Direct Labour Organisations

HC Deb 30 March 1982 vol 21 cc226-78 7.44 pm

Mrs. Ann Taylor (Bolton, West)

I beg to move, That an humble Address be presented to Her Majesty, praying that the Local Government (Direct Labour Organisations) (Competition) (Amendment) Regulations 1982 (S.I., 1982, No. 325), dated 9th March 1982, a copy of which was laid before this House on 11th March, be annulled

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

I understand that with this it will be convenient to take motion No. 6 on the Order Paper: That an humble Address be presented to Her Majesty, praying that the Local Government (Direct Labour Organisations) (Competition) (Scotland) Regulations 1982 (S.I., 1982, No. 318), dated 8th March 1982, a copy of which was laid before this House on 11th March, be annulled

Mrs. Taylor

The regulations about which we are concerned deal with the new restrictions imposed by the Government on the operation of direct labour organisations. They are being introduced without proper consultation with those most directly involved and before the existing regulations have operated even for 12 months.

The regulations are designed to offer no more and no less than a few crumbs of comfort to a building industry suffering its worst depression since the war. Like the rest of the country, it is feeling the effects of the Government's decision to cut expenditure on housing, roads and construction generally. The Government can thus offer little hope of prosperity to their one-time friends in the construction industry. Having contributed so much to Tory Party funds in the past and spent so much opposing the Labour Party during the last general election, they have got very little for their money.

The regulations are yet another and probably the most serious attack by the Government on the whole concept of direct works. The Government's attack began with the Local Government, Planning and Land Act 1980. It was intensified by the regulations that they introduced last year. Now, less than 12 months after those changes, the Government are once again changing the rules of the game and tightening the screw on direct labour organisations. They are doing this partly as a result of their ideological dislike of direct labour organisations, but also because of their need to appease big building interests—which they apparently regard as more important than the value attached by Ministers to their own assurances about the Government's legislation and intentions with regard to direct works.

I should make it clear at once that Labour Members positively believe in direct labour organisations. We recognise that, by and large, direct works departments have a good record of service to local authorities and to tenants and provide value for money to ratepayers. They have also set an example for the rest of the building industry in terms of security of employment, pensions rights, employment of the disabled, health and safety at work and apprenticeships.

Whenever we discuss direct labour organisations, however, the Government choose to ignore those points and insist on pressing ahead with their attack on direct labour. As in other areas, they wish to pursue a policy of privatisation which can be pushed through only if new, artifical restraints are imposed on direct labour organisations.

Those regulations are but the latest area of attack. In introducing them, the Goverment are clearly going back on their own assurances about their intentions with regard to direct labour.

The index-linking of tendering limits, for example, is very important to all direct labour organisations. When the original legislation went through the House, Ministers gave assurances on several occasions that the Government intended to uprate the limits. They were set extremely low in the first place.

In February 1980, the then Under-Secretary of State for the Environment, the hon. Member for Shipley (Mr. Fox), in Committee on the Local Government, Planning and Land (No. 2) Bill, said that he and the Government wanted to be fair to the local authorities. Those were almost his last words as a Minister, because he did not last much longer. However, he gave specific assurances about the Government's attitude on uprating the tendering limits. For example, in Committee, he said: We agree. ….that the thresholds should be amended regularly to take account of changing prices. Later the Under-Secretary said: I accept the principle of index linking. …it is an important principle. The Under-Secretary then said that for any figures to be acceptable in the present climate there must be regular updating. The hon. Gentleman added that the Government would, therefore, find a way of index linking the tendering limits.

It is interesting to consider what happened with regard to index linking on tendering limits now that we have come to these regulations. There has been no uprating. Worse still, the Government have not only refused to uprate their original limits and, therefore, keep their promise, but they have reduced the limits for highway contracts. We shall be interested to hear from the Minister how a reduction from £100,000 to £50,000 in the tendering limit squares with the assurances on uprating that were given by other Ministers in his Department.

Perhaps we should not dwell too much on Government assurances. They may be as worthless as the Government's assurance that they understood the problems of highway authorities, the need to have a sufficiently large work force to deal with both winter and summer work and the justification for a large investment in the specialist plant that the highway authorities felt was necessary.

Again, in Committee, the then Under-Secretary said that he believed it was necessary for highway authorities to have sufficient work to keep a team of skilled operatives readily available. They would be necessary to justify investment in specialist plant. The hon. Gentleman went on to say: There is, therefore, a particular problem. We have proposed, therefore, that below the £100,000 level there should be no mandatory tendering".—[Official Report, Standing Committee D, 26 February 1980; c. 200–232.] However, the Government now propose that the tendering limit of £100,000, set in February 1980, should be only £50,000. Surely all the factors that the Minister thought important in February 1980 are just as relevant now. The limit should not be dropped to £50,000; it should be increased, in line with Government assurances, to £125,000.

I assure the Minister that not only Opposition Members are worried about the proposed change. Many Tory county councils are worried about the effect that these changes will have on them. One senior county engineer and surveyor has recently stated that the original considerations that led the Government to set their limits have not changed and that the limits should now be raised in line with inflation.

I should like to know how the Minister justifies what has been going on in conjunction with the Department of Transport. The Department of Transport has issued a substantial questionnaire to all highway authorities seeking evidence about the likely impact of the proposed changes. The Government introduced regulations on 16 March, but the response to the questionnaire was not due back at the Department of Transport until 26 March. This shows clearly that the Minister had made up his mind by 16 March, that he had no intention of looking at the opinions of those directly concerned in these matters and that he also had no intention of taking those consultations seriously. I ask the Minister to justify that action and to explain why the questionnaire was sent out at all if the Government had already prejudged the issue.

The other main change in the regulations is probably even more damaging to local authorities. This concerns tendering for maintenance work on jobs below £10,000. The Government are putting constraints on direct labour organisations that do not apply to private contractors to make it easier for private contractors to win tenders. The Government are still insisting that direct labour organisations must make a return of 5 per cent. on each of the four descriptions of work given them. Yet everyone knows that private builders are not claiming, and are not making, a 5 per cent. return at present. Moreover, private firms can, and often do, balance profit and losses on different contracts. Cross-subsidisation is common in the industry. Direct labour organisations will not be allowed to do that. The Secretary of State will be able to say that one part of a DLO is not performing satisfactorily and will be able to close it down if it does not meet the 5 per cent. target. That situation does not apply to private industry.

Who will check the returns of building firms with the same scrutiny that is applied to those of DLOs? Will the Minister confirm that the Inland Revenue estimates that tax evasion within the private building industry amounts to £1 billion a year? Will the Minister be making any representations to the Treasury to ensure that local authorities benefit from the 1 per cent. cut in the national insurance surcharge just as private contractors will benefit? If the Minister is not looking into these matters, hon. Members will have further evidence of what he means by fair competition.

The new regulations on maintenance work mean that the administrative charges of local authorities will increase considerably. My local authority in Bolton had to take on extra temporary staff last year to deal with the tendering arrangements and the regulations that the Minister then introduced. Now that 30 per cent. of maintenance work below £10,000 has to go out to tender, it will have to put more people on to the preparation of tender documents and such activities—all at a cost to the authority.

At a time when the Secretary of State accuses local authorities of overspending, he is putting more pressure on them. The extra adrnininistration is already costing local authorities money. Sheffield direct works department has been monitoring some of the extra costs involved in the changes so far. As a percentage of the contract sum, the extra cost of the preparation of specifications, tender documents, valuation certificates and suchlike amounts to 2.63 per cent. The extra cost of the supervising of contracts amounts to more than 4 per cent. That is a total extra cost to the authority of 7 per cent. It estimates that this example is typical of the extra cost to the authority. On average, on maintenance work, local authorities will find their costs increasing by between 5 and 10 per cent., depending on the size and nature of the work. All that means that there will be less work for the authority, because this administrative cost has to come out of the budget for work.

At the moment, many direct labour organisations believe that they are well organised and can win contracts against fair competition. For example, Manchester estimates that it has won 75 per cent. of the contracts for which it has been tendering. Why should efficient DLOs be burdened with extra bureaucracy when they are already operating satisfactorily? Why should local authorities be forced to do less productive work and more paper work?

If more work goes to private contractors, the general conditions of employment in the building industry will decline. One of the reasons for local authority costs being higher is the need for increased supervision of private contractors regarding matters such as safety. In Sheffield, in the past three months the local authority has found it necessary to record 37 verbal warnings to contractors because of their failure to comply with safety regulations. Problems ranged from defects in scaffolding to the way in which they dealt with stripped asbestos. Work had to be stopped on three contracts and the factory inspector had to issue four prohibition notices. With such practices going on, it is not surprising that the supervision costs of local authorities increase.

The Minister is attempting to stack the cards against DLOs, so that private builders can get a bigger slice of the smaller construction cake. It is only because of the Government's failure to pursue a reasonable level of construction work that private builders are interested in direct labour work. If and when there is an upturn in construction work, private contractors will be less interested in DLO work, especially maintenance work, because they will expect a higher return from new build.

The regulations are little more than a sop to private builders in lieu of a proper building programme. They are an attempt at privatisation that will be costly to the public purse in the same way as the Government's decision to scrap the road construction units has been. That cost £9 million last year in winding-down costs. We have yet to see the total costs when private contractors start to hold local authorities to ransom because they know that local authorities are no longer able to do the work. Even Sir Derek Rayner, in his report on road construction units, acknowledged that the RCUs' costs were 15 per cent. lower than they would have been had the work gone to outside consultants.

The Government's one-sidedness is apparent in the way in which they insist that DLOs cannot compete with private contractors for work outside their own localities. If the Government are serious about fair competition, they should remove these restrictions and allow DLOs to compete where they wish. The regulations are not an attempt at fair competition for the DLOs. They are vindictive and they discriminate against DLOs.

However, this is not the end of the story. We are worried about what further restrictions the Minister might want to introduce next year. I hope that he will give us some assurances that these regulations will be the end of the line, and that he will not introduce even worse measures next year.

The Labour Party believes that the Government have not stood by their previous assurances on DLOs. The Government will do anything rather than introduce a reasonable policy for the construction industry. We believe that the regulations are irrelevant and vindictive to Britain's building needs. We shall vote against the regulations.

8.5 pm

The Minister for Housing and Construction (Mr. John Stanley)

The hon. Member or Bolton, West (Mrs. Taylor) suggested that direct labour organisations felt discriminated against. I assure her and the rest of the House that the private building industry feels that the competition visa vis DLOs is far from fair since the new regime started on 1 April 1981. I shall elaborate on that in a moment.

I have been looking at the background on the various policy decisions on DLOs in recent years by the Labour party. One of the statements that I came across was that we should ensure that DLOs are efficiently run as separate municipal enterprises, publicly accountable for their performance. That is not a policy statement by the National Federation of Building Trades Employers, or by the Federation of Civil Engineering Contractors, or even by the organisation much loved by the Labour Party, the Campaign Against Building Industry Nationalisation. It is an extract from the 1979 general election manifesto of the Labour Party. That manifesto statement alone, that DLOs should be "efficiently run" and "publicly accountable", destroys from the outset the Opposition's case for the prayer.

I now give some background to the order which is the new statutory provisions concerning DLOs introduced in the Local Government, Planning and Land Act 1980. Those provisions were long overdue. The hon. Member for Bolton, West suggested that DLOs had a good record., and certainly in the late 1960s and throughout the 1970s as the House will recollect, there was a whole series of DLO scandals in individual authorities which evidenced gross inefficiency and gross waste of ratepayers' and taxpayers' money. It was recognised almost universally that there was an imperative need to improve both the efficiency and the accountability of the DLOs.

Interestingly, even those whose uncritical admiration of most forms of public sector activity is normally fairly boundless were compelled to admit that all was not well with the DLOs. I noted that the hon. Member for Lambeth, Central (Mr. Tilley) who was then chairman of the building works committee of the Wandsworth borough council, felt bound to confess in his pamphlet, "Changing Prospects for Direct Labour" that some of the criticisms had some substance. He went on to say: while many `DLOs' are well run, there are some which are not. Coming from the hon. Member, that was a fairly remarkable confession.

The need to increase the exposure of DLOs to competition, which is what the regulation seeks to do, was also fully recognised by Ministers in the Labour Government. I note that replying to a question from my hon. Friend the Member for Hove (Mr. Sainsbury) the then Under-Secretary of State said: The efficiency of direct labour departments should be tested in competition with private contractors."—[Official Report, 15 October 1975; Vol. 917, c. 1338.] The right hon. Member for Brent, East (Mr. Freeson), when he was Minister for Housing and Construction, set up a departmental working group to examine DLOs and the report of that group reads: No authority should allow work to be allocated to its DLO without assurance from fair and reasonable testing of the market that by doing so benefit will accrue to the ratepayers. There could be no more emphatic statement of the desirability of competition with DLOs. That was the background to the new DLO provisions that we introduced in 1980, when there was a well-nigh universal acknowledgement that DLOs should be made more efficient and more accountable.

The hon. Member for Bolton, West suggested that the regulations were premature, and that the new system should have had longer to settle down. I remind the House that my hon. Friend the Under-Secretary of State for Health and Social Security made our position clear nearly a year ago. He said on 22 June: We propose to review all aspects of the operation of the new regime for DLOs in the light of experience of its working this first year".—[Official Report, 22 June 1981; Vol. 7, c. 56.] That DLO review has taken place and has been carried out in detail.

Mrs. Ann Taylor

Will the Minister tell us more about how he has carried out such a wide and sweeping review in less than nine months since that statement was made? How can he assess the workings of regulations which have not been in operation for 12 months?

Mr. Stanley

The review has been done in a full and comprehensive manner. We invited representation from local authorities and from the construction industry. The response from the industry was substantial.

I want to make it plain that, while the review has shown that the majority of authorities have sensibly and responsibly followed the new DLO provisions, it is apparent that a number of councils have blatantly and in a most determined manner sought to prevent DLOs from being exposed to proper competition from the private sector. The value of the construction work now undertaken by DLOs is considerable. In 1981 in Great Britain, DLO output represented about £2 billion worth of construction work. That constitutes a significant slice of work for the construction industry as a whole, and the Government consider it essential that the construction industry as a whole should have a fair chance to compete for it.

It is clear that in some authorities the private sector has not been given a fair opportunity to compete for this work, and that the name of the game, in some authorities at least, has been to circumvent the intention of the legislation. Councillor John Senior of Sheffield—an authority quoted by the hon. Lady—the convenor of the Association of Direct Labour Organisations made clear that association's objectives when he said, according to the Municipal and Public Services Journal: We mean to obstruct the new laws every inch of the way—that's what we're all about". He went on: We should get our solicitors departments to advise us on how to get round the new direct labour legislation". That sort of approach is still current in some quarters, and it was vividly reflected in the advice that was given to NUPE members in a recent article in NUPE News: Members of NUPE working for local authorities need to be vigilant. When they hear of any moves—the merest suggestion—that private contractors are contemplated they should raise the matter with their Branch and full-time officer … Above all, NUPE members must be ready to challenge each and every attempt by private contractors to burrow into local authority services". Conservative Members feel that the time is overdue for a certain amount of burrowing into certain monopolistic activities.

I shall describe what the Government propose in these regulations, in the related circulars, and in other ways, to deal with the various devices that have been employed over the past year to prevent DLOs from being exposed to fair competition. First, a number of authorities have excluded all contractors from tendering for DLO work unless they employ 100 per cent. trade union labour. In our view, that is a blatantly restrictive practice, and we greatly welcome the fact that my right hon. Friend the Secretary of State for Employment in the Employment Bill, is making void, and therefore unenforceable, any union labour-only clauses in contracts.

Second, a number of authorities have imposed a variety of onerous contractual conditions as a means of deterring competition from the private sector. These include, for example, excessive performance bonds, above even the maximum recommended by the local authority associations themselves, and also clauses that enable the local authorities unilaterally to determine whether a breach of contract has occurred, with no independent safeguards for contractors. Although those devices are within the purview both of district auditors and of the Director General of Fair Trading, I draw attention to the fact that my right hon. Friend stated in paragraph 19 of the DoE circular 6/82: They will if necessary seek legislative powers to enable them to prohibit specific requirements or conditions of contract which appear to them to be unreasonable and artificially to reduce fair competition". Third, in our view there has been some abuse of the limited exemption from going out to competitive tender on contracts that are extensions of existing ones. In the regulations we are therefore reducing the scope of the exemption for extension contracts, and we are also tightening up the definition of two important terms used in the regulations—the definition of a job, and the definition of estimated cost.

Fourth, in a number of cases local authorities have gone out to tender, the bids have come in, and the contract has been awarded to the DLO, even though the DLO did not submit the lowest tender. Of the evidence on this point that has come to the Department in recent months, there was, for example, a Harlow council contract worth over £100,000 for an extension to council offices which was awarded to the DLO, even though the DLO was under bid. A Gateshead council house modernisation contract, worth more than £400,000, was awarded to its DLO when again the DLO was under bid. A Sandwell council housing contract worth over £600,000 was given to its DLO, again when its DLO was under bid. The Government consider that, unless there is good reason to act otherwise, it is inexcusable for a local authority to accept other than the lowest tender.

For that reason my right hon. Friends have now used their new powers under section 18 of the Local Government, Planning and Land Act to issue directions under which the annual reports of direct labour organisations will have to specify the actual contracts awarded to DLOs where the DLO was not the lowest tenderer, and the reasons for the decision in each case. That information will be examined extremely carefully by both my right hon. Friends and by district auditors.

Finally, the representations that we received in the review convinced us that it was perfectly practical and highly desirable that more of the highways work and maintenance work that is not currently exposed to competition with private sector could and should be put out to tender. Hence our proposals in the regulations to reduce the threshold for competition for highways work from £100,000 to £50,000, and our proposal to put an initial 30 per cent. of maintenance work below the £10,000 threshold out to competition.

The hon. Lady set out the predictable string of arguments about why further competition is undesirable. The Labour Party has never managed successfully to reconcile its belief that DLOs are the most efficient organisation in the construction industry with its equally fervent belief that they should be shielded from the competition of the private sector to the greatest possible extent. I am not entirely sure how those two can be reconciled. I suggest that the arguments that were advanced are false because a number of authorities are already going out to competition for work below the current thresholds and are doing so perfectly satisfactorily.

Devon county council, for example, has already adopted a £50,000 threshold for highways work, and I understand that the county has found that that provision provides an efficient use of its resources and is quite satisfied with it.

Northamptonshire county council does not make any use of a formal threshold for putting highways capital projects out to tender. For a number of years that council has sought competitive quotations for virtually all highways work in its capital programme.

In London, the borough of Bromley, I understand, put two-thirds of its highways work below the £100,000 threshold out to competitive tender. Croydon is another borough that put work below the £1 00,000 out to tender.

The same is the case on non-highways maintenance work where many authorities are already putting out a substantial proportion of work below the £10,000 threshold to competitive tender.

The new towns—for example, Peterborough, Central Lancashire and Warrington—put virtually all their maintenance work out to competitive tender.

In London, Bromley puts over half its maintenance work below the £10,000 threshold out to competition, and Kensington and Chelsea and Hammersmith and Fulham put some two-thirds out to competition.

Outside London, many districts, including Solihull, Woking and Brighton, do likewise. Indeed, I understand that in Brighton any work costing more than £1,500 is put out to tender.

All that could not demonstrate more clearly that the arguments advanced by the Opposition are shallow.

The Government consider that a further tightening up of the DLO competition regulations is important. Competition is far and away the best guarantee of value for money and of proper protection for the ratepayer and taxpayer. The leading body in local government concerned with proper financial discipline, the Chartered Institute of Public Finance and Accountancy, in its report on DLOs, said: The only reason for the continued existence of a direct works undertaking is its ability to provide a service at least as effective and economical as its competitors. We agree with that. Our new regulations are designed precisely to that end, and in the interests of efficiency and economy I ask the House to reject the Opposition's prayer.

8.22 pm

Mr. Reginald Freeson (Brent, East)

Frankly, I have never heard such a feeble speech about DLOs in all the time that I have been in the House. To talk as though the measures before the House are of any significance for the construction industry's capacity to compete for public works is nonsense. It is a sop, and, frankly, leading representatives of the building industry, with whom I have a great deal of contact, should be ashamed of themselves for the silly, facile and childish campaign that they have continued to run in pursuit of this kind of measure. The Minister is weak to respond to that kind of nonsense. It is irrelevant to the problems of the construction industry. The only relevance it has to direct works is to impose unnecessary restrictions.

The Minister went through a string of local authorities which were, at least in part, operating the kind of threshold procedure that he is incorporating in the regulations. Well, good luck to them. That is a matter for them. It is a matter for their elected members to decide. It is a matter for their ratepayers and their citizens to argue about, and to change or to extend as they so wish. However, there is absolutely no justification for the Minister to quote such a series of examples in support of a national imposition on all local authorities irrespective of local conditions and economics.

Strung through the Minister's remarks were a number of quotations; one or two attributed to me and my colleagues in the Labour Government in the Department of the Environment, another attributable to the Chartered Institute of Public Finance and Accountancy and another organisation whose name I have forgotten. In none of those cases was the Minister stating the position being argued, except, possibly, when he referred to the answer to the undated parliamentary question. All those quotations from myself, from CIPFA, and from the working party report of 1978 and others, must be set in context.

The working party report of 1978 was circulated as a basis for more effective action by DLOs. It was a good report. However, let me deal with some history. The. Minister is fond—as are other Conservative Members and some people in the industry—of raising rather foolish Aunt Sallys as if they are the party of greater efficiency in the construction industry. He does so as if the Conservative Party was the party of greater efficiency in direct works organisations and as if the Labour Party merely accepted, with bright blue eyes, that everything that direct labour organisations did was perfect, efficient and marvellous and that nothing should touch them.

The history of public policy-making is quite the reverse. In 1969, when I was Parliamentary Secretary in the old Ministry of Housing and Local Government—in the Labour Government before last—we produced a manual. The Labour Government set up a working party, It was the first of its kind. At no stage during the previous 13 years of Conservative Government had anything like that been produced. The manual was entitled "Manual of Principles of Financial and Management Control for Local Authorities Carrying Out New Construction by Direct Labour". It was a guidance document and was issued to all local authorities in co-operation with local authority associations, following extensive study.

In 1974, when I was appointed Minister—after an intervening period of three and a half years of Conservative Government—I was concerned to ensure that there were efficient direct labour organisations that could undertake a widening role, where it was right for them to do so. Before taking any further steps, I checked to see what had been going on since the Labour Government left office in 1970. The Minister is free to check what I have to say about the previous Conservative Government, because there is nothing secret about it. Between 1970 and 1974 not one step was taken by any Minister in the Department of the Environment to monitor the effects of the manual's circulation. It was left to the incoming Labour Government to do that. We did so with the back-up of CIPFA and we set up another working party, which produced the report of 1978. In addition in the statements that we made and the consultations that we undertook, we issued guidance to ensure that the guidelines set out in the manual—which were reinforced by the CIPFA report and by the working party that I had set up—were applied.

We began to prepare legislation. It went far beyond the nonsense that we have received from this Government. We were concerned to see efficient, effective local authority direct work organisations and so were the local authority organisations with whom we consulted and studied. We began to draft legislation. Ironically, that draft was ready to be presented, but was killed by the Lib-Lab pact. It would have gone well beyond the legislation that has existed since 1980, which is being reinforced by this legislation.

We would have given local authorities the power and right to enter into genuinely free and open competition with the industry. We would have given them the power to convert their direct labour organisations into genuinely independent municipal enterprises and building companies. It was all there in draft. They would have been able to compete freely for work outside their boundaries. However, even then the system would not have been fully free, because the provision would merely have been extended to allow them to do work for housing associations, for adjoining local authorities and for public sector services that they were prevented—and are still prevented—from undertaking. That would have been a major policy step forward. To their shame, those in the industry for whom I would otherwise hold great respect ran in fear of the prospect of somewhat freer competition from well-organised direct labour organisations.

Such legislation would also have brought inefficient organisations to book. The preceding Tory Government did not take any steps to see to that after the publication of the manual. That is the policy background and the approach which, if hon. Members and the industry willed it, could provide the basis for a genuinely fair and objective attitude towards the role of public sector building works. A genuine basis for competition and efficiency must be established but there is no question of greater equity and greater efficiency in the regulations. It is a petty move and a sop to some of the industry's leaders—who should know better—in a difficult situation in which virtually every area of activity has declined.

In the past few days, I have seen the figures published recently by the Department of the Environment. This is the background to the regulations before us. In 1981 the total output of the construction industry was down by 12 per cent. on 1980. In the last quarter of 1981 it was 4 per cent. lower than in the third quarter, and it was 10 per cent. lower than in the fourth quarter of the previous year. New work in public housing was down by 10 per cent. on the third quarter and was 39 per cent. lower than in the fourth quarter of the previous year. New work in public non-housing works was 4 per cent. lower than in the previous year. New construction in the private industrial sector was down 2 per cent. in the third quarter of 1981 and was 18 per cent. lower than in the fourth quarter of 1980. Under the present Government, every area of activity of the construction industry is down. That is the background to this petty piece of nonsense.

The regulations are massively irrelevant to the needs of the building industry. It is about time that the Government and the leaders in the industry began to be objective and sensible. Instead of playing around with this silly nonsense, there should be, and there could be, an expansion of public works. It would not produce a radical change overnight—we have gone too far down the road of decline for that—but the works could get under way and in so doing could provide a much larger and more sensible work load in short, medium and long-term programmes for the entire building industry.

In that context, there would be provision for more work by efficient DLOs without petty constraints, which impose unnecessary costs on local authorities and put at risk the jobs of a growing number who have been employed by DLOs—good craftsmen and good workers who are modestly paid and who provide a good service on the whole.

I turn to the image of direct works that the Minister has gone out of his way to encourage others to pursue. The Minister is right to say that over the years there have been direct works organisations in a number of local authorities that have operated inefficiently for longer than they should.

Mr. Michael Brown (Brigg and Scunthorpe)

Scandals!

Mr. Freeson

When the hon. Gentleman says that there was a series of scandals, he is grossly overstating the position and is creating a smear. Such language is unnecessary because even where there have been cases of inefficiency it is wrong to generalise and say that they are scandals. There have been scandals but it is true—I do not say this as an excuse for inefficiency in certain direct works organisations—that there have been massive inefficiencies and scandals in the private sector. However, we do not go around smearing the whole of the private building industry.

This type of political nonsense has been going on for far too many years both in the House and in the media. It is about time that it stopped. It does no good to the construction industry—it does not enhance its work load, it does not improve its efficiency as a whole and it does not do any good to direct works. All it does is mislead the public and the industry. If action is taken as a consequence of this view in the belief that something is being done for the industry when it is not, it will demoralise those who wish to see good standards, good organisation, good management and good work in the public sector. Examples of inefficiency are in the minority.

Secondly, there are at least as many instances, if not more, where direct works organisations have picked up the tab for collapses in the private building sector on certain contracts. Shortly after I was appointed Minister for Housing and Construction I had the ironic experience of having to instruct my officials to go into close and intense negotiations with the local authority in my constituency because there had been a major collapse by a private sector contractor engaged on a large redevelopment scheme in the area. The direct works organisation had to pick up the contract at an additional cost of £1 million and it had to apply for a special loan sanction. That is not the only example. As a local councillor, leader of the council and a Member of Parliament I am aware of half a dozen large-scale collapses by private contractors over the years.

The Minister fosters the impression that direct labour organisations have the lion's share of public sector building works, small though they have become over the past two or three years. That impression is incorrect. The bulk of public sector work is undertaken by private contractors. Even in these difficult times half the work load of the building industry, which is worth thousands of millions of pounds a year, is in the public sector, and a large slice of that comes from within the local authority sector. However, only 4 per cent. or 5 per cent. of the total work load in the building industry is carried out by direct works organisations.

Surely we, the industry and the Government have more important things to concern ourselves with in our involvement with the industry than the petty piece of nonsense that the Government have introduced. It is a sop. It will do no good to the industry. I do not believe that it will make that much difference to the private sector work load. It may increase it marginally by about 1 per cent. Someone who does not need them will make a few more coppers and the ratepayers will have to pick up the tab. It will do the industry no good as it will continue to face the same problems. The measure will damage local authority work and will lead to further demoralisation. It misses the point of what needs to be done for direct works organisations and the construction industry. The Minister should not present pieces of nonsense of this sort. He should go away and do his job of work.

8.39 pm

Mr. Tony Durant (Reading, North)

I welcome the regulations. Direct works started with the best of motivations. Local authorities wanted some of the small maintenance work on their properties and schools to be carried out by direct labour organisations and the scheme grew. For a long time it did not seem necessary to do very much. The right hon. Member for Brent, East (Mr. Freeson) has told us what he had in mind—thank God it was not enacted—which would have led to the creation of enormous municipal undertakings which could have gone outside the local authority sector to compete all over the place—

Mr. Ted Graham (Edmonton)

Yes, competition.

Mr. Durant

The right hon. Gentleman made me more frightened than ever. I am not frightened of the word "competition". I like the word. When the right hon. Gentleman served as Minister for Housing and Construction he produced one or two interesting documents. I did not read the municipal undertakings document because it did not see the light of day. However, we heard talk of it. I refer to the development that the right hon. Gentleman said would arise. He said that he was delaying plans which were lost because of the Lib-Lab pact.

Mr. Freeson

The hon. Gentleman misheard what I said. We undertook a major study in conjunction with local authorities and produced a working party report. That was published, circulated and was obtainable in the Library's Victoria Tower. That circulation became the basis for action by a growing number of local authorities in Britain, before the question of legislation was raised. It was killed by the Lib-Lab pact.

Mr. Durant

I was not commenting on the right hon. Gentleman's documentation, which was used by local authorities. I was concerned with what it was leading to, what the right hon. Gentleman said was in the legislation pipeline and what was killed by the Lib-Lab pact. The right hon. Gentleman said that local authorities could go out and compete. Opposition Members shouted "Competition" so they must believe that his remarks were right. As a Minister in that Government, he produced a number of papers, including a Green Paper on housing. That was an interesting document, but its proposals were never implemented. He also produced a paper with a yellow cover on the Rent Acts. That was also an interesting document and I still carry it with me. It concerned reforms of the Rent Acts and, again, he ran away from them.

Therefore, the right hon. Gentleman does not have a great housing record to put to the Government. He produced interesting documents but little came of them. That fact must be clear.

When I asked the right hon. Gentleman whether we needed these municipal undertakings, he said that he would create them. Do we need them? What are they for? Do we not have a private construction industry prepared to do this work anyway? What is it all for? It is to create a bigger municipal undertaking, and that is a bad step. I have been nervous and suspicious of direct labour organisations all my political life, even when I was a local councillor. When calculating estimates, such organisations do not include a percentage of the chief executive's salary or a percentage of the civic office's costs. They are, of course, all parts of the overheads. If one is running a company, parts of the overheads must go into every contract. However, when one gets down to that sort of detail and considers the estimates, of course, such overheads are not there. There is no point in all this elaboration to do work which plenty of people are already able to do.

I strongly support this measure. Of course, if local authorities throughout Britain had taken the spirit of the 1980 Act, we would not be discussing these regulations. We are doing that now because many of them set out 10 break that legislation. Therefore, we are trying to put things right. Local authorities found ways of getting round it. If authorities had said that they agreed with the Government's desires, that they seemed reasonable measures and that they would go along with them, we would not now be legislating. That is why the industry has become anxious. One cannot blame it for getting anxious because it is basically unfair competition. Contracts are not put out to full tender in many cases. That should be done. I support the lowering of levels. Unfortunately, in the 1980 legislation, a job was not clearly defined. That may be our fault, since we put the legislation through. A job should be defined, and it now is in these regulations.

To say that we must have an enormous army of people ready for the weather because otherwise the roads might get blocked is nonsense. Most local authorities must use private contractors during bad weather conditions anyway. It is nonsense to keep a large force ready in case the weather deteriorates and road conditions become bad. That is a complete fabrication and I cannot understand why it is necessary. The legislation that we pushed through was deficient. It did not allow construction and maintenance work to be subdivided to avoid the competition threshold. We now want the competition threshold to be lowered.

There is detailed documentary evidence that some local authorities, particularly metropolitan authorities, want to get round the regulations and bring in union-only labour contracts. In a free society, is that right? Is that the way we should run our country? Certainly not. Why should that be a term of fixing a competitive contract? That is not fair competition. I was barracked by Opposition Members on the question of fair competition. That is not fair competition by anyone's standards.

Therefore, I support the regulations because they provide an opportunity for the private sector to do more local government work, which they do well and adequately. The Opposition's arguments are way out and oriented towards the belief that the man in the town hall knows best instead of saying "Cannot we get rid of the elaborate machinery of local government?"

Mr. Freeson

The legislation will make for more bureaucracy, not less.

Mr. Durant

Of course it will not. If it makes more, the department needs examination by the district auditor because that means that once again people are not doing the job that they are paid to do.

The construction industry would like its share of the £1.5 billion worth of work, which is thought to be the amount of local government work to be done at the moment. It is right that the industry should have that opportunity.

A large number of small firms would like to take on work such as school maintenance. Why should local authorities be involved in such activities? The reason why local government has increased is that it has become involved in work that should be put out to private contract. It is not the job of local authorities to run everything in their areas. That is the slippery road to over-bureaucracy, high costs and high rates.

Therefore, I support the measure, which is sensible and reasonable. After all, it does not abolish the direct works departments. I may be moving that way, but the Government are not moving that way; they are merely saying that those departments must compete. That is a reasonable statement. Why are Opposition Members so nervous of that? If they are in favour of competition, what is the matter with the regulations? Is there anything wrong with making the competition open and honest? I support the regulations and welcome the Minister's statement.

8.47 pm

Mr. Ken Eastham (Manchester, Blackley)

I cannot make up my mind whether I ought to feel sorry or angry about some of the comments that have been made by Conservative Members. They have made a feeble case in trying to justify the constant attack on direct labour organisations.

There is what seems to be a constant obstacle course for the direct works organisations. If they can cope with the legislation that the Government have introduced, the Government will go back to the drawing board, take a fresh look at the legislation and see whether they can introduce some more legislation that will frustrate once again direct works organisations. That will continue. I have no doubt that, due to their efficiency, direct labour organisations will still survive. Then the Government will once again go back to the drawing board to try to find some other ways to nobble those organisations.

We have constantly experienced the hatred of Conservative Members. When I was in local government for years it was the same with Conservative councillors. Often they made all sorts of charges that could not be confirmed or founded, but they were being fed to them by the private sector. They were so panic-stricken that they had to collude in any way so that they could undermine this useful vehicle for the ratepayers.

I suppose that that is part of the spoils of winning the general election. The private building sector is now expecting to be paid off. That is a consequence of the Conservative Party winning the general election. They will continue to carry on the pay-off and those who will be paying will unfortunately be the ratepayers. The Government are handing out all the goodies as the years go by.

It seems reasonable for me to remind the House why direct labour organisations were introduced. I spent a number of years in a large and very efficient local authority, a model of its kind, to which central Government, including Conservative Governments, often turn. I remember the early 1960s when we were constantly ripped off by private firms with their price rings. They decided who should receive particular contracts. We had no direct labour organisation at that time. A contract would go out to tender and we used to receive offers from four or five firms which varied by only about £5 for jobs costing hundreds of thousands of pounds. Then one firm would tender for a little less than the others and, surprise, surprise, that company would get the contract. We would all pay through the nose, as ratepayers, and we in local government knew it.

It was precisely because of this that we had to do something about it. We thought it would be no bad thing if we did without the middle man and organised our own building force to get cracking and beat them at their own game.

We had to put up not only with price rings but with shoddy workmanship as well. The private sector had a very poor record. Work was not completed on time, there were months of delay with all kinds of excuses offered and there was no accountability such as we can have in our own organisations. When we introduced our direct works organisation, we enjoyed better accountability and also had some say in the finishes.

Local authorities have one prime responsibility—to get the best possible deal for the ratepayers. So far tonight I have not heard one Government Member express a real, basic interest in the ratepayers, yet it is the ratepayers who ultimately pick up the bill and we should not forget this.

Mr. Durant

Just as a point of correction, I did mention the ratepayers.

Mr. Eastham

I am surprised. It must have been such a fleeting reference that I did not pick it up. I am glad that the hon. Member did mention them. More ratepayers ought to take note of some of the speeches which hon. Members on the Government side make in this place, when it comes to getting value for money and when we talk about competition.

In these proposed amendment regulations we are to introduce a compulsory 5 per cent. profit. The direct labour organisations work for the local authorities yet they are to be compelled to make an extra 5 per cent. As far as we were concerned, if something could be done purely on a cost basis that was what the ratepayer ought to pay. I certainly cannot understand why the direct works organisation has suddenly to take another 5 per cent. profit. It seems absolutely barmy even to consider it.

Maintenance is what we are primarily discussing tonight, although I should like to deal later with one or two other matters that have been introduced by Members on the Government Benches. It is logical for companies to run their own maintenance organisations. The large engineering company for which I once worked thought it was both profitable and a matter of sound management to have its own maintenance department. It had its own bricklayers, electricians and maintenance men because this saved money. It did not bring in outside contractors. It could have done but would not have dreamed of doing so. It would not have been so barmy. It realised that there is a basic benefit in organising and paying for its own maintenance. Conservative Members cannot deny that.

Mr. Durant

Although I accept that that was the custom, I assure the hon. Gentleman that industry is putting more and more work out to contract. That is the present trend.

Mr. Eastham

I would hate to disabuse the hon. Gentleman, but often companies have specialised machinery. Bill Bloggs down the road with his handcart is not usually the right sort of man to maintain expensive, sophisticated equipment. If firms wish to ensure that maintenance is carried out properly, they do it themselves. Even in local government many sorts of sophisticated equipment need maintenance. I do not mean only painting or building walls. Even local authorities have expensive heating plants and air conditioning and it pays them to have specialists working under their control.

Reference has been made to emergencies. About four or five years ago there was a freak gale in Manchester and the roofs were blown off 500 or 600 houses. Fortunately, because we had a direct labour organisation, we were immediately able to put out an emergency team that could carry out some repairs without any nonsense about tendering. We had that benefit, which has been repeated scores of times when local authorities are faced with emergencies.

Mr. Bob Cryer (Keighley)

Would my hon. Friend acknowledge that there have been circumstances where even Tory-controlled local authorities have established direct works departments? After local government reorganisation, when the former Keighley borough council—controlled by Right-wing extremist Tories—had handed over the maintenance of council houses entirely to private enterprise contractors, the incoming Conservatives in Bradford found that such a shoddy job had been done by the private companies that they established a direct works department to take over the maintenance.

Mr. Eastham

I am grateful to my hon. Friend the Member for Keighley (Mr. Cryer). Greater Manchester county council, when it was Conservative-controlled, asked Manchester city council to maintain many lifts in the area. That was a real hard-line Tory council at the time. Thankfully, they were smashed at the previous elections and they are out for four years, but the city council will carry on providing the services in any way possible.

The new regulations propose that in future there mast be a mass of documentation. After the documentation has been completed, it must be sent out for tendering, with the attendant time lag. The tenders must then be returned and considered. They must be legally vetted and, if the tender is granted to a private firm, we must have inspectors to ensure that the firm has done a good job. It is very tricky to deal with some private concerns.

Every part of the sequence that I have just mentioned requires manpower. Year after year the Government have been swanking and telling local authorities that they must reduce their staff, but the implementation of this legislation will require more manpower. It has been estimated that the Government are placing a burden of an extra 5 to 7 per cent. on direct labour organisations, which must be paid for by the ratepayers. Central Government will not pay for it. So the ratepayers will be paying mere and ultimately getting less work. That is the kind of philosophy that is being introduced.

It is interesting to note that some of the biggest building disasters in Manchester were completed by the great champion of the private sector that has been referred to. I will give the House one or two examples. The hon. Member for Brigg and Scunthorpe (Mr. Brown) was shouting, "scandals!" We will talk about scandal. There are scores of examples but I will mention only a few.

The Bison flats in the Wellington Street development, which I know very well, were completed about 10 years ago and consisted of 1,000 dwellings. They are now so bad that the architects cannot cure all the defects. There has been a survey and the council has been told that it would cost £9 million to make the flats habitable. I call that a massive scandal. The flats will have to be demolished because they are so bad. Unless the council is fortunate when it goes to court, it will be the ratepayers who will ultimately have to pick up the bill.

Mr. Durant

I am sorry to keep interrupting the hon. Member. I presume that these Bison properties in Manchester were built under contract to the local authority. Surely the local authority bore some responsibility for their condition. If that was a contract put out by the local authority, surely it is partly responsible. I am asking that question.

Mr. Eastham

You are asking the question. One of the great problems of dealing with the private sector is all the dodging and weaving that goes on. Are you trying to suggest that we need an army of inspectors to watch everything that the private sector does? That is basically what you are saying.

Mr. Deputy Speaker (Mr. Ernest Armstrong)

Order. The hon. Gentleman keeps accusing me of various things. He must not do that.

Mr. Eastham

I am sorry, Mr. Deputy Speaker. I do not wish to do that.

The hon. Member for Reading, North (Mr. Durant) is implying that in future when the private sector does any big jobs, we shall have to engage a massive team of inspectors to watch everything that is going on.

There was another scandal in regard to Manchester abattoir some years ago. A private contractor came in to build a new abattoir. So far as I remember, the price was £3 million. It was a complete shambles. The firm collapsed and left a load of rubble on site. Nothing could be done with it. We had to turn to our direct works organisation and ask it to pick up the pieces. If we had not done that, another private firm might have come in but naturally that would have been at a competitive price. Fortunately we had our own direct labour organisation to do something about it.

Another example in Manchester is the Turkey Lane development. These flats were built privately about seven years ago. I have been told that massive funding will be required to make them habitable; it is going to cost £750,000 in 1982–83. We shall be lucky if we can keep those flats together rather than being forced ultimately to demolish them. That is another example. It should not be forgotten that the cost of all that must be met by the ratepayers. Yet Tory Members pontificate about saving ratepayers' money, and about responsibility and competition. What kind of competition is that? If Tory Members could cite scandals of that scale—I am only giving odd examples—the House would never hear the end of it. The CABIN organisation and the rest would churn out leaflets about £9 million going down the drain in Bison flats in Wellington Street. They would have gone to town publishing such stories but they do not have them because our organisations are more honourable.

My right hon. Friend the Member for Brent, East (Mr. Freeson) said that in some towns there have been hiccups, but local authorities have had the courage to face up to them and to try to put matters right. That is quite different from the attitude of Tory Members. Their main desire is to smash direct works organisations. That aim does not hold water and certainly carries no conviction with people living in areas such as mine who recognise the value of these organisations.

Mr. Michael Brown

The hon. Gentleman has just made a point on which he should be asked to expand. He said that he objected to the possible existence of an entire army of bureaucrats to inspect private building works. Those same local authorities double up on the work of the Housebuilders Federation which imposes extremely tight and stringent inspections on every member of their organisation for every house that is built. Those stringent regulations and inspections are doubled up by local authorities, which are only too anxious to ensure that the same private building contractors have those works inspected when they are intended for private purchasers. The hon. Gentleman's other point—

Mr. Deputy Speaker

Order. The hon. Gentleman has made one point. He must not make a speech in an intervention.

Mr. Eastham

I do not see the relevance of the hon. Gentleman's point. I was merely trying to illustrate the enormous problem of coping with some of the cowboys in the private sector. The problem often concerns maintenance. I take the example of painters. If ever there were scandals, there are scandals about painting. Houses in a council estate near me were supposed to receive three coats of paint. The private sector won the contract and I understand that later the painters were seen selling cans of paint that were supposed to have gone on the council houses but were considered spare. Such cases are not unknown.

Mr. Cryer

Does my hon. Friend accept that direct works departments never try to con the council into accepting new dodges or designs that are not soundly based? Does he also agree that, because they are employed by the council, they give information as fully as they possibly can? There have been no Taylor—"we built Ronan Point"—Woodrow escapades from direct works departments with local authorities having to fork out millions of pounds to make up for deficiencies in the original building design.

Mr. Eastham

My hon. Friend is absolutely right. Obviously, if officers serving their own local authority do not give the true facts, they are liable to be sacked. That can be done with one's own employees. It is quite different when one is dealing with someone from the other side, who may be selling off his wares by tender and could not care less whether he honours the words of the contract. That is a substantial difference. Local authorities can run their own organisations and pay for expertise. They are answerable to the public—

Mr. Bob Dunn (Dartford)

No, they are not.

Mr. Eastham

Yes, they are. The councillors are answerable to the ratepayers. That is what local elections are for. That is accountability.

We all know what the current crisis in the building industry is really about. The Government are not spending enough money on normal building projects because of their own policy of cuts. They are now trying to appease the private sector by raiding the direct works sector. If they want their friends' support in the next general election, having failed them in one way, they have to find them something. Therefore, they intend to savage the direct works organisations and raid their work to keep their own friends sweet.

Mr. Freeson

Does my hon. Friend agree that that is a pretty poor return for those members of the industry who ran the CABIN campaign, at a cost of about £1 million, just before the last general election? This measure follows a 40 per cent. collapse in production and resources for the building industry from the public sector.

Mr. Eastham

My right hon. Friend knows more about CABIN that I do, but there was certainly massive expenditure in my city to try to undermine with half-truths the facts about the building industry.

I remind the Government that when the private sector is more buoyant it is not interested in building for local authorities. In the early 1970s, with the big building bonanza and the gazumping of house prices, we could not get building workers for love or money. The private sector, which the Government are now hell-bent on bringing into local government affairs, was not interested then. Moreover, I predict that if buoyancy ever returns—that is not likely while the Conservatives are in power, but the fortunes of the building industry are likely to improve when Labour returns to power—the private sector will once again not be interested in building council houses and other run-of-the-mill work where controls are strict. We shall then be in a mess, because by then the Conservatives will have destroyed the fabric and organisation of a building team that can meet the normal demands of ratepayers.

I was looking today at the Government's expenditure plans. In 1978–79 the amount allocated for new local authority dwellings was £1,105 million. The figure for 1981–82 showed a dramatic fall to £700 million. That is the cause of the problem. The private sector is so desperate that it has to beg the Government to find work for it by taking it away from direct works organisations.

The solution is simple. The Government should expand the economy and provide the private sector with proper, worthwhile contracts. That would be far more honourable than cutting building works and then saying "The only chance for you, lads, is for us to smash direct works and give you a few jobs there". That is not a satisfactory conclusion. The Government must rethink their policies to get the industry out of the current crisis that the Government themselves have created. The young hon. Member for Brigg and Scunthorpe seems to think that this is funny. I can assure him that representatives of the building trade who came to see us two weeks ago did not regard it as funny when they told us that 400,000 skilled building trade workers had no jobs. If the hon. Gentleman thinks that that is funny, let him say so in his election address. The building trade workers will soon tell him what is what. The regulation will not improve the maintenance programmes for council house tenants and local authorities. There will be more delays, more cost and more shoddy workmanship.

9.15 pm

Mr. Michael Brown (Brigg and Scunthorpe)

It is a pleasure to follow the hon. Member for Manchester, Blackley (Mr. Eastham). He has raised the temperature of the debate. I make no criticism of that. This is a controversial subject and it is proper that both sides of the argument should be aired. I welcome the rise in tone of the debate. It is important that we analyse what is at stake, not only in the regulations, but in what lies behind them.

The hon. Gentleman and some of his hon. Friends talked about pay-offs to the private building industry. What does CABIN stand for? It is the Campaign Against Building Industry Nationalisation. There was a payoff—the election of a Conservative Government that removed the threat of nationalisation from the private building industry.

I am glad that there was a pay-off. The industry now has a Government who recognise the importance of the private sector to the building industry. Labour hon. Members owe it to the House and to the private sector of the building industry to state their exact intentions. Should we ever have the misfortune to have a Labour Government, will they again attempt to nationalise the building industry? If so, I hope that the campaign against any threat of nationalisation of the building industry will be re-established. The people of this country, and local authorities in particular, should recognise what nationalisation of the building industry will mean.

Mr. Cryer

rose—

Mr. Brown

I shall not give way. The hon. Member for Keighley (Mr. Cryer) did not have the courtesy to attend the beginning of the debate; he came in two-thirds of the way through. I am anxious to devote my attention to the regulations.

I do not want to trade on your indulgence, Mr. Deputy Speaker. Nationalisation of the building industry is, a subject that involves a long and controversial debate.

I make no apology for wanting to smash direct labour. As the Member for Brigg and Scunthorpe, I have to deal with an expanding direct labour organisation in Humberside county council and in Scunthorpe borough council, which has been Labour-controlled for many years. Humberside voters returned a Conservative-controlled authority in 1977. My hon. Friend the Member for Bridlington (Mr. Townend) was then the leader of that well-run county council. The council contracted out to private industry for school cleaning, window cleaning, and a whole host of activities.

I congratulate Opposition Members on referring to the poor ratepayer. That is marvellous. We are making some progress. No doubt the many letters they receive about rate increases have drawn their attention to the fact that people have to pay the price. I welcome the word "ratepayer" being used in the speeches of hon. Gentlemen.

The Humberside county council put out many services to contract. After four years, it offered itself for re-election with a rate reduction. But the local people decided to return a Labour-controlled county council. I do not like what happened. I bet that those who voted for a change will not like it when the demand for a 61 per cent. rate increase pops through their letter boxes. I cannot believe that Humberside ratepayers will say that the 61 per cent. rate increase is worth while and that they will pay it with pleasure because the direct labour department has been expanded.

Mr. Eastham

I wonder whether the hon. Gentleman understands the financing of rates. Has he heard of the RSG? Does he accept that the savage cuts in the rate support grant have put up the bill to ratepayers?

Mr. Brown

I would have some sympathy with the hon. Gentleman if the 61 per cent. increase introduced by Humberside county council could be attributed to some action on the part of the Secretary of State. I assure the hon. Gentleman that the last reason that Labour county councillors would dare to raise with the Government as an excuse for putting up the rates to the extent that has occurred is the rate support grant. Humberside county council has done well out of the rate support grant. The county council has unashamedly stated that it will take on people and expand the direct works department.

Direct labour departments, if expanded, will be more inefficient and will cost the ratepayer—

Mr. Cryer

How does the hon. Gentleman know?

Mr. Brown

I shall come to the point that the hon.. Gentleman raises in remarks I wish to make about Scunthorpe borough council. I want, first, to complete my remarks about the Humberside county council. Under Conservative control, the authority had no hesitation in publishing the benefits and savings that had been made for the ratepayer. But no estimates have been produced by the Labour-controlled county council, and there seems no likelihood of the present county councillors acting in a similar manner unless powers are imposed to try to extract from them the information necessary to prove whether they are efficient.

A point has been raised about Scunthorpe borough council, which has a large direct works department. Opposition Members claim that a great advantage of direct works departments run by local authorities is that the bosses are democratically elected councillors. There are a considerable number of Conservative democratically elected councillors in the borough of Scunthorpe. They are kept out of the committee that deals with direct labour. The press is not admitted. In fairness, I should say that there are other Labour-controlled authorities in Humberside and Yorkshire where Conservative councillors serve on such committees. That does not happen in Scunthorpe. How can the ratepayer judge whether he is getting value for money? Thankfully, as a result of the regulations now before the House, it will be possible to put direct pressure on the borough council to find out what is happening. It has had to be done by difficult means. The local authority is not prepared to allow the official opposition party to have any nominees on the committee to enable them to see what is going on.

When there is no opportunity for democratically elected councillors of a different political persuasion to find out what is happening within a direct works department, I conclude that is because there is something to hide. If the Labour-controlled Scunthorpe borough council wishes to take issue with me, I suggest that it puts before me and the whole of the local electorate the figures for its direct works department. We are making some progress because, as the result of the boldness of my hon. Friend and the restrictions that he is putting on the profligacy of direct works departments, there will be an opportunity of judging for ourselves.

My only mild criticism of the resolutions is that they do not go far enough. I should like private enterprise to have the opportunity to tender a little more than it does. I am worried that some devious Labour-controlled local authorities might seek to parcel up one contract into separate contracts spread over a period of time in separate types of activities, so that they do not have to go out to tender. There is nothing wrong with the tendering system. It enables every organisation, private or public, to test itself for its efficiency. Earlier in the debate the Opposition appeared to be calling for competition. They will be able to have it. We are urging that the privileged position of the direct works departments should be taken away.

Many unsavoury activities are being carried on in Scunthorpe borough council and its direct works department. It has been indicated to me by a roundabout route that the borough council does not have sufficient work to justify the existence of its direct works department and it is frightened of investigation. I suspect that the reason why the borough council does not have sufficient work on hand is that the rate increases of the past year or two years do not persuade many people to come and live in Scunthorpe.

The rate increases will inevitably lead to more unemployment. They have cost the British Steel Corporation in Scunthorpe £3 million. Every organisation that I have contacted has complained about them. A publican to whom I spoke last Saturday told me that his rates increased by £5,000 last year. Small builders or manufacturers employing 20 people have had to pay an extra £30,000 in rates. That is the picture of the whole of manufacturing industry in Humberside. These rate increases are caused partly by the inefficiency of direct works departments. The profligacy of such departments is bound to filter through into the rates and cause people to leave the area, which will mean that the direct works departments will have even less work.

Direct works departments should compete in the open market on the same terms as private enterprise. Nonsense has been talked tonight about the quality of work and of rogue private enterprise builders. On the whole, we are talking about builders who are members of the National Federation of Building Trades Employers and who take out insurance to ensure that their workmanship is up to the standards of the Housebuilders Federation.

We have to bear in mind that when tenders are invited, there is often an inbuilt element of failure, because those setting the tenders and designing the buildings are trying to get something on the cheap. Local authorities will get only what they pay for. If they design a building, such as a tower block of flats, and try to set a contract with certain types of materials, they cannot blame the builder if he observes the contract.

Mr. Eastham

One of the examples that I gave earlier was the scandal of the £9 million of defects in the Bison flats in Wellington Street, which were built under a design and build contract. How can that be blamed on the local authority?

Mr. Brown

I do not know the circumstances of the case that the hon. Gentleman describes. I am prepared to accept what he says. Often, when there is allegedly shoddy workmanship, the contractors have adhered to the tenders, and local authorities do not know what is involved. Local authority inspectors inspect private house building very rigidly and always seem to have enough time to make private building contractors' lives a misery. If local authorities recognised that there is duplication of inspection in the private sector and used some of their inspectors to cope with the problem described by the hon. Gentleman, they might employ those inspectors better.

The steps taken by the Government are just the beginning. I hope that this is the start, and that one day we shall abolish direct labour departments. The motives of many Labour Members should be challenged on this issue, because they know that employees in direct works departments support the National Union of Public Employees. Why did that union respond so defensively in the pamphlet mentioned by my hon. Friend in his opening speech? My hon. Friend did not quote a paragraph in the document, in which NUPE said that it must ensure that it does everything possible to make its operations efficient, because there may be something in the Government's argument. Therefore, it must ensure that it can meet the Government's case. It realises that it has to justify what it is doing and that there are some things that are not quite right in direct works departments.

Mr. Donald Dewar (Glasgow, Garscadden)

Am I correct in summarising the hon. Gentleman's argument by saying that he objects to and is horrified by the fact that a trade union is interested in efficiency and in protecting its members' jobs?

Mr. Brown

I am surprised that a trade union should be interested in the efficiency of the work that its members undertake only when pressure is put upon it by my right hon. Friend the Secretary of State. It is a change in the political climate, and one that is welcome. The fact that NUPE is frightened by the threat of ensuring that it has to be more responsive and answerable to public debate, as a result of measures passed by the Government, shows how much that union is on weak ground.

The DLOs argument is a straightforward case of the Opposition recognising that the unions which support them will lose members. As my hon. Friend the Member for Reading, North (Mr. Durant) said earlier, I cannot understand why a local authority should reject a private contractor on the ground that he allows his employees the freedom to join or not join a trade union. Here, again, dear old Scunthorpe borough council makes sure about that. It is a device to try to cut out the private operator, even when it is known, despite the controls that my hon. Friend seeks to place on local authorities to correct the imbalance in the direct labour departments, that those direct labour departments will not stand up to competition.

I welcome these measures by the Government as a first step on the long road that we have to travel before we can honestly say that direct works departments are competing fairly. I do not want to see direct works departments survive in the long run. I believe that they will die of their own incompetence. When they have to compete in the outside world, they will find that they are unable to do so and will die. I do not mind competition in the short run. The whole point of the Government's measures is to open up the whole building contracting world to free competition. If direct works departments want to enter the world of competition, so be it for the time being. However, the day will dawn when they will find that they will not be able to compete.

The regulations are to be welcomed. I believe that the House should give them their full support.

9.37 pm

Mr. John Cartwright (Woolwich, East)

There was a moment when I thought that the hon. Member for Brigg and Scunthorpe (Mr. Brown) was intent on talking out the measure rather than supporting and welcoming it.

When I hear some of the Opposition and Conservative speeches, I recall my experience of direct labour as a local authority leader. When I hear Conservative Members suggesting that it is possible to do without direct labour and that everything can be left to private enterprise, I have to say to the House that that was not my experience.

Like the hon. Member for Manchester, Blackley (Mr. Eastham), I can recall the building boom of the early 1970s when we could get a private tender for neither love nor money. We hawked private tenders round the United Kingdom and, indeed, round Europe as well. We could not get a single private building firm to tender for major housing developments. Had we not had a direct labour force, there would not have been some of the housing developments which now exist in my constituency.

It is clear to me that an effective and efficient direct labour department is a worthwhile investment for any local authority and any group of ratepayers. To run down a direct labour department involves major dangers of dependence on private enterprise for which a local authority may later find that it has to pay a high price.

I underline the fact that a direct labour department must be efficient and effective. It should not be seen as a gigantic municipal job creation scheme, operated at the ratepayers' expense. Over the last year or so, I am bound to say that I have received a great many complaints from my constituents about the standard of council house maintenance provided by my own direct labour department. As I travel round the country, I find that such complaints are mirrored in other areas. I suspect that I am not the only hon. Member who has received complaints about lengthy delays in getting work done; about tenants hanging about waiting for operatives who never turn up; about repeated return visits, particularly when different trades are involved; and about work left half completed. There is a major problem here.

We have talked a good deal this evening about ratepayers, but we should also be concerned about council tenants. Their rent levels are already quite high enough. They are entitled to reasonable service for repairs to their homes. Sadly, some—I underline "some"—direct labour organisations are not meeting the council housing demands that they should be meeting.

I am persuaded that there is a powerful case for competition with direct labour organisations. The Government have already introduced that element of competition. It was introduced in April 1981. I have riot heard any clear convincing evidence from the Government tonight to show me that the arrangements made in April 1981 are being substantially undermined by local authorities. Little concrete evidence has been provided to the House tonight to support that suggestion by the Government.

Direct labour organisations are still adjusting to the new regime that was introduced in April 1981. As yet, there is a limited amount of firm evidence on which one can judge the results of that change. Since the Minister's review was started in September 1981, only six months after the first changes were made, I find it hard to believe that there is firm evidence to justify a further change such as the one that the Government are putting forward tonight.

It would have been much better to await the results of the first year's operation of the new competition arrangements, when there would have been hard evidence to show the performance of direct labour organisations. If, in the light of firm evidence, it was conclusively shown that there was a need to introduce a further element of competition into direct labour organisations, that measure should have been taken. On the other hand, if, as I suspect, the evidence showed that direct labour organisations had been winning tenders in competition with private enterprise and that they were continuing to provide value for money to the ratepayer, the case for this more rigorous competition could not be sustained.

The Government's proposals will positively harm direct labour organisations and their efficiency. I understand that all of them have made their arrangements for the 1982–83 programme on the basis of the existing proposals. They need to plan their spending and manpower arrangements, and it is extremely difficult to operate an efficient ship if there is a last-minute change. Indeed, the Government seem to delight in last-minute changes for local authorities. Such a last-minute change would make it very difficult for a direct labour organisation to run an efficient operation in the coming financial year.

As has been said, the changes will involve additional administrative on-costs, more computer time and more work in the finance and legal departments. All that must be added to the cost to be borne by the direct labour organisations. The County Surveyors Association is hardly a revolutionary body, but it has suggested that 250 extra staff will be needed as a result of the reduction in the tendering limit on highways work.

I am most concerned about the adverse impact of the proposals on training. There was a belief that local authorities that had taken on additional building and engineering apprentices in their direct labour organisations would be able to charge some of the costs against a central local authority fund. That would apply if they had taken on more than they needed to carry out direct labour work. There is a strong case for local authorities setting such an example and offering more young people the apprentice training that Britain desperately needs.

We now discover that the district audit service, supported by the Department of the Environment's circular of 15 March, says that all apprentice training costs must be charged to the direct labour organisation. It is true that in paragraph 27 of the joint circular, the Secretaries of State seem to be offering some sort of loophole. They suggest: any authority which believes that it has incurred apprentice training costs over and above those which are related to its DLO needs should identify these, as agreed with its auditor, as a special item in its accounts so that their impact on the rate of return achieved by the authority on its DLO activities can be properly assessed. That falls far short of a clear sign to local authorities that an exception will be made for the extra training. Faced by competition from private firms which, on their own admission, are substantially cutting their training activities, many direct labour organisations will also have to cut their apprentice training. The Institute of Municipal Building Management clearly states; There will be a substantial reduction in the number of apprentices trained by local authorities for their DLOs and therefore for the building industry in general. That is scandalous, when the building and construction industry desperately needs more skilled young people.

All of us recognise the problems of the private building industry and, particularly, of small firms. However, those problems cannot and should not be tackled by undermining effective and efficient direct labour organisations. As other hon. Members have said, there is ample maintenance work for everybody as long as the Government authorise a sensible approach to the needs of the existing housing stock. The Greater London house condition survey of 1979 shows that a quarter of all homes in London are unfit, lack modern amenities or are in need of substantial repair. A programme to tackle that problem would do far more for the private builders than an attempt to sneak work from direct labour organisations. The Government's case has not been made out and my right hon. and hon. Friends and I will vote against the regulations.

9.45 pm

Sir Albert Costain (Folkestone and Hythe)

It seems not to be appreciated that the regulations do not seek to abolish direct labour organisations. The object is to make them competitive, like ordinary building contractors. The hon. Member for Woolwich, East (Mr. Cartwright) explained at some length the problems of keeping people employed. He suggested that direct labour organisations should be subsidised by the ratepayers to keep the employees in jobs. If the private contractor does not have contracts he will generally find some work for himself and his men.

Mr. Cartwright

I was saying the exact reverse. I was arguing that direct labour organisations should not be seen as gigantic job creation operations to be paid for by the rates. I said that apprentice training should be an exception, as it is reasonable to ask local authorities to set an example to the rest of the industry.

Sir Albert Costain

Building itself will supply opportunities for apprentices. Many great firms have implemented that policy. The Opposition are over-keen to stop private enterprise building houses to let. I have said to the right hon. Member for Brent, East (Mr. Freeson) on other occasions that he is responsible for more homelessness than anybody else. There could be 30,000 houses made available for letting and contractors would continue to build more houses for letting.

Mr. Freeson

I understand the hon. Gentleman to say that 30,000 houses a year could be built for letting and that that would be new build by the private sector. Is he aware that no one is stopping that happening? The Government have introduced measures that they claim will extend the provision of private rented new build housing outside the Rent Acts. Let us wait to see whether there will be 30,000 houses built under the provisions that the Government have provided, about which the hon. Gentleman does not seem to know.

Sir Albert Costain

I did not say that 30,000 houses would be built. I said that there are 30,000 houses standing empty that are desperately needed and that would be let if the Opposition would undertake not to reverse the proposals that the Government are introducing. I wish to return to direct labour organisations. We are not discussing housing to rent. I understand that the right hon. Gentleman has that on his conscience and that he cannot get it off it.

The hon. Member for Manchester, Blackley (Mr. Eastham) produced the finest argument to which I have ever listened against direct labour organisations. He claimed that every man who works for a direct labour organisation is a paragon of virtue. Apparently he wants no supervision and needs only to be told to build houses. I have never heard such nonsense. One of the problems with direct labour organisations is that they do not provide enough supervision. They do not estimate correctly and they do not set the men to work.

I am not for abolishing direct labour organisations. It is necessary for surveyors' departments in all local authorities to have some men on hand for emergencies. The regulations do not seek to abolish the direct labour organisations. They merely ask them to be competitive with ordinary contractors. That is all they ask for. We are simply asking the Opposition to realise that such direct labour organisations cannot be competitive. It is said that they should continue, but that is nonsense.

Anybody who has had experience in the building industry knows that people generally employed by direct labour organisations have been in, but could not keep, jobs in the building industry. [HoN. MEMBERS: "Oh."] They could not keep their jobs in the building industry. That is what it is all about. Men were made redundant in the building industry because they could not compete and were not sufficiently skilled. They then get jobs in direct labour organisations. These regulations will make direct labour organisations compete in the ordinary way with contractors. What is wrong with that?

9.51 pm

Mr. John Maxton (Glasgow, Cathcart)

I take up the point made by the hon. Member for Folkestone and Hythe (Sir A. Costain) and my hon. Friend the Member for Manchester, Blackley (Mr. Eastham), about scandals in the building industry in the private sector. Such a scandal exists in Glasgow—the Royal hospital for sick children. That hospital was built by a private contractor under Government orders, of course, and was not put out to contract by a local authority. It was put out to contract by civil servants. It is on the verge of collapse and cannot be properly used. The company involved has faced massive law suits. I shall not name the company, but the hon. Member for Folkestone and Hythe knows perfectly well which company built the hospital.

Mr. Freeson

Name it.

Mr. Maxton

I shall not bother naming it because the hon. Member and others know perectly well what I am talking about.

I am sorry that the hon. Member for Brigg and Scunthorpe (Mr. Brown) has left, especially after criticising my hon. Friend the Member for Keighley (Mr. Cryer) for not attending the debate. the hon. Member for Brigg and Scunthorpe made great play about CABIN and the building industry voting to elect a Tory Government. Its pay-off was that nationalisation was stopped. It must be wondering what sort of pay-off it got. The number of building companies which have gone bust under this Government is legion. The number of people declared redundant is enormous because of the Government cutbacks in building expenditure.

Of course, there is now an organisation—not CABIN—in Scotland, made up of building companies, construction employers and the trade union movement in the building industry. It is desperately trying to fight for more public expenditure in the construction industry.

Mr. Keith Wickenden (Dorking)

Does the hon. Gentleman accept that local authorities are presently underspending on their capital expenditure by £1,000 million a year?

Mr. Maxton

They are certainly not doing that in Scotland.

The real problem for Britain's building industry is due not to direct works departments but to the Government's cuts in public expenditure.

It must be made clear, for the first time, that this debate concerns two different sets of regulations. The Scottish and English regulations are not the same. The Scottish regulations do what was done for England and Wales in 1981. In other words, they are regulations that the Government in England and Wales are now amending.

I am not sure whether I ought to be pleased or unhappy about that. I am pleased that at least we have not yet had the cut from £100,000 to £50,000 in road building contracting and that one-third of maintenance contracts below £10,000 have not yet been put out to tender in Scotland. It is fair to say that that will happen. Therefore, I am unhappy about it in the sense that we shall simply have to go through this procedure yet again for Scotland. From what the Minister for England and Wales has said, it seems that we might be debating yet another motion for England and Wales. In the directive that was published with the regulations the Government have made it clear that 30 per cent. of contracts under £10,000 must be put out to tender. They said that the Government will however, wish to consider, in the light of experience, whether a percentage higher than 30 per cent. should apply from 1 April 1983. The use of the word "higher" prejudges the decision.

It is said not that the figure might be reduced or changed, but that it might be made higher. Therefore, in January, February, or March 1983 there will be another two sets of regulations. The Scottish one will amend the legislation that is going through the House tonight. It will b.c. brought into line with the legislation for England and Wales. At the same time, the English regulations will be changed yet again, so we shall still not be in line with the English.

We have heard a great deal from Conservative Members about how they wish to see competition. They want free competition and they have said that the direct works departments must be brought into line in terms of competition with private industry.

The Minister for Housing and Construction quoted from the Department of the Environment working party report. He claimed that that was the basis for the legislation. He should have read a little more because it makes it clear that if there is competition for direct works departments it must be genuine competition. Not only are private enterprise companies allowed to compete with the direct labour organisations for work of the local authority, but the direct labour organisations are allowed to compete for work outside their local authorities. The report states that the direct labour organisations should be able to contract or tender for county councils outside their own authority, district councils and Greater London boroughs and also should be able to carry on work for private house owners in certain circumstances, such as where the dwelling is a former council house.

Conservative Members make great play of the sale of council houses. The report states that work may be carried out in such dwellings or if the area is a general improvement area or a housing action area, or is subject to a renovation grant.

In other words, the report said that the competition should go both ways. It is a matter not just of forcing the direct labour organisations to compete, but of allowing them to compete with private companies. The 5 per cent. profit margin was on that basis. It was based not on the direct labour organisations having to do only their own work and no other work but on the fact that they would be working as building companies in the open market. Therefore, one might expect that in normal circumstances—not under the Government—they could achieve that 5 per cent. level. They cannot do that just now because of the restrictions placed on them.

The report also said that the period over which losses by a direct labour organisation should be carried was five years, not the three years that is being imposed by the Government. At the end of the five-year period, it was not the Secretary of State who was to have the power to deal with the direct labour organisation but the local authority, which would re-examine and reorganise it. Therefore, the document was much more carefully worked out than the Government's proposals.

I shall take Glasgow as an example. I accept that the direct labour organisation in Glasgow has not been perfect. It is not necessarily the best or most efficient organisation in Great Britain. However, I praise that organisation because of the work that it did for the citizens of Glasgow during the severe weather over Christmas. Many workers worked long hours trying to repair burst pipes, ceilings that had collapsed and flooded houses. They tried to repair houses more rapidly than they would have done otherwise so that the people who were flooded out of their homes could move back. The workers did a tremendous job during that period.

If we are to have the imposition of these regulations, and the direct works department has to cut back on its staff in order to meet the 5 per cent. limit, possibly losing contracts as well and also facing very severe restraints in terms of expenditure, put on it by the Government, we shall have substantial redundancies in the direct works department in Glasgow. The effect is that if we were to have the same sort of severe weather next year as this, the suffering of the Glasgow council house tenants would be even greater and the period over which this suffering would last would be considerably longer, as the employees of the direct works department will simply not be there to do that job in an emergency.

The hon. Member for Woolwich, East (Mr. Cartwright) quite rightly mentioned training. I am only sorry that the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) has not been present on the occasion of the first Scottish debate since he entered the House. He might have learnt more about Glasgow if he had stayed. He made great play about how he was going to take a great interest in Glasgow and in Scottish affairs as a whole.

Mr. Arthur Lewis (Newham, North-West)

I know that he always wants to be fair, but the right hon. Gentleman has a problem, which he is discussing, as to whether he should chuck up his directorship of a bank because, with that £10,000 plus the salary here, plus his Common Market pension, he is in difficulties with regard to his prices and incomes policy.

Mr. Deputy Speaker

Order. I hope the hon. Gentleman will not pursue that. It has nothing to do with the matter.

Mr. Maxton

I can assure you, Mr. Deputy Speaker, that I have no intention of going down that particular path, interesting though it is.

The fact is that we shall have redundancies in Glasgow's direct works department. The work that is at present done by its staff will not be carried out any more efficiently by private enterprise. We shall have less training of building workers. I hope that the Minister in his reply will clarify this point because these regulations cover the Scottish Special Housing Association as well as the local authority direct works departments. The Minister may nod if he wishes to confirm that that is the case.

In that particular direct works department no new apprentices have been taken on in the past two years and the department has now said it will not take on any next year. Therefore, the bodies that ought to be training young people are not taking them on to train them.

As to trade union membership, perhaps there is a question there, but a local authority is certainly entitled to know that when a private company puts in a bid the people it says are craftsmen really are craftsmen, properly qualified and having completed an apprenticeship. One way of achieving that is to ensure that they are trade union members because the trade unions make sure that they are properly qualified people. That ought to be borne in mind.

On the cross-subsidisation of contracts, why should not a DLO be allowed to behave in exactly the same way as a private company? Private companies are allowed to make a loss on one job, a profit on another and count one off against the other. The DLOs are not to be allowed to do that. My constituents and those of other Scottish Members will find that standards of housing repairs and new house building will be seriously eroded by these regulations. I shall therefore vote against them.

10.4 pm

Mr. John Ward (Poole)

I should declare an interest as a director of a construction company. It might prove that I know what I am talking about. I should also apologise to the House for not being here at the beginning of the debate, but I have been in Committee. It rather depends on the activities of the Opposition whether I must leave before the end of the debate.

I listened carefully to the hon. Member for Glasgow, Cathcart (Mr. Maxton) and I wish that he would explain to us who designed the hospital about which he talked and who was responsible for its supervision, because the most competent builder in the country cannot cope with incompetent design and supervision. I am prejudiced because I believe that any private enterprise, on balance, provides a better return for the taxpayer or ratepayer than any State or local authority enterprise. The proof is that, if we examine the record of the direct labour organisation in Glasgow, we find that it has lost millions of pounds over the years. It is not alone in that.

The hon. Member for Cathcart also used the hackneyed excuse that a local authority should be able to insist on trade union membership so that it could prove that craftsmen would be employed on the job. Any competent building contractor will ensure that he has competent men working for him, with or without a trade union membership, as suits the men that he employs. I see no reason why we should dragoon people into the trade union movement because local authorities are not prepared to go after fair tenders and obtain value for money for their ratepayers. I welcome the fact that there is a proposal in the Employment Bill to prevent that.

My welcome to the proposals this evening must include some congratulation to the National Federation of Building Trades Employers and the Federation of Civil Engineering Contractors, which have both been assiduous in drawing to the Minister's attention the problem with the present law. Bad contracts, whether in direct labour organisations or in the private sector, are usually a result of bad supervision and planning.

I am also glad to see that it will now be possible, because of the activities of the National Federation of Building Trades Employers, for maintenance work to be put out on a schedule of rates to the private sector. If one considers the record of other nationalised industries and corporations, one is not encouraged to support the direct labour organisations run by local authorities.

Another reason why I believe that the private sector deserves special consideration is that it needs a base in the United Kingdom if our consultant engineers are to continue to do such a massive amount of work in the export market and bring hundreds of millions of pounds in invisible exports into Britain year after year.

I hope that the regulation will prevent the splitting up of contracts to feather-bed direct labour organisations. The hon. Member for Woolwich, East (Mr. Cartwright) mentioned effective and efficient direct labour organisations. Surely that is precisely what my hon. Friend the Minister is trying to obtain.

We can examine the record of Newcastle city council's direct labour organisation. Tyne and Wear county council decided to go ahead with four schemes to improve minor roads. The tender from the direct labour organisation was £231,800. The tender ultimately accepted from a private enterprise was £117,535. The chairman of the highways committee might well have said There seems a tremendous difference between the two costs. That was a blinding flash of inspiration.

I agree with the leader of the Conservative Party on Newcastle city council, who said that it is an illustration of what he had been saying all along. He said: It is another example of the council not getting value for money". When Newcastle city council's opposition leader says ghat he believes that the private sector can carry out work more efficiently and more cheaply, those figures are confirmation.

Mr. George Foulkes (South Ayrshire)

Like Freddie Laker.

Mr. Ward

The problems with direct labour organisations in the past have arisen largely because they have been allowed to cook the books. They did not include overheads such as office costs. Often they hid their plant costs. The new audit commission will winkle out many more problems that the direct labour organisations have caused. The ratepayer is entitled to expect that every local authority will effectively and objectively consider how it spends public money, because it is all public money in the end. If, by going out to private enterprise, local authorities can obtain a better deal for their ratepayers, they should do so. I would have thought that anyone concerned with the efficient and right use of public money would support the regulations.

There have been a lot of remarks about the need to retain a direct labour organisation. My hon. Friend has put a modest measure before the House. It could well he said that every parcel of local authority activity should be tested against a tender from a private sector organisation. Wherever this has been done, the ratepayer has been seen to be getting value for money. If hon. Members wish to know why the CABIN organisation was formed, they have only to look at the majority by which these regulations will be passed. The Opposition have done nothing hut condemn British industry, including the building industry, to threats of nationalisation and more quangos.

Mr. Foulkes

We will nationalise the hon. Member if he does not sit down.

Mr. Ward

I suppose that if I were nationalised that would be one way to get an indefinite State pension with a total amount of inefficiency. As I intend to stay on the Tory side of the House, it is unlikely to happen.

While we are talking about direct labour organisations, may I ask whether any hon. Member can understand why, with all the crying for extra work in the construction industry and all the problems of unemployment, local authority after local authority is underspending on the amount allowed for new construction?

My hon. Friend has done the House and the country a favour in presenting the regulations. I wish them well and look forward to supporting them in the Lobby.

10.12 pm

Miss Joan Maynard (Sheffield, Brightside)

The Government are anxious to accuse Labour Members of being doctrinaire. These regulations are a piece of doctrinaire policy on their part and another attack on the public sector. The Minister says that we are afraid of fair competition. We are not afraid of fair competition, but we object to the Government continually putting obstacles in the way of direct labour organisations so that they cannot compete fairly. That is what we are complaining about.

I am sorry that the hon. Member for Brigg and Scunthorpe (Mr. Brown) has left the Chamber, because he made some serious accusations against Scunthorpe borough council. If he has any proof of those accusations he should make them in the proper place and let them be properly investigated instead of coming here casting innuendoes against that council.

The hon. Member complained of unions protecting vested interests when they are trying to protect jobs. Anyone would think that Government Members did not have any vested interests. In effect they are here tonight to defend those vested interests. Let us not be mealy-mouthed about it.

There has been talk about scandals. Before I came to the House, I was a member of a local authority that was very much Conservative-dominated. All the scandals that we had to deal with arose from the failures of the private sector that we had to deal with. I now represent part of the city of Sheffield. In Hallamshire hospital we are experiencing serious problems about the cost of heating the hospital, with the lift and the laundry equipment. That hospital was built by the private sector. The people of Sheffield are very concerned about what it will cost them to put that scandal right.

The proposed changes in the regulations will massively increase total administrative costs. They will inevitably take funds from repair work. They will make it more difficult for councils to be competitive. I re-emphasise the point made for my hon. Friend the Member for Bolton, West (Mrs. Taylor) about the Government's broken promises. During the passage of the Local Government, Planning and Land Act 1980, we were told that local authorities would have to put out to tender all highway work worth more than £100,000, except for road bricking and snow clearing, as well as all construction work worth more than £50,000 and all maintenance work worth more than £10,000. The purpose was to give a boost to the private sector at the expense of the councils' direct labour organisations.

The Government promised that those tendering limits would be regularly increased in line with inflation. That was two years ago. Since then, there has been no increase in the limits. Indeed, the reverse is about to happen. The Secretary of State now plans to reduce the limit on highway work from £100,000 to £50,000 and, even worse for local councils, to change the rule on maintenance work so that in future one-third of all maintenance work must be put out for tender.

By far the largest amount of council maintenance work involves small jobs costing £20 or so. Under the new rules, if broken windows need to be repaired for three council tenants, only two of the jobs can be done straight away by the council work force. The third window repair will be solemnly put out to tender. No doubt the council workmen will end up doing the job in any case, but the formality will have to be observed. That is a ridiculous proposal. It will be costly to ratepayers and a waste of time from the point of view of those waiting for the repairs to be done.

Sheffield council estimates that maintenance work organised in that way will add 7 per cent. to the authority's costs. The Secretary of State talks about overspending authorities, but at the same time he is directly responsible for putting extra burdens on the ratepayers.

Sheffield direct works department was established in 1926 by the first Labour council in order to cut through corruption and red tape and to respond directly to the city's building needs. It has established standards of health and safety, decent working conditions, training and apprenticeships, and, most important, continuity of employment, of which the city is very proud. Sadly, those standards are frequently lacking in the private sector.

Equally important is the fact that the direct works department is directly accountable to the city's ratepayers. On tenants' requests alone, it carries out 12,000 house repair jobs per month, as well as maintaining all the schools, old people's homes and public buildings in the city. If the council is forced to deal with innumerable private contractors, the cost of that work will be massively increased. Additional office work, the cost of paper and postage, legal wrangles about the cost of workmanship, estimating and accounting work, supervision and inspection, will all add to the costs.

Sheffield council believes that at times such as this scarce money should be paid to retain skilled employees and tradesmen who know their work and can respond to the needs of the tenants and the people of the city. The Government wish to add to the ever-increasing legion of office staff at the town hall.

I believe that a Socialist housing policy and a policy for land and the building industry are inextricably linked. [Interruption.] It would be a very bad job if we abolished agriculture, because we should all be very hungry. Not only must the work force be socially organised. The land and the building industry must be socially owned. Local authorities started to employ their own building labour about 100 years ago to provide a better quality service and, a more efficient standard of building service and to avoid being taken for a ride by private contractors wanting to cash in on quick profits. Direct labour serves the people. It does not exist to make a fast buck at their expense. Ever since direct labour organisations were established they have been under attack by private contractors. We are always told that private contractors are in favour of competition. However, they do not seem to like the competition that they have faced from the DLOs.

The proposals will mean higher administrative costs. Safety standards will fall. Jobs will be lost. The ratepayers will pay more for what will not be as good a job as is now done. For all these reasons, I oppose the regulations that are before the House.

10.21 pm

Mr. Den Dover (Chorley)

I declare my interest as parliamentary consultant to the George Wimpey group. I should also declare my interest as a ratepayer in Chorley, Lancashire, and in South Hertsmere, in Hertfordshire. I believe that the regulations will ensure that ratepayers get better value for money in the carrying out of local authority contracts for maintenance and for major capital works.

My mind goes back a year to the time when the regulations came into being. The Federation of Civil Engineering Contractors—I am a civil engineer—was upset that inadequate background research had taken place into what should be the ceiling above which work should be put out to competition. I believe sincerely that £50,000 is much more appropriate than the former £100,000. I feel that more direct capital works on roads will be brought into competition between direct works departments and private contractors.

My main misgivings about the regulations are that local authority direct labour departments have been able to abuse the intentions of the 1980 Act. They have split the work into smaller units below the ceilings set by the Government. It has then been possible within the terms of the Act to give further contracts on a negotiated basis sometimes at rates of up to 30 per cent. more than the first contract rates.

The most awkward aspect is that work has been placed with direct labour organisations even though they have not submitted the lowest bid. I welcome Welsh Office circular 12/82 that includes directions to local authorities to explain why they have given contracts to their direct labour organisations when they have not submitted the lowest price. This will ensure that the Act and the regulations are not abused.

There is one outstanding feature to which I should like Ministers to give their attention. It is all very well talking of getting building work in competition. I welcome the fact that 30 per cent. of maintenance work will have to be gained in competition. What matters, however, is the final cost. To date, local authorities have been able to say, if the bidding price was £1 million and the all-up cost was £1½ million, that the value is £1½ million.

There is need for careful control of the certification of the amount of work done by local authority direct works departments. The work should be carefully measured on an independent basis and multiplied by the rates in the contract, where it had been gained in competition, to show the value of the work done rather than the accountants within the direct labour department saying that the cost was so much and that this was therefore the value that they would put to the work. In other words, there is need for independent certification by outside surveyors, by surveyors in another department of the council and by outside consultants. This shortcoming still exists.

Mr. Eastham

Is the hon. Member aware that many cities have the precise mechanism to which he is referring? It is costed and organised not by the direct works organisations but by a separate department in many local authorities, such as Manchester, with architects and quantity surveyors who as professional people, make their judgments.

Mr. Dover

I know from my experience at the GLC as director of housing construction that in some authorities there are architects and surveyors who determine what the value should be. I also know from my experience that it is all too easy for a "professional" to have the interests of the council or the direct works department at heart. Unknowingly they raise the value to try to make the books look better than they are.

The only answer to this problem is to bring in outside accountants and independent surveyors, both quantity and chartered, who know what the building work is about, can take an independent view and say whether the direct works department is losing or making money. That is what I did in the GLC. Until my arrival, the direct works department thought it was making quite a good percentage return on the work that it did. However, it took only a few months of these independent observers and experts to show that the department was making a substantial loss.

There is still one more step to take. We must make sure that direct works departments have independent assessments of the work that they have done. It is meaningless for them to say that they have gained the work in competition. Anyone can put in a low price. At least we have the ultimate sanction that if the direct works department is shown to be losing money over the years the Secretary of State can close it. The important question is: what is the value of the work done? I look forward—in addition to the welcome regulations—to some more careful control of the values going into the accounts of the direct labour organisations.

10.27 pm

Mr. Allen McKay (Penistone)

I shall start with a point raised by the hon. Member for Chorley (Mr. Dover) about the architects, planners, and quantity surveyors in local authorities. What he said does them no credit. I had the privilege of working for four years with the architects, planners and quantity surveyors in Barnsley authority as chairman of a committee. I assure the hon. Gentleman that what he says is a contradiction in terms. He claimed that these people deliberately put the price low to protect the local authority. That is wrong because it is on that standard that the local authorities tender for the work. If the figure is put low they will not protect either the authority or the workmen. It is a qualified price, the best estimate made by professional people, and it is on that estimate of price, that the council goes to tender on contracts.

The Minister raised the question of tendering. He made quite a play regarding contracts not going to the lowest tender but to the direct works department against the lowest tender. What he did not say was whether the direct works department had the second, third or fourth lowest tender. As he knows, when authorities consider the contracts that come in they also consider other things besides price. If they always accept the lowest price, people become concerned and know that they are accepting not only the lowest price but possibly future trouble and cost. That point must be borne in mind. Therefore, when the Minister talked about local authorities accepting the quote from the direct works department hie gave only half the story by not saying whether that quote was the second lowest price. In many contracts the lowest price is not accepted. I confess that I believe in selective tendering instead of open tendering. In my view, open tendering is a licence for cowboys. It puts upon the local authority financial obligations which it will have to face in the future as a result of accepting the lowest tender.

Another aspect of tendering is obvious when one knows the contractors. They over-reach themselves in the men and plant that they use. One knows that if one accepts the lowest tender, there will not only be delays in the programme itself, but there will be increased costs and problems when the clerks of works report on the work that has been done. That can result in litigation with the contractor.

Because contractors have no work, they tend to cut corners. In trying to put in the lowest tender in an open competition, they do things that they would not do an normal times. That often results in bankruptcy among contractors, which in turn leads to delay and cost to the authority, delay in the completion of houses, and thus to delay in plans for the receipt of rents. It also leads to delay in the completion of other local work. Often one has to resort to the law to get justice. That leads to greater delay. So we should bear in mind all the facts that are involved in tendering.

The Minister made his usual attack on the trade unions. He talked about NUPE. He seemed to forget that the GMWU, the ETU, and many other trade unions are involved in direct labour organisations. In fact, a lobby that took place last week confirmed the number of trade unions that are involved.

Then there is the question of taking the building industry into public ownership. A few years ago, a lot of people were running round with placards saying "Hands off the building industry". I am glad to say that they have changed their minds, now that they realise what this Government have done.

I have a friend who is a master builder, who is now working abroad. At one time he owned his own firm. He moved out of building, and then came back to it. He worked for several people, in charge of their building contracts. Eventually he left, because he could not stand the kind of houses that he was having to build. He said that the houses would be falling down in 20 years' time, and that if he could not build a good type of house he would prefer to leave the country. He was working for private contractors.

The Airey type houses were a prime example of what local authorities had to build. They are now falling down. The 40 years' life that they were supposed to have is no longer possible.

I shall say a brief word about the slur cast by the hon. Member for Folkestone and Hythe (Sir A. Costain), who is no longer in the Chamber. He said that workmen who work for local authorities do so only because they are not good enough to work for private industry. That slur should be condemned by the Minister, because local authorities employ some of the finest craftsmen in all trades, as well as some of the finest professional people—all connected with the direct works industry. That slur should be condemned once and for all. Some people who have worked for the local authorities have set up private businesses. They have taught excellent apprentices in all trades for many years, which private industry has not been able to do. I hope that the Minister will say a few words about the statement of the hon. Member for Folkestone and Hythe. As to the local authorities' approach to cartels and trade rings, one of the local Sheffield newspapers recalls a group of Labour Members of Parliament headed by my hon. Friend the Member for Bootle (Mr. Roberts) who tabled a motion in the House calling on the Secretary of State for the Environment to investigate the setting-up of price-fixing rings for painting contracts in the North-West. An attempt was made to extort nearly £200,000 from the Manchester city council and £92,368 has been got away with. That is the type of contractor who brings direpute upon other contractors. As I have tried to say, and as some of my colleagues have said, all local authorities are not alike, nor are all direct works organisations.

Sheffield has had a tremendous build-up in local authority direct works. In 1926, local government decided upon a programme of direct works. After it had spent a lot of money on newly erected houses it found out, much to its cost, that it had to spend a lot of money on repairs to the newly erected houses. Therefore, it decided to set up a direct works department. From 1926 onwards it took into its orbit the building of houses, schools and public buildings, which were erected to a high standard of public workmanship. In fact, it went a little further, because all the Sheffield trams were built by direct labour and were acknowledged to be the finest in the country. The local authority went on to do great things in public health, child welfare, food purity, control and remedying of disease. The build-up of the direct works department continued as it moved into those fields.

It now has a work force of 3,000 people and it is substantially a municipal enterprise. That is the type of enterprise that the department is moving into. It is a continued attack not only upon the direct labour organisation itself but a continued attack by the Government upon the local authorities. It is a continued attack upon an organisation that has been set up to serve the needs of the authority and its people.

In Sheffield, the building maintenance division alone has 1,495 operatives, all working on incentive schemes. The total number of properties maintained last year exceeded 100,000, of which 95,000 are dwellings. I do not think we can set up an organisation under private enterprise that could take over the problems, the maintenance and the repairs of that type of dwelling.

The roofing section has 28 operatives. Two thousand five hundred repair tickets were issued for asphalt work and an additional 300 jobs were undertaken for minor works, which includes painting and home improvements. A scaffolding section was set up purely and simply because it was found that the costs of going to a private contractor for scaffolding were so high it could take on that job itself at a far cheaper rate. That is why the local authority has built up its direct works department. It also set up a lift section, which has to be on call 24 hours a day to take over emergencies.

I would like to ask the Minister why it is that, only 12 months after the introduction of similar legislation, the Government have again introduced legislation working against direct works organisations. Why must it be so soon? The position that was created 12 months ago has not yet been fully evaluated? Why is it necessary to decimate further the local authorities' direct labour organisations before we have found out the result of the last bout of legislation? Is it just a sop to the construction industry, as a lot of hon. Members have said? Is it because of Government policies against direct labour organisations and local authorities? Is it because jobs that the private contractor will tender for under the Bill would not have been tendered for in normal circumstances? Is it, therefore, a case of sharing out the existing work, which will decimate the direct labour organisations? The cost to local authorities will be tremendous. The proposal will increase administrative costs and there will be less money available for repairs and maintenance, and that will increase the charges.

The biggest problem will be to balance work loads planned by the direct works departments. Painters may be brought in prior to repair work. Therefore, the work must be carefully timed with the repair programme. The external work is done in good weather and interior work is done in bad weather. In such a situation, there is little that local authorities can do if they have to tender, because the gap in between may be too large.

Sheffield has taken tenants' complaints about repairs and maintenance into account, and is running a 13-week programme on a rota work system. Two caravans will move into each area every 13 weeks. Every repair reported within that 13-week period will be done while the direct works department is in that area. The caravans will then move to another area. If the department has to tender for such work, that programme will be lost. The planning, and maintenance of the houses and the welfare of tenants will be put in jeopardy.

I shall conclude by quoting a letter from the chairman of the committee in Sheffield. She writes: The new changes will massively increase Town Hall administrative costs. This will inevitably take funds from that set aside for the actual repair work. The new legislation says that a sizeable proportion of all the small Council Repair and Maintenance work should be put out to competitive tender from private builders. Since the original Direct Labour Law introduced last April, which extended the areas of work subject to competition, the workload borne by Town Hall administration has quadrupled. The Council estimate that maintenance work organised in this way adds a 7 per cent. cost to the authority. These changes will more than double the present increase in costs. The Government is acting totally irresponsibly in changing the rules to this very complex legislation after only 12 months. At the same time as he talks of "overspending authorities", Mr. Heseltine is directly putting extra burdens on the ratepayers … From tenant requests alone, the Sheffield works department carries out 12,000 housing repair jobs a month, as well as maintaining all the schools, old people's homes and public buildings in the city. If the Council is forced to deal with innumerable private contracts to do this work, the cost would be horrifying: Office work; the sheer cost of paper and postage; the legal wrangles over the cost or workmanship; the estimating and accountancy work; the supervision and inspection … Accountants and typists cannot actually mend the damaged ceiling or leaking pipe. The direct works department will do more administration and less maintenance and repair work.

I ask hon. Members to vote against the legislation, which represents an attack not only on direct works departments, but on local government and the rent payers and ratepayers, which the Government are supposed to be protecting.

10.43 pm

Mr. Neil Carmichael (Glasgow, Kelvingrove)

I had not intended to speak, but when I heard some of the incredible assumptions that Conservative Members made I decided to do so. They implied that private industry meant good, clean, honest and open work, while direct labour meant inefficiency, and—it was hinted—a touch of professional corruption. That was too much for me, and I felt that something should be said.

I have many complaints and reservations about direct labour. Direct labour organisations are not the be-all and end-all. Not every job should be done by direct labour. Wider interests must be brought in. However, when I hear Conservative Members speak as if everything that direct labour did was bad while everything that private enterprise did was good, I know that they do not realise how direct labour started. It began because of the corruption, inefficiency and appalling workmanship of private industry.

A library in my area, in Partick, was built by the Scottish building guild in the 1920s. The guild did not survive, because, as my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) pointed out, it had to break even year by year. It was not allowed to carry a profit forward and, therefore, it was not able to take a chance on any contracts coming forward.

The work that was done by private enterprise in those days was appalling. A great deal of the corruption that has taken place in the building industry over the past 20 years has involved private enterprise. Multi-storey flats were sold in package deals. Some of them were extremely dangerous and uninhabitable because of dampness and many associated problems. Private enterprise sold to local authorities throughout the country white elephants of shopping centres. They have become slums and in some instances private firms will not rent the units.

In the heart of my constituency is the Royal hospital for sick children. It was built by private enterprise. The list of faults is enormously long. Scottish Office Ministers and the hon. Member for Aberdeenshire, West (Sir R. Fairgrieve) are well aware of the deficiencies. The original price was about £3 million and the repairs alone will cost about £7 million. The water supply, the drainage and sewerage systems and the exterior facings have had to be replaced or rebuilt. Every floor has had to be relaid. When the hon. Member for Aberdeenshire, West was an Under-Secretary of State for Scotland he told me in an answer that about 15,000 bed weeks had been lost until about a year ago. Even now not all the wards are occupied. The hospital was built by private enterprise.

I have some criticisms of direct labour organisations, but Conservative Members should not get wrong ideas aout private enterprise. The hon. Member for Chorley (Mr. Dover) came close to impugning the professional integrity of local authority surveyors. Their professional integrity is being attacked when it is suggested that local authority surveyors cook the books to make prices seem a wee bit better. If the hon. Gentleman believes that, he must accept the old adage in the building industry that more money is made by the surveyor's pencil than by the concrete mixer. That applies equally to private enterprise and local authority direct works departments.

There will always be large local authority contracts. Scottish Labour Members are always meeting building contractors and trade union representatives who are desperately seeking heavy civil engineering work. The work is not available in the private sector and they have pleaded with us. We have tried to persuade the Government to make it available and—

Sir Russell Fairgrieve (Aberdeenshire, West)

The hon. Gentleman has mentioned me twice during his speech. He knows perfectly well, as I know very well—he has read the report time and again—that the problems that we experienced in the construction of the Glasgow children's hospital had nothing to do with the building contractors; they were due entirely to wrong political decisions.

Mr. Carmichael

The hon. Gentleman was chairman of the Conservative Party in Scotland. I am surprised that he takes the view that the problems were due to wrong political decisions. He could have made hay out of suggesting that political decisions were causing problems. It was a bad building decision. I am not ascribing blame at this stage. I want, and would be happy to have, a public inquiry into what went wrong.

As we know, many scandals have occurred in the building industry over the past 10 to 15 years. Many professional difficulties arose in the building industry over that period. I have often asked for a public inquiry into that hospital. I was unable to get one because Ministers in the Scottish Office have always hidden behind the assumption that there would always be legal proceedings. We are hanging on so long over the question of legal proceedings that we will let the matter slip through our fingers. A public inquiry would be of real advantage to the building industry.

We must continue with direct labour—with all its faults, and I hope that it can significantly improve—because a great deal of the outside building industry is still bad and inefficient. We must have a yardstick by which to judge it, and direct labour is the only yardstick I can think of.

10.51 pm

Mr. Donald Dewar (Glasgow, Garscadden)

Scotland, which is, of course, my prime consideration tonight, has not been burdened 'oy part HI of the Local Government, Planning and Land Act 1980 before this week. Unfortunately, our period of immunity is coming to an end. We must all now concentrate our minds on how best to minimise the damage that the Government are doing to the construction industry and direct labour organisations, both in Scotland and in England.

This has been an interesting evening. We have been left without any doubt about the change in the English regulation and the construction of the Scottish regulations. If one were of a charitable disposition, one might think it was something to do with efficiency or the need to make direct labour more efficient and competitive—to make it come out of this period of Conservative Government with a lean and hungry look. We might argue, for all that, that it was still not justified. However, in terms of motivation, it is clear from the speeches tonight that it has nothing to do with efficiency. This is a vendetta against direct labour which is being pursued by the Government and cheered on in voracious style from the Conservative Back Benches.

The hon. Member for Reading, North (Mr. Durant), in an inelegant phrase, said that the original legislation had been pushed through the House. He was probably right about that. He said that he was always nervous and suspicious when direct labour organisations were mentioned. However, these hints on motivation were, of course, outdone by his hon. Friend the Member for Brigg and Scunthorpe (Mr. Brown). Although I often listen to Scottish debates, I had not heard the hon. Gentleman in full flood before. He struck me as being the Tory equivalent of the Militant Tendency. His speech was a splintered explosion of prejudiced slogans. He made no bones about what he was about. He said that he made no apology for wanting to "slash" direct labour. In fact, he said "smash". His pronounciation of syllables is not as clear as those of his hon. Friend the Member for Edinburgh, Pentlands (Mr. Rifkind). Certainly the motivation and malice were there in plenty. He said that he wanted to "smash" direct labour. Of course, that is exactly what all this is about. He was outdone only by his hon. Friend the Member for Folkestone and Hythe (Sir A. Costain), who put forward the extraordinary proposition that no one working for direct labour was good enough to work in the private sector. He might want in his cooler moments to dissociate himself from that proposition. When the Minister replies, I invite him to make it clear that he would not support that proposition.

The Opposition are not for a moment trying to whitewash direct labour organisations or saying that they are perfect in every way and area. That would be ludicrous. We are saying that it is important that local authorities should have the right to have direct labour organisations and to operate them as they want, untrammelled by Government prejudice and obstruction. We are saying that it is wrong for the Government artificially to build barriers with a view to preventing the proper running of direct labour organisations if democratically elected councillors wish to run them.

Over the Government's period of office we have been observing a major attack on local democracy. We have seen it in the pile upon pile of legislation, all of it encroaching on and infringing the basic rights of councils to operate and run their own affairs as they see best and being answerable to their electorate. The regulations are another small example of that happening again. The rights of local authorities are being chipped away. Because of the statutory straitjacket into which direct labour is being shoved, it will be more difficult for it to compete effectively and properly. These regulations are not about fair competition but about putting direct labour into an unfair situation in which it cannot compete effectively and responsibly.

The Minister for Housing and Construction made some complaints about the way in which local authorities had been trying to interpret the regulations, to get round them and to continue to operate their direct labour departments. Local authorities have that right. I am strengthened in that view by the Scottish Development Department's circular 8/1982, with which the Minister will be familiar. The Scottish Office states in that document: It is the responsibility of each individual local authority to interpret the Act in the context of its own particular circumstances. I make it clear that I hope that local authorities will continue to exercise that responsibility. If the context of their circumstances means that it is sensible and efficient to have direct labour organisations, I hope that the authorities will continue to operate them effectively.

The question to which we want to address ourselves from a Scottish point of view is, what will happen in the period that lies ahead? In the Scottish Development Department circular it is said that the proposals, particularly on tendering, are difficult to summarise and have to be studied carefully. I suspect that that means that the proposals are devious and obscure.

It is clear that in two major respects there is a sharp distinction between the arrangements north and south of the border. In England, for highways work, anything above £50,000 has to go to competitive tender. In Scotland the cut-off point is £100,000. For maintenance in England under £10,000, 30 per cent. goes out to tender. In Scotland that 30 per cent. rule applies only to work above £10,000. I am not complaining about those distinctions, nor am I suggesting that we should have the same system north and south of the border. We have our own distinct traditions. If there is a differential in this case, I welcome it.

We want an explanation and an assurance from the Minister that in a few months the Minister will not trudge back to the Dispatch Box to say that the thresholds will be reduced to £50,000 and £10,000. We do not like the scheme that has ben introduced, but we want an assurance that there will be a period of stability and that the Government will not chop and change, presumably on the basis that direct labour organisations are not suffering enough under this Administration.

A number of general points can be made about the regulations. They have nothing to do with fair competition. If it was an even-handed scheme meant to keep in balance the private and public sectors, why should we restrict the right of the direct labour organisations to tender in the private sector? It is an inescapable conclusion that prejudice has stopped the Government following the logic of their argument.

I wish to ask the Minister about a specific and perhaps minor but important point concerning the extension contracts. He will remember that in Scotland, as in England, the extension contract must be granted within 12 months of the orginial contract and that the price increase to take account of inflation must be less than 10 per cent. That is extremely restrictive. I have been advised by many people in the construction industry that it is so restrictive as to be almost unworkable. The circular states that the conditions have been made more rigorous than was first proposed and goes on to refer to the English experience. I suspect that they have been made more rigorous because the Secretary of State is keen that the penalties should bite and that they should be seen to be effective so that he may get the accolade of approval from his friends in the private construction industry.

If we have an extension contract that is let to the private sector firm that won the original contract, will it be subject to the same restrictions? That is not clear from the documents that have been made available or the rubric of the regulations.

The Minister will not be surprised to hear me say that the 5 per cent. return on capital provision seems to be totally unreasonable. If we consider what is happening in the private sector, we see that very few firms—very few of the firms that have been represented by Conservative Back Benchers this evening—will be returning 5 per cent. on their capital employed, given the economic blizzard that the Government have managed to conjure up for the construction industry.

If we consider the explanation given in the circular, which is that the 5 per cent. is not supposed to represent the current rate of return being obtained by industry, but is rather the broad cost of capital over a certain period, we see that we cannot force upon direct labour organisations restrictions which, if they were applied in the private sector, would more than increase the deluge of bankruptcies that has resulted from the Chancellor's economic policy. The point has been made by many of my hon. Friends that it is another example of the same phenomenon. The refusal to allow cross-subsidy between the various areas of activity of a direct works department is again an unnatural restriction which would cause enormous problems for any commercially run firm in the private sector.

I do not like the regulation. It will have a direct and unpleasant effect on employment prospects in many cities, and especially in my city of Glasgow. In February 1981, the Glasgow direct labour organisation employed 5,326 people. In February 1982 the number had fallen to 4,801—a drop of over 500—and it is well known that the direct labour organisation is being forced to look for another 1,250 redundancies in the months ahead. That is tragic at a time when the housing stock in many parts of Glasgow is deteriorating because of lack of financial input and when unemployment has reached scandalous and disastrous proportions.

That is not the only problem. Glasgow direct works department employed 141 apprentices. It hoped to be able to take on 70 this year, but it cannot be confident because of the effects of the Government's economic policy, which will be exacerbated and intensified when this straitjacket is clamped upon the normal commercial judgment of the local authority and its direct labour organisation.

In the circular, the Secretary of State, in a weak and hapless way, pays tribute to the fact that this is a problem. He says that he recognises that a local authority may wish to take on more apprentices than may normally be commercially justified in terms of the 5 per cent. return on current capital, but all that he can suggest is that local authorities should make it a special item in their accounts so that there will be an addendum referring to the fact that the extra apprenticeship places have been filled.

I wish to have some concrete assurance that that is the position and that it will not be used as a basis on which to claim that there has been a failure to carry out the financial targets under the Local Government, Planning and Land Act 1980, and that that will not be used in turn as an excuse for further restrictions and cutbacks.

I do not suggest that this serious position is entirely the fault of the regulation. That would be ludicrous, because it has come into effect only now. There are other reasons. Principal among them is the harsh and mean approach to the capital requirements of local authorities in housing by the hon. Member for Pentlands and the Secretary of State.

To take Glasgow again, it looks as though the capital spend will be about £52 million this year against an initial allocation on a needs basis of £70 million. Hon. Members will realise how inadequate that £52 million is when they remember that last year the initial allocation was £55 million which was subvented during the year. When we take that miserably inadequate allocation and add to it the kind of restriction envisaged in these regulations, we see a situation in which the Government are doing everything they can to strangle the direct labour organisation, on the basis not of rational argument but purely and simply of political prejudice and spite.

It was extraordinary to listen to the hon. Member for Brigg and Scunthorpe making a charge against the trade unions that they were merely trying to preserve jobs. I have had cause sometimes to criticise trade unions, as we all have on occasions, but it is cheek and brass-necked impudence for anyone to complain, in view of the crisis of employment in the West of Scotland, that trade unions are trying to preserve jobs and the capacity of the local authorities to do good and provide a service for the people they represent.

This is a sad, vindictive, mean and petty measure, motivated by spite. That may sound like overkill. I see the hon. Member for Pentlands smiling and laughing. Having listened to the speeches from the Benches behind him this evening, I think that every one of my words can be justified to the full. We are piling on direct labour organisations administrative costs, restrictions and burdens. If the Opposition were to suggest the equivalent for the private sector, the howls of pain and outrage from Conservative Members would be deafening, and rightly so.

This is a campaign to make direct labour a failure, to make it unworkable and to ensure that it can be held up to ridicule, not because it is wrong in principle or ineffective in practice but because it is the victim of Government obstinacy and prejudice. It is against that that we will be protesting in the Lobbies.

11.8 pm

The Under-Secretary of State for Scotland (Mr. Malcolm Rifkind)

The hon. Member for Glasgow, Garscadden (Mr. Dewar) has within his vocabulary more pejorative terms than most hon. Members could concoct in the course of six months. He has managed to include most of them in his contribution. He has suggested that the Government are launching a vendetta against direct labour departments and seeking to impose a stranglehold on them. These were the milder terms that he used.

One would have thought from the contributions of the Opposition that these regulations were of the kind that my hon. Friend the Member for Brigg and Scunthorpe (Mr. Brown) wanted. He said that he would like to see all direct labour departments banned. From some of the comments of Labour Members, one would have thought that that is exactly what these regulations would achieve.

Both the English and the Scottish regulations seek to achieve a situation whereby direct labour departments will be in a position comparable to that of private enterprise. If they can compete on fair and open terms with private enterprise it is right and proper that they should be able to carry out the work; but if they are unable so to compete, it is not surprising that they should not be able to carry out the work.

The right hon. Member for Brent, East (Mr. Freeson) gave us a delightful glimpse and insight into the workings of the last Labour Government. He told us that but for the advent of the Lib-Lab pact we would have had not just guidance to local authorities but legislation that would have gone far beyond anything that the Government are contemplating. It would appear that when the right hon. Gentleman was in charge of these matters he was delighted to contemplate such legislation, but when his party goes into Opposition any legislation is to be opposed.

Mr. Freeson

Is the hon. Gentleman trying to mislead the House? May I recommend to him that he ceases commenting on what I did not say and reads the Official Report tomorrow? He is totally and deliberately, with the help of his hon. Friends, misinterpreting what I said.

Mr. Rifkind

I took careful note of what the right hon. Gentleman said. He said that his legislation would have gone far beyond anything that the Government contemplate. There was no doubt that that included giving direct labour departments the opportunity to involve themselves in other private sector work. Is he suggesting, however, that he would not only have given direct labour departments far greater power but that he would not have imposed upon them any of the responsibilities or fair tendering requirements that the Government contemplate? If he seeks to give them far greater power without any greater responsibility, his view is shared by his hon. Friend the Member for Garscadden who has just said that, although it was ludicrous to suggest that local authority direct labour departments ever had any faults, he and his hon. Friends stood not only for the maintenance of direct labour departments but for the ability of local authorities to operate them untrammelled—that was the word that he used—explicitly suggesting that in his view local authorities should operate no control whatever to ensure that direct labour departments carry out their activities in a fair and open way.

Mr. Freeson

There is nothing secret or newly revealed about what I said earlier. It is all published and on the record. It was published by CIPFA and in the working party report that my hon. Friend the Member for Glasgow, Carthcart (Mr. Maxton) quoted but apparently received no attention from the Minister. What I said at the time of those reports and again today was that we would have translated into legislation the guidelines in the CIPFA report and the working party report of 1978, but that we would also have included in the legislation proposals to enable those departments, where local authorities could prepare schemes, to be completely independent and to compete elsewhere with private enterprise. That is what I said and that is what I meant.

Mr. Rifkind

The right hon. Gentleman advocated increased power for direct labour departments without increased responsibility to the ratepayers or the obligation to compete fairly with the private sector.

Another interesting insight was provided by the hon. Member for Woolwich, East (Mr. Cartwright), who indicated that the SDP intends to vote against the regulations. It is an ironic twist of fate that the first vote cast by the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) will be a vote in favour of Glasgow direct works department which has a reputation for incompetence and inefficiency unparalleled throughout the length and breadth of the United Kingdom.

I may do the right hon. Gentleman an injustice, but I cannot recall that an at any stage in his long and weary election campaign, in any part of his manifesto or in any remark to the press or to the thousands of people who flocked to hear him, he suggested that one of his first acts in the House in the interests of the constituents of Hillhead would be to do is little bit to preserve the incompetent and inefficient Glasgow direct works department. In a sense, perhaps, I do indeed do the right hon. Gentleman an injustice, because if that is how he intends to vote today it will be in the best traditions of the Labour Party to which he belonged for most of his career. Indeed, it is incumbent upon all Labour Party members in the city of Glasgow and those who were once Labour Party members to keep Glasgow direct works department sacrosanct and untouchable. The right hon. Gentleman has quickly realised the realities of Glasgow left of centre politics.

I turn from the predicament of the right hon. Member for Hillhead to the specifically Scottish points raised by the hon. Member for Garscadden. The hon. Member for Glasgow, Cathcart (Mr. Maxton), who also spoke on this, suggested that the obligation of Glasgow to carry out the emergency work arising from the recent freeze showed the need for a direct works department. He is clearly out of touch with his own local authority. If he had contacted the authority to find out how it responded to the freeze, he would have been informed that it took on 200 temporary employees to deal with the problem and that once the work was completed it had no further need of them. The matter was not dealt with by the direct labour department, nor could it somehow cope with the entire situation by itself. My hon. Friend the Member for Reading, North (Mr. Durant) was quite right to say that in emergencies it is perfectly possible for local authorities to use the private sector, and the concept of an emergency is not of itself proof of the absolute necessity for a direct works department.

The suggestion of the hon. Member for Manchester, Blackley (Mr. Eastham) that the ability of local authorities to deal with emergency work would be impeded by the regulations is incorrect. Emergencies are specifically exempted from the competitive tendering requirements. There is, therefore, no danger of the kind that the hon. Gentleman indicated.

The hon. Member for Garscadden, like a number of hon. Members, asked about the position of apprentices. The hon. Gentleman should be aware of the factors that the Government would take into account in respect of a local authority that had more than what might be expected to be its normal share of apprentices. He should also remember that an amendment was tabled yesterday to the Local Government and Planning (Scotland) Bill exempting any apprentices taken on by a local authority as a result of the Manpower Services Commission's job creation programmes. They will not be taken into account in respect of these matters.

The hon. Gentleman also drew attention to the fact that the Scottish regulations are different in a number of respects from the English regulations. This arises from the simple fact that the Scottish DLO requirements come into effect for the first time tomorrow. The Government, in consultation with the Convention of Scottish Local Authorities, agreed to a delay of 12 months for the implementation of the regulations. These have been fruitful months. There have been discussions with local authorities in Scotland. We do not rule out the possibility of further modifications of the kind inherent in the English regulations before the House today.

As the Scottish local authorities have been preparing for the initiation of the scheme based on the existing proposals, it is right and proper that this should be translated into action. We shall consult over the next few months to see whether the arguments that have led my right hon. and hon. Friends in the Department of the Environment to make modifications in England apply with equal force in Scotland. I cannot give the hon. Gentleman any guarantee that these additional provisions could not be contemplated in Scottish circumstances. They may be necessary and desirable in Scotland but it is right and proper that we should allow the present regulations to be introduced before any final decision is taken.

Mr. Maxton

I asked the Minister a specific question about whether the regulations cover the Scottish Special Housing Association? Will he answer that question?

Mr. Rifkind

As the hon. Gentleman will be aware, these regulations cover local government direct labour organisations. The legislation as a whole applies to the Scottish Special Housing Association, which is covered by the same general requirements. However, the regulations we are discussing are local government regulations. That is a point that the hon. Gentleman may wish to bear in mind.

Mr. Dewar

On the difference between the English and the Scottish regulations and the likely continuity of the difference, is it fair to say that, despite the qualifications that he has made, the Minister is satisfied that, at the moment, the limits on tendering in the Scottish regulations are correct and that he will at least allow them a reasonably stable and lengthy life so that they can be properly assessed? Will he give an assurance that there will not be the situation that has arisen in England where Ministers have returned within 12 months to make the threshold lower?

Mr. Rifkind

I am not satisfied that they are necessarily correct. We submitted draft regulations to Scottish local authorities last June. We submitted amended regulations at the beginning of this year. As local authorities have been preparing for the introduction of direct labour provisions on the basis of the regulations that they have seen over the past few months, we accept that it would not have been appropriate, having sent draft regulations, now to put before the House regulations that were in any significant sense different from the drafts that they had seen. It is right and proper that local authorities should have the opportunity to implement the regulations. We shall see how they work out.

I am not suggesting that it will be desirable in the course of the next two or three months to come back with new regulations. A longer period will be required. The English regulations have been in force for at least a year. The new requirements in England will not come into force until October. A significant period will have elapsed before the amendments come into effect in England. I have no doubt that a significant period will be necessary in Scotland for a similar purpose.

Mr. Dewar

It seems to me to be an extraordinary fudging and mudging position to suggest, as the Minister is suggesting, that he is introducing these specific proposals without being clear that they are right or that they are the best possible starting point. There are a number of proposals for Scottish regulations that have clearly been changed in the course of preparation, because of English experience. That is the exact phrase used in the circular about, for example the 10 per cent. as against the 25 per cent. margin on the extension of contract. Can we then take it, as there have been those changes in the light of English experience and as the Minister has English experience against which to measure his decision to keep the present limits where they differ from England, that he has been convinced in the light of English experience that they are right?

Mr. Rifkind

The hon. Gentleman has a nerve. If we had today introduced Scottish regulations identical to the English regulations he and his hon. Friends would have been pontificating about the different Scottish requirements and about how insensitive the Scottish Office was to differing Scottish needs and how typical it was of the Government to ignore separate Scottish circumstances.

Mr. Maxton

indicated assent.

Mr. Rifkind

At least the Member for Cathcart is honest enough to nod his head in agreement. That is exactly how he and his hon. Friends would have reacted.

The Government are saying that, given the drat regulations that we sent to the Scottish local authorities,. it is right and proper that these regulations should, in al material respects be the same as those draft regulations. We shall allow the regulations to operate for a good period and then in the light of the Scottish experience, plus experience that is relevant from the situation elsewhere in the United Kingdom, we shall decide whether further changes are required.

The regulations, both Scottish and English, are nothing that a responsible local authority need fear or be concerned about. Any local authority that is competent and has an efficient, well-run, responsible and accountable direct works department will be able to look with complete confidence and equanimity to the future. Those authorities that know that they have for years maintained, at the ratepayers' expense, direct works departments that could not justify fair and open competition with the private sector will have something about which to be concerned, and that is right.

It is on that basis that I commend the regulations to the House.

Question put:

The House divided0:Ayes 206, Noes 261.

Division No. 112]	[11.22 pm
AYES
Abse, Leo	Faulds, Andrew
Allaun, Frank	Field, Frank
Anderson, Donald	Fitch, Alan
Archer, Rt Hon Peter	Fletcher, Ted (Darlington)
Ashley, Rt Hon Jack	Foot, Rt Hon Michael
Ashton, Joe	Ford, Ben
Atkinson, N. (H'gey.)	Forrester, John
Bagier, Gordon A.T.	Foster, Derek
Barnett, Guy (Greenwich)	Foulkes, George
Barnett, Rt Hon Joel (H'wd)	Fraser, J. (Lamb'th, N'w'd)
Beith, A.J.	Freeson, Rt Hon Reginald
Bennett, Andrew(St'kp'tN)	Freud, Clement
Bidwell, Sydney	Garrett, John (Norwich S)
Booth, Rt Hon Albert	Garrett, W. E. (Wallsend)
Boothroyd, Miss Betty	George, Bruce
Bray, Dr Jeremy	Gilbert, Rt Hon Dr John
Brown, Hugh D. (Provan)	Golding, John
Brown, R.C. (N'castle W)	Graham, Ted
Brown, Ronald W. (H'ckn'yS)	Grant, George(Morpeth)
Brown, Ron (E'burgh, Leith)	Hamilton, James(Bothwell)
Buchan, Norman	Hamilton, W. W. (C'tral Fife)
Callaghan, Jim (Midd't'n&P)	Harrison, Rt Hon Walter
Campbell, Ian	Hart, Rt Hon Dame Judith
Canavan, Dennis	Hattersley, Rt Hon Roy
Carmichael, Neil	Haynes, Frank
Cartwright, John	Healey, Rt Hon Denis
Clark, Dr David (S Shields)	Heffer, Eric S.
Cocks, Rt Hon M. (B'stolS)	Hogg, N. (Edunb't'nshire)
Coleman, Donald	Holland, S.(L'b'th, Vauxh'll)
Concannon, Rt Hon J. D.	HomeRobertson, John
Cook, Robin F.	Homewood, William
Cowans, Harry	Hooley, Frank
Cox, T. (W'dsw'th, Toot'g)	Howell, Rt Hon D.
Craigen, J. M. (G'gow, M'hill)	Howells, Geraint
Crowther, Stan	Hughes, Mark(Durham)
Cryer, Bob	Hughes, Robert (Aberdeen N)
Cunliffe, Lawrence	Janner, HonGreville
Davidson, Arthur	Jay, Rt Hon Douglas
Davies, Rt Hon Denzil (L'lli)	Jenkins, Rt Hon Roy (Hillhead)
Davies, Ifor (Gower)	Jones, Rt Hon Alec (Rh 'dda)
Davis, Clinton (Hackney C)	Jones, Barry (East Flint)
Davis, Terry (B 'ham, Stechf 'd)	Kaufman, Rt Hon Gerald
Deakins, Eric	Kerr, Russell
Dean, Joseph (Leeds West)	Kilroy-Silk, Robert
Dewar, Donald	Lambie, David
Dixon, Donald	Lambom, Harry
Dobson, Frank	Lamond, James
Dormand, Jack	Leadbitter, Ted
Douglas, Dick	Leighton, Ronald
Dubs, Alfred	Lestor, Miss Joan
Duffy, A. E. P.	Lewis, Arthur (N'ham NW)
Dunwoody, Hon Mrs G.	Lewis, Ron (Carlisle)
Eadie, Alex	Lofthouse, Geoffrey
Eastham, Ken	Lyon, Alexander(York)
Edwards, R. (W'hampt'n S E)	McCartney, Hugh
Ellis, R. (NED'bysh're)	McDonald, Dr Oonagh
Ellis, Tom (Wrexham)	McElhone, Frank
English, Michael	McGuire, Michael(Ince)
Evans, John (Newton)	McKay, Allen (Penistone)

McKelvey, William	Ryman, John
MacKenzie, RtHonGregor	Sever, John
McNamara, Kevin	Sheerman, Barry
McTaggart, Robert	Sheldon, RtHonR.
Magee, Bryan	Shore, Rt Hon Peter
Marshall, D(G'gowS'ton)	Short, MrsRenée
Marshall, Dr Edmund (Goole)	Silkin, Rt Hon J. (Deptford)
Marshall, Jim (Leicester S)	Silkin, Rt Hon S. C. (Dulwich)
Martin, M (G'gowS'burn)	Silverman, Julius
Mason, Rt Hon Roy	Skinner, Dennis
Maxton, John	Smith, Rt Hon J. (N Lanark)
Maynard, Miss Joan	Soley, Clive
Meacher, Michael	Spearing, Nigel
Mikardo, Ian	Spriggs, Leslie
Millan, Rt Hon Bruce	Stallard, A.W.
Miller, Dr M.S. (E Kilbride)	Stewart, Rt Hon D. (W Isles)
Mitchell, Austin(Grimsby)	Stoddart, David
Mitchell, R. C(Soton Itchen)	Stott, Roger
Morris, Rt Hon A. (W'shawe)	Strang, Gavin
Morris, Rt Hon C. (O'shaw)	Straw, Jack
Morris, Rt Hon J. (Aberavon)	Summerskill, HonDrShirley
Moyle, Rt Hon Roland	Taylor, Mrs Ann (Bolton W)
Newens, Stanley	Thomas, Dr R. (Carmarthen)
Oakes, Rt Hon Gordon	Thorne, Stan (PrestonSouth)
O'Halloran, Michael	Tilley, John
O'Neill, Martin	Tinn, James
Palmer, Arthur	Torney, Tom
Park, George	Varley, Rt Hon Eric G.
Parker, John	Wainwright, E.(Dearne V)
Parry, Robert	Walker, Rt Hon H.(D'caster)
Pavitt, Laurie	Watkins, David
Pendry, Tom	Welsh, Michael
Penhaligon, David	White, Frank R.
Powell, Raymond (Ogmore)	White, J. (G'gowPollok)
Prescott, John	Whitlock, William
Radice, Giles	Williams, Rt Hon A.(S'sea W)
Rees, Rt Hon M (Leeds S)	Wilson, Gordon (Dundee E)
Richardson, Jo	Wilson, Rt Hon Sir H. (H'ton)
Roberts, Albert(Normanton)	Wilson, William (Ct'rySE)
Roberts, Allan(Bootle)	Winnick, David
Roberts, Gwi lym (Cannock)	Woodall, Alec
Robertson, George	Wright, Sheila
Robinson, G. (Coventry NW)
Rooker, J.W.	Tellers for the Ayes:
Ross, Ernest (Dundee West)	Mr. George Morton and Mr. Ioan Evans.
Rowlands, Ted
NOES
Adley, Robert	Buck, Antony
Alexander, Richard	Budgen, Nick
Alison, Rt Hon Michael	Bulmer, Esmond
Ancram, Michael	Burden, Sir Frederick
Aspinwall, Jack	Butcher, John
Atkins, Robert(Preston N)	Butler, Hon Adam
Baker, Kenneth(St.M'bone)	Cadbury, Jocelyn
Banks, Robert	Carlisle, John(LutonWest)
Beaumont-Dark, Anthony	Chalker, Mrs. Lynda
Bendall, Vivian	Channon, Rt. Hon. Paul
Benyon, W.(Buckingham)	Chapman, Sydney
Berry, Hon Anthony	Clark, Hon A. (Plym'th, S'n)
Best, Keith	Clark, Sir W. (Croydon S)
Bevan, David Gilroy	Clarke, Kenneth (Rushcliffe)
Biffen, Rt Hon John	Cockeram, Eric
Biggs-Davison, Sir John	Colvin, Michael
Blackburn, John	Cope, John
Blaker, Peter	Corrie, John
Body, Richard	Costain, Sir Albert
Bonsor, Sir Nicholas	Cranborne, Viscount
Boscawen, Hon Robert	Critchley, Julian
Boyson, Dr Rhodes	Crouch, David
Braine, Sir Bernard	Dean, Paul (North Somerset)
Bright, Graham	Dorrell, Stephen
Brittan, Rt. Hon. Leon	Douglas-Hamilton, Lord J.
Brooke, Hon Peter	Dover, Denshore
Brotherton, Michael	Dunn, Robert (Dartford)
Brown, Michael(Brigg & Sc'n,)	Durant, Tony
Browne, John(Winchester)	Dykes, Hugh
Bruce-Gardyne, John	Edwards, Rt Hon N. (P'broke)
Bryan, Sir Paul	Eggar, Tim
Buchanan-Smith, Rt.Hon.A.	Elliott, Sir William

Emery, Sir Peter	Irving, Charles(Cheltenham)
Eyre, Reginald	Jessel, Toby
Fairbairn, Nicholas	Johnson Smith, Geoffrey
Fairgrieve, Sir Russell	Jopling, Rt Hon Michael
Faith, Mrs Sheila	Joseph, Rt Hon Sir Keith
Farr, John	Kaberry, Sir Donald
Fell, Sir Anthony	Kellett-Bowman, Mrs Elaine
Fenner, Mrs Peggy	Kershaw, Sir Anthony
Finsberg, Geoffrey	Kimball, Sir Marcus
Fisher, Sir Nigel	King, Rt Hon Tom
Fletcher, A. (Ed'nb'ghN)	Lamont, Norman
Fletcher-Cooke, Sir Charles	Lang, Ian
Fookes, Miss Janet	Latham, Michael
Forman, Nigel	Lawrence, Ivan
Fowler, Rt Hon Norman	Lawson, Rt Hon Nigel
Fox, Marcus	Lee, John
Fraser, Peter (South Angus)	Lennox-Boyd, Hon Mark
Fry, Peter	Lester, Jim (Beeston)
Gardiner, George(Reigate)	Lloyd, Peter (Fareham)
Glyn, Dr Alan	Loveridge, John
Goodhew, Sir Victor	Luce, Richard
Goodlad, Alastair	Lyell, Nicholas
Grant, Anthony (Harrow C)	Macfarlane, Neil
Gray, Hamish	MacGregor, John
Grieve, Percy	MacKay, John (Argyll)
Griffiths, E. (B'ySt.Edm'ds)	Macmillan, Rt Hon M.
Griffiths, Peter Portsm'thN)	McNair-Wilson, M.(N'bury)
Grist, Ian	McNair-Wilson, P. (NewF'st)
Grylls, Michael	McQuarrie, Albert
Gummer, John Selwyn	Marland, Paul
Hamilton, Hon A.	Marshall, Michae(Arundel)
Hamilton, Michael(Salisbury)	Mates, Michael
Hannam, John	Mather, Carol
Haselhurst, Alan	Maude, Rt Hon Sir Angus
Havers, Rt Hon Sir Michael	Mawby, Ray
Hawksley, Warren	Mawhinney, Dr Brian
Hayhoe, Barney	Maxwell-Hyslop, Robin
Heddle, John	Mayhew, Patrick
Henderson, Barry	Mellor, David
Heseltine, Rt Hon Michael	Meyer, Sir Anthony
Hicks, Robert	Miller, Hal (B'grove)
Higgins, Rt Hon Terence L.	Mills, Iain(Meriden)
Hill, James	Mills, Peter (WestDevon)
Hogg, Hon Douglas(Gr'th'm,)	Miscampbell, Norman
Holland, Philip(Carlton)	Moate, Roger
Hooson, Tom	Monro, Sir Hector
Hordern, Peter	Montgomery, Fergus
Howe, Rt Hon Sir Geoffrey	Moore, John
Howell, Rt Hon D(G'ldf'd)	Morrison, Hon C. (Devizes)
Howell, Ralph(N Norfolk)	Morrison, Hon P. (Chester)
Hunt, John(Ravensbourne)	Mudd, David
Hurd, Rt Hon Douglas	Murphy, Christopher

Question accordingly negatived.

Myles, David	Spicer, Michael (S Worcs)
Neale, Gerrard	Sproat, Iain
Neubert, Michael	Squire, Robin
Newton, Tony	Stainton, Keith
Normanton, Tom	Stanbrook, Ivor
Onslow, Cranley	Stanley, John
Oppenheim, Rt Hon Mrs S.	Steen, Anthony
Osborn, John	Stevens, Martin
Page, John (Harrow, West)	Stewart, A.(ERenfrewshire)
Page, Richard (SW Herts)	Stewart, Ian (Hitchin)
Parkinson, Rt Hon Cecil	Stokes, John
Parris, Matthew	Stradling Thomas, J.
Patten, Christopher(Bath)	Taylor, Teddy (S'end E)
Patten, John(Oxford)	Tebbit, Rt Hon Norman
Pattie, Geoffrey	Temple-Morris, Peter
Pawsey, James	Thomas, Rt Hon Peter
Percival, Sir Ian	Thorne, Neil(Ilford South)
Peyton, Rt Hon John	Thornton, Malcolm
Pink, R. Bonner	Townend, John(Bridlington
Pollock, Alexander	Townsend, Cyril D, (B'heath)
Porter, Barry	Trippier, David
Proctor, K. Harvey	van Straubenzee, Sir W.
Raison, Rt Hon Timothy	Vaughan, Dr Gerard
Rathbone, Tim	Viggers, Peter
Rees-Davies, W. R.	Waddington, David
Renton, Tim	Wakeham, John
Rhodes James, Robert	Walker, B. (Perth)
Ridley, Hon Nicholas	Walker-Smith, Rt Hon Sir D.
Ridsdale, Sir Julian	Waller, Gary
Rifkind, Malcolm	Walters, Dennis
Rippon, Rt Hon Geoffrey	Ward, John
Roberts, M. (Cardiff NW)	Warren, Kenneth
Rossi, Hugh	Watson, John
Rost, Peter	Wells, Bowen
Royle, Sir Anthony	Wells, John (Maidstone)
Sainsbury, Hon Timothy	Wheeler, John
St. John-Stevas, Rt Hon N.	Whitelaw, Rt Hon William
Shaw, Giles (Pudsey)	Whitney, Raymond
Shaw, Michael (Scarborough)	Wickenden, Keith
Shelton, William(Streatham)	Wilkinson, John
Shepherd, Colin(Hereford)	Winterton, Nicholas
Shepherd, Richard	Wolfson, Mark
Silvester, Fred	Young, Sir George(Acton)
Sims, Roger	Younger, Rt Hon George
Skeet, T. H. H.
Smith, Dudley	Tellers for the Noes:
Speller, Tony	Mr. David Hunt and Mr. Tristan Garel-Jones.
Spence, John
Spicer, Jim (West Dorset)