HC Deb 07 May 1993 vol 224 cc471-8

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

2.35 pm
Mr. Tam Dalyell (Linlithgow)

The passionate opposition to the Government's local government reform proposals in Scotland has more to do with the fact that decision making will be anaesthetised and local government paralysed for five years than it has to do with finance.

The subject of this Adjournment debate is the Touche Ross report on finance. I thought that it was prudent, sensible and well mannered last Friday, as soon as I knew of my luck in getting an Adjournment debate, to let the Government know precisely what I intended to ask, so I hope that their reply will be a considered reply to questions that they have had for a week.

I shall deal first with planning and economic development. Touche Ross has calculated that savings ranging from £58.4 million at the 51 -unit level to £75.1 million at the 15-unit level can be made from planning and economic development.

Given that the Scottish Office calculation of grant-aided expenditure—GAE—for planning and economic development for 1992–93 for both regions and districts is £68.3 million net, will the Minister please explain several matters?

First, how can savings of £75.1 million be made from a combined region and district service costing a net £68.3 million?

Secondly, given that the present planning function is carried out by three islands, nine regions and 37 districts —a total of 49 councils in all—will the Minister please explain how savings of £58.4 million can be made by increasing the number of authorities from 49 to 51?

Thirdly, what are the estimated costs and the nature of the other costs included in this heading and are they normally charged to capital account?

Fourthly, will the Minister please explain how the new unitary planning function is expected to operate with fewer staff than existing regions have at present?

My second subject is library services. Touche Ross has postulated savings ranging from £7.4 million at the 51-unit level to £11.5 million at the 15-unit level for that service, which is presently administered by 41 authorities, and the GAE, as calculated by the Scottish Office, for 1992–93 is £76.1 million. Therefore, will the Minister please explain the following?

First, how can an increase in the number of library authorities from 41 to 51 produce savings of £7.4 million, almost 10 per cent. of the total cost?

Of the total costs for the library service of £76.1 million, it is estimated that £19 million relates to the replacement of books, and so on. The balance of £57.1 million relates to staff and property costs. Therefore, will the Minister please explain how a figure of £21.3 million from a total of £57.1 million—that is; 37 per cent.—could be described as non-operational, that is, managerial?

My third subject is housing. How is it estimated that the total supervision and management costs for the housing service on an all-Scotland basis for 1992–93 amounts to £150 million?

Will the Minister please explain how £38.7 million or 26 per cent. of this total is deemed by Touche Ross to be non-operational?

Fourthly—operational and non-operational costs—for the purposes of the study operational costs were excluded on the assumption that the same quality and quantity of service, together with the same management practices would continue.

The distinction between operational and nonoperational staff is critical to the calculation.

What, therefore, is the breakdown by function of the operational staff and the non-operational staff estimated by Touche Ross reconciled to the total number of local government employees?

It is considered that that information should in fact be readily available.

Fifthly, on staffing structure, the postulated savings are based on a hypothetical model staffing structure for each service. Please supply this for each function, together with a full explanation of the assumptions used in formulating the model structures for the new unitary authorities.

Please explain why, in most options, unitary authorities have been assumed to require less administration and finance staff than existing regions.

Sixthly, on ongoing costs, please explain why Touche Ross treated the costs of information technology, democracy and early retirement pensions as purely transitional and not as ongoing, despite contrary advice from the DOE to the Local Government Commission for England.

Seventhly, on transitional cost—retirement/ redundancy costs, Touche Ross has estimated the number of redundancy/early retirements to vary from 474 at the 51-unit level to 6,633 at the 15-unit level. The costs in year one similarly vary from £16.7 million to £110.4 million.

Given that 26 per cent. of local government employees are aged 50 or over, and given the experience of some English residuary bodies which suggests that redundancy/ early retirement costs could be in the range 1.7 to 2.7 per cent. of revenue expenditure, amounting to £125 million to £200 million, please explain why the figures calculated by Touche Ross are so low.

Finally, on transitional costs—winding up existing authorities, the costs of winding up existing authorities is estimated by Touche Ross to be £88 million over five years before inflation, whereas experience elsewhere would indicate that expenditure on that item could amount to 3.7 per cent. of current expenditure, or £275 million.

As that figure is critical in the costs/savings equation, please say why the figure does not vary across the range of sizes and give the Scottish Office's own estimate of the cost of winding up existing authorities.

I gave notice of those question, and to ensure that the Minister has time to answer I shall now sit down.

2.41 pm
The Parliamentary Under-Secretary of State for Scotland (Mr. Allan Stewart)

I congratulate the hon. Member for Linlithgow (Mr. Dalyell) on his tenacity in obtaining this Adjournment debate. I listened with the greatest of interest to what he said. As he rightly told the House with his customary courtesy, a few days ago he provided me with a list of the questions that he intended to ask. I shall do my best to answer them.

First, I want to spend a moment or two spelling out the background to the Touche Ross report. Of course, the question of costs in the reform of local government in Scotland is of considerable importance. It has been argued that Touche Ross somehow got its figures wrong and that reform is therefore unaffordable and should not go ahead. There is no basis for those general criticisms and I shall explain why.

The first step that Touche Ross undertook was to gather detailed information about the current management structures in Scottish local authorities. Throughout the costing exercise, it has been assumed that the level and quality of services provided by local authorities would remain constant. It was therefore assumed that there would be no significant change in the numbers of staff directly involved in service delivery. Touche Ross and other commentators have therefore concentrated their analysis on the numbers of managerial and support staff, to which the hon. Gentleman's questions rightly refer.

Touche Ross employed consultants from the Institute of Public Finance to conduct a representative survey of local authorities to establish current management/staffing structures. That work was delayed for a time because of an initial refusal by the Convention of Scottish Local Authorities to co-operate, but finally that information was collected. It is worth pointing out that the survey is the only source of data on management structures across Scotland. Those commenting on the Touche Ross findings have either done so from the viewpoint of their own structure—or, in the case of consultants, the authorities for which they have been working—or have used the Touche Ross figures. Therefore, the Touche Ross figures have been invaluable in that respect.

Essentially, the approach involves comparing the cost of current staffing structures with those which the new authorities might be expected to develop. Because the number of teachers, social workers and others—what one might call the frontline troops—are likely to be unaffected by the boundaries of the new authorities, the methodology concentrates on management staff and other specialists whose jobs will be affected by the structure chosen.

If it is thought that the number of staff in the new structure will be fewer, allowance will have to be made for redundancy and early retirement payments. Similarly, if it is thought that additional staff will be required, the costs of recruitment will have to be included. These initial costs will then have to be compared with the longer term savings that will arise from having fewer staff in the new authorities, in order to arrive at a long-term estimate of the costs and savings arising from the reform.

Mr. Dalyell

Is the Minister happy about the calculations for early retirement? The experience last time was that very many local government employees—often excellent local government employees—could not face up to the hassle of a different structure and therefore took early retirement. In other circumstances, they would have continued with their careers.

If there is another shake up, do the Government understand that many good people will say, "We've had enough. We're not going to live with yet another reorganisation, so we'll take early retirement."? That factor has not been taken into account by Touche Ross.

Mr. Stewart

It has been taken into account. However, the effect on staff morale of another reorganisation and how staff see their future careers developing is an important consideration. That is why I announced to the Convention of Scottish Local Authorities that we had decided to appoint a staff commission to look into these matters, and which will be the subject of the Bill that we hope to put before Parliament next Session.

Mr. Dalyell

My hon. Friend the Member for Monklands, West (Mr. Clarke) has done me the courtesy of coming to sit on the Opposition Front Bench. He is former chairman of COSLA. He knows that, commission or otherwise, the fact is that we have experience of what happened last time. And what happened then is likely to happen again. Talk to local authority employees. There is a great degree of fed-upness.

Mr. Stewart

We shall certainly learn from the experience last time, and from the particular experience last time when a large number of local authority employees found themselves doing essentially the same job within the new structure at substantially enhanced salaries. We shall certainly, under the capping regime, have controls that will affect that. I shall return later to the hon. Gentleman's detailed point, for it relates to the sixth point that he put to the House.

The methodology that the consultants have given us is a valuable tool. The responses to the consultation exercise suggest that it was a sensible approach. Why else, for example, should the City of Aberdeen district council, which is controlled by the Labour party, say, as I told the House on Wednesday, that the report is the only detailed study available of the likely costs of any reorganisation to a single-tier system … and accordingly the best use possible should be made of it. Many of the cost assumptions which can be checked have been shown not to be unreasonable, whilst further sensitivity analysis has been carried out. The second task assigned to the consultant—the part that has generated most debate—was to use the methodology to estimate the possible costs of reform for each of the illustrative structures shown in the consultation paper. That refers more directly to the question that the hon. Member for Linlithgow asked. That task required Touche Ross to make a number of assumptions—for example, on the likely staffing structures of the new councils and on the level of redundancy and retirement payments on offer, to which the hon. Gentleman referred. Clearly, no one knows at present what those detailed figures will be. That depends on the shape of the new map and it will be up to the new councils, when they are in place, to take decisions on their staffing levels. Thus, the concept of a right answer to the likely costs is essentially meaningless and generally acknowledged as such.

Before turning to the detailed questions asked by the hon. Member for Linlithgow, I must say that I believe that it was always not only inevitable, but desirable that once the Touche Ross estimates were known, others would react to them. That was precisely our intention in deciding to publish the Touche Ross figures—in full, I reassure the hon. Member for Monklands, West (Mr. Clarke)—last October. The greater the body of evidence that became available—and it became available from a wide range of sources—the more likely we were to be able to assess the likely costs and savings arising from a particular structure. I must emphasise that such an approach implies no criticism of Touche Ross. Rather, it is an extension of its work. By publishing the consultants' suggestions and by taking note of the comments made on them, we have sought to reach a balanced view of the costs and savings that may emerge.

In practice, our expectations about the likely response to the Touche Ross findings have been entirely borne out. Some people have criticised them as being over-optimistic, some as over-pessimistic. We have had useful discussions with local authority interests and we have had helpful input from professional bodies. All the evidence has been carefully weighed. To suggest, as some people have, that Touche Ross has got things "wrong" is deeply misleading and fails to give due credit to the excellent work of Touche Ross.

The hon. Member for Linlithgow first asked about planning and economic development. The Touche Ross category of planning and economic development also included many staff involved in property services, as well as architects, quantity surveyors and valuers. Those staff made up more than two thirds of the total category. The figures for that grouping are not, therefore, directly comparable with those shown for general aggregate expenditure purposes.

The hon. Member for Linlithgow also asked about planning authorities and how savings could be made by increasing the number of planning authorities from 49 to 51. There are two answers to that question. First, for most of Scotland, moving to an unitary structure means moving from two sets of planners to one set of planners for an existing area. That is likely to lead to economies. Secondly, it does not seem unreasonable that the smaller authorities, implied by the 51-authority structure, might choose to combine similar departments, thus requiring fewer senior managers. That is a general point which the representations that we have received from regions have on the whole avoided and the representations that we have received from districts have generally emphasised. The hon. Member for Monklands, West will, of course, know of the positive reaction from his own area and of the belief by West Lothian district council that it could supply effectively and efficiently a whole range of services under a single-tier structure.

The hon. Member for Linlithgow asked about Library services. That is one of the matters that my officials are examining in the light of comments that have been made. It is worth noting, however, that libraries account for about 2 per cent. of total local authority expenditure: changes to the cost of that service are unlikely to have a marked effect on the overall costs of reform.

The hon. Gentleman also asked about housing. I am not sure of the basis for his figure of f 150 million, but I can tell him that the figures quoted by Touche Ross represent 3.2 per cent. of the total budgeted expenditure on housing for 1992–93. I do not consider that to be an unreasonable level of management and administration spending.

The hon. Gentleman asked about operational and non-operational costs, and suggested that the information on that should be readily available. I assure him that it is readily available. The Touche Ross report shows the number of non-operational staff by function. As the hon. Member for Monklands, West will know, as a former chairman of the Convention of Scottish Local Authorities, the total number of local authority employees according to function is available for the joint staffing watch survey, which is published by the Scottish Office and COSLA.

The hon. Member for Linlithgow asked me to supply the Touche Ross model staffing structures for each service. That information was passed to COSLA earlier this year, and I will arrange for him to receive a copy. He also asked why, in most options, unitary authorities have been assumed to require fewer administration and finance staff than existing regions. That takes us back to a point that I made earlier. It is, of course, a matter for the consultants, but I understand that they decided that the unitary authorities offered scope for rationalisation of some existing staffing structures. That is also the response of a number of individual local authorities of different political persuasions to the consultation exercise.

Mr. Dalyell

There will be a whole mosaic of joint boards. How will they be staffed, and who will pay for them? Has that been taken into account in the calculations?

Mr. Stewart

The consultation document mentioned the joint arrangements, but I do not accept that there will be a raft of joint boards; we have consistently said that there is a range of possibilities for joint arrangements under a new structure. Indeed, joint arrangements of all sorts operate now. There are joint boards and joint arrangements between local authorities, and local authorities can get together to contract out services under competitive tendering, if they wish to do so.

The hon. Gentleman asked about on-going costs and pensions. Touche Ross has assumed that there will be an on-going pension cost. As for information technology and councillor numbers, I understand that Touche Ross made a conscious decision not to include them in on-going costs, as they were considered to be either very speculative or relatively insignificant. That was a reasonable decision for the consultants to take in the circumstances.

The hon. Gentleman asked me about transitional costs and the estimates for retirement and redundancy costs. Touche Ross assumed a severance package based on the terms available during the Greater London council break up. It used assumptions about the number of staff likely to be involved based on information that it obtained. Of course, different assumptions would produce different estimates, but that does not mean that one estimate is wrong and that another is right. The final cost will depend on the level of the severance package on offer and the number of staff retiring or made redundant.

The hon. Gentleman asked me about transitional costs and the winding up of the existing authorities. Touche Ross has assumed that whatever structure is chosen, all the existing authorities will have to be wound up. The work involved will not, therefore, vary with the structure. I am aware of the suggestion that the cost of winding up the existing authorities could be as high as £275 million. Frankly, I believe that those figures are simply wrong.

Mr. Dalyell

If the Minister believes that the figures are wrong, what is the Scottish Office estimate? We are told we are wrong; what does the Scottish Office think?

Mr. Stewart

I was about to respond to that point before the hon. Gentleman intervened. It is worth noting that other reputable commentators have suggested that the costs assigned by Touche Ross are too high, not too low. The hon. Member for Linlithgow quite reasonably wanted to know the Scottish Office estimate of the costs of winding up the existing authorities. Given that the commentators have produced conflicting views, we are at present considering all the evidence that has been presented to us. We will set out the costs implications of the new structure when we publish the White Paper in due course.

Mr. Dalyell

That is a bit of a cop out. Who are those reputable commentators—

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse)

Order.

Mr. Stewart

I was not giving way, Mr. Deputy Speaker, as I have already given way several times to the hon. Gentleman. He rather delayed me as I was about to answer his question.

To sum up, I welcome this debate. It is an opportunity to put on the record the excellent work of Touche Ross and to put the matter wholly and reasonably into context. Local government in Scotland is an issue of great importance and we all agree about that. I have no doubt that there will be considerable debate in the coming months about every aspect of our proposals—and rightly so.

No doubt the hon. Member for Monklands, West will want to comment on the fact that there has been much correspondence from people in Airdrie saying that they do not wish to be associated with Coatbridge under the new structure. No doubt hon. Members will wish to debate many other factors.

It is important that the debate should be about things that matter—

Mr. Tom Clarke (Monklands, West)

What about Eastwood?

Mr. Stewart

A combination of Airdrie and Eastwood is not one of the illustrative structures put forward in the consultation paper.

I do not believe that selective nitpicking of the preliminary conclusions of Touche Ross on costs and savings are productive.

Mr. Dalyell

Is the Minister suggesting that my questions are nitpicking?

Mr. Stewart

I am not suggesting for a moment that the hon. Gentleman's questions are not valid. Of course they are valid and I have endeavoured to answer them as fully and as reasonably as I can. I hope that that takes the debate forward.

We now have evidence from a wide range of commentators in respect of the Touche Ross report. That allows us to proceed confidently and in full co-operation with our colleagues in the Treasury. The hon. Members for Linlithgow and for Monklands, West have put forward a thesis that there is some great split between the Treasury and the Scottish Office on these matters. I believe that it was the hon. Member for Fife, Central (Mr. McLeish) who said that the Treasury was outraged about the fact that it was being conned by the Scottish Office. I thought that that represented a world of fantasy wholly outside my experience of these matters.

We are proceeding with the co-operation of our colleagues in the Treasury to decide upon an appropriate single tier structure for Scotland. The detailed decisions, after the work—

The motion having been made after half-past Two o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at four minutes past Three o'clock.