§ Mr. David Wilshire (Spelthorne)First, I take this opportunity to note the late hour and to thank Mr. Speaker, through you, Mr. Deputy Speaker, for allowing me to raise a matter on which I feel strongly. I also thank the Minister for sparing time to attend the debate.
I begin by making two brief personal observations. First, all that I want to say about the management of local government services is based on my own personal experience. I served for six years as a council leader. My remarks are not based upon abstract theory. Secondly, I draw the attention of the House to the Register of Members' Interests. It discloses that I am the co-director of the political management programme at Brunel university, where work on this question has been carried on for some time.
Why, then, do I think that these issues need to be aired? Any examination of the management of local government services does not require legislation. That must be welcome news to all hon. Members and to local government everywhere. Legislation alone will not secure the future of local government. All hon. Members want its future to be secured, but legislation is only half the story. It will end abuses but it will not improve services. That requires skilful management. Moreover, any legislation that is passed has to be implemented. That is a challenge for effective local government management.
Another reason for airing the matter on this occasion is that local government management has not been systematically studied during the last 15 years. About 15 years ago the Baines report was published. That report was made by bureaucrats for bureaucrats, not by managers for managers. We must look carefully into the management of local government services, if local government is to flourish. Whatever we may say or think about it, local government is essential and it will not go away.
That begs the question how local government should be managed, if it is not to be managed according to the Baines model or if it is not to be managed as it is now being managed by many authorities. There are three key points to bear in mind.
First, local government should he managed by real managers, not by administrators. Secondly, local government should be managed by an appropriate form of management. Local government is not Marks and Spencer, even if some of us think that it should be. It can never be that. Thirdly, local government services must be managed in a businesslike way, although those services are not businesses. Managing services in a businesslike way amounts to asking for a major cultural change in many organisations. I know from my experience that it also calls for major organisational changes. Both cultural and organisational changes can be traumatic experiences.
We require real managers in local government. The Government can play their role by encouraging real management in local government, by making facilities available for it to develop and, if necessary, by providing funds to speed up the training.
Traditionally, local government services have been administered rather than managed. Among the less endearing features of local government is a strong central core of administration. The power of the treasurer in local government is formidable, awesome and often obstructive. 1035 Input is the main controlling factor. How much money is put into local government is the main means of control. That does not lead to effective management. Responsibility is devolved to officers who often find that they do not have the authority to go with that responsibility. The story of the person who is responsible for postal services in a local authority not having control over the postal budget or not being able to control the purchase of stamps is the all-too-familiar a story of responsibility and control being detached from one another.
Worst of all is the fact that in the traditional system of local government roles are confused. Chief executives are not quite sure what their role is; chief officers are not quite sure about the difference between them and chief executives. What is probably most serious of all, councillors are not quite sure where they fit into the pattern.
Sadly for local government, there have been dramatic developments elsewhere in the public sector. There have been major changes in the Civil Service. Above all, the National Health Service has been at the forefront of change, in the overhaul of its management structures. However, those lessons have yet to filter through significantly to local government.
The model that I would urge upon the Government to consider for local government is the model that they adopted for the National Health Service, with its process of general management as a way forward. My experience and my belief is that the analysis brought to bear on the Health Service is absolutely right in the NHS and would be absolutely right in local government.
That takes us on to what needs to be done to develop more effective managers. First, it is necessary to establish a strong general management lead in the officer structure and then create strong and effective service managers in posts that really matter. The role of a general manager has to be made absolutely clear. A general manager is not a chief executive, nor is he a typical departmental head or chief officer in charge of an empire. General managers have to be free from service responsibility, they have to work across all services with meaningful control of all that goes on. They have to have the authority that chief executives often do not and more than anything else they have to get away from the idea that the job of general manager is somehow to chair in a mystic way a management team that all too often is composed of people who are invited to look across all services while having their own empires to defend.
The role of service managers also needs to be clearly understood. Service managers need to be free to deliver the services for which they are responsible. They need the authority and the control to do those jobs. They need their own budgets and they need to be able to decide how to spend them. They need their own cost centres and they need to be able to bid for their own resources.
It is never going to be possible to manage a service, be it in the public sector or elsewhere, without proper and effective control of the staff. The manager, not the personnel department, must do the hiring and firing, The manager, not the personnel department, must argue for the structures and suggest the grades. To manage effectively, a manager must have his own targets based on 1036 outputs which must be based on quality and not numerical factors. I have never been impressed on being told the number of times that a council cuts the grass in a year. I am much more interested in how long the grass is before they think it needs cutting. That is the targeting and control that they need.
In addition, local government needs to adopt an appropriate form of management. Local government is not a business. It cannot be run like Marks and Spencer for the simple reason that local government cannot withdraw from statutory functions, as a business can if it is making a loss. Councillors can never become line managers in the business sense. In their franker moments, councillors sometimes admit that they are unclear about their role, and that they seem to lack some of the skills that are needed. Therefore we have to identify a third manager in local government—the political manager. When we understand and work out that role, we shall get away from the conflict between councillors and officers and the complaint that all too often, councillors are officer-dominated.
Finally, one has to ask what is involved in managing services in a businesslike way. It is not possible to go into detail in such a brief debate, but certainly the customers must come first. That is the key to it all. Secondly, the central bureaucracy must be dismantled, and, thirdly, it must provide business budgets. Certainly there have to be incentives for managers. The authority that I used to lead now has a profit-sharing scheme for its DLO because the DLO makes so much profit.
A review of local government is not only a good idea but it is long overdue. Despite all the legislation, which I willingly support and believe to be necessary, as long as it is only legislation and not a major overhaul of local government services, we shall not secure the future of a flourishing local democracy in Britain.
My experience during 11 years in local government has taught me a number of things. If management is overhauled it gives councillors a much more satisfying role. It gives them greater control of authorities and, therefore, enhances democracy. My experience has also taught me that if management is overhauled better services are provided and more services are obtained from the same amount of money.
I learnt also that if the power of the centre, particularly the financial centre is ended—the lawyers have their own budget, and have to recover their own costs, and the planning department is free to use in-house lawyers or go down the street to a private firm of solicitors if it prefers—it saves a great deal of money because overheads will shrink. If one is careful, the money saved can be re-invested and given to the managers who deliver the services. The money that was spent on overheads can be spent on local people.
My hon. Friend the Minister may talk about all the things in which he used to be involved, such as competitive tendering. All the changes could make it easier for in-house people to win the contracts because they would be better managed and more cost-effective. My experience has also taught me that better-managed authorities mean jobs that are more secure and union support.
All those objectives have been achieved in one council that I know. I know that many other Members have similar experiences. We would all say that if the Government can encourage local government services to be better managed, and encourage officers and councillors 1037 to do their jobs in a better way, then, without passing another law, there will be better services, better democracy and a much more secure future for local government.
§ The Parliamentary Under-Secretary of State for the Environment (Mr. Christopher Chope)I congratulate my hon. Friend the Member for Spelthorne (Mr. Wilshire) on his stimulating speech about the management of local government services. He has shown, as he has on previous occasions, an insight into the problems based on knowledge and experience as the leader of Wansdyke council and as a member of that authority before he became the leader. I hope that his remarks will be widely read by members and officers in local government.
My hon. Friend's contribution gives me the opportunity to discuss the action that the Government have taken through the Local Government Act 1988 to try to bring about a new approach to management in local government. That was the essential purpose we had in mind when we planned the legislation on competition, which is now embodied in the first part of the 1988 Act.
My hon. Friend has described the action which a good and progressive Conservative-controlled authority was taking of its own accord, without needing the spur that the Act provides. But, alas, too few authorities have been prepared to take the long cool look at all management activities and structures which Wansdyke put in hand with such productive results. If we had waited for voluntary action to bring the kind of changes that were needed in local government generally, I fear we would have waited a long time.
The truth of that is proved clearly by the spate of activity that has accompanied the passage of the Act. Large numbers of advertisements appeared for managers to run competitive processes. There were innumerable articles on the challenge that lay ahead and how best to deal with it. Seminars and conferences were launched on every side—and did very good business. My hon. Friend and I have spoken at a number of those conferences.
All that suggests strongly that few authorities were in a position properly to define and describe the services they needed and the way in which they could best and most effectively be provided. Most have found their existing command and control quite inadequate to handle service delivery in a competitive environment. There was clearly a widespread fear that present cost levels were less than competitive. The kind of self-examination which we have seen in Wansdyke had few imitators.
All this made somewhat ironic the impassioned pleas that we heard from so many authorities and from the local authority associations, asking to be left alone to decide whether or not to go in for competition because they were in the best position to know whether their cost levels were such as to deliver the best value for the ratepayer's hard-earned money. They cannot have it both ways. If their service delivery was already so efficient, competition should have presented them with few problems. There would have been no need to question existing management structures, nor any need to consider whether to break loose from control service provision, nor any need to cast around for people capable of managing the provision of services.
Already we are seeing that substantial cost savings have been identified, bonus schemes are being drastically 1038 revised, the level of central overheads is being questioned, asset holdings are being pruned as spare capacity is identified and clear and simple organisational structures are being adopted in place of vague and informal ones. For example, a report published for Income Data Services, which came out last week, showed that increasing numbers of councils are merging all their direct service organisations into a single business unit so that they can compete more effectively with the private sector. This means new profit-sharing schemes, the encouragement of work force participation, of such methods as team briefings and quality circles, and new incentives for managers such as performance related pay. There is also a new and welcome move towards term-limited contract arrangements for senior staff.
All of this only confirms what the Government have believed all along—that any organisation that is left to run without outside pressures on its efficiency for any length of time is likely to fail increasingly to deliver real value for money. The Audit Commission's findings have repeatedly confirmed that this is a fact of life.
I can assure the House that, the Government see competition as a way of strengthening local government. Clear decision-making processes, full and regular information on cost levels and reductions in these cost levels can only work to the benefit of members, officers and ratepayers, and therefore of the local democratic process as a whole. That is why the legislation is specifically designed to strengthen the organisations in local government that are responsible for the actual provision of services—always assuming, of course, that they are capable of being strengthened in this way. What the Act says is that council employees can continue to provide direct services, but only if they can show—in fair and open competition—that they can win a tender in the face of counter bids from the private sector. If they are not capable of doing this, the ratepayer would be better served by whoever can win the contract on such terms.
The advantages of transparency in management and costing are guaranteed by the requirement that each of the services made subject to competition must be separately accounted for—with costs, including overheads, and revenues properly identified. We would expect most services as a rule to achieve the not unreasonable rate of return of 5 per cent. on capital—and we have required the auditor to comment on how far they are successful in this objective. We have also provided appropriate—and in some cases, I fear, all-too necessary—sanctions.
The savings that this revaluation in the management of local government offers are certainly very substantial indeed. The leader of Bristol city council has said publicly that savings of £600,000 have already been identified. Berkshire plans to save £800,000 a year just on school cleaning alone and Langbaurgh received a bid of £150,000 for street lighting which previously cost it £450,000. Those are just isolated examples. The Audit Commission, in its recent report on competitive tendering for parks and open spaces said that it had found, from its limited experience of tendering to date, that authorities could expect to achieve savings of between 10 and 30 per cent. on the previous price, with overall net savings of between 5 and 25 per cent. For parks and green spaces alone that could add up to savings of up to £200 million a year without any reduction in quality of service. That is just in the service area, which people might regard as relatively mundane—a total of £200 million a year.
1039 The prize that we are looking for is, in every sense, worthwhile. The savings are not to be measured in money alone, although these are likely to be considerable, but in improved management, better cost structures, better 1040 motivated and better rewarded work forces. Where Wansdyke has pointed the way to what can be done, other councils should be following. That will result in better and more efficient services for the public.
§ Question put and agreed to.
§ Adjourned accordingly at six minutes to Three o'clock.