HL Deb 15 February 1988 vol 493 cc406-27

2.49 p.m.

Report received.

Clause 1 [Defined authorities]:

The Earl of Caithness moved Amendment No. 1: Page 2, leave out line 16.

The noble Earl said: My Lords, at the same time I shall speak to Amendments Nos. 30, 35 and 103.

Amendment No. 1 removes the Development Board for Rural Wales from the list of defined authorities in Clause 1(1) of the Bill. The development board is established to operate as a development agency with economic and social functions in rural Wales. The body is more akin to the Highlands and Islands Development Board in Scotland and the Development Commission in England than to a local authority and the other defined authorities listed in Clause 1(1) of the Bill.

My right honourable friend the Secretary of State for Wales is able to ensure that the board exposes its activities to competition and uses private contractors wherever that is possible and reasonable. We have therefore concluded that there is no need to include the board in Clause 1(1). Similarly, there is no need for the legislation governing building and maintenance direct labour organisations to apply to the board. Therefore the consequential amendment deletes it from the list of bodies in that legislation. The other amendments are consequential. I beg to move.

On Question, amendment agreed to.

Lord Carmichael of Kelvingrove moved Amendment No. 2: Page 2, line 27, leave out ("islands").

The noble Lord said: My Lords, it is perhaps to the advantage of the Committee if we deal with Amendments Nos. 2, 7 and 9 together. I see that the noble Lord, Lord Campbell of Croy, is here. This amendment is the same as the one which was tabled at Committee stage. It is to emphasise the importance we place on the fact that the islands of Scotland—the Orkneys, the Shetlands and the Western Isles—are unique. It is perhaps understandable to apply the rigours of the Bill to the larger islands. But there are many small islands, as the Minister knows very well. I recognise that he has been concerned about the way in which the Bill will work on the ground when consideration is given to some of the smaller islands. There may be difficulty, for example, in getting a contractor or in getting any competition at all. In some cases, even with the de minimis rule it may still be better to leave it to the local people who have been responsible for a very long time.

I am grateful to the Minister for having met the noble Lord, Lord Campbell of Croy, and myself to discuss this point. As the Minister well knows, we agreed to table amendments to obtain his preliminary thoughts, although we still have another chance later. We wish to have his thoughts on how this all-embracing clause will apply to the very special circumstances of the islands. I hope the Minister will be able to reassure us as he did to some extent when we had an audience with him the other day. I beg to move.

Lord Campbell of Croy

My Lords, the two amendments in my name, Amendments Nos. 7 and 9, are to be discussed at the same time as the amendment moved by the noble Lord, Lord Carmichael. I feel some responsibility for any special problems which arise for the three islands' councils, Orkney, Shetland and the Western Isles, because I brought them into existence in the Act of 1973 when I was Secretary of State. The history is that the Wheatley Royal Commission reported in October 1969 and recommended that the islands should all be part of the mainland local authorities. In the only debate which took place in the other place in early 1970, I indicated, as a member of the shadow Cabinet, that the Conservatives favoured separate local authorities for Orkney and Shetland, contrary to the proposals of the Royal Commission.

After coming to office in 1970 I confirmed, as Secretary of State, that this was our position and added the Western Isles as a third group. The amendments in my name apply only to the three islands' councils. There are no comparable local authorities in the United Kingdom. Each is a single tier of local government possessing most of the functions of local government. Having heard their views at Committee stage, I realise that the Government are not prepared to exempt the three islands' councils from competitive tendering under Part I of the Bill.

I understand that the Government will find it too much to accept Amendment No. 2 which has just been moved. In the circumstances of isolated islands with very small populations, ridiculous situations can arise unless there is some flexibility in the application of Part I. I am sure that the Government will also wish to avoid excessive and unnecessary expenditure and the creation of bureaucracies.

In Committee on 26th January my noble friend Lord Stodart of Leaston, who chaired a committee of investigation five years after the reorganisation of local government, commented that the efficiency of the three islands' councils was good. Without being immodest about decisions I took in 1970 and 1971, the creation of the three councils has been widely regarded in Scotland as a success. In carrying out the duties concerning the services in Part I of the Bill—for example, refuse collection, street cleaning and school meals—the councils are pragmatic in their approach. They arrange what is possible. In some remote islands there is not much option. They arrange what in their view is most cost-effective. The result is that at present some services are performed by the islands' own workforces and others by contractors.

My amendments are similar to two which were discussed at Committee stage. One deals with the application of the de minimis provision which, according to the consultative paper, at present is contemplated as £100,000. The other amendment deals with the situation where clearly the cost of embarking on the tendering procedure is unlikely to be worth the benefits that can be achieved. I described these amendments at Committee stage. I also pointed out the geographical problems. These are very different to those of a town or city, or rural area on the mainland. The equivalent of moving from one neighbourhood to another in a town, meaning perhaps a three-minute drive by motor car, in these island areas is a sea journey of a mile or several miles in unhelpful weather, possibly a gale.

At the Committee stage, my noble friend Lord Dundee invited the noble Lord, Lord Carmichael, and myself to a meeting between the two stages and following the consultation stage. When we were discussing this proposal on 26th January the local authorities and others still had until 31st January in which to submit their views. I understand from the meeting which we had that the Government consider that the necessary flexibility can be provided under Clause 15(6) of the Bill. That was not mentioned in the earlier debate.

I shall read that subsection because its wording is important: Regulations under any of sections 4 to 8 above may make different provision for different cases or descriptions of case (whether for different areas, different defined authorities or kinds of authority, different defined activities, different kinds of work falling within same activity, or otherwise.". That provides a very wide degree of discretion for the Government if they are prepared to use it.

I shall listen very carefully to my noble friend replying to this debate. I know that the three councils themselves would prefer something more definite and to have it written into the primary legislation in this Bill. Nonetheless, if the Government can give a reassurance that they will use the subsection which I have just read out, then I believe that the two problems which I have pinpointed in my two amendments can be dealt with.

Timing is important, and I hope the Government can give a reassurance on this. I understand that the three councils should be able to consider situations in their areas and put special cases to the Scottish Office well before the dates when the Bill requires the first round of tendering. Your Lordships will recall that different services are to be phased in at six-monthly intervals. Such special cases can then be considered and regulations made by the Government on the matters which arise in my amendments. I refer, first, to the grouping of operations for the application of the de minimis criterion; and, secondly, to the inordinate cost of the tendering process in relation to likely benefits. In general the Government can, it seems, make regulations to avoid island anomalies or ridiculous expenditure, and I look forward to hearing what their intentions are. I beg to move.

3 p.m.

Baroness Carnegy of Lour

My Lords, before my noble friend replies. I should like to back up what my noble friend Lord Campbell of Croy has just said. At Committee stage I explained why I feel that the total exemption of the islands would be a great mistake; and I hope that the House will not accept Amendment No. 1. I gave reasons at that time—and I shall not repeat them—as to why I thought the benefit of tendering should be available to people in the islands, because although up to a point tendering has been tested in certain places in the islands, it has not been fully tested as yet. Under the Bill that could be done.

I do not know whether the Government are of a mind to accept my noble friend's amendments. If they are not, I hope that perhaps they have listened carefully to the alternative type of flexibility that he has described. In the islands it will only be possible to discover by trying it out what tendering can do for people in remoter areas. If in some places it is found possible to tender in new ways, to break up the areas for tendering and to use procedures that are new and work, that may be helpful to other parts of the islands. We do not want it ruled out completely. At the same time if tendering costs far more than is saved then it is a rather idiotic line of approach.

It is a matter for exploration and for trying out what is possible. The more I have thought about it and the more I have talked to people in small communities and in smaller areas, the more I have come to believe that there are ways forward under the Bill which will be helpful in remote areas. At the same time, flexibility is necessary and it is absolutely essential that it is made clear to councils how they should proceed once the Bill becomes law.

The Minister of State, Scottish Office (Lord Sanderson of Bowden)

My Lords, I have listened with great care to the points which my noble friends Lord Campbell of Croy, with his special knowledge of the islands, and Lady Carnegy of Lour and the noble Lord, Lord Carmichael of Kelvingrove, have made on the application of the provisions of Part I of the Bill to the three Scottish island authorities.

Let me say at the outset that I am absolutely convinced of the need to include Scottish island authorities in the scope of the Bill. Local authorities, including the island authorities, are already required to go out to competitive tender for a substantial proportion of their building and maintenance work. There is no doubt that the competition requirements under the 1980 Act have sharpened the cost effectiveness of in-house provision with the introduction by local authorities of improved management and organisational systems. Significantly we are not aware of any difficulties experienced by the island authorities in their operation of the competitive regime under that Act, and this is legislation which has been in operation now for more than five years.

The island authorities have responded quite well to the present competition requirements and indeed have shown that private contractors can provide a satisfactory service in these remote areas. Orkney Islands Council, for example, uses private contractors in the provision of a refuse collection service for six of the 11 islands on which it provides a service, and the Western Isles Islands Council has put its roads maintenance work out to private contractors. I was pleased to hear my noble friend Lord Campbell of Croy say that he accepted the principle that the islands councils should not be excluded from the Bill.

Both my noble friend and the noble Lord, Lord Carmichael of Kelvingrove, are concerned about the implementation of the Bill in these areas. They have asked that, when the competition provisions are implemented, account should be taken of the special circumstances of the islands. We had that need very much in mind when drawing up the Bill. Clause 6(3) of the Bill, taken together with Clause 15(6), which has already been referred to by my noble friend Lord Campbell, gives the Secretary of State for Scotland power to make regulations applying competition to such authorities and with such exceptions as he may determine. The power is therefore already provided which would enable the Secretary of State to structure any regulations he makes in an extremely flexible way. I can assure your Lordships that it would be possible using these powers for the Secretary of State for Scotland to achieve the objectives underlying my noble friend's amendments.

We now have responses from the three island councils to the Scottish consultation paper on implementation of the competition provisions of the Bill. We are looking closely at these responses before coming to a decision about the application of the competitive regime to these authorities. So that we know precisely what the circumstances of the island councils are, I have asked the Scottish Development Department to meet with the three island authorities to discuss with them fully the precise circumstances of the operation of their services and the particular difficulties they anticipate should these services be subject to the compulsory tendering process. I can assure your Lordships that the specific points raised today will be carefully discussed, along with the points raised with me last week by the noble Lord, Lord Carmichael of Kelvingrove, and my noble friend Lord Campbell. When, in the light of these discussions, my right honourable and learned friend comes to make regulations on implementation, he will, of course, wish to keep in mind the objective of these provisions in the Bill.

The Government's firm view is that opening up services to competition can bring substantial savings as well as improvements in the standard of service. Competition should not, however, be introduced regardless of the circumstances. When the costs of complying with the Bill's provisions look like offsetting the potential competitive gains, there is a case for exemption. This is the purpose of our proposal for a de minimis level to exempt activities that are carried out on a very small scale. While I cannot anticipate the decisions of my right honourable and learned friend, we shall look carefully at the application of the aim underlying the de minimis provision to the islands.

The island councils themselves will have flexibility in the application of the Bill's provisions to their areas. They will need to adjust the specifications of the work to be done to the services they wish to provide on both the large and small islands in their areas. They will need to be satisfied that potential contractors can provide a satisfactory service. There is a further safeguard for the island authorities. If, after seeking tenders, they take the view that a potential contractor offering the lowest price does not have the capacity to provide the service, they are not required to accept that tender.

The action which I have described will be taken before the regulations are made. It is difficult to be certain about the effects of the Bill in areas such as the islands. For this reason and to measure the impact of the competition provision of the Bill in Scotland, the Scottish Office Central Research Unit is to undertake a research project to monitor and evaluate, for Scotland only, the effects of the new competitive regime on those local authority activities listed in the Bill.

To help isolate the effects of legislation from other factors influencing the outcome, it will be necessary to obtain measures before and after the Bill is implemented and the phasing of the introduction of increased competition around which the evaluation would be framed means that the results of the work will also be phased in their delivery. First results from the early experience of increased competition would be available for those services in authorities which will be required to subject their services to competition from April 1989.

The noble Lord, Lord Carmichael of Kelvingrove, mentioned the small islands and one person doing many jobs. It is true that on some of the more remote islands one contractor performs a number of services for the local authority; for example, a contractor could be undertaking both road maintenance work and refuse collection. To maintain such an arrangement it would merely be a matter of the authority drawing up the necessary contract documentation.

Following this debate, it is clear that we in the Scottish Office will pay particular attention to the decision that we have arrived at. We shall study most especially the effect of this legislation on the islands.

In conclusion, I should like to reinforce the Government's commitment to establishing, through detailed discussion with the island authorities, the practical difficulties and special circumstances that they consider they will encounter when faced with the Bill's competition requirements. It will then be a matter for the Secretary of State, exercising the extremely flexible regulation-making powers available to him. It will also be possible, through the research project to which I have already referred, to monitor the effects of the competitive process on the islands council and to respond thereto where it is considered necessary.

My noble friend Lord Campbell of Croy has asked that we give high priority to an examination of the special circumstances faced by the island authorities, and the noble Lord, Lord Carmichael of Kelvingrove, asked that we recognise the uniqueness of these authorities. I hope that what I have said makes clear the Government's commitment to a careful examination of the island authorities' circumstances. I hope that in the light of what I have said noble Lords will consider withdrawing their amendments.

Lord Campbell of Croy

My Lords, before my noble friend sits down, there is one point to which he may not have replied and that was in regard to timing. I listened carefully to his last few sentences. Is it possible for him to indicate that special cases could be considered before the tendering process starts for the first service, which is expected at about the end of 1989? It would be of great assistance to the islands councils if they knew that they could put forward cases and that they would be considered and that regulations could be made before the first tendering starts.

Baroness Phillips

My Lords, before the Minister sits down and before my noble friend replies to the amendment, I should like to ask him at the outset whether we are going to hear every time and at great length the argument that competitive tendering is accompanied by increased efficiency. In my experience, competitive tendering is certainly accompanied by a reduction in costs, because the labour is not paid as much as the people who previously worked for the authority. I challenge that there is increased efficiency. Before we hear any more of this from the Government—we will get it on other amendments—I ask them to bring supporting evidence to show that when there has been a change of system they have noted increased efficiency.

Lord Sanderson of Bowden

My Lords, with permission, I shall reply to the two points that have been raised. First, in relation to the remarks of my noble friend Lord Campbell of Croy about phasing in, we have a programme for that. We have to consult quickly with the island authorities before we reach the period of tendering. We hope that we shall learn the immediate responses quickly and that we shall be able to work within the framework of the phasing to obtain the right answers on each of the denominated subjects for tender.

As regards the much wider question raised by the noble Baroness, there is no doubt about the enormous savings that can be achieved by exposing a wide range of services to competition. That fact is beyond doubt. The noble Baroness asked whether competition was or was not efficient. In my experience outside the House and before I came here, I have never had any doubt that competition is a spur to efficiency.

3.15 p.m.

Lord Carmichael of Kelvingrove

My Lords, I gain the impression from what the Minister said that he is slowly beginning to realise that there is not a great deal of logic in including some of the islands, because he is giving so many assurances that there will be examination and consultations with the islands before anything is done. He said that the islands already use private contractors and that that makes one sure that there is no ideological objection in the islands to using such contractors.

My noble friend Lady Phillips spoke about efficiency. We have never managed to work out exactly what we mean by efficiency. There has been no study. The Minister could ask the SDD to undertake to work out what the total efficiency is; that is, including the service to the people and how the people react to it, as well as any savings that are made.

The Minister spoke about enormous savings. Whatever else he was talking about, he was not talking about the islands. He was talking about the mainland, whereas the amendment talks about the islands. On the smaller outer isles there is little possibility of benefiting from any economies of scale. Even on the main island of Orkney the volume of some services is too small to achieve any noticeable economies of scale. The services which will be subject to competition do not involve high cost and consequently the thought of making big savings is ludicrous.

On the smaller outer isles, the services are organised to ensure that there is a minimum of management and supervisory input. The way that I read the Bill or the way that I think local authorities——

Lord Harmar-Nicholls

My Lords, are we not going against the agreement that we made on a previous occasion when we interpreted our Standing Orders and decided that on Report, after the Minister had replied, there would be no more detailed debate? If we are going to have that, we shall never get through the Bill. I think that we ought to have some self-discipline.

Lord Carmichael of Kelvingrove

My Lords, I do not know whether the noble Lord was in the Chamber when I moved the amendment, but I was most economical with time. I moved it in about two minutes so that we could deal with the matter. We had a discussion with the Minister which was very satisfactory. The noble Lord, Lord Campbell of Croy, and I wanted to get on the record what the Minister said. I think that is fair enough. Now that it is on the record, I am entitled in view of what I said to ask the Minister to expand a little more on what he will consider when he makes his regulations.

Lord Harmar-Nicholls

My Lords, at the beginning of the Report stage can we know where we stand? There should be no question of saying anything which would cause the Minister to reply again. Advice was taken and the agreement (accepted on all sides) was that on Report after the Minister had spoken there should be no detailed debate.

Lord Underhill

My Lords, surely the mover of an amendment must be given the right to reply. That is a democratic right which every noble Lord accepts.

Lord Carmichael of Kelvingrove

My Lords, perhaps I may briefly expand upon that point. The Minister's reply was substantially what he had previously told us. However, if he had not been such an honourable Member of this place, his reply today could have been quite different. Surely I should then be entitled, as I think I am on a couple of points, to emphasise the importance of the amendment. One of the important points I made was that the islands already use private contractors. Therefore they have no ideological objection to competitive tendering. Indeed, the Minister made a point of saying that such authorities sent much of their work out for tender. I thought that that reflected on his earlier insistence that there must be tendering for all services unless they fall into one of the many categories mentioned.

I am legitimately trying to extend the categories at which the Minister will be looking. That is why I gave the example of some of the work that is done on the smaller islands off the mainland of Orkney. I am sure that the Minister has gained considerably from the general discussion that the House has had on the subject.

I shall look at what he has said very carefully and get advice on it. I do not want to press the matter any further at this point. Unlike the other place, we have another stage—a Third Reading—when we can still discuss things. I beg leave to withdraw this amendment.

Amendment, by leave, withdrawn.

Clause 2 [Defined activities]:

Lord McIntosh of Haringey moved Amendment No. 3: Page 2, line 37, at end insert ("which shall be implemented in relation to any defined activity specified in this section in accordance with the need for the orderly and efficient provision of services to meet the requirements of the community.").

The noble Lord said: My Lords, in moving this amendment, I should like to speak also to Amendment No. 12. It will be impossible for me to avoid referring to some of the more detailed amendments which are down in the names of myself, my noble friends and the noble Lord, Lord Ross of Newport, for debate this afternoon.

The reason why the amendment has been put forward in this form now is that we are reluctant to detain the House with a series of detailed exceptions and alterations to the structure of competitive tendering which is proposed by the Bill. Perhaps we can find some moderate and reasonable way of putting into the hands of the Secretary of State rather more flexibility in dealing with local authorities and local authority services than he has given himself so far in the Bill as drafted. I must emphasise that nothing in this amendment would force the Secretary of State to do anything other than that which he, in the full maturity of his judgment, would wish to do. There is no compulsion on the Secretary of State to make exemptions either to the timetable or to the content of competitive tendering, or indeed to any of the structure of the competitive tendering work.

What these two amendments do is give the Secretary of State the power which I should have thought every reasonable Secretary of State would wish to have: to listen to local authorities, to the particular circumstances which arise in many different parts of the country, and not just those in the Scottish islands. There are, after all, variations in other parts of the country between one region and another and between one authority and another. The amendment would give those differences and any special problems which may arise due effect in the way in which the Secretary of State implements the provisions of the legislation.

Let me deal first of all with the issue of timing. We have had from the department a most elaborate timetable which sets out a matrix of services and of authorities deliberately geographically scattered, with the intention of ensuring that different local authorities put out to tender different services at different times in the forthcoming months. One of the most immediate effects of that is that there is no possibility of effective pooling of services between adjacent local authorities. I do not know whether the Government have taken that into account; but I should have thought that there was no ideological objection to such pooling. But since neighbouring authorities will be putting different services out to tender at the same time and therefore the same services out to tender at different times, there will not be the opportunity for that degree of economy. But the situation is worse than that. The actual dates which are proposed for tendering are quite illogical and irrational. In most cases the date is 1st October. That does not correspond with local authority financial years, and does not even correspond effectively with the school year for the education services. All schools will have started before 1st October, and clearly to change a tender for cleaning or maintenance work in schools within the first few weeks of a school year is totally irrational and could be extremely damaging.

However, there are exceptions. There are dates such as 1st April (which is in the middle of the school year) and which is equally irrational. There is no possibility of local authorities saying to the Secretary of State, "Of course it is your decision; of course we accept the basic provisions of the Bill. But is there any reason why we should not set a starting date which suits the service which we provide and which after all we know rather more about than you do? Why should we not set starting dates which meet the objectives of the Bill and more adequately meet the demands of local services and local residents?" That is the first issue raised by the amendments; the implementation dates and the timings.

The second question, perhaps of even greater importance, is the limited exception of a particular area of work. This was raised by my noble friends at Committee stage in a rather different form and it was brought back on the basis that the original amendments could have been thought to be more threatening to the Government's intentions than these amendments. I suggest to the House that they are in no way threatening to the Government's intentions. There is nothing here which need give any reasonable Secretary of State any pause or hesitation, nor feeling that the Bill is being damaged in any way. To retain a certain proportion of a service, perhaps 10 per cent. (it could on some occasions be more) is not a serious departure from the intention of the Bill, and it has precedents and very clear advantages.

The particular precedent to which I wish to refer is the provision under the Local Government, Planning and Land Act 1980 for building construction and highway work. It was accepted by this Government in that Act that it is appropriate for a local authority to retain one part of these services for direct labour, for internal implementation, and to put the rest out to tender. So far as I know, this has not caused any difficulty. It has not been suggested by the Government that it is causing any difficulties and it seems to us that the precedent is a good reason why this very modest part of the amendment should be welcomed by the Government.

There are specific reasons, in addition to precedents, why 100 per cent. of a service is not necessarily the appropriate amount to put out. That was raised in more detail on specific services in Committee. In many cases, a local authority needs to maintain a certain mimimum workforce for disaster purposes for civil emergencies—I suppose even for more serious emergencies in war time. There are many occasions when it is easier and more effective to call out an employed workforce than to get hold of a contractor and persuade him to call out his workforce. For the safety of our people, I suggest that this power of greater flexibility for the Secretary of State is worth having.

Then there is the question which unfortunately arises—and it is not really any good the Government denying that it arises—where contractors are in default of their obligations. There have been examples of that in many councils, Conservative as well as others. It is no good saying that when a contractor defaults the contract can be put out to tender again. In the meantime, the work is not being done, and unless the local authority has some sort of reserve labour force available to do the work, then there will be a gap in the provision of services which cannot be to the benefit of local people and cannot be financially or operationally justifiable by local authorities.

Another consideration which should be taken into account is the need to avoid tendering cartels. All too often that happens in the building trade, the electrical trade and in trades for many local authority and other services. We find that tenderers feel it is more convenient to get together and make sure that nobody is undercutting than to put forward genuine competitive tendering. If there is the possibility of some small part of the tender remaining under local authority control, the local authority has direct understanding of the costs of the service and is enabled to monitor whether the costs as declared by the tenderer and as charged by him are actually reasonable. For all those reasons, the limited exception of a particular area of work is beneficial to the operation of local authority services without in any way being damaging to the principle of the Bill.

Finally, there is the question of the effective implementation of the provisions of the legislation in relation to new or existing statutory responsibilities of defined authorities. In another place two major Bills are now in Committee, both of which affect in great detail the operations of local authority services. The Education Reform Bill will, if it pursues its course unchecked and without substantial amendment, mean that there will be a whole new financial relationship between schools, governing bodies and the education authorities. How can an education authority on the one hand be deeply involved in decentralising the financial management of its schools and on the other hand try to abide by a rigid timetable of competitive tendering as proposed in this Bill? That just does not make sense.

We already know from the Scottish experience what will happen if the Local Government Finance Bill pursues its course unchecked and without substantial amendment. Scottish local authorities are already finding that they have to put very substantial effort into planning for the community charge. They know very well that they are having to set up totally new systems for registering individuals and for checking on eligibility for the community charge. This is having a great effect not only on their relationships with their electors but also on the financial background to the services they are providing. That also is in deep conflict with the very precise timetables which are proposed in this Bill.

If these three major pieces of legislation are to go through at the same time, local authorities will have an intolerable burden of change and restriction put upon them all at very much the same time. I suggest that the provisions of flexibility for the Secretary of State to adapt to local conditions, to listen to local authorities and to listen to the people who are actually there and who know about the services can only be of benefit. They cannot be threatening to the Government. They cannot take anything away from the intention behind the Bill. They do not remove even the element of compulsion which we find so objectionable but they do seriously improve the possibility of this Bill being implemented without damage to local services. I beg to move.

3.30 p.m.

Lord Ross of Newport

My Lords, I rise with some diffidence as this is my first attempt to speak on a Bill on Report. However I should like very much to follow the noble Lord, Lord McIntosh of Haringey, whose experience in local government as a former member of the late lamented GLC is rather greater than mine as a former leader of the smallest county council in England, on the Isle of Wight. But from my experience as leader of that council in the years 1973, 1974, 1975 and later in 1981 to 1983 I know of the problems that we are likely to face with this legislation.

During the first period of time that I mentioned it was extremely difficult to get outside contractors to come to the Isle of Wight and to quote for many tasks. There was certainly strong evidence of collaboration in the tenders that were put in. We went out of our way to encourage contractors to come from the mainland to bid for major construction jobs on the island. Some of them who came wished that they never had as they went bust in the process.

I do not deny that the position today is rather different. There is, thank goodness, rather more competition in my part of the world than there was 15 years ago. I welcome that situation and long may it continue. Nevertheless it is a problem. In this amendment we are asking for flexibility and understanding on the part of the Government of the particular conditions that apply. I am sure that in other parts of the country, possibly in Wales where there are smaller authorities, these things apply just as much as they do with my authority.

It costs contractors about 8 per cent. of the overall cost of operations to bring across materials such as bricks and gravel to the Isle of Wight. We have a total monopoly in the supply of gravel, as there is only one supplier. That fact adds to the cost of operations there. Therefore there must be an understanding when a local authority is trying to meet the requirements which undoubtedly will fall upon it under this Bill. Our county architect is the man at present in charge of trying to bring this legislation into effect.

The numbers in our direct labour organisations are now as low as they could possibly be. On road operations the figure is as low as 70 and on work maintenance, under 40. It would be wrong if we allowed that position to get worse. We must try to keep the DLO going. Certainly 15 years ago it was essential that it was there to compete with the only other main contractor, who was having a field day on his own. I question whether that day may well not return. Therefore it is important that local authorities are able to maintain their DLOs even if only at a fairly low level.

I support very much of what has been said. I do not know where we would have been without our DLOs during the gales of last autumn. They did a magnificent job. If local authorities had had to try to enlist private contractors who might have been committed elsewhere, with all their vehicles in the wrong places, I do not know what would have happened. Who would have removed trees blocking the roads, for instance? That is why it is so important to retain the DLOs. They did a magnificent job at the time.

Emergency provisions were mentioned by the noble Lord, Lord McIntosh of Haringey. I support absolutely what he said on that. Here we are encouraging local authorities to put their act in order for emergencies, yet that may be in jeopardy if there is too much pressure on them to allow for flexibility. That is the plea we are making, and I support it entirely.

Baroness Blatch

My Lords, the amendments have been described as giving the Secretary of State powers to listen. I suggest that he may be listening for a very long time and local authorities may be talking for a very long time. The phrasing suggested in the complicated document—the matrix that was referred to by the noble Lord, Lord McIntosh of Haringey—is to bring about an ordered implementation of these proposals. Therefore no local authority in the country is required to do more than put out one of the suggested headings to competitive tendering in the course of a little over a year from now.

Some local authorities will already have done that. The more enlightened will have done. The possibility is that, if one considers all six headings, there will be the odd local authority that has no work left to do. Others which are pre-empting this legislation are already busy preparing the way for competitive tendering. Consequently it will not come as a culture shock to those authorities. We really cannot abandon this timetable. I do not at all believe that it is unachievable.

Fears have been expressed during the debate both by the noble Lords, Lord McIntosh of Haringey and Lord Ross of Newport, about the difficulties of keeping a reserve labour force and the effect that that might have on DLOs. If the DLOs are so magnificent—and certainly they are in many parts of the country; in my own authority the transportation department wins contracts against the private sector time and time again, and long may it continue—they will win the work. The compulsion in this legislation lies not in compelling local authorities to put their work out to contract but to test their services against an open market. If their services are better, more cost-effective and more operationally effective than the private sector, they will continue to win the work and to perform it.

As regards tendering cartels, again if the service that an authority receives from an outside contractor is more cost-effective and more operationally effective, that contractor will win the work. I wish to deal in a moment with the point that the noble Baroness, Lady Phillips, made about quality as well as cost. I agree that we should do what we can to eliminate the cartel aspect of tendering but if the service that is provided is more cost-effective and more operationally effective the authority concerned benefits and also the people for whom the service is provided.

On the question of quality I said on Second Reading and again in Committee that quality control is probably the area of skill where local authorities have most to learn. The authority that has done more than any other in the whole country in that respect is Wandsworth. Time and time again at seminar after seminar the amount of work that local authorities have to put in in knowing what services are being provided in their area at present is emphasised. I certainly know this from my experience in Cambridgeshire.

I am sorry to say that there is a lamentable lack of knowledge on the part of local authorities about exactly what is being done and at what cost. That will have to be known. There must also be hard work done in preparing proper specifications. The specifications must include the work to be done and the standard at which it must be done. The greatest skill of all lies in managing monetary quality and contractors. Those will be new skills for local authorities. I believe they are skills that can be learned.

I have always been very depressed by how ready people are to criticise, evaluate and comment on quality when private companies are doing the work and the decided reluctance on the part of the same people to comment on quality when the work is being done by direct labour. That must change. The greatest significance and benefit of this legislation, which I absolutely support, is that the issue will cease to be a political football as it has been in local authorities in the past. We will no longer have situations in which Labour-controlled authorities kick out any kind of private contractor and when a Conservative authority then comes in and says that services will go out to competitive tendering. All local authorities will be required, irrespective of their politics, to test their services against the private contractor.

Another matter I find depressing—I have no doubt that this theme will run through much of what we shall talk about today and on Tuesday and Thursday—is the suspicion that noble Lords opposite have of the private sector and the almost total and unreserved confidence they have in direct labour. I am sorry to say that. However, it concerns what has been said. I believe that it is important to note that there are good, bad and indifferent practices both within local authority control and in the private sector.

The important point is that local authorities should know what they want from services and make sure that they get it. If, in the process, they free up money and resources, then it is important that those resources should benefit the service, if that is the decision of the local authority. That was the case in Cambridgeshire when £3 to £4 million saved on one contract went directly into books, equipment and teachers in the classroom. I think that if the electorate had to choose where the money should go, they would opt to use it on the chalkface of a service, whether that service was education, caring for the elderly or caring for the young.

I do not believe that the legislation is a threat to DLOs. I think it is almost the reverse. The good, sound DLOs will be as competitive as the sharpest of the service providers in the private sector. The statutory responsibility for making plans for emergency cover will be there. I take the illustration used by the noble Lord, Lord Ross of Newport, concerning emergency cover. If the local authority keeps a reserve cleaning force which is working perhaps in a quarter of the authority, and if there is a sudden emergency in the other threequarters, that labour force cannot properly cover for the emergency. The authority will have to bring in other labour. The idea of having large banks of very highly paid staff sitting around waiting for an emergency simply is not true.

Lord Ross of Newport

With the greatest respect to the noble Baroness, I was pointing out that the direct labour organisations in my particular part of the country are at such a low ebb that they could disappear altogether.

Baroness Blatch

I do not believe that that is the case. I think we have to consider the jobs which are to be done and make sure that the mechanisms are there to see that the jobs are done, whether that is an emergency or whether it is not. Certainly our statutory obligations must be addressed.

Baroness Seear

Is the noble Baroness saying that my noble friend Lord Ross is telling an untruth? He is very experienced in local government and a former Member of Parliament. I assure your Lordships that what he says will be accurate.

3.45 p.m.

Baroness Blatch

I was not suggesting that the noble Lord was telling untruths. I was suggesting that he has misinterpreted the legislation and the effect it will have. As regards his competence in local government, he has been the local councillor for a number of members of my own family. I know of his competence in the local authority on the Isle of Wight. I meant to cast no aspersions whatsoever on that competence.

I hope that I do not have to return to this matter too many times today. However, I believe that noble Lords opposite will continue to come back to their blanket criticism and will say that the only people who can provide good services are those in the direct labour forces of local authorities. The compulsion is that we should subject our services to the market. If we get that operationally and financially right, the benefits will go to the people for whom we provide services and to those who pay for them. I do not believe that we should be inhibited in seeing the legislation on its way.

As for phasing, which is the main concern of the amendment, that requires each local authority to be mindful of producing one service in a year's time. I do not believe that that is beyond the wit of any local authority.

As regards the grouping of local authorities, there is nothing in the legislation which prevents local authorities from actually going out on all six of the headings as soon as they wish. The phasing allows authorities to do that in a more orderly and measured form. However, if a neighbouring local authority wishes to go in concert with another local authority, there is nothing in the legislation to prevent that.

Baroness Phillips

My Lords, before we return to Scotland, which is the subject that we should be discussing——

Noble Lords


Baroness Phillips

Have we passed that? Oh, good! The arguments are the same. Perhaps I may say to the noble Baroness that no one has suggested that there should be no tendering. My comment was a different one. Each time the Government mention tendering, they say that it brings greater efficiency. That is where I challenge the Government.

I have the misfortune to have an office in the borough of Westminster. The authority is hardly a socialist authority. It has introduced private contracting for street cleaning. For some curious reason, those street cleaners are followed by street cleaners employed by the borough. Therefore, all the people who have offices must pay twice; first, they pay through their rates and, secondly, they pay individually. They have no option. As an exercise in cost-effectiveness, I find that an extraordinary illustration of the system we are discussing.

Lord McCarthy

My Lords, I support the amendment. We have a problem in that I understand from the noble Lord, Lord Harmar-Nicholls, that under our rules of procedure we cannot say much after hearing the Minister. Since we do not know what arguments the Minister will be using, we must attempt to anticipate his arguments.

After reading the amendment, it is difficult to anticipate what objections there can be. It is an extremely reasonable amendment. I cannot imagine that the Minister will say that he actually wishes local authorities to start on inconvenient dates which are also inefficient and that that is the policy of the Government. I cannot imagine that the Minister will say that he wishes to deprive authorities of small and efficient emergency services. I believe that that is the answer to the points raised by the noble Baroness, Lady Blatch. The provisions in the amendment are extremely modest. I cannot imagine that the Government wish to say that a local authority should not be in a position to discharge its obligations.

The Government might say, as they frequently do, that the amendment is unnecessary because that is what they will do in any case. The answer to that point has always been: "If you are so certain of that, why can you not accept the amendment and reassure us?". Surely, the critical aspect of Amendment No. 12 is not that it seeks to control the Secretary of State but that it merely says that he should exercise his powers under the various subsections, have regard to the ordinary and efficient provision of services and give due consideration to any representations received. If he gives due consideration and decides that the case is not made out under paragraphs (a), (b) or (c), he can state his conclusion. I cannot see what the Minister can possibly say against the amendment.

The Earl of Caithness

My Lords, our discussion gives me a nice opportunity to welcome the noble Lord, Lord Ross of Newport. We look forward to hearing him take part. I hope that we may persuade him, before we conclude the Report stage, that he is sitting on the wrong side of the House and that the charges concerning errors of judgment about the Bill are totally unfounded.

I have little quarrel with the sentiments lying behind Amendment No. 3 although I think value for money and the ratepayer deserved a mention alongside "the requirements of the community". The Government will certainly take account of the need for the orderly and efficient provision of services in implementing Part I of the Bill. As I have argued in previous discussions of the Bill, the best way of securing the efficient provision of services is by exposing those services to competition.

But there is no need to add the words in Amendment No. 3 in order to achieve this. My right honourable friend the Secretary of State is not only a reasonable man, but in case there were any doubts on that score he is obliged to behave reasonably. If he did not take account of the kind of factors mentioned in the amendment he would be open to challenge.

Amendment No. 12, to which the noble Lord also spoke, seeks to impose much the same kind of duty as Amendment No. 3, and also requires the Secretary of State to give due consideration to representations from defined authorities relating in essence to the case for local variations in implementation. We discussed this topic at some length in Committee.

As I said then, the three departments concerned issued separate consultation papers on implementation last November, with a closing date for comments of 31st January. The objective of our proposals is to expose services to competition as quickly as possible but at a pace with which authorities and contractors can cope. We have received a large number of comments on the paper and where the authors have agreed those comments will be placed in the Library. We are now considering those comments, and will announce firm proposals as soon as possible.

A common theme in many of the comments was that authorities should be given a degree of flexibility to match implementation to local needs. We are considering whether there are ways in which we could achieve this without opening up scope for abuse. The risk is that if we allow flexibility some groups of authorities will exploit that and put the same activity out to competition at the same time, thereby swamping contractors.

A number of authorities have also suggested that we should exempt a certain amount of work from competition to enable them to cope with particular local needs. As your Lordships will know, the approach that we have adopted so far is that if there is a case for exemption of a particular part of an activity, that should be provided either on the face of the Bill or in regulations and orders rather than by providing that every authority can carry out a proportion of each activity competition-free. The proposal in our consultation paper was therefore that authorities would be obliged to expose to competition all the work falling within each activity. I believe that proposal was the right one but we will of course be considering the comments made, including those made by your Lordships, before coming to a final decision.

The noble Lord, Lord McCarthy, said that he was perplexed to work out how I should reply to these amendments. Only an Oxford don who had not read the discussion at Committee stage would come up with such a comment because I did go into the matter in some detail at that earlier stage. I am sure that your Lordships will agree that consistency is a very good motto when dealing with this point.

The noble Lord, Lord McIntosh of Haringey, asked a number of questions some of which pertain to future amendments. Perhaps I could leave detailed comment until those amendments come up for discussion rather than have a debate on Part I. I should like to say a word about pooling. It is not true that the dates we have proposed are the last dates by which authorities would have to expose services to competition. Neighbouring authorities could agree a joint date if they so wished, providing that it was before the date set for either of them.

I very much support my noble friend Lady Blatch concerning the efficiency, or lack of it, of direct labour organisations. I think that she made a very valid point which is entirely relevant to our discussions.

The noble Baroness, Lady Phillips, again raised a point she made on an earlier amendment about efficiency. The Government's view on the efficiency of competition received strong backing in an Audit Commission occasional paper last year which concluded that lack of sufficient effective competition was costing authorities some £510 million a year on the three services it examined: house maintenance, refuse collection and vehicle maintenance. It also ventured the opinion that on average DLOs are more expensive to ratepayers than are private suppliers.

Therefore, the savings that can be made are not just on the reduction of wages, as alleged by the noble Baroness. Important recent research shows that most savings brought about by competition and contracting-out do not stem from lower wages. Papers by the Institute of Fiscal Studies concluded that over three-quarters of the savings resulted not from lower wages and fringe benefits but from improvements in technical efficiency; that is to say, in the physical productivity of men and vehicles.

Finally, I turn to the point raised by the noble Lord, Lord McIntosh of Haringey, about other statutory responsibilities resulting from other Bills now in another place which your Lordships will shortly be discussing. Of course when that legislation comes before us it will have to take account of the effects of this Bill as is the case with all subsequent legislation. For example, following the break-up of ILEA, when the inner London boroughs become educational authorities, the legislation will have to give the boroughs time to enable any school meal services that they take over to be exposed to competition.

In conclusion, we believe that the flexibility provided in the Bill covers the main thrust of Amendment No. 3. I suggest that the right thing to do is to support the Government on this point.

Lord Lloyd of Kilgerran

My Lords, before the Minister sits down perhaps I may ask him a question arising out of his strong support for the speech of the noble Baroness, Lady Blatch. He said that her speech was entirely relevant to the discussion. The noble Baroness referred to the desirability of eliminating cartels. I understood from her speech, with her great experience of Cambridgeshire——

Lord Harmar-Nicholls

My Lords, I think that the noble Lord's remarks are in breach of our decision as to how we conduct the Report stage. Last week, when I adopted a similar approach, thinking that it was right, I was told in no uncertain terms by all sides of the Chamber—and I understand that it will be reinforced by the Procedure Committee—that the Bill having had a Second Reading and a Committee stage, at the Report stage when the Minister has replied that should end the debate; otherwise the discussions could go on forever.

Lord Lloyd of Kilgerran

My Lords, perhaps I may have leave to speak. Having regard to the speech of the noble Lord, Lord Harmar-Nicholls, for whom I have great respect, I was present on that occasion, and it was in entirely different circumstances to those in which I now find myself. At this stage I do not propose merely to ask a question of the Minister before he sits down. I shall take the opportunity of addressing the Minister in writing about the matter that I wish to raise, having regard to the speech of the noble Baroness, Lady Blatch, in which she referred to cartels. I should like her to disclose the cartels in Cambridgeshire she wishes to dispose of.

Lord McIntosh of Haringey

My Lords, I, too, should like to welcome the noble Lord, Lord Ross, to our deliberations at Report stage. He will already have learned two lessons. First of all, he will have learned that those who speak from the Government Back Benches to Conservative Central Office briefs do not always find that the briefs are particularly relevant to the amendments which are before the House. His second lesson will have been that some noble Lords on the Conservative Back Benches do not like debate and want to find ways of curtailing it, even at the expense of not allowing the Minister to reply to specific points which have been raised in the course of debate and which deserve specific answers.

A large part of the debate from the Benches opposite has taken place as if the amendment said something totally different. Indeed, the noble Earl himself said that he largely supported the objectives of Amendment No. 3, perhaps with the desirability of the addition of the words "value for money". That is something to which we certainly would not object, in addition to "requirements of the community".

The Minister praised himself for showing consistency both at Committee stage and now. I suggest that although consistency is a virtue, in the face of a different argument—and one which has been put forward reasonably from these Benches—it becomes obstinacy rather than a virtue. If there are different amendments put forward that would have a different effect, then the Government ought to give the wording of those amendments the consideration it deserves. That has not been the case.

I reiterate that this amendment does not attack in any way the principle of the Bill. It does not take away from the Secretary of State the authority it is proposed that he should have under regulations and under several sections of the Bill to provide for the time-tabling, scope and definition of services. The amendment only says that in making those regulations the Secretary of State shall give due consideration to any representations from the defined authorities on certain specific matters. Is that so unreasonable? Is that in any sense an amendment that would damage the Government's objectives? It would actually salvage the Government from some of the difficulties they might otherwise face, rather than tending to wreck the obligations of the Bill.

My noble friend Lord McCarthy had a good point when he observed that the small emergency force that a local authority might wish to maintain for emergency planning purposes would still be possible but that it could not actually do anything. If it were already providing a service, so that it was not sitting on the sidelines waiting for an emergency to occur, then it would conflict with the conditions of the Bill because it would conflict with the tendering and contracting process. That is turning local authority responsibility on its head; it does not make any sense The Government's response is not in fact a response to the amendment tabled. I suggest that it is desirable for the opinion of the House to be taken.

4.2 p.m.

On Question, Whether the said amendment (No. 3) shall be agreed to?

Their Lordships divided: Contents, 86; Not-Contents, 122.

Amherst, E. Kearton, L.
Ardwick, L. Kilbracken, L.
Attlee, E. Kilmarnock, L.
Aylestone, L. Leatherland, L.
Banks, L. Listowel, E.
Basnett, L. Llewelyn-Davies of Hastoe, B.
Blackstone, B. Lloyd of Kilgerran, L.
Bonham-Carter, L. Lockwood, B.
Boston of Faversham, L. Longford, E.
Bottomley, L. McCarthy, L.
Briginshaw, L. McIntosh of Haringey, L
Bruce of Donington, L. McNair, L.
Carmichael of Kelvingrove, L. Mais, L.
Carter, L. Mason of Barnsley, L.
Cledwyn of Penrhos, L. Milford, L.
Cocks of Hartcliffe, L. Molloy, L.
David, B. Mountevans, L.
Davies of Penrhys, L. Nicol, B.
Dean of Beswick, L. Northfield, L.
Denington, B. Phillips, B.
Diamond, L. Pitt of Hampstead, L.
Donaldson of Kingsbridge, L. Ponsonby of Shulbrede, L.
Elwyn-Jones, L. [Teller.]
Ewart-Biggs, B. Rea, L.
Ezra, L. Ritchie of Dundee, L.
Falkland, V. Ross of Newport, L.
Fisher of Rednal, B. Seear, B.
Fitt, L. Serota, B.
Foot, L. Shackleton, L.
Gallacher, L. Shepherd, L.
Galpern, L. Somers, L.
Gladwyn, L. Stewart of Fulham, L.
Graham of Edmonton, L. Stoddart of Swindon, L.
Hampton, L. Strabolgi, L.
Hanworth, V. Taylor of Blackburn, L.
Harris of Greenwich, L. Taylor of Mansfield, L.
Hayter, L. Tordoff, L. [Tetter.]
Heycock, L. Underhill, L.
Hirshfield, L. Wallace of Coslany, L.
Houghton of Sowerby, L. Wigoder, L.
Hughes, L. Williams of Elvel, L.
Irving of Dartford, L. Willis, L.
Jeger, B. Wilson of Rievaulx, L.
Jenkins of Hillhead, L.
Airey of Abingdon, B. Holderness, L.
Allerton, L. Hood, V.
Alport, L. Hylton-Foster, B.
Ampthill, L. Ilchester, E.
Arran, E. Johnston of Rockport, L.
Atholl, D. Killearn, L.
Barber, L. Kimball, L.
Beaverbrook, L. Kinloss, Ly.
Belhaven and Stenton, L. Kinnaird, L.
Beloff, L. Lane-Fox, B.
Belstead, L. Lauderdale, E.
Bessborough, E. Long, V.
Bethell, L. McAlpine of Moffat, L.
Birdwood, L. MacLehose of Beoch, L.
Blatch, B. Macleod of Borve, B.
Blyth, L. Malmesbury, E.
Borthwick, L. Margadale, L.
Boyd-Carpenter, L. Marley, L.
Brain, L. Masham of Ilton, B.
Bramall, L. Maude of Stratford-upon-
Brougham and Vaux, L. Avon, L.
Bruce-Gardyne, L. Merrivale, L.
Butterworth, L. Mersey, V.
Caithness, E. Milverton, L.
Cameron of Lochbroom, L. Morris, L.
Campbell of Alloway, L. Mountgarret, V.
Campbell of Croy, L. Mowbray and Stourton, L.
Carnegy of Lour, B. Munster, E.
Carnock, L. Nelson, E.
Carr of Hadley, L. Newall, L.
Chelmer, L. Nugent of Guildford, L.
Chelwood, L. Orkney, E.
Cottesloe, L. Oxfuird, V.
Crickhowell, L. Pender, L.
Croft, L. Peyton of Yeovil, L.
Cullen of Ashbourne, L. Platt of Writtle, B.
Davidson, V. [Teller.] Plummer of St Marylebone, L.
De Freyne, L. Porritt, L.
Denham, L. [Teller.] Rankeillour, L.
Dundee, E. Reay, L.
Eccles, V. Renton, L.
Effingham, E. Rodney, L.
Elles, B. Romney, E.
Elliot of Harwood, B. Sanderson of Bowden, L.
Erroll of Hale, L. Sandford, L.
Faithfull, B. Shannon, E.
Ferrers, E. Shaughnessy, L.
Fortescue, E. Skelmersdale, L.
Fraser of Kilmorack, L. Stockton, E.
Gainford, L. Strange, B.
Gardner of Parkes, B. Strathspey, L.
Glenarthur, L. Sudeley, L.
Gray of Contin, L. Swinton, E.
Gridley, L. Terrington, L.
Haddington, E. Teviot, L.
Hailsham of Saint Thomas of Gwydir, L.
Marylebone, L. Thurlow, L.
Halsbury, E. Tranmire, L.
Harmar-Nicholls, L. Trefgarne, L.
Havers, L. Ward of Witley, V.
Hesketh, L. Westbury, L.
Hives, L. Wolfson, L.

Resolved in the negative, and amendment disagreed to accordingly.