those submitted.

We shall take suitable precautions to ensure that we have confidence in the security of contract staff. I note what my hon. Friend said about that important feature. Other measures, such as controlling hours of access, can also be taken to maintain proper security standards, and special arrangements are made for particularly sensitive areas, as we do, indeed, where contract cleaners are being currently used. My hon. Friend will not expect me to go into details of these publicly tonight, but I assure him that that is already the situation.

I am sorry that it has been necessary to involve these redundancies, but the Government are determined to press on with their policy of achieving public sector economies. Everything possible has been done to soften the financial effect of the redundancies. All but two of the staff affected at Bath are part-time workers. Except for two cleaners recruited this year on a purely casual basis, none will be paid for less than six months from the date of issue of the redundancy notices and those entitled to more than this by virtue of length of service will receive it. Five of the staff are over 60 and will be retired on pension, but additional compensation payments will be made to those staff who have been employed for 12 months or more and have not yet reached retirement age. It is generally the case that contractors offer re-engagement to former staff made redundant. We are encouraging this and we have agreed to provide facilities for interview on site.

The Ministry's staff side has been given opportunity for comment and discussion at every stage, but I must stress that the saving to be secured by transfer to contract services has never been other than clear cut.

I hope that my hon. Friend will accept, therefore, that, painful though these decisions are, our resources must be deployed to be as cost-effective as possible. Over the years we have had plenty of experience of contract cleaning. We are convinced that in this and many other instances it has an important part to play in making savings of taxpayers' money.

Question put and agreed to.

Adjourned accordingly at two minutes past Two o'clock.