HL Deb 19 July 1977 vol 386 cc197-225

3.49 p.m.

Baroness BIRK

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, that the House do now resolve itself into Committee.—(Baroness Birk.)

On Question, Motion agreed to.

House in Committee accordingly.


Clause 1 [Restoration of powers conferred by certain orders]:

Lord SANDYS moved Amendment No. 1: Page 1, line 5, leave out Clause 1 and insert following new clause:

Restoration of Powers

.—(1) Any authority named in Column (1) of the following table may enter into agreements with any local authority for the construction of buildings or works wholly or substantially in the area of the former borough specified in respect of such authority in column (2) which will engage the services of the officers of the first mentioned authority.

(2) In this section "officers", in relation to any authority, includes the holders of any offices or employments under that authority.

(1) (2)
The Borough Council of Barrow-in-Furness Barrow-in-Furness
The Borough Council of Blackburn Blackburn
The Borough Council of Bolton Bolton
The City Council of Bristol … Bristol
The Borough Council of Burnley Burnley
The City Council of Cardiff … Cardiff
The Borough Council of Derby Derby
The Borough Council of Gateshead Gateshead
The Borough Council of Grimsby Grimsby
The City Council of Kingston upon Hull Kingston upon Hull
The City Council of Lincoln Lincoln
The City Council of Liverpool Liverpool
The City Council of Manchester Manchester
The City Council of Newcastle upon Tyne Newcastle upon Tyne
The Borough Council of North Tyneside Tynemouth
The City Council of Plymouth Plymouth
The Borough Council of Rotherham Rotherham
The Borough Council of Scunthorpe Scunthorpe
The City Council of Sheffield Sheffield
The Borough Council of South Tyneside South Shields
The City Council of Stoke-on-Trent Stoke-on-Trent
The Borough Council of Stockport Stockport
The Borough Council of Sunderland Sunderland
The City Council of Swansea Swansea
The Borough Council of Wigan Wigan

The noble Lord said: I beg to move this Amendment standing in my name and in the names of my noble friends. My noble friend Lady Young made it quite clear in her closing remarks on Second Reading that we regard this Bill as completely unnecessary. However, we are making a genuine attempt in this Amendment, and indeed in those following it, to improve the Bill. That is what we seek to do by this series of Amendments. The Bill, as drafted, may be short as it consists of only two clauses, but in our submission it is confusingly so because it follows a pattern of drafting which was much criticised by the Renton Committee on the preparation of legislation. If I may trespass on your Lordships' time—

Baroness BIRK

May I interrupt the noble Lord? I think it was agreed that we should speak to Amendments Nos. 1 and 6.


I beg your Lordships' pardon: I should say that I beg to move Amendment No. 1 and I should like to speak to Amendment No. 6 at the same time. These two Amendments are linked, and I return to the fact that the Renton Committee on the preparation of legislation made a very special point in Recommendation No. 39 on page 152 of the report, which read as follows: The needs of the eventual user of Statutes must be given priority over those of the legislator when proposals for amending existing legislation are being framed". That was paragraph 13.17. Then, in Recommendation No. 41, the Renton Committee further added: The present practice of amending legislation textually, wherever convenience permits, should be applied as generously as possible". Unfortunately, the Government have set aside the very wise words of the Renton Committee, because there is no doubt whatever that they have presented your Lordships and another place with a Bill in totally different terms. We believe that the manner in which the Government have presented this Bill, that is to say with a recitation of references to orders which have now lapsed, does not make for clarity for the users of legislation.

I believe that it will assist noble Lords who may not have had the opportunity to follow the proceedings of the Bill through Standing Committee in another place if I explain the list of 25 authorities which is set out in our Amendment. These authorities are now district councils which no longer have responsibility for the functions that their predecessors, the old county boroughs, had at the time of the passing of the Local Government Act 1972 relating to the control of direct labour departments. The list is a little difficult to understand. The Government have created the problem, which perhaps my noble friend Lady Young put most succinctly at Second Reading when she said: The Bill puts in statutory form the former orders allowing 25 district councils to carry out works for their county councils and neighbouring district councils in specified areas". The problem arises because only 12 of the named authorities have made use of their powers, while no fewer than 13 have made no use of them. May I give some examples. Stockport is not anxious to be included in the list. Grimsby, which I regret to say is incorrectly spelt in column 2 of the Amendment, has not used its powers. At a council meeting in May of this year Grimsby passed a resolution, which was forwarded to the Secretary of State, requesting that it should be permitted to relinquish the said powers.

At this point I should draw your Lordships' attention to Amendment No. 6 which sets out in simple form the manner of relinquishment of powers. This Amendment will be no surprise to many noble Lords who followed the course of the Bill through another place, for they will recognise the terms of the Amendment moved there. The fact that Derby is referred to in this list a as borough council may cause some surprise. It was a matter of warm congratulations that Derby should have City status conferred upon it at the time of the Silver Jubilee. Derby is not anxious to use the powers which are to be conferred by the Bill.

What, therefore, are we left with? We are left with a group of authorities which are anxious to use their powers, and prominent among those authorities which have specifically asked for powers are Rotherham and Sheffield. Sheffield has a problem with regard to highway construction where a quite substantial works contract amounting to over £1 million was concerned. Furthermore, Stoke-on-Trent, the very largest user of these powers in terms of finance and whose works in the past year were valued at £1.2 million, is particularly anxious to pursue their use. At this point, however, I must refer to the fact, to which I have no doubt my noble friends will also refer, that there were no fewer than 13 unfavourable district auditors' reports on direct labour organisations which are now functioning. I will not refer at this stage to specific cases, because I know that they will come into later arguments.

It is not my task to make a Second Reading speech; my purpose is to explain the two Amendments. Because of the manner in which the Amendments are set out I believe that they follow the very apt suggestions of the Renton Committee regarding making it clear what the legislation is about. I am quite certain that to any user of the legislation who was presented with the Bill it would not be apparent which authorities are involved. Now we have a complete table and a means by which those authorities that are not anxious to use the powers conferred by the Bill are able to relinquish them.

So far as the very important matter of boundaries is concerned, I believe that special powers already exist. In Section 254, which is to be found in Part XII of the 1972 Act, there is a quite specific instruction for the Secretary of State's guidance, should be wish to identify a local authority to which any particular functions are to be transferred. Furthermore, by Section 67 of the 1972 Act the Secretary of State was given additional powers. At this stage I do not believe that it is necessary to explain in greater detail the functions of those sections, although I should be happy to try to do so, if necessary. I beg to move.

3.58 p.m.

Baroness BIRK

I cannot see any merit in changing the Bill in the way proposed by this Amendment. Indeed, it could result in a considerable disadvantage, for to name each of the 25 authorities could make the Bill hybrid. The merit of the present drafting is that it indicates clearly the reason why the Bill is necessary. The Amendment, together with the proposed change of title, suggests that new powers are to be given to 25 authorities, whereas all that is proposed is the restoration of powers which these authorities had up to 31st March 1977. This is made absolutely clear by the form in which the Bill is drafted. The fact that the Bill does not indicate which are the 25 authorities is no reason for approving this Amendment, which goes much further than that. The names of the 25 authorities can easily be established by reference to the Statutory Instrument.

So far as relinquishment is concerned, the powers conferred by the Bill are permissive, not mandatory. I know that the noble Lord, Lord Sandys, dwelled upon the point, which also came up at Second Reading, that certain authorities had not used the powers, but it is for each of the 25 authorities to decide whether it wishes to seek to use the powers. No duty is placed on them to do so and, indeed, whether the powers are used depends upon whether another authority awards work to the DLO, because that is what we are talking about under this Bill.

I do not think it would be right to enable a particular authority by resolution to relinquish the powers conferred on it by the Bill because the policies of local authorities change over the years, particularly where there are changes in political control. To enable an authority of a particular persuasion at any given time to relinquish powers which the authority might wish to use in the future would not be acceptable, and, as I think we are all aware, there are numerous permissive powers held by local authorities which they may choose not to exercise. We are not aware of any precedent enabling an individual authority to abdicate the powers given to it.

When the noble Lord, Lord Sandys comes to the point about the DLOs and how some authorities have not exercised them correctly, that is possibly true on occasion, in the same way as it is true that certain private contractors do not always behave as they should. Indeed, many DLOs have been used when a private contractor has gone bankrupt, so this is six of one and half a dozen of the other.

The Bill is drafted in this form because the powers with which it deals were conferred on the authorities by orders under the Local Government Act 1972 for a fixed period only. Therefore, the purpose of the Bill is to do away with the terminal date, to make the powers permanent, and for that reason it is drafted in terms of an Amendment to the orders and not in terms of new powers. Except for changing the Bill and turning it inside out, with which the Amendments to which we shall be coming are concerned, it seems to me that there is no reason for this Amendment.

There is only one further point I wish to make. If the real purpose of it is that the noble Lord and his colleagues feel that the actual authorities should themselves be spelled out, I have some sympathy with not having to turn from one Act of Parliament or one Statutory Instrument to another in order to seek information. I believe the more easily one can make information available, the better, and I should be prepared to consider whether we could list the 25 authorities in the Schedule to the Bill for information purposes only, provided this would not raise questions of hybridity. If that is the main purpose of the Amendment I can certainly give that undertaking.


The noble Baroness has agreed one simple point in connection with the drafting. We believe that legislation by reference to Statutory Instruments should be avoided. As in this particular case no fewer than three Statutory Instruments are concerned and have to be consulted if one is to achieve the full list of 25, it seems to be very satisfactory if the Government agree that a Schedule to the Bill should be attached and we would warmly welcome that suggestion. Bearing that in mind, and further reserving our position upon the situation as it now stands, so that we may return to this issue at the Report stage, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

4.4 p.m.

Baroness YOUNG moved Amendment No. 2: After Clause 1, insert the following new Clause:

Provisions concerning exercise of powers

.The parties to an agreement or intended agreement whereby any building or work (in this Act called a "relevant work") is to be constructed by a district council (in this Act called a "contracting council") under an agreement made by virtue of section 1 above shall comply with sections (Obligation to put work out to tender) (Form of Contract) and (Separate accounting)) of this Act.

The noble Baroness said: In moving this Amendment I wish to speak at the same time to Amendments Nos. 3, 5, 8 and 9. This is a series of linked Amendments and they are based on the recommendations which are known as the CIPFA recommendations—which stands for those made by the Chartered Institute of Public Finance and Accountancy. This series of Amendments would have the effect of making the authorities which would have these powers present their accounts in the form recommended by CIPFA. I do not think it is necessary for me to explain in detail how these accounts will work, so far as I understand it, the Government themselves have accepted the principle of the CIPFA accounting. They believe it to be the right way of presenting accounts and what they are concerned about is the time when they should be brought in.

I believe also that the principle of the CIPFA accounting has the support of the Liberal Party. May I quote what the honourable Member, Mr. Stephen Ross, said in another place on 17th May: I support the Conservative Opposition in their request to the Minister that the CIPFA basis of accounting should be written into the Bill."—[Official Report, Commons, 17/5/77; col. 269.]

This matter was debated in Committee in another place and there was a tied vote. Therefore, I believe the principle of this matter has the support of all Parties, and the reason why I believe it has support is that it has been produced by accountants for local authorities and the fact is that direct labour departments more than any other departments in a local authority are themselves in direct competition with private builders. So it is necessary that comparisons of costs should be fairly made. The only way these comparisons can be made is if a similar system of accounting is used for direct labour departments as would be used by private building firms. This is not only in the interests of other private building firms who are in competition with the direct labour departments; it is of course very much in the interests of ratepayers that they should be able to understand the accounts and it is therefore very much in the interests of local authorities as a whole.

One has only to look and see the latest difficulties that a direct labour department has got itself into. I refer to those figures that have been produced since June of this year from the Wakefield Council, whose leader I believe is Councillor Smart, who recently wrote of the advantages of direct labour departments in the magazine Municipal Review. The figures show that on 22 building works the deficit is now £1,082,551. At a time when local government is going through a great financial crisis it seems to me quite wrong that it should be incurring this kind of deficit, and I cannot believe that it is in the interests of local government or of the building industry that this should be so.

Furthermore, the CIPFA recommendations have already been included in two local Acts; namely, the Tyne and Wear Act and the South Glamorgan County Council Act, and the Committee will recall that those two Private Bills were subject to very full debate in your Lordships' House. This said, it is necessary to try to understand the reasons why the Government have been unwilling to accept these accounting proposals. The first reason that has been given is that the 25 authorities listed, who would be the only ones to whom this would by Statute apply, would then have two different accounting systems. Where the direct labour department was doing work for the district authority itself it would use one accounting system; where the district council was doing work for the county council or a neighbouring district authority it would have to use the CIPFA recommendations, and it was thought that this would be too complicated for it to apply. In my view, this argument simply does not stand up when one considers the Tyne and Wear Act and the South Glamorgan County Council Act where in fact the CIPFA recommendations apply.

Furthermore, as to the argument used by the noble Baroness, Lady Birk, which was that if a county council was going to accept a tender from a direct works department of a district council it would want to ensure that it was getting value for money, it could not tell if it was getting value for money unless that authority had the same kind of accounting procedures as were being used by a private builder who submitted a tender. So the fact is that the county council could not know what it was going to get. This point was very well made when a similar Bill which would have applied to Scotland was going through another place, when the honourable Member Mr. Ewing made it quite clear that it could well be that a county council was going into a completely open-ended commitment if there was not a proper statement of accounts showing the proper costing of the direct works department.

Such accounting would, therefore, be helpful to the other authorities that were contemplating using this direct labour; and at the end of the day, although, as the noble Baroness said on the preceding Amendment, there may well be inefficient private builders, if private builders are inefficient sooner or later they go bankrupt, and they therefore suffer for their inefficiency. If a direct works department is inefficient, the ratepayers can simply subsidise it for years to come without anybody realising what has happened. As my noble friend Lord Sandys indicated, it is a terrible indictment that 13 authorities—it is true that none of them is on this list—have been up-braided by a district audit because of the inefficiency of their direct works departments.

We believe this is an important Amend ment. We are not asking for anything which has not got agreement in principle between all the parties. The question we need to ask the Government is what they are waiting for, and why will they not include these proposals in this Bill? The CIPFA recommendations were published in June 1975. The noble Baroness said that there was a Departmental Working Party reporting on the proceedings for accounting for construction work and that it was expected to report later this summer. She then said that the problems of accounting for maintenance work would be undertaken. I do not know how long it is expected that all this will last, but it does not look to me as if there could possibly be anything in the Queen's Speech in November which would bring in these procedures for direct labour organisations, and presumably if there is no indication at the beginning of the new Parliamentary Session we could wait at least one more year, if not longer, for these procedures to be brought in.

I should have thought, on the contrary, that there was every argument for bringing them in now. The 25 authorities could be used as a pilot scheme to see how they worked and to see whether any further refinements were needed, because it seems to me that once the principle is agreed it is only right that it should be carried out in practice. This is particularly important at a time when we need to encourage efficiency in local government. It in no way prevents a local authority, if it so wishes, from having its direct labour department; but it does make sure, from the point of view of the customer and the ratepayer, that the true accounts are shown up, so that everybody knows whether or not they are getting value for money. I beg to move.

Baroness BIRK

May I ask the noble Baroness whether I am right in thinking that she included Amendment No. 5 in the group she was speaking to?

Baroness YOUNG

Yes, I did.

4.14 p.m.

Baroness BIRK

It is understandable, and I share noble Lords' concern, that there should be a proper financial framework for the operation of direct labour organisations. I do not think there is any argument between us on that. I also appreciate that since similar Amendments were tabled in another place some effort has been made to remove certain weaknesses to which attention was then drawn. In particular, in the new clause, Clause 3, a limit has been included below which competitive tendering is not required. Some provision has also been included to deal with negotiated contracts. But none of the new clauses, however, adequately covers the provisions which would be needed to give DLO authorities power to charge on the basis of a quoted price. Without such a power the use of standard contract forms providing for contract price would be largely inappropriate.

It is not really clear what is meant by the reference to "proper charge" in the new Clause 9. A clear indication would need to be given of the way in which proper charges were to be assessed. Also on Clause 9, which would require a DLO authority to ensure that in respect of such projects income is sufficient to defray expenditure, private contractors do not necessarily operate in that way in respect of each contract, and in fairness DLO authorities really should not be expected to do so either. So a financial objective should operate in relation to a DLO's activities over a period. This, I accept, is really just picking on points on the various clauses. My basic exception to them all is that, although I accept that the general intent behind these clauses certainly accords broadly with the Government's view on the way in which the accounting system should develop, the weaknesses in the drafting demonstrate the need for the provisions to be properly worked out.

The most important point of all, as I previously explained on Second Reading, is that the place for introducing a new financial system is comprehensive legislation dealing with DLO activities generally. I explained this on Second Reading but I am afraid I shall have to go over the argument again. It would be completely inappropriate to have these provisions in the Bill, because they would apply to only that part of the DLO activities of the 25 authorities which is undertaken by virtue of this Bill. The provisions would not affect the other DLO activities of the 25 authorities which represent by far the greater proportion of their DLO work; that is, the work they do for themselves. Nor would they affect the DLO activities of all other local authorities.

It would seem to me, and I hope to the Committee, that it would be quite anomalous to have special accounting provisions simply for 25 authorities, whose powers were merely being restored as a result of the reorganisation of the 1972 Local Government Act. It would also be confusing to have different systems operating within a single authority, which would be the case for the 25 authorities. If this were inserted in this Bill they would have to operate two different accounting systems, which I do not think can make for great efficiency. It would also be wrong to provide a new financial system to bring DLOs into line with private contractors without giving DLOs an ability, like private contractors, to seek work on a wider basis. What we need to do is to provide a proper framework covering not only the financial arrangements but also the scope of DLO activities.

We accept that until there is comprehensive legislation there should be a continuing dialogue. In our Consultation Documents last year we set out the main principles we proposed to embody in the comprehensive legislation. We expect to receive in the summer a report from the Departmental Working Party on the detailed arrangements in relation to new construction work. A further CIPFA report is expected before long in relation to maintenance work, and I hope the Working Party will be able to advise on the detailed arrangements on that aspect early next year. When we have a report from the Working Party we will consult those concerned on these issues, and this will enable the discussions to be continued.

Regarding this Bill, however, it would not be right, for these reasons, to accept these new clauses. I think I should say a word on the new Clause 5, which is included in the group, which deals with the suspension of powers. Before one can contemplate suspending a local authority's powers under general Statute one must have established clear-cut criteria to enable a sound and fair judgment to be made of the need for such action. Until there are satisfactory accounting and charging arrangements this cannot be done. There must be a proper basis for considering the form of the sanction in the case of a DLO which does not operate effectively.

Under the comprehensive legislation that the Government had hoped to introduce, a DLO authority would have been under a duty to avoid making a loss (having been given power to charge on the basis of a firm price); the Secretary of State would have had power to direct that all or part of a DLO's activities should cease if a DLO failed to meet the financial duty in three consecutive years; and, in deciding whether to exercise the power, the Secretary of State would have had regard to whether the DLO authority was likely to meet the financial objective within a reasonable period. In all these instances the client authority would take into account the fact that it would have to pay the actuals costs of the DLO authority in deciding whether it was economic to award work to a DLO. Therefore, in that way its financial responsibilities are the same as regards whether it awards the work to a DLO or to a private contractor. A client authority usually puts its work out to tender and it is in its interest to choose the most economic course.

The noble Baroness, Lady Young, quoted the examples of Tyne and Weir and Glamorganshire. It is perfectly true that when the Bills were drafted it was pointed out that there were financial problems. However, the Promoters at the time decided to go ahead as this whole question was then being raised and discussions were taking place. However, it is certainly extremely improbable and unlikely that this would happen in any further private Bills.


It is always interesting to listen to the noble Baroness, Lady Birk, and she adopts a patient and motherly tone as if she were a world weary elder relative dealing with difficult and irresponsible children raising awkward questions. The noble Baroness has put up a barrage of technical points about the drafting of some of the Amendments moved by my noble friend Lady Young, and has also attempted to drown us with a whole series of points which claim to show that it would be impossible to introduce a proper system of accounting for direct labour organisations.

I should like to ask the noble Baroness, Lady Birk, the question that I asked on Second Reading, because she has not yet answered it. It is a question that I think your Lordships need to hear again and we should like to hear the noble Baroness' answer, if she has one. We understand that when the Government had a plan for a much more comprehensive Bill, they were to introduce a system of thorough, overall control over direct labour organisations. If that system is ready now why can it not be used as a pilot experiment in the Bill now before the House? The noble Baroness, Lady Birk, made great play with the drafting defects, as she explained them, of the Amendments before the House. I always take it as a compliment if the Civil Service pick holes in the drafting, because they must think that there is something in the Amendment that is worth pointing out as a drafting defect.

The noble Baroness then explained in great detail why it would be so difficult to introduce proper accounting methods. Yet, at the same time, she continues to proclaim the Government's intention and desire to bring those proper accounting methods into practice. We need to know why this Bill, the Government's own Bill, cannot be used as the trial run for these accounting methods. They have been worked out by the CIPFA Working Group since 1975. The Government support the recommendations. I do not know whether the Liberals in this House support the recommendations, but the Liberals in the other place support them. Why did not the Government take this opportunity to put them into effect? It is not a technical or an ideological matter; it is concerned with large sums of money.

I shall not repeat some of the horror stories that are known to your Lordships about things that have gone on in direct labour organisations in Glasgow, Wandsworth or other places. However, I should like, briefly, to give your Lordships an idea of the comparable return for the money between building operations carried out by private operatives and direct labour. The figures are taken from the statistics that the Department of the Environment publishes. The figures that I have for last year show that the output per man as regards direct labour was 1,084 and the private figure was 2,861. We must get some common sense into the accounting of direct labour organisations. If they fail, or if they are inefficient, it is not the Government who pay: in the end it is us. This is an opportunity for the Government to show their good intentions and to put tough accounting procedures into the Bill, because we still have not had a good explanation as to why they will not do so.

Baroness BIRK

I think that the noble Lord, Lord O'Hagan, was so busy working out his phraseology to describe how I was replying to the Amendments that he omitted to listen. I explained the position exactly and not in technical language. Incidentally, the Bill is very technical and I felt that it would be for the convenience of the Committee to get all the technical matters off in one go without having to go backwards and forwards. I shall repeat what I have said and I should be extremely grateful if the noble Lord, Lord O'Hagan, would, in his boyish way, listen to what I am saying. I accept that the general intent behind the clauses accords broadly with the Government's view of the way in which the accounting system should develop, but I said that it would be completely inappropriate to have these provisions in the Bill because they would apply to only that part of the DLO activities of the 25 authorities which was undertaken by virtue of the Bill.

The provisions would not affect the other DLO activities of the 25 authorities—that is to say, where they do work for themselves and not for other client authorities; I shall make sure that the noble Lord, Lord O'Hagan takes these points in, so he must be patient—which represent by far the greater proportion of their DLO work. Nor would they affect—and this is extremely important—the DLO activities of all the other local authorities. Therefore, it would be quite anomalous to have special accounting provisions simply for 25 authorities whose powers were being restored. In addition, it would be confusing to have different systems operating within a single authority which would, in fact, be the case for the 25 authorities.

As we intend to introduce a Bill which deals with a much more comprehensive approach to DLO activities generally, that would be the time to bring in all the provisions that we have been discussing. There is no difference between us as regards the need for these new accounting and charging provisions. After all, we set up the Working Party and we have accepted its report. However, this Bill is not the instrument to do it. All the argument in the world will not change what is, frankly, an obvious fact.

Baroness YOUNG

Would the noble Baroness, Lady Birk, care to answer the point made by my noble friend Lord O'Hagan, as to whether or not the original Bill that was drawn up and dropped included these recommendations? If it did include them, will she tell us whether the Government have clauses in draft which could go into a Bill at any time?

Baroness BIRK

The general recommendations on the wider issues had been worked out and were being worked out. They would have to be scrutinised again but they could probably go into a Bill. However, it would be a quite different Bill because it would be dealing with DLO activities of all local authorities and not just these 25—it was only because the order finished on 31st March 1977 and it was just to bring them into line. Noble Lords opposite are trying to build an edifice on something which is just a small rearrangement, a correction, in order to bring the activities of the 25 authorities within the new boundaries which have now encompassed them since the Act of 1972. If the Opposition come forward and say, "Yes we would love to have this Bill which has not yet been put before us" we would respond very gladly and bring it forward, no doubt, for the next Queen's Speech.

Baroness YOUNG

We have listened with very great care to what the noble Baroness, Lady Birk, has said about this series of Amendments. I fully appreciate the objectives of the Bill and what it seeks to do, but I cannot accept that it is so difficult for these 25 authorities to have these accounting procedures on the occasions when they will be doing work for a county council or a neighbouring district council. There is nothing whatever to prevent them bringing the accounting procedures for their direct labour departments that are working for themselves into line with the CIPFA recommendations. Then, of course, they would not have the two procedures together. That is an argument that does not stand up to the test when one considers what the reality of the situation in a local authority would be.

I quite recognise that many of these Amendments may be incorrectly drafted. Anyone who has ever attempted to amend a Bill knows perfectly well that no Amendment is ever correctly drafted. I should be quite prepared to withdraw the Amendments if the Government would come back and draft them correctly. However, that was not what the noble Baroness promised. She has agreed with us that in principle they are right and that they ought to apply in local authorities.

Ailsa, M. De Freyne, L. Mackie of Benshie, L.
Airedale, L. Denham, L. [Teller.] Macleod of Borve, B.
Alexander of Tunis, E. Deramore, L. Mancroft, L.
Allerton, L. Derwent, L. Mansfield, E.
Alport, L. Eccles, V. Merrivale, L.
Amory, V. Effingham, E. Montagu of Beaulieu, L.
Ampthill, L. Elliot of Harwood, B. Montgomery of Alamein, V.
Amulree, L. Elton, L. Mottistone, L.
Arran, E. Emmet of Amberley, B. Mowbray and Stourton, L. [Teller.]
Atholl, D. Falkland, V.
Avon, E. George-Brown, L. Moyne, L.
Banks, L. Gisborough, L. Newall, L.
Barnby, L. Gladwyn, L. Noel-Buxton, L.
Beaumont of Whitley, L. Glasgow, E. Nunburnholme, L.
Belstead, L. Glenkinglas, L. O'Hagan, L.
Berkeley, B. Greenway, L. Onslow, E.
Blake, L. Grey, E. Rankeillour, L.
Broadbridge, L. Gridley, L. Reigate, L.
Brock, L. Hailsham of Saint Marylebone, L. Rochdale, V.
Brougham and Vaux, L. Hampton, L. Sackville, L.
Caccia, L. Hanworth, V. St. Davids, V.
Campbell of Croy, L. Henley, L. St. Helens, L.
Carrington, L. Home of the Hirsel, L. Sandford, L.
Cathcart, E. Inglewood, L. Sandys, L.
Clancarty, E. Kinloss, Ly. Selsdon, L.
Clwyd, L. Kinnaird, L. Sharples, B.
Cork and Orrery, E. Loudoun, C. Skelmersdale, L.
Cranbrook, E. Lucas of Chilworth, L. Spens, L.
Cullen of Ashbourne, L. Luke, L. Stamp, L.
Daventry, V. Lyell, L. Strathclyde, L.

This Bill, which we do not believe to have been necessary but which nevertheless is before the Committee, provides an opportunity to have these accounting procedures in 25 authorities on certain occasions. It seems to us on this side of the House to be something that would be well worth trying out as a pilot scheme. If they are based on the CIPFA recommendations, we shall welcome the Government's proposals when they come forward. However, as I understand the timetable, the report will not be complete until next summer, and it will be at least 18 months before anything could happen. We have an opportunity in this Amendment to do something immediately which we believe to be in the best interests of the building industry, the ratepayers of authorities and, above all, local government itself, because it will be seen to be fair and right. For that reason I cannot withdraw the Amendment.

4.32 p.m.

On Question, Whether the said Amendment (No. 2) shall be agreed to?

Their Lordships divided: Contents, 104; Not-Contents, 57.

Strathcona and Mount Royal, L. Trefgarne, L. Ward of North Tyneside, B.
Strathspey, L. Vernon, L. Ward of Witley, V.
Sudeley, L. Vickers, B. Westbury, L.
Terrington, L. Vivian, L. Wigoder, L.
Thurlow, L. Wakefield of Kendal, L. Young, B.
Balogh, L. Gaitskell, B. Phillips, B.
Birk, B. Greenwood of Rossendale, L. Raglan, L.
Blyton, L. Gregson, L. Rhodes, L.
Boothby, L. Hale, L. Ritchie-Calder, L.
Brockway, L. Halsbury, E. Roberthall, L.
Buckinghamshire, E. Henderson, L. Rusholme, L.
Burntwood, L. Houghton of Sowerby, L. Sainsbury, L.
Castle, L. Hughes, L. Shepherd, L.
Champion, L. Janner, L. Shinwell, L.
Chorley, L. Kirkhill, L. Snow, L.
Collison, L. Leatherland, L. Stone, L.
Cooper of Stockton Heath, L. Llewelyn-Davies of Hastoe, B. Stow Hill, L.
Crook, L. Longford, E. Taylor of Gryfe, L.
Darling of Hillsborough, L. McCluskey, L. Taylor of Mansfield, L.
Davies of Leek, L. Maelor, L. Wells-Pestell, L. [Teller.]
Delacourt-Smith of Alteryn, B. Milford, L. Williamson, L.
Donaldson of Kingsbridge, L. Oram, L. [Teller.] Wilson of High Wray, L.
Elwyn-Jones, L. (L. Chancellor.) Pannell, L. Wootton of Abinger, B.
Fisher of Camden, L. Parry, L. Wynne-Jones, L.

Resolved in the affirmative, and Amendment agreed to accordingly.

4.42 p.m.

Baroness YOUNG moved Amendment No. 3: After Clause 1, insert the following new clause:

Obligation to put work out to tender

.—(1) A local authority which desires a contracting council to carry nut a relevant work shall either—

  1. (a) put the relevant work out for competitive tender and in respect thereof comply with the provisions of the Code of Procedure for Selective Tendering (1972 Edition) published by the National Joint Consultative Committee of Architects, Quantity Surveyors and Builders or such other code of procedure as shall from time to time be published by that committee in collaboration with the Secretary of State; or, if the Secretary of State so directs, shall comply with such other code as may be prescribed or approved by him for the purposes of this section; or
  2. (b) negotiate a price which shall not exceed the limit specified in subsection (2) below.

(2) The limit specified for the purposes of subsection (1) above shall be £50,000 or a higher sum being the same proportion to the said sum of £50,000 as shall be borne by any increase in the Index of Retail Prices to the figure shown therein for the month of July 1977.

(3) The Index of Retail Prices means the Index of Retail Prices published by H.M. Stationery Office or any official publication substituted therefor.

The noble Baroness said: I have spoken to this Amendment. I beg to move.

On Question, Amendment agreed to.

[Amendment No. 4 not moved.]

Baroness YOUNG moved Amendment No. 5: After Clause 1, insert the following new clause:

Suspension of powers

.The Secretary of State shall have power by written notice to suspend for such period or periods as he thinks fit the operation by a district council therein named of the powers conferred by section 1 above if after consideration of the specified accounts prepared by that Council in accordance with section (Separate accounting) of this Act or the reports of the District Auditor on the new building and construction works carried out by that council on its own behalf he is of the opinion that there is an unreasonable risk that the exercise of those powers will result in loss to the council.

The noble Baroness said: Again, I have spoken to this. I beg to move.

On Question, Amendment agreed to.

[Amendment No. 6 not moved.]

4.44 p.m.

Lord O'HAGAN moved Amendment No. 7: After Clause 1, insert the following new clause:

Duration of Act

.—(1) This Act shall continue in force for the period of year beginning with the date of the passing of this Act and shall then expire unless it is continued in force in accordance with subsection (2) below.

(2) The Secretary of State may by order made by statutory instrument provide that this Act shall continue in force for a period of one year beyond the date on which it would otherwise expire.

(3) An order shall not be made under subsection (2) above unless a draft of the order has been laid before Parliament and approved by a resolution of each House of Parliament.

The noble Lord said: I rise to move Amendment No. 7, which stands on the Marshalled List in the names of my noble friends and myself. There has been some misunderstanding about the origins of this Bill. In the Local Government Act 1972, certain transitional provisions were made for the consequences of the alteration of local authority boundaries. One of those provisions was to enable the direct labour organisations to continue working and so make for an easy transition to the new system of local government when fully implemented.

What the Government have chosen to do is to attempt to perpetuate those transitional provisions and to fossilize and make them permanent, and so to prove the truth of an old French proverb which I shall quote only in English "There is nothing that lasts except the provisional". This is not a good way to make laws nor is it a good way to enable local government to carry out its proper functions.

There is another reason that led me to think about the way the Bill is phrased. It is this: as we can see from the words of the Bill itself, it seeks to establish on the Statute Book, permanently and for ever, direct labour organisations working to, and within, boundaries that are now wholly out of date. We may well find in years to come that there are difficulties because there will be no other piece of legislation in relation to which it is relevant, and continues to be relevant, to take into account the location of the boundaries of the old boroughs before the local government reorganisation.

I am not resting my case on the fact that local authorities may not know where the boundaries were some while ago. Nevertheless, with a constantly evolving landscape and townscape, it is difficult to keep track of boundaries that have nothing but historical interest except in this one particular instance. Therefore, because the Government are choosing to attempt to perpetuate something that was meant to be merely temporary in a permanent Statute, I want both Houses of Parliament to be given a chance to keep an eye on it and see how things are developing.

If ever there was a case for a Bill being referred to one of the new Standing Committees proposed by your Lordships' Practice and Procedure Committee, in which evidence could be taken from Departments and outside organisations as to the desirability and workability of the Bill, it is this one. I have in my hands newspaper articles, one of them headed: More facts needed before role of direct labour departments expanded". Another one concludes: Direct labour is as good as the men who manage it. Before the Government legislates to extend the system it must pause for a moment from the politics and look to its managers". That has not been done. That full survey has not been carried out.

Because this Bill is giving permanence to something that was not designed to be permanent, I feel that Parliament needs to keep an eye on how the situation develops, and at the same time Parliament needs to be able to take stock of how direct labour organisations are working. They are controversial, they are costly, and often they are disastrously inefficient. I am attempting in this Amendment to provide that this Act shall not continue in force without an Instrument being passed through both Houses of Parliament annually. That would give both Houses a chance to examine how things were developing and whether the Bill was working as intended. It would give both Houses a chance to see how direct labour was facing up to the new challenges. It would give both Houses a chance to examine whether difficulties had arisen because of the out-of-date nature of the boundaries on which this Bill is based. It is a piece of common sense to make sure that this Bill works. If the Government intend to have this Bill, surely they want it to work. In the interests of greater Parliamentary scrutiny of this legislation—post-legislative scrutiny, if you like—I beg to move this Amendment.


I should like to support this Amendment, so cogently moved by my noble friend Lord O'Hagan. In parenthesis, I should like to say that the Government should take note of the ingenious way in which it is drafted, for it could have been the sort of Amendment which the Government might have had in mind for the Control of Office Development Bill to which we have so recently given our attention.

To turn to the Local Government Act 1972, I believe that, when that Act was before Parliament, great consideration was given to the consequential and transitional arrangements. The section with which we are concerned, Section 254, laid particular stress on the problems of the boundaries of local authorities. There is a subsection there, subsection (4), which I shall not quote in detail but which I have had before me and which permits the Secretary of State to give a specific direction on this matter. Further, the Secretary of State can call upon additional powers under Section 67, which deals with a much wider range of transitional and consequential provisions. The Amendment is entirely in keeping with both those sections of the 1972 Act and would give Parliament the opportunity to examine this matter in a year's time.

Baroness BIRK

I agree it is an ingenious Amendment, but ingenuity is not the only criterion for accepting Amendments, and while I give credit for its ingenuity I am afraid I must urge the Committee to resist it. What the noble Lord, Lord O'Hagan, would be doing would be restoring the powers for only one year with provision for one extension for one year by order of the Secretary of State. There is no sufficient reason for limiting the operation of such powers in time. This arose only because the measure introduced by the last Conservative Government on local government reorganisation failed to deal with the position of direct labour organisations. The 1972 Act should have made permanent arrangements regarding the scope of their activities, and the only reason why the orders were time limited originally was that it was not possible under Section 254 of the 1972 Act—this was a consequential and supplementary provision under which the orders were made—to provide the powers on a permanent basis because the Local Government Act powers were not wide enough to enable the orders to do that.

This Bill will be supplanted at a later date by comprehensive legislation on local authority direct labour organisations—we discussed this on earlier Amendments— and this will provide a uniform basis for the operation of DLOs throughout the country and in the context of the present local government boundaries. Unfortunately it is not possible at this stage to say when that comprehensive legislation will be introduced, but it would be a nonsense and an unnecessary waste of time and effort to have to legislate again simply to enable the 25 local authorities to continue to have these powers. I cannot see the sense of trying to run a DLO on a yearly expectation of life because that must make forward planning impossible.


I hesitate to interrupt, but I think I heard the noble Baroness say that she could not see how it could be a good idea to legislate again. Surely she understands that the Amendment would mean that this legislation would become annually renewable.

Baroness BIRK

My Lords, if the comprehensive legislation comes forward, we shall have to be legislating on that and there does not seem to be any reason in the meantime to look at this every year and to try to run it on a yearly expectation of life; perhaps I used the word "legislate" when I did not mean to do so.

This arose out of an anomaly and the anomaly, when it was discovered, was corrected temporarily by the transitional orders. It was a stop-gap measure and it was hoped that before the temporary orders expired we should have introduced the comprehensive Bill, but unfortunately that was not to be, and while we still intend, as I have said in discussing the Amendments today, to bring forward such a measure, it is necessary now to take action to continue the effect of the transitional orders. There seems no reason considering the history of this whole episode arising out of the 1972 Act, to depart from rectifying it for the time being, until new legislation comes in, and to make this rather extraordinary exception of having it on a yearly basis. I do not think that would make sense one way or the other.

Baroness YOUNG

The noble Baroness said she did not feel it made sense, yet she herself has argued consistently throughout our debates on the Bill that it does no more than continue what is the present practice. We have argued quite the contrary, that the Bill is putting in statutory form orders which have been renewable, and therefore there is a difference. This Amendment—and I congratulate my noble friend Lord O'Hagan because it is ingenious—says what the Government are saying and what they are intending to do. I should have thought therefore that it was worth accepting.

Baroness BIRK

I cannot see any point in accepting the Amendment unless the noble Baroness feels, returning to the point of the other substantive Amendments, that she would like to go over to the new system of financing just for 25 authorities under which each would have to be operating by two different sets of accounting. In addition to that, there would be uncertainty as to what would happen at the end of each year. I should have thought that with her Party's view on public expenditure—she is always keen, and rightly so, to ensure that expenditure and personnel are not wasted—she would have realised that the effect of all that has been said throughout the discussion on the Amendments to the Bill would result in greater expenditure and more manpower being used in what would be a rather ineffectual and inefficient way for 25 authorities and only for a small part of their work. This is an extension of the argument we have had previously.


I am disappointed by that answer because my Amendment would not take away from the Government their objective in putting forward this Bill. My Amendment would, while safeguarding the Bill itself, give Parliament an annual opportunity to see how things are progressing. We have heard on all sides that the DLOs are in need of examination, particularly on the accounting side—that is something on which there is almost unanimous agreement in the Committee—and I am sad that this constructive Amendment has not met with a better reception. I will reflect on what the noble Baroness has said and, in the meantime, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Baroness YOUNG moved Amendment No. 8: After Clause 1, insert the following new clause:

Form of contract

. Any agreement for the carrying out of a relevant work shall incorporate the appropriate standard form of building contract for the time being published by the Joint Contracts Tribunal (commonly called the RIBA Standard Form of Contract) or that published by the Association of Consulting Engineers, the Institution of Civil Engineers and the Federation of Civil Engineering Contractors (commonly called the ICE Standard Form of Contract) or such other standard form as shall be in common use.

On Question, Amendment agreed to.

Baroness YOUNG moved Amendment No. 9: After Clause 1, insert the following new clause:

Separate accounting

.—(1) The accounts of the contracting council shall include a separate account (hereinafter called "the specified account") in respect of each relevant work carried out by that council under an agreement made by virtue of section 1 of this Act and which shall be included in the accounts next following the expiry of nine months after the issue of the final certificate for that work; and subsection (1) of section 159 of the Local Government Act 1972 (which relates to the inspection and taking of copies of accounts) shall have effect as if the reference to the accounts to be audited included a reference to the specified account.

(2) The contracting council shall bring into the specified account all costs, liabilities, charges and expenses including financing costs attributable to the relevant work to which the account relates and shall in particular without prejudice to the generality of the foregoing ensure that the specified account shall—

  1. (a) include a proper charge in respect of—
    1. (i) labour and labour overheads;
    2. (ii) the use of premises in connection with the carrying out of the relevant work,
    3. (iii) building and works department administrative and supervisory expenses;
    4. (iv) central administrative expenses;
    5. (v) capital, operating, maintenance and finance costs for all plant equipment, vehicles and workshops, and used in carrying out the relevant work;
    6. (vi) any supplies taken from stock for the purpose of carrying out the relevant work; and
    7. (vii) in relation to goods manufactured by the contracting council and used in the carrying out of the relevant work, labour materials and all other relevant expenses; and
  2. (b) where an item is attributable partly to the relevant work and partly to other work or to two or more relevant works show a fair apportionment having regard to the respective values of the works in question.

(3) After audit the specified account shall be available to the public for examination.

(4) The contracting council shall use their best endeavours to secure that (having due regard to the provisions of subsection (2) above) the income derived from the carrying out of each relevant work is sufficient to defray their expenditure in respect of that work.

The noble Baroness said: I spoke to this Amendment earlier. I beg to move.

On Question, Amendment agreed to.

Clause 2 [Short title and extent]:

4.58 p.m.

Lord O'HAGAN moved Amendment No. 10: Page 1, line 22, leave out ("Local Authorities (Restoration of Works") and insert ("Direct Labour (Extension of").

The noble Lord said: In moving this Amendment, I seek to tell your Lordships and members of the public, and those who are concerned to examine the Bill, what the Bill actually is, and I think that is a good Parliamentary principle. Governments—this is no doubt a criticism which could be applied to all Governments—tend to want to find the most flattering or else the most obscurantist Titles for their Bills; they either wish to make them sound better then they are and gild them, or they wish to be what I believe is called obfuscatory and make it wholly unclear what the Bill is for. My noble friend Lord Sandys told me that when he first looked at the Bill and saw the Title, Local Authorities (Restoration of Works Powers) Bill, he thought it was a conservation measure. The Title as it stands gives very little indication of what the Bill is really intending to do.

To give Bills Titles which indicate what they really are should not be considered simply a joke. It is necessary to make the objects of our legislation clear both to the average citizen trying to find an Act relevant to his particular anxiety and to the practitioners of the law. The words Local Authorities (Restoration of Works Powers) Bill give no clear idea of what the Bill does. The Bill extends the powers of direct labour, and my Amendment seeks to make this clear. This is a simple, small Amendment designed in Parliamentary terms to comply with the principles of the Trade Descriptions Act. It seeks to describe the Bill as what it really is, and to remove the cloak of the rather long and complicated Title which at present obscures the true nature and purpose of the Bill. I beg to move.


I should like to support the Amendment because I believe it to be important, and my noble friend has referred to a difficulty which I had in placing the Bill in its correct pigeon-hole. I again referred to the report of the Renton Committee on the Preparation of Legislation, which I mentioned earlier, to see what it had had to say about the arrangements for Short Titles. It is interesting to note that the Statute Law Society had an important suggestion to make. It contended that Titles should not be chosen …at random, inconsistently, or unsystematically, but should be selected by a designated person or body charged with this task and according to prescribed rules ". That is the view of the Statute Law Society on the matter. The Society goes on at greater length to enlarge upon its argument, but I believe that the case is very largely self-explanatory from what has been written into the Amendment and from the argument presented by my noble friend Lord O'Hagan.

Baroness BIRK

In a period of inflation the noble Lord, Lord O'Hagan, is certainly inflating this Bill because he is trying to make it much wider. I do not think that he is entirely clear as to what the Bill is about. All the Bill is concerned to do is to restore the powers of 25 authorities. I agree that there are occasions when the Titles of Bills are not quite so comprehensible as they might be, but this is the Local Authorities (Restoration of Works) Powers Bill, and anybody who has sat through the Second Reading and Committee stage ought to be quite clear that what we are doing in the Bill is to restore powers to 25 authorities which lost them because of a change of boundaries due to the 1972 Local Government Act. The phrase "Restoration of Works Powers" is absolutely correct nomenclature. To use the Title "Direct Labour (Extension of)" would, in my view, be quite wrong and inaccurate. For this reason, the Amendment is unacceptable. It does not convey with accuracy the meaning of the Bill, nor what the Bill is about. It would be grossly misleading to suggest that the measure is concerned with the general extension of the power of direct labour organisations, which is what the noble Lord's Amendment would suggest, and even if he did not see it that way, that is how it would normally be read. Therefore, I hope that the Committee will resist the Amendment.


I thank the noble Baroness for her stout defence of the Parliamentary draftsmen and her departmental advisers. This Bill does indeed extend direct labour, and extends it into infinity. The object is to make it go on without stopping. We shall not continue the argument; we shall return to it another day. In the meantime, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 2 agreed to.

On Question, That this be the Title of the Bill?

Baroness YOUNG

Before we pass this point, I should like to say that I am conscious that, now that the Committee has accepted the series of Amendments on the proposals on accounting, I believe that there needs to be an Amendment to the Long Title of the Bill, and that I wish to consider this at the next stage.

Title agreed to.

House resumed: Bill reported with the Amendments.