REGISTER OF PRIVATE CONTRACTORS (Hansard, 14 March 1990)

§ Mr. Campbell-Savours
I beg to move, That the clause be read a Second time.

§ Mr. Speaker
With this, I understand that it will be convenient also to take new clause 11—Contracts for competitive tendering—

§ Mr. Campbell-Savours
The objective of new clause 9 is to place a responsibility on the Secretary of State to set up a register of contractors, the effect of which would be to provide for greater glasnost in the way in which private contractors operate, wherever they may be in the United Kingdom.
Much controversy surrounds the activities of private contractors. Privatisation is politically sensitive and, so far as the public is concerned, extremely controversial. The industrial side of the National Health Service includes catering, domestic and laundry services. When between 70 per cent. and 90 per cent. of the costs of that industry comprise wages, the only opportunity for profit taking in that industry must come from reducing wages and conditions—and in particular the wages.
A year or two ago, the Treasury produced a report called "Using Private Enterprise in Government". That report stated: most of the savings from contracting out arise because contractors offer poorer conditions of employment. Contractors in the ancillary services usually offer similar basic rates of pay ranging from 10 per cent. less to a few per cent. more in some cases, but they eliminate costly bonus schemes 580 and overtime working, provide little if any sick pay and avoid national insurance payments by means of more part-time working. The truth is that savings to generate profits in those industries in which we require a register to be set up arise because people cut labour costs and the result is discontent and a high turnover of staff.
That is why I pursued the Under-Secretary of State for Scotland, the hon. Member for Stirling (Mr. Forsyth), in Committee. People and those Members of this House who press for contractorisation and privatisation in the NHS are pressing on Government the need to reduce the wages and salaries of people who already work in low paid areas of the NHS.
I understand that many hon. Members have consultancies and directorships in those organisations, whether they be lobbying companies or in direct contact with contractors. I also understand that many hon. Members, and particularly their spouses who are not required to register shareholdings in the Register of Members' Interests, have holdings and are direct beneficiaries of legislation which promotes privatisation. In so far as the Bill is enabling legislation, it will ensure that many thousands more contracts will be let for services.
Under the terms of new clause 9(a) the register would show Any contracts held with National Health Trusts, health authorities, or Health Boards in Scotland. Members might question the need for that. The answer is to be found not in a Government document, but in a document published by the trades union privatisation unit. That document lists the authorities that have had difficulties with private contractors. It identifies the contractors and the services that they were providing.
For example, there are well documented complaints over many months about the laundry service in the acute unit of Croydon health authority. The company involved there was Advance Laundry. South West Surrey district health authority had problems with Allied Medical Catering, which went into voluntary liquidation three months into its contract. Andmarc, another company providing domestic service in North West Surrey health authority, had its contract terminated after just 10 clays, during which it could not meet the required standard. Blue Arrow, another company providing domestic service at Parkside hospital in Macclesfield health authority, failed to meet the standards. It pulled out of the contract after just one year. Following the failure of another company, A and E Chapman, to provide adequate service at new East Surrey hospital, the contractors' performance was put under strict health authority scrutiny. Its one year contract was not subsequently renewed.
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Contract Clean (Southern) in North West Surrey health authority, which provided domestic service, claimed that it had under-estimated costs and quit after a year of the contract. I have pages and pages of companies in this sector employed under rules instituted by the Government, no doubt driven down the route of competitive tendering by more than obliging Members of Parliament asking parliamentary questions to elicit a response from district health authorities.
Many companies listed in the document have either lost their tender or simply been put out by the health authority. Contract Clean (Southern), County Cleaners and 581 Crothall, are further examples. Crothall failed in many contract areas covering the three areas covered by the clause—catering, laundry and domestic—in every part of the United Kingdom. Its record is appalling.
Endless Hospital Services is another such company. Exclusive is another, which I understand has representatives in the House. The list also includes Express Laundries (Blackpool), Gardner Merchant, Hall Hospital Services, Home Counties Cleaning, Hospital Hygiene Services, ICC Hospital Services, Ideal, Initial Laundry, Kneels, B. A. Lister, Mediclean, OCS, RCO, Reckitt, Royal Jersey Laundry, Spinneys, Sunlight, and Westcott. It is a roll of dishonour. People have taken on contracts who cannot run them properly or meet standards. They have either been forced to leave or booted out of the contract by the district health authority.

§ Mr. Rowe
Will the hon. Gentleman give way?

§ Mr. Campbell-Savours
I have no intention of giving way. The hon. Gentleman had weeks in Committee to ask questions on these matters. He did not do so.

§ Mr. Nicholas Bennett (Pembroke)
We did.

§ Mr. Campbell-Savours
He concentrated on matters which were insignificant.

§ Mr. Neil Hamilton (Tatton)
Is this a COHSE brief?

§ Mr. Campbell-Savours
No. The information is available to any Member of Parliament who seeks to find out the truth. Anyone can find it. The problem is that Conservative Members sit on their backsides and refuse to address themselves to the truth. The truth is that contractorisation and privatisation in the NHS are appalling failures.

§ Mr. Donald Thompson (Calder Valley)
Will the hon. Gentleman give way?

§ Mr. Campbell-Savours
No.
I want to move on to paragraph 2(b) of the new clause which deals with the registration of penalties invoked in such contracts. Why do we need to refer to penalties? Why should the register show where penalties had to be paid? The answer is simple. Many companies have been subject to penalties. They include Allied Medical Catering, in South West Surrey health authority. The company went into liquidation. The health authority also terminated the contract of Andmarc. In Kingston and Esher health authority in 1986, Advance Laundry pulled out. Blue Arrow Cleaning Group in Macclesfield health authority pulled out in 1986. Exclusive Cleaning in Bromley health authority pulled out.
In every area of the United Kingdom, and particularly in the constituencies of Conservative Members, this policy has miserably failed. Contractors have been turfed out, and often penalised. It was Sir Whatisname Forte who three or four years ago decided to go into this business until he took a closer look and decided that he could make money from privatisation only by cutting wages. Not even Sir Charles Forte was willing to do that. Where he was unwilling to go, Conservative Members were perfectly willing to press for in this House. Clearly, they do not carry with them the same moral standards, if I may use that word. We are talking about standards.
A Conservative Member who is willing to come to the House and advocate that a privately contracted NHS 582 worker earns only 1.80 an hour, which is indeed the going rate offered by many contractors, is unfit to sit at Westminster. No one in his right mind in the society of the 1990s and living in the real world can possibly advocate such wage levels, yet people do. That is why we took such strong exception to the Under-Secretary of State for Scotland, the hon. Member for Stirling. Before coming to Parliament, he spent his life pushing these appalling contracts that led to low-income families throughout the country suffering. They could not afford to go to work and earn as little money as they were earning. [Interruption.] Hon. Members can cringe—[HON. MEMBERS: "We are not cringeing."] Hon. Members can cringe. Let them stand up and defend those wage levels. They are indefensible.
I wish to raise the question of what you referred to yesterday, Mr. Speaker, as public policy. Sponsored Members of Parliament receive no money from their sponsoring union. I receive nothing personally and I claim no expenses, not one penny. The Conservative party has successfully sown a myth in the public mind about what sponsorship means in order to be able to justify their consultancies and directorships, which are based on personal financial remuneration.
If we are to accept the principle of public policy and if a Member who receives personal remuneration is entitled to vote, on what basis can that principle of public policy be extended to cover procedural motions, such as the guillotine motion? It is an important principle. Why should Members of Parliament be able to drive through legislation, not on its principle, but procedurally simply because they will be the financial beneficiaries? Why should they have that right?
We had that argument some years ago in the Committee considering licensing hours. Three Conservative Members voted for a sittings motion. Weeks later, we blocked the Bill on Report on the Floor of the House as a punishment for their moving the sittings motion before the 1987 general election. Hon. Members may remember that. We believed that it was wrong that those with a direct pecuniary interest should use procedure to drive through legislation from which they could benefit directly.

§ Mr. Bill Walker
Will the hon. Gentleman give way?

§ Mr. Campbell-Savours
I have absolutely no intention of giving way. [HoN. MEMBERS: "Give way."] I gave way to the hon. Gentleman many times last week, and he will be getting a letter from me about it.
It is wrong that people with a direct pecuniary interest who receive money in their back pocket should be allowed to vote. That has happened on this Bill. It is a constitutional outrage that it is happening in the House. If the general public understood the complexities of procedure, but saw it simply as, indeed, it is in practice, they would feel equally outraged. The problem is that they will not learn the truth, but they should know the truth.
I feel strongly about the new clause, but, as many Members wish to speak, I advise my hon. Friends not to push the matter to a Division. Let us have more debate, in the hope that some Government Member will get up and defend the levels of wages paid in the industries about which I have been talking.

§ Mr. Nicholas Bennett
Those of us who served for three months on the Standing Committee that dealt with the Bill enjoyed listening to the hon. Member for Workington 583 (Mr. Campbell-Savours) make these speeches week in and week out. He was the Robespierre playing to Madam Defarge from Halifax. We have been told that he is incorruptible, but when we examine his interests what do we find? First of all, he is a sponsored member of a Health Service union. Time and time again, he has voted against competition in the Health Service, against competitive tendering, and in favour of union monopoly power.
Did the hon. Gentleman just once stop to think about what he was doing as a union-sponsored Member? What was his interest in voting for union monopoly power? Tonight he has impugned the honour of other hon. Members, but not once did he make such a declaration. He does not consider it wrong that he and his hon. Friends should be sponsored by unions with a vested interest in a Health Service that is not reformed, in working practices that are not changed, and in entrenched monopoly power for one union in the Health Service.
But this applies not only to the hon. Member for Workington. The hon. Member for Halifax (Mrs. Mahon) is sponsored by the National Union of Public Employees, the hon. Member for Wakefield (Mr. Hinchliffe) is sponsored by the National Union of Public Employees, and the hon. Member for Peckham (Ms. Harman) is sponsored by the Transport and General Workers Union. One could do a long roll-call of Labour Members who, week in and week out, have spoken—

§ Ms. Dawn Primarolo (Bristol, South)
On a point of order, Mr. Speaker. The hon. Member for Pembroke (Mr. Bennett) has just named several hon. Members. It is a courtesy of the House that Members who are to be named are notified. Has the hon. Gentleman notified these Members?

§ Mr. Speaker
We must not get too wide of the new clause, which concerns the register of private contractors. I think that we have had enough of the other matter.

§ Mr. Bennett
If the hon. Member for Workington thinks that it is important to have a register of private contractors and that the interests of Members should be looked at, we are entitled to wonder why certain Opposition Members are so keen to defend the status quo. They oppose private contractors because they have a vested interest in supporting union power.

§ Mr. Bill Walker
The question that I had hoped to put to the hon. Member for Workington (Mr. Campbell-Savours) I shall put instead to my hon. Friend. Does not my hon. Friend find it interesting that the hon. Member for Workington and others appear to believe that it is quite in order for Members of this House to write articles attacking the principles, and sometimes the practices, of privatisation and to accept substantial fees for doing so and then speak in this House about the subject without declaring an interest? Is that in any way different from the activities of any Member engaging in any other activity that ought to be declared?

§ Mr. Bennett
My hon. Friend is absolutely right. Indeed, he has made the point better than I could have done.

§ Mr. James Couchman (Gillingham)
My hon. Friend will remember that, early in the Committee's proceedings, we willingly and properly declared our interests. Many Government Members did so, as did many Opposition 584 Members, including the hon. Members for Halifax (M rs. Mahon) and Wakefield (Mr. Hinchliffe). Indeed, that is what convention dictates. Does my hon. Friend remember that three times I had to prod the hon. Member for Workington (Mr. Campbell-Savours) into making any declaration of interest at all?

§ Mr. Bennett
My hon Friend is absolutely right: the hon. Gentleman did not declare those interests without being prodded into action.

§ Mr. Campbell-Savours
On a point of order, Mr. Speaker. You know me and you would know that what has just been said is a tissue of lies.

§ Mr. Speaker
I was not on the Standing Committee—

§ Mr. Campbell-Savours
Let me finish my point of order, Mr. Speaker.

§ Mr. Speaker
Order. I was not on the Standing Committee, so I have no knowledge of these matters. May I say to the whole House that this debate is not about Members' interests but about the register of private contractors.

§ Mr. Campbell-Savours
rose—

§ Mr. Speaker
Order. The hon. Member for Workington (Mr. Campbell-Savours) mentioned this matter, and I have allowed a response. We must now return to the kernel of the debate.

§ Mr. Campbell-Savours
Further to the point of order, Mr. Speaker. Will you allow me to deal with the final comment by the hon. Member for Gillingham (Mr. Couchman)? If he wishes to repeat that statement outside the House, I shall prove that I am right by suing him in the courts. Perhaps he would like to take up my offer. If he does so, I promise him a writ. All right?

§ Mr. Couchman
rose—

§ Mr. Speaker
Order. This is developing into a much wider subject than the debate on the new clause. I do not think that a point of order can arise on this matter. The hon. Member for Workington must not allege—I should have stopped him at the time—that any hon. Member has told a lie. Perhaps he will withdraw his comment.

§ Mr. Campbell-Savours
I referred to a tissue of lies, Mr. Speaker. If you find that term offensive, I will withdraw it, for you.

§ Mr. Speaker
Let us return to the debate and stick closely to it.

§ Mr. Bennett
The hon. Member for Workington does not like getting a taste of his own medicine. We shall bear that in mind in future debates, when he may try this on again.
When looking at the new clause, we are entitled to ask what a lack of competitive tendering means in terms of union power. It was interesting that the hon. Member for Workington talked about companies that had lost contracts or failed to deliver. Under the old system, where contracts were carried out by in-house union members, there was no control over the service. There was no opportunity to get a new contract from someone else, 585 because the power was in the hands of the union—the porters and the cleaning staff in the hospital—and there was no competition for the customer, the NHS.
The new system is much better, because it enables district health authorities and hospitals to say that, if a contractor does not provide the services required, he can be turfed out, and taken to court if in breach of contract, and the contract will be handed over to someone else. That is a much better system than the old union monopoly power system.
The hon. Member for Workington said that he, as a member of the Confederation of Health Service Employees, receives no money. Of course, the fact that some of those members do not receive the money personally—some of them do—means that that money is used for their election expenses and other things, which the rest of us have to find out of—

§ Mr. Campbell-Savours
On a point of order, Mr. Speaker.

§ Mr. Bennett
The hon. Gentleman is off again.

§ Mr. Campbell-Savours
I should like to clarify for the House the fact that no member of COHSE in the House of Commons receives any money personally. The hon. Member for Pembroke (Mr. Bennett) should withdraw his remark. No money is received from COHSE as either expenses or salary. The hon. Gentleman should read what he said.

§ Mr. Speaker
Order. We seem to be returning to a matter that I said was not in order. Let us keep to the subject of the new clause.

§ Mr. Bennett
I should like to finish my last point, Mr. Speaker. I did not say that any member of COHSE received the money direct—

§ Mr. Campbell-Savours
The hon. Gentleman did.

§ Mr. Bennett
I did not. Hon. Members should listen. The money that those people receive for election expenses means that they do not have to spend money out of their own pocket—taxed income—on election expenses, because they receive it from someone else. The rest of us have to pay out of our own pocket. It is an indirect remuneration. On that point, I finish my speech.

§ Mr. Jeff Rooker (Birmingham, Perry Barr)
On a point of order, Mr. Speaker. Let us clarify the matter so there is no mistake. It is illegal for a candidate to fund his own campaign.

§ Mr. Speaker
Order. I think that the hon. Member for Pembroke (Mr. Bennett) has sat down.

§ Mr. Win Griffiths (Bridgend)
When I skimmed through the Bill, I could not see a clause under which I could legitimately raise the point that I wanted to make, but new clause 9 gives me that opportunity. Although my hon. Friend the Member for Workington (Mr. Campbell-Savours) has been concerned with obnoxious current practices relating to private tendering in the Health Service, I want to raise an issue that could have important implications if the Bill is passed.
At the Princess of Wales hospital in my constituency, a full-time consultant in the pathology department, Dr. 586 Joan Williams, and the chief medical laboratory scientific officer, Mr. David Else, established a private pathology company named Healthcare Diagnostics Ltd. at the science park in Bridgend. While no direct conflict of interests exists at present between their work at the hospital's pathology department and their status as shareholders and directors of a private company, obviously one will arise soon.
The hospital's pathology department is an income-generating department, and Dr. Joan Williams especially is in a position to obtain privileged information from that department and to know of the costs of all the services offered by the hospital to individuals and to private companies who want, for example, blood tests on all their employees. A third of the fees paid go directly to the health authority. In the case of drug screening trials, 100 per cent. of the money goes into the health authority's research budget.
I thought that might have been a one-off case of possible commercial espionage within the Health Service by full-time NHS employees. However, when I publicised the facts of that case, I discovered that at the University of Wales hospital in Cardiff, a similar situation had developed involving Dr. Keith Davies, a top-grade biochemist working for the hospital, and Dr. Stephanie Matthews, a part-time consultant.
They established a private company, Lifecare Advanced Medical Ltd, of which they are shareholders, directors, company secretary, and company chairman. They, too, are in a position to take work from the pathology department of the hospital for which they work. In the case of drug screening trials, shortly after Lifecare was established, the hospital pathology department lost that work by some direct or indirect route—the matter is still in dispute. What is not in dispute is that Lifecare Advanced Medical Ltd was suddenly undertaking the drug screening work that had previously been the responsibility of the hospital's own pathology department.
Dr. Keith Davies is at least partly responsible for setting the charges that are made for that work, so he is in a position to obtain work both for the Health Service laboratory by which he is employed full-time and the private laboratory of which he is chairman and a shareholder.
I can divulge another abuse of Dr. Davies' position. He served on a panel interviewing candidates for the post of a medical laboratory scientific officer with the University of Wales hospital. The same evening, he phoned the candidate who had been offered that job and said, "Come and join us at Lifecare." That was the job that the candidate then took up. That is the kind of scandal that can arise when Health Service employees are involved in private companies competing with the income-generating departments of the Health Service.
Not only should there be a register of private companies allowed to tender, but any such company that has an NHS employee or one of his or her close relatives as a shareholder, director, or whatever, should be disqualified from the register. Individuals who are intent on competing with the National Health Service should decide whether they want to remain employed within the NHS or to run their own private companies. I hope that the Minister who replies to the debate will denounce and reject such activities as unsuitable for NHS employees and that he will undertake to issue guidelines to prevent them from being carried out in the future.

§ Mr. Rowe
The hon. Member for Bridgend (Mr. Griffiths) has described what prima facie appears to be a clear conflict of interests. If that is the case, I have no hesitation in condemning it. However, in a structure of the size and diversity of the National Health Service, at every level there will be conflicts of interest and it is essential that we are alert to them. For example, we all know that many Health Service personnel augment their salaries by working partly in the private sector. I have absolutely no doubt that that provides them with opportunities for cross-fertilisation.

§ Mr. Win Griffiths
I agree with the hon. Gentleman that if Dr. Keith Davies was carrying out tests for a private pathology laboratory owned and controlled by someone else for £10 an hour or whatever, there would be no conflict of interests. However, he is the director, company chairman and a shareholder in the private company while he is responsible for getting such work into the Health Service pathology laboratory. The Minister should make it quite clear that that should not be allowed.

§ Mr. Rowe
I have absolutely no brief for such a practice and I condemn it wholeheartedly if that is the case.
I am sorry that the hon. Member for Workington (Mr. Campbell-Savours) is not in his place—I apologise, he is not in his usual place, and he does not appear to be paying attention. The privatisation publication of his union is unlikely to list the large number of contracts which have been discharged successfully, because the union is interested only in those which have failed to deliver the goods. I happen to find some consolation and comfort in the long list of contracts which have been terminated because they have not reached the standard required by the health authority because it shows that the health authorities are keeping a close eye on the quality of the contractors delivering the service. Throughout the National Health Service millions of pounds are being saved and in many cases a very much higher standard of service is being delivered by private contractors.
There is one element, however, on which I hope that my hon. Friend the Minister will be able to reassure me. When the necessary breaking up of the trade union dominated monopoly of services to the health authorities was started, it was written into the law that health authorities had to accept the lowest tender. That was a mistake, as I know from my own experience. A constituent of mine told me that he worked for a highly ethical cleaning company with high standards which made a point of never diminishing the salaries and conditions of service of staff whom they took over. That company added immense value by a combination of training and technology, but when it tried to break into tendering for the National Health Service it found it impossible because it was unable to underbid other contractors. It tendered to break in at the point at which it was paying exactly the same salaries and conditions of service and to improve the service over the 12 months in which it had the first contract until it became apparent that it was offering good value for money, but that was not possible.
I hope that my hon. Friend the Minister can assure me that the new system will not contain such an artificial barrier to high quality services due to some routine rule which dismisses anyone who does not offer the lowest price.

§ Mr. John Maxton (Glasgow, Cathcart)
I shall be brief because we are trying to keep to a timetable and I suspect that we may be running a little behind.
The case that my hon. Friend the Member for Bridgend (Mr. Griffiths) cited is not unique. Greater Glasgow health board recently employed a person to get its laundry service into shape for privatisation—to prepare the contracts and reorganise the service in a certain area of Glasgow. Then it was discovered that that same man and his son were setting up a laundry company to bid for the contract. What did the health board do? It rightly removed the man from the job that he had been doing, but it did not fire him. Moreover, it did not stop his company from taking part in the tender process. That seems to me to be quite wrong.
My hon. Friend the Member for Workington (Mr. Campbell-Savours) may sometimes seem abrasive and his remarks may sometimes rile people, but he is right to talk of the sleaze factor in the privatisation process, of which there is a genuine fear. The Opposition and large sections of the public feel that there is something sleazy about privatisation, and "sleazy" is the right word. The Conservative party is advancing an ideology and arguing in favour of what is supposedly a great principle—the principle of privatisation—which benefits it, its friends and supporters and, in some case, its members.
We should remember, too, that in laundry and catering services, competition is almost non-existent. The competition is between the in-house tenderers and large multinational companies which do not compete with each other but carve up the contracts between them. There is no competition at that level; the only competition is against the in-house tenderers.

§ Mr. Campbell-Savours
But in an industry in which between 70 per cent. and 90 per cent. of the costs are labour-related, surely the real competition has to do with who can secure the lowest costs. That is the real competitive position and that is why I find the whole business so utterly immoral.

§ Mr. Bill Walker
rose—

§ Mr. Maxton
I hope that the hon. Gentleman will at least allow me to answer my hon. Friend the Member for Workington, who referred to a second sleaze factor. The first is that the large multinational companies involved are mostly contributors to the funds of the Tory party, whose election expenses they pay. A lot of nonsense is talked about Labour's election expenses, but the Conservative party spends much more money than we do and the multinationals pay their election expenses.

§ Mr. Bill Walker
I thank the hon. Gentleman for giving way to me again. He is well aware of the position. Does he suggest that a company such as Fishers based in Aberfeldy in my constituency is part of a multinational company? Where does that company—one of the leading companies in its field in Scotland—figure in his calculations?

§ Mr. Maxton
Of course, some small companies are involved. No one is suggesting that the multinationals have an absolute monopoly. What I suggest, though, is that 81 per cent. of catering is in the hands of two or three major companies and that they are nearly all contributors to Tory party funds. That is the first sleaze factor.
589 The only point that I want to make—[HON. MEMBERS: "Only?"] It has been a long day. I have been in the House since 8.30 yesterday morning and I must admit that it is beginning to show.
The profits that the companies make and the savings which Ministers claim accrue—they are dubious savings—are almost entirely at the expense of some of the lowest-paid people in the country. That is what we find so disgusting. People in the Health Service who are paid just over £2 an hour, which hardly provides them with a high standard of living, are being forced to take wages of £1.60 or £1.70 an hour. If I take my wife out to dinner, we spend between the two of us what these people are expected to live on for a week. The friends of the Conservatives are lining their pockets at the expense of low-paid workers.
The factors that I have mentioned are what make the process of privatisation sleazy and what give it a corrupt feel. It is a distasteful business, and we will continue to fight it for a long time to come.

§ The Parliamentary Under-Secretary of State for Health (Mr. Roger Freeman)
The hon. Member for Workington (Mr. Campbell-Savours) has continued his campaign of attacks on my hon. Friend the Member for Stirling (Mr. Forsyth). I am sure that I speak on behalf of all my hon. Friends when I say that my hon. Friend has behaved fairly, correctly, honestly and in accordance with the rules of the House.

§ Mr. Brian Sedgemore (Hackney, South and Shoreditch)
Does the Minister agree that if the hon. Member for Stirling (Mr. Forsyth) has operated in accordance with the rules of the House, there may be something wrong with the rules?

§ Mr. Freeman
I repeat the support that my Government colleagues and all Conservative Members extend to my hon. Friend, and our condemnation of the wholly unjustified innuendoes and attacks made by the hon. Member for Workington.
The hon. Members for Workington and for Glasgow, Cathcart (Mr. Maxton) fail to distinguish between privatisation and contracting. Privatisation is about the change in ownership of assets and services, but we are talking now about contracting. There is a big difference. Contracting can be about services provided within the public sector and from the private sector. The arguments advanced by the hon. Member for Cathcart do not accord well with the reason of our earlier debates. He argues that all contractors are spivs, that they all contribute to the Conservative party, and that something stinks about the whole operation. I do not believe that most hon. Members would sympathise with that argument, nor would anyone observing the debate regard it as a fair representation of what is a sensible procedure.
We have introduced into the NHS compulsory tendering for catering, cleaning and laundry. The Labour party manifesto, I understand, commits the party to ending compulsory tendering in those three services—a process which has saved £110 million for the NHS, money that has gone back into improving patient care.
Most of these services are labour-intensive. Both in-house groups and private companies which tender should seek to make the most efficient use of the staff to be employed. That does not mean only wage rates, but it 590 includes them because this is a free country in which we have a free economy. Other factors are numbers of staff employed, equipment and motivation. All those factors must be taken into account, and that is why some private tenders win. I must tell the House, however, that only some 20 per cent. of all contracts have been won by private sector companies outside the NHS.

§ Mr. Campbell-Savours
We know why.

§ Mr. Freeman
I can tell the hon. Gentleman why—because the redundancy payments that private sector companies have to pay must be borne by those companies. Although payment may be spread over the term of the contract, it presents a great impediment to those companies competing for such work.

§ Mr. Couchman
Does my hon. Friend agree that the fact that direct labour has been successful in winning so many of the contracts is a measure of the old "Spanish" practices which operated before tendering? Direct labour now works much more effectively and efficiently than previously.

§ Mr. Freeman
I am grateful to my hon. Friend.

§ Mr. Maxton
What about VAT?

§ Mr. Freeman
Where VAT makes a difference between the price tendered by a private company and an in-house bid, it is not taken into account. The hon. Gentleman will know that VAT is refunded under the Finance Act 1984. It is fair to take that into account when comparing the cost of an in-house tender with that of a private company.
My hon. Friend the Member for Mid-Kent (Mr. Rowe) asked me specifically about contracts and quality. There is no question of NHS authorities always being obliged to accept the lowest tender. I admit frankly that other factors must be taken into account. If quality is such a factor, the authority can opt for the higher tender and it must disclose that publicly. I do not believe that we need to amend the law to deal with the position that my hon. Friend described.
The hon. Member for Bridgend (Mr. Griffiths) raised a question which gives cause for concern. If the facts are as presented by him, we must give him the benefit of the doubt. I will study the record. Contracts for consultants and all other NHS employees should provide for the elimination of such conflicts of interest.

§ Mr. Win Griffiths
The Minister should study the Official Report of 1 March, columns 464–69, where I described in great detail what is happening in those two companies. I did not want to detain the House by doing so again today—I just wanted to mention the issues involved. I am glad that the Minister's response has been positive because the potential for conflicts of interest is serious in the cases that I mentioned.

§ Mr. Freeman
I am sure that the House shares the hon. Gentleman's concern. I will study the record and draw it to the attention of my hon. Friend the Minister at the Welsh Office with responsibility in that matter.

§ Mr. Campbell-Savours
I wish to tell the Minister the story of a trade union official who attended a meeting between another person and me some four years ago. He was a regional official and he wept as he told me that he had felt obliged to go to the trade union representatives in a hospital in the north of England and tell them that they 591 should accept wage cuts to ensure that an in-house tender won, thus keeping out an outside contractor. Are the Government really trying to build the kind of Health Service in which trade union officials are driven into such quandaries and have to compromise decades of representing of workers' rights?

§ Mr. Freeman
It is in the interests of all patients in the NHS not only in those three sectors but in others that such activities—be they cleaning, contracting or laundry activities not of a clinical nature—are tested and shown to represent the most efficient and effective combination of employees in the Health Service.

§ Mr. Campbell-Savours
Garbage.

§ Mr. Freeman
It is not garbage because that is how we shall ensure that we get value for the £30 billion that the taxpayer spends on the NHS.
We have provided that contracts in the Health Service are open, non-discriminatory, properly timetabled and documented, and that Members' interests are fully and properly declared. I invite the House to resist the new clause.