Lords Sitting of 3 December 1991

Preamble
The House met at half-past two of the clock: The LORE CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Salisbury.

Aircraft Accidents: Human Factor
Lord Willis Lord Willis asked Her Majesty's Government:
What steps they are taking to reduce the percentage of aircraft accidents caused by human error.
Viscount Davidson: My Lords, the statutory responsibility for the safety regulation of UK civil aviation rests with the Civil Aviation Authority. It fully recognises the significance of human factors in aviation accidents and has set up a human factors study group. The principal areas covered by the group's work are: flight deck design and procedures; maintenance and inspection techniques; ground and air crew training; and cabin safety.
Lord Willis: My Lords, I thank the Minister for that reply and accept that the British aviation industry has, rather belatedly, made some progress in this area. Does he agree that since 70 per cent. of air accidents are caused by human error there should be a more detailed and thorough study of that aspect? Does he also agree that there should be one overall controlling authority to investigate such accidents? Is he further aware that there have been instances, particularly in the United States, where it has been possible to reduce accidents by studying human error? Does he not agree that we should follow that example in this country?
Viscount Davidson: My Lords, the Air Accidents Investigation Branch, which determines the causes of aircraft accidents, has been able to identify several areas where human factors have played a prominent part in the accident sequence. Information built up is shared among aviation regulatory and accident investigation authorities worldwide via their computer databases. I can also tell the noble Lord that, following accidents, the Air Accidents Investigation Branch co-opts behavioural scientists from the RAF Institute of Aviation Medicine to work with the branch en human performance studies. The IAM team of behavioural scientists is one of the most experienced groups operating in that field anywhere in the world. It is the best national source of expertise on the subject and the branch has had the benefit of its help in several of its investigations.
Lord Clinton-Davis: My Lords, I thank the Minister for a very helpful reply and congratulate the CAA on the progress it is making in this regard. However, does the Minister agree that nonetheless there is a need for a measure of harmonisation at European level—not confined to the European Community but perhaps initiated by the Community
92
—of the basic control panel of aircraft, which could certainly give rise to errors, as is evidenced by the Answer he has already given?
Viscount Davidson: My Lords, the noble Lord has raised a very useful point. I said that the information which is built up is shared between all aviation regulatory and accident investigation authorities worldwide, but I shall certainly put the European point to my noble friend.
The Earl of Halsbury: My Lords, does the noble Viscount agree that, acts of God apart, all accidents are caused by human error and there is nothing specific to the aviation industry about human error?
Viscount Davidson: My Lords, the noble Earl is, as usual, right. The purpose of the work which I have described is to reduce the likelihood of human error so far as that is humanly possible.
Viscount Caldecote: My Lords, are the Government fully satisfied that the reduction in the cockpit crew from three to two on long distance flights is compatible with the interests of safety?
Viscount Davidson: My Lords, I am sure that the CAA took that point into account when making its decision.
Lord Willis: My Lords, is the Minister not aware that while it is not possible to eliminate human error entirely it is possible to reduce it and that that has been done successfully by some airlines in other countries? The noble Viscount gave an impressive list of the measures that have been taken to reduce human error, but in this country at least the incidence of human error remains at the same level. Is he aware that a book entitled The Naked Pilot has recently been published—which results from a long study by a former British Airways pilot, David Beatty—which recommends certain measures which as yet have not been taken by the British aircraft industry? Will the Minister recommend that book not only to the RAF but also to the civilian airlines?
Viscount Davidson: My Lords, not having read the book I am not in a position to recommend it. However, I can tell the noble Lord that information about the reduction in accident rates is not readily available but, overall, accident rates are reducing while air traffic is increasing. While a human factor may be identified as contributing to an accident the prime purpose of air accident investigation is to establish the sequence of events and to learn lessons, not to apportion blame. Accordingly, accident investigators are reluctant to indicate that a human factor was a prime cause of an accident.
Lord Whaddon: My Lords, is the noble Viscount aware of the apparent conflict which has sometimes occurred between the making of practice approaches for landing by trainee pilots and the 500 feet clearance rule for aircraft which has apparently been breached? Is he aware of the articles which have appeared in the aviation press concerning that conflict, and will he

93
look again at the matter to ensure that pilots under training are cleared to make as many practice approaches as are necessary?
Viscount Davidson: My Lords, I shall certainly pass on that point to my noble friend.

Air Traffic Control
2.43 p.m.
Lord Taylor of Blackburn Lord Taylor of Blackburn asked Her Majesty's Government:
What progress is being made in rationalising air traffic control systems in Europe.
Viscount Davidson: My Lords, work on the initial phase of an action programme to increase capacity in Europe by integrating the air traffic control systems and optimising the air traffic route network of 23 European countries was successfully completed in October. Progress will be reviewed by ECAC transport Ministers at their next meeting on 17th March 1992 in London.
Lord Taylor of Blackburn: My Lords, I thank the Minister for that reply, but will he say what progress has been made in rationalising the many and varied schemes in operation throughout Europe?
Viscount Davidson: My Lords, I am sure that the noble Lord, Lord Taylor of Blackburn, will be pleased to know that the reason I am answering this Question today is that my noble friend Lord Brabazon of Tara is in Brussels at the meeting of the permanent commission of Eurocontrol which is reviewing progress on the European air traffic control harmonisation and integration programme following completion of the first phase of the programme. I am sure that he is enjoying a good Brussels lunch after a successful meeting.
To answer the noble Lord's specific question, I have a list of plans for longer term improvements. I believe that it would be best if I read out some of them and then sent the rest to the noble Lord. In the United Kingdom, NATS is implementing its largest ever investment programme—some £100 million annually—and has increased annual recruitment of controllers from 80 in 1988 to 240 in 1991 and subsequent years. Following a UK proposal, European transport Ministers agreed in April 1990 to an action programme called the European ATC harmonisation and integration programme. Work on Phase 1, a comprehensive evaluation of Europe's ATC systems, has been successfully completed. As I said, European transport Ministers will meet in London next March to review progress.
Lord Clinton-Davis: My Lords, is the noble Viscount aware—I speak from some experience of meetings at Eurocontrol—that the lunch is usually more productive than the meeting itself? Nonetheless, do the Government share the widespread view that Eurocontrol has the potential to provide a single arm for air traffic control? Does the Minister agree that it is now time—the matter is urgent—for Eurocontrol to
94
be vested with greater powers so that we avoid the absurd duplication, based on arguments of sovereignty, which afflicts passengers, flyers and airlines throughout Europe?
Viscount Davidson: My Lords, I agree to the extent that integration could be achieved more quickly and would dovetail with the urgent, short-term tasks of increasing capacity and of improving co-operation and co-ordination on a practical level. That is impractical in the immediate future, but we do not rule it out in the longer term.
Lord Harmar-Nicholls: My Lords, is my noble friend aware that it is easier to talk about rationalisation than it is to bring it about? Is he aware that I served for a number of years on the EC transport committee where this matter was discussed again and again and that self-interest of the various participants was very real and deep-seated?
Viscount Davidson: My Lords, I am sure that my noble friend is right.
Lord Molloy: My Lords, does the noble Viscount agree that probably the most important aspect of all forms of rationalisation is the rationalisation of security to prevent aircraft being damaged or blown up and people being slain? Does he agree that that should be the top priority throughout Europe?
Viscount Davidson: My Lords, I am sure that I agree with the noble Lord. However, this is not a Question about security. It is a Question about rationalising air traffic control systems.
Lord Whaddon: My Lords, will the noble Viscount bear in mind that the vast majority of aircraft on the British register are not airliners but machines of general aviation? Will he ensure that in any rationalisation of air traffic control systems the bodies representing general aviation are adequately consulted?
Viscount Davidson: My Lords, I shall draw that point to my noble friend's attention.

The Disabled: Parking Scheme Changes
2.47 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
What progress is being made with the introduction of a new national scheme for parking for disabled people to replace the present orange badge scheme.
Earl Howe: My Lords, the Government have announced the decision to proceed with a package of measures designed to improve the orange badge scheme. The main changes will be to introduce a new passport-style badge; to give automatic entitlement for a badge to those in receipt of war pensions' mobility supplement; to extend eligibility to certain people with very severe upper limb disabilities; and to increase from two to three hours the limit on yellow

95
line waiting. The regulations to implement those changes will be laid shortly. The new scheme will come into effect on 2nd March 1992.
Lord Campbell of Croy: My Lords, I am grateful to my noble friend for giving that up-to-date report which shows that the scheme is not being held up. Does he agree that the new scheme has been accepted by virtually all those most concerned as being more helpful to individual disabled people than the orange badge scheme and less open to abuse by other people?
Earl Howe: My Lords, I agree with my noble friend that the new scheme contains distinct improvements. I have here a prototype of the new badge. On it appears not only a hologram but a space on the inside, which will not be visible from the outside of a vehicle, for a photograph. That photograph will provide a real deterrent against abuse and will enable police officers and traffic wardens to verify cases of abuse more easily.
Lord Hailsham of Saint Marylebone: My Lords, I must declare an interest, being the holder of such a badge. Will my noble friend tell me what steps a holder of such a badge must take in order to switch from the existing scheme to the new scheme in March?
Earl Howe: My Lords, the intention is for existing badges to run until expiry. At that time it will be open to holders of a badge to apply for a new one.
Baroness Flather: My Lords, is my noble friend aware that certain London boroughs do not allow orange badge holders to park on yellow lines? Such a restriction makes it difficult for out-of-town disabled people to come into London when their only means of transport is their own owner driven vehicle. Will that restriction be affected by the new scheme?
Earl Howe: My Lords, the central London boroughs have particular problems of traffic congestion which make it impractical to adopt the orange badge scheme on a full-blooded basis. However, the granting of some form of parking concessions for disabled people in central London is currently the subject of a separate series of meetings between the Department of Transport, the authorities and the Disabled Persons Transport Advisory Committee. We hope to reach a conclusion early in the New Year.
Lord Donaldson of Kingsbridge: My Lords, can one qualify for the badge on grounds of age alone?
Earl Howe: My Lords, no.
Baroness Llewelyn-Davies of Hastoe: My Lords, is the noble Earl aware that one of the worst abuses of the scheme is that no one seems to check whether unauthorised people are parking on the disabled persons' reserved places? I must declare an interest because I hold a badge. There are always vehicles on spaces where disabled people can park, largely lorries and vans, but no one appears to take notice of them. Is he further aware that in central London the spaces for disabled people to park have been suspended for the duration of the Christmas holidays, which makes
96
Christmas shopping extremely difficult for the disabled? Why should that small number of spaces be removed for the whole of the Christmas period?
Earl Howe: My Lords, the central London boroughs have particular problems with traffic congestion. Nevertheless I shall ensure that the remarks of the noble Baroness are brought to the attention of my colleagues in the discussions to which I referred.
With regard to cracking down on abuse, police and traffic wardens take action in appropriate cases where they can. However, the difficulty is one of verification. The new scheme makes verification a great deal easier, and holders of the cards should in turn be deterred from allowing any misuse.
Lord Underhill: My Lords, in view of the widespread acceptance of the new scheme and the inclusion of a photograph, does the Minister agree that there should be strict enforcement of the new scheme? When we have discussed various aspects of road traffic law we have emphasised time and again that there is little point in having new laws unless they are enforced. Will the Government pay special attention to ensure that the police, traffic wardens and/or parking attendants carry out the law?
We welcome any move to assist disabled persons who at present are exempted from parking in the four London boroughs. It will be vital for those disabled persons to be able to move around London when they visit.
Earl Howe: My Lords, I share the noble Lord's last sentiment. We are doing all that we can in that regard.
Whether police powers should be increased in some way is a difficult matter. The Government are considering measures which would give police powers to demand inspection of the orange badge, a power which they do not currently have. However, we feel that for the time being their powers are sufficient.
Lord Stallard: My Lords, will the noble Earl enlarge on a previous reply? In what way does the suspension of disabled persons' parking spaces help the problems of the inner London boroughs?
Earl Howe: My Lords, that question is best addressed to the boroughs themselves.
Lord Stallard: My Lords, the noble Earl mentioned that such spaces were suspended because the boroughs have problems. I ask what problems will be helped by the suspension?
Earl Howe: My Lords, I believe that is a question for the boroughs. I mentioned it because it is up to the boroughs to decide how they manage their parking spaces. Although I understand the relevance of the point which the noble Lord makes, I cannot answer for the boroughs.
Lord Glenamara: My Lords, is the noble Earl aware that there is a whole lot of the United Kingdom outside London? Is he aware that some of the most difficult places in which to park are small country towns? Will he ensure that there are sufficient parking spaces in such places for the disabled?
Earl Howe: My Lords, I was aware of the first point. I believe that one of the main problems to which the noble Lord may refer is pedestrianised precincts. I recognise that pedestrianised areas in some town centres cause difficulties for disabled people. The Department of Transport issues guidance to local authorities encouraging them to consult disabled organisations and to take account of the needs of disabled people, in particular in town centres. However, ultimately it is a local authority matter. There is no obligation on them to give the vehicles of disabled persons unrestricted access to pedestrian areas.
Lord Campbell of Croy: My Lords, with regard to the question raised by the noble Lord, Lord Glenamara, will my noble friend agree that one of the great successes of the 1970 Act—of which I was one of the sponsors in another place—was that it brought in a system where local authorities throughout the country, including Scotland, were able to issue orange badges which were then accepted everywhere in the country?
Earl Howe: My Lords, I fully agree with my noble friend.

Kenya: Human Rights
2.56 p.m.
Lord Judd: My Lords, in the absence through ill health of my noble friend Lord Ennals, at his request I beg leave to ask the Government the following Question:
What is their attitude to the denial of human rights in Kenya in the light of the Harare Declaration of Commonwealth Heads of Government.
Lord Cavendish of Furness: My Lords, Her Majesty's Government deplore abuse of human rights wherever it occurs, and the Kenyan Government have been made well aware of our anxieties over the restraints on freedom of expression and assembly in Kenya.
The British Government therefore warmly welcome the reported decision of the Kenyan Government to move speedily to a repeal of Section 2A of the Kenyan Constitution and to the holding of multi-party elections in Kenya next year. This represents a major advance in implementation of the pledge made by Commonwealth Heads of Government to work with renewed vigour to promote democracy and fundamental human rights.
Lord Judd: My Lords, I thank the noble Lord for the reply. However, is he aware that there will be widespread support in this country for the stand that the Government have made in this respect? Is he also aware that for many working in the front line of economic and social development in the third world, the context of democracy and freedom is absolutely essential to progress, but that if that policy is to carry weight, consistency is essential? For example,
98
Indonesia is as important as Kenya. While the policy is being pursued, it is essential to protect the needs of the poorest and most vulnerable members of society.
Lord Cavendish of Furness: My Lords, first, perhaps I may say how sorry I am to hear that the noble Lord's noble friend is in poor health. I hope that he will pass on my best wishes. I was grateful for the noble Lord's opening remarks. I can only agree with everything that he said.
Lord Cledwyn of Penrhos: My Lords, I know that the whole House appreciates the close ties that this country has enjoyed with Kenya over a long period of time. However, is the Minister aware that there is a good deal of disquiet in this country and elsewhere about the tardy way in which the Government have regarded the problems of Kenya and the development of an oppressive and cruel regime? Will he say what actions the Government are taking to indicate their displeasure and disagreement with those policies? For example, will he say what aid Britain is giving to Kenya at present? We support the Government's late conversion to taking some action. However, is he aware that Canada and the United States have been far more active in making their opposition to that government known?
Lord Cavendish of Furness: My Lords, we speak frankly to the Kenyans about our anxieties on human rights and political reforms. We were very disappointed at the Kenyan reaction to the rally organised by proponents of the multi-party democracy and to their arrest. We spoke forcefully on that occasion. The criteria which guide our aid policy have been clearly set out. We take into account many factors including respect for the rule of law, human rights, market principles and good economic management, pluralism and public accountability. To those, Kenya is no exception.
Lord Cledwyn of Penrhos: My Lords, can the Minister go further and say to what extent the declaration has influenced the Government in their aid policy towards Kenya? He did not answer my question. Do we still continue to give the same aid? Have we reduced it or does it not exist?
Lord Cavendish of Furness: My Lords, we and other donors will be looking for further indications that Kenya is committed to a programme of economic and political reform before considering further aid pledges. That approach was strongly endorsed at the meeting of the donors in Paris on 25th and 26th November.
Lord Bottomley: My Lords, is the Minister aware that Odinga, who was number two to Kenyatta and helped to build up the independence of Kenya, has been denied human rights for a long time? Have the Government made any specific representations on his behalf?
Lord Cavendish of Furness: My Lords, will the noble Lord tell me to whom he is referring? I am afraid that I missed the name.
Lord Bottomley: My Lords, I was referring to Odinga.
Lord Cavendish of Furness: My Lords, the impression that I have is that human rights have been restored to everyone to whom they were previously denied.
Lord Molloy: My Lords, is the Minister aware that those of us with a close interest in and considerable knowledge of Kenya will heartily welcome the Government's new approach, despite its lateness, as will tens of thousands of African Kenyans? There will not be a great deal of support for the policy from white Kenyans. However, will the Government press ahead as fast as they can in order not to let down the tens of thousands of black Kenyans who believe that a new life is offered to them by our Government's proposals?
Lord Cavendish of Furness: My Lords, the noble Lord is right in saying that the news of the decision of the Kenyan Government will be welcomed by tens of thousands of Africans. Indeed, it will be welcomed even more widely.
Lord Hatch of Lusby: My Lords, while welcoming the new moves by the Moi Government in Kenya on pluralism, does the Minister realise that he was incorrect in saying that human rights have been restored to all those in Kenya who were deprived of them? There are many Kenyans in prisons who have suffered torture and many are exiled. The coming of plural government does not necessarily restore those rights to them. Will the Minister look into the matter more deeply before coming to the House and saying that the Government believe that human rights are restored to all to whom they were refused?
Lord Cavendish of Furness: My Lords, I must accept from the noble Lord, Lord Hatch, that my answer was too sweeping. I am not aware of individual cases. However, I am under the impression that President Moi is making an effort to reverse previous policies and to root out corruption.

Business
3.3 p.m.
Lord Hesketh: My Lords, it may be for the convenience of the House to know that the Committee stage of the Local Government Bill will be adjourned at about 7.30 p.m. for about one hour and that during this adjournment the Maximum Number of Judges (Scotland) Order 1991 will be taken.

Registered Foreign Lawyers Order 1991
The Lord Chancellor (Lord Mackay of Clashfern)The Lord Chancellor (Lord Mackay of Clashfern) rose to move, That the draft order laid before the House on 18th November be approved [4th Report from the Joint Committee].
The noble and learned Lord said: My. Lords, this order comes before your Lordships as a consequence of the Courts and Legal Services Act 1990. That Act
100
removed the statutory bar to solicitors in England and Wales entering into partnership with persons who are not themselves solicitors.
Section 89 of the 1990 Act paves the way for solicitors in England and Wales to enter into partnership with practising members of any legal profession that is regulated within a jurisdiction outside England and Wales. With effect from 1st January 1992 Law Society rules will be amended to allow these multi-national partnerships of lawyers to be created. The ability of foreign lawyers to practise in partnership with solicitors will enable firms to provide a wider range of services to clients, especially in matters having an international element.
Any foreign lawyer who wishes to enter into partnership with a solicitor must apply to the Law Society to be registered. Once he is practising in partnership with a solicitor the foreign lawyer will be subject to the same rules as solicitors as regards professional practice, conduct and discipline. For example, he will have to maintain professional indemnity cover for any claims made against him. He will also be bound by the same accounts rules. However, by virtue of being a member of the partnership he will not be able to undertake areas of work that are by law reserved to solicitors; that is to say, advocacy, litigation, conveyancing and probate. However, if he is a lawyer qualified in an EC member state he will continue to enjoy limited rights to practise in this country in at least some of these areas.
The purpose of this draft order coming before your Lordships is not, however, to gain approval of the principle of solicitors entering into partnership with overseas lawyers. That is a matter which the law already permits. The purpose of this draft order is to secure that two legislative provisions can apply to registered foreign lawyers as they do to solicitors. In other words, in order to facilitate the running of these new partnerships one should be able to treat references to solicitors in these two provisions as including references to registered foreign lawyers.
The first of the two is at paragraph 2 of the draft order and relates to Section 85 of the Solicitors Act 1974. The effect of this section is that, where a solicitor has an account with a bank or building society, the bank or building society does not face a claim from a client if money in the account is misapplied by the solicitor. Furthermore, the money in the account is not to be taken by the bank or building society to meet personal liabilities of the solicitor.
The second provision is at paragraph 3 of the draft order and relates to regulation 8 of the Banking Act 1987 (Exempt Transactions) Regulations 1988. This exempts a solicitor with whom client money is deposited in the course of his profession from being regulated as if he were a bank.
I hope that your Lordships will agree that both these provisions should apply to registered foreign lawyers in the same way as they apply at present to solicitors. I beg to move.
Moved, That the draft order laid before the House on 18th November be approved [4th Report from the Joint Committee]. —(The Lord Chancellor.)
Lord Mishcon: My Lords, the noble and learned Lord the Lord Chancellor, with his usual clarity, has indicated that a particular stage has been reached in a revolutionary process. That process was initiated by the Courts and Legal Services Act 1990 which the noble and learned Lord piloted through this House. I know that he will not regard it as an impertinence if I bring to the attention of the House the fact that the ability to enter into partnership with foreign lawyers led to a definition of "foreign lawyers" in the Courts and Legal Services Act. Included in that definition are Scottish lawyers.
It is a revolutionary process and one in which the House will be interested. The order will result in a broader service to the people of this country by allowing an international element of speciality to enter into legal practice. However, I am hoping, as is the Law Society, that in addition it will ensure that London is the major centre for international dealings in law. The order will take effect from 1st January 1992 but 1st January 1993 is a more familiar date to members of the EC. In giving permission for such merged partnerships of foreign and English lawyers we shall have acted ahead of that significant date.
We have a law and a language which are common in a large part of the world. It may be as true in the future as it is now that our Commercial Court is the envy of almost every other system of law. Furthermore, London is the seat of arbitration because its courts are so adept in carrying out those arbitrations in accordance with English law or any foreign law which may be applicable.
The Law Society is anxious that your Lordships should know of the great appreciation felt within the profession towards the noble and learned Lord the Lord Chancellor. It is grateful for his personal interest in the matter and for the way in which he and his department have speeded up complex procedure. It is estimated that by the end of 1992 more than 1,000 foreign lawyers will have registered. I convey to the noble and learned Lord the thanks of my profession and the thanks of the House.
Lord Hailsham of Saint Marylebone: My Lords, when my noble and learned friend replies—and perhaps I missed this—will he explain what is the situation as regards the profession of the English barrister in this country, the faculty in Scotland and the Bar in Northern Ireland and in the Republic of Ireland?
The Lord Chancellor: My Lords, this provision is intended to allow partnership with solicitors in England. Members of the profession who are regarded by the Law Society as properly to be in partnership with English solicitors will be able to register in this matter.
The present situation in Scotland is that the rules of the Law Society of Scotland would not permit Scottish solicitors to form such partnerships, and the rules of the Bar would have a bearing on that too. Therefore, the idea of the provision is to allow solicitors in England to be in partnership with those from other jurisdictions who could appropriately be in partnership with them.
102
I thank the noble Lord, Lord Mishcon, for his kind remarks and his support for this measure. It is an extremely important development, vital to the standing of this country in the field of international law, and in particular as regards London.
Lord Mishcon: My Lords, in the reply which the noble and learned Lord gave to the noble and learned Lord, Lord Hailsham, he mentioned English solicitors. I know that he will wish it to be pointed out that the measure covers Wales as well.
The Lord Chancellor: My Lords, I am grateful for the correction, particularly with the noble Lord the Leader of the Opposition sitting there. It would be inappropriate for me not to acknowledge the great debt which our law owes to those who come to serve it from the Principality.
On Question, Motion agreed to.

Local Government Bill [H.L.]
3.12 p.m.
The Minister of State, Department of the Environment (Baroness Blatch): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Baroness Blatch.)
On Question, Motion agreed to.
House in Committee accordingly.
[The Principal Deputy Chairman of Committees in the Chair.]
Clause 8 [Application of competitive tendering to professional services etc.]:
The Principal Deputy Chairman of Committees (Baroness Scrota): My Lords, before calling Amendment No. 83A I should point out to the Committee that if it is agreed to, I cannot call Amendments Nos. 84 to 90 inclusive.
[Amendment No. 83A not moved.]
[Amendments Nos. 85 and 86 not moved.]
Viscount Mills Viscount Mills moved Amendment No. 87:
Page 8, line 30, at end insert:
("(c) the evaluation of the environmental standards which persons willing to carry out the work are able to meet.")
The noble Viscount said: The aim of Clause 8(2) is to maintain, or indeed improve, the existing standards of service for professional and technical services which are put out to compulsory competitive tendering. It is proposed to achieve that aim by ensuring that tenders cross a pre-set quality threshold before price is even considered. However, there is no specified requirement for environmental standards to be met.
The purpose of the amendment is to ensure that potential tenderers for local authority services are able to meet the necessary environmental standards in the course of carrying out their functions. The lack of that requirement could result in the diminution of environmental standards of service because the focus could be totally on financial and other non-environmental criteria.
I accept that at first glance it may not he obvious as to how local authority professional and technical services, if misdirected, could cause environmental damage. Therefore, I give an example. The promotion of tourism is one service which the Government propose to put out to compulsory competitive tendering. Tourism is a growth industry which increasingly involves local authorities. The majority of local authorities now have a tourism policy for their area. Without the appropriate checks and balances, tourism development can have considerable impact on the environment. Let us take, for example, an authority in a coastal area which decides to put its development of tourism policy to tender. Under the Bill as drafted, the authority would consider the tender in terms of cost, economy, efficiency and effectiveness. Not surprisingly, the potential contractor may formulate a policy which sets priorities for the development of such activities as water skiing, jet skiing, footpath construction and so on.
As the Committee will know, coastal areas provide essential habitat for many forms of wildlife and especially birds, which depend on undisturbed areas both for feeding and roosting. Because Clause 8 does not include specified environmental safeguards, there is a serious risk that tendering for tourism, as in the example, could have a damaging effect on our environment.
The amendment would help to prevent such a situation occurring and thus improve the Bill. It would require local authorities, in assessing the relative value of tenders, to take account of environmental aspects. In turn, that will encourage the tenderers to think environment as well as profit. To be effective, such environmental safeguards must be built into the legislation. I beg to move.
Lord Norrie: I support this amendment. I welcome the Government's objective of seeking value for money in local service provision. I welcome also the emphasis placed by my noble friend Lady Blatch on Second Reading, when she emphasised that quality is an important consideration in the extension of compulsory competitive tendering.
However, I believe that environmental standards should be considered to be a distinct part of the quality of services. The public are increasingly looking to local authorities to ensure high environmental standards in the provision of a range of services. The consequences of yesterday's Division will, I believe, make that all the more pertinent. I should not like to see the search for efficiency and reduced costs leading to a decline in the environmental standards of local services. My noble friend Lord Mills described how that may occur with tourist promotion.
Clearly, the Royal Institute of British Architects has shown through its lobbying that it is concerned that CCT should not be allowed to cause a decline in the standards and quality of buildings. That is important whether it be in the town or countryside.
Issues such as energy conservation in buildings, appropriate building materials and design which enhances the character of the surroundings are all important environmental considerations. They should be taken into account in the tendering process.
104
Environmental considerations are relevant to many other services which are likely to be affected by the provisions of the clause; for example, engineering services and the management of property and construction. One way of ensuring that environmental standards are maintained and improved is to ensure that they are taken into account alongside other quality considerations as well as financial terms and questions of cost.
Therefore, this amendment requires tendering procedures to address specifically the environment as a distinct aspect of service standards. I hope that the Minister will be able to reassure the Committee that environmental standards will be maintained.
Earl Howe: I appreciate the concerns which have prompted the amendment in the names of my noble friends Lord Mills and Lord Norrie. Local authorities have a range of responsibilities with important environmental implications. The needs of the environment must be respected whether authorities employ their own staff to discharge their responsibilities or turn to private companies to do work on their behalf.
Our consultation paper, Competing for Quality—Competition in the Provision of Local Services, presents our proposals to extend CCT to several professional services, and in particular to the so-called construction-related services; architecture, engineering and property management. Clearly, the way in which these services are performed can be of especial relevance to both the built and the natural environment. Certainly, those employed or appointed by local authorities to take forward the design of buildings or roads must be conscious of environmental concerns and capable of safeguarding them. There can be no doubt on that score.
However, I do not consider that the right way of addressing these concerns is through the approach proposed in the amendment. Clause 8(2) (a) already provides for a separate evaluation of the quality of tenders and of those who submit them. We are ready to consider what the components of such a quality evaluation might be, but one could well be the professional experience of tenderers relevant to the work subject to CCT. It may be that relevant environmental experience could appropriately be included if the work subject to CCT clearly called for such experience.
More fundamentally, however, I consider that the essential mechanism for addressing environmental concerns in work which is, or will be, subject to competition is the tender specification, which will be as important for professional services as for the work already subject to CCT under the 1988 Act. It is vital that the local authority in each case prepares a well-considered and clearly comprehensible specification, which will make it clear to all concerned—the local authority as client, the successful tenderer as contractor, and the local community as customers—exactly what work has to be done, to what standard and over what period. If the specification is right, and the CCT process attracts the right competitors, the service delivered will meet the standards set, be they performance-related, or environmental. I hope

105
therefore that with that explanation of our intentions my noble friends will see fit not to proceed with their amendment.
Baroness Nicol: Before the noble Viscount, Lord Mills, responds, I wonder whether the Minister can clarify a matter. Is he saying that guidance has already been, or is about to be, issued to local authorities as to how they should get environmental protection under the circumstances? I am not clear whether the Minister is leaving it to the local authorities or whether the Government are proposing to issue guidance. If that is the intention of the Government, can the Minister say what formula has been or will be applied? How will he ensure, if it has not already been done, that in property management consultancy exercises due regard is paid to environmental costings? I am not at all sure how the Minister proposes to bring these matters into a reasonable and understandable exercise for the local authorities.
Lord Howie of Troon: I am interested in what the Minister said about the preparation of the brief. That is clearly of extreme importance in a matter of this kind. It strikes me that a brief on a technical and environmental matter may be drafted either by the local authority or other public authority, or by a consultant brought in by the local authority. If the local authority decided that it required the help of a consultant to draft the brief, can the Minister say whether that would be subject to CCT?
Earl Howe: In answer to the noble Baroness, Lady Nicol, I must point out that there are regulations already in existence extending principally from the planning and compensation Act which covers that kind of situation. However, the department will be issuing guidance in due course although the precise form that it will take is still unclear. I shall write to the noble Baroness. I undertake also to write to the noble Lord as regards the point he raised about consultants.
Baroness Hamwee: I thank the noble Viscount and the noble Lord who introduced this issue. It is an important one on which we shall spend some time. Following on what the noble Earl, Lord Howe, said, I too understood that the word "quality" in subsection (2) (a) should extend to the environment. I hope that in evaluating quality we should also be talking about the quality of life as one of the aspects of the quality of services. I was a little disturbed when he said that quality could include environmental criteria. I hope that he will take back the message which has clearly come from all sides of the Committee that the interests of the environment are uppermost in everyone's mind.
I welcome very much his comments about the design of specifications and the scope which he seems to indicate may be available to local authorities for taking that into account. That will be a very welcome message to take back though I dare say it is a matter to which other Members of the Committee and myself will return.
Earl Howe: I fully agree with the sentiments that the noble Baroness expressed. It is worth remembering
106
that it is for local authorities themselves to determine the quality threshold which they are going to adopt. That is why I say that it could include environmental considerations. As we discussed yesterday, environmental anxieties are part and parcel of what constitutes effectiveness in this context. I hope that that message is understood.
Viscount Mills: It was perhaps a predictable response that the amendment would be covered by Clause 8(2) (a) as regards quality. I have to disagree. The quality of service is an intrinsic factor whereas its effects on the environment are extrinsic and may be quite independent of the quality of service which is supplied. The example which I have given as regards the tourist industry clearly illustrates that. The tourism policy adopted could be of high quality and financially attractive and yet still be highly detrimental to the environment.
The Minister may be aware that a precedent has been set by the National Audit Office whereby environmental costs have been included in the cost-benefit analysis of publicly funded schemes. I go back to my original comment when introducing this amendment that to be effective such environmental safeguards must be built into the legislation. In those circumstances, will my noble friend the Minister consider bringing forward an amendment at Report stage which makes it clear on the face of the Bill that any consideration of tender price will include environmental costs or benefits?
Earl Howe: I take note of my noble friend's comments. Environmental considerations are a matter for weighing up with many other considerations, as we mentioned yesterday. While I am not in a position to give him the assurance that he seeks, I can say that it is certain that environmental considerations will be built into both the specifications that local authorities choose to adopt and into the quality threshold as well.
Viscount Mills: Before the Minister sits down perhaps I may take this opportunity to state that the environment is not just another factor. It is not just a criteria to be considered along with freedom of information, women's issues or equal opportunities as the noble Baroness, Lady Hamwee, suggested yesterday. Important as these matters are, without the environment there would be nothing to consider. Ultimately we are dependent on the environment and not it on us.
Lord Tordoff: Is the noble Viscount aware that without women there would be nothing to consider either?
Earl Howe: As I said, local authorities already have obligations for environmental considerations as they relate to measures in the Planning and Compensation Act, and the Environmental Protection Act still remains in place. That is not affected or invalidated by the Bill.
Viscount Mills: I thank my noble friend for his comments. I may wish to return to the matter at Report stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
3.30 p.m.
The Principal Deputy Chairman of Committees: In calling Amendment No. 88 the Committee should be aware that if it is agreed to, I cannot call Amendment No. 89.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 88:
Page 8, line 32, leave out from ("consult") to end of line 33 and insert ("and take account of the views of the National Consumer Council, National Council of Voluntary Organisations, relevant professional bodies and the local authority associations in England, Wales and Scotland.").
The noble Lord said: When Amendment No. 88 was drafted the issue of consultation did not have such widespread significance as it has now. In view of the amendment carried last night, Clause 8 and the orders under it take on a rather different aspect from that which they took in the Government's original drafting. However, I thought it worth retaining the amendment on the Marshalled List and detaining Members of the Committee for a few minutes to discuss the subject. The whole issue of consultation on the extension of compulsory competitive tendering rather than merely on the orders under Clause 8(1) deserves further consideration in the light of last night's decision by the Committee.
From the outset I must say that such evidence as there is regarding compulsory competitive tendering in the past is by no means as favourable to the Government's claims as they seem to believe. That is particularly so when one considers that Clause 8 as now drafted extends the quality considerations not merely to the architectural and engineering professions—as the consultation paper does—but to the whole range of competitive tendering for local government services.
I do not know what the department said to the press regarding the effect of last night's amendment, though Some curious reports have been coming back to me. However, it is clear that last night we did not destroy Clause 8 at all. In fact we extended the quality threshold argument to the whole of compulsory competitive tendering rather than to just a small part of it, and that is quite apart from what we did in upholding the principle against Henry VIII legislation.
Before we look at consultation on specific orders perhaps we should look at the consultation already taking place as regards Clauses 8 to 11 of the Bill and Schedule 1. In other words, perhaps we should be looking critically at the consultation paper Competing for Quality which has already been published. That paper no longer represents the Bill before Parliament. It confines the discussion of quality to two paragraphs —2.4.8 and 2.4.10—and refers only to quality considerations in proposed new procedures for architects and engineering services. Now that quality covers the whole range of competitive tendering surely the consultation paper is misleading.
As I say, I do not know whether the department has picked up on the point. Certainly local authority associations have done so. I am authorised to say that all local authority associations—the Association of County Councils, the Association of District Councils, the Association of Metropolitan Authorities
108
and the Convention of Scottish Local Authorities—support the demand that I now make that the consultation paper be withdrawn and revised. They do that regardless of the political complexion of their members; they do that in the interests of local government as a whole.
It is not satisfactory to have a consultation paper to which local authorities are expected to respond when it proposes quality as a factor for only two services although it is now applicable to all the services. As it was not satisfactory for the consultation paper process to be carried on at the same time as the procedures of this Chamber, it becomes even less satisfactory when the consultation paper is no longer adequate for the purpose. With the leave of the Committee, I am taking the opportunity offered by the amendment, which calls for a more limited but more effective form of consultation with local authority associations, voluntary organisations and others, to put the point to the Government as clearly as I can that the present consultation paper should be withdrawn and the Government should reconsider their position on Clause 8 and the succeeding clauses. I beg to move.
Baroness Blatch: Two points are implicit in what was said by the noble Lord, Lord McIntosh. One of those points is that he appears to imply that somehow or other the Government believe that quality is not a factor in other services for competitive tendering, and that somehow it applies only to two specific services which are the subject of the Bill. That is not true. We are advocating that quality as such is dealt with in different ways for different services.
The effect of last night's amendment means that quality must be taken into account in precisely the same way for all services. That cannot be sensible. We are saying that it will be necessary to take quality into account in different ways for different services.
As the noble Lord pointed out, the purpose of the amendment is to require the Secretary of State to consult widely on any order that he may wish to make under Clause 8. The organisations named have all been given the opportunity to comment on the principle of the Government's proposals. What is now sought, in addition, is a requirement that they should be consulted on the detail of any proposed order. That would make the consultation process unnecessarily unwieldy, particularly if other organisations which have equal claims to be consulted, such as those representing chargepayers, were included. Perhaps I may remind your Lordships that a Clause 8 order would modify the CCT procedures in connection with the extension of CCT; it would not itself extend compulsory competitive tendering.
Of course I understand the wish of a wide spectrum of organisations to have the opportunity to comment on our proposals, and, as far as possible, the Government try to respect that wish. However, those organisations are mainly interested in the standards of service delivery and that will remain in the control of the local authority client. Indeed, what CCT affects is the efficiency with which those standards are achieved. Furthermore, I doubt whether those organisations, with the exception of the local authority associations, would actually wish to contribute to the detailed

109
drafting of an order under Clause 8. We shall certainly consult the local authority associations again when we reach the point of turning any firm proposals into secondary legislation.
Finally, the reference to local authority associations would mean that virtually any body describing itself as a local authority association, however unrepresentative, would have the right to be consulted on a Clause 8 order. I am certain that the noble Lord opposite does not wish that, and more certain that it is not the wish of the Committee. The amendment is unneccesary. Consultation is a real exercise and the fears of the noble Lord are unfounded. I ask the Committee to reject the amendment.
Baroness Carnegy of Lour: Before the noble Lord replies, I should like to say that I hope he does not intend to press the amendment. He has completely forgotten consumers and voluntary organisations in Scotland, though he remembered the local authorities in Scotland. That is quite extraordinary and the amendment simply will not do.
Lord Howie of Troon: I am a little surprised that we are debating this matter today. I thought that the events of last evening would lead the Government to withdraw to their various havens in order to cogitate how to proceed on Clause 8. I see the Minister shaking her head and of course I do not expect her to agree with me immediately; but she will in due course.
The clause is now a pile of wreckage and should be taken away. The Government should consider what to do next and bring the clause back repaired, if they must bring it back at all. I do not wish to pursue these lofty thoughts at any great length—noble Lords will know that that is not my way. I want to support my noble friend Lord McIntosh in Amendment No. 88 and refer in passing to my own Amendment No. 89, which I fear would fall if Amendment No. 88 were agreed to. I say that with great feeling because last night I had tabled Amendment No. 38 when we agreed Amendment No. 37 and I was squeezed out then. I should not like that to happen twice in two days.
The point I wish to make is a very narrow one. It refers to the specific groups which are mentioned in Amendment No. 88. I am asking that the consultation process should include the professional institutions. I think I am right to speak to Amendment No. 89 under Amendment No. 88, although it is not grouped, because I am sure that anything which the Government may say about professional bodies under Amendment No. 88 they would also say about professional institutions under Amendment No. 89.
I raise the point for this reason. I do not believe that the Government understand the nature of the in-house professional team. Or, if they do understand it, they have not made it plain in the legislation. The in-house professional team—I refer specifically, as noble Lords would expect, to those involved in architecture and engineering with whom I am well acquainted—has two functions. First, it acts as an internal consultant performing a professional function to professional standards in exactly the same way as
110
any other professional consultant; that is, professionally, the local authority architect is the same as an architect in private practice. He has other duties which are different, but professionally he is the same.
The second function which the in-house team carries out is equally important but different. It acts as a professional client, guiding and advising the authority, drawing up the brief, as we mentioned earlier on, selecting outside consultants and monitoring their work. So there are two different functions to perform. Both are professional functions and they are both performed to a total professional level of competence.
That is important because it provides a fully professional career for the architect or engineer in the public service. Fully professional staff are attracted to it. The Institution of Civil Engineers has around one-third of its members in the public service. The number is hard to define because the definition of "public service" changes quite a bit from time to time with privatisation. But a sizeable number of professional engineers and architects are in the public service. They are attracted to the public service because it gives them a fully professional career. If it transpires that the functions which they are to perform are in any way diminished, the attractions of these professional careers will be diminished and the standard of the staff attracted into the public service will be very much reduced. It will be very much reduced for obvious reasons. If the attractions of the posts are less than those in private practice, architects and engineers will not come into the public service. It would be a great mistake for the Government to insist on CCT, with its emphasis on the market. Despite what the Minister has said about quality, I believe that the market rules in this respect and quality is certainly not the major factor.
I think the Government are mistaken and should certainly consider consulting with the professional architectural and engineering institutions, and others which may well be appropriate, in the detail of how their schemes are to be carried out.
Lord McIntosh of Haringey: Perhaps I could console my noble friend Lord Howie and the noble Baroness, Lady Carnegy. I do not see the difference. I agree with everything he says, but I do not see the difference between professional bodies in my amendment and professional institutions in his amendment. I hope that on reflection he will feel that we have covered the point which he has so rightly made.
As far as concerns the point made by the noble Baroness, Lady Carnegy, in syntax it is always a question whether England, Wales and Scotland is taken to refer only to the immediately preceding phrase or to the whole range of bodies set out in the amendment. It was certainly my intention that it should refer to the whole range of bodies set out in the amendment. Therefore, although the corresponding body to the National Consumer Council is called the Scottish Consumer Council in Scotland—and I presume the National Council of Voluntary Organisations has a similar Scottish name—the intention certainly is that all parts of the amendment

111
should cover comparable bodies in Scotland. There is perfectly good precedence for this in Part I of the Bill where the draftsman gets tired of saying Audit Commission and Scottish Accounts Commission and reduces it to Audit Commission when clearly the Scottish Accounts Commission is included.
3.45 p.m.
Baroness Carnegy of Lour: The Labour Party, which controls the vast majority of local authorities in Scotland, should not insult colleagues by failing to mention the two Scottish bodies, which are totally separate. That is quite honestly ignorance on the part of the noble Lord and I was just trying to appraise him of the fact that his amendment will not do. That is all.
Lord Howie of Troon: I do not wish to get involved in any party squabble across the Floor. I fully accept that his bodies include my institutions and we are both agreed—as is almost always the case.
Baroness Blatch: My noble friend makes an important point and I have no doubt that the noble Lord, Lord McIntosh, has noted it. This whole issue is about when the talking has to stop. I have explained that a great deal of consultation is going on all the time with local authority associations, voluntary organisations and also with the professional bodies. It has to be said that the professional bodies are enormously helpful when, for example, it comes to defining quality thresholds. We shall be talking to a number of professional bodies about this but at some point the talking has to stop, and it is for the Government to put an order based on the results of that consultation before the Houses of Parliament and for Parliament to decide.
The noble Lord, Lord Howie of Troon, made reference to this Bill being in a mess and that we should all just forget it and leave Clause 8 alone. I should say to him that the Bill is still very much intact. The Secretary of State's power to extend competitive tendering is entirely in place. The effect of the amendment last night reduces the Secretary of State's flexibility to treat definition of quality in different ways for different services. In other words, it takes away what I believe is his ability both to sensitively and effectively deal with the definition of quality. That is what we are saying: a reduction in flexibility. That point I am absolutely certain will be addressed as the Bill proceeds through this House and through another place.
Lord Howie of Troon: I did not say that she should leave the clause alone. I said that she should bring it back repaired and in a seaworthy condition—if that were possible.
Baroness Blatch: I think the noble Lord's particular phrase was "to go away and cogitate". The effect of the amendment has reduced flexibility: that is all it has done. The policy of the Government is in place and the ability of the Government to extend competitive tendering is also in place. We are dealing with the ability of the Secretary of State to deal sensibly, effectively and sensitively with the definition of quality. We believe that that is important; noble Lords
112
opposite clearly do not. We shall certainly be addressing that as the Bill passes through both Houses.
Lord Howie of Troon: I am terribly sorry, but perhaps the Minister will reflect that I have tabled several other amendments, all of which include the word "quality". I cannot let her say that I, at least, am not interested in quality.
Baroness Blatch: I have not made that suggestion. Perhaps I may say to the noble Lord that the ability to deal differently with different services in a sensitive way has been denied to the Bill so far by the success of the amendment last night. I believe that the Government's record on consulting Scottish local authorities, English and Welsh local authorities and indeed the professional bodies is a good one and will continue to be so.
Baroness Hamwee: While I do not for one moment suggest that the Scots should not be consulted—I hope that the noble Baroness, Lady Carnegy, will understand that that is a genuine comment—I support the amendment. The Minister has spoken of the need to cajole people into competitive tendering by the compulsion that is the subject of the Bill. Having myself cogitated on that phrase, it seems to me that the best way to cajole is to persuade and the best way to persuade is by full debate. The very number of amendments which we would have debated had last night's Division not gone as it did shows the widespread anxiety about how the extension of CCT might proceed, and shows the great wish of people from so many services and sectors to have their say at the appropriate point.
Given the experiences that we have had of competitive tendering, I have to say to the Minister that the talking should not stop at the point where the Government have listened but have not indulged in further debate with those who have made their point. Consultation is quite a long process if it is to be successful. For it to be successful it has to persuade those taking part in it.
Though the example is quite different there are serious lessons to be learnt from the soap opera of the television franchises. If that did not contain some small lesson for discussion about how quality and the extent of consultation should be considered, then it is one thing that we have missed.
Baroness Blatch: Perhaps I may say in response to one of the points made by the noble Baroness that it is quite normal to consult on a draft order that comes before the House. Clause 8(3) includes the words "Before making an order". When an order is made, the Government place it before the House. At that point it must be for the Government to make the final recommendation and for each House of Parliament to confirm or reject that recommendation.
Lord McIntosh of Haringey: I rather thought that at some stage the Minister would seek to give the Committee her view on what Clause 8 now means. I am sorry that she should feel it necessary to give the House a view which in my opinion is totally distorted.

113
She spoke affectingly about sensitivity and flexibility as if that were the object of the original wording of Clause 8. That is certainly not the case. What we have said in the amendment is that the provisions should be applicable on a common basis. That is the minimum protection required in order to make sure that the Secretary of State is acting fairly as between one service and another and one local authority and another and is not simply taking these powers, which, I must repeat, were powers to amend primary legislation, to discriminate at his own whim between one service and another and between one local authority and another. That is what Clause 8 stated until the amendment was carried last night. All the talk about flexibility and sensitivity is simply a gloss on what the clause stated and does not reflect either the original drafting or the drafting of the amendment.
What the Minister has chosen not to do in her reply to the amendment is to respond to my important and urgent point about the consultation document which is now before the public and before local authorities. I put it again to the Minister that the consultation document no longer reflects the Bill before Parliament. It no longer reflects the widening and widened requirements that quality should be considered in all compulsory competitive tendering, and it no longer reflects the more limited powers which the Secretary of State now has under the Bill to intervene in a differential way between different local authorities and different services. I put it to the Minister that the proper course now would not be to continue with a sham consultation process but to withdraw the paper and put it out again in a revised form.
Baroness Blatch: I can give the noble Lord an absolute assurance that consultation will go ahead as planned and that the loss of one amendment on one evening reducing a measure of flexibility on the part of the Secretary of State, which was the intended use of that power, will not invalidate the importance and the essential nature of that consultation process. It will continue, and it will continue unaltered.
Lord McIntosh of Haringey: The Government are reducing the credibility of the consultation process to which they claim to be committed. All the local authority associations, regardless of political complexion, have asked that the consultation paper be withdrawn. I hope that the Committee will consider it right to express its support for proper consultation by agreeing with the amendment.
Baroness Carnegy of Lour: I must ask the Committee to pay attention to what the amendment does. It asks that the National Consumer Council of England and of Wales and the voluntary organisations in England should be consulted—the Scottish organisations and the Scottish Consumer Council are completely left out. We have had that from the Labour Front Bench and the Liberal Democrat Front Bench. If the Committee votes for the amendment it will be saying something very peculiar indeed, something that will be enormously resented in
114
Scotland. I really must make the point. For that reason I hope that the Committee will vote down the amendment.
Lord McIntosh of Haringey: The noble Baroness is being uncharacteristically prickly. The words "England, Wales and Scotland" apply not only to local authority associations but to consumer councils and voluntary organisations. We could have added the words "Scottish Consumer Council" but it would have been a distinction without a difference. It is clear from the wording, as it is clear in many examples of the drafting of legislation, what is intended by the amendment. I respect the noble Baroness but I cannot take her intervention seriously. It is right that the Committee should take a view on the matter and should take the view that consultation, when it takes place, should be taken seriously by the Government. That is not the case at the present time.
3.57 p.m.
On Question, Whether the said amendment (No. 88) shall be agreed to?
Their Lordships divided Contents, 109; Not-Contents, 164.

Division No. 1

CONTENTS

Addington, L.

Howie of Troon, L.

Aylestone, L.

Hunt, L.

Banks, L.

Hutchinson of Lullington, L.

Beaumont of Whitley, L.

Irvine of Lairg, L.

Birk, B.

Jacques, L.

Blackstone, B.

Jay, L.

Boston of Faversham, L.

John-Mackie, L.

Bottomley, L.

Judd, L.

Broadbridge, L.

Kennet, L.

Brooks of Tremorfa, L.

Kilbracken, L.

Bruce of Donington, L.

Kinloss, Ly.

Callaghan of Cardiff, L.

Leatherland, L.

Campbell of Eskan, L.

Llewelyn-Davies of Hastoe, B.

Carmichael of Kelvingrove, L.

Lloyd of Hampstead, L.

Carter, L. [Teller.]

Lockwood, B.

Castle of Blackburn, B.

Longford, E.

Cledwyn of Penrhos, L.

Lovell-Davis, L.

Clinton-Davis, L.

Macaulay of Bragar, L.

Cocks of Hartcliffe, L.

McIntosh of Haringey, L.

Crook, L.

Mais, L.

David, B.

Mallalieu, B.

Dean of Beswick, L.

Mar, C.

Desai, L.

Mason of Barnsley, L.

Donaldson of Kingsbridge, L.

Mayhew, L.

Dormand of Easington, L.

Milner of Leeds, L.

Ezra, L.

Molloy, L.

Falkender, B.

Morris of Castle Morris, L.

Falkland, V.

Mulley, L.

Foot, L.

Murray of Epping Forest, L.

Gallacher, L.

Nicol, B.

Galpern, L.

Ogmore, L.

Gladwyn, L.

Parry, L.

Glenamara, L.

Peston, L.

Graham of Edmonton, L.[Teller.]

Redesdale, L.

Richard, L.

Greene of Harrow Weald, L.

Ritchie of Dundee, L.

Grimond, L.

Robson of Kiddington, B.

Hampton, L.

Rochester, L.

Hamwee, B.

Russell, E.

Hanworth, V.

Sainsbury, L.

Harris of Greenwich, L.

Scanlon, L.

Hatch of Lusby, L.

Seear, B.

Henderson of Brompton, L.

Serota, B.

Hilton of Eggardon, B.

Shackleton, L.

Hollis of Heigham, B.

Stallard, L.

Hooson, L.

Stedman, B.

Houghton of Sowerby, L.

Stoddart of Swindon, L.

115

Strabolgi, L.

Wallace of Coslany, L.

Tanlaw, L.

Whaddon, L.

Taylor of Blackburn, L.

White, B.

Taylor of Gryfe, L.

Willis, L.

Thomson of Monifieth, L.

Wilson of Langside, L.

Tordoff, L.

Wilson of Rievaulx, L.

Turner of Camden, B.

Winchilsea and Nottingham, E.

Underhill, L.

Young of Dartington, L.

NOT-CONTENTS

Abinger, L.

Harvington, L.

Adrian. L.

Henley, L.

Ailesbury, M.

Hertford, M.

Aldington, L.

Hesketh, L. [Teller.]

Alexander of Tunis, E.

Hives, L.

Allenby of Megiddo, V.

Holderness, L.

Alport, L.

Hood, V.

Arran, E.

Hooper, B.

Astor, V.

Howe, E.

Balfour, E.

Hunter of Newington, L.

Belhaven and Stenton, L.

Ironside, L.

Beloff, L.

Jellicoe, E.

Birdwood, L.

Jenkin of Roding, L.

Blatch, B.

Johnston of Rockport, L.

Blyth, L.

Killearn, L.

Boardman, L.

Kings Norton, L.

Borthwick, L.

Kinnaird, L.

Boyd-Carpenter, L.

Knollys, V.

Brentford, V.

Lauderdale, E.

Bridgeman, V.

Lindsey and Abingdon, E.

Brigstocke, B.

Lloyd-George of Dwyfor, E.

Brougham and Vaux, L.

Long, V.

Butterworth, L.

Lytton, E, L.

Caldecote, V.

Mackay of Clashfern, L.

Campbell of Alloway, L.

Macleod of Borve, B.

Campbell of Croy, L.

Malmesbury, E.

Carnegy of Lour, B.

Manchester, D.

Carnock, L.

Mancroft, L.

Carrington, L.

Manton, L.

Cavendish of Furness, L.

Marshall of Goring, L.

Chelmer, L.

Merrivale, L.

Clanwilliam, E.

Mersey, V.

Cochrane of Cults, L.

Mills, V.

Colnbrook, L.

Milverton, L.

Constantine of Stanmore, L.

Monk Bretton, L.

Cottesloe, L.

Morris, L.

Cox, B.

Mottistone, L.

Cross, V.

Mountevans, L.

Davidson, V. [Teller.]

Mowbray and Stourton, L.

Denham. L.

Munster, E.

Denman. L.

Murton of Lindisfarne, L.

Denton of Wakefield, B.

Nelson, E.

Dormer, L.

Nelson of Stafford, L.

Dundee, E.

Norfolk, D.

Eccles of Moulton, B.

Norrie, L.

Effingham, E.

Oppenheim-Barnes, B.

Ellenborough, L.

Orkney, E.

Elles, B.

Orr-Ewing, L.

Elliott of Morpeth, L.

Oxfuird, V.

Erroll of Hale, L.

Palmer, L.

Faithfull, B.

Pender, L.

Fanshawe of Richmond, L.

Perry of Southwark, B.

Ferrers, E.

Peyton of Yeovil, L.

Flather, B.

Platt of Writtle, B.

Fortescue, E.

Porritt, L.

Fraser of Carmyllie, L.

Pym, L.

Fraser of Kilmorack, L.

Quinton, L.

Gainford. L.

Rankeillour, L.

Gardner of Parkes, B.

Reay, L.

Goold, L.

Renfrew of Kaimsthorn, L.

Gray, L.

Renton, L.

Gray of Contin, L.

Romney, E.

Greenway, L.

St. Davids, V.

Gridley, I..

St. John of Bletso, L.

Grimston of Westbury, L.

Seccombe, B.

Grimthorpe, L.

Sharpies, B.

Hailsham of Saint Marylebone, L.

Shrewsbury, E.

Shuttleworth, L.

Hardinge of Penshurst, L.

Skelmersdale, L.

Harmar-Nicholls, L.

Stodart of Leaston, L.

116

Strange, B.

Ullswater, V.

Strathcarron, L.

Vaux of Harrowden, L.

Strathclyde, L.

Vivian, L.

Strathmore and Kinghorne, E.

Waddington, L.

Strathspey, L.

Wade of Chorlton, L.

Sudeley, L.

Wharton, B.

Swansea, L.

Whitefaw, V.

Swinfen, L.

Wigram, L.

Terrington, L.

Wolfson, L.

Teviot, L.

Wyatt of Weeford, L.

Thomas of Gwydir, L.

Wynford, L.

Thorneycroft, L.

Young, B.

Trumpington, B.

Resolved in the negative, and amendment disagreed to accordingly.
4.7 p.m.
[Amendments Nos. 89 to 91 not moved.]
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 92:
Page 8, line 43, leave out paragraph (b).
The noble Lord said: The Minister has been very determined to show Members of the Committee that the Bill ought to give the maximum opportunities for flexibility and sensitivity. The purpose of this amendment is not in any way to oppose the idea of flexibility and sensitivity, but to seek to find out what is in the Government's mind as regards Clause 8(5), which states that the Secretary of State shall have:
"The power to make an order under this section shall include the power—

"(a) to make such incidental, consequential, transitional or supplementary provision as the Secretary of State thinks necessary or expedient; and

(b) to make different provision for different cases, including different provision for different localities and for different authorities".

That is the kind of wording which tempts me to say, as the noble and learned Lord, Lord Hailsham, has heard me say before, that it means that the Secretary of State shall do what he likes. Therefore, why bother to have a large number of words to express that very simple thought? It is a puzzling piece of wording. It goes further in giving the Secretary of State power to do what he likes than any equivalent provision that I have so far met. No doubt the Minister will have precedents to read to me on the matter. I do not claim that I read more than a tiny proportion of the legislation which passes through this Chamber.
I must ask the Government to say how such wide-ranging powers will actually be used. For example, is it really intended that the Secretary of State shall have the power to say that local authority A must put out service X to competitive tender but that local authority B need not do so; or that local authority A shall put out to private tender services X and Y but not service Z? That is the possibility that arises from the wide-ranging wording of Clause 8(5) (a) and (b).
That leads me to wonder what are the principles upon which the Secretary of State will make his judgment in exercising those powers. Will he be responding to special pleading from local authorities or, depending upon his political background and point of view, will he be responding to special pleading from private contractors who might be interested in taking over the services? Those matters are not clear

117
from the way in which the Bill is drafted. As it stands, the power is all embracing. It is not enough merely to call it a reserve power.
I am not saying there should be no reserve power to force local authorities, under certain circumstances where they are patently not carrying out their responsibilities, to go out to competitive tender for certain services. It would be bold to say that competitive tendering was so wrong that it should not be possible, in extreme cases, for the Government to say that it should take place even when a local authority resists. I know that some of my local authority friends will not like that, but that is my view.
The wide-ranging power contained in Clause 8(5) (a) and (b) deserves a good deal more explanation from the Government than it has yet received. I beg to move.
Lord Howie of Troon: I can understand, I think, why the Government might wish to include different provisions for different localities and for different authorities, but I am not sure what "different cases" means. Does it mean different projects, projects of a particular kind, or projects in a certain cost range? What does it mean? What are the cases involved?
Baroness Blatch: We must remember that Part I of the Local Government Act applies to many different types of defined authority. It applies not just to counties, boroughs and districts, but to parishes and to development corporations. It may be that the consultation process will suggest that the provision for separate evaluation of quality and cost which we propose will not be appropriate for all types of authority. The procedures may also need to differ according to the value of the contract and the size of the authority. I believe that that is the point raised by the noble Lord, Lord Howie of Troon. There may be some circumstances where different localities merit different treatment, perhaps because of different market circumstances. This is not intended to be exclusive. There may be other circumstances where different treatment is appropriate.
The Secretary of State will not, of course, use the power in an unreasonable or discriminatory way, but it is essential that he should be able to take account of such legitimate differences when framing the orders.
I hope that the noble Lord will feel able to give way to that flexibility. The power in Clause 8(5) (b) is expressed differently from the power contained in Section 15(6) of the 1988 Act; but it has no different purpose, and we believe it to have no wide effect.
Lord Simon of Glaisdale: I am glad that the noble Lord, Lord McIntosh of Haringey, has raised this matter. My objection to the provision is different from his. He regards it as sinister. I presume to regard it as completely unnecessary. It occurs in statute after statute, and now, no doubt automatically, pops up in the computer and word processors in the department and in Parliamentary Counsel's office. Of course the Minister can make different types of order for different authorities and in different localities. That is all included. There is no need to spell it out. The only
118
reason which might now be advanced is that it has been done so often that we cannot prevent an advocate from saying, "Well it was done in a previous statute and therefore its omission here is significant". I have never known that argument succeed, but that does not prevent it being put forward in case after case.
When the Renton Committee reported in 1975, the statute book ran to three volumes. The committee remarked upon its prolixity. Ten years later, in 1985, it ran to five volumes. It not only ran to two more volumes but it embraced fewer statutes than 10 years previously. It is because we clutter up our statute book with unnecessary provisions like that that the statute book becomes more and more unwieldly. I hope that the noble Baroness, Lady Carnegy, is here to hear me say that it also becomes more and more expensive for the purchasers of the statute book.
4.15 p.m.
Lord Howie of Troon: Before the Minister replies, I am not sure that I am very much clearer about what are or are not "cases" in this respect. I should like to be clear about one point: the Minister used the two words "quality" and "cost". I did not quite catch what she said. Was she trying to imply that there might be circumstances in which the cost side of the tender was more important than the quality side, or did I just misunderstand that point?
Baroness Blatch: I did not suggest that one was more important than the other. During the course of the Bill's passage I have suggested a number of times that in some services it is necessary to define quality in a different way and more specifically because the service itself—for example, professional services—is more complex and less straightforward.
I find the arguments put forward by the noble and learned Lord, Lord Simon of Glaisdale, compelling and particularly seductive. They are different from the ones put before the Committee by the noble Lord, Lord McIntosh. I bow to the noble and learned Lord's greater knowledge of these matters. I can give him the assurance that if I am advised that the words are superfluous and that the Secretary of State will be able to act in a flexible way—as I said, recognising that there will he different sets of circumstances in which the Secretary of State will require the flexibility to act differently—and I believe that the words should be removed from the Bill, they will be. If the noble and learned Lord's advice is confirmed, as I suspect it will be, I shall see that the words do not sit on the face of the Bill merely because the provision has been included in other legislation.
Lord Simon of Glaisdale: I am very much obliged to the Minister. I cannot encourage her to believe that she will get very far in her consultations, but it is very good of her to say that she will have them.
Baroness Blatch: The noble and learned Lord underestimates me. If I believe that there is a technical explanation and that the words are superfluous in this place they will be removed from the face of the Bill.
Lord McIntosh of Haringey: I think that I should respond to the debate on behalf of the noble and learned Lord, Lord Simon of Glaisdale, as he has taken over the thrust of the argument. I was interested in the exchange which took place between him and the Minister. I should he happy to see the subsections removed on the basis that they are unnecessary. I should be even more happy to see them removed since I retain a nagging suspicion that they give the Secretary of State power to discriminate in ways which could be undesirable. That would apply to any Secretary of State, not just the present one. On the basis of the Minister's final response, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 93 not moved.]
Clause 8, as amended, agreed to.
Clause 9 [Power to define conduct as competitive or anti-competitive]:
Lord Howie of Troon Lord Howie of Troon moved Amendment No. 94:
Page 9, line II. after ("competition") insert ("in terms of quality and price").
The noble Lord said: I do not intend to detain the Committee long with this matter. Amendment No. 94 is grouped with Amendments Nos. 97 and 99 which all say much the same: that the word "quality" should be clearly placed on the face of the Bill. My general objection to compulsory fee competition is that it is likely to lead to a reduction in design quality. That is what I am talking about, whether it be civil engineering or architectural design.
This is wholly different from quality in terms of dustbin collection, street cleaning and such matters. I wish to draw the attention of the Committee to a letter from a civil engineer which was published in the magazine New Civil Engineer on 28th November. The letter was from a Mr. R. A. Hannan, a member of the Institution of Civil Engineers who lives in France. I quote his letter because it states what I wish to say as clearly as, or perhaps more clearly than, I could from the view of the working civil engineer in the working conditions in which civil engineers find themselves rather than in the rarefied atmosphere of this Committee. Mr. Hannan quotes from the report Guidelines for the design of public buildings by the Department of the Environment. It states:
"Good design need not cost more than poor design, though it may sometimes warrant extra expenditure on structure and materials".
His letter goes on:
"The opposite is the case. Good civil engineering design is that which results in the most economic use of materials. Therefore good design warrants less expenditure on structure and materials. Bad design results in clumsy, oversized, ugly structures with wasteful use of materials".
Later in the letter Mr. Hannan makes a significant comment in relation to the Bill and the reaction of clients to the fees which designers may charge. He speaks of the refusal of the client, in this case some kind of public authority,
"to acknowledge the fact that good design does cost more than poor design. More time and expenditure in the design stages involving additional site investigations, engaging additional expertise, comparison of more alternative schemes and more sophisticated calculations will result, in the long
120
run, in a more aesthetically acceptable solution, and less over-expenditure during and after construction on claims and unforeseen contingencies".
Mr. Hannan is saying something which is self evident: namely, that if we save money on the fee, we spend it later on. By saving money on the consultants' fee, we achieve poor design. We cannot possibly want that. Poor design at the beginning leads to greater expenditure in the whole life of the project. That is why I want quality to be at the front of any competitive arrangements which lead to the appointment of consultants, whether they are architects, engineers or people in similar activities.
The measurement of the quality of design is very difficult. It is not as easy as judging between two prices, but it is much more important both for the long-term economic viability of the project and also for the quality of life of the citizen. I beg to move.
Lord McIntosh of Haringey: I wish to support my noble friend's amendment. He touched on a theme to which we shall certainly return in later amendments, notably Amendment No. 102 which is concerned with this aspect. The Government rightly in their publications draw attention to the possible conflict between short-term costs and long-term benefits. The Government do not seem to recognise that the way in which contract specifications have in the past been drawn up—although with Clause 8 as amended that will be more difficult—very often local authorities have been forced to sub-optimise. In other words they have been forced to choose an option which is cheaper at the design, installation and construction stage, but which will cost more in terms of energy consumption, maintenance and so on afterwards. With his particular knowledge, the noble Lord, Lord Howie, drew proper attention to that point. I hope that the Government take it seriously.
Lord Skelmersdale: I am confused by the amendment. As a result of the Committee's activities last night, the proposition of the evaluation of quality remains very firm. It not only remains firm, but it occurs earlier in Clause 8 than the Government originally intended. I therefore dispute the suggestion of the noble Lord, Lord Howie, that quality is not on the face of the Bill.
The second reason for my confusion over the explanation of the amendment is that Clause 9 to which it refers has the heading:
"Power to define conduct as competitive or anti-competitive".
I do not see where the issue of quality comes into it, although I agree with everything the noble Lord said about the need for quality.
Baroness Blatch: Perhaps I may return to the illustration given by the noble Lord, Lord Howie of Troon, about good and poor design. He said that good design leads to more economic use of materials and that poor design can cost more and lead to more expensive use of materials. I do not argue with that. I believe that often poor design is an expensive option. Whether one uses good materials or poor materials, poor design is poor design. At some time there is a reckoning for it.

121
However, it is also possible to have good design leading to the use of expensive materials and poor design using poor materials. All that can sometimes be true. In speaking to the amendment, the noble Lord properly made the case for a sensitive and thorough definition of quality when it refers, for example, to architectural services. Thus I believe that the case for it has been made.
The Secretary of State proposes to use the power to make regulations to clarify the existing framework for competitive tendering so that local authorities are required to treat certain matters which have hitherto caused problems in tender evaluation on a consistent basis in order to ensure that external contractors have a fair chance to compete. The matters at present proposed are set out in the first part of our consultation paper Competing for Quality Competition in the Provision of Local Services. Examples are how redundancy costs and some other costs extraneous to the bid should be treated, and how long should be allowed for various periods in the process of letting contracts. If the Secretary of State should decide to adopt the double envelope tendering procedure which the consultation paper offers for consideration for professional services, he may also wish to make regulations to ensure that each stage of that procedure is properly carried out. In particular he is likely to wish to use the power to rule out financial considerations from the evaluation of the unpriced bid against the quality "threshold" at the first stage. He is also likely to wish to rule out quality considerations from the second stage of the procedure; namely, consideration of the financial bids of those who passed the quality threshold.
These amendments would therefore restrict the Secretary of State's power to introduce the double envelope tendering procedure. The procedure, when combined with a well-considered contract specification, should allow quality issues to be clearly and explicitly addressed and separated from financial considerations in a way that is fair to all bidders. I hope that it was not the noble Lord's intention to prevent this. If it was, I must ask him what alternative he proposes.
More generally, it would not be right to set out on the face of the Act what detailed matters these regulations should, or should not, address. The matters we have identified in the consultation paper are those which have caused most difficulty hitherto. Others will almost certainly emerge as competition is extended to new fields. But I can assure the noble Lord that it is not the Government's intention to prevent quality considerations from having their proper weight in tender evaluation, within the context of competitive tendering. The amendments would prevent the suggestion we have made for achieving this. In view of this, and of my assurance that we shall not neglect quality, I trust that the noble Lord will agree to withdraw these amendments.
4.30 p.m.
Lord Howie of Troon: I am surprised that the noble Lord, Lord Skelmersdale, is confused by these amendments. They are simple. They contain fewer words than any other amendment on the Marshalled List. It is quite possible for consultants to compete against each other on quality proposals alone. It is not only quite possible, but it is the way in which they have competed for the past 150 or so years, and it is the way in which, in a sensible society, they will continue to compete.
That takes me to the only other matter that I want to raise. I am somewhat reassured by the comments that the Minister has made about the importance that she places upon quality. She has repeated them on several occasions during the proceedings on this Bill, and I take her word for it absolutely. The noble Baroness put one direct question to me. I was not suggesting that the Government should abandon their two envelope system, although I do not like it. The noble Baroness said that if we abandoned the system what alternative would I suggest.
There is an alternative, and that is to make the choice on one envelope, that envelope being totally on quality, and leave the price element to be negotiated. That is a system that the World Bank uses to some extent, and which has been used for quite a substantial period of time. There is nothing wrong with it. It is a great deal better than the dual envelope system that the Government suggest.
I only mention that in passing and in reply to the noble Baroness's direct question. It was not what I had intended to say. In the light of her assurances, and in the certainty that we shall return to this matter on Amendment No. 102 and possibly later in the Bill, I beg leave to withdraw my amendment for the moment.
Amendment, by leave, withdrawn.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 95:
Page 9, line 13, at end insert:
("1A) Conduct not prescribed by regulations under this section shall be deemed not to be construed as conduct which has the effect of restricting, preventing, or distorting competition or is likely to have that effect.)".
The noble Baroness said: I should like to move Amendment No. 95, which again picks up the issue of competitive and anti-competitive behaviour. Under the 1988 Act local authorities were subject to sanctions by the Secretary of State if they behaved uncompetitively, but they had the discretion to decide for themselves what was anti-competitive, and therefore local authorities could, and did, consider advice from a wide range of sources—for example, from the Audit Commission, from CIPFA—the Chartered Institute of Public Finance and Accountancy—as well as the DoE. Indeed the Government's Circular 19/88 encouraged local authorities to do precisely that and seek their own advice.
Our understanding is that this Bill will remove that discretion from local authorities. They will be bound by whatever provision is contained in the regulations.
Behind that is the belief that local government has been behaving uncompetitively, and that this needs to be tightened. But is that true? As we argued at Second Reading, only 31 of the 2,800 or so contracts out to tender since 1988 have been called in, or reviewed, or criticised by the Secretary of State as uncompetitive. Yet nonetheless the Government's belief appears to be that if local authorities are winning 80 per cent. of the contracts, and barely 1 per cent. of them are regarded by the Secretary of State as uncompetitive, then there must be something wrong with the system. If the private sector cannot win by the existing rules, change the rules, and change them again until the private sector wins a higher percentage of contracts.
As the chief executive of a traditional Conservative county council, Norfolk, said quite recently, what are the Government seeking to do under the CCT? I quote
"Which is the Government's message? Is it that we [the Government] believe in the best value for money for local authority services, or is it we believe that these services are best provided by the private sector?".
These are not the same things, and the chief executive of that Conservative county called on the DoE to "come clean on its objectives".
This amendment tries to get a grip on the notion of what constitutes "uncompetitive". It is not, I would suggest to the Committee, simply whatever the Secretary of State may rule just because too many of his friends are not getting their contracts. This amendment limits what the Secretary of State can deem uncompetitive to that which is defined in regulations under Clause 9. Those regulations issued under Clause 9 of the Bill would be subject to parliamentary scrutiny, but if the Secretary of State can bypass that scrutiny by ruling whatever he sees fit post hoc as uncompetitive, then parliamentary scrutiny is redundant.
This amendment would bring the Secretary of State's actions within the definitions laid down by Parliament, and the question is—and it is one that we have had before—whether Parliament, through its legislation as in 1980 and 1988, should determine what is uncompetitive, or whether it should be a power taken unto himself by the Secretary of State. If the Committee believes that this should be within the purview of Parliament, I hope that it will support the amendmsent.
Baroness Blatch: A straight answer to the question posed by the chief executive of Norfolk, put by the noble Baroness, Lady Hollis, is that we believe that the local authorities' role is as enablers to see that services are provided; that they should specify the quality of those services themselves; and that they should certainly monitor the effective delivery of those services and do something about it if the services delivered are not consistent with the quality set out in the specification. But whether that work is done by direct labour forces or by the private sector is not a point at issue. The point at issue is that the playing field on which everybody is competing for this work should be as level as possible.
We consider that the uncertainty that has arisen out of divergent approaches to tendering by local
124
authorities needs to be resolved by means of the prescription of consistent practice through regulations, and we would wish to establish consistency as widely as possible across the different aspects of tendering. Both the Local Government Planning and Land Act 1980 and the Local Government Act 1988 already place the Secretary of State in the position where he has to take a view on whether authorities have behaved anti-competitively, since both Acts give him a power to use sanctions on authorities who have so behaved. The Committee will of course recognise that in reaching a view on such matters the Secretary of State's actions are ultimately reviewable by the courts.
Since the passage of the 1988 Act the Secretary of State has made his views known widely through his use of sanction powers and through the issuing of guidance. Clause 9, by giving him a power to issue regulations dealing with such matters, will make it possible to provide even greater certainty on questions of competitive and anti-competitive behaviour, and this will be helpful to all concerned.
Regarding the statistics mentioned by the noble Baroness, the fact that such sanctions are available to the Secretary of State and the threat of his using them has a salutary effect on local authorities, encouraging them to do the right thing.
The amendment would provide that local authorities' conduct in the context of CCT could be regarded as anti-competitive only if regulations had been made dealing with such conduct. It cannot be right that if a local authority blocked off competition for work subject to CCT by acting in a way which had not previously come to the attention of the Secretary of State, and therefore had not been addressed specifically in regulations, that authority could not be brought to book for anti-competitive behaviour. It should be remembered that at the end of the day the Secretary of State can be—and from time to time is —challenged for unreasonableness and that the court would be the arbiter in such matters. It would be highly irresponsible for the Secretary of State to accept the limitation which the amendment would impose.
I hope that with that explanation the noble Baroness will feel able to withdraw the amendment.
Lord Stoddart of Swindon: I hope she does not, because it is a very good amendment. It seems to me that the Government want to wage perpetual war against local authorities. They appear to believe that local authorities. far from wanting to assist their ratepayers or chargepayers, want to do the reverse and place further burdens on them by ensuring that any work that is done for the authorities is charged at a higher price than necessary. That is what the noble Baroness is saying. Reasonable local authorities—and I believe that local authorities are reasonable bodies—if they wish to assist their ratepayers and to carry out more work, will have all the work in hand carried out as cheaply and as well as possible.
The noble Baroness shakes her head. I have had some experience of the matter. I found that far from the local authority on which I had the honour to serve being anti-competitive it was the private sector which

125
was anti-competitive. Because the private sector was anti-competitive we ensured that our direct labour organisation became stronger. We discovered that the private sector was so anti-competitive that it organised itself in rings. We discovered that because as regards one particular contract a private sector company made the mistake of leaving a letter within the tender envelope. We found that anti-competitive practices, far from taking place in the local authority, were taking place in the private sector. By ensuring that the direct labour organisation was able to compete on a level playing field we found that not only was the direct labour organisation able to carry out work more cheaply than private enterprise but, in addition, from then on the prices charged by the private sector fell.
Therefore, in my experience, local authorities do not want to endanger competition by obtaining work for their direct labour organisations which would cost the local authority more; they want to do the reverse. This niggling at local authorities and refusal of the Government to trust local authorities to do what is best for their ratepayers has undermined the confidence of local authorities, those who serve on them and those who work for them. I wish the Government would start believing in what they preach; namely, that local democracy is good and the more responsibility is given to local authorities the more they will rise to the challenge.
4.45 p.m.
Baroness Blatch: The noble Lord, Lord Stoddart of Swindon, began by saying that we were at perpetual war on this issue. There is no requirement to take the lowest tender, but it is important that the world, and certainly the local community, understands why a lowest tender has not been accepted and good reasons must be given. It is also true from experience so far that some authorities do engage in anti-competitive behaviour. Sometimes that is so obvious that the matter is taken as far as the courts. At other times a warning is enough. That it happens is beyond doubt.
The noble Lord also referred to the playing field. The Bill is all about ensuring that the playing field is level. The noble Lord went on to say that there is anti-competitive behaviour in the private sector. I agree with the noble Lord that there are good, bad and indifferent practitioners in the public sector just as there are good, bad and indifferent practitioners in the private sector. There is other legislation which deals specifically with the private sector. The Restrictive Trade Practices Act 1976, administered by the Office of Fair Trading, is designed to counter the adverse effects of some of the practices which the noble Lord mentioned—cartels and other anti-competitive practices. Action has been taken against a number of firms which have admitted price fixing among suppliers, for example, of ready mixed concrete, road surfacing materials, steel reinforcing bars, float glass and fuel oil.
There is legislation in place which can deal with anti-competitive behaviour in the private sector. We say that when local authorities define the work that
126
they want to be done at a quality which they determine then the people who bid for that work, whether direct labour forces or private sector companies, should do so on a fair basis. We believe that the amendment is inhibiting in that respect.
Baroness Hollis of Heigham: Will the Minister care to tell us how many further cases, in addition to the 31 out of 2,800, she believes would have been caught by the Secretary of State had this legislation been in place?
Baroness Blatch: I am not able to be specific. I have said that when anti-competitive behaviour is indicated the matter is sometimes resolved by the local authority without any further action being taken. We also know that there have been instances of what the Secretary of State has regarded as anti-competitive behaviour which has not been caught by existing legislation. That is the whole point of this legislation.
If there is only one example, in one area, of thousands of pounds being spent where they ought not to be spent then it is important that we, the Government, should act as guardians of the public interest. In general, as a result of competitive tendering, in which noble Lords opposite do not believe, savings have been made. That has been codified. Standards have risen and many direct labour authorities are now in better shape, better managed and more effective in their delivery of services almost directly as a result of the measures which this Government have put in place.
Baroness Hollis of Heigham: In terms of the Minister's original remarks in response to the amendment there is much with which we would not disagree. She is certainly right to say that local authorities are enablers of services. They need to monitor the services provided as well as themselves also being providers. We also entirely accept that in that situation the playing field should be as level and as fair as possible. However, we do not accept that the Minister's conclusions follow from the Minister's remarks.
Under pressure the Minister agreed that since 1988 only 31 cases have gone through the Secretary of State's default powers out of a total of 2,800 contracts. I then asked the Minister a moment ago what other examples she would have wished to have seen caught but which were not caught because the legislation was not sufficiently comprehensive. She could not give the Committee a single example. One would have thought that, if there had been such transgressions to hand, she would have informed the Committee.
The Minister then went on to say that, even if there was just one case, those all-encompassing powers would be necessary. If I may use a phrase that has been used elsewhere, it is a fishing trip to say that there may, although we are not certain, be some authority ingenious enough to come up with something that the Secretary of State, although equally ingenious, has not quite thought of. It is a fishing trip to say that we should therefore have an all-encompassing, all-empowering responsibility for the Secretary of State to define what he sees fit as anti-competitive in ways that

127
the local authority cannot necessarily anticipate in advance because it has not been laid down in regulations. That appears to be not only heavy-handed beyond words, but to put local authorities in the unfortunate position of not knowing in advance whether their behaviour may or may not be deemed uncompetitive until it is caught and declared so by the Secretary of State. The Minister's logic does not follow—
Baroness Blatch: I am grateful to the noble Baroness for giving way. Perhaps I may put a straight question to her. If a matter is not specifically prescribed on the face of the Bill but is, in the Secretary of State's judgment, a case of anticompetitive behaviour and if it survives the challenge of unreasonableness and the challenge of the courts—in other words, if it is seen to be a reasonable judgment and to be anti-competitive by the courts themselves—does not the noble Baroness agree with me that the Secretary of State should be allowed to make that judgment in the public interest?
Baroness Hollis of Heigham: There are two issues involved in responding to the Minister. The thrust of our amendment is, first, that the local authority rather than the Secretary of State should decide what is and what is not competitive. In other words, the emphasis lies with the local authority. Secondly, that separates the functions of the Secretary of State and prevents him from being both judge and jury in his own case. Amendment No. 96 concerns the Wednesbury Rules which were cited by Mr. Justice Popplewell with regard to the Knowsley case. He held that, although the local authority had acted entirely properly and had taken into account the full range of costs in awarding a tender other than to the lowest tenderer, it could not hold the Secretary of State to be acting unreasonably because he could define his own agenda. That is the situation that the amendment seeks to prevent.
Baroness Blatch: I hope that I rise for the last time on this point. The noble Baroness implied that the Secretary of State would be judge and jury in the case. In fact, it is almost exactly the opposite. The noble Baroness advocated that not only shall the local authority provide the service and specify and make the contract, but that it may act anti-competitively and then judge whether its behaviour is anti-competitive or not. The Secretary of State cannot be judge and jury. Once he has made that judgment, it is subject to challenge on the grounds of unreasonableness and can be challenged in the courts. He cannot possibly be judge and jury.
Baroness Hollis of Heigham: I rise on this point for the last time. I shall not press the matter to a vote at this stage. It is clearly an issue to which we shall return in the next and subsequent amendments and on Report. It is clear that a number of legal opinions suggest that the local authority was right in spirit, but could not be held to be right in law by virtue of the definition drawn by the Secretary of State. We shall return to that issue. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 96:
Page 9, line 29, leave out ("or disregarded").
The noble Baroness said: This amendment picks up some of the issues that we have just discussed. Under the 1980 and 1988 Acts, local authorities had to satisfy conditions of not acting uncompetitively. In the history of local government, certainly since the war, it has been presumed that they will operate within the framework of the Wednesbury Rules, the legal judgment of 1948 which laid down that local authorities must take all proper factors into account in the best interests of their area. That was the fiduciary principle laid down in the Wednesbury Rules.
Since the 1980 and 1988 Acts, there have been three cases relating to compulsory competitive tendering which are relevant to this amendment. The Knowsley case has already been cited. There are also the Leicester and York cases.
Perhaps I may enlarge a little on the Knowsley case. Knowsley borough council challenged by way of judicial review the Secretary of State's direction under Section 14 of the 1988 Act that the authority had acted uncompetitively in awarding a refuse contract to its in-house DSO rather than to an apparently lower cost external contractor. I was glad to hear the Minister say earlier that the local authorities were not automatically required to award contracts to the lowest tenderer. The authority in question argued that, taking all factors into account, the in-house quote would turn out to be cheaper. The factors that it took into account were reapportionment of overheads, lease termination costs, contributions to former employees' pensions, CEC charges and the like.
In responding to the case with regard to whether any cost arising from awarding the contract to Sitaclean was a proper figure to be taken into account, Mr. Justice Popplewell commented:
"if it were open to me to lay down the proper approach on principle it would be that the local authority as employer are entitled to take into account the overall cost to the ratepayers as the result of the contract going to an outside contractor. The overall cost seems to me to be those costs which if proved properly flow directly from losing the contract. However, that is not my function—it is not to decide if the authority were unreasonable—for my part I do not think they were. If I were having to decide as a Judge in the Queen's Bench what costs should be taken into account I think it likely that I would have taken the same view as the local authority. But that is not my position. What I have to decide is whether the Secretary of State is unreasonable."
Ultimately, the Secretary of State was found to be not unreasonable.
That is my understanding of the legislation. The amendment seeks to clarify what happened in the Knowsley case. There appears to be a straight contradiction between the Wednesbury Rules, on the one hand, which lay down the fiduciary duty of the local authority to take into account all factors in order to protect the financial interests of its local taxpayers and, on the other hand, the Secretary of State's position, particularly with regard to his drive towards CCT and privatisation.
The amendment would prevent the Secretary of State from prescribing items of actual or potential expenditure that local authorities are prohibited from

129
considering in evaluating tenders. The Wednesbury principles require that all relevant factors should be taken into account. The Secretary of State would not therefore be empowered to remove what Mr. Justice Popplewell would regard as a relevant factor. That seems to me sane, sensible, proper, in the tradition of our common law and in the best interests of local electors. I beg to move.
Baroness Blatch: I shall not explain again our reasons for seeking the regulation-making power in Clause 9, save to re-emphasise that we consider that it is needed to provide far greater certainty and clarity on matters in which local authority practice varies so widely.
As a result of this amendment and Amendment No. 98, such regulations would do little more than list those matters that could be taken into account and could not spell out the way in which such account could be taken. We have set out our proposals on the treatment of extraneous cost items in tender evaluation in our CCT consultation paper. We identified a number of items which we consider should not be taken into account when a local authority compares the costs submitted by its own workforce and by external tenderers, such as the cost of continuing overheads or central administration. There has been extensive discussion of those matters both before and since the issue of the consultation paper. We want to consider carefully the responses that we received to that paper.
Nonetheless, the regulations must address both types of extraneous cost items—those to be included and those to be excluded—if they are to provide the certainty and consistency for future CCT exercises, which is the prime purpose of the regulations. For the same reason, the regulations will have to do more than provide a list of items which are to be included in order for there to be a proper comparison of the costs and benefits of the tenders submitted. We propose that they should be calculated at constant prices and discounted at a real discount rate over a period that would be consistent across all authorities. We have proposed a period of 10 years. Again we shall consider the views expressed on those proposals but we shall finally resolve the approach to be followed. It is necessary that the regulations spell that out in order to provide a proper basis for all concerned with CCT exercises.
With that explanation, I hope that the noble Baroness will feel able to withdraw the amendment on the grounds that we are seeking for consistency and to eliminate uncertainty.
5 p.m.
Baroness Hamwee: My Lords, I support the amendment. The words in the Bill which precede "disregarded" are,
"matters which are to be taken into account".
I understand that those words mean simply what they say. Matters are to be taken into account, not to be obeyed strictly. It does not preclude one from considering outside factors.
130
The Minister has spoken of certainty and clarity. However, other words that have been used seem to go beyond certainty and clarity into the area of such precise prescription as to make one more alarmed at the reference to items to be "disregarded".
I have a different point on Amendment No. 98. Following the comments made today by the noble and learned Lord, Lord Simon of Glaisdale, is it necessary to spell out "disregarded" in the detail and to the extent that occurs in the Bill at present? That may be another example of a few more words than are absolutely vital.
Baroness Blatch: Perhaps I may respond to the point about matters which are to be taken into account and link it with a point raised by the noble Baroness, Lady Hollis. She was fairly selective in her quotation from Lord Justice Popplewell. Lord Justice Parker and Lord Justice Leggatt took a contrary view. It was that local authorities were able to take account only of the bids and of no other costs. Our regulations do not go that far but allow for the Government to take a measured view of what should be taken into account and what should be disregarded. It is that aspect which can be challenged by local authorities themselves.
Baroness Carnegy of Lour: In proposing the amendment, the noble Baroness, Lady Hollis, as the main part of her argument quoted Lord Justice Popplewell. Has she taken account of comments in Scots law? Does the argument hold in Scotland? I am beginning to wonder to what extent the Bill has been considered with regard to Scotland. I am glad to see the noble Lord, Lord Carmichael, in his place. I am anxious that we legislate correctly for Scotland and that amendments should be considered in that light.
Lord Carmichael of Kelvingrove: Before the noble Baroness sits down, perhaps I may point out—I had thought that we were working from similar briefs—that Lord Prosser said much the same as Lord Justice Popplewell. Lord Prosser stated:
"If the placing of a contract with an outside contractor would lead to the local authority incurring major liabilities, I cannot regard taking notice of that fact, and giving weight in the decision making process, as within the category of actings covered by sub-section 9(4) (aaaa). A responsible regard for the truth does not seem to me to be something which can be said to restrict, distort or prevent competition, unless one has decided that competition is more important than both truth and the interests of citizens for whom the local authority are responsible".
I believe that that is good, strong, logical Scottish thinking.
Baroness Carnegy of Lour: I thank the noble Lord. I may have that brief; I am unaware of it. I apologise if I displayed any ignorance. I am glad to know that fact. We need to keep an eye on such matters as we proceed through the Bill.
Baroness Hollis of Heigham: In her concluding comments the Minister referred to a host of matters which we wish to explore in greater detail on Amendments Nos. 104 to 109. Those include price fixing cartels, on-going expenditure that authorities will incur, 10 years amortisation of savings and so on.

131
Perhaps we may take up detailed arguments later. The core of the amendment relates to the basic issue of whether the local authority has the right to be regarded as acting reasonably when there are two conflicting principles—the fiduciary responsibility to its ratepayers or taxpayers under the Wednesbury Rules—as against the requirement of the Secretary of State, given the words on the face of the Bill and by regulation, as to what constitutes competitive and anti-competitive behaviour.
As I understand it, the outcome of the Knowsley case was that although the local authority was held to have acted reasonably, the Secretary of State was not held to have acted unreasonably. That is why the judicial review was not upheld. That leaves the conflict unresolved. Most people of good sense and good will would and should regard the Wednesbury principles as being the binding principles within which all other legislation should be subsumed.
On this side of the Chamber, we feel strongly on the matter because without it the ethical core of local government business is jeopardised. I mean that very seriously. Therefore I should like to test the opinion of the Committee.
5.6 p.m.
On Question, Whether the said amendment (No. 96) shall be agreed to?
Their Lordships divided: Contents, 82; Not-Contents, 139.

Division No. 2

CONTENTS

Addington, L.

Howie of Troon, L.

Beaumont of Whitley, L.

Hunt, L.

Birk, B.

Irvine of Lairg, L.

Blackstone, B.

Jacques, L.

Boston of Faversham, L.

Jay, L.

Bottomley, L.

Jeger, B.

Brain, L.

Jenkins of Putney, L.

Broadbridge, L.

John-Mackie, L.

Brooks of Tremorfa, L.

Lockwood, B.

Campbell of Eskan, L.

Longford, E.

Carmichael of Kelvingrove, L.

Lovell-Davis, L.

Castle of Blackburn, B.

Lytton, E.

Cledwyn of Penrhos, L.

Macaulay of Bragar, L.

Clinton-Davis, L.

McIntosh of Haringey, L.

Crook, L.

Mallalieu, B.

David, B.

Mar, C.

Dean of Beswick, L.

Mason of Barnsley, L.

Donaldson of Kingsbridge, L.

Morris of Castle Morris, L. [Teller.]

Dormand of Easington, L.

Falkender, B.

Murray of Epping Forest, L.

Falkland, V.

Nicol, B.

Gallacher, L. [Teller.]

Ogmore, L.

Galpern, L.

Parry, L.

Gladwyn, L.

Richard, L.

Glenamara, L.

Ritchie of Dundee, L.

Graham of Edmonton, L.

Robson of Kiddington, B.

Gregson, L.

Rochester, L.

Grey, E.

Russell, E.

Hampton, L.

Scanlon, L.

Hamwee, B.

Seear, B.

Hanworth, V.

Sefton of Garston, L.

Harris of Greenwich, L.

Stoddart of Swindon, L.

Hatch of Lusby, L.

Strabolgi, L.

Hilton of Eggardon, B.

Taylor of Blackburn, L.

Hollis of Heigham, B.

Taylor of Gryfe, L.

Holme of Cheltenham, L.

Thomson of Monifieth, L.

Hooson, L.

Tordoff, L.

Houghton of Sowerby, L.

Turner of Camden, B.

132

Underhill, L.

Wilson of Langside, L.

Wallace of Coslany, L.

Winchilsea and Nottingham, E.

White, B.

Young of Dartington, L.

Willis, L.

NOT-CONTENTS

Abinger, L.

Howe, E.

Aldington, L.

Ironside, L.

Allenby of Megiddo, V.

Jellicoe, E.

Alport, L.

Jenkin of Roding, L.

Arran, E.

Johnston of Rockport, L.

Astor, V.

Killearn, L.

Balfour, E.

Lauderdale, E.

Beaverbrook, L.

Long, V.

Belhaven and Stenton, L.

Mackay of Ardbrecknish, L.

Bellwin, L.

Mackay of Clashfern, L.

Beloff, L.

Macleod of Borve, B.

Bessborough, E.

Mancroft, L.

Blatch, B.

Manton, L.

Boardman, L.

Marsh, L.

Borthwick, L.

Merrivale, L.

Boyd-Carpenter, L.

Mersey, V.

Brigstocke, B.

Mills, V.

Brougham and Vaux, L.

Monk Bretton, L.

Butterworth, L.

Mottistone, L.

Caldecote, V.

Mountevans, L.

Campbell of Alloway, L.

Munster, E.

Carnegy of Lour, B.

Murton of Lindisfarne, L.

Carnock, L.

Nelson, E.

Carrington, L.

Norfolk, D.

Cavendish of Furness, L.

Norrie, L.

Charteris of Amisfield, L.

Oppenheim-Barnes, B.

Cochrane of Cults, L.

Orkney, E.

Cockfield, L.

Orr-Ewing, L.

Colnbrook, L.

Oxfuird, V.

Constantine of Stanmore, L.

Pender, L.

Cox, B.

Peyton of Yeovil, L.

Craigavon, V.

Platt of Writtle, B.

Cranbrook, E.

Porritt, L.

Cross, V.

Pym, L.

Davidson, V. [Teller.]

Rankeillour, L.

Denham, L.

Reay, L.

Denton of Wakefield, B.

Renton, L.

Dormer, L.

Romney, E.

Downshire, M.

St. Davids, V.

Eccles, V.

Seccombe, B.

Eden of Winton, L.

Selborne, E.

Elibank, L.

Shannon, E.

Elles, B.

Sharples, B.

Elliot of Harwood, B.

Shrewsbury, E.

Elliott of Morpeth, L.

Skelmersdale, L.

Elton, L.

Stodart of Leaston, L.

Faithfull, B.

Strange, B.

Fanshawe of Richmond, L.

Strathclyde, L.

Ferrers, E.

Strathcona and Mount Royal, L.

Flather, B.

Fortescue, E.

Strathmore and Kinghorne, E.

Fraser of Carmyllie, L.

Sudeley, L.

Fraser of Kilmorack, L.

Swansea, L.

Goold, L.

Swinfen, L.

Gray, L.

Terrington, L.

Gray of Contin, L.

Teviot, L.

Gridley, L.

Thomas of Gwydir, L.

Grimston of Westbury, L.

Thorneycroft, L.

Grimthorpe, L.

Trefgarne, L.

Hailsham of Saint Marylebone, L.

Trumpington, B.

Ullswater, V.

Hardinge of Penshurst, L.

Vaux of Harrowden, L.

Harmar-Nicholls, L.

Waddington, L.

Harmsworth, L.

Wade of Chorlton, L.

Harvington, L.

Westbury, L.

Henley, L.

Wharton, B.

Hesketh, L. [Teller.]

Whitelaw, V.

Hives, L.

Wise, L.

Holderness, L.

Wynford, L.

Hood, V.

Young, B.

Hooper, B.

Resolved in the negative, and amendment disagreed to accordingly.
5.15 p.m.
[Amendments Nos. 97 to 99 not moved.]
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 100:
Page 10, line 1, leave out paragraphs (e) and (f).
The noble Lord said: I need not read the amendment, but in order to outline the full flavour of this part of the Bill I must read out with emphasis subsection (3) (e) and (f). I remind Members of the Committee that under this subsection the Secretary of State is authorised to make regulations as to competitive or anti-competitive activity. Paragraphs (a), (b), (c) and (d) of subsection (3) list matters which may be covered by the regulations. Paragraphs (e) and (f) appear on page 10 of the Bill. Paragraph (e) provides that the regulations may:
"make provision for the issue by the Secretary of State of guidance"—
Members should remember the word "guidance"—
"as to how conduct restricting, distorting or preventing competition is to be avoided in the doing of anything under or for the purposes of Part III of the 1980 Act or Part I of the 1988 Act; and".
Paragraph (f) provides that the regulations may:
"require the extent (if any) to which there has been a contravention of guidance issued by the Secretary of State under the regulations to be taken into account in any determination of whether or not a condition mentioned in subsection (2) above has been fulfilled".
The conditions in subsection (2) are referred to in the definition of "conduct" described in the regulations as conduct distorting competition or not distorting competition as the case may be. The implication of that provision is clear. Paragraph (e) states that the Secretary of State may issue guidance; paragraph (f) states that the guidance is, in effect, elevated to the status of being a regulation.
We spoke earlier and last night about Henry VIII legislation in which government show disrespect for primary legislation by allowing it to be altered by secondary legislation. I suggest to the Committee that in this provision we have some Henry VIII legislation—one might call it Edward VI legislation—in which disrespect is intended by government to secondary legislation. The Government are saying that guidance which is issued to local authorities becomes elevated to the status of secondary legislation.
We have been familiar with the use of the word "guidance" for many years. Generally speaking, guidance issued by the Secretary of State is taken seriously; those concerned are expected to have regard to it. However, when the Secretary of State issues regulations there is no question of the local authority or others concerned having regard to them; they must give effect to them. There is a clear distinction between guidance which must be taken into account and regulations which must be given effect to.
We are becoming reduced to government by circular. That has been going on for far too long and I suspect that it went on even under Labour Governments. It is occurring to a considerable extent in planning regulations in respect of which local authorities are considered to be at fault and could be challenged in the courts if they fail to implement planning circulars from the Department of the Environment. However, the provision now appears
134
plainly on the face of the Bill. Therefore, government by circular is no longer a creeping danger but is actually happening and being proposed for the first time. I suggest to the Committee that on that issue alone, regardless of any other factors relating to competitive or uncompetitive activity, paragraphs (e) and (f) of Clause 9(3) should not appear on the face of the Bill. I beg to move.
Baroness Blatch: This is a further attempt to limit the scope of the regulation-making power in the clause with the effect that uncertainties, which need to be resolved, would persist. It is customary for the Secretary of State to provide guidance to local authorities on a range of matters through circulars or similar documents. Most local authorities find them useful when finding their way through legislation.
On compulsory competitive tendering the Secretary of State has covered a range of related matters in circulars issued since the passage of the relevant legislation; for example, circular 19/88 of August 1988 and circular 1/91 of March 1991. We consider that it will be appropriate for the Secretary of State to be able to set out his views on CCT related issues in that way and to issue regulations under the clause in order to underline and clarify the relevance of such guidance as to the way in which local authorities carry out their competitive tendering exercises.
I stress that the guidance in question will not necessarily be that contained in circulars so far issued. Local authorities must have regard to guidance. When the Secretary of State makes a judgment about whether or not a local authority has behaved anti-competitively, it is important that he should consider the extent to which local authorities regarded or disregarded the guidance. As I have said a number of times, that judgment can be challenged in the courts on the ground of unreasonableness.
This amendment would seriously inhibit the Secretary of State and would preclude such clarification action which I believe is helpful to local authorities. I ask the noble Lord to withdraw the amendment.
Baroness Hamwee: I support the amendment. However, in doing so I suggest to the noble Lord, Lord McIntosh, that Elizabeth I may be a better monarch and one more likely to have done this sort of thing than poor Edward VI.
When I was a new member of the administration of my local authority I commented to a chief officer on how distasteful it was that there was so much legislation by circular. He sighed and said, "Every chairman coming into office says that but every government find they must do it." There may be some truth in that but I prefer to remain more idealistic and set my sights higher. We should not slide down the road of legislation by some other type of instrument.
If this suggestion is only guidance, why is it referred to in legislation? Is it not possible for the Secretary of State to issue guidance of which local authorities can take account and can regard as helpful? The words may not say so, but is not the sense of this suggestion far more akin to regulation than a mere helpful back page to help to guide one through the difficulties of the

135
legislation—I use the word broadly—which will apply? Other Members of the Committee are far more capable than I to comment on that. However, it occurs to me that if guidance is given the status which it is accorded in these paragraphs, will not the courts be rather more reluctant to regard the Secretary of State as being unreasonable than they would be if they were not given such status?
Lord Stoddart of Swindon: My noble friend has raised an extremely important issue. Increasingly weare having government and decision by edict rather than decision after due and proper discussion. For a long time I have been under the impression that the relationship is not between government and local authority but between Parliament and local authority. In fact, local authorities derive: their existence and power from Parliament and not from Secretaries of State. However, increasingly power is being taken away from Parliament to regulate local authorities. They are being regulated in ways of which Parliament has no concept because Parliament and Members of Parliament, unless they are extremely closely tied up with local authorities, hardly ever see the regulations which are being issued in their hundreds by Ministers. Therefore, my noble friend has raised an extremely important and interesting point which should be taken seriously.
We now move from regulations to guidance. I always believed that guidance was to guide and not to be enforced. Its purpose is to give advice and to help people. It is not to tell people what they must do but to guide them along a certain path. Now, as my noble friend pointed out, guidance says, "This is the guidance but if you will not be guided, then we shall make it compulsory". That seems nonsensical. I should be interested to hear what the Minister says. The point is reasonable and I am grateful to my noble friend for raising it.
Baroness Blatch: It may be helpful if I draw a distinction between guidance which are guidelines to help and guidance which has a different status. That is known by all parties in both Houses. In coming to their views about tendering procedure and so on, local authorities must have regard to guidance and be seen to have regard to it. That is rather different from guidelines which I believe were being described by the noble Lord.
Lord Simon of Glaisdale: I respectfully agree with the noble Lord, Lord Stoddart, that the noble Lord, Lord McIntosh, has raised an extremely important point; namely, how far guidance and, by extension, circulars are to have legislative or even the faintest juristic force.
Yesterday evening, in her able defence of what proved to be indefensible on Amendment No. 37, the noble Baroness defended the Henry VIII provision on the grounds that it was subject to the affirmative resolution of Parliament; in other words, there was some parliamentary control. However, as regards guidance, the noble Baroness said that local authorities must have regard to it. However, the crucial point is that there is absolutely no
136
parliamentary control over letters of guidance or circulars. They do not come before Parliament even for a negative resolution.
We are bound to ask how far we are going along the road of bureaucracy. So far as I am capable of judging the matter, I am in favour of competitive tendering. I have every sympathy for those who are administering the policy when they find it being avoided and they want to plug the holes by this and that. However, that is not a sufficient excuse for intervention and, indeed, subversion of our normal legislative processes.
Parliamentary democracy, like any human institution, is not perfect. But it is well tried. There is no reason why we should give up all the safeguards and all the value that it has shown over the centuries and submit to government by future letters of guidance. At this stage we do not know what the guidance will be; it is insufficiently defined. I therefore suggest to the noble Baroness, who has thus far conducted the Bill to general admiration, that she consider how far we are travelling down the road of bureaucratic rather than democratic government.
5.30 p.m.
The Earl of Erroll: Perhaps I may add something to the debate. I am interested in the redefinition of "guidance". I had not thought about it before, but as a small businessman and layman I often receive notes of guidance on this, that or the other. They always contain a disclaimer which states, "You cannot abide by these notes. We may have got them wrong and you must read the regulations to see the true position". They are issued by the VAT man, local government and all sorts of people. They always contain a disclaimer to the effect that the guidance is not accurate but the regulations are. I should like to know why "guidance" is now definitive. Is it definitive or are the regulations definitive? As a layman I do not understand.
Baroness Blatch: It is the law that is definitive. Guidance is something that is issued—in this case to local authorities—to clearly set out a number of factors that need to be taken into account or had regard to in coming to a decision in regard to specific subject matter—in this case compulsory competitive tendering.
I am always reluctant to take issue with the noble and learned Lord, Lord Simon. I know that his experience in these matters is considerable. However, it is normal and common practice for all governments, not only this Government, to refrain from cluttering up legislation with a plethora of detail, certainly in cases where the detail may change over a period of time. For example, it is easier to change guidance than to change primary legislation.
It is also true that guidance is consulted upon. Draft guidance has been drawn up for the Local Government Commission. All sorts of bodies will have an input into the final version of that guidance. There is therefore a fairly democratic process in being. At the end of the day the intention is for guidelines to be helpful to public authorities and guide them through the minefield of legislation. Guidance is something which the government of the day—it applies to all governments—believe must be taken into

137
account when decisions are being made in regard to specific issues. Those clearly set out factors that have been arrived at on the basis of consultation.
The Countess of Mar: Over and over again we seem to be having trouble with language. I wish Bills could be written in plain English so that we could all understand them. Perhaps it would be better to say "instruction" rather than "guidance" on the face of the Bill. "Instruction" is obviously what is meant.
Baroness Blatch: That is a wrong assumption. It is not an instruction. If it were an instruction people would not only need to have regard to it, but also to positively carry out what it says. Guidance is a set of factors which an authority needs seriously to consider in the process of making up its mind about a specific issue. It is guidance in that sense. It is not an instruction. The only instruction element is that the authority must have regard to those factors in making up its mind. The specific factors are not instructions.
Lord Stoddart of Swindon: I am sorry to pursue the matter. In my book guidance is guidance. I reckon the Oxford Dictionary would give "guidance" the same status as I give it; that is, that it is to guide. It is not to instruct; it is to guide.
I am not averse to that. However, in paragraph (f) we see the words, "contravention of guidance". How can one contravene guidance? One can perhaps contravene instructions. That I accept. But how can one contravene guidance? The Minister said that if we disregard the guidance we will contravene it. Therefore it is not guidance. It is an instruction, as the noble Countess pointed out.
I served on local government and received guidance from governments on many occasions. Often I told the government to go to hell. For example, in 1968 when the local authority of which I was leader was lending some £2.5 million a year to people to buy their own homes, the Labour Government said, "Our guidance to you is that you will only lend £300,000 a year". I wrote back and said, "Thank you for your guidance, but I do not agree. We are receiving a lot of money in repayment of capital and I am entitled to re-lend that to people who want housing". "No", said the Government, "you cannot do that". I said, "Yes, I can. Try and stop me". And they could not. There was no law that could stop me and they could not issue an instruction. Therefore they had issued guidance which I chose not to follow.
That is guidance and the proper status of guidance. The Government are now trying to increase its status to one of instruction. If they want to instruct local authorities let them say so and Parliament will know exactly what they are doing. But please do not let them try to mislead us by suggesting that all they want is to guide local authorities when in actual fact they want to instruct them and to impose penalties if those instructions are not followed.
Lord Howie of Troon: I do not want to stop my noble friend Lord Stoddart in any way; I wish to support him. I agree with him and believe that he is right.
138
It may be in the recent recollection of the Chamber that in explaining guidance to us the Minister drew attention to guidelines. She explained that guidelines were helpful and advisory. If I remember rightly, the noble Baroness went on to say that guidance was rather more severe. "Guidance" seems to me, from her own definition, to be not unlike "instruction", as we heard a moment ago, and not unlike "regulation", as my noble friend Lord McIntosh described it.
A certain amount of confusion exists on the Government Front Bench. Perhaps the Minister will undertake to take the amendment away and consider the differences, in so far as they exist, between guidelines, guidance, instruction and regulation. They could possibly return with a revised paragraph to be inserted in the Bill at a later stage.
Lord McIntosh of Haringey: I am afraid the Minister has been as badly advised on this amendment as she was on Amendment No. 37 last night. Of course we all know what guidance is and what its force is. It comes in circulars and it is the responsibility of local authorities to have regard to it. If the matter goes to the courts then the local authority, in defending its action, must show that it had regard to the guidance and acted reasonably.
That is different from what happens in regulations, as was made clear by a number of Members of your Lordships' Committee. Paragraph (f) is different in what it says from paragraph (e). If it were simply a matter of having the authority to give guidance, paragraph (e) would not be necessary on the face of the Bill. There is no prohibition anywhere on the Secretary of State on giving guidance. Some people may regret it, but it has been established for a very long time that it is a fact of central and local government relationships. Paragraph (e) on its own merits does not need to be on the face of the Bill because guidance can be issued without it. That paragraph is in the Bill for a very specific purpose; namely, to support paragraph (f) which says, as my noble friend Lord Stoddart quite rightly said, that the Secretary of State can treat contravention of guidance as being in effect disobedience to an instruction. The paragraph states that the regulation can require:
"the extent (if any) to which there has been a contravention of guidance issued by the Secretary of State under the regulations to be taken into account in any determination of whether or not a condition … has been fulfilled".
That paragraph is clearly elevating guidance to the status of instruction or regulation which has to be put into effect but not, as with guidance, to have regard to it. Under this clause there is no shortage of powers to the Secretary of State as regards regulations.
Paragraph (a) states that the regulations may,
"prescribe the matters which are to be taken into account, or disregarded, in the course of any evaluation … who should undertake or carry out particular work".
Paragraph (b) states that the regulations may,
"prescribe the manner in which, or extent to which, any matter described in the regulations is to be taken into account or disregarded",
and so forth. There is no shortage of powers. In paragraphs (e) and (f) the Government are deliberately seeking to put in unnecessary provision for guidance and then to elevate it to the status of regulation. That is unacceptable. It is a constitutional

139
principle. There is disrespect for parliamentary control, such as it is, of secondary legislation. The Committee should reject that. I gladly give way to the Minister.
Baroness Blatch: Before the noble Lord presses the amendment, perhaps I may once more give a reason for this measure being on the face of the Bill. It is very important for local authorities to be convinced that the Secretary of State is not making a purely subjective judgment about their behaviour. By putting the matter on the face of the Bill in the manner in which it is done here, a way is set out by which the Secretary of State will arrive at a judgment. In other words, by issuing guidance which is clearly set out in the Bill and in consideration of anti-competitive behaviour, he will make a judgment about the degree to which that guidance was either regarded or disregarded. The breach will be in disregarding the guidance. Because the provision is on the face of the Bill local authorities are left in no doubt whatever that there is no subjectivity in the Secretary of State's judgment, but that it is about as objective as it can be.
Lord McIntosh of Haringey: I thought that the Minister was going to produce examples where legislation had given power to the Secretary of State to give guidance. Clearly, she cannot do that. The answer is that the Secretary of State has power to give guidance without requiring legislation to do so. I am sorry that this is becoming very boring, but the status of guidance is very clear. Local authorities have to have regard to it and if they are challenged they have to show that they have had regard to it and that they have acted reasonably. That is what guidance means.
Paragraph (e) would not be on the face of the Bill unless paragraph (f) was elevating guidance to the status of a regulation. The word "contravention" is totally inappropriate to guidance. That is the fundamental point which the Minister fails totally to answer. On that basis I ask for the opinion of the Committee.
5.44 p.m.
On Question, Whether the said amendment (No. 100) shall be agreed to?
Their Lordships divided: Contents, 83; Not-Contents, 120.

Division No. 3

CONTENTS

Airedale, L.

Gainsborough, E.

Beaumont of Whitley, L.

Gallacher, L. [Teller.]

Birk, B.

Galpern, L.

Blackstone, B.

Gladwyn, L.

Boston of Faversham, L.

Glenamara, L.

Bottomley, L.

Graham of Edmonton, L. [Teller.]

Brooks of Tremorfa, L.

Campbell of Eskan, L.

Grimond, L.

Carmichael of Kelvingrove, L.

Hampton, L.

Carter, L.

Hamwee, B.

Castle of Blackburn, B.

Hanworth, V.

Cledwyn of Penrhos, L.

Harris of Greenwich, L.

Clinton-Davis, L.

Hatch of Lusby, L.

David, B.

Hilton of Eggardon, B.

Dean of Beswick, L.

Hollis of Heigham, B.

Dormand of Easington, L.

Hooson, L.

Erroll, E.

Houghton of Sowerby, L.

Falkender, B.

Howie of Troon, L.

Falkland, V.

Hunt, L.

140

Irvine of Lairg, L.

Ritchie of Dundee, L.

Jay, L.

Robson of Kiddington, B.

Jeger, B.

Russell, E.

Jenkins of Putney, L.

Scanlon, L.

John-Mackie, L.

Seear, B.

Judd, L.

Sefton of Garston, L.

Kennet, L.

Shaughnessy, L.

Lockwood, B.

Simon of Glaisdale, L.

Longford, E.

Stoddart of Swindon, L.

Lovell-Davis, L.

Strabolgi, L.

Lytton, E.

Taylor of Blackburn, L.

Macaulay of Bragar, L.

Taylor of Gryfe, L.

McIntosh of Haringey, L.

Thomson of Monifieth, L.

Mallalieu, B.

Tordoff, L.

Mar, C.

Turner of Camden, B.

Mason of Barnsley, L.

Underhill, L.

Molloy, L.

Wallace of Coslany, L.

Morris of Castle Morris, L.

Whaddon, L.

Nicol, B.

White, B.

Ogmore, L.

Willis, L.

Parry, L.

Winchilsea and Nottingham, E.

Redesdale, L.

Winstanley, L.

Richard, L.

Young of Dartington, L.

NOT-CONTENTS

Abinger, L.

Hesketh, L. [Teller.]

Aldington, L.

Hives, L.

Allenby of Megiddo, V.

Holderness, L.

Arran, E.

Hood, V.

Astor, V.

Hooper, B.

Auckland, L.

Howe, E.

Balfour, E.

Huntly, M.

Beaverbrook, L.

Ironside, L.

Belhaven and Stenton, L.

Jenkin of Roding, L.

Beloff, L.

Johnston of Rockport, L.

Blatch, B.

Killearn, L.

Boardman, L.

Lauderdale, E.

Borthwick, L.

Long, V.

Boyd-Carpenter, L.

Mackay of Ardbrecknish, L.

Bridgeman, V.

Mackay of Clashfern, L.

Brigstocke, B.

Macleod of Borve, B.

Brougham and Vaux, L.

Mancroft, L.

Butterworth, L.

Merrivale, L.

Campbell of Alloway, L.

Mersey, V.

Carnegy of Lour, B.

Mills, V.

Carnock, L.

Milverton, L.

Cavendish of Furness, L.

Monk Bretton, L.

Clanwilliam, E.

Mottistone, L.

Cochrane of Cults, L.

Mountevans, L.

Colnbrook, L.

Munster, E.

Colwyn, L.

Murton of Lindisfarne, L.

Constantine of Stanmore, L.

Napier and Ettrick, L.

Cox, B.

Nelson, E.

Cross, V.

Norrie, L.

Davidson, V. [Teller.]

Oppenheim-Barnes, B.

Denton of Wakefield, B.

Orkney, E.

Dormer, L.

Pender, L.

Downshire, M.

Peyton of Yeovil, L.

Dundonald, E.

Pym, L.

Eccles of Moulton, B.

Rankeillour, L.

Eden of Winton, L.

Reay, L.

Elibank, L.

Renfrew of Kaimsthorn, L.

Elliot of Harwood, B.

Renton, L.

Elliott of Morpeth, L.

Renwick, L.

Elton, L.

St. Davids, V.

Faithfull, B.

Seccombe, B.

Ferrers, E.

Selborne, E.

Flather, B.

Sharples, B.

Fraser of Carmyllie, L.

Shrewsbury, E.

Fraser of Kilmorack, L.

Skelmersdale, L.

Gardner of Parkes, B.

Stodart of Leaston, L.

Geddes, L.

Strange, B.

Gray, L.

Strathclyde, L.

Gridley, L.

Strathcona and Mount Royal, L.

Grimston of Westbury, L.

Hardinge of Penshurst, L.

Strathmore and Kinghorne, E.

Harmar-Nicholls, L.

Sudeley, L.

Harmsworth, L.

Swinfen, L.

Harvington, L.

Teviot, L.

Henley, L.

Teynham, L.

141

Thomas of Gwydir, L.

Wade of Chorlton, L.

Trumpington, B.

Wharton, B.

Ullswater, V.

Whitelaw, V.

Vaux of Harrowden, L.

Wynford, L.

Waddington, L.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.
5.52 p.m.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 101:
Page 10, line 10, at end insert:
("( ) No regulations made under this section shall interfere with the manner in which a local authority chooses to—

(a) organise its services in response to local conditions;

(b) contract with a willing tenderer;

(c) carry out its role as a buyer of services.

( ) In particular, regulations will not be issued in connection with:

(a) contract documentation and specifications;

(b) the size and scope of contracts;

(c) the use of local authority assets.").

The noble Lord said: In moving Amendment No. 101, I shall speak also to Amendment No. 103. These amendments are concerned with other aspects of the issue which has already been raised by my noble friend Lady Hollis when she moved her amendments about the Wednesbury principle. Amendment No. 101 seeks to make sure that no regulations are made under this clause which interfere with the manner in which a local authority chooses to organise its services in response to local conditions, to contract with a willing tenderer, or to carry out its role as a buyer of services.
In documentation on competitive tendering the Secretary of State and other Ministers have always talked about the necessity of defining carefully the nature and standards of the services which local I authorities wish to see provided. It has always been said that competitive tendering is designed to increase the economy of local authority services but to make it possible for representatives of the community to decide what level of service is needed.
If they are going to do that, surely they must be able to act as proper purchasers of services from either their own staff or from the private sector. What cannot happen, or should not happen, is that regulations limit their ability to act effectively as buyers of services. These amendments are not particularly far-reaching; they are not saying anything which ought not to be well understood. However, unfortunately the regulation-making procedure in Clause 9 is so widely drawn that it is possible for the regulations to put very severe restrictions on the local authority's ability to act effectively as a buyer of services.
Let us take the example of organising services in response to local conditions. Services have to be organised to be controlled from a department; therefore they are dependent on the departmental structure of the local authority. Geographical limits have to be set to a contract for services. In order to fit in with the other services of a local authority, there has to be some sort of specification of the method to be used. The willing tenderer procedure is fairly well understood and is well understood in purchasing in the private sector. The specific examples which we go
142
on to give in Amendment No. 101 make that clear. The contract documentation and specification have to be adapted to the local authority's needs and procedures. It ought not to be—as it so often is, for example, in France—laid down on a completely prescriptive and unvarying national level.
The Minister made a plea earlier on for flexibility and sensitivity. I throw that plea back at her and say surely local authorities will work most effectively if they are allowed to be flexible. Again, the size and the scope of contracts is something which cannot be laid down centrally; it cannot be laid down by regulation by the Secretary of State. It has to reflect the needs of the community and the needs of the local authority and the citizens.
The use of local authority assets—the way in which a tender is framed—can have a very great effect on whether the service will be carried out efficiently. To take the obvious example of street cleaning, in the local authority service that is usually combined with the need for snow clearing on occasion. The street cleaning teams use assets of the local authority—in other words, snow-clearing equipment—when they are called upon to do snow clearing. If street cleaning is privatised—and that may well be the right thing to do; I am not arguing against the principle of private tendering at the moment—then part of the contract may have to specify that the company will be responsible, using local authority assets—because there is no point in buying them themselves—for the snow clearing. These seem such common sense provisions that it is difficult to see why amendments of this kind could be thought to be a threat.
I turn to Amendment No. 103. I do not think the Government will find anything to object to in the principle of these amendments. The amendment says that regulations shall not be made which prejudice the ability of an authority to set standards of service; to establish criteria to assess the ability of a tenderer to carry out the work—that is common business practice I should have thought—and fully investigate, to its satisfaction, the ability of a tenderer to carry out the work. The point is that so much of the very elaborate procedures which could be set out in regulation would actually damage the ability of a local authority to carry out the tendering procedure properly.
Let me return to the issue to which my noble friend Lord Howie referred, which is the issue of a double envelope tendering. I think everybody knows that the double envelope tendering procedure—where one first opens an envelope on quality and then assesses the ability of tenderers to achieve the quality without knowing their price—has been brought into disrepute by the Broadcasting Act. It was so clear that even the former Prime Minister, Mrs. Thatcher, was moved within 24 hours of the result of that fiasco to write and apologise and to take personal responsibility for the fact that it had been carried out. It does not actually work. There are better ways of doing it. I personally support the view of my noble friend Lord Howie. Certainly for services like architecture the best thing is to choose the person with whom one wants to deal and then negotiate the money with the people best qualified to do the work.
There are other variations. It is possible to look at the quality and the price together, and that is what the Government do in their tendering procedures. I often receive an invitation to tender for government services and it is made very clear in the tender document that the Government reserve the right not to take the lowest tender, to take any part of any tender that they choose, and to reject any part of any tender that they choose. In other words, they reserve the right to take a higher bid or to negotiate a bid. The Government assume that right for themselves but deny it to local authorities. The implication behind all of this, despite the sweet words about flexibility, is that the flexibility is entirely to be given to the Secretary of State and no flexibility is to be given to local authorities. That way lie inefficiency and inequity; that way the whole principle of competitive tendering can be negated. I beg to move.
6 p.m.
Baroness Blatch: This amendment and neighbouring amendments use the powers in the 1988 Act to wreck the level playing field, the very thing that we are trying to achieve by the Bill, and certainly they override anti-competitive behaviour. I do not believe that any of that is in the public interest. The noble Lord starts from a base of not liking competitive tendering and certainly not liking compulsory competitive tendering. That shows in many of the amendments.
In 1988 Parliament approved the Local Government Act 1988, with its requirement in Part I that local authorities should carry out competitive tendering for a range of services specified in the Act. The 1988 Act required local authorities to avoid anti-competitive behaviour, and gave the Secretary of State sanction powers which he could use if he considered that authorities had acted anti-competitively. Many authorities have complied with both the letter and the spirit of the 1988 Act in putting work out to tender during the past three years. But, sadly, too many have failed to do so.
In our view it would be greatly to the benefit of all involved with the CCT process if a clear and consistent basis for tendering exercises could be established in advance, so that the need for later intervention by the Secretary of State would be reduced, if not removed altogether. That is why we have placed this clause before Parliament, in order to enable us to clear away the uncertainties over tendering practices. We have set out our proposals for regulations to be made under this clause in our CCT consultation paper, published on 5th November.
Amendment No. 101 would provide that regulations could not cut across what we might call the "client" activities of local authorities, and in particular could not deal with contract documentation, the packaging of contracts, and the use of local authority assets. Of course local authorities must be able to act as effective clients. But they must also meet their "client needs" in a way which is not anti-competitive. As we have explained in paragraphs 1.26 to 1.29 of our CCT consultation paper, the decisions which they take on the matters identified in this amendment may
144
indeed inhibit competition. It cannot serve the I fundamental purpose of Part I of the 1988 Act if regulations to be used to define anti-competitive behaviour are unable to tackle these issues.
The subject matter of Amendment No. 103 is close to that of Amendment No. 101. I would say again that the Government are in no doubt about the importance of local authorities acting as effective and responsible clients in the organisation of services to their local communities. CCT has provided local authorities with the opportunity and the stimulus to get to grips with the proper organisation of these services, and we have seen a widespread improvement in the management of services subject to the CCT legislation. Of course, local authorities need to have confidence that in appointing a contractor they are placing the provision of a service in reliable hands. We would not wish to make regulations depriving authorities of such confidence, but we consider that there must be reasonable limits to the demands for information and for performance guarantees which authorities may make on tenderers. This amendment would give free rein to the most exorbitant demands of local authorities.
I repeat that we see the use of the regulation-making power in Clause 9 as being consistent with the objectives of the 1988 Act, and as necessary to tackle inconsistencies and uncertainties which have caused problems for local authorities and private contractors alike. The amendments would perpetuate those problems. I hope that, in the light of what I have said, the noble Lord will not press the amendment.
Baroness Hamwee: I wish to speak in particular to Amendment No. 103. I had hoped that the Minister might feel that the provisions of Amendment No. 103 were rather different from those of Amendment No. 101. I take her point that the exorbitant demands of disreputable and untrustworthy local authorities, if there are such authorities, should not be given free rein.
Lord McIntosh of Haringey: Which ones?
Baroness Hamwee: There may be some. On the other hand, it is important that we should state clearly that those which, as the Minister has said, wish to act as responsible clients should be able to do just that. The right to set standards of service, to assess the ability of a tenderer and to investigate to its satisfaction the ability of a tenderer to carry out the work is not in the slightest way overambitious, exorbitant or extravagant. I do not know whether the noble Lord intends to divide the Committee on the amendment. If he does not, perhaps the Minister will take that thought with her in order that the sentiment expressed during the debate may be incorporated somewhere so that local authorities may feel that they are regarded by government as responsible when they are trying to act responsibly.
Lord Howie of Troon: I wish to support my noble friend Lord McIntosh in this amendment. Before doing so I should like to touch on a point in passing. From time to time in her remarks the Minister refers to the various successes which CCT has already

145
produced in various local government services. No one on this side of the Committee has challenged her on those remarks. I do not intend to challenge her in any depth but I wish to put it on record that the quality of service in the collection of dustbins in the London Borough of Barnet is no better now than it was in the old days when it was done in the old way. I do not wish to pursue that point very far but I notice that the noble Baroness uses these previous alleged successes in order to throw light on successes which she expects to arrive in the future.
Lord McIntosh of Haringey: Before my noble friend proceeds with his support for me, perhaps he will allow me to defend myself against that very gentle rebuke. I did not go into the history of the successes or otherwise of existing compulsory competitive tendering because the amendment last night has changed the rules. As the Bill now stands, local authorities will have to have regard to quality as well as price for the existing services which have already been privatised. I thought that that was a sufficient achievement for me to spare the Committee from a recital of some of the more awful instances of privatised services in the past.
Lord Howie of Troon: I thank my noble friend for that intervention. I would be slowed up if I were to follow him too far. My remarks were not intended as a rebuke. I hoped that I might bring the slightest blush of shame to the Minister's cheeks and then hear no more of this in the course of the remaining debates.
This part of the Bill seems to relate to local authorities in two ways. There is the local authority as a client and then there is the local authority as the in-house consultant, so to speak. It might be involved in some arrangement whereby the in-house consultant was in competition with an external consultant—architects or engineers—and the client would deal with this matter in some manner. The Bill is intended to ensure that not only the in-house consultant behaves in a competitive way but so too does the authority as a client. That is how I see the Bill. I may turn out to be wrong.
I should like to say something about the nature of tendering. In my early career, when I used to function as a civil engineer, I had to deal with the consideration of tenders, and so on. There was almost an unwritten rule, if I may put it that way, that we never took the lowest tender unless there was a specific instruction which stated that we were obliged to do so. Indeed, we would only take the lowest tender with the greatest reluctance, for the simple reason that the lowest tender was usually the worst one that could possibly be obtained. Seldom in the construction world is the lowest tender the one which is really wanted. The best tender is the one required. As I said earlier, the tender required is the one which gives an immediate price and the best whole-life cost.
Therefore, when one talks about acting in a non-competitive way, one is obliged to take into account a complex arrangement of characteristics in the tender of which the price—or, in this case, the fee
146
—is only one. The various elements of professionalism, expertise, and so on, are other characteristics. I believe that my noble friend has put his finger on a weakness in this part of the Bill and that he ought to be supported.
Lord McIntosh of Haringey: I am grateful to my noble friend for that further expression of support. I also accept the fact that what I described as "a courteous rebuke" was not in fact intended to be a rebuke. I believe that the amendments before the Committee should be looked at in the context of Clause 9.
Clause 9 is concerned with the definition of the words "competitive" and "anti-competitive". All of these regulations are to that effect. It is very clear from the way that the Government are resisting even the most reasonable and moderate amendments that they seek to put the definition of those words on a pedestal. That is to say, they want it to be more important than any other single consideration in the letting of tenders. Despite last night's decision, they think that it is more important than quality and that it could even be more important than price. They certainly do not take into consideration the wider responsibilities of local authorities; for example, their fiduciary duties, their duty to achieve the best value for money over the longer term as well as in the shortest term and their duty to see to it (as future amendments will make clear) that the tendering process is free from the operation of cartels. All of those considerations are brushed to one side. They are determined to see to it that compulsory competitive tendering is pushed forward regardless of the consequences.
The Minister accused me earlier of being opposed to competitive tendering; that is not true. However, I am certainly opposed to the indiscriminate use of compulsory competitive tendering powers regardless of local circumstances, regardless of local judgment and regardless of the needs of local people. I fear that the Government have been peculiarly intransigent throughout the passage of the Bill, despite the fact that our amendments have not been recking amendments; indeed, like this one, they have generally been helpful.
I am sorry that the Government's response has been of this kind. I do not think that it is appropriate to divide the Committee at this stage. However, these matters in general are ones to which we shall certainly return on Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 102 and 103 not moved.]
6.15 p.m.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 104:
Page 10, line 10, at end insert:
("(3A) By regulation under this section the Secretary of State shall prescribe that the award of a contract to an external tenderer when the work was previously undertaken by direct labour shall be considered to be subject to the Transfer of Undertakings Regulations (Protection of Employment) 1981.").
The noble Baroness said: This amendment concerns the Transfer of Undertakings Regulations

147
(Protection of Employment) 1981. These were enacted by the British Government in 1981 following an EC directive. The purpose of the regulations is to ensure that when a company changes ownership—that is, when a transfer of ownership between companies takes place—the company continues, but in different hands, to ensure that the rights of employees which are based on continuity of employment (redundancy rights, unfair dismissal, maternity pay, and so on) are retained by the employee and taken with him or her into the new company.
Clearly, the latter is a matter of considerable significance to the employee. It also matters, when considering the issues which we discussed earlier today, to the local authority. I say that because it transfers responsibility for items such as redundancy payments to the new organisation. It is also important to the customer—that is, the local taxpayer—because it has the effect of ensuring that its experienced and skilled staff are more likely to remain in post when a company ownership is transferred.
Therefore, given that we have an EC directive with such virtuous consequences, why should this amendment be necessary? I suggest to Members of the Committee that the issue is not whether employees do or do not transfer their rights, but whether the TUPE regulations apply as such to local government as they clearly do to commercial organisations. Does the EC rule out local government from the transfer of undertakings? On the contrary, European law states that they apply to any organisations "emanating from the state". I suggest that DSOs are a clear example of such organisations. Yet, despite the spirit and the pace of the EC directive, the British Government have narrowed the scope so that the TUPE regulations apply to activities of a commercial nature only and therefore do not apply to the transfer of DSO undertakings. We believe that that is a false reading of the regulations. Indeed, it is being challenged in the courts at present on the grounds that DSOs are commercial organisations which are required, for example, to return 5 per cent. on their operations.
Earlier this afternoon the Minister made much of the point that whether contracts go outside into private competitive hands or remain in-house with DSOs, the latter are operating in a commercial and competitive environment and are expected to act accordingly. That was the Minister's own gloss and one which I would be happy to accept in those circumstances.
Therefore, does the Minister believe that the Transfer of Undertakings Regulations (Protection of Employment) 1981 apply to services which are currently subject to CCT, or which will be following the enactment of the Bill—pace Clause 8? If she does not believe that they do, is she saying that DSOs are not operating in a competitive and commercial climate? But, if they are operating in such a climate, why will she not accept that the TUPE regulations apply to local government? Finally, why will she not align British Government law with that of the EC, given the fact that when there is a clash between the two the latter takes precedence? I beg to move.
Earl Howe: As the noble Baroness said, the effect of this amendment would be to apply the Transfer of Undertakings (Protection of Employment) Regulations 1981 to all transfers of work from a local authority direct service organisation to an external contractor.
The 1981 regulations are designed to protect employees when the commercial undertaking they work for is transferred to a new employer. They do not, and should not, cover the circumstances envisaged here. In these circumstances there is no transfer, because the local authority retains responsibility for the work, and no commercial undertaking.
Let us be quite clear about what this amendment would do. It would deny local authorities and their chargepayers the benefits of competition. At present, when an in-house team fails to win the right to continue to do the work for the local authority it may be redeployed on other work, or, in some cases, its members may have to be made redundant. In the latter case, they would receive appropriate compensation from the local authority and may be given the opportunity to work for the incoming contractor.
However, if this amendment was accepted, the incoming contractor could be obliged to take on all the in-house team on their local authority pay and conditions. Contractors would be severely restricted in their ability to restructure their workforces, to devise new performance-related arrangements or to introduce innovative ways of doing the work. In short, they might not be able to increase efficiency to the extent that local taxpayers have a right to expect. I appreciate the anxiety of the staff about the changes they may face, but that is not sufficient reason to deny charge payers efficiency gains by extending the scope of the regulations to those wholly inappropriate circumstances.
Members of the Committee opposite earlier expressed enthusiasm for the level playing field, but it should be clear that the amendment wrecks that playing field and the entire basis of competitive tendering. I hope that the noble Baroness will think better of it and withdraw the amendment.
Baroness Hollis of Heigham: The Minister said that the amendment would deny to local authorities the benefit of competition. I do not accept that. This is a point to which we shall return. When it suits them Ministers are conflating the interests of the local authority as contractor—the DSO—and the interests of the local authority as fiduciary trust holder for the wider public interest. We saw that confusion earlier today. We are seeing it again.
The Minister argued that it is not reasonable in terms of competitiveness—the local authority would not enjoy the benefits of competition—if the rights presently enjoyed by employees were transferred with them when a DSO contract went outside. Because those costs are not transferred to the private, incoming contractor, they continue to be carried by the local authority in its fiduciary role, although not necessarily by the DSO as a trading organisation. That may produce a level playing field between two potential contractors, but it cuts across the rights employees would enjoy in the private sector, were the situation to

149
arise, and the rights of local taxpayers to enjoy the protection from the local authority to which they are entitled, as fiduciary trust holder on their behalf, trying to establish the best value for the local authority.
The Minister says that that denies to local authorities the benefit of competition. On the contrary, he is putting the outside contractor into a privileged position while ensuring that the in-house local authority team, or the local authority on behalf of its taxpayers, has to continue to bear costs properly borne by the private sector thus favouring the private sector in the competitive field. That is the difference between us. I am sorry that the Minister fails to distinguish between that conflict of interest—on the one hand as contractor, and, on the other hand, as client. However given the lateness of the hour I do not intend to press the amendment to a Division. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 105:
Page 10, line 10, at end insert:
("(3A) No regulation made under this section shall require a defined authority to assume any notional time period over which any annual savings from any contract award might accrue.").
The noble Baroness said: The amendment provides that,
"No regulation made under this section shall require a defined authority to assume any notional time period over which any annual savings from any contract award might accrue".
The background to the amendment is the consultation paper Competing for Quality which proposes that when evaluating tenders local authorities would be required, through regulations made under Clause 9, to assume that any possible savings from contracting-out the work would continue for 10 years. There is little or no evidence to support that proposal.
Contracts, as laid down by the Secretary of State, often run for four to five years only. It would be folly, and in contradiction of its fiduciary duty, for a local authority to assume notional savings following a contract when the notional savings are assumed to run for twice the time the contract is to run. That is perverse.
If the service is contracted out and, as a result, council operations wind up—a point to which we shall return on later amendments—there is likely to be an increase in prices when the contract is subsequently let for the second time. The result of always having an in-house bid is that it prevents the growth of cartels or monopoly price fixing, which warp the final bid level. Once the DSO has gone there is no genuine alternative competing bid against which to measure, and press down on, the external bid. We then have a monopoly.
Why presume that savings will run for 10 years when contracts, in the first place, will run for four to five years, and when, if they are renewed, prices may well increase because there will be no in-house bid to bring down the price level? I can only suggest that the Government are motivated by the desire to inflate the assumed and anticipated savings that will come from
150
privatisation. Far from establishing a level playing field, the result will be to favour private contractors over DSOs yet again. Much earlier the Minister favoured a level playing field. So do we. However, I cannot understand for the life of me what a level playing field means when a contract running for four or five years is supposed to generate savings for 10 years, even though that contract will have had to be renegotiated and may well have gone to a different organisation.
We are being asked to assume savings beyond the period of the contract. If we do not do so, we are told we are acting uncompetitively. That is perverse and shows the Government's desperate wish to depress the capacity of in-house organisations to contract and compete effectively and to hold down prices in the interests of us all. I beg to move.
Baroness Blatch: Paragraphs 1.19 to 1.21 of the consultation paper set out our proposals for the treatment of extraneous cost items in tender evaluation. The amendments offer a negative image of our proposals and would rule out of any regulations made under this clause those items which we consider must be covered if we are to achieve clarity and consistency in the field of competitive tendering for local authority services.
We propose to require that in comparing the allowable costs and savings resulting from the acceptance of tenders submitted, local authorities should calculate those sums at constant prices and discount them over a period of 10 years that we would specify. The amendment would preclude the specification of any period for the calculation of savings. It cannot be right that a local authority could reject an external tender, offering recurring annual savings in carrying out the work, because the authority would face one-off costs of, say, redundancy payments which in total would mean higher expenditure if an external tender were accepted, but only in the first year of the contract. Clearly, the financial evaluation must take account of the longer term. As for the specification of a 10-year period, we expect that, in general, government departments will use a 10-year appraisal period when evaluating tenders, which is the rule we propose to adopt for local government. We believe that the specification of a 10-year period will strike the best balance between the need to take account of short-term costs and long-term benefits.
I repeat that we see use of the regulation-making power in Clause 9 as consistent with the objectives of the 1988 Act and as necessary to tackle inconsistencies and uncertainties which have caused problems for local authorities and private contractors alike. The amendment would perpetuate those problems, and I hope that the noble Baroness feels able to withdraw it.
Baroness Hollis of Heigham: Does the Minister accept our argument that a contract may last for five years while the Government propose that the savings will be assumed for 10 years?
Baroness Blatch: No, I do not accept that premise.
Baroness Hollis of Heigham: Will the Minister comment upon the apparent contradiction that most

151
contracts, as regulated by the Secretary of State, will run for four to five years while the White Paper suggests that notional savings must be assumed for 10 years?
Baroness Blatch: The costs of redundancies and other overheads which are included are often added to the contract tender price for one or two years only. That is unfair. Local authorities should manage to spread the discounting of those services over 10 years. The noble Baroness speaks as though, at the end of five years, nothing happens. The discounting continues for a further five years. That will lessen its impact. It is our view that that will be taken into account when it comes to retendering for the new contract.
Baroness Hollis of Heigham: I remain completely baffled by an argument which suggests that the process is similar to buying a lease for five years while assuming that one has rented the property for 10 years. That seems to be what the Minister is saying. I remain baffled, but I do not believe that there is any point in pressing the amendment at this time of night. I beg leave to withdraw it.
Amendment, by leave, withdrawn.
6.30 p.m.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 106:
Page 10, line 10, at end insert:
("(3A) No regulation made under this section shall prejudice (or have the effect of prejudicing) the ability of a local authority to prevent, in so far as possible, the future availability of contractors to tender for services, or the creation of a monopoly supply situation for the delivery of any service; nor shall it prevent a local authority from rejecting a bid from a contractor or contractors where in the opinion of the authority there has been collusion between contractors, or the fixing of prices.").
The noble Baroness said: The amendment seeks to pursue a theme which we have been exploring with the past two amendments. It is to try to ensure that the local authority's responsibility to its taxpayers—to maintain the best value for money for services with a genuine level playing field in competitive tenders—is supported. We fear that once an in-house DSO has lost its ability to compete, we may as a result see cartels.
The amendment asks the Committee to review the situation. Cartels operate in different ways. For example, they may have major financial implications for the local authority; they will clearly raise prices. They will generate higher contract prices than if there had been open competition. They will create the conditions that we talked about just now for contractors to seek unjustified or excessive cost increases during the life of the contract because the local authority in its fiduciary role has no alternative supplier. It will make more difficult the achievement of value for money through efficient, effective and equitable service delivery. As a result, local authorities would not be able to serve their taxpayers as they should.
The fear behind the amendment is the experience we have had in the past few years. All the service
152
sectors that were subjected to CCT have witnessed a series of takeovers and mergers since 1989. For example, with the enforced tendering for National Health Service cleaning and laundry work, by 1990 two cleaning contractors had gained two-thirds of the NHS domestic contracts, either through direct bids or takeover of firms who had won contracts. Such takeovers and mergers will no doubt continue. We can have no confidence in the situation where the DSO's capacity to put forward an internal bid has gone, and where the market has effectively been monopolised by one or two contractors. I am not saying that they are not offering value for money but we have no way of testing the efficiency. The amendment seeks to alter that. Competition is sustained by genuine competitiveness between firms. We have no guarantee that this will happen.
In 1888 the old LCC was set up and subsequently it and the county councils set up in 1894 quite deliberately, whatever their political persuasion, created direct works departments. Conservative county councils in the late 19th century were prominent in setting up DSOs, as were the Liberal and progressive authorities at the time. The reason they did so was to break the cartel fixing in everything from transport to water, gas and the utilities. As a result they improved the value for money for local taxpayers and ratepayers.
I ask the Committee not to throw away that accumulated experience of local government. We suggest that without the capacity to contract and to ensure fair competition, local taxpayers will be the losers. I beg to move.
Baroness Blatch: To some extent I addressed these points when speaking to an earlier amendment proposed by the noble Lord, Lord Howie of Troon. The effect of these amendments would be to leave local authorities free to make judgments about a range of matters to do with the current and future operation of markets and the behaviour of private contractors, which are highly contentious. These are areas where local authorities have no particular expertise and where a body of legislation already exists to protect customers and the public interest.
I understand authorities' anxiety that the market in the provision of goods and services for which they are responsible is sometimes weakly developed and that some contractors may collude or act in such a way as to restrict competition, resulting in higher prices than are necessary. The Government are clear that such behaviour is both undesirable and illegal.
As I mentioned on the earlier amendment, the Restrictive Trade Practices Act 1976, administered by the Office of Fair Trading, is designed to counter the adverse effects of cartels and other anti-competitive practices. Action has been taken against a number of firms who have admitted price-fixing among suppliers of ready-mixed concrete, road surfacing materials, steel reinforcing bars, float glass and fuel oil. Local authorities have played a valuable part in bringing these cases out into the open.
The government recognise that the legislation needs strengthening, and have announced their intention to bring forward legislation as parliamentary time

153
permits. In the meantime, local authorities who have cause to think that they have evidence—and it is important to emphasise that they should have evidence—of anti-competitive behaviour should notify the Office of Fair Trading in line with the guidance recently issued to them.
The noble Baroness opposite argued that direct labour organisations are the best safeguard against anti-competitive practices. I do not dispute that DLOs had an important role to play in preventing such practices before the Restrictive Trade Practices Act was on the statute book. But the Government take the view that the regulation of fair competition is primarily a matter for the OFT, and that local authorities' understanding and appreciation of the operation of the market is inevitably very limited. They believe that adequate safeguards exist in the 1976 Act, and that where appropriate the provisions should be strengthened. To provide local authorities with the powers that these amendments would bring would, in the Government's view, introduce the possibility of an even worse distortion of competition as authorities sought to protect and retain their direct labour organisations. Far from protecting local taxpayers from higher prices, these measures would preserve inefficiencies and result in poorer services. I am sure that that is not what the noble Baroness intended in the amendment. I hope that she will feel able to withdraw it.
Baroness Seear: Before the noble Baroness sits down, does she agree that it is delightful to hear of Labour's conversion to competition, but in the days when there was only direct labour and there were many Labour councils, there was absolutely no competition at all?
Baroness Blatch: The noble Baroness is absolutely right. There was no competition. I believe that it is right that where direct labour forces win in fair competition against the outside sector, they should gain the work.
Baroness Hollis of Heigham: We on this side of the Committee entirely agree that local authorities' DSOs should operate in a businesslike way, offering value for money. There is no dispute between us. Commenting on the remarks of the noble Baroness, Lady Seear, where there have been inefficient DSOs from whatever authority or whatever party, I personally—and I am sure I speak for my noble friend Lord McIntosh—would be no defender of such DSOs. In our individual capacities as leaders of authorities, we have sought to overcome the problem. Nevertheless, as the Minister accepted in her helpful remarks, the situation remains that there is a problem about cartels. They are being found to exist and are being exposed in many areas of the building trade. The Minister paid tribute to the extent to which local authorities have helped to reveal that and I believe it was a graceful acknowledgment. She accepts that such cartels are often informal, hard to monitor and to bring to light. Bids are put in but bidders know in advance what other parties are doing and segments of
154
the work are allocated between them. We agree that there is a need to bring those extremely anti-social, anti-competitive and undesirable practices to an end.
The point I wish to press is that the Minister said that legislation would be forthcoming, and that there were adequate safeguards in the 1976 Act but legislation would be forthcoming to tighten them. Will she tell us when that legislation may come? I could withdraw the amendment with a glad heart if, in the foreseeable future, the Government were going to do what they suggest to strengthen the legislation of 1976 in ways which would avoid the necessity for amendments like this one being explored.
Baroness Blatch: I repeat that we believe that the Act needs strengthening. There is evidence for it and it is our intention that that should happen; but I added that it would be when parliamentary time permits. It would be presumptuous of me so close to a general election to pre-empt not just what we may do in the next Parliament but what any government may do in the next Parliament.
Baroness Hollis of Heigham: How can one resist the suggestion that we shall be making the legislation within a few months' time and can take on our own problems? In that light, I am happy to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 107:
Page 10, line 10, at end insert:
("(3A) No regulation made under this section shall prevent a defined authority from taking into account the reasonable effects of future increases in prices resulting from awarding a contract externally.").
The noble Baroness said: The amendment seeks to prevent the Secretary of State from overruling an authority which takes into account the reasonable effects of future price increases. In other words, it is the mirror image of some of the amendments that we have already explored.
We have so far accepted—and I think the noble Baroness opposite has accepted—that the presence of an in-house bid can often restrain bids submitted by private contractors. But clearly, if the service is privatised, the in-house operation is closed, the staff are made redundant, and the assets disposed of. Consequently, once the first contract ends, there may be no capacity to have genuine competition the second time around.
In these circumstances the local authority is likely to face an increased bid, and the Audit Commission and CIPFA have long recognised that to be the case. So incidentally have the Government in circular 1/91. However, in that circular the Government said that local authorities believe that it is not possible to quantify what the future assumptions will be, because the local authorities may not make hypothetical assumptions about the future movement of prices. It should not therefore be taken into account when reaching a decision on the award of a contract. It seems from circular 1/91 that the Government have already said that local authorities may not take into

155
account possible future increases in prices once, for example, a DSO no longer exists and when perhaps a cartel may be in operation.
Having said that, why pursue the amendment when it looks as though the Government have already made their position clear? The reason is that although this has been outlined by central government on the grounds that it cannot be costed and that it is hypothetical and the like, in the same breath and in the same circular, and certainly in the latest consultative White Paper, we have had the argument that though local authorities may suffer short-term losses—for example, the costs of their depots, and so on, not being able to be financially effectively used—nonetheless these short-term losses will be outweighed by unquantified, longer-term benefits.
Will the Minister not accept that if unquantifiable benefits resulting from competition, as reflected in the White Paper, could and should be taken into account by local authorities to offset their known short-term losses, so equally should unquantifiable and unquantified price rises? The Minister seems to be saying that benefits, though unquantifiable, should be taken into account; losses, which may be unquantifiable, may not be. The principle is exactly the same. Either we do, or do not, go in for future forecasting, but what we should not do is to go in for future forecasting, as the Government would wish us to do, when it benefits the private sector, but refuse to do so when it does not. That is the purpose of the amendment, which I have pleasure in moving.
Baroness Blatch: I am a little confused, not by my understanding of the amendment, but by the way in which the noble Baroness spoke to it. I find it an extraordinary amendment. It would ensure that an authority could take into account, when evaluating tenders, the effects of future increased prices which might result from the award of a contract to an external provider. This would mean for example that an authority was entitled to reject the lowest tender on the grounds that it had concluded that an external contractor, if awarded the contract, would be in a position at some future date to raise the price for doing the work, and moreover that the increased price would have undesirable consequences.
We are determined to extend competition as provided in this Bill. What we are not prepared to do is to go along with the notion that local authorities are somehow particularly well equipped to anticipate the behaviour of the market and the various factors within it, and to judge the effect of hypothetical price increases on their taxpayers. If they were capable of such prophecy then a good living could be made by those officials and members with such skills.
There are, as I indicated in speaking to Amendment No. 106, powers to act against restrictive practices that aim to raise the prices of goods and services beyond that which can be reasonably justified. That legislation is designed to protect customers and the wider public interest, and we are committed to strengthen the current provisions as soon as parliamentary time permits. The Government are fully apprised of the need to ensure that the benefits of free and open competition are extended as widely as
156
possible, and that includes making sure that no supplier or provider acts in an anti-competitive manner. It would be quite unacceptable for this role to be handed over to local authorities whose prime motive may be to protect their direct labour organisation rather than ensure good value for their taxpayers. I hope that the noble Baroness will agree to withdraw her amendment.
6.45 p.m.
Lord Desai: Can the noble Baroness clarify a point that has been puzzling me? Most of the time in economics when we talk about competition we assume that purchasers have some knowledge of what they are purchasing. On this amendment, as on the last, the Government seem to be assuming that the local authority has no knowledge, and no capacity to know, either that a cartel is acting against it or that prices may increase in the future.
It does not know exactly how much prices may increase; it may only do as well as the Treasury does, which is not very well. But we should still allow that purchasers should have the ability—even the imperfect ability—to forecast what price increases they may face and take those into account in making a purchase. That is a purely commonsense point. To assume that local authorities have no capacity to detect cartels or to forecast price increases seems a rather strange notion. In other words, who knows? Is it only the private sector that knows?
Baroness Blatch: The noble Lord, Lord Desai, is absolutely right. It is important that purchasers who are purchasing something know exactly what they are purchasing. In the case of local authorities putting work out to tender, it is for the local authority both to describe what it wants and at what level, and then to put it out, and, as I believe under the measures in the Bill, to put it out to fair competition.
We shall have to agree to differ, but if the noble Lord is saying that we should give licence to local authorities to make subjective judgments about what price increases may actually happen at some time in the future, and add that to the contractor's tender price in order to make their own direct labour force seem more competitive, that is a policy that we could never support. I hope that the noble Lord will make clear to the wider public whether that is the policy which his party would support.
Lord Desai: We have forecasts of price increases published by the Treasury and by various other private and public bodies. What is to prevent a local authority from using those published forecasts and acting on that knowledge? You are denying them the right to act upon available knowledge.
Baroness Blatch: The noble Lord is suggesting differential treatment for a private contractor and the local direct labour force. If the noble Lord is saying that you can have some view about where the economy is going in the future—which of course happens in certain sectors—and a view is taken about what inflation may be and what the level of price increases may be, then the notion must be applied just

157
as much to a direct labour force as to a private contractor. In that case the real terms price of the contract at the time—in other words the contractor's tender price and the direct labour organisation's tender price—must be seen as equal, unless the noble Lord is suggesting something wholly unacceptable to this side of the Committee and to the Government; namely, that there shall be a higher notional increase attached to the private contractor and a lower notional increase some time into the future applied to the DLO. That is wholly unacceptable.
Lord Desai: If the noble Baroness were to inspect the data on public sector pay and private sector pay in any Treasury publication, she would see that such a differential exists and that, often for a long period of time, public sector pay is below private sector pay. It is easy to envisage a situation in which such a differential can honestly, without any desire to cheat, arise.
Baroness Blatch: I am grateful to the noble Lord for giving way. The noble Lord is making a rather simplistic assumption about public sector pay. It does not always follow that public sector pay is necessarily, in any given pay increase, lower than private sector pay. When one is comparing the pay of contractors, an argument often used by noble Lords opposite is that the pay is much lower in the private sector than it is in the DLOs. That is the first point.
On the second point, it is not enough to think of a pay increase in isolation. One must also consider other conditions of service. When one takes those into account one finds very often that the cost of employing in-house labour is higher.
Baroness Seear: Perhaps I may say in response to the noble Lord, Lord Desai, that for my sins I served for 13 years on the Top Salaries Review Body. Attempting to make any real comparison of total rewards, including benefits such as indexed pensions and the rest of it, was extremely frustrating. The arguments that went on about the relative benefits of an indexed pension and a chauffeur-driven car would have defeated even the noble Lord, Lord Desai.
Lord Desai: I meant only to say that differences can and do exist.
Baroness Hollis of Heigham: At the heart of the issue is the plausible assumption that there will be situations in which the private sector bids for work on the basis of loss leaders. That is undeniable. We have seen it happen, particularly when companies are hungry for work. We have seen it happen when contractors want for the first time to obtain a share of work. Every good supermarket will use the method to attract people through its doors. The implication is that that destroys the in-house capacity to compete subsequently. At a future re-tendering that loss leader price will float upwards and become excessive.
It is precisely for that reason that the first edition of the CIPFA code of guidance—and perhaps the
158
Minister will indicate whether or not she believes that CIPFA is right—referred directly to the matter. It states:
"Where authorities want to give a contract to a DSO for the purpose of preserving its capacity to compete on later occasions they may do so even if the DSO tender is not the lowest, providing both that the work is the minimum necessary to keep the DSO afloat and the price difference is not so significant as to affect good value for money principles".
That is what CIPFA, a recognised public body, gave as guidance to local government. Is the Minister saying that she finds that unacceptable?
All we are trying to do with the amendment is to ensure that we keep a healthy competitive market. Where local authorities suspect that a tender is a loss leader or that the original bid has been deflated and as a result will be followed by price rises in future, whether through a loss leader or cartel effect, the local authorities' ability to act in the interests of their taxpayers and to aim at a competitive playing field should not be inhibited. That is why we moved the amendment. Perhaps the Minister may wish to comment on the CIPFA code.
Baroness Blatch: It is true that CIPFA has been enormously helpful in making that advice available. However, that is not the last word on the matter. In the case of the particular example which the noble Baroness mentioned I have to say that I do not agree.
In relation to the point about loss leaders, it is important to remember that when a contractor wins work from a local authority at a price which is deemed by the local authority to be a loss leader, at least for the duration of that loss leading tender price the local authority gains considerably. When the time for review comes and a more realistic price is put in place, if that breaches the principle of fair trade there is a mechanism for taking action by invoking the 1976 Act. If it is simply a more realistic price then I have to say to my noble friend—to the noble Baroness (well, she is a friend!)—that the local authority still benefits.
The survey which has been undertaken on competitive tendering shows that overall local authorities have benefited considerably financially and the performance of both in-house labour forces and contract services has raised standards in local authorities.
Baroness Hollis of Heigham: These will be my two final points. The first is a point to which I shall want to return. The situation is becoming very confused for local authorities. They have guidance from CIPFA—the recognised Chartered Institute of Public Finance and Accountancy—guidance in some cases from the Audit Commission, again a recognised independent, quasi-professional body, as CIPFA undoubtedly is, (and by saying quasi-professional I do not in any sense mean to impune their competence), and also from the DoE. Increasingly guidance from those three sources is diverging. Local authorities are expected to make good judgments in the interests of their taxpayers while CIPFA says one thing, the Audit Commission may or may not say something different and the DoE says something else again. Those are the professional judgments on which we expect our DSO

159
managers and city treasurers to manage affairs in the best Interests of their local authorities. I was disappointed that the Minister did not endorse the professional guidance of CIPFA to local authorities.
Baroness Blatch: Perhaps I may correct the noble Baroness, for the record. I said that CIPFA made a very valuable contribution and that its advice on this issue has been much valued. However, on the specific point raised by the noble Baroness I said that I did not agree.
Baroness Hollis of Heigham: Or, to paraphrase the Minister, CIPFA is very valuable but just happens to be wrong.
My second point concerns the wider issue of competition. The Minister said that local authorities would enjoy the benefits of the loss leader bid which would be low and would lead to an undoubted financial gain. There may be a financial gain but, given all the debates we have had so far about the quality of service, there is no doubt—and my noble friend Lord Howie made the same point earlier—that the quality of service is affected. We have seen that in privatised contracts bought by leading companies in London—where else? An example was quoted at Second Reading of one case in which 1,000 people flowed through 80 refuse cleaning jobs in three years. As a result complaints trebled. That is what happens when people buy work below a proper market price: quality plummets.
I am sure that the Committee will permit me to finish the debate on the amendment with a quotation from John Ruskin:
"It is unwise to pay too much,
But it is worse to pay too little.
When you pay too much,
You lose a little money—that is all.
When you pay too little,
You sometimes lose everything.
Because the thing you bought was incapable
Of doing the thing it was bought to do".
I beg lave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 108:
Page 10, line 10, at end insert:
("(3A) No regulations made under this section shall require a defined authority to subtract from an external bid any item which will require actual expenditure by that authority.").
The noble Baroness said: The amendment is designed to pick up the point about performance bonds. We have explored the matter in this amendment because the Government's position on performance bonds has varied.
The Government's stated aim has been to introduce competition. We accept that we want that competition to take place fairly. One of our anxieties, which has been explored in previous amendments—the Committee may think ad nauseam—is that when DSOs lose a bid, unlike the private contractor they may not go out to find other clients to keep themselves alive; they have to close. DSOs which lose in-house contracts close. Private contractors which lose a bid
160
for local authority services can find an alternative client and keep afloat. As a result, prices may very well drift upwards.
The second difference between a DSO and a private service competing for the same tender is that the operation of the DSO remains under the direct control of the council. The Government know therefore and have accepted in the past, the need for local authorities to obtain the same quality assurance—or life quality assurance—from private contractors through performance bonds.
Perhaps the Committee will forgive a personal anecdote. As someone who was for 11 years a housing chairman I knew how important it was to get performance bonds from private building contractors—because all our building work went out to competitive tender—to ensure that they were capable of doing the work competently and that the company would not close in the meantime or fail to perform. The cost, then as now, of providing the bonds is as much an element in the price of the job as turning up with the correct tools. One does it by turning to the banks for references and one adjusts the scale of the performance bond according to the integrity, and known track record and experience of the company one is dealing with.
For many years performance bonds have been used in connection with building work—where I have had personal experience of them—and in engineering contracts. There has never been any suggestion from private engineering or private construction companies that it was improper, unreasonable or impeded consultation. Yet now we are being told that this is a factor which should not be taken into account in evaluating the cost of a tender.
The Minister ought to justify that departure from well-established practice—which has existed for the 20 years in which I have been involved in local government—which ensures for local government the contractor's ability to deliver what was promised and have a performance bond to set against the delivery of that performance. If we do not have it, we shall be extraordinarily vulnerable to the loss leader situation in which quality suffers and the local authority has no economic leverage against which to judge that performance. I beg to move.
7 p.m.
Baroness Blatch: This amendment seeks to achieve the opposite effect of the proposals that we made in our CCT consultation paper. It provides that regulations under Clause 9 could not require authorities to subtract any cost items from tenders submitted by external contractors for the purposes of tender evaluation. We proposed in the CCT consultation paper that, in comparing the cost of tenders submitted for work, local authorities should subtract from the price tendered by private contractors any cost incurred in order to provide a performance bond which the authorities may have required.
I must stress to the Committee that we are not precluding local authorities from requiring performance bonds, but we consider that the resulting cost

161
to the contractor is extraneous to the direct cost of performing the work itself. It should therefore be taken out of the tender evaluation process to avoid distorting the comparison with the cost of the in-house bid.
We have argued for some hours for a level playing field. We shall have to agree to differ on that matter, but we believe that the playing field should be level. If we were to accept the amendments tabled by the Opposition, the level playing field would be stood on its head in presuming in favour of direct labour organisations. The amendment is unacceptable and I hope that the Committee will not support it.
Baroness Hollis of Heigham: It is clearly fruitless to push the amendment to a vote. Performance bonds indicate in effect the financial integrity, and capacity of an organisation as assessed by bodies such as banks, to deliver the performance as promised. That is an entirely proper cost to be taken into account. DSOs have that guarantee of quality and integrity because they continue to receive the monitoring internal to a local authority. It is perfectly proper to require performance bonds to be regarded as part of the cost of a private contract to be set against the equivalent cost of the monitoring of DSOs that local authorities carry out.
As the Minister said, the gap between us is as wide as the Rubicon. I hope that she will be the first to cross it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 109:
Page 10, line 10, at end insert:
("(3A) No regulations made under this section shall require a defined authority to exclude from consideration in tender evaluation—

(a) the effect on cash flow of variations in the terms of any transaction, including the actual payment of frozen holiday payments;

(b) costs arising from the discretionary award of compensation by way of added years to staff who would be made redundant; and

(c) costs of accommodation, storage or central administration so far as may not be immediately saved in the event of a service being taken over by an external contractor.

(d) the cost of any losses incurred if an incoming contractor did not wish to make use of depots and vehicles that had been made available to him; any such losses relate to bygone expenditure which is not relevant to the choice between internal and external bids.").

The noble Baroness said: This is the last of a clutch of specific amendments. It seeks to ensure that no regulations made under the Bill would require a local authority to exclude from consideration a "shopping list" of costs. We have already picked up some of those costs by implication, but perhaps I may explore some of the others a little further.
When we consider the costing of contracts, we are considering two or three different items. First, we are considering staff costs. We argue that some of the costs that a local authority would expect to pay if it failed to hold a contract in-house would continue to be borne by the local authority. Again, we want to
162
ensure that there is a level playing field because, with all due respect to the Minister, the Government are confusing the local authority's role as contractor with its role as client.
Secondly, we are considering the physical cost of accommodation—depots, vehicles and so on—when not used by the private contractor. I wish to explore this point a little more fully than the point about staff costs which we have already discussed.
Perhaps I may take the example of depots to show how unfair the Bill would be without such an amendment. In Circular 1/91, which was published at the beginning of the year, the Government said that local authorities were required to make available to private contractors their depots because, otherwise, contractors would be deterred from competing. Furthermore, paragraph 17 stated:
"Making depot facilities available to contractors … would make the best possible use of [authorities] assets … in the interests of their chargepayers".
In other words, making such depots available would be the best possible use of assets and would be in the interests of chargepayers.
However, if the contractor did not want to use those depots, the local authority could not include the item as a loss. If we consider the circular together with the Bill, it means that throws in the value of depots if it helps the contractor to compete and one excludes it if it helps him to compete. You throw it in if it helps to make financial use of assets, but you exclude it on the grounds that it is considered to be "bygone expenditure", to quote from the consultation paper, if the contractor does not want it.
Where then is the best possible use of the local authority's assets that we are asked to bear in mind in the circular? In other words, if the interests of the contractors and local taxpayers coincide, the Government exhort us to take that route, but, if they do not, the interests of the contractor are supposed to prevail. That makes it clear that the Government hope that the interests will coincide. When they do not, the interests of contractors are to be privileged. The Bill cannot be clearer than that.
The Bill is not about economy. If it were, there would be no such inconsistency. It is about privatisation and, once again, putting more bumps into the playing field in the hope that DSOs will be knocked out of the game. I beg to move.
Lord Skelmersdale: So far in this long series of amendments the arguments of the noble Baroness, Lady Hollis of Heigham, have been based on a situation in which there is effectively one private sector contender for a tender—if you can have a contender for a tender; the noble Baroness knows what I mean—and the local authority. However, we are rapidly moving to the stage at which the first three-year, four-year or five-year tenders will have finished. There will therefore be two or more private sector tenderers tendering for a contract and possibly the residual DLO or new DLO, which would be formed to carry out a particular contract, will be involved too.
In Amendment No. 109, the distinction between the two or more private tenderers is not made. That means that the playing field, which both sides of the

163
Committee have agreed should be level, will not be level among the private sector competitors. That is quite wrong. For example, competitor A would not be allowed to put into his contract price
"the effect on cashflow of variations in the terms of any transaction, including the actual payment of frozen holiday payments",
redundancy payments and so on.
The amendment encapsulates all the wrong arguments which have been made throughout this series of amendments from the other side of the Committee.
Baroness Hamwee: I know that we are talking about specifics, but I hope to bring us back to the underlying concerns which have no doubt led to this series of amendments. Perhaps I may take up the point made by the noble Lord, Lord Skelmersdale; namely, his comment that, with regard to the services that have been put out to CCT for four or five years, DLOs are not now generally in a position to compete because they have been wound down. They do not even begin to approach the boundary line of, to use that extremely overworked phrase, the level playing field.
It is right that I put on record from these Benches that, although we have been quiet during this series of amendments, that has been as much as anything in order to assist the Committee to move on with its business. It does not indicate a lack of support for the underlying anxieties that are being articulated.
I should like to put it on record that I am extremely anxious that the level playing field does not allow DLOs to participate as a player. We are losing the choice, variety and so on in our local authorities. Underlying that, we have to address the Government's ambitions, which are rapidly being realised in some areas, to reduce the powers of local authorities.
Baroness Blatch: It is a further amendment which offers the converse of what we propose in the CCT consultation document. Whether it is called wrecking or whether it simply negates does not matter. It is entirely consistent with the fact that noble Lords opposite simply do not approve. My noble friend Lord Skelmersdale was indeed right. I listened carefully to the noble Baroness, Lady Hamwee. However, we refer to a straight comparison between the cost of employing a DLO and the cost of employing a contractor. If that comparison is unfavourable to the DLO this range of measures referred to in the series of amendments makes it seem more competitive simply by adding costs of one kind or another to the tender price of the contractor until it becomes unfavourable. Therefore the cost of employing the contractors as labour forces is not comparable and not favourable, yet somehow there are ways and means of contriving to make the DLO seem more favourable.
The amendment would provide that regulations under Clause 9 could not require the items listed in the amendment to be excluded from local authorities' evaluation of tenders. The items in question vary, but the common theme which links them is that, while there may indeed be costs arising to the local authority from these items, those costs should not rightly be regarded as integral to the cost of having the work
164
carried out by an external contractor. If such costs are included in the comparison of tenders received, the result is a distortion of competition which must be avoided in order to secure the aims of Part I of the 1988 Act.
I do not propose to dwell in greater detail on our proposals. I must stress that we see a need for regulations to be made under this clause which would remove as much uncertainty in tendering matters as possible. The effect of the amendment is the opposite; namely, to uphold and perpetuate inconsistency and doubt. I hope that the noble Baroness will feel able to withdraw the amendment.
7.15 p.m.
Baroness Hollis of Heigham: I consider the statement by the Minister very revealing. I wonder whether she meant it to be as revealing as it may prove to be. The noble Baroness accepted on the one hand that there were real costs to the local authorities should its DSO not win a contract in-house. Some costs are listed in the amendment. They are real costs; the Minister accepts them. There is a real bill to be met with regard to frozen holiday pay entitlements, compensation, costs of accommodation, vehicles and depots, central establishment charges, and so on. The Minister accepts that those are real costs which will be incurred somewhere. Nonetheless she is not willing to see those costs set against the equation that the local authority has to make as a client when assessing which of two bids it should accept.
I ask the Minister this question in good faith. If she were on the board—of course she cannot be—of a major company such as Marks & Spencer or Sainsbury's, would she expect to be neutral between an in-house bid and an out-of-house bid knowing that, by taking the latter, residual costs to the company of which she was a director would continue? Those costs would have to be borne by that company. Yet she is not willing to take them into account in the name of competition. She would quite properly regard the ongoing costs that that company had to carry, were a contract to go out, as a proper consideration to bring into play when deciding whether to contract out. If the savings more than offset the cost of contracting out plus the residual cost left to the organisation, she would contract out. However, if the outside bid were cheaper but the advantages gained were outweighed by the losses incurred, I am confident about the advice she would offer as a director. Why should she ask local authorities to behave differently?
Baroness Blatch: The noble Baroness again is over-simplistic in the way in which she interprets what I said. It is possible for local authorities to cease to incur many of the costs that have been named by the noble Baroness. There are alternatives in the case of some of the matters to which the noble Baroness referred. Some costs can be discontinued completely if the work is contracted out. It is possible to take a longer term view. The annual savings, year on year, need to be weighed against the cost of keeping what might on the face of it be the more expensive option of keeping the direct labour in without challenge.

165
We are talking about licence to contrive. We do not approve of that. The range of amendments taken together allows licence to contrive in favour of the DLOs. We want fair competition. Where a DLO wins the work on a level playing field, we welcome that.
Baroness Hollis of Heigham: Does the Minister accept, first, that those are real costs that will follow? The amendment refers to,
"Costs of accommodation, storage or central administration so far as may not be immediately saved".
Those are no contrivances. They are real costs which the consultative document recognises. Those words are in the consultative document. I accept that if a cost can be dismissed within a few months, it is not necessarily a substantial material consideration. But we refer to the costs of accommodation, storage, central administration charges, depots, vehicles, heavy equipment, or costs which will continue to be incurred for many years, in many cases after a contract has come to an end. Those are proper costs. If they cannot be set against the savings offered by an external contractor, who will pay? The Minister may rightly say that the taxpayer will benefit from a reduced bill for refuse and cleaning, for example. But his position will be worse by 200 per cent. because of the increased costs that the authority will continue to bear. Those costs have to be borne somewhere, as the Minister said in her opening remarks.
Is the Minister really saying that local authorities should accept a lower outside tender but continue to bear higher internal costs so that the net cost to the authority is greater than it would otherwise be if that contract remained in-house? That is what we are talking about.
It is clear that the Minister does not wish to respond to that last point. I can only assume that it is all right for local taxpayers to pay a higher overall price and to suffer under-value for money in the name of doing everything possible to ensure that the private contractor can compete. I can only deplore that. I hope that it is noted that apparently that is the Minister's view. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 110 to 113 not moved.]
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 114:
Page 10, line 17, leave out from ("expedient") to end of line 20.
The noble Lord said: I shall move this amendment. If the Committee thought that it was going to get away with Part I of the Bill that easily, it has another think coming.
It is an extremely important amendment. In many ways it refers back to the discussions that we have had about the powers of the Secretary of State and the abuse of those powers which are implied in many of the provisions of this part of the Bill. The provision to which we object in Clause 9 of the Bill is the measure under subsection (4)(b) which allows the Secretary of State under regulation,
166
"to make different provision for different cases, including different provision for different localities and for different bodies".
I take it that it is understood that "different bodies" means different individual authorities. Different words are used for local authorities. They are called "relevant authorities", or "relevant bodies". A similar provision in Clause 8 allows the Secretary of State,
"to make different provision for different cases, including different provisions for different localities and for different authorities".
I had thought that Sir Ernest Gowers had made it clear that such elegant variation was undesirable on stylistic grounds. It is even more undesirable to use in the same part of a Bill different words to mean the same thing. However, the matter is far more serious than the merely stylistic question.
The Government appear to justify the provision with the assumption that the legislation in the 1980 and 1988 Acts which gave local authorities some interpretative powers has not worked. That is not the case. Under the 1988 Act in particular—and I remember that Act clearly because I was involved in trying to prevent its passage in its present form—the Secretary of State had substantial powers of sanction to override the letting of contracts if he believed that a level playing field had not been achieved. No one has said that those sanction powers were ineffective. The truth of the matter is that they have hardly every been used. Local authorities have taken advice from the Secretary of State, from CIPFA and from the Audit Commission. They have adopted a set of broad principles which in nearly all cases have satisfied the Secretary of State.
We need from the Government more convincing evidence showing that the sanctions and broad principles have not worked and that they need to be interpreted by giving these extraordinarily wide provisions of discretion to the Secretary of State. In effect, the provisions entitle the Secretary of State to be inconsistent in the way in which he deals with different authorities, different localities and different cases. One of my noble friends asked the plaintive question: what is meant by "different cases" when authorities, localities or bodies are already spelt out? He received no answer. The fact is that during the past three years, in fact since the 1988 Act, the Secretary of State has issued four different views on how local authorities ought to take into account redundancy costs.
The power is unjustifiable because it is wide and because the evidence shows that the Secretary of State has chosen not to use the perfectly adequate existing sanctions under the 1988 Act. Unless better evidence is produced showing the need for these wide powers they should be resisted. I beg to move.
Baroness Blatch: I believe that the noble Lord overstates his case. Amendment No. 113 would replace the negative resolution procedure in the Bill by affirmative procedure—
Lord McIntosh of Haringey: I have not moved Amendment No. 113. I am moving Amendment No. 114.
Baroness Blatch: I apologise to the noble Lord. He spoke earlier about the resolution procedure and I confused the two amendments.
Clause 9(4) (b) allows the regulations to make different provision for different cases. This is analogous to Clause 8(5) (b), which we have already debated. It also follows the precedent of Section 15(6) of the 1988 Act which allows different provision for different cases in regulations under Sections 4 to 8 of that Act. In its effect this subsection is identical to section 15(6) of the 1988 Act. As I said in the debate on Clause 8 the Secretary of State would not use this power in an unreasonable or discriminatory way. It is essential that he should be able to take account of legitimate differences when framing the regulations. He might, for example, wish to take account of differences between services and the market for providing those services when setting maximum and minimum periods for different phases of tendering. He might also wish to distinguish between different classes of authority or different types of area; for example, to take account of differences in the labour market, in rural and urban areas when prescribing the minimum mobilisation period to be allowed a successful bidder. There will be other differences which it may be appropriate to take into account.
The provisions in Clause 9(4) are closely modelled on those in the 1988 Act. There is nothing novel here. They are not going to be used in a discriminatory fashion. As I said in the debate on Clause 8, I am prepared to take advice on whether to include it.
Lord McIntosh of Haringey: In the light of the Minister's last statement I shall not pursue the amendment. However, she has not answered the trivial point about wording let alone the substantive point about the meaning of this part of the clause. She has not even explained why the comparable subsection in Clause 8 refers to different localities and different authorities while this subsection refers to different localities and different bodies. Before I turn to the more important issues perhaps the Minister will enlighten the Committee about whether the difference in wording means a difference in meaning.
Baroness Blatch: I hope that I shall be able to help the noble Lord. Clause 9(4) refers to bodies rather than to authorities because it relates to the 1988 Act which applies to defined authorities, and to the 1980 Act which applies to local authorities and development bodies. The word "body" includes authority, but I am advised that the word "authority" does not include body.
Lord McIntosh of Haringey: I am most grateful to the Minister. I am sure that any reasonable lay reader of legislation will have spotted that point immediately and that only my stupidity has concealed it from me. It is a case of:
"What from Eli was concealed
The Lord to Hannah's son revealed".
The substantive point is much more serious and has not been answered in any way. It is that powers existed under the 1988 Act—indeed, the Minister appears to glory in that fact—and it has not been necessary to use
168
them. That is the real point of the issue. The number of occasions on which the Secretary of State has used the sanctions available to him under the 1988 Act is very small. No evidence has been given to the Committee which would justify the extension, even the continuation, of such wide powers. This, together with a comparable provision in Clause 8, is a matter to which we may be obliged to return at a later stage. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 9 agreed to.
Clause 10 agreed to.
Baroness Blatch: This would be an appropriate moment to break. I beg to move that the House be now resumed.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.
Earl Howe: My Lords, I beg to move that the House do now adjourn during pleasure until 7.34 p.m.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 7.29 to 7.34 p.m.]

Maximum Number of Judges (Scotland) Order 1991
The Lord Advocate (Lord Fraser of Carmyllie)The Lord Advocate (Lord Fraser of Carmyllie) rose to move, That the draft order laid before the House on 14th November be approved [3rd Report from the Joint Committee].
The noble and learned Lord said: My Lords, the draft order seeks to increase the maximum number of judges of the Court of Session from 24 to 25. Until 1968 the number of judges at the Court of Session, who also act as judges of the High Court, was determined by statute but the Administration of Justice Act of that year, which fixed the number of judges at 19, also provided that future increases should be by way of Order in Council. Since that time four such orders have been made: one in 1972 for one judge, the second in 1977 for two judges, the third in 1985, and the fourth in 1986, each for one judge. It is some five years therefore since authority was last sought to increase the number of judges of the Court of Session.
The reason which prompted the present draft 1991 order is essentially the same as that which led to the earlier orders; namely, the continuing and substantial increase in business in the Supreme Courts, both first instance and appeal. Between 1986 and 1990, the number of criminal appeals increased from 2,070 to 3,038. The number of judge sitting days devoted to criminal work, both first instance and appeal, increased from 1,606 to 1,852. Over the same period, the number of contested first instance civil cases increased by no less than 65 per cent. and the number of contested civil appeals increased by 31 per cent.
Over a period of five years when the volume of court business increased so substantially, the Supreme Courts have been able not only to cope with these

169
workloads but also to reduce delays significantly. For ordinary civil proofs, the period before a court hearing which stood at 15 months in 1986 was reduced to five months by 1990. For criminal appeals against conviction where the appellant is in custody, the delay period has been reduced from four-and-a-half months in 1986 to one month in 1990. Those are but two examples of very significant improvements which have been secured in the Supreme Courts in recent years. Such a state of affairs cannot be achieved other than by the application of a great deal of careful thought and the expenditure of much energy. I would wish to pay tribute in that regard to the inspired leadership of both Lord President Emslie and Lord President Hope, and to the very considerable work of judges and court service staff.
The Supreme Courts have therefore been able, with 24 senators, to contain considerably increasing workloads over the past five years and, at the same time, to pull back on court delays. It is now abundantly clear, however, that unless the number of senators is increased, court delays will worsen significantly. Given all the progress secured in recent years, that would be most unfortunate. It is to avoid that situation, and to enable the Supreme Courts to continue to deal timeously with business brought before them that the Government, at the request of the Lord President of the Court of Session, have decided to bring forward a draft order to increase the number of senators from 24 to 25. I beg to move.
Moved, That the draft order laid before the House on 14th November be approved [3rd Report from the Joint Committee].—(Lord Fraser of Carmyllie.)
Lord Macaulay of Bragar: My Lords, on this side of the House we welcome the order but it raises a question as to whether it is sufficient to deal with the Scottish position in the Supreme Courts. As the noble and learned Lord said, it is five years since the last order was made but the workload on senior judges has been ever increasing. Sadly in Scotland there has been a 15 per cent. rise in criminal work for the senators of the College of Justice. There has also been a tremendous expansion in civil work.
What is happening in Scotland is worthy of some criticism: there is provision to use retired judges, subject to an age limit, and temporary judges to service the higher courts, both civil and criminal. At least the use of retired judges, forgetting the temporary judges for a moment, indicates that a real manpower shortage exists in the Scottish judicial system.
The retired judges are put into the Appeal Court to sit on either side of the presiding judge in that court to deal with appeals. That enables other judges who would normally be sitting in the Appeal Court to be released to deal with cases at first instance, both civil and criminal. However, questions must be asked regarding the policy of using retired judges. I ask these questions.
First, what is the annual cost to the Exchequer of using retired judges who have been declared by Parliament to be no longer eligible to sit as judges? Of course a statutory provision exists allowing them to be
170
recalled. My information—right or wrong—is that the daily fee for a retired judge on a considerable state pension based on his salary, runs close to £400 a day, being around £370 as a fee for sitting in the court plus expenses of not less than £25. I may be wrong in that regard. However, to use a quote from the Orkney inquiry, I do not see why there should be a judicial gravy train for retired judges. If they are retired and the country says that they have done their service for the country, then they should be allowed to live in peace wherever they choose to go.
Secondly, why should they be used at all if the state says that they must retire? It is a contradiction in terms for Parliament to say, "You are too old to be a judge. But you can come back and be a judge provided you sit in the Appeal Court on one side or the other of the presiding judge".
Thirdly—and this is perhaps the most important question —is the use of retired judges sitting on a daily basis plus expenses masking the real position of the lack of numbers of judges in Scotland. In other words, if they were not available other judges would have to be used in the Appeal Court and the true extent of the lack of judicial manpower would be revealed.
Fourthly, the use of retired judges in that context may also be blocking promotion to the Supreme Court for people who would otherwise be eligible to become Senators of the College of Justice. I do not know of any other profession serving the public which retires people and then brings them back and allows them to behave as though they are not retired. That is a disturbing situation.
On speaking to judges—I have been known to speak to them occasionally—they complain, first, of over-work. It is a genuine complaint and I am sure that the noble and learned Lord the Lord Advocate will agree with me. Only last week I spoke to a judge who told me that he works from Monday to Thursday and seldom goes to bed before 2 a.m. That is a deplorable situation in which to place any man who is administering justice.
Secondly, in Scotland there is a lack of what is known as writing time; that is, time for both civil and criminal judges to sit back and reflect on their judgments. They are under tremendous pressure. As I understand the position, although a judge may take one or even a few days off when he wants to write a judgment, he will be suddenly whisked off —I hesitate to use the word "provinces" because they do not exist in Scotland—to other areas to hear a criminal case. Judges must be allowed to write their judgments, civil or criminal, in a civilised manner.
Thirdly, on more than one occasion judges complained that their holiday arrangements were completely disrupted due to the shortage of judges to deal with the work, particularly in the criminal courts. That situation is deplorable. I do not blame the Government; it is not their fault. However, we must recognise that there must be sufficient judges to give us a civilised system which leads to rational rather than hurried decisions.
Perhaps the noble and learned Lord the Lord Advocate could say on what statistical and population basis it was decided that one more judge will meet the

171
pressure in the courts. Is the same statistical and population ratio used in England and Wales or is it merely because the Lord President says that he wants one more judge? I should like to know the reasoning behind it. The impression was certainly given that the Senators of the College of Justice are over-worked and certainly more than one judge is needed.
The salary of a judge is £84,000 a year. To the layman and indeed to me that is a lot of money. However, in terms of the total administration of justice it is nothing. We are talking of £84,000 plus a pension provided the judge is not over-worked and lives long enough to collect it. That is not a great deal to pay for the proper administration of justice.
The other matter that I wish to raise is whether the Government are giving consideration to the possibility of the civil courts sitting a five-day rather than a four-day week. The four-day week arose from the old days when the judges had to return from their country estates. Perhaps one or two still own country estates, although if one listens to some of them they cannot afford country estates on their salaries. However, the days of returning by coach and horse from the depths of Inverness or Sutherland are gone.
The five-day week operates in the sheriff court, in the lower courts and in England. The question must arise why Scotland does not do it. No doubt the answer will be that the judges need time to write their judgments. Well, let us have sufficient judges so that we can operate a five-day week with the judges being required to write their opinions, either civil or criminal, on the Monday and a sufficient number to deal with the work which requires attention.
The alternative is to look again at the sheriff court. I did not give the noble and learned Lord notice of this question and I do not expect an answer today. However, I should like to know the effect that increasing the power of sentencing in the sheriff court in criminal cases to three years in sheriff and jury trials has had on the running of the High Court. Has there been a drop in remitted sentences? As your Lordships will know, when a sheriff felt that he could not sentence someone to less than two years he referred the case to the High Court for sentence. That power has been raised to three years and perhaps consideration could be given—I do not say that it is a good idea—to raising the power of sentencing in the sheriff court to five years. I know that was considered in the past and cast aside because people did not trust the sheriffs to exercise a power of that standing, the power to sentence someone to prison for five years. But in the light of the rise in criminal cases to which the noble and learned Lord referred, it may now be appropriate to raise the sentencing power of the sheriff court to five years. After all, they are sheriff and jury proceedings and in England there is no difficulty in that regard. I do not see why there should be any difficulty in Scotland, and the Appeal Court, we hope, can always correct any silly decisions by the sheriffs.
That can only be done if the manpower is available to do justice to the system, to the judges themselves, to the litigants and to the accused. Justice under pressure is bad justice. Within reason everything must be done to relieve the pressure on judges.
172
In closing, I wonder why it is necessary—there may be some legal reason for it—to come here every so often begging for another judge. Why do we not simply take a broader approach? For instance, we could make a ceiling on the number of judges rather than going through what I do not wish to call a charade but what is an exercise of saying, "Please can we have another judge because the system is falling apart?" That is a ludicrous way of dealing with the system of justice in this country. I do not oppose the Motion because I want to see more than the number of judges covered in the Motion so that the judicial system of Scotland can progress in a way that will be recognised by the people of Scotland as being a good, fair and efficient system, and where the senior judges are not acting under considerable pressure as they are now.
7.45 p.m.
Lord Fraser of Carmyllie: My Lords, my honourable friend Sir Nicholas Fairbairn, QC, will no doubt be flattered to know that the legal spokesman for the Opposition in your Lordships' House has taken the care to read what he had to say when the matter was debated in another place. He too made the point that the original arrangement of four sitting days in the Court of Session was to allow for those with estates in the country to return to Edinburgh in good time.
As I understand the position, in England if one adds up the number of Mondays—or writing days as they are to be described—in both jurisdictions they come to pretty much the same number. It is a matter of interest whether in Scotland we follow that arrangement, with writing days following after, shall we say, a long difficult civil proof. I have no doubt that what the noble Lord said will be of considerable interest to the Lord President of the Court of Session. However, it is not directly germane to the difficulties encountered on the basis of the statistics I gave to your Lordships' House in seeking an increase from 24 to 25 judges.
Perhaps I can say with respect to the noble Lord that there is one matter on which it would appear to me he advances his argument on a false premise. Under the powers contained within the Law Reform (Miscellaneous Provisions) Scotland Act 1985, Section 22, the Lord President of the Court of Session, with the consent of the Secretary of State, may recall a retired judge to assist with the disposal of business, but he can only do so in circumstances where that judge retired in advance of what is now the statutory retiring age of 75.
Unless I have the position badly wrong, that is similarly the position on this side of the Border. In 1990 five retired judges were available who, together, provided around 250 court sitting days. Although the noble Lord opposite appeared to be somewhat critical of the contribution made by those retired judges, I would dissent from that. I consider that they have indeed made an important contribution.
More to the point, as regards the profile of the ages of judges in Scotland, the number of retired judges who will be available in the future under the age of 75

173
to assist in either the High Court or the Court of Session will not be that great. That is one of the factors that leads to the increase in the number of judges now being sought.
In direct answer to the noble Lord regarding the annual cost of using retired judges in the Court of Session and the High Court, the figure is around £100,000 per annum. He has used the language of criticism that has been adopted as regards the Orkney inquiry, but with a figure of £100,000 per annum that would not appear to be in any sense a gravy train.
When the present Lord Chancellor was Lord Advocate of Scotland he was very keen to emphasise to the sheriffs of Scotland that they had a power to remit from their own sheriff courts to the High Court where the Crown had mounted a prosecution in a sheriff court, but having heard the facts put before him and a verdict returned by the jury, the court decided that the gravity of the offence was outwith his existing sentencing powers. My noble and learned friend repeatedly urged that sheriffs should remit to the High Court if they thought that their sentencing powers were inadequate. As the noble Lord has raised the matter I return to it and encourage the sheriffs yet again that if they feel that they cannot impose an appropriate sentence because of the limitations of their powers, they should remit. As the public prosecutor in Scotland, I shall be more comfortable to instruct that more cases be marked from the High Court to the sheriff court. If I felt that the judgment was wrong as regards the severity of the offence, the sheriff court should be more willing to use its powers to remit.
That seems to be the better way forward. Instead of increasing yet again the sentencing powers of the sheriffs it would be more desirable if we moved down some cases. If it was then considered that we had the balance wrong the sheriffs should use their powers to remit. I cannot offer the noble Lord any precise statistics for obvious reasons, but my impression is that, because the Crown has marked a case down to the sheriff court, that court in some way takes that as an indication of the severity of the offence and the sheriff court is reluctant to remit to the High Court. I would not be uncomfortable at all if it dissented from Crown counsel's judgment as regards the severity of the offence and remitted to the High Court.
I am grateful to the noble Lord for his approval of the effort that has been made to increase the number of judges from 24 to 25. The arrangements that we have made for increases from time to time seem to be appropriate. I am sure that the noble Lord will appreciate that if the number of judges in Scotland is to be increased by one, two or three, that involves an extra burden on the public purse. The arrangements that we now have to bring the matter back before Parliament from time to time when an increase is necessary is the right way to do it.
Lord Macaulay of Bragar: My Lords, before the noble and learned Lord sits down, perhaps I may ask for clarification. On the figures that he has given it would appear that the money being paid to retired judges—I am not critical of them because they
174
perform a great service in the Appeal Court—appears to exceed the cost of one other judge in Scotland. My arithmetic is notoriously incorrect, but it appears to work out at £104,000 on the basis of £400 a day. Is the noble and learned Lord saying that, although the Crown Office takes a decision to send a case to the sheriff court, that a sheriff exercising his authority within that court is now to be given a guideline saying, "We have sent this matter down to the sheriff court because we believe that it falls under the three years' sentence mark, but if you do not feel happy about that please send the case to the High Court and we shall sort it out there". That seems a rather dangerous practice to adopt.
Lord Fraser of Carmyllie: My Lords, as regards the latter point, I am not saying what the noble Lord suggests. There is a power to remit. As the noble Lord appreciates, sentencing is not a matter for the Crown. The Crown, and particularly Crown counsel, in marking cases for the High Court or the Court of Session, has to have some regard for the severity of the offence. The noble Lord has been a member of the Crown counsel team, and I do not believe that he would ever claim infallibility for that team in the assessment of the severity of an offence. All I am indicating, as my distinguished predecessor the present Lord Chancellor did, is that if the sheriffs consider that the offence or crime truly merits a more serious sentence than they can impose, then they should remit. The impression that I have, and I can say no more than that, is that in such circumstances they are very reluctant to do so because there seems to be an apprehension that we have a greater and more precise view about sentencing than we have.
The £100,000 figure is the one that I have given the noble Lord for the annual cost of retired judges. He has given the figure for the annual salary of a judge. If he works it out and takes account of what may be other ancillary costs, I have little doubt that the total figure would exceed that.
I am sure the noble Lord appreciates that from time to time there are peaks in the way that business comes before the courts. That is where the real value of retired and temporary judges comes in. I certainly do not suggest that we should in any way move to a very extended pool of retired or temporary judges rather than having full-time judges, but simply to have a limited number who can assist the courts in discharging their business. That is probably the best way to ensure that the business is performed expeditiously without imposing too great a cost on the public purse.
On Question, Motion agreed to.
The Earl of Strathmore and Kinghorne: My Lords, I beg to move that the House do now adjourn during pleasure until 8.30 p.m.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 8.1 to 8.30 p.m.]

Local Government Bill [H.L.]
House again in Committee.
Clause 11 [Amendments of competition provisions]:
[Amendment No. 115 not moved.]
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 116:
Page 11, line 3, at end insert ("and under section 2(9) of the 1988 Act, the Secretary of Slate shall prescribe a de minimis provision of £250,000 in any financial year to be uprated at regular intervals in line with inflation").
The noble Baroness said: In moving Amendment No. 116 I shall speak at the same time to Amendment No. 121. I hope that the Minister has had guidance on that.
Baroness Blatch: I am not objecting, but I had a note from the noble Baroness saying that we would be dealing with Amendments Nos. 115 to 117. I shall be addressing Amendment No. 115. The noble Baroness seems to have excluded it at this moment.
Baroness Hollis of Heigham: The Minister is entirely correct. We are not moving Amendment No. 115. I have moved Amendment No. 116 and I shall speak at the same time to Amendment No. 121.
The Government have always accepted that there is a threshold of work below which the cost of preparing the tenders, specifications and so on is self-defeating. We are talking about contracts under the present de minimis rule of perhaps three or four full-time equivalent staff in cleaning or catering. When the matter arose in 1988 the noble Lord, Lord Sanderson of Bowden, felt that, as the cost of complying with the Bill's provisions looked like offsetting the potential competitive gains, there was a case for exemption. In 1988 the noble Earl, Lord Caithness, said that that figure should be kept under review and, by implication, that the figure could be raised upwards. That has not yet happened.
On this side of the Committee we suggest that the figure of £100,000 as originally fixed was too low. Refuse collection and maintenance contracts in Scotland which are above £100,000 fall into the CCT arrangements but 50 per cent. of them have received no competitive bid. The result in Scotland has been that the total costs for those contracts has increased, extra staff have been employed but no savings have resulted. The amendment seeks to probe the Minister's views on the need to uprate the de minimis provision of 1988 to a figure of £250,000. I beg to move.
Baroness Blatch: Amendments Nos. 116 and 121 seek to achieve the same end by slightly different means. Amendment No. 116 would oblige the Secretary of State to make an order dealing with a de minimis threshold under Section 2(9) of the 1988 Act; Amendment No. 121 would write that threshold onto the face of the 1988 Act.
The noble Baroness will be aware that a de minimis exemption already exists in the legislation governing CCT. The 1988 exemptions order made by the Secretary of State under Section 2(9) of the Local Government Act 1988 provides that work to a value of less than £100,000 per annum is not a "defined
176
activity" and is therefore exempt from CCT. That provision applies, as would the amendment proposed by the noble Baroness, to activities already subject to the discipline of competitive tendering, and unless altered or limited in scope by my right honourable friend would also apply to any new activities added under the provisions of this Bill or existing legislation.
The existing £100,000 de minimis rule reflects a judgment as to the point at which it would not be right to oblige an authority to comply with the accounting and reporting requirements of CCT and not any belief that there are no benefits in putting work of a lower value out to tender. On the contrary, tendering, properly managed, gives opportunities for savings regardless of the size of the authority concerned and regardless of the size of the contract. It may be the case that in the light of new evidence my right honourable friend revised his judgment; or that in the case of new activities a different judgment would be appropriate. I have to say that we have as yet received no evidence to suggest that the £100,000 limit is too tight.
As far as concerns new services, if my right honourable friend brought forward any orders to extend the list of defined activities he would also need to consider the appropriate level of de minimis provision, if any.
I have to say that the Government consider Amendments Nos. 116 and 121 unacceptable. I hope that the noble Baroness will withdraw them.
Baroness Hamwee: I support the amendments. I am sorry that the noble Baroness, Lady Carnegy, is not present because I shall refer to some Scottish examples just to show that there is no discrimination. The Secretary of State might find, if he inquired, that authorities which had in their area dispersed communities would find precisely the difficulties that the amendment seeks to ameliorate. The services involved are relatively small in value. If the Minister were to make inquiries of the Convention of Scottish Local Authorities she might find that she had the evidence to persuade her right honourable friend that this matter should be looked at again.
The Earl of Balfour: Part II of the Bill does not apply to Scotland.
Lord McIntosh of Haringey: The noble Earl is ahead of himself. We have not reached Part II.
Baroness Blatch: Perhaps I may say in response to the noble Baroness, Lady Hamwee, that I have not changed my views on the principal point being raised in the amendments, but it is right that I should speak at least with my noble friend Lady Carnegy when I have an opportunity to do so. It is right that we should gather as much information as possible as the Bill goes through this Chamber. I shall do that but I want it to be on the understanding that it is without any commitment.
Baroness Hamwee: I thank the Minister for that. It is much appreciated.
Baroness Hollis of Heigham: I shall withdraw the amendment but before doing so I wish to make two points. The figure of £100,000 was set in 1988. A clear

177
impression—not exactly an undertaking—was given at the time that the figure would be uprated, perhaps in line with inflation or the RPI or in terms of a more realistic figure given the outcome of experience in the form of tenders.
The figure has not been reviewed. It needs to be and it would be helpful if the Minister would say that she was willing to take the matter away and consider it. As the noble Baroness, Lady Hamwee, said, some of the strongest evidence of problems comes from Scotland. We need information in that regard. As I understand it, there is nothing in the consultation paper on de minimis. Yet, throughout the consultation process, it has been relied upon very heavily as the basis for the size of contracts in competitive tendering.
Although we have not been so fortunate, the Minister has had the advantage of reading the PA report on white collar services. That formed the basis of the consultation document. Can she say whether that report suggested any de minimis rule for professional services? It would be most helpful for us to have that information.
Baroness Blatch: It is quite impossible for me to discuss a detail of such a report from the Dispatch Box at this stage.
Baroness Hollis of Heigham: I stand to be corrected by those who are infinitely more experienced in the procedures of this Chamber than I am. However, I assumed that, where documents were part of the domain of public debate in this place, it was the Minister's responsibility to ensure that copies were put in the Library unless their contents were such that they were commercially confidential in some understandable sense—that is, either affecting individuals or the value of contracts. I do not understand why a key document which clearly influenced both the Government's thinking and the consultative White Paper about which there has been so much discussion, has been withheld from Members of the Committee. On the presumption that it does not contain commercially sensitive information, I do not understand why it should not add to the general level and nature of discourse. Perhaps the Minister can explain why that is so.
Baroness Blatch: It is not normal practice that advice which Ministers seek in order to form views —whether it be draft guidance, consultative papers or whatever—should be placed in the Library. When something is brought to this place to form the basis of legislation, it is essential to ensure that, for example, any guidance or forethinking should be in the public domain for consultation. That is precisely what is in the public domain. The noble Baroness is referring to advice which was taken en route.
Baroness Hollis of Heigham: It is for the Minister to say what is and what is not in the public domain. I do not see the difference in status between a PA report which may raise questions of de minimis and which would be helpful for us to explore—a report which is not available for us to consider but which has nonetheless influenced the thinking in the consultative
178
paper—and some of the consultative papers that will be available for consideration either before or after Christmas upon which the basis of legislation, and the Secretary of State's powers, will be drawn. I do not see the difference between either set of documents. Both of them are informing us about the Government's thinking and both of them are leading to the formation of the nature of the legislation under discussion today.
It would be most helpful to Members on both sides of the Committee to have that document. It would provide clarification of thought on some of the principles that have been raised. The unavailability of such information does not improve the standard of debate in this Chamber. However, perhaps we can return to that matter at a later stage. In the circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 117 not moved.]
Clause 11 agreed to.
8.45 p.m.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 118:
After Clause 11, insert the following new clause:
("Consultation over contract specifications
. Where a local authority draws up a document specifying the nature, quality, quantity or otherwise detailing a service for which a contract is to be offered for tender competitively it shall consult—

(a) such voluntary organisations and statutory bodies as appear to the authority to represent the interests of persons who use or are likely to use such services within the area of the authority and;

(b) such persons and voluntary organisations as appear to the authority reasonably to be in a position to offer such services.").

The noble Lord said: This amendment is in the form of a new clause. I should say straightaway that this is not necessarily a clause which will appeal to some of my friends in the local authority associations and in local authorities. I say that because it is, quite irrespective of any responsibility that the Secretary of State may have, putting additional obligations on to local authorities. However, I believe that local authority members and officers generally would welcome such a clause. It opens up the procedure for competitive tendering in a way which does not threaten the general thrust of the Bill; indeed, that is not the point. In fact, it ought to improve the tendering process.
Where local authorities have been providers of services for a very long time, they naturally adhere to their own ways of providing such services. For example, they are used to their own standards and to the assumptions that they make about levels of provision. Therefore, with the best will in the world, it is very difficult for such local authorities to accept that there may be totally different ways of doing things. It is only too likely that they will frame a tender document in the light of their own experience. I can think of many examples where central government do likewise. I can also think of many other examples where this happens in business life. Indeed, it is nothing unique to local authorities.
We are seeking by way of this amendment to provide that particularly voluntary associations and statutory bodies which represent the interests of persons who use or who are likely to use the services, and persons in voluntary organisations who might be in a position to offer such services, should be consulted about the tender document; in other words, in the words of the amendment, they should be consulted about,
"a document specifying the nature, quality, quantity or otherwise detailing a service for which a contract is to be offered".
That in no way means that that consultation should affect the tendering process itself. That must be a commercial process as between those who are tendering for the service and the authority which is issuing a tender for the service.
When the decision is being taken about the content of the lender document, it seems to us to be common sense that a local authority should be required to consult those who have different detailed experience on the ground of the real needs of service users. For example, the London Borough of Bromley has been putting out its children's homes to private tender. I have no personal knowledge of that tendering process. I do not know what the result has been. However, there are many people in the voluntary and in the private sector who have real experience of running children's homes outside local authority control. It seems to me that it would be most sensible for the London Borough of Bromley to be required to talk to the National Children's Home or the National Association of Young People in Care, both of which represent the users and not the providers of the service about such a contract.
Again, looking at the providers of services, although I mentioned the National Children's Home, Barnardos might also be tendering for the contract. Without prejudice as to whether the latter would obtain the contract, its experience is relevant and ought to be brought in. The National Society for the Prevention of Cruelty to Children above all ought to be able to comment on the quality conditions in the tendering document which would actually protect the rights of children in homes.
There are many examples of that sort of consultation procedure in the National Health Service and Community Care Act 1990. Moreover, there are plenty of examples where not only has it been enacted, but my understanding is that it also actually works. It does not delay the tendering process; indeed, it improves it. In my view, it is a worthwhile addition without in any way threatening the tendering process which is proposed under the Bill.
I can give many more examples. I suppose that the classic or e would be the planning service. However, I shall restrict myself to what I have already said. I hope that the Minister will feel that this amendment is one that does not threaten the thrust of the legislation but that it actually offers the opportunity for the tendering process to be improved. I beg to move.
Baroness Blatch: We wish to encourage local authorities to consult consumers of services about the standards that they desire. Indeed, this almost links
180
back to the very first amendments to the Bill. The difference between talking about aspirational targets or aspirational service standards and the actual business of putting a contract out and delivering good services. This is at the heart of the Citizen's Charter. We believe that outside providers should also be consulted. However, we are not convinced that the proposed new clause covers all those who should be consulted; nor are we convinced that it is necessary or desirable to consult each time a specification is drawn up.
Finally, the amendment does not provide—this is important —for consultation about service standards when the work is to be done in-house without competition. In our view, there should be concern about standards whoever provides the service. Indeed, experience shows that control over the setting of standards is often slacker when there is no competition since, without a clear separation between service provider and the in-house client, the standard tends to be set by and for the convenience of the provider rather than through explicit consideration by the council in consultation with consumers.
I understand what the noble Lord said, but there is nothing to preclude local authorities from communicating with the public about the standards of service and the service delivery that they want. We do not want on the face of the Bill something that adds to the bureaucracy and does nothing necessarily to improve what happens between a local authority when it is providing through its DLO or outside contractors through competition.
Baroness Hamwee: I support the amendment. I note what the Minister says. If the amendment can be improved, I am sure that that is something that its movers will take on board at a later stage. To involve and take advantage of the knowledge and experience of the users and other providers of the service is a necessary part of the whole process. The Minister says that the amendment does not include consultation with regard to direct service organisations. I should have thought that the earlier clauses of the Bill relating to performance standards would have covered that ground more than adequately.
I commend the amendment to the Minister, and I shall use one of her own examples. In my borough, as she is aware, work in the two royal parks is going out to tender. I might have a discussion with her on another occasion about the process that was gone through. The friends of the parks appreciated that they did have a chance to comment, albeit just a little one, on the specifications. There were some discussions with the Minister. They were glad of the opportunity to make comments even though they had only about a week to do so. I believe that that will have informed the process and will lead to a better outcome.
Lord Mancroft: I understand and appreciate the motives of the noble Lord, Lord McIntosh, in moving the amendment. It is important and it is a good thing that it has been discussed by the Committee. Some of the Members of the Committee may be aware that I am involved with some voluntary organisations who

181
regularly tender for contracts with local authorities. It is my experience that most local authorities have close relationships with those voluntary organisations. The people within the voluntary organisations who are responsible for providing care together with local authorities have close, ongoing working relationships with them. There are sensible people on both sides of the equation. They seem to work well together so that the provider provides what the local authority wants and the local authority lets the provider know what it wants. They seem to come to good conclusions. Not always, of course, but on the whole, the system seems to work well.
Whereas I appreciate that the closer the contact, now and in the future, the better, it seems to me that that does not have a place in the Bill at the moment. I do not believe that it would provide any higher standard of service. My experience is that the voluntary organisations provide a higher level of service than the local authorities have been asking for. Their standards are infinitely higher which is why it is so much more satisfactory for the local authorities to shop around among the voluntary organisations. Although I concede that it might be nice to include in the Bill the requirement that local authorities should have an obligation to consult, it seems to me that they consult without that obligation and that there is no possibility that they will stop consulting. It would be an extra, unnecessary adjunct to the legislation.
Baroness Blatch: I thank my noble friend for that interjection. It illustrates the difference between the two sides of the Committee. We are not in any way invalidating the need and the desire to consult local communities, but when wording on the face of the Bill such as, "it shall consult"—again, I say that this relates to competitive tendering only—
"such voluntary organisations and statutory bodies as appear to the authority to represent the interests of persons",
who may use the services, is suggested, we are aware that that is a difficult thing to do. How does one consult everyone who represents the people? Does it include every organisation that represents someone who will use the services? The amendment continues,
"and such persons and voluntary organisations"—
it is an "and", so additional consultation is required—
"as appear to the authority reasonably to be in a position to offer such services".
The difference between us lies in the compulsion to add a layer of bureaucracy. That is so because if accepted these would be requirements and obligations under the Bill. The consultation would have to take place every time a specification was altered in any way. Under the amendment, once there was a change of a word, or a phrase, or a slight modification, there would be a requirement to go out to a raft of consultations, in addition to what is already happening informally and effectively.
Lord McIntosh of Haringey: I believe that the Minister will concede that when I moved the amendment I did so in a reasonably conciliatory way and without in any way threatening the thrust of this part of the Bill. I can only conclude from that strange
182
reply that after what happened last night the Minister is under orders to ensure that no comma or phrase in Clauses 8 to 11 is changed. That is the only charitable reason that I can adduce.
The amendment says nothing about what the Minister described. It provides that the local authority,
"shall consult such voluntary organisations and statutory bodies as appear to the authority to represent the interests of persons who use or are likely to use such services".
If it does not appear to the authority that there are any such organisations, it does not need to consult. The amendment continues:
"such persons and voluntary organisations as appear to the authority reasonably to be in a position to offer such services".
If it does not appear to the authority that there are any such persons or voluntary organisations, then it does not need to consult. It is not a prescriptive requirement. No extra bureaucracy is involved. It is, as I think the Minister in one of her candid moments admitted, something which reasonable local authorities might wish to do. Let us encourage them to do so, and let us encourage them in this modest way.
It can only be a determination not to have one change in the Bill which can have led the Minister to have responded in that unhelpful way.
Baroness Blatch: Let me give the noble Lord an example. It is not an unusual one. Let us take road maintenance. Every person within a local authority area and every organisation—there is no person or body who would not have an interest—will have an interest in the repairing and maintenance of roads. Where does the consultation begin and end? If it were to be selective, it would be unhealthy. We should leave local authorities free to determine how they communicate with their local communities. On the basis of the proposed measures people will have a good deal of information about the quality of that communication. They can at election time make real judgments about whether they have a council that communicates effectively.
Lord McIntosh of Haringey: Again, the Minister has not observed the difference in wording between paragraphs (a) and (b). In paragraph (a) we talk about the interests of persons who use or are likely to use the services, and we restrict the consultation to voluntary organisations and statutory bodies. When we talk about people who are in a position to offer the services, paragraph (b) provides for such persons and voluntary organisations. There is no risk of the local authority being flooded with the views of users of the services. I wish there were. That would be much better. If that were possible, and if the amendment had not been tightly drawn, the local authority could fulfil its obligations merely by advertising and saying that anyone fitting those categories who would like to have a copy of the tender documents and comment upon them should write and obtain one and reply by the following Friday, or whatever the time limit may be. The Minister is making heavy weather of what was intended to be a helpful suggestion. If the Government

183
are going to be intransigent on this as well as all other matters, I am afraid that there is no alternative but for me to beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
9 p.m.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 119:
After Clause 11, insert the following new clause:
("Saving for E.C. legislation
.The exercise of the powers conferred on the Secretary of State by and under sections 8 and 9 above shall be without prejudice to the operation of European Community legislation relating to the co-ordination of procedures on the award of public contracts, or to the operation of regulations implementing such legislation.").
The noble Baroness said: The amendment refers to the EC directives and asks that the powers conferred on the Secretary of State,
"shall be without prejudice to the operation of European Community legislation".
The reason for the amendment is that the consultative document nowhere refers to EC Directives. I stand to be corrected on this but as I understand it, EC Directive 71/305, taken with the latest revision of 89/440, defines CCT arrangements for public works where the contract value is above 5 million ecu or over £3 million. We have those EC directives and a draft directive which I understand will probably come out later this month, Directive 91/332, which will apply to public services. It would come into effect in mid-1993.
At the moment, defined activities, those covered by CCT, an; exempt from EC law, but from mid-1993 they will no longer be exempt. In addition, those professional public services such as architecture, engineering and the like, the priority services referred to in the consultative paper, will also come under EC law. The point was made earlier this afternoon that where national law and EC law conflict, EC law prevails. The sanctions include the withholding of significant sums of EC grants.
The amendment seeks to ensure that there is co-ordination and not potential conflict between national regulations and EC directives. I suggest that the issue might usefully have been explored in the consultation paper. As it was not, we hope that the Minister's, response will indicate ways in which the two bodies of legislation, potential and actual, may be aligned.
I remind the Committee that as regards some of the professional services—architecture, engineering and subsequent legal, personnel, financial services and so on—there is the presumption in the White Paper of a double envelope procedure. First, there would be a quality threshold and once bids had passed it, the presumption was that one would go on to the second stage where bids would be judged by cost. One would take the lowest.
Why is it worth proposing this amendment? What is the difference between the procedure outlined in the consultative paper and what we understand to be the case under EC law? Under the latter, after passing through stage one, the quality threshold—and here the national and EC law are in agreement—the local authority can either take the lowest price which is the
184
route in the Government's White Paper or (and this is the important point) the local authority can go for the economically most advantageous tender. This brings us full circle back to the discussion we had earlier on as to whether we should take the lowest tender, even if ultimately it produced increased costs.
According to the EC, the economically most advantageous tender might include consideration of such issues as technical merit, service quality, delivery dates and the like. In other words, under British law one would tend to go for the cheapest; under EC law it is clear that one has a choice of going for value for money, if the client chooses, where it is not the cheapest. That is an argument that the Government themselves accepted in their guidance on purchasing policy, Circular 116/90: the cheapest is not always the best value.
Maybe the Government agree that that is the route that local authorities are permitted to follow. After all, it is what the Audit Commission suggested we do, as well as what the EC proposes. However, with the wording of the amendment, the phrase "economically most advantageous" would mean that the local authority would still have to have good reason for departing from the cheapest price, but it would permit the extra degree of flexibility for local authorities. Value for money would be safeguarded. It would, however, ensure that domestic law and EC law were co-ordinated in ways that would enhance the capacity of local authorities to pursue value for money. I hope that the Minister will support the amendment.
Baroness Blatch: I entirely accept the sentiment underlying the amendment. The United Kingdom is part of the Community and the Government wish to implement Community legislation in full. But the new clause is unnecessary. Without it, it would be unlawful to use the powers in Clauses 8 and 9 in such a way as to conflict with EC legislation. Should it happen inadvertently, then as the noble Baroness pointed out, European Community legislation would take precedence. In any case, our proposed use of these powers is wholly consistent with European Community works and services directives. So the new clause neither adds to nor subtracts from our proposals.
We must not be in the business of introducing new legislation which has no effect whatever. The effect of the amendment is entirely neutral, therefore it is superfluous. I hope that the Committee will not accept it.
Baroness Hollis of Heigham: Perhaps I may seek clarification of the Minister's comments which took me somewhat by surprise. Is she saying that the amendment is unnecessary, because either the British Government are already doing that or will have to do so when the EC directive comes into force? Is she saying that it is permissible for local authorities to accept the economically most advantageous tender when it is not the cheapest? Does she accept that into the consideration of "economically most advantageous" will go precisely the shopping list which we considered under Amendments Nos. 104 to 109 which she has hitherto rejected?
Baroness Blatch: We have signed European Community law and under it we have no alternative but to adhere to it and abide by it. We have an obligation to do that. As regards those aspects where the noble Baroness believes there may be a total contradiction or breach of European Community law in the way in which the Bill will work or in the way in which local authorities behave, that would seem to be illegal. I said that European Community law would override national law in these matters.
Baroness Hollis of Heigham: I thank the Minister for that response. I take it to mean that with some of the amendments which we moved and which the Minister was unable to support, Amendments Nos. 104 to 109, the Minister accepted publicly that real costs were to be incurred by the local authority and they might come into consideration when determining whether to accept an outside contract because they were part of the total package in deciding whether or not something was economically more advantageous to the local authority.
If that is what the Minister said, as I take it to be, then although the Committee may not have accepted Amendments Nos. 104 to 109, nevertheless those amendments will come into play when the EC directives for mid-1993 are in place. In the light of that, I am happy to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 1 [Amendments of Competition Provisions]:
Lord Simon of Glaisdale Lord Simon of Glaisdale had given notice of his intention to move Amendment No. 120:
Page 28, line 35, leave out paragraph 10.
Lord McIntosh of Haringey: The noble and learned Lord has indicated to me that he does not wish to move this amendment.
[Amendment No. 120 not moved.]
[Amendment No. 121 not moved.]
Schedule 1 agreed to.
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 122:
Before Clause 12, insert the following new clause:
("Abolition of the Local Government Boundary Commission for England
. The Local Government Boundary Commission for England shall cease to exist with the commencement of this section.").
The noble Lord said: I beg to move the new clause standing in my name on the Marshalled List and to speak also to Amendments Nos. 226 and 227 to Clause 24. I put down these amendments in the spirit of innocent inquiry. Hollow laughter opposite! Wait for it, and I shall explain. Part II of the Bill, which we have now reached, replaces the Local Government Boundary Commission for England with the new Local Government Commission for England. This is necessary because the existing commission, which was set up under Section 46 of the Local Government Act 1972, is too restricted in its remit for the job that the Government, with much agreement up and down the country, now wish it to perform.
The problem is that the existing commission is restricted in making representations to the Secretary of State to effect changes in local government areas
186
appearing to it to be desirable. It is only permitted to suggest amalgamations and separations for areas of "like description", which of course will lead to amendments later in the names of various of my noble friends. In other words, to change areas either within districts or within counties.
Clause 14 of this Bill, however, gives them much wider functions, and in subsection (2) (b) allows them to recommend changing, for example, counties into districts, or a district council, or presumably groups of district councils, into a county. Also, in subsection (1) (a), it permits unitary authorities. Clearly there are two legislative methods of achieving this end. The first, which the Government have I believe quite rightly rejected, is to increase the powers of the present boundary commission to achieve the Bill's objectives. I believe that if they had done this it would have resulted in an unduly complicated piece of legislation by reference which, in the terms of the famous book 1066 and All That, would be a bad thing.
The other method is to destroy the old commission and create a new one to carry out both the existing functions and the extra ones conferred upon it by the Bill. Interestingly, however, the draftsman has chosen to do something else. He has set up a new commission —11 clauses and 1 schedule, if my mathematics are right—before abolishing the old one. This formulation is upside down, and I should like to ask my noble friend why they have prepared Part II of the Bill in this way. After all, you cannot fill a jam pot with honey before emptying out the strawberry jam. I beg to move.
Baroness Blatch: I am relieved that this is a probing amendment. As I understand the amendment, the effect would be to abolish the Local Government Boundary Commission on the date that the Bill receives the Royal Assent, irrespective of whether or not the new Local Government Commission had been set up. Clause 24, which abolishes the Local Government Boundary Commission, is to come into force on a day to be appointed by my right honourable friend the Secretary of State. This approach secures maximum flexibility over the timing of the winding up of the Local Government Boundary Commission in relation to the setting up of the new commission. The new commission can be set up at any time after Royal Assent and as soon as my right honourable friend appoints its members.
What I can say to my noble friend is that we are firmly committed to winding up the Local Government Boundary Commission at an early date. Indeed, we have no wish to see it in being any longer than is necessary to effect a smooth transition of work from the boundary commission to the local government commission. To achieve an orderly transfer of work from the Local Government Boundary Commission to the new commission we need to retain flexibility in the winding up of the Local Government Boundary Commission.
There is very little between us if the fear behind the amendment is that we shall have a duplication and the boundary commission in being for longer than necessary. I hope I have been able to assure my noble friend that that will not be the case.
Lord McIntosh of Haringey: Are not the Government in danger of falling into the trap of the city fathers of Limerick? The Minister will recall that the city fathers of Limerick resolved to build a new jail. They resolved to build it with the stones of the old jail, and they resolved to keep the old jail in operation until the new jail was ready.
Lord Skelmersdale: I think my series of amendments fails with respect to the story that the noble Lord, Lord McIntosh of Haringey, has just enunciated. I accept my noble friend's strictures on the amendment. However, she has not answered my point. That point is, why delay destroying the old commission until after the new one has been appointed? I accept that I could have said in my amendment that:
"the Local Government Boundary Commission for England shall cease to exist with the commencement of this Part",
in which case I suspect that my noble friend's worries would have been alleviated.
She did not answer the main thrust of what I said in my introduction. However, this is not the time to go into detail. Perhaps she will be good enough to write to me to tell me the real reason behind her rejection of my point.
Lord McIntosh of Haringey: I regret being tempted to get to my feet again, but if this is not the time to go into detail, when is?
Lord Skelmersdale: When I have an answer that I can understand to the point which I enunciated in my introduction to my amendment, which I shall clearly not receive tonight. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 12 [The Local Government Commission for England]:
[Amendment No. 123 not moved.]
Clause 12 agreed to.
Schedule 2 [The Local Government Commission for England]:
9.15 p.m.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 124:
Page 29, line 34, leave out ("five and not more than fifteen") and insert ("twenty-five and not more than thirty-one").
The noble Lord said: Amendment No. 124 starts the consideration of the composition, powers and responsibilities of the Local Government Commission. Looking at the amendments to follow, perhaps the Committee will allow me to say that this is not the most important of those amendments. However, it is of some significance. The Government's declared intention, as set out in the consultation paper, is that the commission should not just have completed its work by 1st April 1994 but that the new authorities should be established by 1st April 1994.
I do not know how many other noble Lords have been involved in past reorganisations of local government. I was involved in the reorganisation of London government in the early 1960s. I can assure the Committee that that timescale, involving a body of between five and 15 people going round the country
188
place by place and making judgments about the local government structure for those areas and then putting their recommendations into effect, is extraordinarily tight. I seriously doubt whether that is possible.
I realise that Mr. Banham has been appointed chairman of the commission. I should be very interested to hear his views about the feasibility of completing the work in that time. After all, the period between the passing of this Bill and the implementation of the new authorities is scarcely more than two years. I should also be interested to know what plans Mr. Banham has and what plans have been proposed to him by the department in respect of the work he will have to carry out and the work consequential on the work of the commission.
It may be that the Government have ideas for splitting up the commission and for it to operate in different areas at once. If that is the case I suggest that that would be a very sensible way to approach the problem. A commission consisting of between five and 15 people is simply not large enough. If it is to rely on members of the commission rather than on people brought in on an ad hoc basis to assist the commission —although I believe that that is required for the purposes of continuity and comparability between the deliberations of the commission in different parts of the country—it ought to be a larger commission.
A further advantage of a larger commission is that it enables the commission to include people with real experience of communities as well as local authorities in different parts of the country. I shall not press that point too far because it is the subject of subsequent amendments. However, it is important to recognise that, unless there is a commission of sufficient size to include wider representation, none of the other provisions, either in our amendments or in the Government's own plans, for a representative and well-informed commission will be realised.
I find it impossible to conceive that the commission as proposed can complete its work in the time proposed by the Government. I make this suggestion of a larger commission not out of any desire to frustrate the work of the commission. I made it clear from the outset at Second Reading that we were not opposed to the establishment of a commission or the principle of local choice in the structure of local government. We are certainly not opposed to the thrust towards unitary authorities which is in the Government's mind and has been in the mind of the Labour Party for a considerable time. In order to make it work I suggest that the Government would be wise to accept the amendment which is intended only to be helpful. I beg to move.
Baroness Hamwee: I support the amendment for the reasons given by the noble Lord, Lord McIntosh. Perhaps I may give him a minor piece of news. Although I do not believe everything that I read in the newspapers, the Times of 29th November carried a report of an interview with Mr. Banham. With regard to the number of commissioners, he is quoted as saying:
"It is not quite the more the merrier, but I do want to see a broad commission so that individual commissioners could look at individual parts of the country in detail".

189
I am not sure whether the Government or Mr. Banham have in mind that one commissioner will take one area. That is what the reporter then goes on to say, but the report also comments on the fear of local authorities that areas which are left until last will lose key staff to places which have been reviewed earlier. That is a serious and well-founded fear. I therefore support the possibility of extending the numbers and putting in a floor to the numbers so that the job can be done thoroughly and swiftly.
Earl Howe: The amendment would give the commission between 25 and 31 members. The matter has been considered carefully and we cannot see a need to increase the number of members of the commission as the noble Lord, Lord McIntosh, proposes. We have said that we wish the commission to carry out a rolling programme of work, looking at the country area by area in a timetable that we believe is achievable. The noble Lord mentioned April 1994 as a deadline. It is intended that only a limited number of the new unitary authorities should be up and running by that date.
The number of commission members specified in Schedule 2—between five and 15—seems to us a perfectly adequate number given the way in which we have suggested that the reviews should be carried out. It is always difficult to reach a consensus with a larger number of people and we have deliberately chosen a manageable number in order to facilitate the commission's work. It is not as though it will only be the commissioners themselves who are doing the work; they will have a capable staff to advise them. I therefore urge the noble Lord not to press the amendment.
Lord Skelmersdale: Following a point made by the noble Baroness, Lady Hamwee, it is fair to ask my noble friend how he anticipates that the commission will work. Does he expect that there will be one commissioner per inquiry or that there will be more? It is clear to me that there will be several areas under review by the commission as a whole at any one time. Clearly, not only must it have the staff to do the background, nitty-gritty work, but it must have one or more commissioners involved in particular areas.
Lord Stoddart of Swindon: On Second Reading on 18th November I commented at col. 736 of Hansard:
"Those authorities reviewed at a late stage will find it difficult to recruit and retain staff. Therefore, I believe that if local government reorganisation is to be a success it is essential that there should be a thorough national review followed by implementation on a single vesting day".
That is still my view. I support my noble friend's amendment for the reasons that he gave and for the additional reason that a rolling programme is dangerous in that it may roll on for too long. I hope that even at this late stage the Government will consider the need to have a thorough but rapid look at the boundaries and come forward with proposals which can be implemented on a single day. Acceptance of the amendment would help them to do just that.
Baroness Seear: I should like briefly to add to that. Other speakers have spoken of having one commissioner in one place and one in another. I should have thought it totally unsuitable to have fewer than two people. In undertaking such a job one needs to rub one's mind on someone else's. One needs at least two people in each area that is being studied. With the timing involved, that requires double numbers.
Lord Skelmersdale: That is why I asked my question of my noble friend. If one reviews an area in its entirety, one will overcome the problem that the noble Lord, Lord Stoddart, sought to address. For example, if one considers the whole of Somerset, Avon or Berkshire—the noble Lord knows Berkshire better than me—the problem of the available labour pool being snapped up by one part of the area or another should be avoided.
Lord McIntosh of Haringey: I wish I thought that it would work that way. Unfortunately, what has been said about April 1984, and about the commissioner moving around the country, fills me with apprehension. The noble Lord, Lord Skelmersdale, cited the example of Somerset and Avon. It has been made clear that it is the Government's intention to start with Avon and Humberside. Those are probably the least popular of the new counties. But let us consider what occurs if one starts with Avon. Presumably one will create a county borough of Bristol and some unitary district councils around Bristol, some in what is now Somerset, some in what is now Gloucestershire and so on. The knock-on effect on the remainder of Somerset with regard to the possibility of a coherent structure in the areas which are not at present included in Avon, and perhaps should be included in the new unitary councils around Bristol, is very great.
I cannot understand how one can have a general rolling programme which will not be sub-optimising. (I apologise for the jargon.) It will produce solutions which are appropriate at the time that the decision is taken—let us say, June 1992—but would not be appropriate if the consideration did not take place until June 1993. We are not playing a jigsaw puzzle game with maps. We talk about the way people organise their local government. To be honest, I cannot see the system working.
Lord Skelmersdale: That is the point I made. I am glad that the noble Lord referred to Avon. One cannot look at the city of Bristol or the existing county of Avon without considering the surrounding areas. That is why I said that one must look at large enough areas. That is what I would expect the commission to do.
Lord McIntosh of Haringey: There will always be boundaries relating to the bigger areas. My noble friend Lord Stoddart is right. The idea that one can go piecemeal round the country and then implement the system on a piecemeal basis will not work. I do not see how it will be made to work.
We may have moved a little away, although not far away, from the size of the commission. The ability of the commission to undertake a number of inquiries which will have implications for each other as well as

191
for local people is severely constrained by the proposed size of the commission. The noble Baroness, Lady Seear, is entirely right. To have a single commissioner, perhaps with outside help, undertaking an inquiry will not be satisfactory from the point of view of that commissioner or anyone else.
In addition to the arguments that I have adduced about the speed with which the commission can work and its representative nature, the commission must be convincing and acceptable. It must be understood to be fair and representative to local people who will give evidence to it. I do not see how that will be achieved with a small commission such as is being proposed.
The noble Baroness, Lady Hamwee, with her quotation from Mr. Banham, revealed that those who thought about the matter more deeply than the Government appear to have done have come to a different conclusion from that of the Government. I am delighted to yield to the noble Earl.
9.30 p.m.
Earl Howe: It is the Government's intention that the commission should carry out its work area by area. An area could be larger than a county. In all respects, the Government will determine a programme which makes sense. At the same time the commission will be able to find the best local solutions and we shall be able to move quickly in those areas where the case for change is established. It is by no means clear that Avon and Humberside will be the first on the list. That suggestion has been mooted but no decision has yet been taken. I understand the points that have been made and I am sure that they will be borne in mind when the commission begins its work. However, the commission will not be overstretched and we shall ensure that it carries out its work thoroughly.
Lord Stoddart of Swindon: Let us suppose that it is found that the commission cannot carry out its work with the number of members and the staff available. Are the Government prepared to he sufficiently flexible to increase the members as it goes on? Will the Government return to Parliament and say, "This is not working. Will you give us the power to appoint more commissioners?"?
Earl Howe: We do not envisage that to be a problem.
Lord McIntosh of Haringey: The noble Earl's answer merely papers over the cracks. He has heard from Members on all sides of the Committee about the anxieties of those who know what they are talking about. It seems that they have a better idea of the task that will face the commission than the Government have, although perhaps not a better idea than Mr. Banham judging from what he has said.
The Government are digging themselves a trap by restricting the membership of the commission to 15. They will discover that in doing so they are committed to a procedure which will be far too long and drawn out. It will result in decisions being taken which are the best for the present but not for the future, but with which they must continue for a long time. The Government's motives in setting up the commission
192
are admirable but they will find themselves with a monster; not a monster that is too large, but one that is too small and too slow. It is an issue to which we must return in some form at a better hour of the day. Only on that basis do I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 125:
Page 29, line 35, after first ("State") insert ("of whom not less than half nor more than three quarters shall be persons having knowledge or experience of local government").
The noble Lord said: I shall speak also to Amendments Nos. 126 to 130. I appreciate that not all those amendments are tabled in my name and that of my noble friend Lady Hollis. It is a matter for Members of the Committee to decide whether they wish to have their amendments grouped with ours. In the amendments we are concerned not so much with the size of the Local Government Commission but with its membership and representation. Disappointed as we are with the Government's response about its size, we wish to pursue the question of its representative nature.
Amendment No. 125 suggests that not less than half and not more than three-quarters of the commission should be people with knowledge or experience of local government. The commission is about local government and communities, although we recognise that it is not confined to that. We believe that it would be a good idea to have a levelling of people who come freshly to the problem and who have never been involved with local government. The fundamental skill which will enthuse the work of the commission will be based inevitably on some experience of the working of local government, of the problems that may arise with two-tier authorities, of the problems of dealing with the needs of communities and authorities which are too large and of dealing with services in authorities which are too small. That is the single most relevant piece of experience and it should be heavily represented on the commission.
Amendment No. 126 suggests that the membership of the commission should be established,
"after consultation with the local authority associations and such other organisations as are appropriate".
In this case consultation is likely to mean asking people for suggestions as to who are likely to be members rather than saying, "This is our list. What do you think of it?" I cannot imagine that it will take the second more formal form. We do not suggest exactly how consultations should proceed but we say that the Government should take advantage of the skills which exist in the local authority associations in particular and that we should seek that help in finding people who are both willing and able to do the work. "Able to do the work" is a major consideration because a huge task is proposed.
Amendment No. 127 is no longer relevant. The chairman has already been selected. I shall not move that amendment because of the appointment of Mr. Banham.
No doubt the noble Lord, Lord Norrie, will speak to Amendment No. 128 which is in his name. We

193
support the view that there should be representation of environmental interests on the commission. Despite the words of some Members of the Committee earlier, that thread should not merely run through the considerations of the commission but in a sense should suffuse them. No doubt the noble Baroness, Lady Hamwee, will speak to Amendment No. 129 which is in her name.
Amendment No. 130 is in the name of the noble Baroness, Lady Young, and my noble friend Lady Hollis. The amendment is concerned with consultation on the appointment of a chief executive. Clearly that will be a critical part of the commission's work. If consultation is, as we believe, appropriate for the chairman and members of the commission, so too should it be for the appointment of a chief executive.
On Second Reading, at col. 795 on 18th November, the Minister said that the Government would seek a balanced membership for the commission covering those with local government experience and those with other experience too. The amendments seek to give flesh to the intention expressed by the Government which we fear is not adequately expressed in the Bill as drafted. I beg to move.
Baroness Hamwee: I speak to this amendment and some of the amendments grouped with it. As regards Amendment No. 125, this is an occasion —and in a way I am glad to have found one—on which I disagree with the noble Lord, Lord McIntosh. I do not like to see legislation prescribing the knowledge and experience of a number of members of the commission and particularly not such a large number as one-half to three-quarters. The members of the commission have an enormous amount of ground to cover: voluntary organisations, local business interests —and in our discussions about communities over the past two days we have tended to forget that local businesses are also part of our communities—public service organisations and the general public. The list could be long. It would not be appropriate to be as prescriptive as is suggested.
Amendment No. 129 is a probing amendment. I hope that the Minister will be able to explain what is meant at line 46 on page 29 where paragraph 1(5) (b) states:
"The Secretary of State may remove a member of the Commission from office if he is satisfied that he … has not complied with the terms of his appointment".
My amendment attempts to discover what will be the terms of the appointment. It seems to me that the terms should be the duty to fulfil the functions of the commission. However, the amendment is tabled in order that we may learn what is meant by that last line on page 29.
Lord Norrie: Perhaps I may speak to my Amendment No. 128, which was supported by the noble Lord, Lord McIntosh. It seeks to ensure that among the members appointed to the Local Government Commission there is adequate representation of environmental interests.
The Bill provides the Secretary of State with considerable discretion in deciding who to appoint to the commission. Although we now know that the
194
commission will be headed by John Banham of the CBI, we have yet to hear from the Government regarding the background and experience that the Secretary of State will be seeking when appointing members of the commission. That is a matter of interest to everyone affected by local government reform. It is important that the Bill tells us more about the criteria to be used in appointing members of the commission.
Members of the Local Government Commission will undoubtedly need to cover a wide range of expertise across the spectrum of local government services. I contend that it is not enough to ensure that members are experienced in or knowledgeable of local government. It will be necessary to ensure that the commission has an understanding of all local government services.
The growing importance of environmental concerns is widely recognised. My right honourable friend the Secretary of State for the Environment, in his introduction to the Government's first year report on the environment White Paper, said, when referring to the need to build environmental concerns into policy making,
"there will be an environmental expert on relevant Government committees and bodies".
The need for environmental expertise on the Local Government Commission cannot be over-emphasised. In the same first year report the Government made an important commitment that local government reform should make local authorities "better able" to rise to the environmental challenge. It also stated that the Local Government Commission will consider the need for effective environmental protection in developing proposals for reform.
I am particularly concerned that the importance of strategic planning for environmental protection is fully understood by the commission. To meet the environmental expectations of local government reform the Secretary of State should appoint appropriate people to the commission. They should have an understanding of the nature of the environmental challenge and the sort of local authorities we need in order to meet that challenge. That is what I hope my amendment will achieve.
Baroness Seear: Briefly commenting on what my noble friend Lady Hamwee said in regard to Amendment No. 25, I do not quite know what the noble Lord, Lord McIntosh, is seeking. He says that these people must have knowledge or experience of local government. The word "or" implies that they do not need to have had experience of local government. Can there be anybody in the country, after the poll tax, who does not have knowledge of local government? Who are those people?
Lord McIntosh of Haringey: Tony Travers of the London School of Economics.
Baroness Seear: The London School of Economics, in my experience, is by no means always correct.
Earl Howe: All these amendments in their various ways concern the membership of the Local Government Commission or its staff. Two of the

195
amendments require my right honourable friends the Secretary of State and the Home Secretary, who is also concerned with the appointments, to consult the local authority associations and other organisations about the appointment of the chairman and members of the commission.
Amendment No. 130 requires my right honourable friends to appoint at least two members of the commission after consultation with environmental bodies. Amendment No. 125 would require between half and three-quarters of the commission members to have knowledge or experience of local government.
Naturally my right honourable friends welcome the suggestions they receive from the associations and other organisations, including bodies specially concerned with the environment, about people who might be suitable for those appointments. We have made it clear that we want people on the commission with knowledge of local government. I know that my right honourable friend has said that he fully intends to ensure that environmental issues are covered. But decisions about the appointments are for my right honourable friends and we do not accept that it is appropriate for there to be a statutory requirement for consultation before the appointments are made, nor do we consider it appropriate—as Amendment No. 130 would require—to lay an obligation on the commission to consult these bodies about the appointment of its chief executive. As has already been mentioned in the debate, my right honourable friend announced in reply to a Parliamentary Question—
Lord Stoddart of Swindon: I am obliged to the noble Earl for giving way. He said that the Secretary of State will not consult the authorities and that he must be left free to do what he wants. Surely he is going to consult some people. The Secretary of State cannot possibly know the range of people who might be able, willing and competent to serve. Are not the best people to consult those who know something about the issues involved?
9.45 p.m.
Earl Howe: I did not say that the Secretary of State would not consult. I said that on the face of the Bill he should not be obliged to consult, which is a very different thing. Mr. John Banham, as has been mentioned earlier in the debate, and currently Director General of the CBI, will be heading up the commission. I am sure that noble Lords will agree that Mr. Banham has an excellent knowledge of local government from his former role as controller of the Audit Commission and that we can expect an outstanding contribution to the commission's work from him.
Amendment No. 129 seeks to require the terms of appointment of commission members to include a duty to fulfil the functions of the commission along with other members. It seems self-evident that that is what being, a member of the commission means. The requirement in Amendment No. 129 seems entirely unnecessary and inappropriate. The noble Baroness, Lady Ham wee, asked me a specific question about the
196
meaning of Schedule 2, paragraph 5(b). That provision enables my right honourable friend the Secretary of State to remove a member from office if he is satisfied that that member has not complied with the terms of his appointment. What is referred to here is the simple matter of a contract of employment as is quite normal in business.
As regards the composition of the commission about which a number of Members of the Committee have asked, we are not publishing the criteria that will determine its make-up. It will be a balanced commission and the members will he taken from as wide a cross-section as possible, with professional experience, taking into account the expertise required for the job. The anxieties expressed this evening are ones which I, and I am sure the commission chairman, Mr. Banham, will fully understand. The main point is that the functions of local government will be high on the list of the expertise that the members of the commission will have at their disposal.
Lord McIntosh of Haringey: Can the Minister say whether it is the Government's intention to appoint the other members of the commission while the Bill is still before Parliament?
Earl Howe: That is a very good question. I shall have to write to the noble Lord about it.
Lord McIntosh of Haringey: It would be very helpful to know because we are receiving assurances about the good intentions of the Government while the Government are as usual resisting any attempt to put those good intentions onto the face of the Bill. We are concerned that the anxieties which have been expressed on all sides of the Committee are relieved. The points which the noble Baroness, Lady Hamwee, and the noble Lord, Lord Norrie, and others have made are not trivial. Noble Lords on all sides of the Committee have put their names to these amendments not because they are anxious to hold up the business or hear the sound of their own voices, but because they want the commission to work. We all want it to work because we are all concerned with the same objective.
I am very much concerned that, because of the inadequacy of the size of the commission, the lack of precision about its membership and above all because of the speed with which the commission is to be worked, we may end up with a botched job. We have had two very badly botched jobs of local government reform in the past 30 years. Both of them were put forward by Conservative Governments and repudiated by another Conservative Government. Those botched jobs took far longer to design and implement than this proposed reform which has much going for it. It will not prescribe the same pattern everywhere and because it is being responsive to local needs, this reform does many of the things that we want to see. Let us not spoil it by restricting the "representativeness" and the size of the commission too much, and by making its timescale impossible. I gladly give way to the noble Earl.
Earl Howe: There will be no formal appointments —and I stress the word "formal"—to the commission until after Royal Assent.
Lord McIntosh of Haringey: Stressing the word "formal" means that the appointments will be made in posse, and that the decisions will have been made about the membership of the commission. That is what really matters.
Lord Skelmersdale: That is a little unfair. In cases like this it is quite normal to announce very early on the presumptive chairman of a new body, or a new quango, as this will be. It is also quite normal to carry out soundings as to who the future members of the commission will be. It is equally normal not to appoint them until a Bill has received Royal Assent.
Lord McIntosh of Haringey: The noble Lord speaks with the due caution of an ex-Minister. The reply which the noble Earl, Lord Howe, gave to me did not indicate whether people were to be approached and offered the jobs before the legislation is passed or whether there would simply be soundings taken. I quite understand that no formal appointment will be made. It would be impossible to make a formal appointment—that is a tautology. I should like to know whether adequate time will be given to the consultation about the "representativeness" of the
198
body. If it is proposed to approach people and offer them the jobs as I said, in posse, before the Bill finishes proceeding I doubt whether the commission can be adequately representative. I wonder whether the noble Earl can tell us how far the process of appointment, short of a formal announcement, will be taken while the Bill is still before Parliament.
Earl Howe: It is impossible for me to elaborate on what I have already said. It is possible for certain individuals to be approached informally; but I have no knowledge of who they are or when that might happen.
Lord McIntosh of Haringey: The noble Earl is learning the discretion of office very successfully and very quickly. That is not a satisfactory response. The commission which we all want will not be well served by the nature of the legislation which is proposed to set it up. This is certainly a matter to which we shall have to return at a later stage. I beg leave to withdraw Amendment No. 125.
Amendment, by leave, withdrawn.
[Amendments Nos. 126 to 130 not moved.]
Baroness Hamwee Baroness Hamwee moved Amendment No. 131:
Page 31, line 2, after ("any thing") insert ("including causing a local inquiry to be held").
The noble Baroness said: In moving this amendment, I shall speak also to the other amendments grouped with it and in particular to Amendments Nos. 133 and 134. The schedule to the Bill, the incidental powers, specifically preclude the holding of a local inquiry. It was a little surprising to see not simply that the commission could not make up its own mind as to the means that it should adopt to inquire the views of local people and all those who were interested in contributing to the process, but that it was to be specifically restricted from holding a public inquiry. The main amendment standing in my name in this group is to leave out the words,
"or to cause any local inquiry to be held".
The incidental power and the mechanisms to be employed should be a matter for the commission, which we are being assured tonight will consist of very trustworthy people. Indeed, I am sure they will be.
Amendment No. 134 stands in the names of the noble Lords, Lord Feversham and Lord McIntosh. My point here concerns parishes. Even if there is no formal public inquiry, the commission could undertake a rolling stage show around the country and conduct its deliberations in public in a way that the local community could contribute to. The parishes would appreciate that approach.
Lord McIntosh of Haringey: In the previous group of amendments the noble Baroness, Lady Hamwee, indicated the first schism in our views in the course of our proceedings on the Bill when she did not agree with what we were saying about public authority experience on the commission. I am sorry to say that I do not agree with her about public inquiries. A public inquiry is a long drawn out and expensive way of conducting the business of the commission. I hope that the Government will resist those amendments.
Although Amendment No. 134 has been grouped with other amendments, it was tabled by the noble Lord, Lord Feversham, in his capacity as president of the National Association of Local Councils. I am pleased to be associated with him on the amendment. Amendment No. 134 does not imply that there should be public inquiries. We think that the commission should hive the power, if I may quote the words used to set up Committees of this House, to meet from time to time and at such places as seem to the Committee to be convenient. In other words, the Local Government Commission should have the power not only to send individual members to meet in different parts of the country but if necessary to meet as a body in different parts of the country. It should go out of its way to use the ability to meet in different parts of the country to inform itself about local views.
I would expect the Minister to say in reply that that power exists and that it is not necessary to have it on the face of the Bill. I think it is worth emphasising our view that it is an important power and that it is essential to the effective conduct of the commission's business.
Lord Desai: Our experience of local government over the past 15 or so years has shown that many policies have been based on ignorance of what local people want. That is now beyond doubt. I do not care very much what means are used to elicit local opinion on matters affecting local people. However, if the commission is to be a success, it should use effective and efficient methods of consulting local opinion. There may be public opinion surveys. The commission may travel around the country listening to the people. Indeed, television may be used in this way. It is extremely important that the commission's work should be seen by the people themselves and not just by us. Those relations with the public are very important. I urge the Government to accept the amendments.
Lord Skelmersdale: I could not agree more with the noble Lord, Lord Desai, but to conduct a form of local review is going a little far. After all, we have in the Bill Clause 15, which adjures the Local Government Commission to publicise its intentions, activities and vires to such people as appear to it to be interested. The word will get round the local authority area very well indeed. The commission must take account of the views submitted to it. Equally, it must deposit copies of draft recommendations in advance of submitting them to the Secretary of State. Those can be commented on by the local populace. The point is well covered in the Bill.
10 p.m.
Lord Stoddart of Swindon: Clause 15 is simply not good enough. It gives the commission power to do many things. However, it does not say that it should properly consult local people. When we talk about local people, we are not talking about local councillors or any other bodies which have a close relationship; we are talking about ordinary people who vote in local elections and who are in fact at the sharp end. They are the ones who either benefit or suffer from the administration of their local authority. Therefore, the sort of organisation that they have must be very important to them. There must be means of discussing the matter between the commission, or the commissioners, and the ordinary people in the area. As my noble friend pointed out, it is vital that there should be a way in which ordinary voters can express themselves.
I happen to believe that the latter should be achieved by a series of public meetings. These can be very successful. Indeed, you can enthuse people to take part in such public meetings. For example, I remember when we wanted to amalgamate the water undertakings of Reading, Berkshire and South Oxfordshire. We were compelled to have not just one public meeting, we were obliged to have two of them and a town poll. That meant that the people of Reading—not those in Berkshire because they were not under the same constraint—became involved in the whole business and they eventually voted for it. However, they were well informed as to what was happening. It is vitally important that the ordinary people who are to be administered should have the

201
opportunity to speak directly to the commissioners, and not through anyone else. They must be able to speak to them directly. One way or another, I hope that we can ensure that that process takes place.
Earl Howe: These amendments would enable or require the Local Government Commission to hold local public inquiries as part of its process of review. As my noble friend Lord Skelmersdale rightly pointed out, Clause 15 of the Bill sets out the framework for the procedures the commission must follow when conducting its reviews, including the arrangements for consultation with local people and organisations.
It is clear that a review by the commission will be initiated with publicity, at which point any interested parties will have the opportunity to put forward their views and, if they so wish, to submit proposals for change to the commission. The commission will then prepare draft recommendations and invite comments on them during a specified consultation period. Following its consideration of the comments received on its draft recommendations, the commission will draw up its final report and recommendations which will be published and submitted to the Secretary of State.
Clause 17 places a duty on the Secretary of State to wait for six weeks after receiving the commission's report and recommendations before making an order which implements the recommendations. That provides local people and organisations with a further opportunity to make representations on the recommendations, this time, however, directly to the Secretary of State.
There is nothing in the Bill to prevent the Local Government Commission from holding informal local meetings as part of the process of finding out what local people think, where it considers it appropriate to do so. I cannot help feeling that it is much better to go along to a village hall and listen to the people than it is to sit through rather stultifying formal inquiries. My right honourable friend intends to issue guidance to the commission about the procedure it should follow in carrying out its reviews. He intends to direct the commission to have regard to this guidance under Clause 15(7). We shall invite views on the content of this guidance.
We firmly believe that the arrangements for consultation are such that the need for local public inquiries, or hearings, which can be both costly and time consuming, will not arise. It is clear that the arrangements for public consultation have been designed to provide all interested parties with ample opportunities to make their views known to the commission and to my right honourable friend the Secretary of State. I therefore urge the noble Baroness not to press the amendment.
Lord Stoddart of Swindon: Will the guidance to be given to the commission be on the basis of paragraph (f) on page 10 which, in relation to the guidance,
"require the extent (if any) to which there has been a contravention of guidance issued by the Secretary of State".
We discussed that issue earlier. Will the commission have guidance or guidelines?
Earl Howe: It will be guidance.
Lord Stoddart of Swindon: So paragraph (f) on page 10 will apply. If the commission does not accept the guidance, it will be in contravention of the guidance.
Earl Howe: If the guidance says that certain procedures must take place, the commission must pay heed to that.
Lord Desai: I have read Clause 15 and I still have the feeling that it is talking about specialised bodies when it refers to interested parties and lobbies. It is not talking about ordinary people. While I welcome what the noble Earl said about informal soundings that the commission may take, I should be much happier if that provision were made more explicit and said that the commission would be encouraged to go around the country and talk to the people. It is much more important that it does that than consult local government specialists, for example.
Earl Howe: The commission will be in touch with all segments of the community, not just organisations, but the people themselves.
Lord McIntosh of Haringey: Perhaps I may pursue the point made by my noble friend Lord Stoddart. In response to the question whether the commission would be unable to contravene the guidance, the Minister said that it would have to pay heed to it. That is a new phrase which I have not previously heard in legislation. By "pay heed to", does he mean the same as "have regard to"? What is the distinction?
While I am on the subject, I recall that only yesterday I was rebuked magisterially by the noble Lord, Lord Cockfield, when I pointed out that the Secretary of State had the general power to give directions to the Audit Commission about any part of its activities. The obligation on the Audit Commission was to give effect to those directions; in other words, the Audit Commission, in the nicest possible way, is a creature of the Secretary of State. When I said that that was strange, the noble Lord, Lord Cockfield, said that it was readily explained by the Secretary of State's need to answer to Parliament for the Audit Commission's activities. Why does not the same procedure exist for the Local Government Commission? In the absence of such direction-giving power and such obligation on the commission to give effect to the directions, how can the Secretary of State answer to Parliament for the activities of the Local Government Commission?
Earl Howe: I hope that this answer will be helpful: the guidance that the commission will have will set out the requirements and considerations that it must adopt in regard to the proper delivery of services in any particular area. It must pay regard to that guidance. It is clear that the Secretary of State would direct the commission to have regard to that guidance under Clause 15(7).
Lord McIntosh of Haringey: The noble Earl has not answered my point about the directions and how the

203
Local Government Commission would be answerable to Parliament, or perhaps the noble Lord, Lord Cockfield, was in error when he said that.
Baroness Blatch: Perhaps the noble Lord will allow me to intervene at this point. The noble Lord is playing games over this amendment and is being unnecessarily difficult. The Secretary of State will direct the Local Government Commission to have regard to the guidance. We have all had sight of the guidance. One of the aspects of the guidance in which I know my noble friend Lord Norrie will be interested is that it sets out that the Local Government Commission must have regard to the proper delivery of services; for example, land use planning and proper delivery of any local government service. It must have regard to it. If it does its work without having proper regard to the guidance it will be considered in breach of its work. Its recommendations to Parliament will be defective because it will not have had regard to the proper delivery of local government functions.
Lord McIntosh of Haringey: I have still not received an answer to my question about the difference between the Audit Commission and the Local Government Commission.
Baroness Hamwee: I had no idea that I was going to stimulate and provoke such a debate. I do not think that this was playing games; it exposed something important. I hope that the noble Earl's reply which referred to Clause 15 is a trailer for the approval of amendments on the Marshalled List for Thursday.
I see nothing inconsistent in the ability to hold an inquiry and holding that inquiry in a village hall. I do not suggest in my amendments that the investigations should not be held as conveniently and as locally as possible. My main distaste for the Bill is that there is the proscription against holding a public inquiry. However, I take the point about the greater the informality, probably the greater the response provoked. However, in view of the hour, I shall clearly not get anywhere and I beg leave to withdraw the amendment.
Earl Howe: Before the noble Baroness sits down, I put on record that the guidance under Clause 15(7) is procedural, and that under Clause 13(6) is what we have published. There is a distinct difference between the guidance in each clause; but regard must be had to both.
Baroness Hamwee: I thank the noble Earl. I am sure that we shall all go away and wrap hot towels round our heads and try to work out all these distinctions.
Lord Skelmersdale: Or cold towels?
Baroness Hamwee: I find that hot towels work perfectly!
Amendment, by leave, withdrawn.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 132:
Page 31, line 6, at end insert ("and such power shall include power to commission and carry out surveys of public opinion in the areas subject to review").
The noble Baroness said: My noble friend Lord McIntosh has made clear that we warmly welcome this part of the Bill. Our amendments are genuinely meant to be constructive and to probe or to amplify terms of reference. Thus when the recommendations of the Local Government Commission are made, they can be readily accepted by local authorities of all sizes and political persuasions as sensible and fair.
This is one of a series of similar amendments in the hope that we may strengthen the robust nature of the recommendations that we expect the Local Government Commission to bring forward. Hence the nature of this amendment which seeks to empower the Local Government Commission to,
"commission and carry out surveys of public opinion in the areas subject to review".
In a way, it is an extension of the arguments we have just had about committees of inquiry, public inquiries, and so on. I wish to take the Committee back to the 1974 re-organisation of local government. It was based on the concept of functions. Not surprisingly, as every function has a different ideal population size for its base, we ended up with two tiers, agencies, gaps and overlaps that have done much to mystify the users of local government ever since.
The reorganisation of 1974 was based on the car driver and as a result, it could never quite make up its mind what the natural area of a community or a local authority was, whether it was the historical boundaries—a subject which we shall come to shortly—its built up area, its travel to work area or the degree to which it serves a population for shopping and services.
Having one reorganisation based on the concept of functions and another on the notion of concentric rings of community meant that this produced an instability at the heart of the 1974 reorganisation. It has led to subsequent discontent and efforts to change it going right back to 1977. In some cases such as planning, functions have had to be re-allocated downwards; in others—for example, highways — agency arrangements have had to be set up to make better use of services. In other cases, counties have set up area offices coterminous with district councils and the social services or they have set up local offices with different boundaries from those of the social services, if they were also education authorities. The result has been a mystifying patchwork that is costly, cumbersome and incomprehensible. That is why we, as I am sure do Members on the Government Benches, welcome this reform.
At least two things, among no doubt many others, should have been learnt from the experience of 1974. The first is that the only way to obtain stable local government to which people can relate and which they can comprehend and therefore hold accountable is local government based on local communities—not on functions, not on the distance you can drive in your car, but on communities.
Functions come and go. For example, health and various aspects of education have been, and are being, stripped out of local government. But equally,

205
economic development or arts and leisure, for example, are growing in significance. In other words, functions come and go, but communities endure.
The second thing that might have been learnt from 1974 is the crucial importance of starting with communities first and then considering services and functions and the best way of ensuring that they are met. A further lesson that the Minister will certainly endorse is that of the enabling authority, which has meant that there need be no incompatibility between the concept of a local community on the one hand and that community's competence to arrange value for money services on the other.
Behind that is the question of what is the community; in other words, what people identify with. The amendment suggests that we find out by asking them so that the result is a local government that they own. We are not seeking to prejudge the outcome of those surveys, but I have no doubt that the surveys are necessary. If we do not base the work of the Local Government Commission on such research and surveys then we shall simply add to the pressure on the Secretary of State when the Local Government Commission has reported, and a second and intense round of lobbying of the Secretary of State will result for him, or her, not to accept the recommendations of the Local Government Commission. We shall be in a continuous programme of instability.
We want the local government recommendations to be robust. We want them to carry consent. We doubt that there will be enough commissioners to do the job, an issue we have already raised; we doubt that its members will carry sufficient experience, but we shall wait to see. We want the commission to have the confidence of the local government world. All those considerations give us concern. If, however, we can get the concept of what the community is carried with consent and support, then at least the commission will have the building blocks on which to produce a local government system for the future with stamina and robustness. The most effective way of determining what people think in their community is to ask them, and that is the point of the amendment. I beg to move.
Lord Skelmersdale: The noble Baroness is right. Over and over again the Government have made it clear that they want the commission to respect the achievable wishes of the local population. So far as this amendment is concerned, I look at paragraph 4(1) of Schedule 2 on page 31.
"Without prejudice to any powers exercisable apart from this paragraph, the Commission shall have power to do any thing … to facilitate … the carrying out of any of its functions".
Noble Lords opposite constantly complain of the wide scope of Bills. Here we have a perfectly reasonable and, I am sure the noble Baroness would agree, acceptable wide power for the commission: therefore, we do not need the amendment that she has moved.
Earl Howe: I am grateful to my noble friend for his helpful intervention. I probably need all the help I can get. Clause 13 requires the commission to have regard to the need to reflect the identities and interests of local communities in carrying out its reviews, and
206
there we agree. We are very anxious that the commission should use the best methods available to determine the views of local people about their community and their feelings towards the place where they live and the structure of local government they would like to see. We believe that in many areas opinion polls may be a useful tool for the commission in its work. The Local Government Boundary Commission has used them in its work and found them a valuable aid to examining local opinion. We therefore intend, in the guidance which my right honourable friend will issue to the Local Government Commission about the procedures which the commission may follow in carrying out its review, to encourage the commission to use polls wherever appropriate.
To help the commission make the best possible objective assessment of the views of local people about the communities in which they live we have commissioned some research into community identity. The overall aim of the research is to develop and refine criteria which might be applied to the assessment of community identity and loyalties and which might be amenable to testing by means of surveys of public habits and attitudes in a given local area. The findings of that research should make a useful contribution to the commission's work.
I can reassure the noble Lord and the noble Baroness that under the Bill as drafted the commission would indeed have the power to carry out opinion polls, although it is up to the commission to decide how it carries out its work, and that we intend to encourage it to use opinion polls through the guidance on procedures which my right honourable friend may issue under Clause 15.
I hope that the noble Lord and the noble Baroness will be satisfied with that response and will not press the amendment.
Baroness Hollis of Heigham: That is absolutely splendid. Can the Minister say when we may hope to see the results of the research he has commissioned?
Earl Howe: The research is intended to inform the commission's deliberations. We may disseminate the findings more widely but I do not yet know when those findings will be complete.
Baroness Hollis of Heigham: I hope that the noble Earl will forgive me, but perhaps he might for once chance his arm and say that he would expect the research to be published. We are talking about what counts as community identity. If that information is to inform the Local Government Commission and form part of the mind map of the commission in much the same way as its precise terms of reference, which refer to the need to take account of communities and that version of communities will have been shaped by the research which has been commissioned, I should have thought that it was appropriate for that information to be put out for public debate and consideration. It will be very important when other bodies present their arguments to the commission that they share a common language as to what the word "community" means in the circumstances.
Earl Howe: I understand the anxieties of the noble Baroness. I am sure that she will understand that it will be a working document. It will be a bank of information which will enable guidance to be issued. If we feel that it contains information which is likely to be of particular interest and importance we shall disseminate it more widely. However, one would not normally expect a document of that kind to circulate in the public domain.
Lord McIntosh of Haringey: The Government constantly publish documents of this kind and expect to do so. Every department in the realm, with the possible exception of the Ministry of Defence, expects its research, whether it is designed for the purposes of an individual agency or commission or for government generally, to be published. It is a well known and well understood principle of government research. The Government always retain the Crown copyright in such projects with the deliberate and express intention that the information should be published.
I do not suggest that the noble Earl should go beyond his brief now, but I ask him to think about the issue and, on mature consideration, to write to my noble friend. I think that he will find that all precedents are in favour of publication.
Earl Howe: The noble Lord is quite right that the Government do indeed publish such information, but only when it is considered appropriate to do so. It is by no means appropriate in every instance.
Baroness Hollis of Heigham: Perhaps I may say one last sentence to finish the point. At the heart of the terms of reference of the Local Government Commission is the objective of producing effective local government embodying local communities. I hope that we accept that definition.
Clearly, if a concept of community based on research is at the core of that objective, that must be in the public domain so that all sides involved, including the local authority associations and the professionals, share a common language. Unless that information is published, we shall not share that common language, a great deal of debate may go beyond the point and the different sides may simply bypass each other. In the circumstances, it would be absurd if the research on which the Local Government Commission was proceeding was not in the public domain. That would produce a great deal of misunderstanding. In the hope that we can press the Minister on the matter at a later stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 133 and 134 not moved.]
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 135:
Page 31, line 17, at end insert:
("(1A) Any formal meetings of the Local Government Commission shall be open to the public.").
The noble Baroness said: Amendments Nos. 135 and 136 seek to apply in a modest way to the formal working of the commission the requirements that local authorities must fulfil under the Local Government (Access to Information) Act 1985 and other
208
legislation. Under the access to information legislation, all the meetings of local authorities—council committees and sub-committees—are open to the public unless there are good reasons, all of which are defined in legislation, why the public should be excluded. Those provisions have operated effectively, successfully and, I believe, beneficially with regard to local government business. Agendas and reports are also open to public inspection unless they are precisely exempted. Furthermore, those agendas and reports must be publicly available at least three clear working days in advance so that everyone may have the right to consider the information in the public domain.
The two amendments propose that the commission should be subject to the same procedures and openness as the local authority system which it is considering. We do not suggest that all meetings should be open to the public. The commission would still be able to work up reports in private and have informal discussions. However, the proposals would allow members of the public to be aware of the issues discussed by the commission at any meeting and to consider and comment on any formal reports to that body. It is not unreasonable that a body which is considering the future of local government in England should be bound within the realm of practicability by similar considerations as to conduct as apply to the body whose future it is reviewing. I beg to move.
Earl Howe: The Local Government Commission will be a deliberative, not a decision-making, body. It will assess and analyse complex information and draw up recommendations. We consider that the most appropriate means for public involvement in the commission's work is for there to be ample opportunity for considered representations to the commission at each stage of a review.
Clause 15 sets out the framework for the procedure that the commission will follow. I do not need to repeat what I said in connection with an earlier amendment. There will be plenty of opportunity for interested parties to put forward their views and, I am sure, plenty of publicity in the process. The draft recommendations will be drawn up only after all the recommendations and comments put forward by local people have been taken into account. That is how the objective which I believe both sides of the Committee seek will be achieved. The arrangements for consultation are such that it is not necessary to require the Local Government Commission to open its meetings to the public or to publish the agenda or working papers for the meetings. The amendments are not necessary and I urge that they should not be pressed.
Baroness Hamwee: I am sure that the Government will note the anxiety about openness and the public's ability to discover what is going on. However, it would be a little difficult to support the amendments which refer to formal meetings; first, because I am not sure what is the distinction between a formal meeting and an informal meeting; and, secondly, because we have heard today that perhaps we shall have only one commissioner conducting the inquiry in each patch of the country.

209
My noble friend Lady Seear referred to the need to have more than one commissioner because one needs to bat ideas around. If there is only one commissioner supported by staff, how will there be agendas for meetings which that commissioner will have with herself or himself'? I am not sure how that could operate.
Lord Skelmerdale: I believe that the idea of more than one commissioner came from myself. It was not subscribed to by the noble Baroness and the noble Earl on the Bench in front of me. I should not like the noble Baroness, Lady Hamwee, to get away with the idea that I direct government policy on the matter. I most certainly do not.
Baroness Hollis of Heigham: If we do not need the public present because there is only one commissioner, that is a bad thing. If there is more than one commissioner and they talk to each other, the public should certainly be there, and that would be a good thing.
I am sure that the noble Earl understands the spirit of the amendment. It may not be in the most precise form; it may need redrafting. However, if we want the recommendations of the commission to be well informed, to be robust, to stick and to carry consent, then they must carry the public with them. We expect that of local government. The public have the right to know. So far as is practicable, we wish to have the same rules of debate, of openness and public accessibility, applied to the commission as we expect that the commission would wish to see applied to local government.
Perhaps the Minister will consider the matter to which we may return when we discuss more closely the working arrangements of the commission. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 136 not moved.]
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 137:
Page 31, line 47, at end insert:
("(1A) The amount available to the Commission shall be sufficient to ensure appropriate consultation with the Audit Commission and an adequate level of publicity and consultation.").
The noble Baroness said: I shall be even briefer. I shall be delighted if the Minister says that the amendment is unnecessary and redundant.
A number of amendments have been tabled from all sides of the Chamber which require additional consultation, additional publicity, the use of opinion surveys and so on to ensure that there is maximum public input. Equally, Clause 16 provides that the Audit Commission shall charge the Local Government Commission such fees for opinions provided, for example on value for money, as will cover its costs. Such work, whether research, opinion polling, or paying the Audit Commission, involves resources. The amendment seeks to ensure that the Local Government Commission is adequately financed, in particular if it is to complete its considerations in the appropriate timescale to do the
210
job properly. If the Minister says that of course it will, and that the amendment is unnecessary, I shall be delighted. I beg to move.
Earl Howe: Schedule 2 sets out the arrangements for financing the Local Government Commission. Each year the commission will receive an amount of grant from the Department of the Environment which the Secretary of State considers sufficient to enable the commission to carry out its functions.
This will not be an arbitrary figure. It will be based on the Local Government Commission's own forecast of the amount of grant it will need to carry out its functions in that year, taking account of the costs of publicity, of consultation and of the Audit Commission, on the basis of its programme of work set out by the Secretary of State.
The procedure for arriving at the amount of grant to be paid to the Local Government Commission will form part of the public expenditure survey leading to the approval by Parliament of the Supply Estimates. It will therefore be for Parliament to approve the level of grant to the commission.
It is our firm intention; indeed there is no question but that the commission will complete the job and will not be inhibited in its work by resource constraints. I hope that with that reassurance the noble Baroness will not press the amendment.
Baroness Hollis of Heigham: I am well content. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 2 agreed to.
Clause 13 [Duty to conduct reviews and make recommendations]:
[Amendment No. 138 not moved.]
The Deputy Chairman of Committees (Lord Airedale)The Deputy Chairman of Committees (Lord Airedale): In Amendment No. 139 there is a misprint on the Marshalled List. The amendment should read,
"Page 11, line 17, leave out ('of such areas')".
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 139:
Page 11, line 17, leave out ("of such areas").
The noble Baroness said: In moving this amendment, I shall speak also to Amendment No. 141. They are straightforward amendments which seek clarification. Its purpose is to ensure that the whole of England outside the metropolitan areas is included within the review of local government structure. We are seeking to ensure that the re-organisation of local government outside the metropolitan areas is completed once and for all. To risk doing only half the job will continue to produce uncertainty and instability, in particular for the remaining two-tier areas. Perhaps the commission will recommend a two-tier or single structure in particular areas. However, we wish to ensure that is covered by a comprehensive review and not by the patchy review which we fear may be the case. We hope that the Minister will assure the Committee that all the areas of England will be covered by the Local Government Commission.
Baroness Blatch: The Government have made it clear that they intend the Local Government

211
Commission to carry out a rolling programme of reviews of local government in the shire counties. We believe that an area by area approach will best enable the commission to give full and careful consideration to all local concerns. We have already said that we intend to give special priority to Humberside where the Local Government Boundary Commission found a strong case for change. Other priorities will be announced in due course. Areas where there is a history of dissatisfaction with the existing structure must be high on the list.
The Secretary of State would be able to use his power to set a balanced and manageable programme for the commission and to give directions to the commission to require it to consider only boundary or only pectoral changes, for example. This could be necessary where the commission had already made recommendations for improving the structure of local government in an area and consequential boundary changes were needed.
The Local Government Commission will have the power 10 recommend more far-reaching changes than the Local Government Boundary Commission and will no: have a mandatory programme of reviews of local government structure and boundaries. In those circumstances, it is essential that my right honorable friend the Secretary of State should have the power to direct ice commission which areas to review and which type of changes to consider. We intend that the commission should review all shire counties in England—
Baroness Hollis of Heigham: Perhaps I may intervene in order to ask the Minister whether she is correct in saying that the Local Government Commission will have a more fundamental role than the Boundary Commission? Did she put that the right way round?
Baroness Blatch: I was saying that the work of the Boundary Commission will be subsumed by the Local Government Commission. The work of the Local Government Commission may make a recommendation what requires no boundary changes. However, it may make recommendations that have an impact on boundaries. Therefore, it will have to complete its work by making references to boundary changes.
Baroness Hollis of Heigham: Perhaps it is my fault that I am a little confused. We are not debating the amendments relating to boundaries. They are Amendments Nos. 147 and 145. We are currently debating Amendments Nos. 139 and 141. They seek to obtain a comprehensive review by the Secretary of State and not a partial review which would leave the residual areas of the country uncertain about their two-tier status, unitary status, and so forth. I am puzzled because I believe that perhaps the Minister is talking to Amendments Nos. 145 and 147 rather than to Amendments Nos. 139 and 141. Is that correct?
Baroness Blatch: No, I was speaking to Amendments Nos. 139 and 141. Perhaps I may repeat precisely what I said. The Local Government Commission will have the power to recommend more far-reaching changes than the Local Government
212
Boundary Commission. It will not have a mandatory programme of reviews of local government structure and boundaries. In those circumstances, it is essential that my right honourable friend the Secretary of State should have the power to direct the commission as to which areas to review and which types of change to consider.
Lord McIntosh of Haringey: I thought I heard the Minister say in her earlier response that the review would cover all shire counties in England. If she would repeat that assurance, my noble friend would be satisfied.
Baroness Blatch: No. The difference between us is that Members of the Committee opposite are asking for a complete comprehensive review to take place at the same time. I repeat what I said earlier. The Government have made it clear that they intend that the Local Government Commission should carry out a rolling programme of reviews of local government of the shire county areas in England. Therefore, it will not be one review of all areas of England at the same time.
Lord McIntosh of Haringey: I was not suggesting that it would be all at the same time. I realise what is the Government's intention. We seek an assurance that it will be not just a review of the shire counties but specifically of all the shire counties. In other words, no shire county of England will be excluded ultimately from the review.
Baroness Blatch: That is right. On completion of the rolling programme, all areas of the country will have been covered.
Baroness Hollis of Heigham: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Oppenheim-Barnes Baroness Oppenheim-Barnes moved Amendment No. 140:
Page 11, line 17, after ("areas") insert ("or classes of local authorities").
The noble Baroness said: I move this amendment on behalf of my noble friend Lady Young who expresses her apologies. She cannot be here this evening because she has a long-standing engagement. I speak also to Amendment No. 150 which is in my name and that of my noble friends Lady Young and Lord Beloff and the noble Baroness, Lady Hollis.
I shall try to be brief, but there is a good deal of very strong feeling in the areas concerned about these matters. The purpose of Amendments Nos. 140 and 144 is to allow the Secretary of State to direct the local commission to review not only areas but classes of local authorities. I support these amendments because it seems to me that certain authorities are clearly in a class of their own. They combine most of the features which the Local Government Commission would be looking for in making its recommendations for change to a unitary structure.
Because I believe it is likely to be of assistance to the Local Government Commission in going about its review work, I welcome the prompt publication and content of the draft guidance. The Government are

213
right to give such prominence in the guidance to community identity as the cornerstone of effective local democracy.
In moving the amendments, I refer to only one part of the draft guidance which is relevant to my argument. Paragraph 4 of the guidance refers to strength of identity with a particular area. It recognises that there are likely to be cases where strong identity with a town or city will weigh heavily against weaker identity with a group of districts or a county. If people live within one of our great historic cities and enjoy the civic pride which goes with the history and traditions of such a city and participate in the modern working life of that essentially urban environment, they are far more likely to identify with that city as representative of their interests than they are with the rural hinterland which may surround it. They are also likely to feel that councillors elected from within that city community are more likely to understand the needs and aspirations of the modern urban environment.
In 1974 the great city of Gloucester, which I represented, was in a very sad way as a result of the reorganisation, particularly because the functions of education and social services were removed from where they had happily been previously. There were elected representatives from within the city on the county council, but the county council was a mature council. The chairmanships and deputy chairmanships of the various committees were already in the hands of those who had a great deal of rural experience but no experience of the great historic city of Gloucester. As a result, much damage was done to the historic grammar schools of that city.
Paragraph 4 recognises that rural and urban communities can co-exist and indeed are both part of the fabric of our society but that they are essentially different. A large number of our shire counties are made up of one or more large cities or towns. In the case for making a number of those areas unitary authorities, that is self-evident. If strong community identity, competence and capacity can be established for those urban areas leading to a presumption in favour of the unitary authority status, it remains for the commission to focus on the surrounding areas. Amendments Nos. 140 and 144 offer the Secretary of State an opportunity to direct the Local Government Commission to proceed by dealing first with such "classes of authority" as the historic cities. That will be helpful in looking at the first areas of the country and would not prejudice the outcome for other parts.
I turn to Amendment No. 150. This amendment is in keeping with the reference to "history" in paragraph 3 of the draft guidance for the Local Government Commission. But it is of sufficient importance to be considered for inclusion also on the face of the Bill. I know that my noble friend the Minister has been listening with great sympathy to what I said in regard to Amendments Nos. 140 and 144, but I hope that she will listen with even greater sympathy in relation to Amendment No. 150.
The right reverend prelate the Bishop of Exeter said at Second Reading that there are deep roots within the
214
communities of many of our ancient cities which have enjoyed hundreds of years of community government. Charters are not just pieces of paper with nostalgic relevance. They look forward as much as back, reflecting a strength of community identity and civic focus. When we talk of historic traditions we are not only talking about civic traditions of government and community pride focused on a specific city but also about the nation's historic continuity held in trust by those cities.
If historic traditions were to be embodied in legislation as they are in the guidance for the commission, it is perhaps more likely that we shall be able to avoid the nonsense that has occupied so much time and energy in Gloucester recently, where proposals for a new magistrates' court by the county council have been viewed by the city council planning committee as being totally out of character with the historic site in which it is to reside. The city council received strong backing from the Royal Fine Art Commission, English Heritage and the Gloucester Civic Trust. Despite that and the city's own national award-winning work on design and conservation, the council is unable to exercise any direct prerogative in the matter.
On a more recent timescale, the concept of historic traditions also refers to an authority's track record. That is a matter which must be reflected in any decisions.
Finally, Amendment No. 150 seeks to reinforce the draft guidance on the question of history. It seeks also to remind us of the wide connotations of civic traditions and I hope that it will find favour with my noble friend.
Baroness Nicol: I wish to support Amendments Nos. 140 and 144 particularly. Both these amendments have the backing of the historic cities group which Members of the Committee probably know comprises Cambridge, Carlisle, Chester, Exeter, Gloucester, Lincoln, Norwich, Oxford, Worcester and York. I had the privilege of serving on Cambridge City Council in the days before the last reorganisation. I had only a very short time on it before we suffered that reorganisation. The difference between the feeling of the city's identity then and afterwards is quite remarkable. Therefore, I understand why all these cities are welcoming the opportunity to return to unitary authority.
Historic cities are particularly vulnerable to modern pressures. They have inherited mostly ancient street patterns and they cannot cope with modern traffic. They are constrained in their development by the need to protect our heritage of historic buildings and so they have added costs as well as less flexible opportunities for commercial and industrial development. But they also have opportunities including tourism which can be exploited by an informed approach. As the noble Baroness, Lady Oppenheim-Barnes, said, from their long past they enjoy a much closer feeling of community than many of the newer creations.
But if they are to make the most of these opportunities (which I am sure that we all want them to do), they need to be masters in their own houses.

215
There is no other way in which they can fully exploit and yet protect the very precious heritage which most of them have to care for. I very much hope that the Government will accept this amendment so that these cities can be treated in a special way.
Baroness Blatch: Amendments Nos. 140 and 144 are designed to provide for the commission to review particular classes of local authorities. The Secretary of State may specify the types of authorities the commission should review by direction, and for that reason these amendments are not necessary. We intend the commission to proceed area by area with structural reviews, but it might prove useful to refer to types, of authority later when specifying a programme for electoral or boundary changes.
Even expressing all our very real anxieties about the work of the commission, the one thing that we must not do is pre-empt what it has to do. It must approach its work with an open mind. Some of the points made by my noble friend and by the noble Baroness, Lady Nicol, about historic cities are well taken by me. I have had a very constructive meeting with representatives of the historic cities. I know that they have a record which is not just the one mentioned by the noble Baroness, Lady Nicol, but a record of working with the world of heritage, tourism, business and commerce in a way which is different from other parts of the country.
Nevertheless, it is important (I emphasised it when I met tie representatives) for them to make their case to the commission. It is that body which needs to be convinced in the first place of the need and of the pace for change. It will be for the commission to make a recommendation to my right honourable friend who in turn will make a recommendation to Parliament. One of the problems of dealing with this work on the basis of classes of authority is that it is not possible to say that we shall look at districts because they are within counties and therefore counties and districts would need to be looked at at the same time. Equally, historic cities are also within the boundaries of counties. Therefore, the rolling review area by area will be determined by my right honourable friend.
This debate is very important. The comments made in it will continue to be part of that bank of information which will influence my right honourable friend when he comes to determine the programme. Although my noble friend Lady Oppenheim-Barnes has pointed to the importance of history, I can tell her that that point too is very well taken. Historic roots and local communities are very often interlinked anyway. That is a very important point. I must emphasise that we must be careful not to pre-empt the work of the Local Government Commission.
Amendment No. 150 would require the commission to have regard to the historic traditions as well as the identities and interests of the local communities. Again I can assure my noble friend and the noble Baroness, Lady Nicol, and other Members of the Commerce that we appreciate the importance that people attach to the history of their local areas. I am well aware that some of our oldest cities which have traditionally run their own local affairs, are particularly keen to become unitary authorities.
216
It is because we recognise the importance of tradition that the draft guidance to the Local Government Commission makes it clear that the Commission should consider the history of an area when assessing community identities. However, I must say once more that we do not believe it necessary to include this requirement in the Bill. We believe that the Local Government Commission must approach its work with an open mind, and we must not pre-empt the conclusions of that work. The debate has been useful, and my right honourable friend will be told of the import of it.
Lord Beloff: Before we conclude the debate, perhaps I may inject one other consideration into the question of historic traditions. It seems that the real worry we have about local government and another reform is whether it will stick. It has been suggested—probably rightly—that the only thing that would make it stick is if it is based upon a sense of community.
I do not know—and I find it very difficult to know—whether communities exist any more in this country, given the mobility of the population and the fact that people live in one place, earn their living in another and are taxed by a third, and so forth. I am sure that this cannot be discovered by public opinion polls or by any of the other gadgets of the social scientists. We can only do it by making assumptions; and the assumption is that if a city has had a long tradition of self-government in one form or another, its citizens probably have an attachment to it which is not shared by artificial, imposed units of local government. We are told that the reason why certain counties face abolition is that they have not taken root.
We have abandoned a great many natural divisions of local government that once existed in this country. We have no more ridings and tithings, sokes, hundreds and wapentakes. These were all real things, whereas the districts are the creation of legislation. Therefore it is important that the potential existence of any community, whether it be a natural county—not a created county—an historic county or an historic city, should figure very largely in the commission's deliberations. I say this particularly because I believe —and this has hardly been touched upon—that if we could get that kind of community we might then begin to rebuild a more satisfactory relationship between central and local government, which is the other great weakness of our system when compared with other systems where the two are thought to be naturally compatible, and where a career in one often leads to a career in another.
I hope the Minister will not object to my adding these considerations, though I agree that it is for the commission to take them on board.
Lord Renfrew of Kaimsthorn: Perhaps I may add a word of support to what my noble friends have said. It is most encouraging that the Minister has assured us that the commission will take account of historical factors in evaluating identities.
However, the Bill as drafted gives the impression of a rather piecemeal area approach: one will look first at

217
one area and then at another area. The debate has been helpful in expressing the hope that the commission will first sit down to consider those criteria which will lead it to establish its priorities. It is important that before the commission moves from one area to another it has clear criteria as to whether historic cities, for instance, are likely to become unitary authorities. The historic factor, as the noble Baroness, Lady Oppenheim-Barnes, has stressed, is one that will be of great importance, not only in the cathedral cities but in other historic cities in this country.
Baroness Blatch: Both of those interventions were enormously helpful and of course will also be reported to my right honourable friend.
I wish to respond to two specific points. My noble friend Lord Beloff posed an important question: will it stick? That will be the great challenge of the work of the Local Government Commission. Not only must it do what I believe will be the difficult job of identifying communities and making recommendations to Parliament that they are the right communities for unitary authority status, but those recommendations must enjoy the widest base of support for change. The case for change needs to be made first and then it must receive the widest base of support. The wider the base of support for the change the more likely it is to stick. But that must also be balanced against the proper delivery of services. The concerns of some of my noble friends and other noble Lords, for example, about the proper delivery of strategic functions, must be taken into account. The Local Government Commission will have to have regard to the guidance which will set out all the factors that must be taken into account in the course of its work.
There is in our proposals a presumption in favour of unitary authorities. Where a unitary authority is not appropriate, the Local Government Commission having done its work, it will be necessary for the commission to produce positive reasons for no change and not just say that it is better just left alone. There will have to be positive reasons why two-tier authorities remain rather than negative reasons. This has been a useful debate and I shall report very fully to my right honourable friend.
Baroness Hamwee: Perhaps I may add a word from these Benches in support of the notion of history being a factor in the identity of communities. It is too late to embark on a discussion as to whether or not there is such a thing as a collective folk memory. I believe that there is. We feel that historical traditions and historical identities will be important to the decisions of the commission. I must also add—and I am sure that I speak for my noble friend Lord Tordoff as well—that there are cities in this country that may not have the charm of our old university and cathedral cities. Their charm may be more industrial, but historical and important nevertheless.
Lord Tordoff: Perhaps I may amplify what my noble friend said. When the commission tries to decide whether Manchester and Salford should be separate
218
places, it will have an historic problem. I am reminded, in terms of sense of identity—this is where the noble Lord, Lord Beloff, is right—that people believe that they belong to a particular area of the country. They have names for it. Mr. A.J.P. Taylor said that he was always a Lancastrian, a view that I endorse entirely. Indeed he said that when he saw the cliffs of Yorkshire falling into the North Sea and the sands of Southport stretching ever westward he had the glorious vision of Lancashire stretching from coast to coast, a view that I should like to support. There are enormous difficulties in putting labels on places and saying that one is historic and one is not, but the sense of history that people feel in themselves as citizens of an area is very important.
Baroness Blatch: Labels are important to some people. Names such as the Ridings, Pembrokeshire and Monmouthshire are important. There is the facility to resurrect traditional county boundaries or traditional boundaries with the old names in a non-administrative way. If that is what local people want, that is what local people will say to the commission. It will be for the Local Government Commission to make recommendations to my right honourable friend.
Baroness Hamwee: We may have passed the point of embarking on this subject but the reference to Monmouth and Pembroke is interesting. It has arisen in the context of the part of the Bill that does not extend to Wales and has raised some high feelings.
Baroness Oppenheim-Barnes: I thank my noble friend Lord Beloff for his profound contribution and those noble Lords and noble Baronesses who supported the amendment. I should also like to thank my noble friend the Minister especially for her sympathetic remarks. I believe that there may be a window of opportunity here. I wonder whether it is too much to hope that there may be someone on the commission who has personal knowledge of one of our historic cities and who will, therefore, be even more sympathetic. With that hope in my heart, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
House resumed.

Tribunals and Inquiries Bill [H.L.]
The Lord Chancellor: My Lords, I beg to introduce a Bill to consolidate the Tribunals and Inquiries Act 1971 and certain other enactments relating to tribunals and inquiries. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time. — (The Lord Chancellor.)
On Question, Bill read a first time, and to be printed.

Severn Bridges Bill
Reported from the Select Committee with amendments and recommitted to a Committee of the Whole House.

British Railways Bill
Brought from the Commons, read a first time and referred to the Examiners.
House adjourned at five minutes past eleven o'clock.