Local Authorities (Trading and Competition Powers) (Hansard, 1 May 1996)

§ Mr. Gordon Prentice (Pendle)

I beg to move, That leave be given to bring in a Bill to allow local authorities to trade and compete with private sector providers. Such a Bill is long overdue. It is needed to clarify beyond doubt the powers that local authorities have to supply services or goods to other organisations. In this vital sector, the law is opaque.

I have always wanted to give local authorities a power of general competence that would allow them to do anything that is not specifically prohibited by Act of Parliament. At present, the position is precisely the reverse. Councils can lawfully act only if the powers have been given to them by Parliament. However, a power of general competence along those lines does not feature in the Bill. It is much more narrowly focused. I therefore hope that it will receive all-party support.

The form of the Bill has emerged after discussions with the Association of Direct Labour Organisations, its director John Roberts, and others. ADLO has a membership of more than 200 councils nationwide, and they are all crying out for clarification of the law. They tell me that they have to negotiate a legal minefield before they can respond positively to requests from local companies or local people who wish to buy their services. Sometimes it is possible, but, more often than not, it is unlawful, and the council must turn down the chance of earning money that could only benefit council tax payers.

Railtrack, whose prospectus is published today, is a case in point. It wanted to contract with councils to cut grass and to remove litter on railway land, but that was outside the powers of local authorities, and the proposal was spiked.

The Bill would allow councils to provide goods and services that are connected with their functions. It would not allow them to set up car companies, for example, in competition with Nissan, or factories to manufacture television sets. However, the Bill would allow councils to acquire premises, appoint staff, and form companies. They would be able to charge for the goods and services they supply, and that has always been a grey area.

These important new powers would be circumscribed by regulations that the Government of the day may consider necessary. The regulations could exclude certain goods or services, or restrict the geographical area within which a local authority may provide goods or services, or may in some way restrict the terms or conditions of any agreement that councils may enter into. I say that for the benefit of Conservatives, who may fear that the new powers would give councils an unfair advantage over other organisations or individuals. The Bill contains plenty of safeguards.

Currently, councils have a restricted range of services in which they can engage in head-to-head competition with the private sector. A council car park is one example. Round the corner from it there may be an NCP car park which is competing head to head for the same trade. However, that is the exception rather than the rule.

Thamesdown Contractors is the trading arm of Thamesdown borough council, and its experience is more typical. It manufactures and supplies PVC window fames, 1165 and can install them in council houses. But if someone exercises his right to buy his council house and wants the council to put in a new set of windows, the council cannot do it, because it would be against the law. That is clearly absurd. There are many other such examples.

Many councils employ arboriculturists to deal with trees that overhang highways or are in public parks. Out of the goodness of their hearts, they often offer advice to individuals on the care and preservation of trees and so on. Sometimes they advise on the design of new developments, but on the strict application of the law, they are unable to respond to requests from local people who want their services and would be prepared to pay for them.

Motor vehicle services are also important. Virtually every council has a fleet of vehicles that needs to be looked after. Why is it not possible for that service to be offered more widely? Councils are well placed to undertake the maintenance of private gardens and sports pitches, but it is legally impossible. The surfacing of private car parks or drives in conjunction with highway work on an adjoining site is possible. It is absurd that a council laying tarmac cannot run it up a private drive whose owner is prepared to pay for it. That is an eminently sensible idea, but it is unlawful.

Many councils grow plants, and the cost to the parks departments of putting in a few extra plants is minimal. Although all the gardeners out there would like to buy plants from local authorities, it is impossible. There are many areas in which people would freely choose to buy services, but the law prevents them from doing so.

I mentioned safeguards. No one wants to see florists, glaziers or local garages put out of business by local authorities, and anyone who suggests that that would happen is misrepresenting the Bill. The councils want the famous level playing field, no more and no less. They do not want unfair advantages. As I have said, the law is opaque. The power to trade is severely circumscribed, and is permitted only by the Local Authorities (Goods and Services) Act 1970, which sets out the limited room for manoeuvre that is open to councils.

The Audit Commission has taken a narrow view of council powers. According to the Municipal Journal, its advice to district auditors has been the kiss of death to direct service organisations. That is true. There are people who take a much less restrictive view, arguing that it is permissible, lawful and sensible for councils to contract to provide services and employ staff to carry out the agreement. Tragically, that has never been tested in the courts. Local authorities have always erred on the side of caution, fearful that they might be visited by the district auditor, who would exact terrible retribution if the council spent money when it had no lawful authority to do so.

The Department of the Environment has confused things even more in a letter that was sent to the local authority associations on 7 December last year. It apparently gives the green light to local authority trading, stating: It is the Department's view that local authorities have powers to trade for profit and to take on staff for the purposes of those trading activities. No one knows whether that is a correct statement of the law, but coming from the Department, it has a certain authority. All is confusion.

1166 The Audit Commission is apparently revising its earlier guidance in the light of the Department's letter, although we have yet to see the new guidance. It is all haphazard and unsatisfactory. That is why legislation is needed to clarify the law. Councils up and down the land are hungry for new work and opportunities. They have embraced the contract culture, which will please Conservative Members, and demonstrated that they can deliver top-quality services that people value. My Bill will give powers to local authorities to do just that.

§ Mr. Robert G. Hughes (Harrow, West)

The hon. Gentleman called for all-party support. I am on my feet to disappoint him. He went to great lengths to reassure us about how restricted the Bill's scope is but Conservative Members know that if Labour councillors are given new powers, they will abuse them. Labour councils have foreign policies and increased or newly invented allowances for Labour councillors. They run political campaigns on taxpayers' money. Council after council uses double accounting in respect of council nursing homes. It costs more to run, but they are able to put in their books that they charge less for those places.

Of course Labour councillors would welcome the Bill, as they would any extension of their powers. Consider their record. They have failed to spend money wisely: they cannot control expenditure; they cannot collect their council tax; they will not collect their rents; they charge as much council tax as they can get away with; they saddle their communities with debt; and they run measurably worse services. No wonder the hon. Gentleman attacks the Audit Commission, which is what measures how badly Labour councils perform. Now they and the hon. Gentleman want more freedom to wreck their communities.

Labour has always dreamed of councils with the power to do everything, provide any service, and ride roughshod over private providers. Labour simply cannot understand that it is fundamentally wrong for council tax payers to subsidise speculative commercial activities. It would not be the councillors who took the risk, but the council tax payers. When such activities go wrong, as they clearly would, those working in the businesses that the council has done its best to destroy will pick up the bill, having already faced unfair competition, as council tax payers are the lender of last resort.

What is Labour's track record that leads to the Bill's introduction? What would be in its prospectus? Would it be Bradford, where the direct labour organisation paid people who were not even on the payroll? They worked for free for the managers' favourite rugby league side. Presumably to keep everybody quiet, the senior managers were the highest paid in any metropolitan council.

Would it be Darlington, where Labour built a model train with enough bricks to build 44 large houses? Would it be in Goole, where the clerk of a small town council with a budget of little more than £1 million was paid more than a Cabinet Minister? Or would it be Kirklees, which has refined its time for recruiting housing officers to six months, of which 1 am sure it is proud. Or would it be Lancashire, where sick leave cost £12 million last year alone? Instead of spending money on poorer people, it spent £100,000 on a so-called anti-poverty unit. That money would have paid for more than 16,000 hours of home help. What people in Lancashire will get is hot air rather than home helps.

1167 In Birmingham, even a Labour councillor has been forced to admit that the council's budget is operating in many ways like a slush fund. That is real Labour in power—real power, real abuse.

The hon. Member for Pendle has, if I may say so, a special place in local government. Before he went to Lancashire, he was in London, where, as leader of Hammersmith and Fulham council, he invented the crazy notion of using debt swaps to expand trading. The point is not that debt swaps were not used before, but the way in which the hon. Gentleman and his council used them—trying to fund extra spending with junk bonds.

Of course, it all went wrong, and probably cost Hammersmith and Fulham council tax payers £97 million. The hon. Gentleman clearly does not like to keep good ideas to himself, as he has shown today. As a Labour party employee, he so enthused other councils with the idea that the total loss in the country probably exceeded £500 million. What a marvellous record for one person.

Before we take the proposal of the hon. Member seriously, we should look at where his previous good ideas have taken us. The Bill is so silly an idea. The House has better things to do, so we should simply let him carry on with it and just ignore him.