HC Deb 10 November 1982 vol 31 cc643-50

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

10.41 pm
Mr. Guy Barnett (Greenwich)

I am grateful for the opportunity to raise the issue of contract catering at the Royal Naval College, at Greenwich in my constituency.

The proposal to move to contract catering became public shortly after the Ministry of Defence began consultations on 23 July. It has caused a good deal of concern and even alarm in my constituency. There has been comment in the local press. The present catering staff, who are likely to be affected, are deeply worried by the proposal. Doubts have even been expressed by the management of the college.

I wish to emphasise that I have deliberately not asked the management officially for its views for fear of placing it in a difficult position, but the Minister should tell the House what reaction his proposal has met among the naval staff and the management of the college. Understandably, it is the industrial staff whose jobs are directly threatened who are most alarmed and dismayed by the proposal. There can be no valid criticism of the performance of the staff. Every time I have been a guest of the Royal Naval College or enjoyed the hospitality of the Admiral President I have been struck by the efficiency, thoughtfulness and courtesy of the catering staff with whom I have come into contact, and I have been highly impressed by their culinary skills.

Let no one be in any doubt about the considerable demands that are made upon them. In addition to the considerable requirements of the officers' mess, which start daily with early morning tea for every accommodated individual and end with dinner in the Painted Hall, there are varied requirements which arise from Royal, State, diplomatic and Admiralty Board banquets. There are formal dinners for external organisations, buffet lunches, parties and receptions. That is just to name a few of the varied requirements that fall upon the present catering staff who serve the college so supremely well.

They do so because the people who make up that staff share a tradition of loyalty derived from the fact that many of them have previously served Her Majesty in the Armed Services and have then served the Government for many years in anticipation that their jobs would be safe, even if the weekly wage was small.

What is the argument for the proposal to replace the present staff of about 100 by a contract firm? I wrote to the Under-Secretary of State for Defence Procurement, and his reply, in a letter dated 1 October, was that it would be cheaper. He thought—I hope that I interpret his words fairly—that a contract firm would be at least as efficient as the present work force.

I shall deal first with the cheapness argument. The Minister cannot quote the nature of the putative contractor's bid without disclosing commercial information. I understand that. But if cheapness is his objective, he must answer a number of questions. First, what initiatives have been taken by the management of the college, on his instructions, to cut costs in the present service? My information is that no such initiatives have been taken. It would be making quixotic demands on the trade unions to suggest that they should come forward with such proposals.

Secondly, as the Minister knows, there has been an almost universal ban on recruitment, with the result that the present work force is about 30 below strength. So why does the Minister insist on making cost comparisons that count the establishment level and not the numbers actually in post? Does he not accept that the only legitimate comparison is on the basis of those now in post, plus an efficiency exercise initiated by the management in cooperation with trade union representatives? Thirdly, in his letter to me the Minister states: in line with Treasury guidance, 5 per cent. of total redundancy compensation is included in the comparison of the annual costs of contract and in-house catering. That may be the Treasury's idea of a fair comparison, but no accountant would agree that so small a percentage represents a realistic figure for redundancy costs that will arise as a result of implementing the proposal to go out to contract.

The Minister used the argument of efficiency. That is even less soundly based. In his letter to me he said that he is well satisfied with his many cleaning contractors. Even were that to be true, it is hardly relevant to this proposal. He admits in his letter: Our experience in the catering field is as yet somewhat limited. Yet he is prepared to consider a proposal to hand over to a contractor a very wide-ranging function. It is a varied responsibility of which few contractors can have had experience—anything from a full dress State banquet to the routine and varied needs of the college, as well as the private functions.

It would not surprise me if the contractor who had been awarded the contract, and possibly even moved in, would find it necessary to withdraw because he was unable to fulfil his obligations. He might even default on them. What would the Minister do then? He may think that the best hope is for the contractor to re-engage the staff who are being made redundant to take advantage of their expertise and experience. If so, what is he saying? It is that the work force of the college is highly competent, but the management of the college is not. If that were the case, logic should then decide him to sack the management, appoint new managers and keep the present staff.

I am driven to the unwelcome conclusion that the Government think that it would be advantageous to divest themselves of their responsibilities as employer, and that the major saving that they hope to make will be made at the expense of the employees who, if they are re-engaged by the contractor, will be paid even lower wages than they are now receiving and suffer worse conditions of employment than those which are currently the subject of trade union negotiation.

Mr. Roland Moyle (Lewisham, East)

Does not my hon. Friend agree that both he and I have enjoyed the catering arrangements at the college from time to time, and found them of first-class efficiency? Is it not crystal clear to any impartial person that the interests of his constituents and mine are being sacrificed for a managerial scheme of dubious efficiency, purely on doctrinaire grounds?

Mr. Barnett

I agree entirely with my right hon. Friend. He represents a constituency near to mine and will recognise, as I do, the vital importance of the role of the Royal Naval College in our area. However, I would go further. I am sure that my right hon. Friend will agree that the Royal Naval College has a national, if not international, reputation, which needs to be preserved. My final point, which is perhaps the most important, concerns security. We are told that the Government are security conscious. If they are not, they should be when there is a constant threat to the realm, to important individuals and to members of the Armed Services. Recent lapses in security affecting the Royal Family have caused considerable public disquiet. I raised those issues in my letter to the Minister, but his view is that there is no cause for concern on security grounds with regard to the proposal for the college.

Would that also be his view about the Palace of Westminster? I understand that the House of Commons (Services) Committee would not accept it. If anything, the risks to be run at the Royal Naval College are greater than those that might affect this building. One reason is the fluctuating demands for catering and waiting staff in the college, which dictate the need for casual staff on precisely those occasions when the college hosts royalty, foreign statesmen, diplomats and other important individuals.

The Minister suggests that there will be a pool of supplementary labour from which the contractor can draw for special occasions and that the Ministry will ensure that that pool contains only the people who are security vetted. However, I am told that there are a number of instances in which that system does not work. The substitution of a security-cleared worker for someone who has not been so cleared is a strong possibility, and is one that I understand has arisen in other areas where contractors have been employed.

I ask the Minister to consider that matter of security more seriously than he seems so far to have done or to give a fuller answer than the one contained in the letter that he wrote to me.

There are, of course, differences between the Government and myself on political grounds, but I am deliberately not dilating on them in this Adjournment debate. However, the Government owe the House, and those who work in my constituency and who are involved, much more explanation on three points: how the Minister arrives at the cost comparisons that he says that he has made; whether he thinks that the figure that he has included to cover redundancy costs is fair; and explanation on the security aspect on which the House is entitled to greater reassurance than hon. Members who have written to the Minister have so far received.

10.52 pm
The Under-Secretary of State for Defence Procurement (Mr. Geoffrey Pattie)

I am grateful to the hon. Member for Greenwich (Mr. Barnett) for raising this subject tonight, as it gives me the opportunity to set out some of the background both to the specific proposal to introduce contract catering at the Royal Naval College, Greenwich and to the general exercise of which this is a part. Since 1979 we have been examining the scope fpr contracting out cleaning and catering services at defence establishments in Great Britain, and I know from the letters that I have received that this subject is of interest to a considerable number of hon. Members.

I should say at the outset that we have not yet taken a final decision on whether to introduce contract catering at the Royal Naval College, Greenwich. We are at present consulting the departmental trade union side on the proposal, and we shall take its views into account before reaching a final decision. We shall also, of course, take into account the points in the debate tonight. We do, however, hope to be able to make the decision in the near future, because if we are to go ahead, the timing of the changeover to contract is an important consideration to which I shall return later.

Before I deal with the merits of this proposal, I should like to set it in the context of our general study of contract cleaning and catering. The Government came into office committed to bringing about a reduction in the size and cost of the Civil Service. Contracting out cleaning, and catering services is one of the "good housekeeping" measures undertaken in my Department as a contribution to this goal. It enables us to save money and to help to meet our reduced manpower targets, without detriment to the defence effort. From the beginning, it was clear that contract cleaning offered the prospect of significant financial savings at a large number of Defence establishments. It was also clear that, while the case for contract catering was in general more finely balanced, there was the possibility of savings at certain establishments such as the Royal Naval College, Greenwich.

It is sometimes said that the aim of this exercise is to contract work out to the private sector whatever the cost. This is not so. We decide to contract out cleaning and catering only after a careful and detailed cost comparison between the costs of doing the task in-house and the costs of contract, and only when we are satisfied that contract would be no more expensive. In all the large number of cleaning contracts and the small number of catering contracts so far approved, contract has proved to be not just no more expensive but clearly cheaper—in many cases substantially so.

Cleaning contracts have so far been authorised for over 200 defence establishments, which will save over 4,800 complemented Civil Service posts, and an estimated sum of around £8 million a year. Only a few catering contracts have so far been authorised, mainly because a much smaller number of establishments are suitable for contract catering, and, because in some cases contract would have been more expensive than continuing the present in-house arrangements, we do not proceed with them. The Royal Naval College, Greenwich, is, however, one establishment where we could save money by changing to contract.

I regret to say, as the hon. Member for Greenwich predicted I would say, that I am unable to disclose details of the cost comparison which leads to that conclusion. I recognise that the hon. Member would like to have these full details, as indeed would our trade unions. There is unfortunately a genuine difficulty here to which we have been unable to find a solution. The fact is that the tenders we receive are submitted on a "commercial in confidence" basis. Tenderers have a right to expect that the privacy of the details they provide to us will be respected. This point was considered by the central arbitration committee in 1980, when the Civil Service union sought a ruling that the Ministry of Defence should disclose information from some cleaning tenders. the central arbitration committee concluded that because the information was submitted by tenderers "in confidence", the Department could not be required to disclose it. I can, however, give the hon. Member my assurance that the cost comparison for catering at Royal Naval College, Greenwich shows that that contract would be significantly cheaper.

The cost comparison is, as I have said, based on a detailed assessment of the relative costs of in-house and contract catering. It includes, on the in-house side, the costs of food, wages, employer's national insurance contributions, superannuation, administration and other costs. On the contract side, it includes the contract price, the costs of those directly employed staff who would be retained, administration and other costs and a proportion of the likely cost of redundancy payments to staff who would no longer be required.

The total in-house costs of catering at the college come to £1,028,000 a year at 1981 prices, based on the full complement of staff. Because of under-manning, to which the hon. Member for Greenwich referred, the staff strength is below the complement, and on the basis of staff in post, the in-house cost is about £200,000 less, or £837,000 a year. For the purposes of the cost comparison, we normally use the in-house costs based on the full complement of staff, to ensure that we are comparing like with like. The full complement is the number of staff required to carry out the full task, and this is also the basis on which tenders are invited. A true comparison of the costs of the two options must therefore be based on the in-house costs of carrying out the full task—in other words, the cost of the full in-house complement. In fact, in this case, contract catering would be cheaper even than the lower in-house costs that I have quoted, based on the actual number of staff employed at present.

I know that the trade unions have questioned the fact that the allowance for redundancy costs in the comparison is 5 per cent. of the total estimated payments, and have argued that that percentage is too low. The figure of 5 per cent. has been laid down by central Departments as the correct one to use when making such cost comparisons. It is based on the fact that redundancy payments are, of course, a one-off cost in the changeover to contract, and to add the total cost on to the first year of the changeover would give a false picture of the long-term balance of advantage between in-house and contract catering. We must take a long-term view of the relative costs, and while clearly some account must be taken of the once-for-all costs of a change, spreading such costs out over a reasonable period is considered the best way of doing so.

Mr. Moyle

The Minister is basing his case entirely on costs. There are other factors, as my hon. Friend the Member for Greenwich (Mr. Barnett) has said. Many prominent people from abroad take advantage of the catering services at the Royal Naval College. Will he assure the House that standards of service and efficiency will be at least as good as they are now under any future arrangements?

Mr. Pattie

As the right hon. Gentleman will appreciate, I am dealing with a series of points and I shall be coming to standards. I assure him that a change of this sort would not be contemplated if we were not satisfied on two fundamental points—first, that we would get genuine and significant savings, and, second, that standards would be as high as they had been in the past. There is no point in changing to lower standards.

The hon. Member for Greenwich also raised the point whether it would still be cost-effective to change to contract catering when that would also involve giving staff pay in lieu of some of the u[...] period of notice to which they would be entitled. That raises the question of the timing of the changeover, to which I referred at the beginning of my speech. For practical reasons, the changeover would be best made during one of the holiday periods at the college—Easter, summer or Christmas. The defence studies wing of the National Defence College, Latimer, will be moving to Greenwich during next summer, and it would not be practical to introduce catering contractors at the same time as this other change is taking place. That means that if the changeover to contract did not take place in Easter 1983, it would not be possible until the end of the year. Making the change at Easter would involve giving some pay in lieu of the full period of notice, but the cost of that is assessed as being less than the savings achievable by changing to contract at the earlier date.

I am aware that the local work force has now expressed an interest in submitting its own proposals for cutting the costs of in-house catering as an alternative to contract. It has been made clear to our trade unions that while we are ready to consider counter proposals from them, these must be submitted no later than the tendering stage. That is to allow us time to evaluate them and, if they are considered acceptable, to cost them and compare them with the tenders. That stage has now passed, and so it is too late to consider such proposals.

I fully understand the anxieties of the work force about job losses and its future employment prospects. The proposal to bring in catering contractors at the college would involve the disappearance of the equivalent of 118 full-time complemented posts. Because a number of those are unfilled at present, the actual number of jobs lost would be the equivalent of 85½ full-time posts. The number of individual staff members affected would depend on how many part-time and full-time employees in the expected field of redundancy actually leave, but the maximum number would be just under 100. Every effort would be made to find alternative Government employment for those displaced, but it is likely that some at least would have to be declared redundant.

However, the incoming contractor would of course need to employ staff to enable him to carry out the contract, and we encourage both cleaning and catering contractors to recruit the extra staff they will need from among the existing work force.

It is in both his and our interests that he should have a work force experienced in the requirements of the establishment concerned, and we have found from experience that contractors co-operate well on that point. For example, we have analysed what became of the directly employed staff at the first 95 establishments where contract cleaning has been introduced during the current exercise. Of the staff in post when the decision was taken, 53 per cent. either transferred to other Ministry of Defence employment or opted for retirement or voluntary redundancy terms. Four-fifths of the remaining 47 per cent. were offered employment by the incoming contractor. Of those, just under half accepted the offer of employment and just over half, for whatever reason, declined. The final result was that 71 per cent. of the existing staff were either employed elsewhere in the Ministry of Defence or by the contractors, or had opted for retirement or voluntary redundancy, and most of the remaining 29 per cent. had had the opportunity of employment with the contractor. Our experience with the small number of catering contracts let so far has been similar, and while, of course, no guarantees can be given that the pattern would be repeated exactly at the RNC Greenwich, there is no reason to expect that that would not be so.

As to the terms of employment offered by commercial firms, they are obliged under the contract to observe the terms of the fair wages resolution, and we take care to verify that the contractors' proposed wage rates are in line with local market rates.

On the question of the standards of service provided by contractors, we are satisfied that the firm to which we propose to award the RNC Greenwich contract is highly reputable and is fully capable of meeting our requirements. Firms are asked to tender only if we consider them to be able to carry out the task to our satisfaction and tenders are carefully scrutinised to see that they are realistic and provide acceptable standards.

As the right hon. Member for Lewisham, East (Mr. Moyle) reminded us, particularly high standards are required at the RNC Greenwich, because of the nature of some of the catering functions held there, but the use of contractors for such prestige functions is not a complete novelty. The Government hospitality fund makes considerable use of commercial caterers for its functions, and we are confident that a commercial firm at RNC Greenwich would be able to maintain the high standards expected of it.

Some concern has been expressed about the security aspect of using a commercial caterer in an establishment such as the college, particularly since the contractor would need to bring in extra staff to supplement his regular employees on special occasions. As I said a moment ago, contractors are already used in similar circumstances by the Government hospitality fund, and the Department would take whatever steps were considered necessary to satisfy itself as to the acceptability of the staff employed. That would naturally be made easier if, as we hope, the contractor at Greenwich recruited his extra staff from the existing work force. Arrangements would also be made to establish a pool of reserve labour for special functions when more staff were needed. I assure the House that we attach great importance to security and we are satisfied that the arrangements will be adequate.

I do not share the suspicion in some quarters that commercial contractors are somehow less reliable and less able to meet the standards required than directly employed staff. That is not borne out by our experience. Our many cleaning contractors and their staff have, in general, shown themselves to be as reliable, adaptable and dedicated as our own employees. For example, in a number of establishments where special demands were placed on them during the Falklands operation, they responded well. In many cases, despite some initial apprehensions about the standards provided by contract cleaners, we have seen positive improvements in standards as a result of their introduction. Although we have, so far, less experience of contract catering, I am confident that it can be just as successful.

I fully sympathise with the present catering staff at RNC Greenwich whose jobs would be affected by the proposal. Many have given long and dedicated service, but, at a time when we are looking for economies, we cannot afford to ignore the significant savings which we are satisfied would come from a change to contract. I hope that many of the existing work force will find employment with the contractors so that their services will not be lost to the college.

In conclusion, let me repeat what I said at the outset. We have not reached a final decision on the proposal, although we hope to do so soon. All the views expressed tonight will be taken into account in reaching that decision, but I must say that I believe that there remain good reasons why the proposal should go ahead, and that the apprehensions about the implications of the change to contract are not well-founded. If the final decision is that we should go ahead, I am sure that we can maintain the high standards of catering required at the college while making worthwhile savings.

Question put and agreed to.

Adjourned accordingly at seven minutes past Eleven o' clock.