HL Deb 03 December 1991 vol 533 cc102-68

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 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. 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 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 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 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 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 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 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 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 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.

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 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
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.
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.
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.
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 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—

  1. "(a) to make such incidental, consequential, transitional or supplementary provision as the Secretary of State thinks necessary or expedient; and
  2. (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 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 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 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 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.

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 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 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 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 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 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 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 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.

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.

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
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.
Underhill, L. Wilson of Langside, L.
Wallace of Coslany, L. Winchilsea and Nottingham, E.
White, B. Young of Dartington, L.
Willis, L.
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 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 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 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 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 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.

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 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
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.
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.
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.
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 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—

  1. (a) organise its services in response to local conditions;
  2. (b) contract with a willing tenderer;
  3. (c) carry out its role as a buyer of services.

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

  1. (a) contract documentation and specifications;
  2. (b) the size and scope of contracts;
  3. (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 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 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 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 —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 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 (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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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—

  1. (a) the effect on cash flow of variations in the terms of any transaction, including the actual payment of frozen holiday payments;
  2. (b) costs arising from the discretionary award of compensation by way of added years to staff who would be made redundant; and
  3. (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.
  4. (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 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 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 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.

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 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, 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 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.]