Local Government Bill

HL Deb 15 February 1988 vol 493 cc469-87

Consideration of amendments on Report resumed on Clause 2.

[Amendments Nos. 11 to 13 not moved.]

Schedule 1 [Competition]:

The Earl of Caithness moved Amendment No. 14: Page 34, leave out lines 14 and 15.

The noble Earl said: My Lords, this is a drafting amendment. I beg to move.

On Question, amendment agreed to.

Baroness Nicol moved Amendment No. 15: Page 35, line 38, at beginning insert ("subject to sub-paragraph (2) below").

The noble Baroness said: My Lords, in moving this amendment, it may be convenient for the House if I speak also to Amendment No. 16, as the two amendments go together.

This is a successor to an amendment moved in Committee which the Minister was kind enough to say he was minded to accept, though he did not approve of the wording. I hope that the present wording is acceptable. However, perhaps I should first explain what we hope the present wording will cover. For example, we wish to ensure that the phrase "other plants" includes trees. Your Lordships may remember that in Committee we discussed the need to protect arboreta and to ensure that specialist maintenance staff employed by local authorities could be retained to do that particular job.

I quote from a letter from Hampshire County Council. The council is concerned that the Government could suggest that, grass cutting around the trees should go out to competition, leaving the work on the trees themselves to be handled by the direct labour force without competition. This would be administratively expensive and would fail to provide the security which the Management Committee desire". I hope that the wording now before the House will prevent that situation arising and that it will secure the protection of specialist teams, as we said in Committee, for the care of plant collections and for sites of special scientific interest. I beg to move.

The Earl of Caithness

My Lords, I am grateful to the noble Baroness for moving this amendment, which, as she said, introduces the substantive amendment, Amendment No. 16, which would exempt work whose primary purpose was research or plant preservation from the definition of ground maintenance work, which will be subject to competition. As the noble Baroness reminded me, I promised in Committee that the Government would consider an amendment along these lines. I am therefore pleased to advise your Lordships that the Government are willing to accept these amendments.

The amendment will mean that plant research work, and work connected with national plant collections, arboreta—to which my noble friend Lord Selborne drew particular attention in Committee—other horticultural collections and botanical gardens will not have to be exposed to competition. That covers the point raised by the noble Baroness which concerns the Hampshire County Council.

I should say, however, that the fact that we have accepted that it would be wrong to force authorities to expose this work to competition does not mean that we accept that the work must, in all cases, be carried out in-house. The majority of national plant collections are not in local authority hands and there are obviously many private contractors who could carry out scientific ground maintenance work to at least as high a standard as local authorities. So we should still urge local authorities to consider exposing this work to competition voluntarily, so as to see whether the in-house operation represents best value for money.

In that connection perhaps I may mention the work of the Nature Conservancy Council, which my department sponsors. A good deal of the work on national nature reserves is carried out by contract workers and volunteers, and we are encouraging the council to explore the scope for more of its work to be contracted out. Earlier this month the council published a very creditable practical guide to preparing site management plans for nature conservation, designed to help other bodies carry out practical work within a scientific framework. I am sure that, provided local authorities draw up such plans properly, they should explore all the options for getting the work done—volunteers, contractors' employees and so on.

Meanwhile, I am happy to accept these amendments and I confirm to the noble Baroness that, although there is no definition of "plant" in the Bill, I understand that it includes trees.

Baroness Nicol

My Lords, I am grateful to the Minister for that reply. Perhaps I may remind the House that it was never our intention to insist that local authorities should do this work themselves. We merely wish to give them flexibility so that, where it would cost more to go out to tender than to maintain the collection, or whatever it be, they would be given the option. That is all we sought and I am grateful to the Minister for his acceptance of the amendments.

On Question, amendment agreed to.

Baroness Nicol moved Amendment No. 16: Page 35, line 43, at end insert— ("(2) An activity does not fall within section 2(2)(f) above if its primary purpose is research or securing the survival of any kind of plant.").

On Question, amendment agreed to.

Viscount Mersey moved Amendment No. 17: Page 36, line 6, after ("vehicle") insert ("or of a fire authority vehicle").

The noble Viscount said: My Lords, in moving this amendment, I must stress once more that it is an amendment of life and death. It seeks to exclude fire brigades from enforced competitive tendering on vehicle maintenance just as police vehicles are already exempted in the Bill. The rapidity with which the fire at King's Cross spread is now daily before our eyes as we read the evidence given at the inquiry. No noble Lord would dispute the fact that had the fire appliances arrived even 20 seconds later many more lives would have been lost.

Fire brigades are unique. They are required by law to be at an accident within a specified time. Fire brigades have their own highly specialised, capital-intensive workshops which have a faultless track record and which, I believe, no private competitor could hope to match. Even if they did manage to match it, there would be a learning period in which the government would literally be putting people's lives at risk while the private contractors learned the new craft of fire engine maintenance.

In Committee I listed the main reasons for keeping our fire brigade vehicle maintenance in-house and I certainly do not want to weary your Lordships by repeating them. They can be found in the Official Report of 25th January, col. 595. Many other Members gave yet more excellent reasons from every side of the Committee, including, from this side, my noble friends Lady Carnegy of Lour, Lady Blatch and Lord Gisborough. There was also the formidable voice of my noble friend Lord Renton, who may or may not be back in time for this amendment.

So strong was the feeling that my noble friend Lord Caithness said that he would take away my amendment to consider it, and we are grateful to him for that. I have now heard from him on what the Government propose in lieu of our amendment. With his permission I refer to the letter that he wrote to me. In it my noble friend undertakes to use the power in Clause 2(9) to exclude the maintenance of fire service vehicles from the general provisions of Part I. That is a major concession and it is very good news. He continues by saying that he wishes the Government to be free to alter that decision at a later stage after consultation with the interested parties, debate in either House and after experience of competitive tendering for the maintenance of other local authority vehicles.

Perhaps I may pick up those last three points. First this phrase: once we have some experience of competitive tendering for the maintenance of other local authority vehicles. As I have said, other local authority vehicles are not comparable to fire authority vehicles. Granted they can be very complex—for instance, hydraulic platforms or earth-moving equipment—as my noble friend mentioned at Committee stage, but their repair is not so urgent. Should a contractor fail to deliver he would be fined, yet to fine a contractor for the failure of a fire engine when lives will be lost will be no consolation to the bereaved. Indeed it would add insult to injury.

Second, I wonder what "consulting interested parties" means. Suppose the Government told the London Fire Brigade that it must go out to tender at some future date and the brigade said no. I take it that there would be consultation but I also take it that the Government would hold all the trump cards and would "win" that consulation.

Thirdly, he writes: the order could of course be subject to debate, as provided by Clause 15(2). Perhaps my noble friend can tell me exactly what this means. Is it a Prayer? If it is a Prayer, does he recall our Prayer about the building which was called "Son of Green Giant", which some years back was to be built at Nine Elms, I believe? We were informed that we were going against precedent when we voted on that Prayer. So is not the debate to which he refers of similar power perhaps only to an Unstarred Question?

My noble friend concludes his letter by saying that he hopes we will accept his revision as a "sensible compromise". I do. It is not as good, as clear or as simple as our original amendment but, having said that, the Government have gone a long way to meet my concern and I am very grateful for that. Subject to what other noble Lords have to say—if there are any comments—it is on the cards that I will drop this amendment in favour of the government reassurances given in the letter from the Department of the Environment dated 12th February and which will be probably spelt out in greater detail shortly by my noble friend the Minister.

The Earl of Caithness

My Lords, I have listened carefully to all that has been said on this difficult and sensitive subject and I have re-read carefully the points previously made in Committee. I am grateful to my noble friend for having raised the matter again at this stage of the Bill. I remain unconvinced by the view that it is impossible to involve private contractors in fire vehicle maintenance in a satisfactory way. From my own experience I think that if fire authorities were less wedded to their existing ways of carrying out their functions they might well find scope for substantial cost savings through competition without any loss of service quality. The Government take very seriously the pursuit of greater efficiency and value for money in the fire service.

During his recent inspections of brigades, Her Majesty's Inspector of Fire Services looked critically at all aspects of administration including the arrangements made for the maintenance of vehicles. The inspectorate is concerned not only that the arrangements meet the operational requirements but also that they are cost-effective and efficient. Fire is an emotive issue and it can conjure up images which can all too easily make us lose sight of the practical implementation of what we all desire. Perhaps I should emphasise, as I have done on many occasions during the proceedings on the Bill, that Part I will not mean that the authorities are forced to contract out services to any contractor who puts in a bid. Authorities will be under a duty to specify exactly what service they require. They will want to check that contractors putting in tenders have the capacity to carry out the work satisfactorily and they will be wise to set up contractual arrangements which impose penalties on failure in order to ensure that contractors perform well. That would apply in the field of fire vehicle maintenance as much as in any other field.

The logic of the amendment means that the private sector is considered incapable of carrying out maintenance of any fire service vehicle from the officer's car to the hydraulic platform. We all know that the private sector services vehicles and machinery quite similar to those used in the fire service—for example, the plant and vehicles used in the construction industry. The private sector also services other emergency vehicles, for example some NHS ambulances.

Nevertheless, I recognise the strength of feeling that has been shown in the contributions to the debate which have been made so eloquently by your Lordships, particularly at an earlier stage. Should my noble friend withdraw his amendment (he has indicated that he may), I confirm that I am willing to give a commitment that we will use the power in Clause 2(9) of the Bill to exclude the maintenance of fire service vehicles from the provisions of Part I when we make the first set of regulations and orders under the Bill.

I acknowledge that this proposal would not preclude us from making this work subject to competition by an amending order at a later stage once we have some experience of competitive tendering for the maintenance of vehicles belonging to other local authorities. For example, if that experience showed that contractors can carry out fire vehicle maintenance perfectly adequately, as the Government believe, it would be wrong to have fresh legislation. I agree that other local authority vehicles are different from vehicles of the fire service. If the private sector proves, as I am sure it can, that it can do other repairs and maintenance satisfactorily, then it would be wrong to rule out the fire service altogether.

8.15 p.m.

Lord Elwyn-Jones

Would the noble Lord be good enough to give way? Have the Government consulted the Chief and Assistant Chief Fire Officers' Association, which has written a most deeply worried and anxious letter to me and other noble Lords? Has this association been consulted?

The Earl of Caithness

My Lords, of course they have been consulted. I spoke at length with CAFO on a regular basis when I was at the Home Office. I visited workshops to look at service vehicles. I am sure that the noble and learned Lord will be pleased at the concession I have given to my noble friend following the moving of the amendment. I am willing to give the commitment to use the exemption in Clause 2(9).

Lord Dean of Beswick

My Lords, is it not a fact that although the Minister has indicated some movement—I believe I am drawing the right conclusion from what he has said—when the Bill becomes an Act it will still have reserve powers to enforce this particular function on a reassessment? In other words the Secretary of State is still keeping the bullet in the gun and, if he chooses to pull the trigger, the measure will be carried through without recourse to this House and without it having any influence on the decision. It is really very little which is being offered.

The Earl of Caithness

My Lords, I am sorry the noble Lord, Lord Dean of Beswick, takes that attitude. I believed that I was approaching this problem in a most constructive way. I tried to help in the discussions which have taken place on this matter. If in the light of experience it appears that this work can be contracted out, then that will remain an option. As the noble Lord knows, because he has read the Bill and taken part in the debate, under Clause 2(4) consultations with interested parties will of course include CAFO. The noble and learned Lord knows only too well that that must take place.

Perhaps I may also point out that such an order would be subject to annulment in pursuance of a resolution of either House as provided by Clause 15(1). In that case the very point which the noble Lord, Lord Dean of Beswick, was making is that your Lordships would have another opportunity to consider the matter afresh and to make your views known.

I hope that my noble friend will withdraw the amendment in view of what I believe is a very considerable effort by the Government to try to meet these legitimate concerns.

Viscount Mersey

My Lords, I thank my noble friend for that reply. Perhaps I may first of all convey the apologies of my noble friend Lord Renton to my noble friend the Minister. What happened was that as soon as he heard I was on my feet he started running towards this Chamber but he was then told that he was not going to make it anyway. I believe he was stopped in his tracks by my noble friend Lady Blatch.

I believe that the Government amendment is a pretty generous one. With due respect to the noble Lord, Lord Dean of Beswick, I believe that he has not appreciated the extent of the concession which is being offered. I have a letter in my pocket which I believe will put his fears at rest. Perhaps I may show that to him afterwards. Rather than risk the loss of these quite considerable concessions by pressing my amendment, I shall settle for the amendment of my noble friend the Minister. Therefore I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 18 to 21 not moved.]

Clause 3 [Other definitions]:

The Earl of Caithness moved Amendment No. 22: Page 3, line 40, leave out ("a parish or community council").

The noble Earl said: My Lords, this is a purely drafting amendment. I beg to move.

On Question, amendment agreed to.

Clause 4 [Works contracts: restrictions]:

[Amendment No. 23 not moved.]

Clause 6 [Functional work: restrictions]:

[Amendments Nos. 24 to 27 not moved.]

Lord Dean of Beswick moved Amendment No. 28: Page 6, line 33, at end insert ("and if less than two persons who are not defined authorities submitted a tender, the authority may determine that the service should continue to be provided directly.").

The noble Lord said: My Lords, under the Bill as it is drafted work remains automatically in-house only if there are no tenderers for a service. The amendment suggests that an authority should have a discretion where there is only one tenderer other than itself in relation to a given area of work. The issue behind the amendment was briefly discussed in Committee in the context of the tender position facing Scottish island authorities. There must be some doubt whether more than one private tenderer would be available in a number of areas; for example, refuse collection or office cleaning.

By extension the same principle could apply in a number of remote areas of the country, or even where, because of the rather artificial way in which the tendering timetable has been drawn up by the Government, local private contractors are simply unable or unwilling to put in a tender for a piece of work. The noble Earl, Lord Balfour, referred to this possibility in respect of Scottish islands at cols. 520 to 521 of the Official Report of 26th January 1988 and expressed the hope that, where an island authority was required to go out to tender for a given service, at least two private bodies would be in a position to submit an estimate for the work involved.

His concern stemmed from the possibility that a single contractor could hold a small local authority to ransom at the point where the contract was due to be renewed. This is clearly a widespread danger since authorities will in all likelihood be forced to dispense with staff and equipment relating to an area for which they have lost the in-house bid, leaving them in a difficult position in relation to a further tender in subsequent years.

The amendment proposes a simple safeguard whereby, unless there are two tenderers able to take part in the first tendering process under the Bill, the local authority should retain discretion to keep the service in-house to avoid the possibility that neither it nor any other contractor would be able to respond to emergencies or to fill the place of the single tenderer in the event of a breach of the contract.

The operation of the discretion would of course be subject in the normal way to requirements of reasonableness in relation to decisions by local authorities, and there is no intention or danger that this would be used as a back-door method of evading competitive tendering. If, however, the Government are willing to consider the principle of the amendment it would clearly be appropriate for them to give further consideration to the form of drafting and whether additional safeguards as to the operation of the discretion may in their view be necessary.

It is stressed that the amendment would produce no automatic reversion to an in-house service but might create the opportunity for the local authority to plan for the best interests of its area. We believe that the amendment could serve to stimulate competition in the sense that a private monopoly would be prevented and other contractors would be encouraged to submit bids in the future in the area concerned. I beg to move.

The Earl of Caithness

My Lords, this amendment would either have no effect at all, or it would have an effect that I believe is totally unjustified, depending on how one interprets the word "may". Under the provisions governing competition for functional work authorities must invite tenders from at least three contractors who are not defined authorities, unless fewer than three contractors respond to the advertisement inviting contractors to register their interest.

If no contractors submit tenders, then the authority is obviously free to carry out the work in-house. If one contractor submits a tender, the authority can decide that the work should remain in-house if that represents better value for money. But it has to make that judgment. If "may" in the amendment means "can, if it is justified", then that is the effect of the Bill, and the amendment is unnecessary. But if "may" is supposed to mean "can", irrespective of the other bid, then that is in direct contradiction with the spirit of the Bill.

I realise that, for a variety of reasons and particularly in the early stages of extending competition, the responses to authorities' invitations to tender will vary between different areas and for different defined activities., and that in some circumstances there may well only be one tender submitted for work by a person other than a defined authority. However, I see no reason why that other tender should automatically be disregarded, and the authority determine to continue providing the service directly, without even going through the process of tender appraisal. The fact is that competition against one other service provider is better than no competition at all. If that one person can provide the service in question to the required standard, at a lower cost to the ratepayer than an authority's direct workforce, he should be given that opportunity to do SO.

I therefore do not accept the argument that if an authority contracts out work in these circumstances the contractor will have the authority over a barrel when the time for renewing the contract comes round. That argument presupposes that it is impossible to re-establish a DLO once it has been closed down. The experience of authorities like Eastbourne, which brought its refuse collection back in-house recently despite the fact that this involved acquiring new depots and vehicles, and Ealing, which brought its street cleansing back in-house, shows that that is not true. It also presupposes that the market will not respond to the new opportunities that the Bill will create, and new contractors thereby emerge.

The only possible reasons for local authorities to decide to continue providing these services directly are if, after tender appraisal, their own employees have shown that their bid provides ratepayers with the best value for money available or if there were no other tenderers at all. If the possibility of testing the market exists, even on a small scale, local authorities should take advantage of it.

8.30 p.m.

Lord Dean of Beswick

My Lords, I am sorry that the noble Earl could not be a little more sympathetic and have regard to the arguments that were made by his colleague, the noble Earl, Lord Balfour, when we dealt with this matter in Committee. The point was referred to earlier by the noble Lord, Lord Ross of Newport, who spoke from the Liberal Benches. Both the noble Earl and the noble Lord, at different stages of the Bill, drew attention to the difficulty that could be experienced by island authorities where there may be a dearth of established companies to deal with these services.

The Minister did not give a good example when he referred to the re-establishment of DLO services after the failure of the private sector. He was of course dealing with Ealing. The other borough he mentioned was also, I think, a London borough. We are talking of an average population of approximately 3,000. That is possibly the population of each of those authorities. It is, of course, possible to re-establish the organisation. I should not be surprised, even if they were to readvertise, if they ended up with one tenderer for each contract. However, I do not think that the amendment is aimed strictly at that point.

There is fear in some small or far-flung areas where there is not a large population. They are not substantial catchment areas and only two or three companies can sustain themselves on the existing market in any event. That is the reality. If there is an area with only enough work at the best of times to enable one private company to keep its head above water, there would be one tenderer only because no other people will come forward. They are not there.

With the amount of finance involved in bringing in someone else, I do not think that the tender would be lower than that of the direct works organisation. I am not prepared to press the amendment. I should be surprised, if this particular part of the Bill goes through as it is, whether some of the smaller local authorities in outlying areas, and the island authorities, were not in extreme difficulty as a result. The Secretary of State may have to look at this matter in the not too distant future when the evidence becomes available. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 10 [Financial objectives to be met]:

Lord Dean of Beswick moved Amendment No. 29: Page 9, line 21, leave out ("may") and insert ("shall be made having regard to any additional costs demonstrated by an authority arising from the employment of disabled or handicapped persons and may otherwise").

The noble Lord said: My Lords, the purpose of the amendment is to insert a requirement into Clause 10(4) for the Secretary of State to make allowance, in setting financial targets for authorities, for the additional cost of employing disabled or handicapped people. Clause 10 gives power to the Secretary of State to set a financial target; for example, 5 per cent. of turnover where a local authority's own direct labour organisation wins the tender for any of the services covered by the Bill. In effect, the clause proposes an additional hurdle over which local authorities must jump before services remain in-house on a secure basis.

The amendment proposes that in setting those targets the Secretary of State should make a specific allowance (in practice on the application of the authority) for any additional cost arising from disabled employment. The amendment is extremely limited and would create, in practice, a small exception only to the overall target applied to any service. The origin of the proposal is a commitment given by the noble Earl, Lord Caithness, on 26th January, at col. 534, responding in Committee to Amendment No. 5, which called for exemption for work produced predominantly by disabled people. The Minister said that the Secretary of State would take into account the extra cost of employing disabled people in considering whether to act against any failure by an authority to meet its financial objectives. That was a welcome statement. But the amendment, it is suggested, proposes a more reliable way of safeguarding employment in that area without involving the possibility of retrospective action.

Rather than take any extra costs into account at the stage where a target has not been met and where the Secretary of State is considering whether to commence the process by which ultimately a service can be removed from local authorities, it is suggested that it would be more sensible to build in an allowance at the point where the in-house service bids against the financial target. The effect would be to remove any possible uncertainty on the part of a direct labour organisation as to whether that area of marginal cost would produce any competitive disadvantage. The amount of money is likely to be small but could provide a welcome safeguard for a limited but disadvantaged group of people.

Without the amendment, despite government assurances, there can be no guarantee that a direct labour organisation would feel entirely secure in bidding on behalf of the members of its workforce suffering from a disability or handicap. No doubt the Minister will agree that anything which can be done to increase the security of disabled employees, without cutting across the tendering process, would be a welcome concession.

I have some experience of the employment of disabled and handicapped people in a large and—can your Lordships believe it?—successful direct labour organisation. That organisation successfully stood the test of economic examination by city treasurers and private auditors. I am referring to the time when Manchester had a direct labour force of 4,500 people. We had a substantial percentage of registered disabled people—not severely disabled people—who we were able to employ because we had bought a large factory to produce building components when the public sector building industry activity was probably at its highest. There is no question but that we were successful in our tendering.

I hate to use the word "burden" because I do not think that it is a burden to look after disabled people. We took on that social responsibility. Some of the people were skilled men who had deteriorated through illness and would have been found wanting for work in the private sector. However, we were able to accommodate them in the factory. However, it placed a financial burden on the department that as a council we were prepared to accept. In the amendment we ask for a guarantee that where disabled or handicapped people can be gainfully employed, an allowance could be given. If not there will be damaging discouragement for those people who every Member of your Lordships' House wishes to protect to the utmost. I beg to move.

The Earl of Caithness

My Lords, although I sympathise with the intentions of the amendment, as I am sure the noble Lord, Lord Dean of Beswick, will understand, I believe that its aim of not penalising local authorities for employing disabled or handicapped persons is best achieved by other means.

The method proposed in the amendment of taking into account the additional costs of employing such people is an extremely bureaucratic and time-consuming one. The intention appears to be that the Secretary of State will set individual financial objectives for each local authority, taking into account each authority's own such costs. Therein lie all sorts of problems of estimating how many disabled or handicapped people will be employed in a certain year in a certain activity, and what type of additional costs that will entail. This would be a hefty task for both local authorities and the Secretary of State and one which could result in much room for disagreement and misunderstandings.

For these reasons I return to what I said on this subject in Committee only three weeks ago. I am grateful to the noble Lord, Lord Dean, for mentioning it. I confirm that we have already given this matter very careful consideration. We believe that the most effective way of dealing with it is to give authorities an assurance that in considering whether to act against the failure by them to meet their financial objectives, the Secretary of State will take into account the extent to which any failure is up to the extra costs of employing disabled people. This method will allow the Secretary of State to set financial objectives to cover all defined authorities and then take into account individually any relevant actual additional costs, if they are significant in relation to financial failures.

This would allow the Secretary of State to take into account the very point which the noble Lord, Lord Dean, made about Manchester, because running the good authority which he did, or being involved with that authority, he would be able to assess the additional costs of handicapped or disabled people. Therefore he would be able to put that additional cost to the Secretary of State as a special factor to be taken into account. I hope therefore that noble Lords will agree that the method in the Bill is the right way of tackling this difficult and sensitive problem.

Lord Dean of Beswick

My Lords, I am grateful to the noble Earl for that reply, but I do not think the Government quite understand what would happen if such a policy were implemented. I think the Minister is saying that with any contract where disabled or handicapped people would be or might be deemed to be involved, they would have the right to submit the contract to the Secretary of State, on the basis of what he said within the Government's present proposals. Am I correct in assuming that? Perhaps the Minister could answer that before I go any further.

The Earl of Caithness

My Lords, will the noble Lord repeat his question?

Lord Dean of Beswick

My Lords, I understood what the Minister said to be that with the employment or the expense or the additional expenditure on a contract above what one would consider the norm for the employment of disabled or handicapped people, the local authority concerned could apply to the Secretary of State for that to be taken into consideration. Am I correct?

The Earl of Caithness

My Lords, yes.

Lord Dean of Beswick

My Lords, I am grateful for that. I thought I had heard it correctly but I could only see that as a recipe for clogging the sausage machine. I do not know the number of local authorities involved in this, but suppose there were 300 or 400 applications by local authorities which are already employing handicapped and disabled people. If they wanted that taken into account, are we really saying that the Secretary of State has the resources, the facilities, to study each one in depth; or will he give carte blanche? I do not think it is an exercise which the Secretary of State could carry out, even in conjunction with his ministerial team.

I have here some correspondence from the Institute of Maintenance and Building Management, whose officers in the main are in control of or administer or manage the direct labour building departments in the country. Those are not the only types of people who are members of this institute; it has members from the health service and the water boards. Nevertheless, it says: Special consideration for disabled and handicapped staff: we note the Government have said that whilst the additional costs of such staff must be shown, there can be stated reasons for acceptance of other than the lowest tender. In our experience, there are many local authorities who will wish to follow the letter of the law and not make such allowances. These considerations apply to apprentice training costs already but, as we know, only a few local authorities have sought to use them and numbers of apprentices have been drastically reduced as a result". We maintain that there would be the same outcome for the disabled; that type of local authority would probably behave in that manner. What we are trying to do with this amendment is to give not a copper-bottomed guarantee to disabled and handicapped people, because I do not think that you can provide that scenario in any society. But as regards the Government's way of dealing with this subject, on the basis of what the Minister has said, if it would work I should be delighted. But I cannot see the resources of the Secretary of State being sufficient to provide for the practicalities.

On that basis, I have no wish to press the amendment. I am trying to be objective. I hope that the Minister and his colleagues will have a look at this matter.

8.45 p.m.

Baroness Seear

My Lords, genuinely seeking information, I would ask the Minister if he could explain to us what the process would be for doing this. If we want to make allowances, if the Secretary of State has the right to say that the additional expenditure is justified or is not justified, for that to be done properly needs very detailed inquiry. You cannot just take the numbers of disabled people. Some of the disabled employed may not be any financial handicap at all. If they are doing a job where they do not need to hear anything then the fact that they are deaf is no financial handicap whatever. On the other hand, somebody else with what on paper looks like a slight handicap may be a considerable financial burden.

I was trying to think out the process of how this could be done, and I find myself very confused. I wonder whether it has been thought out. The Minister spoke about the previous suggestion involving a great deal of bureaucracy. At first sight, it seems to me that the Minsiter's proposal will involve an enormous amount of bureaucracy, unless it is completely rule-of-thumb and, as a consequence, wrong.

Lord McCarthy

My Lords, perhaps I may ask the Minister a question on the same point. Surely the thrust of the amendment is to say that the local authority itself will be able to have regard to any additional costs, and if it does, it will be within the law. It will make the estimates and if it says, "We're not going to go out to tender because when we take into account additional costs as a result of disabled and handicapped persons, we are still under the price of the external tender" then it will keep it in-house and it will be within the law. There will be no bureaucracy; it will be up to the local authority.

If the Secretary of State has reason to believe that an authority is not properly taking into account the costs of employing disabled people, that is for him. But under the amendment there would be no bureaucracy at all.

The Earl of Caithness

My Lords, with the leave of the House. perhaps I may say another word on this matter. I should like to make it clear that the local authorities do not have to submit the contracts to the Secrtary of State. What this part of the Bill is doing is to define the financial objectives concerned by reference to such factors as the Secretary of' State thinks fit. If the local authorities fail to make the financial return required, they can explain why. At that point, they can tell the Secretary of' State about the disabled costs. But that is in relation to carrying out the activity and not in relation to contract letting.

The effect of what we have said is that when a DLO bids, it can discount the extra costs of employing disabled people. Therefore the noble Lord's amendment could mean a separate financial objective for each activity and each authority. Far from the Government's position making it difficult, I suggest to the noble Baroness that perhaps it is the noble Lord's amendment that could make it more difficult. That is because if one has, say, six activities and 400-plus authorities, by the noble Lord's amendment that could be something like 2,400 different financial objectives; whereas what we are looking for is something very much simpler than that.

Lord Dean of Beswick

My Lords, I rise to say very briefly that I think we must look more closely at what the Minister has said in relation to my comments. I am not too convinced that he is right, any more than he is convinced that I am right. Having said that, I should like to look at what he has said and perhaps come back on this issue later. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 12 [Information]:

The Earl of Caithness moved Amendment No. 30: Page 11, line 13, leave out ("or the Development Board for Rural Wales").

The noble Earl said: My Lords, I beg to move.

On Question, amendment agreed to.

Clause 15 [Orders, regulations, specifications and directions]:

[Amendments Nos. 31 and 32 not moved.]

Clause 16 [Supplementary]:

Lord Dean of Beswick moved Amendment No. 33: Page 14, line 14, at end insert— ("( ) A City Technology College shall for the purposes of the Local Authorities (Goods and Services) Act 1970 be deemed to be a public body and the Secretary of State shall so provide in regulations if any such establishment would not otherwise fall within this definition.").

The noble Lord said: My Lords, the purpose of this amendment is to return to an aspect of the issue of wider competitive involvement by local authorities which was raised in Committee and the Minister undertook to provide further details of the position in relation to city technology colleges.

In reply to Amendment No. 80 in Committee the noble Earl gave a useful statement of the Government's position as to the opportunities for local authorities to supply goods and services to other local authorities and public bodies. The governing legislation is the Local Authorities (Goods and Services) Act 1970, which defines the limits of such competitive activities by authorities. The practical effect of the Act is that local authorities are not able to provide supplies to the private sector. The amendment moved in Committee sought to establish that grant maintained schools and polytechnics, which will shortly move out of local authority control if the provisions of the Education Reform Bill are implemented in their present form, will remain public bodies for the purposes of the 1970 Act and therefore bodies capable of being supplied by a local authority.

The Minister replied that provisions in the Education Reform Bill, currently before the House of Commons, would achieve this effect in relation to grant maintained schools and polytechnics. He undertook to check the position with regard to city technology colleges and this amendment proposes that those colleges should also be public bodies for this purpose.

Although the analogy is not exactly similar with a grant maintained school in that a city technology college will be a new institution rather than one that is transferred from local authority control, the CTCs will to a very large degree be designed to draw on pupils, teaching resources and even premises which would otherwise have fallen within the state school sector.

The stated purpose of the new colleges is to provide an alternative to existing secondary schools and to that extent could be seen as being derived from the local authority sector. More to the point, city technology colleges will be funded directly by central government and for this reason alone should be seen as public bodies. It is hoped that the Minister will be able to provide a positive answer on this issue if the matter is not already being covered by correspondence between us.

The opportunity to undertake to supply to CTCs would obviously be a useful additional outlet for local authority tenders in an area where many local authorities have shown themselves able to provide a highly cost-effective and reliable service providing central supplies to a number of smaller bodies and authorities. I beg to move.

The Earl of Caithness

My Lords, I happily make an apology to the noble Lord, because I did promise to write to him. But there I was poised with pen in hand, when lo! and behold I saw the amendment. At that point I thought that I would not write to him, that I would save the stamp, as that would be very cost-effective, and that I would supply that information when he moved the amendment. So here I am to answer the noble Lord and to inform the House that the amendment is superfluous.

Under the terms of the Local Authorities (Goods and Services) (Public Bodies) Order 1975: the managers, governors, or other body responsible for the management of an independent school which operates otherwise than for profit", is designated as a public body for the purposes of the Local Authority (Goods and Services) Act 1970. Such a definition, I am assured, covers a city technology college. Therefore there is no need for separate provision.

Lord Dean of Beswick

My Lords, that is somewhat belated good news, but on that basis I beg leave to withdraw the amendment

Amendment, by leave, withdrawn.

The Earl of Caithness moved Amendment No. 34: After Clause 32 insert the following new clause:

("Local authority companies.

.—(1) A local authority or relevant public body shall not enter into a contract under which a company which is associated with the authority or body is to carry out work falling within a defined activity, unless, before entering into that contract, the authority or body has taken reasonable steps for the purpose of securing competition for the carrying out of that work.

(2) For the purpose of this section a company is associated with a local authority or relevant public body if, by virtue of any decision of the authority or body (including that of any committee or subcommittee thereof in the course of discharging any function conferred upon them by virtue of section 101 of the Local Government Act 1972, or, in relation to Scotland, section 56 of the Local Government (Scotland) Act 1973)—

1. (a) the authority or body, or
2. (b) any member or officer of the authority or body, or
3. (c) any nominee of the authority or body,

is a member either of the company or of another company which, in accordance with section 736 of the Companies Act 1985, is the company's subsidiary or holding company.

(3) In this section—

1. (a) "defined activity" has the meaning assigned by section 2 above;
2. (b) "local authority" has the meaning assigned by subsection (2) or, as the case may be, subsection (3) of section 1 above; and
3. (c) "relevant public body" means any authority or committee falling within paragraphs (e) to (j) of subsection ( 1 ) of section 1 above.

(4) This section (and, so far as is relevant for the purposes of the definitions in subsection (3) above, sections 1 and 2 above) shall be deemed to have come into force on 11th February 1988 and, accordingly, has effect in relation to contracts entered into on or after that day.")

The noble Earl said: My Lords, I beg to move Amendment No. 34, which would add the new clause on local authority companies after Clause 32.

It has come to the Government's attention recently that a significant number of local authorities are considering turning their direct labour organisations into companies. In some cases this is doubtless being done as a way of helping those organisations to be effective and efficient, and able to compete on as equal a basis as possible with private contractors. Where that is the reason, the Government can have no objection—it is to some extent the logical outcome of the competitive tendering system that Part I of the Bill will introduce. Once those companies are established, we would hope that authorities would consider carefully the scope for selling their interests in them, so that they become genuinely independent entities.

In other cases, however, it seems that the principal reason for establishing companies would be to avoid the competition provisions in the Bill. Under the present law—Section 135 of the Local Government Act 1972 (before the noble Lord, Lord Carmichael of Kelvingrove, picks me up, that is Section 81 of the Local Government (Scotland) Act 1973)—local authorities are normally, except in emergencies, under a specific duty to secure competition before they award contracts for the supply of goods or materials or the execution of works. That is not true, however, of contracts for services which is the subject of this part of the Bill.

For those contracts there is little to stop an authority awarding a contract for the supply of services without competition. Authorities could, therefore, turn their direct labour organisations into companies and award them long-term contracts for the supply of services such as refuse collection or building cleaning without competition. This would be a relatively easy way of avoiding the effects of Part I of the Bill, as that only applies where authorities are carrying out work in-house, not in cases where the work is carried out by companies which they control. But authorities could control such companies to an extent which made them little different from in-house organisations.

As I have said many times in relation to other aspects of this Bill, we accept that this kind of abuse would never be practised by the majority of councils. But we cannot leave the loophole available for exploitation by the minority who are determined to do all they can to keep services in-house, irrespective of the cost to their ratepayers and taxpayers.

This new clause therefore provides that, if an authority wishes to award a contract for work falling within a defined activity to a company associated with it, it must take reasonable steps for the purpose of securing competition for the contract before it does so. This will ensure that, wherever possible, alternative bids are received and the authority, its ratepayers and its auditor are able to judge whether awarding the work to the associated company represents the best value for money.

The provisions in the clause will apply to contracts entered into on or after 11th February—the day after my right honourable friend announced the provisions and we tabled the new clause.

I would remind the House that I brought that to the attention of noble Lords by answering a written parliamentary Question which was contained in the Official Report. My department wrote to every major authority covered by the provisions on the day the amendment was tabled, to ensure that they were aware of them as quickly as possible. We have adopted a wide definition of an associated company because of the wide range of ways in which authorities might seek to exert some control over companies.

I should emphasise that the clause will not stop authorities turning in-house organisations into companies, or awarding them contracts. As I have indicated, provided this is done for the right reasons and not simply to avoid competition, we have no objection.

I hope that I have said enough to persuade your Lordships that this new clause represents a sensible way of closing a potential loophole, in a way which will not adversely affect the vast majority of authorities. I beg to move.

9 p.m.

Lord Dean of Beswick

My Lords, I do not think that your Lordships will be surprised if I question the appearance of this clause at such a late stage in the Bill. I respect and am grateful for the way that the Minister moved it. I think that he was in a trap that was not of his own making in having to do it this way. The Government—in the main I am talking about the Secretary of State—appear to be in some respect chasing shadows which have not really appeared.

The Minister said in moving the new clause that he had made the Government's intention available or he had given notice of it when answering a Written Question. I do not know when that Question was put down and when it was answered but it would be interesting if your Lordships knew that. We spend a lot of time at this Dispatch Box trying to persuade the Government to change some parts of the Bill. We have not been very successful at all on some issues where the Government could have been a little more generous. Again I am not blaming the Minister who is at the Dispatch Box.

We know full well when we come to the Dispatch Box that if a vote is taken we have little chance of winning, however persuasive our argument. But we expect to be treated in a manner which gives us the fullest opportunity to look at the Government's intentions. I think that this is not the most courteous way for the Government to treat the Opposition as regards a clause such as the one that we are considering.

It may well be that what the Minister has said on behalf of the Government will prove to be right. I do not yet know because it needs to be examined and looked at in depth by the people whom it will affect. It is regrettable to have such a clause at this stage. On that note of pessimism, I should like to reserve judgment on the clause to see exactly what has been said. However, I make it clear that I think it is regrettable that a clause which is as long, intricate and complicated as this one, with such far-reaching effects on local government, should be introduced at this stage of the Bill. I have no doubt that we shall return to the matter in the final stages of the Bill.

The Earl of Caithness

My Lords, the noble Lord, Lord Dean of Beswick, has said that it is to be regretted that the Government have had to put down an amendment at this stage of the Bill. To some extent I agree with him. But I must reiterate that had it not been for a small minority of local authorities which saw a loophole, it would not have been necessary to put the amendment down.

Lord Dean of Beswick

My Lords, what evidence has the Minister given us that a small number of local authorities saw a loophole? Does he say that the Secretary of State, by some poltergeist exercise, implanted himself in certain local authorities and predicted what people there were thinking? He has been very clever, if that is the case. I remind the Minister that on three occasions the present Secretary of State has had to go before a court and on one occasion introduce retrospective legislation in order to put himself right with the laws that he thought had been passed. That is why I say that we view the proposal with very great care. I think that I am entitled to ask the Minister once again when the Written Question was put down and when it was answered.

The Earl of Caithness

My Lords, I was coming to that point when I gave way to the noble Lord. It is true that we only heard very recently that some local authorities were considering setting up such companies, and not through a poltergeist experience by my right honourable friend. The noble Lord knows better than I do the formal and informal contacts between the department and the local authorities. Therefore we felt it right, when such a loophole was clearly going to be exploited, that it should be closed before the event rather than after some authorities had used it to avoid the responsibilities to be laid on them by this part of the Bill.

I confirm to the noble Lord that I answered the Written Question on the same day that my right honourable friend announced what would be done in terms of the amendment. The date was 10th February. I commend the amendment to your Lordships.

Lord McCarthy

My Lords, before the noble Lord sits down, can he tell the House when the Government received that information? Presumably it must have been received since the Committee stage of the Bill in this House, since the amendment was not put down at that time. It must have been in the last 10 days. Can he tell us what his evidence is? Which local authorities are threatening to do those things?

On Question, amendment agreed to.

Schedule 6 [Direct labour organisations]:

The Earl of Caithness moved Amendment No. 35: Page 50. line 9, at end insert— ("( ) In subsection (1), in paragraph (a) of the definition of "development body", sub-paragraph (iii) and the word "and" at the end of sub-paragraph (ii) shall be omitted.").

The noble Earl said: My Lords, I beg to move the amendment.

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 36: Page 50, line 18, at end insert— ("( ) In subsection (4)—

1. (a) after the word "Commission", in both places where it occurs, there shall be inserted "or the Secretary of State"; and
2. (b) after the word "which", in the first place where it occurs, there shall be inserted "is an agreement made by virtue of any provision of the Employment and Training Act 1973, which".").

The noble Earl said: My Lords, Amendment No. 36 is a technical amendment relating to the provisions in Part III of the Local Government, Planning and Land Act 1980 which impose competition on local authority building and maintenance direct labour organisations. I beg to move.

On Question, amendment agreed to.

Lord Hesketh

I beg to move that further consideration on Report be now adjourned.

Moved accordingly, and, on Question, Motion agreed to.