§ 5.28 p.m.
The Minister of State, Department of the Environment (The Earl of Caithness)
My Lords, with the leave of the House, I shall now repeat a Statement which has been made in another place by my honourable friend the Parliamentary Under-Secretary of State about the future of the Crown Suppliers. The Statement is as follows:
"The Crown Suppliers is a self-financing business within the Department of the Environment. It sells furniture and other equipment and services to the public sector. It has operated as a government trading fund since 1976 and under the title of The Crown Suppliers since 1984.
"As direct suppliers to government departments, the Crown Suppliers has achieved considerable success in the design and procurement of its own-brand furniture, the procurement and supply of a wide range of equipment and the provision of fuel and transport. I have, however, considered the role and status of the Crown Suppliers in the light of the untying of departments from the compulsory use of purchasing agencies.
"I have had the benefit of two recent reports by consultants, and have discussed a summary of those reports with staff representatives. It is clear that the Crown Suppliers must reduce their overheads substantially to reflect new working practices and purchasing policies in government departments.
"Many of the activities of the Crown Suppliers are, however, of a commercial nature, and there is little doubt that they could be carried out more efficiently in the private sector. The question therefore is whether the Crown Suppliers should be given full freedom to compete in both public and 1115 private sectors, which would entail transfer to the private sector.
"I am convinced that privatisation provides the brightest future for the Crown Suppliers, as well as a continued source of competitive supplies for the public sector. It will also allow the Crown Suppliers to have access to a wider market. It is the Government's view that the private sector should be invited to bid for those of the Crown Suppliers' businesses which can be undertaken on a normal commercial basis. Some activities will have to remain in the public sector for security and other reasons.
"The Government intend therefore to seek further advice from a financial institution on the best method of effecting the sale of the Crown Suppliers. The business available for sale will include the provision of furniture, furnishings and other equipment on an untied basis for the public sector and the transport hire business. In evaluating offers received, I shall pay particular attention to proposals for the involvement of the staff in the success of the enterprise.
"I also intend to bring forward legislation to effect the transfer at any early opportunity".
My Lords, that concludes the Statement.
§ Lord Graham of Edmonton
My Lords, I should like first of all to thank the Minister for repeating the Statement made in another place. I should also like to advise the House that my noble friend Lord McIntosh is not dealing with the matter as in his professional consultancy business he acts for the Crown Suppliers.
The Statement is very disappointing. Even in his new manifestation, the noble Earl will be aware that noble Lords on this side of the House have for many months sought to find the answers to questions concerning the future of the Crown supply service. Perhaps I may remind the Minister of one or two of the statements he has made.
In the fourth paragraph of the Statement he said that he has had the benefit of two recent reports by consultants. He must know that in the past three years the Government have commissioned four reviews to look into the operation of the Crown Suppliers. There was the Turton Report of 1985 and the Central Unit of Purchasing Review of 1986. They acknowledged that privatisation of the Crown Suppliers, though feasible, would not be in the public interest. The Minister and his colleagues then commissioned further reports. Was it not a case of seeking a second opinion, then a third opinion, and in this case a fourth opinion, until finally they had the opinion they wanted?
Where is the public interest aspect in these matters? The Minister must be aware that the earlier reports said that the public interest ought to be taken more fully into account. Even if privatisation was on, it was not on in the public interest. The Minister told us in the Statement that he had discussed these matters with staff representatives. Is it not a fact that the Crown Suppliers employs 1,486 non-industrial staff? Can he tell us what assurances he has given the staff, 1116 particularly those who are employed in sheltered workshops and those who are the employees of small organisations? What care or concern have the Minister and his colleagues taken to ensure that not only those who can look after themselves but the very many who cannot will be taken care of?
Will the Minister also confirm that the CBI has applauded the Crown Suppliers for its priority sourcing scheme, guaranteeing business and encouraging investment in plant and machinery throughout the country in designated development areas? Can he also confirm that under the present aegis the successful Crown Suppliers not only makes a profit but exceeds the targets that are set? Will he confirm that British Telecom, British Gas, British Rail and most recently British Aerospace all choose to use the Crown Suppliers because they judge it to offer best value in terms of cost, quality and reliability of service? Does not the privatisation of the Crown Suppliers amount to nothing more than its abolition? Is it not a case of political dogma replacing a successful public enterprise?
Why does the Minister say in one of his statements that there is little doubt that these activities can be carried out more efficiently in the private sector? Is not the Government's policy that if it is inefficient it can best be done privately and if it is efficient it can be done more efficiently privately? That is a kick in the face and an insult and is resented deeply by those who carry on the Crown service.
The Statement has done nothing to prove that a public service can be profitable, innovative and successful. This service has been cannibalised and flogged off to the highest bidder, with the friends of the Government making money out of the sacrifice of the public interest. The Statement is a cynical betrayal of the employees, the taxpayer and, above all, the public interest. The Minister should feel ashamed to bring this Statement to the House. He should even now keep the Crown Suppliers in the public sector.
§ Lord Diamond
My Lords, we agree entirely with what has been said from the Opposition Front Bench to the extent that we welcome the Statement repeated by the noble Earl. I should also like to say that we welcome the arrangements made through the usual channels which permit this discussion to be taken at a very convenient moment. I hope that this will be a useful precedent for the future.
The House knows the stance of noble Lords on these Benches on privatisation. In this instance it is obviously a borderline case where certain activities are of a purely commercial nature and others are certainly not. The Minister has said nothing in the Statement to persuade, as he has the responsibility to persuade, those who have doubts about the issue that this is the right way of dealing with it. If you want to change from a public corporation to a private corporation it is the duty of those who put forward the change to justify it. There is nothing in the Statement which goes anywhere near doing that. All there is is the usual assertion that, whatever is before the Government, it can be carried out more efficiently in the private sector. That is an assertion. It is not a persuasive, logical argument. At all events we hope 1117 that when the legislation comes before the House the Government will be far better prepared to justify this move.
In the meantime, perhaps I may ask the Minister one or two questions. I too am very concerned about the two recent reports. Have they been published or are they going to be published, because they seem to go against the general tenor of what we previously understood was the best opinion with regard to a transfer of this kind? Secondly, what is the view of the Crown Suppliers? Has it been consulted? In particular, have the staff and employees been consulted? What is their view? Are they completely, totally and fully protected in any proposed transfer as to their terms of service and pension rights? The House knows that a transfer of this kind always produces difficult problems of reliability concerning future pension rights and there is nothing in the Statement about this.
Have the management employees been consulted about a possible management takeover? Is that what is meant in the Statement by,particular attention … to proposals for the involvement of the staff in the success of the enterprise"?Finally, can we be told more about the application in this case of the Government's philosophy of divide and damage towards which they are leaning more and more when it comes to the privatisation of businesses which are best run as one complete entity and which are now being divided purely because certain parts of them can be sold in the market? The part that cannot and should not be sold is the part dealing with security, military supply and so on. Can the Minister say a little more about that aspect and how it is to he protected?
The Earl of Caithness
My Lords, I am pleased that both noble Lords were able to welcome the Statement as such but not necessarily all its contents.
The noble Lord, Lord Graham of Edmonton, reminded the House that four reviews have taken place. They looked at various different aspects of the Crown Suppliers. They were not all concerned with privatisation, or the feasibility of privatisation, as he knows full well. As I said in the Statement, the summaries of the last two reports have been put in the Library. We believe that the activities of a commercial nature can be provided more efficiently in the private sector. That is entirely logical. That is what quite a lot of the Local Government Bill is all about and in which the noble Lord has taken a very active part. If it is right for local authorities, so it is right for central government.
Moreover some change to the Crown Suppliers is absolutely inevitable. What neither noble Lord seems to have grasped is that since April 1987 government departments have been untied and they are free to shop around for their suppliers. That is correct. It locates the buying decision with the source of funds. But that has affected the Crown Supplier's performance. Direct sales to departments in 1987 were 6 per cent. lower than in 1986. That is only a nine-month period, so the Crown Suppliers would have to reduce overheads, sharpen its competitive edge and widen its spread of markets to survive. The 1118 Government believe that its best chance of increasing sales in new markets lies within the greater freedom of operating in the private sector.
Any of your Lordships who have read the summary of the Dewi Jones report will realise what an emotional upheaval it would be for the Crown Suppliers if it remained in the public sector. For that reason we believe that privatisation is the best solution. The noble Lord, Lord Graham of Edmonton, did not mention anything to do with the staff. The noble Lord, Lord Diamond, did. Surely we must consider the future of the staff—
§ Lord Graham of Edmonton
My Lords, when he reads Hansard will the Minister reflect that I challenged him directly on the statement that consultation with the staff had taken place? I asked him what the reactions of the staff had been.
The Earl of Caithness
My Lords, the noble Lord talked about consultation with the staff. I shall come on to consultation with the staff, but we are concerned with the future of the staff. Where one has a declining market where departments are going out to look at suppliers other than the Crown Suppliers and the Crown Suppliers is facing a narrowing market, surely the right approach is to encourage the Crown Suppliers, which has about 8 per cent. of the global market, to go into the private sector, to compete and to get a wider market. That is the right way for the future of the staff.
Of course we have consulted the staff. There was a delay in that unfortunately one of the main negotiators on the trade union side was ill for a large part of the latter end of last year when the negotiations were due to take place. But my honourable friend the Minister concerned met the staff in December last year.
The noble Lord, Lord Graham, asked about sheltered workshops. To a large extent firms will have to compete on merit for the Crown Suppliers' business as they do now. The Government's purchasing policy, which assists sheltered workshops, small firms and firms in designated areas, now applies to all departments carrying out their own buying following the untying provisions. These conditions may be made by Government as a requirement for supply to the Government whether a company is in the private or the public sector.
The Earl of Caithness
My Lords, let me just deal with all the other points. I think that is right.
The noble Lord, Lord Diamond, raised the very important matter of pensions. Pensions and redundancy provisions would have to be comparable under the Transfer of Undertakings (Protection of Employment) Regulations. The exact nature of those arrangements will, as he rightly knows, require careful and detailed consideration.
Yes, we do not rule out the possibility of a management buy-out. The noble Lord interpreted the words in the Statement correctly. We have not divided and damaged. We have given the Crown Suppliers the opportunity to prosper.
§ 5.45 p.m.
§ Lord Boyd-Carpenter
My Lords, is my noble friend aware that despite the gloomy observations of the noble Lord, Lord Graham of Edmonton, all experience of other activities which have been privatised supports the assertion in the Statement that the functions of this body can be more efficiently performed in the private sector? Can he confirm that the necessary legislation will be introduced during the current session?
The Earl of Caithness
My Lords, my noble friend is absolutely right on his first point, and that is a major reason for the Government to proceed on this route. However, I cannot give him a firm answer at the moment on the date of the legislation but we hope that it will be in the fairly near future.
§ Lord Jenkin of Roding
My Lords, as the former Secreary of State for the Environment who established the Crown Suppliers as a separate entity in the Property Services Agency, let me say how very much I welcome the Statement that has been made today about the privatisation. Is my noble friend aware that at the time the Crown Suppliers was set up we envisaged the privatisation of that organisation? Though it has taken a year or two to come to fruition, it will be very welcome, not least by many of the senior managers in the organisation who have looked forward to it as being the way in which they could get the Treasury off their backs. I hope that my noble friend will be able to accelerate the legislation as swiftly as possible.
The Earl of Caithness
My Lords, I am grateful to my noble friend, who has considerably more experience of these matters than I have. I hope that your Lordships took on board his relevant comments about what the managers of the Crown Suppliers want.
§ Lord Graham of Edmonton
My Lords, I am grateful to the Minister for providing the opportunity to raise one or two matters. Will he explain why in the terms of reference of the last two reports consideration of the public interest aspect was not included? He will be aware that the public interest was the strongest prevailing criterion for the advice given to the Minister in the first two reports. Will he explain why it was deliberately excluded from the last two reports? In my view the public interest is very important.
Will the Minister also say more about the TUPE '81 pension transfer arrangements? The House will recall that when the ordnance factories and the dockyards were privatised the trade unions concerned were apprehensive about the impact of their transfer from one employer to another. I am not flying kites or setting hares loose here, but can the Minister tell me that the Government will consider carefully the experience gained of previous privatisations?
He also spoke rather glibly about those who presently work in sheltered workshops and who, are the recipients of employment from government 1120 agencies. The Minister professed that they would be looked after. Is he seriously saying that he intends that those who are less able to look after themselves and many others—I referred to them in my previous question—in disabled and sheltered workshops will be looked after very carefully indeed? The Minister could help them by giving assurances that in any contract clauses will be included to ensure that.
Will the Minister finally explain why he has deprived the ratepayer and the taxpayer of the measuring rod which the Crown Suppliers gives? When taxpayers have considered value for money from private sources, at least they have had up to now in their control a government supply agency and a purchasing agency. It has been a measuring rod and a monitor. That will disappear. Can the Minister tell us how he will ensure satisfaction from the new arrangement if that disappears?
The Earl of Caithness
My Lords, pensions are always a sensitive and difficult area that deserves great consideration. That will be given. Concerning sheltered workshops I can only repeat that the conditions that may be made by any government as a requirement for supplying to them can be introduced in the public or the private sector, but we realise what an important part this is for small firms and sheltered workshops. We take our commitment to them very seriously. Of course I cannot give guarantees, and I am sure that the noble Lord will realise that.
The noble Lord, Lord Graham of Edmonton, went on to deal with what might be called quality and standards. There are appropriate British standards for various requirements such as fire retardancy, and it is a matter for the departments to make specifications when buying. The Crown Suppliers is not the only department in government interested in developing safer materials. In that regard I should like to mention the DHSS supplies technical division, the DTI consumer affairs division and the Home Office where in my previous position I had a good deal to do with the fire service. Therefore there is a range of in-house departmental bodies which are capable of performing all the functions about which the noble Lord is concerned.