HC Deb 19 July 1993 vol 229 cc16-8
26. Mr. Fabricant

To ask the Chancellor of the Duchy of Lancaster what proportion of market-testing exercises has led to a reduction in costs.

Mr. Waldegrave

Information collected from Departments over the five years to 1990–91 suggests that more than 80 per cent. of market tests resulted in savings. Savings have typically been around 25 per cent. of the original cost of the activity. Even if a market test fails to bring about savings, it is likely to lead to an improvement in the quality of the service being provided.

Mr. Fabricant

I am grateful to my right hon. Friend and I wonder whether he has seen this month's edition of the Local Government Chronicle—a newspaper which I read avidly every time I go to sleep. It mentions that competitive tendering in local government has brought greater savings in the second round of competitive tendering. Does my right hon. Friend agree that similar savings could accrue from market testing in central Government?

Mr. Waldegrave

I am sorry that the Local Government Chronicle has such a soporific effect on my hon. Friend. The report was accurate and was also carried in the Financial Times. It also accords with evidence from Berkshire county council, which revealed that, in many cases, the savings on the second placement of a contract were greater than those on the first placement. I believe that, in future, contractors for central Government services will also bring more savings the second time the contract goes out to tender.

Dr. Howells

Has the Chancellor had a chance to read any of the recent Public Accounts Committee reports about some of the problems that the Government are confronting over managerial consultancies when it comes to market testing? Does he agree that the latter offers an unparalleled opportunity for a descent into graft and corruption on the Italian scale?

Mr. Waldegrave

Any report by the PAC must be very carefully examined and there must be a proper response to it, but the most recent one was about a service run in-house, Forward Civil Service Catering, showing that problems can arise both in the public sector and outside it.

Mr. Ian Bruce

What advice is the Department giving organisations going through market testing on dealing with the Transfer of Undertakings (Protection of Employment) Regulations, which seem to be causing us some problems?

Mr. Waldegrave

After consultation with other Departments, my Department issued guidance on that. As a matter of fact, after a period of delay early in the process, central Government Departments are now finding that TUPE is much less of a bar to the market-testing programme. Indeed, several successful market tests have been carried out in cases in which TUPE has covered the staff and they have worked perfectly well.

27. Mr. McAllion

To ask the Chancellor of the Duchy of Lancaster what progress has been made on the Government's market-testing programme.

Mr. Waldegrave

Market-testing programmes for the period to September 1993 are making good progress. I shall report on the outcome of these as soon as possible after the period.

Mr. McAllion

The Minister has again made claims for cost savings of about 25 per cent. for market testing. Is he aware that independent research carried out by the Audit Commission and by the university of Birmingham on behalf of the Department of the Environment—research into market testing in local government—has shown cost savings of between 6 and 7 per cent., or about one quarter of what he claims for the civil service? Will he therefore tell the House on what independent research his claim is based; or, if there is no such independent research, and the claim is unreliable, will he assure the House that he will authorise independent research into the impact of market testing in the civil service—before he opens his big mouth again and makes far-fetched claims that cannot be substantiated?

Mr. Waldegrave

The figure of 25 per cent. is an assessment of the relatively small programme in central Government to date and it simply reports the facts. I am well aware of the lnlogov report, which showed 6 or 7 per cent. savings in compulsory competitive tendering for local government. The hon. Gentleman will recall that one such local government body was Bristol city council in my constituency, where there was a good deal of trouble with its CCT and there had to be re-tendering. Many Labour local authorities resisted the process and wasted a lot of money; they did not enter into the exercise with the spirit and loyalty that the central Government civil service has shown. The hon. Gentleman would be ill-advised to use those local government figures for CCT when assessing the central Government programme.

Mr. Dickens

Is not it a fact that market testing is extremely effective in the private sector and that it is a running cost, not an expense? All these myths about the inability of market testing to benefit companies or the civil service are ridiculous. We have to produce products and services that people want, at a competitive price and with the right quality, and we have to provide after-sales service. If we got all those things right, would not we beat the world?

Mr. Waldegrave

My hon. Friend is perfectly right. What is more, as the best of the public sector can beat the private sector, it should not he frightened of the process. There have been plenty of winning in-house bids. Instead of trying to resist the whole process, through Opposition spokesmen, the public sector unions should show more confidence in their members by recognising that they will win many of the bids.

Mr. Winnick

On market testing, will not the real test come on Thursday when the Government face almost inevitable defeat? Perhaps the Chancellor should direct his mind to that top priority for the Cabinet.

Mr. Waldegrave

That seems to go a little wide of my responsibilities, but I congratulate the hon. Gentleman on his characteristic ingenuity.