§ 2.48 p.m.
§ THE PARLIAMENTARY SECRET-ARY, MINISTRY OF HOUSING AND LOCAL GOVERNMENT (LORD KENNET)
My Lords, I beg to move, that the Bill be now read a second time. This is a Bill which is designed to enable local authorities and some other public bodies to cooperate with each other in certain matters. Perhaps I could first spend a moment or two explaining what led up to it. The House may remember that in May, 1967, the Government published a White Paper, Public Purchasing and Industrial Efficiency. Among other things, the White Paper sets out the ways in which public sector purchasing could be used to encourage industrial efficiency, help exports and promote import substitution. The main aims were to rationalise and improve the efficiency of public purchasing and to use the very considerable power which it represented to try to secure a reduction in varieties, increased standardisation and improved quality control. The White Paper promised that there would be consultations with the nationalised industries and local authorities to consider how best they could contribute.
Arising out of these consultations the Minister of Housing and Local Government invited the local authority associations and the Greater London Council to join with the appropriate Government Departments in setting up the Joint Review Body on Local Authority Purchasing. This committee was under the very able chairmanship of Mr. A. L. Burton, a distinguished former Lord Mayor of Westminster, and I am glad to have the opportunity of paying a warm tribute to the excellent Report which he and his colleagues produced. The Report concluded that local government could secure an immediate and substantial benefit for itself by rationalising its purchasing arrangements, and it made two main recommendations. The first was that local government should have a national advisory body to promote more efficient purchasing. The second was that there should be early legislation to enable local authorities to co-operate with one another in purchasing goods and materials. Both the Government and the local authority 534 associations accepted the recommendation about legislation, and this Bill is the result. The local authority associations indeed have urged upon us that the legislation is an essential prerequisite to any real co-operation between local authorities in this matter, and that there is no purpose in setting up any sort of national advisory body until local authorities have the powers which will enable them to work together. The Government fully accept that view.
The object of this Bill, therefore, is quite simply to save money for the ratepayers. It will do four things. First, it will enable local authorities and certain other public bodies to co-operate with each other in purchasing goods and materials so that one authority will be able to buy in quantity and supply to another. One of the most obvious examples is where a county council purchases goods or materials both for its own purposes and for supply to district councils within the county. This, indeed, is already happening in many areas under powers which Parliament has granted to local authorities in local Acts. By this sort of co-operation local authorities can make substantial economies. In many cases the needs of a borough or district council are identical with those of a county council—office equipment and materials are very obvious examples. One might expect this to be a field in which big savings could be achieved by purchasing to standard specifications. All the experience of private industry suggests that this must be so, and it is indeed borne out by the experience of local government in those areas where local authorities already have the power to co-operate in this way.
Secondly, the Bill will enable one authority to provide another with administrative, professional or technical services. One of the problems which confronts smaller local authorities with the rapid development of modern technology lies in obtaining the services of highly trained specialist staff fully conversant with up-to-date techniques when there is not sufficient need of their services to justify their employment on a fulltime basis by that smaller authority. To take one example, most of our county councils, and many other large authorities, have a management services unit whose function it is to ensure that all 535 departments of the authority make full use of the latest developments in this field in the interests of efficiency and economy of manpower.
The important point is that an immense effort is being made at the present time within local government to improve efficiency and productivity. One of the top priorities is to improve productivity among manual workers. This point was made very forcefully in a report of the National Board for Prices and Incomes published nearly three years ago which pointed out that among local government manual workers low pay and low productivity went together. Since then considerable progress has been made in the introduction of incentive bonus schemes based on modern work study techniques. Something like 1,000 schemes, covering well over 50,000 workers, have been introduced in the past three years, and altogether 100,000 or so workers are now covered by such schemes. But this is still only 15 per cent. of the manual workers in local government, so there is a vast area still to be covered. This is both important and urgent. It is obvious that if greater progress had been made in this matter we might have avoided the dustmen's strike which caused so much inconvenience in London and other parts of the country a few months ago.
The two sides of the national negotiating body for manual workers have launched an enthusiastic campaign to get incentive bonus schemes introduced in local government as widely and as quickly as possible, but this demands trained work study experts. The difficulty is that the small local authorities simply cannot afford or have not sufficient work to justify employing a full-time work study officer. Under this Bill it will be possible for larger local authorities who have management services teams to assist the smaller ones who have not, and indeed this is precisely what is happening, with valuable results, where county councils have already secured under their local Acts the powers which this Bill will make general.
The third way in which one authority may assist another under the provisions of the Bill is in making available to it, to use the words of the Bill itself, "any vehicle plant or apparatus". Very often the economic solution to a problem lies 536 in a large authority purchasing an up-to-date and expensive machine which is more than adequate to meet its own needs, and arranging for it to be loaned to other authorities. In this way the best modern equipment can be made available to the smallest local authorities when they need it. It may come as a surprise to some of us to know that such an obvious course is not already legal everywhere. The example that springs immediately to mind is the computer, which we have just been talking about in another context. We have now approximately 238 computers in local government. But the most versatile and useful computers are, by and large, the largest and most expensive ones. In general it is uneconomic for medium-sized authorities to have their own computer, and the smaller ones simply could not afford to do so. Even if they can, there is some danger of local authorities wasting money by investing in bigger computers than they need.
There are various ways in which this problem can be solved, but one very sensible one is for the larger local authority—maybe the county council— to come to an agreement with a number of smaller authorities, and invest in a computer which will meet all their needs. This again is something which is already being done in a number of places where local Acts allow it, and I should like to pay a tribute to the excellent work which is being done by local government's own organisation in this field—the Local Authorities Management Services and Computer Committee, known as LAMSAC. The fourth and final thing the Bill does is to enable a local authority to carry out maintenance work on land or buildings belonging to another authority. This is a small but useful power, and I think I need say no more about it.
I have spoken up to now of one local authority giving assistance to another local authority; and that indeed is the prime purpose of the Bill. But it also allows a local authority to give assistance to "a public body", and the words "public body" are defined in Clause 1(4) of the Bill. The definition embraces a local authority (because that is the prime purpose of the Bill) and also any parish council. But it includes as well any person or group of persons specified in an Order made by the Minister of Housing and Local Government and the 537 Secretaries of State for Scotland and Wales as a public body for the purposes of the Act. Any such body must be exercising functions of a public nature, and the Order—I lay stress on this point —is subject to annulment by either House.
The object of this provision is to enable a local authority to assist other types of authority which do not fall within the strict definition of "local" authority and other bodies. Examples that spring to mind are police authorities (which are not always technically local authorities), hospital boards, and possibly voluntary schools, bodies performing welfare and assistance functions, and bodies working in close co-operation with local authorities in the public field; for example, housing associations. I should not like to commit the Government at this stage to the exclusion or inclusion of any particular type of body—the important point is that such a body must be engaged in activities of a public character and any Order must come before the House.
So much for what the Bill seeks to do. Perhaps I could spend a moment or two on what it does not do, because this is one of the points which provoked a good deal of discussion when the Bill was debated in another place. I want to emphasise that the Bill is not intended to be the vehicle for a big expansion of municipal trading, and indeed it cannot have that effect. It enables a local authority to provide goods and services to another local authority or to certain public bodies. And a public body becomes a public body for the purposes of the Act only when it has been so designated by an Order laid before Parliament. The Bill gives no powers to anybody to trade with the public at large. I repeat that those who have powers to trade with the public at large keep them after this Bill is enacted; those who do not have those powers do not acquire them under the Bill.
To ensure that there is no possible doubt about that, two provisions were added to the Bill during its passage through the other House. The first provides that nothing in it will authorise any local authority to be supplied with any goods or services, except for the purposes of its statutory functions. So much for the local authorities. The second provision empowers the appro- 538 priate Minister, when prescribing a "public body" for the purposes of the Act, to place restrictions upon the agreements which may be made with that body under the powers of the Act. This would enable the Minister to prescribe, for example, that goods should be pro-vided by a local authority to that public body only for certain purposes, or to prohibit the supply of goods for resale by that public body to the public at large.
To sum up, this Bill is a modest but, I believe, a useful one. It is part and parcel of the efforts which are being made both by the Government and by local government to secure greater efficiency and greater economy in local government. As such it forms very much a part of our overall preoccupation at the moment on local government reform. Its object is to save the ratepayers' money. There is nothing revolutionary about it because Parliament has already, over a period of thirty years or more, given similar powers to something like a quarter of the county councils in the country, and indeed to a number of county boroughs and other local authorities as well. But powers of this nature become increasingly necessary to match the development of modern technology, and the Government feel that we should delay no longer in extending these powers to all local authorities. Local government has itself told us very firmly that it needs these powers if it is to do its job efficiently, and that is among the main reasons why I have every confidence in presenting the Bill to your Lordships' House this afternoon. My Lords, I beg to move.
§ Moved, That the Bill be now read 2a —(Lord Kennet.)
§ 3.1 p.m.
§ LORD DENHAM
My Lords, I should like from these Benches at this stage to give a slightly qualified welcome to the principles behind this Bill. In our view, it is right in principle that local authorities should not be at a disadvantage compared with private concerns, in that they should be enabled on behalf of their ratepayers to use up their surplus capacity in goods and services by passing them on to other public bodies. And this is what this Bill sets out to do. But this must be qualified by two very important provisos. First, it should be done only if it achieves real savings; and, secondly, 539 it would be wrong for local authorities, with their hidden advantages, to use the provisions of this Bill so as to achieve a monopoly position in any particular trade. As the noble Lord, Lord Kennet, has said, a number of useful Amendments were inserted in the Bill in another place; but it is with the two aspects that I have mentioned in mind that we shall be examining this Bill very closely at Committee stage.
Among other trades, we shall consider with particular care how this Bill will affect the supply of building materials, landscape gardening and horticultural supplies. On the question of achieving real savings, with the powers granted under this Bill there may well be a tendency to over-order, in the knowledge that any surplus can always be sold off elsewhere. Although there is of course a real saving in buying in bulk up to a certain extent, once that extent is reached over-ordering can be not only no saving but also wasteful. In many cases the limiting factor is the economic delivery capacity of a lorry.
In building materials there are between 30,000 and 50,000 different items. Buyers on behalf of local authorities may not have the skill and experience that has been acquired by builders' merchants in knowing how much and how many of these vast number of items to keep in stock at any particular time. The tendency will probably be for local authorities to order in bulk the more frequently used items and to rely on builders' merchants for supplying the more specialist items. But with a large part of their bread-and-butter trade gone, some builders' merchants may not be able to keep in business; and then what recourse will local authorities be able to fall back on?
With regard to unfair trading, the freedom of local authorities from selective employment tax by itself puts them in a position of tremendous advantage. Selective employment tax has turned out to be the abysmal failure that we on these Benches always predicted it would be; so it is unlikely, whatever Administration is in power, that it will last much beyond the time when this Bill is to become law. But in considering this Bill it must be taken into consideration. Apart from this, local authorities have numerous 540 resources to draw on—for instance, warehouses, clerical work, manning and transport—which will enable them to offer goods and services at a price that would be impossible for a private enterprise firm. Once a monopoly is achieved by undercutting prices, prices are almost always certain to rise.
It is difficult in the context of this Bill to draw the line between where fairness to the local authority and its ratepayers ends and where unfairness to private trade begins, but I think the broad ruling should be this. If a local authority budgets for the amount of manpower and materials that it needs for its own internal commitments, and no more, then it is fair that it should be enabled to sell off the excess to other bodies. But I think it would be wrong if local authorities were to take advantage of the provisions of this Bill by employing more men and ordering more materials than they themselves need—or than are justified by savings through bulk buying—purely so that they can enter into competition against private enterprise. These are the reservations that we have about the Bill itself. But this Bill limits the powers it gives to local authorities, both as to the purposes for which goods and services can be supplied and as to the bodies to whom they can be supplied.
We are discussing the Bill with these limitations. But there are fears in affected industries that this is the thin end of the wedge, and that future legislation will remove those limitations, quoting this Bill as a precedent. The Joint Parliamentary Secretary to the Ministry of Housing and Local Government, in his Second Reading speech in another place, was no comfort on this. He said:To set at rest any fears which may be entertained … I should mention two things which the Bill does not do. It does not allow an authority to do new building …I dare say that some of my hon. Friends will regret that this is so, but what we are doing at this stage in this minor Measure is what the local authorities wanted, what was recommended, and what the study group thought would be wise."—[OFFICIAL REPORT, Commons; 24/11/69, cols. 47–48.]Later, he went on:To allay any other fears, I should add that this is not a greater charter for the extension of municipal trading. I should not mind making the case for that again on an appropriate Measure … ".Perhaps the noble Lord in his reply will be able to say something to allay the 541 apprehension that this Bill may be only a stepping stone to a future measure giving unlimited powers for dealing in goods and services.
§ 3.8 p.m.
§ LORD ROYLE
My Lords, I apologise to the House for intervening when my name is not on the list of speakers, but one or two things have happened which cause me to rise to my feet. Most of your Lordships, if not all, in the course of your lives occupy positions of presidencies and vice-presidencies. At the weekend I had letters relative to this Bill from two of the organisations in which I occupy such a position. One was from the Association of Municipal Corporations, who requested that I might give consideration to full support of this Bill. The other came from the National Federation of Meat Traders, who asked me to consider criticising aspects of the Bill. My difficulty now is to try to be consistent and help both of these organisations.
In regard to the first, I want to say that I am completely in agreement with the principles of the Bill. I do not think that the noble Lord, Lord Denham, from his Conservative point of view has any need to worry with regard to the extension of municipal trading. To my way of thinking, the Bill does nothing of the kind. And I personally might be very much inclined to agree to extensions if the opportunity presented itself a little later. But I think that the Bill in its present form will tend towards real economy, and it will give an opportunity in the larger spheres for municipal authorities to co-operate in these matters.
On the other side, as to the other letter which I have received I am a little concerned because my noble friend Lord Kennet, and the noble Lord, Lord Denham, have made no reference to sup-plies to public institutions. There is a very large trade where traders in all kinds of foods—meat, vegetables, fruit and groceries—are supplying schools and other public institutions; and it may well be that there is some concern in the minds of people so engaged that one authority could do a great deal of bulk buying in this respect and sell the goods, maybe at some amount of profit, to other authorities. There might be some fear of 542 that. It may well be that the Government have not considered this side of the matter, have not felt that they had any need to worry about what seems to be a minor matter. But the difference between some of the commodities which have been referred to and food commodities is that there cannot be a great deal of difference in the tendering of contractors in relation to food. Therefore it could mean that some authorities might be wasting time by undertaking much larger purchases of foodstuffs. My noble friend may assure me that this is not the kind of thing they have in mind, but I feel that I should ask him this question and perhaps he can give me some assurances along the lines that I have indicated. I do not think it is a very serious matter, but it might upset some people and if this could be avoided, I think it should be.
§ 3.11 p.m.
§ LORD KENNET
My Lords, I must say that the somewhat vaguely expressed fears of the noble Lord, Lord Denham, show either a sceptical view of the Tory principles of the majority of English local authorities at the moment or, from his point of view, a pessimistic view of their durability. I do not know which it was. There is nothing in this Bill which empowers a local authorty or other public body to supply goods or services to the general public. Where they have that power now, they will keep it; where they do not have it, they will not get it. Nor does the Bill extend in any significant way the powers of local authorities to purchase goods. Where they have those powers now, they will keep them; where they do not have them, they will not get them. All it does is to ensure that what they may at present do separately, in future they may do together. Its purposes are economies of scale and wider diffusion of skills; it is not a charter for municipal trading.
The noble Lord, Lord Denham, asked me to give an undertaking that this was not the thin end of the wedge. In view of what I have just said, I think the House will understand if I say that I am not quite sure what wedge it might be the thin end of. Of course, I cannot give an undertaking that any Government, of whatever political Party, will never again introduce a Bill about municipal purchasing and municipal management services, 543 which is what this Bill is about. They might well do so. However I hope that this Bill will serve to allay the honest fears of noble Lords opposite that this might be a hidden instrument for setting up trading corporations all over the country, making use of the hidden advantages (to use the phrase of the noble Lord, Lord Denham), though what those are I do not know; I thought that all the advantages were perfectly plain. But it is not anything of that nature. It is precisely what it says—a Bill for increased efficiency of purchasing and for increased efficiency in management and professional services and advice.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.