WORK UNDERTAKEN BY LOCAL AUTHORITIES AND DEVELOMENT BODIES UNDER CERTAIN AGREEMENTS WITH MANPOWER SERVICES COMMISSION (Hansard, 2 July 1982)

§ Mr. Macfarlane
I beg to move, That this House doth agree with the Lords in the said amendment.
This is a substantial amendment. The object of new clause F is both straightforward and beneficial. It excludes from the regulatory provisions of the general legislation of local authority direct labour organisations in part III of the Local Government, Planning and Land Act 1980 work undertaken by local authorities in relation to certain agreements with the Manpower Services Commission. Employees engaged in such work on or after 1 April 1982 will not count towards the total of employees engaged on construction or maintenance work for the purpose of the exemption from the DLO legislation contained in section 21 of the 1980 Act for authorities employing 30 or fewer persons on such work.
The beneficiaries will be a number of authorities with small direct labour organisations which will be exempt from the DLO legislation in 1983–84. Without such provision an authority could be caught by a technicality, if the number of employees engaged on MSC-sponsored schemes between 1 April 1982 and the date of Royal Assent pushed its total over 30 at some time during the 1982–83 financial year. The new clause will extend to Scotland as well as England and Wales.
The DLO legislation is designed to impose effective controls on local authority construction and maintenance work. It requires councils: first, to compete with private contractors for a proportion of their work, rather than letting their own employees undertake it; secondly, to achieve a prescribed rate of return on the capital that they employ; and, thirdly, to meet various accounting requirements.
Manpower Services Commission schemes are entirely different. They consist of work which would not otherwise be undertaken by an authority. No purpose would be served in requiring an authority to earn a rate of return or to go out to competition with contractors for such MSC-sponsored work. Both local authority and building contractors' representatives agree that these schemes are irrelevant to the direct labour organisation legislation and should be specifically excluded from it. Local authorities may otherwise be deterred from taking on adult MSC community enterprise programme employees and contractors will see no purpose in tendering for schemes which the authority itself must undertake if it is to take on these employees.
The new clause was not precedented in local authority Acts passed since April 1974. It was therefore with some reluctance that the Government put this down in another place for inclusion in the Bill. It was felt, however, that the amendment was of a minor nature, but very important in effect. Without it, we understand that local authorities might have been reluctant to take on CEP employees. We 1179 think that the new clause will remove any possible deterrent and will certainly help to maintain the impetus of Manpower Services Commission schemes. I understand that it will be warmly welcomed by both local authorities and building contractors. I hope that it will also be welcomed by the Opposition.

§ Dr. David Clark
This is the new clause to which I referred earlier. We welcome it so far as it goes. I was taken by the fact that the Minister admitted that the Government were somewhat reluctant to introduce it in another place in the first instance. We accept that it is sensible to remove the restriction on the MSC, but in our view the proposal does not go far enough. The Minister argues that the MSC should be excluded because in a sense it represents a specific type of project which, but for the MSC, would not be undertaken. We believe that the same argument should apply to all direct labour organisations.
I speak with particular reference to the training of apprentices. As the Minister knows, there has been a great decrease in the training of apprentices in many direct works departments. I cite just a few examples. In Leeds city, between 1980 and 1982, the number of apprentices has fallen from 126 to 21. In Sunderland the number has fallen from 120 to 10. In Gateshead it has been cut by about half, and in the city of Manchester it has fallen from 164 to 39. In my own borough of South Tyneside, there were 700 applicants for 12 vacancies this year. The whole apprentice recruitment system in the direct works departments of local authorities has fallen apart. Unless action is taken, there will be a dire shortage of skilled labour in the future.
In the same way as the Minister excludes the MSC schemes because the work would not be done otherwise, we argue that apprentices in direct works departments should be the subject of exceptional aid because the training is not being undertaken elsewhere. In many industrial conurbations, if training is not done by the local authority, it is not done at all. That is a matter of great concern to us.
As the Minister knows, in the past direct labour organisations were allowed to charge certain appren-ticeship costs against a central fund. Under the new tendering system, however, the whole cost of training and education must be included in the costs of the direct labour organisation. We believe that that is unfair and regressive and that the Government should have extended this provision to include direct labour organisations as well as the MSC.
Therefore, although I welcome the proposal, I hope that the Minister will promise to keep an eye on this and, if possible, try to do something about this pressing problem in the very near future.

§ Mr. Macfarlane
I am grateful for the hon. Gentleman's comments and his broad welcome for the amendment, although he made it clear that in his opinion it did not go far enough. Everybody has anxieties. My right hon. Friend the Secretary of State for Employment and other Ministers have noted the Opposition's view that exemption should be extended to apprenticeship training and the costs included more generally.
My right hon. Friend wishes training programmes to be maintained in the construction industry, but he does not believe that it would be right to exclude apprenticeship 1180 training costs from direct labour organisation accounts. Unlike the costs of MSC-sponsored trainees or employees, apprentice training costs are an integral part of the costs that must be borne by contracting firms and by any organisation carrying out construction or maintenance work. As such, we believe that it would be wrong to treat this as something for which DLOs should not make allowance in their accounts.
My right hon. Friend has, however, already suggested that any authority which believes that, for social or other reasons, it has incurred apprentice training cost over and above those related to DLO needs should identify these, as agreed with its auditor, as a special item in its accounts so that the impact on the rate of return achieved by the authority on DLO activities can be properly assessed. My right hon. Friend believes that that is the proper, flexible way to deal with any problems, if problems there be. I note what the hon. Gentleman has said, but I hope that on balance he will agree that we are mindful of the difficulties and that the Lords amendments should be accepted.