HL Deb 20 February 1968 vol 289 cc337-54

3.48 p.m.

Debate resumed.

LORD GARNSWORTHY

My Lords, I wish to return to the subject raised by the noble Earl, Lord Kinnoull. We were listening a few minutes ago to what I thought was a very informative speech by the noble Lord, Lord Nunburnholme. Before that we had the great pleasure of listening to a most constructive speech from my noble friend Lord Fiske. I rise to comment briefly on the experience of the local authority on which I serve. Surrey is not a housing authority, and we employ only a comparatively small number of men in what are generally referred to as direct-labour teams. But we have a fairly large architects' department, and I think the results that we achieve there may be of some interest in our consideration of this matter. The total annual capital value of building work in the county undertaken by the county council amounts to between £4 million and £5 million, and of this total the sum of £3 million is handled inside the architects' department. That leaves a quite substantial amount of work to be placed with outside architects and consultants, but it gives us the advantage that we are using both methods.

May I take as an example a job which costs, say, £225,000? If the architectural and consultants' work is paid for at the full-scale rates laid down by the R.I.B.A. and the other consultants' professional bodies, the figure of the cost is 14 per cent., or £31,500. If all the work is done inside our own architects' department, the percentage cost—and I am allowing for the overheads involved additionally—comes to 11 per cent., or £24,750, representing a saving on a job of that size of £6,750. So it will be seen that on the total volume of work in the county undertaken within the architects' department the difference between the cost when paid for at what are known as the full-scale rates and the cost when the job is done by our own architects' department represents a saving of some £90,000 a year. I think I ought to say that this authority, like some other fairly large authorities, has been able to negotiate scales slightly more favourable than those I have mentioned as being laid down by the R.I.B.A. and the other consultants' professional bodies, and on that basis our saving is in point of fact slightly less; but it amounts to at least £70,000 a year.

I think it is proper that I should pay tribute to the very efficient organisation of the architects' department in Surrey, and to add that the services it renders extend beyond those given by outside architects. Further, the cost of schemes that have to be revised or, occasionally, scrapped is included in the figure of 11 per cent. that I mentioned earlier. Obviously, if those schemes were done by outside architects then that cost would be outside that 11 per cent. I trust that this very brief statement may be of some interest to your Lordships in our consideration of this subject, and helpful in the determination of the Question raised by the noble Earl, Lord Kinnoull.

3.54 p.m.

LORD BROOKE OF CUMNOR

My Lords, we have listened to a series of informed speeches, and that alone must gratify my noble friend Lord Kinnoull and help him to feel that it was worth while initiating this debate on a somewhat specialised but very important subject. He asked whether the Government would tell us what practical plans they have for raising the efficiency of direct labour departments, and I hope that we shall get an answer to that question from the noble Lord, Lord Kennet, because to all appearances the one practical step which this Government have taken has been the issue of a circular which was more likely to militate against high efficiency in local authorities' direct labour departments than in favour of it.

I have never been one of those who have seen this problem in black and white, with no shades of grey. I have always thought that there was a place for direct labour, and I think the debate this afternoon has upheld that view. I have always been against those who have thought that the philosophic basis of direct labour justified it, however badly it did in practice in particular circumstances. I found myself in agreement with a great deal that my old colleague and, I suppose, enemy in London, the noble Lord, Lord Fiske, said on this subject from his great experience. But what I think your Lordships would like to know is whether the Government are now going to adopt a more vigorous policy to secure higher efficiency in the direct-labour departments of local authorities, rather than let matters rest with the 1965 circular which in itself removed a safeguard designed to ensure efficiency.

It is a fact that, where it has been possible to measure it, the value of output per man employed by direct-labour departments tends to be lower than the output per man employed by private industry working on similar tasks for local authorities. I was glad to hear the noble Lord, Lord Fiske, say that in his view the case for using direct labour on maintenance and repair work was considerably stronger overall than for using it on new building. In the field of most local authorities there is certainly a good deal of work not suitable to be done by ordinary outside contract. It is work which it is difficult to measure or evaluate in advance. For example, there is the day-to-day repair and maintenance work which needs to be closely linked with repair because it would be a mistake to have some people coming round to do the maintenance and then others following on afterwards to do repair work which the maintenance men had laid bare.

But the fact that output per man tends to be lower tells against direct labour on new construction work; and, on the whole, a large building firm can offer greater scope for ability, and therefore attracts abler men to its senior posts. There is also more variety of work within the field of a building firm working for a variety of customers than there is in an ordinary local authority area, though I grant that some exceptionally large local authorities can produce the variety.

But that does not mean that there can be no part for direct labour to play where circumstances are favourable. For example, circumstances are favourable to direct-labour experiments in a place where local builders are not very good, or are not really up to the sort of work which that particular local authority has to get done; circumstances are favourable where there is any evidence of a "ring" among the local builders; and circumstances are favourable where the building industry is at any given time so overstretched that it is extremely difficult for a local authority to get genuinely competitive tenders because, quite frankly, the builders have so much work on their hands that they do not want to take on local authority contracts in addition. I hope that the Government broadly agree with my analysis so far.

Now we come to the problem as seen through the eyes of a local authority. If it embarks on construction work by direct labour, it must be able to provide continuity of work. That is easier, on the whole, for a private building firm. It has a multiplicity of potential customers, whereas, as the noble Lord, Lord Fiske, said, the local authority's direct-labour department has only one. I noticed what the noble Lord said about the larger authorities of the future being able to build up a much stronger direct-labour department than a small authority can. Well, I think it is too hypothetical, either for him or for me, to seek to forecast the findings of the Royal Commission. I sometimes wonder whether local government, as it is to take shape in the future, may not be something very different from the local government that he and I first entered many years ago.

A local authority will wish to keep its direct labour force continuously employed, and so it may be tempted for the sake of continuity to put it on to jobs for which it could have got lower prices from private enterprise and thereby saved its ratepayers' money. This is exactly the problem that I had to face when I was the responsible Minister; and in the year 1959 I issued a circular which said that a local authority with a direct labour force must periodically—not every time, but periodically—test its efficiency, by seeking competitive tenders for at least one contract in three. The rural district council referred to by the noble Lord, Lord Nunburnholme, will not have had anything to fear from that requirement, for he said that that rural district council frequently went to tender and that its direct-labour department was able to do better than the lowest tender it received.

Had I been someone who saw this problem solely in terms of black and white, who thought private enterprise always ideal and direct labour no good at all, I should not have taken the responsibility of saying that a local authority need go to tender for only one contract in every three. But there are unfortunately people on the other extreme—I seek to steer a middle course between them, as did the noble Lord, Lord Fiske, to-day—who think that everything is wrong with private enterprise and everything is right with direct labour, and that therefore it does not really much matter whether direct labour results are tested by open competition with private enterprise.

I remember that not very long after the issue of the circular to which I referred, the Salford City Council sent a deputation to see me to try to persuade me to release it from that one-in-three obligation. I note with interest that Sal-ford is one of the authorities which in recent times has got into serious trouble through overspending by its direct labour force. Nothing that has occurred has convinced me that it is a wrong policy to insist that a direct-labour department should have to compete with private enterprise for at least one in three contracts.

My Lords, it was Mr. Crossman, as Minister of Housing and Local Government, who weakened unwisely. In Circular No. 50/65, referred to by my noble friend Lord Kinnoull, and issued in November, 1965, he released local authorities from that essential obligation to test the competitiveness of their direct-labour departments periodically against the service that private building firms could give. He said they would do well to go to tender sometimes; but he put no obligation on them to do so. Until this weak policy is remedied, until every local authority is required and obliged periodically by Government insistence to compete with private enterprise prices, the series of disquieting reports from the independent district auditors exposing wasteful expenditure by direct-labour departments will continue.

I have in front of me the district auditor's report dated August, 1967, on the building department of the London Borough of Camden, part of which I formerly represented in another place; but my old borough is merged in Camden, and Camden is under different political control. What the district auditor said was: An examination of the 1966/67 bonus claims of the men in the seven area forces showed:

  1. (i) that a large proportion of the bonus claims were for work for which no written orders—either by the Building Department or by the 'customer' department—could be traced;
  2. (ii) that many bonus claims were for work which did not appear in the time-sheets of the tradesmen making the claims;
  3. (iii) that, in many cases, materials which were apparently essential for particular jobs had not been issued to tradesmen who had claimed bonus for those jobs; and
  4. (iv) that only a small proportion of the bonused work had been independently checked and that this small cheek had revealed a high proportion of over-claims."
The district auditor came to the conclusion that a considerable amount of ratepayers' money was being wasted by inefficiency in this Department which permitted these excessive claims.

But I particularly want to invite your Lordships' attention to this farther passage in the district auditor's report. He said: In 1961/2, 1962/3, and 1963/4, the Building Department's tenders were the lowest and the final costs of the jobs concerned were reasonably within the Department's estimates. In 1964/5, however, the Building Department's tender was the highest of the four submitted and they failed to get the job. No competitive tenders have been sought since then although it is fair to add that, in discussion at audit, the Building Manager fully accepted the need to test the market from time to time in open competition. In view of the decline in profitability and competitiveness suggested by the later section of this report on New Building Schemes, the Council will doubtless wish to assure themselves that the Building Department's maintenance work is being carried out efficiently and economically, and it is suggested that they could with advantage resume the former practice of requiring competitive tenders from lime to time, preferably somewhat more often than once a year. My Lords, I apologise for the length of this quotation; but from it you will see the mischief the 1965 circular has done. It has conveyed to local authorities running direct-labour departments that it is not really very important to test their efficiency against private enterprise from time to time. One then finds that the district auditor comes along, after the money has been spent, after the money has been wasted, and, in effect, criticises the council for not having applied this test of competition—the very test from which this Government have officially released the local authorities. Every penny that is wasted here or elsewhere in local government has to be paid for by the public; whereas if a building firm wastes money the loss falls on the owner of that firm, or on the shareholders, and not on the innocent public.

Sometimes, when I hear people taking the extreme side in defending direct labour in all circumstances, I feel that they are bemused by the old fallacy that goods which are sold at a profit are more costly to the public than goods on which no profit is made. One has heard that stupid expression of view. Of course, the public is not nearly so foolish. Out shopping, as between two articles of equal quality, one buys the cheaper automatically. One does not dream of asking which shows the lower profit, and choosing to buy it on that account. High efficiency can produce goods at low cost with substantial profit. Low efficiency will produce neither profit nor value. Profit is the resultant of efficiency, and efficiency is spurred by competition. That really is why capitalism is intrinsically more effective than Socialism in getting the public value for money.

But I must not go away from my noble friend's specific Question into a discussion of Socialist and capitalist philosophy, though it is very relevant to this subject; it is at the very root of it. In authorising that 1965 circular, Mr. Crossman showed that he cared more for Socialism than for the pockets of the ordinary family that has to pay its rates, and, through the rates, to meet the losses on direct labour schemes if they are "bodged". To judge by recent local government elections, the public is not very keen just now to pay the price of Socialism.

My Lords, I believe that this debate will do great good if it produces a further anxiety in your Lordships' House and elsewhere, to have the pros and cons of direct labour, and its relative suitability and unsuitability in different circumstances, coolly analysed. There has been much too little of that in the past, and a step away from it was taken by the issue of the 1965 circular. It is that circular which has done so much damage by creating the wrong atmosphere, and furthering the idea that direct labour is a good thing in itself, even when it does not deliver the goods as cheaply as they might have been obtained in other ways.

Some of the revelations of waste in the district auditors' reports on direct labour schemes operated by Labour-controlled local authorities seem hardly consistent with the tense, taut, atmosphere of technical efficiency which the Labour Government have declared their determination to demonstrate. Until they realise the mistake of that 1965 circular, or until they take other and thoroughly effective steps to safeguard the public against waste by ill-advised or ill-managed direct-labour departments of local authorities, the Government are being inconsistent with their own policy of higher national efficiency. That is what I think this debate is about; that is what we are asking the noble Lord, Lord Kennet, to answer.

4.15 p.m.

THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF HOUSING AND LOCAL GOVERNMENT (LORD KENNET)

My Lords, the House will be grateful to the noble Earl, Lord Kinnoull, for raising this interesting question. In the main we have had a good discussion on it, though during the closing moments I detected a suggestion of the "shuttlecock" element as my noble friend Lord Fiske called it. That I shall do my best to damp down, rather than pursue it with full ballistic vigour. It was extremely important and interesting for us to hear from no fewer than three noble Lords about their own experiences, whether as chairmen, members or, indeed, beneficiaries of direct-labour departments of differing sizes. I was particularly impressed by the fervent endorsement of the operations of what must be the direct-labour department of one of the smallest building local authorities in the country.

The noble Earl, Lord Kinnoull, was right, I believe, to emphasise at the beginning that we are not talking just about maintenance, or just about house building, but that the term "council workmen", wherever we may find them, is another name for members of a direct-labour organisation. They do street cleansing, highway maintenance, horticulture, and God knows how many other things besides the maintenance of buildings and the building of buildings. To put in proportion the complaints which we have heard about the operations of certain direct-labour departments (I am not minimising them: there have been regrettable episodes), I should like to remind the House that most local authorities in England have a direct-labour organisation dealing with building maintenance. Within that, less than most—a minority—actually carry out construction work with direct labour. Out of all the local authorities in England, no fewer than 1,297 use direct labour. Of those, 187 use direct labour for the building of new buildings, including houses. This roughly confirms the picture given in other terms, in terms of actual men employed, by the noble Earl, Lord Kinnoull.

My Lords, there is one thing I must emphasise right at the beginning about the decision whether or not to have a direct-labour department at all. I was most interested to note that nobody suggested that in general local authorities ought not to use direct labour and ought not to maintain such organisations. I think that perhaps the noble Lord, Lord Brooke of Cumnor, went furthest towards it, in using the word "experiment" about direct-labour organisations; saying that it was a useful field of experiment in the use of direct labour. Of course, my Lords, these things are established at a very high level.

LORD BROOKE OF CUMNOR

My Lords, I do not want there to be any misunderstanding. What I said was that most local authorities could very wisely use direct labour on their maintenance and repair work. If I used the word "experiment" in my speech, I think that I was using it in the context of new construction. Obviously, the first time a local authority uses direct labour for that it is an experiment.

LORD KENNET

My Lords, I did not mean to misinterpret the noble Lord, and of course I accept his explanation. But the question whether or not local authorities should have direct labour at all, and, once they have it, whether or not it should be used on this or that—typically on new construction—is a matter for the local authorities, and is not the business of Government. Naturally, any Minister of Housing, as the noble Lord, Lord Brooke of Cumnor, from his longer experience, will know better than I do, is concerned to see that those local authorities which have direct-labour organisations, use them sensibly. Successive Ministers have had different ways of approaching it and each has done his best, but it is not the job of the Minister of Housing and Local Government to say what tasks a local authority should set to be done by direct labour.

The burden of complaints which have struck the public conscience and have been mentioned to-day against direct-labour departments, especially in new building, concerns inefficiency and waste and I think we need to dwell on that for a moment. I would emphasise that I am not saying there is no inefficiency and waste, or that the Government do not have to do anything about it. I shall come to that. But would one be right to form a negative judgment about direct labour, as such, because of these examples of inefficiency and waste? I believe not. If one were to say, "O.K. it just proves that you should not employ direct labour at all", since the job has to be done, that would leave, as the only possible alternative, that the work should be done by contractors. And, of course, 90 per cent. of new house building is done by contractors.

We should compare inefficiency and waste on the part of private contractors with the examples which are before us of inefficiency and waste in direct-labour organisations. This is an extremely difficult thing to do, because with direct-labour organisations one can tell exactly what a building job costs, because the council has to pay up. When the contractor does the same job, one cannot tell exactly what it costs. One can tell the price that he tenders and what, after negotiation, the council may finally pay; but one cannot tell the cost. The contractor may make a thumping profit or, equally likely, he may make a loss He is not going to tell us—this is the nature of private enterprise. It operates on balance from year to year and gets by like this.

The only way we can make a sound judgment on this is by looking at the failure rate of building contractors, because if a building contractor repeatedly finds his costs well above the tenders he puts in, he cannot exist and goes out of business. This, although it may or may not involve loss to the public, certainly indicates inefficiency. So let us set against the examples that have been given—I need not name them again—in the direct-labour field the fact that in 1966, the last year for which the convenient figures are available, no fewer than 481 private building firms went bankrupt. This figure does not include voluntary liquidations. Noble Lords would be right in imagining that the six or eight glaring examples of inefficiency in direct-labour organisations which have been given are offset by something on a much larger scale on the other side, though, in fairness, I must remind your Lordships again that private contractors are building 90 per cent. and direct-labour departments only 10 per cent. of the houses in this country.

THE EARL OF KINNOULL

My Lords, could the noble Lord tell the House how many of the firms which went bankrupt were employed by local authorities? This is relevant.

LORD KENNET

My Lords, I cannot do that, but I think (speaking subject to later correction if I am wrong), probably a large majority of them did house building, or at any rate jobs comparable with what direct-labour organisations do, including the building of houses in the private sector, if not for local authorities.

The noble Lord, Lord Brooke of Cumnor, said that in the case of inefficiency and waste by private builders the loss does not fall on the public, whereas in the case of direct labour organisations it does. This is not so. The loss sometimes does fall on the public. If a local authority employs a contractor to build houses and the contractor "goes bust" sometimes the local authority has to pay up. So that in such cases inefficiency and waste falls on the ratepayer as surely as it does in the other case.

VISCOUNT STONEHAVEN

My Lords, would the noble Lord bear in mind that a local authority can, and often does, insure against this contingency at a nominal rate, in which case the loss does not fall on the ratepayers, whereas they cannot insure against direct-labour losses?

LORD KENNET

My Lords, that can be done, but even that does not always help. Noble Lords who are familiar with this field will remember that last year a couple of local authorities were badly "stung" by the well-publicised collapse of a private developer.

I hope that we can agree that this should not be an ideological matter. House building is a difficult trade. It is tricky for many reasons, and mistakes are made by all who operate in this field. I think that noble Lords opposite should not maintain or continue to claim that the record of direct-labour organisations is in any way worse than the record of the private sector. To do them justice, they did not do so. They just attacked the record of the direct-labour organisations. I would say that there are faults on both sides and that it is less than just to attack one side on this. At this point, with your Lordships' approval, I should like to draw the curtain on the "shuttlecock" aspect of these organisations.

My Lords, I come now to the question of the one-in-three bid. This idea has a long history, which is not always remembered. The Girdwood Committee, which inquired into the costs of house building in 1948, found that it was then the practice of the Ministry of Health (we were then under the first Labour Government) to approve building by direct labour only where the estimated cost had been tested by competitive tendering or where it was known to compare favourably with current tender prices in the locality, so that tendering was not needed to show it. That was the situation throughout the lifetime of the first Labour Government. When the Conservatives came to power, they declared themselves against this procedure of competitive tendering in most cases, and adopted the 1959 rule requiring that only one contract in three should be put out to competitive tender.

I would point out that the first move made by the present Opposition when they were in office was to reduce the impact involved in competitive tendering on direct-labour organisations. That ran for six years, and when Labour came in again we found that this was not working right, not because it was in itself an undesirable idea—I do not think there was anything ideological in this—but because it was found to be too mechanical and was preventing direct-labour organisations from planning a straight run of work for themselves, because they might have been tripped up on every third job. Though it is hard to measure these things, it was making direct labour less efficient than private developers who could organise straight runs of work for themselves, because they could "dot about" and take contracts here and there, taking the ones where they could win, because they were good at that type of work.

In this respect I was particularly interested in what my noble friend Lord Fiske said, that it was acceptable to reinstate competitive tendering only if the direct-labour organisations were allowed to jump about and do jobs in other people's areas so that they could become almost national concerns like the big developers. It had another effect which was possibly even more undesirable. There was an incentive to "fiddle", because it meant that direct-labour organisations, especially the big ones, which had so many jobs going all the time that nobody knew which order they came in, were under strong temptation to undertake only the jobs they knew they could do best and most cheaply. This was not good. It annoyed the contractors against whom they would have had to compare estimates, if they had been put out to competitive tender in the proper way, and led to frictions and difficulties. It worked out in a mechanical way and tended either to make it difficult for the building up of a steady run of work or to make for what I might call, without stretching a point, "fiddling" on the part of local authorities.

So we went back on this. Direct-labour organisations were no longer obliged by circular to test one in three. The noble Lord was fair about this. He pointed out that the then Minister did not say that there ought not to be any more testing, but that it would be a good thing to do this from time to time. I should like to assure the House that this is being done to a considerable extent. It is done not by order, regulation or degree of the Minister, but by a nod and a wink from the principal regional officers of the Ministry throughout the country, and it seems to be working out on the ground with such a degree of common sense that I did not even bother to inquire how often it was being done. Indeed, I should not get meaningful figures, because I should never know whether the testing had been carried out entirely on the initiative of the local authority or because there had been a suggestion from the regional officer of the Ministry. That is the way things go now, and, so far as the Government can see, this is a satisfactory condition. We are getting competitive tendering, and if a direct-labour organisation seems to be going off on a long run of untested operations, then it is given a pretty strong hint that it ought to test one or two by competitive tender.

LORD BROOKE OF CUMNOR

When the noble Lord says that they are given a very strong hint, can he say what he he means by that? I understand how these strong hints are given but, having been the responsible Minister for four years, I know also how local authorities can ignore even very strong hints. What sanction are the Government applying in the last resort?

LORD KENNET

My Lords, these are day to day operations, and the noble Lord will know what good reasons there are for a Ministry and local authorities to remain on good terms. Any deterioration of relations in one field may sometimes cause deterioration in others, and this is a situation which is desired to be avoided by both sides.

There is one detailed point on costing which I think is worth making. Many complaints which are levelled against direct-labour organisations boil down to the fact that the final costing sometimes turns out to be higher than the estimate. This is, of course, the exception rather than the rule. We forget the thousands of schemes which go ahead without any trouble whatever. Sometimes when the cost turns out to be higher than the estimate there may be perfectly good reasons for it: the total of the work may have been increased during the run of the job; there may have been some agreed change. Very often such things (shall I say?) get ignored by those who are predisposed against these organisations, especially the local Press and so on. In the remainder of the cases, where there is no good reason for the increased cost, it may be a case of bad estimating, in the first place, or it may be a case of bad supervision of the work while it is going on. Bad estimating does not necessarily mean the loss of public money. This has to be borne very much in mind. It only means the loss of public money if a contractor could have done the job more cheaply at the final cost. The mere fact that the direct-labour organisation estimated £1,000 and carried it out at £1,500 tells you nothing about whether a private contractor would have been able to carry it out at less than £1,500, however he estimated in the first place. Of course, bad management, once a job is begun, always means waste, whoever is doing it. Sometimes the waste disappears altogether, and we never know about it. That is on the private side.

Because the new subsidies—and here we come to an important point—introduced under the recent Housing Subsidy Act are payable on the estimated cost at tender stage and not on the final cost, local authorities now have a strong financial incentive for making sure that the direct-labour department's estimate is realistic and that there is no subsequent overspending, because if there is they get no subsidy on it. This is in itself a large part of the answer to Lord Kinnoull's Question as he put it down.

Even beyond that, of course, there are cases where there has been clearly mismanagement, and in these cases successive Ministers are not now, as they have never been, inactive. I think it is worth reminding the House that in the case of Salford, which has been mentioned once or twice, it was found that they were overspending very badly, and my right honourable friend Mr. Mellish, who was then the Joint Parliamentary Secretary, urged the council to retrench and cut down to maintenance and small building projects and reform their organisation. This they have done, and I am sure noble Lords opposite would agree that they are right to have done so. This they began to do before the recent change in that part of the world. When a direct-labour organisation over-reaches itself, this kind of radical reappraisal may be necessary, and all sorts of changes urged upon local authorities. I give Salford as one example of a case in which this was done. If it happens again, it will be done again.

The noble Earl, Lord Kinnoull, mentioned the Report Study of the District Auditors' Society, but this point was not taken up in the debate. This Report plays a large part in the present situation, and in the view of the Government is of some importance. The District Auditors' Society last year produced, on the initiative of their own members, and primarily for the use of their own members, a useful Study on the financial control of new works undertaken by direct labour. The Minister made this Study available to those interested as long ago as last April, and a copy was placed in the Library of this House. My right honourable friend then entered into consultations with the local authority associations about the steps to be taken in the light of this Study. He has now received their agreement to the formation of a small Working Party drawn from local and central government. If there are any reserves on the part of any of the local authority associations about the possibility of joining this Working Party, I hope that the Government can rely upon the help of those noble Lords opposite who are interested in this matter to remove those reserves. This Working Party will draw up a short manual of principles of financial control and management for the work in question using the District Auditors' Society's Study as a basis. This manual, if it is acceptable by all concerned, could very well turn out to have a long-lasting and profoundly useful effect in the field that we are considering.

We have talked a lot about where direct-labour building has gone wrong. I want to wind up by giving the House two examples of local authorities where direct-labour building has turned out very well indeed. The County Borough of Sheffield have calculated that their direct labour force has saved £1½ million over 17 schemes comprising over 5,000 dwellings. On 11 of these 17 schemes—and this will please the noble Lord, Lord Brooke of Cumnor—the contract was obtained in competition with private contractors. To go to the other extreme, a rather small building authority, the Bladen Urban District Council, build about 100 houses a year on direct labour, and they do it at about 25 per cent. below the Ministry's cost yardsticks. These achievements are often forgotten in the blaze of publicity coming from certain quarters in the Press about the failures of the system.

To conclude, I have said what the Government are doing, but perhaps I can wrap it up in one sentence. We are seeing that there is competition when there appears to have been a long run without it, and where there appears to be a case for it. We are no longer in the mechanical method of one in three. We have set up this Working Party with the local authority associations—and I very much hope that they will collaborate—to go into what may turn out to be a kind of bible or a system for the guidance of direct-labour organisations. We sometimes descend like a ton of bricks. The Government are not convinced that there is a case for any more compulsive reform or any more general examination. I should perhaps clarify the point that the Mann Report, about which the noble Earl asked, was into the central government's direct-labour organisation—and I refer to the maintenance organisation of the Ministry of Works. So it does not come into this particular field. Having said all that, I should like to answer the noble Earl's Question by saying that the Government are convinced that they make a contribution, and that it is a useful one. In the overwhelming majority of cases it is well and wisely carried out. There is no case for the nationalisation of the building industry into so many local authority direct-labour organisations, and there is no case, equally, for the capitalisation of those existing municipal organisations.

THE EARL OF KINNOULL

Before the noble Lord sits down, I wonder if he could say whether the Government intend to expand or encourage the work studies in the local authority departments concerned, particularly to encourage productivity?

LORD KENNET

Certainly, my Lords. It is a question once again of encouragement. If a local authority have the resources to do this, and think it wise to do so, then of course they will get any advice and help they can from the Ministry to do it. But I am not sure to what extent it is the Minister's role to urge an authority to carry out a work study into its own affairs if the authority does not want to do so. On the other hand, what the Ministry can do is to help to diffuse the results of studies carried out by one authority, among other authorities who may not have the resources to make their own.