HL Deb 17 December 1991 vol 533 cc1273-326

Consideration of amendments on Report resumed.

Baroness Birk moved Amendment No. 20:

Before Clause 8, insert the following new clause:

("Effect of competition on maintenance of specialist libraries


.—(1) No order shall be made under section 2(3) of the 1988 Act by virtue of which work falling within a defined activity for the purposes of Part I of that Act includes the provision of the maintenance of specialist libraries, archives and collections.

(2) Before making any order under section 2(3) of the 1988 Act the Secretary of State shall consult such associations of local authorities, and such other persons as appear to him to he concerned with respect to any effect on the quality of provision of the maintenance of specialist libraries, archives and collections by local authorities of any such order.").

The noble Baroness said: My Lords, the purpose of the amendment is to exclude the maintenance of specialist libraries, archives and collections, library support services and branch and mobile libraries from the Bill. Although support services only are specified in the consultation paper, Competing for Quality, the amendments arc put forward to ensure that that vague term does not include, for example, specialist collections or mobile libraries. The acknowledgment in the consultation document that competitive tendering for library services will not extend to the network of service points is welcome. However, if the purpose of contracting out is (and I quote from the consultation paper), to produce as good a service at less cost or better service at the same price", there must be serious doubts about the proposals to extend CCT to library support services.

Book processing is an area of work for which most authorities already use a range of library supply firms from the private sector. Tying that into a framework of compulsory tendering could hinder effective competition since authorities would be committed either to a single supplier or a limited number of suppliers possibly for a period of up to six years.

The experience of the few authorities which have tried to contract out other elements of library support services such as ordering, cataloguing and classifying books and other materials has been far from promising. I understand that the principal reason was that potential contractors, mainly from firms specialising in library supply, could not identify where a profit could he made in those areas of activity and therefore no bids were forthcoming. One authority in which there is a strong political commitment to contracting out tried twice and approached 31 companies but still failed to persuade one to make a bid.

The evidence therefore suggests that if the Government insist on subjecting those activities to competitive tendering they will force local authorities to incur additional costs and undermine the morale of dedicated library staff without necessarily any practical benefit to library users.

Subjecting library supplies to compulsory competition could mean that library users' choice of books will in future depend not on their individual range of interests but on the commercial supply arrangements struck by private contractors. One has seen that occurring in other areas. Certain lines of books are bought which are not necessarily what people want.

The consultative document states: The purchasing function is probably best exposed to competition by allowing users to purchase goods and services where best value for money can be obtained, rather than contracting out the function". Introducing compulsory competitive tendering—I again stress the word "compulsory"—for library support services would occupy a great deal of staff time when library authorities are already struggling with diminished resources. There is little evidence that the process would attract sufficient competition to allow compensatory savings.

The Government will obviously continue to give the opportunity for tendering but it should not be compulsory tendering. That is the aspect about which we are most concerned. The amendments to which I have referred relate to libraries. However, Amendment No. 23 deals with theatres and arts facilities. As the amendments are grouped together, I shall speak to the amendments while moving Amendment No. 20.

The consultation document confuses the planning, staging and promotion of theatrical and arts events with management of theatres and arts facilities. Those are two entirely different aspects. The two areas overlap but they are not synonymous. Arts staff arrange events at a range of other venues besides purpose-built facilities. For example, events can take place in libraries, parks, leisure centres and other community venues. Even where facilities are purpose built for arts, or theatrical performances, local authorities will usually make them available at off peak times for a range of local community activities run by community groups. It is difficult, and it would be wrong, to disentangle those different uses from the same facilities.

Those community activities could be threatened if major arts and theatre facilities were compulsorily contracted out to private sector contractors. Many local authorities have developed multi-disciplinary leisure departments based on the inter-relationship between cultural, leisure and sporting pursuits. Thus economies of scale have been achieved which would be threatened if there were this narrow concentration on compulsory tendering. Tying authorities into compulsory competition may hinder them in their efforts to provide for a variety of leisure needs in an efficient, cost-effective and co-ordinated way.

There is a complex inter-relationship in arts events between programming, pricing and promotion. It would be difficult to see how those responsibilities could be divided in a way that would be fair to the people involved and would give pleasure and occupation to the people at whom the events are aimed. Compulsion should not be insisted on in this area any more than it should be in relation to libraries. I beg to move.

Baroness Hamwee

My Lords, I speak in support of the amendment. I have my name down in support of all amendments dealing with the exclusion from compulsion of the services listed for reasons that I have already given. However, I wish to put on record the distaste that we on these Benches have for the element of compulsion. I do not believe that it would be effective or efficient for me to speak to every amendment. I therefore shall not take up the time of the House by repeating what will have been said by others in the debate. However, I wish to associate myself and Members on these Benches with the dislike of the compulsory element.

Perhaps I may say a word about the management of the theatres and arts facilities. The noble Baroness, Lady Birk, made an important point about their place in the fabric of local life. Indeed, I should go further than the noble Baroness and say that theatres and arts facilities cross the departments. They are an important part of leisure services. They are a particularly important part of the education service at primary, secondary, tertiary and adult levels. In order to preserve the work done in the different areas of local authority service it is essential that they should not fall within the requirements for compulsory contracting out. That is the fear of people who are accustomed to, pleased, and grateful for the use of those facilities at local level. I support the amendment.

Baroness Blatch

My Lords, I believe that it would be quite wrong to exempt services in advance of the consultation or in advance of the Secretary of State's recommendation—if, indeed, he makes one—to extend CCT to library support services. I repeat that my right honourable friend has the power to extend CCT. However, before he does there is a requirement to consult and a requirement to seek the approval of both Houses under the affirmative resolution procedure. In the light of that I do not believe that it would be appropriate to exempt any service from the provisions of the 1988 Act. Therefore, I ask the House to reject the amendments.

Baroness Birk

My Lords, the Minister's reply was not a surprise. I shall not press the amendment, but I hope that some of the comments that we have made will rub off somewhere on someone. I hope also that when further consultation takes place the Government will realise that it is not necessary to have everything in this monotone of compulsion, because that could do more harm than good.

Baroness Blatch

My Lords, with the leave of the House, perhaps I may say that much of what the noble Baroness has said, and much of what I expect will be said in respect of all the relevant amendments that are being taken separately, is a matter for the consultation process. I hope that the point will be made separately to the department.

Baroness Birk

My Lords, I beg leave to withdrawn the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 21 to 23 not moved.]

Baroness Hollis of Heigham moved Amendment No. 24:

Before Clause 8, insert the following new clause:

("Effect of competition on confidential records

.—(1) No order shall be made under section 2(3) of the 1988 Act by virtue of which work falling within a defined activity for the purposes of Part I of that Act includes the provision of the compilation. use or maintenance of confidential records.

(2) Before making any order under section 2(3) of the 1988 Act the Secretary of State shall consult such associations of local authorities, and such other persons as appear to him to be concerned with respect to any effect on the quality of provision of the compilation, use or maintenance of confidential records by local authorities of any such order.").

The noble Baroness said: My Lords, I shall be brief. I hope that the Minister will confirm that the Government do not intend that confidential records shall be handled by CCT. I made my maiden speech at the same time as the noble Baroness, Lady Cumberlege, in a debate on freedom of information and your Lordships were kind and courteous enough to listen to me. Therefore, we on these Benches firmly believe that as little as possible information of a confidential nature should be held. By definition, it is prone to error, to stereotype, to accidental newspaper clippings and to gossip. We want tenants' files, health records and university records to be open. However, it is widely recognised on all sides of the House that certain material—for example, that in relation to child abuse—must be held in a confidential manner. Equally, a whole range of commercial information—for example, the expected price of an asset at disposal or legal proceedings involving the local authority—must be treated confidentially. I suggest that such information should be kept in-house.

At present, where there is such a breach of confidentiality an aggrieved citizen can go to ward councillors, to officers, to a local authority complaints officer or to an ombudsman. However, if there is a breach by a private firm what recourse does the citizen have? Where does accountability lie? Equally, if the local authority's financial fiduciary duty should suffer as a result of a breach of confidential information, what can it do? Even if it goes to court the damage cannot be remedied. Given the narrow field of confidentiality, for personal information reasons or commercially sensitive information, I hope that the Minister will confirm that there is no intention to send it out to CCT. I beg to move.

Lord Stoddart of Swindon

My Lords, I wish to make a further point that my noble friend did not mention. I refer to the possibility of fraud if confidential documents are let out to private individuals or firms. What then will be the case?

Baroness Faithfull

My Lords, many of the confidential files in local government lay in the social services department; for instance, those relating to child abuse, adoption and court cases. In most of those cases other bodies are involved. The NSPCC is involved in child abuse cases and the social services department shares its papers with the society. In cases of mental handicap or illness the department shares its papers with the outside doctor or outside social worker who is dealing with the case. In cases of adoption the department often shares its papers with outside adoption agencies. As is well known to the noble Baroness, Lady Hilton, it shares its papers with the police.

At no time that I can remember have papers fallen into any hands other than those of professionals. However, it must be said that they have been seen by people outside the department all of whom have taken up the attitude of confidentiality. Therefore, I do not believe that there is reason for the anxiety expressed by the noble Baroness, Lady Hollis.

Baroness Blatch

My Lords, I am grateful to my noble friend for that intervention because this is an important point. The noble Lord, Lord Stoddart of Swindon, raised the issue of fraud. That is an illegal activity whether it is carried out by somebody in the private or the public sector. Indeed, people who carry out fraudulent activities are no respecters of the particular sector within which they work. There must be safeguards. Indeed, internal management will address specifically the way in which local authorities carry out their work. It must ensure that proper safeguards exist. However, at the end of the day if someone is prepared to commit fraud they take the risk and they are no respecters of the particular sectors within which they work—

Lord Stoddart of Swindon

My Lords, I am obliged to the Minister for giving way. There is one difference, however. Where the service is under the direct control of the council at least there is the supervision by the council itself. Once the service goes outside the council's administration there is only an arms-length relationship instead of a direct relationship. That could enhance the possibilities of fraud. That was what I meant.

Baroness Blatch

My Lords, with the leave of the House, I can tell the noble Lord that my noble friend Lady Faithfull has addressed part of the issue. Control must always remain with the local authority. The monitoring and the handling of confidential records must be part of the arrangement with the agency that is being allowed to handle them, or part of the specification if they are the subject of a contract.

The noble Baroness, Lady Hollis, has illustrated well the reasons why we need the facility and flexibility to deal with different services in different ways. I hope that she will remember that when we address the issue of flexibility. In some contracts confidentiality is an important aspect that needs special arrangements which are different from others. At present we do not have that flexibility. The consultation paper does not suggest the extension of CCT to the maintenance of confidential records as an individual service as such. However, many of the services that we have suggested as being appropriate candidates for CCT would involve maintaining records which would in some cases be confidential. The need for confidentiality could, in general, be dealt with in specifications or through a quality threshold if we obtain the flexibility to apply it differently in different cases.

If there are anxieties relating to particular local authority activities they could be expressed now in response to the current consultation paper. I invite all noble Lords who have anxieties about any of these issues to ensure that their views are recorded by the department or during the statutory consultation on any order made under Section 2(3).

9 p.m.

Baroness Hollis of Heigham

My Lords, I am well satisfied with the Minister's response. Clearly this is an issue of concern to everybody. I have reservations about whether it can be dealt with by specification, as she suggests. However, I hope that she is right. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hollis of Heigham moved Amendment No. 25:

Before Clause 8, insert the following new clause:

("Effect of competition on corporate professional services

.—(1) No order shall he made under section 2(3) of the 1988 Act by virtue of which work falling within a defined activity for the purposes of Part I of that Act includes the provision of corporate professional services

(2) Before making any order under section 2(3) of the 1988 Act the Secretary of State shall consult such associations of local authorities, and such other persons as appear to him to be concerned with respect to any effect on the quality of provision of corporate professional services by local authorities of any such order.").

The noble Baroness said: My Lords, this is a broad, sweeping amendment which seeks to exclude from CCT corporate services and those areas which give professional advice and so on. My experience of local government was back in the late 1960s and it may be that the Minister shares that. It was heavily departmental, led by a chief officer in his mahogany office. He was a great figure in his land and territory. Local government was heavily centralised and everything happened within city hall. Therefore, city hall was the corporation and that was the language employed. However, the impact of the Baines Report in the early 1970s and best practice taken on board from quality business organisations has meant that, since the early 1970s, local government has developed in at least three valuable and important ways.

First, it has developed the corporate rather than departmental approach. Secondly, it focuses on problems which cut across departmental boundaries which are, therefore, client or user-led rather than provider-led. Thirdly, especially in county councils, the larger mets and the larger shire districts, there has been a move to go local, to decentralise and to devolve decision-making to local budget holders. One welcomes those three developments.

I suggest to your Lordships that to apply CCT to corporate advice and services and professional advice and services will damage every one of those three trends to the irreversible detriment of local government because CCT will require local government to do what has been jettisoned as bad practice by almost every quality private company in the country.

The corporate approach seeks an authority-wide rather than a departmental perspective. It privileges the strategic perspective. However by definition CCT, with its emphasis on trading accounts, will fragment local government into individual professions, units and departments. I believe that in that process we shall lose the strategic perspective as well as generating the unholy roundabout of every professional officer trying to lay off his or her costs onto others. The lawyers will need to know what is being charged by personnel and finance departments before they can calculate what they should charge those departments. There will be a sort of pass-the-parcel approach.

Corporate professional advice and services cannot be specified in advance because they are concerned with management team matters.

The second development of the early 1970s has been that, increasingly, local government has been more problem and client centred. Following from that, local government has tried to move away from traditional departmental boundaries. That is why the old Section 137 powers have been so important a potting shed in which new developments like economic development have flourished.

Local authorities increasingly wish to establish and have established multi-disciplinary teams of officers and members; for example, for an anti-poverty strategy involving social services, legal rights, housing benefits or equal opportunities as a pathway out of poverty. That has been an innovative, flexible and pluralistic way of recognising and meeting new needs. However, that is a luxury which CCT will not permit because it will send professional officers scurrying back into their departments in order to operate as a trading account.

Thirdly, CCT will inhibit the very attractive moves towards going local, which were mentioned earlier by the noble Baroness, Lady Hamwee, and the Minister. Counties that have posted out personnel, financial services and legal staff into decentralised offices will have to unscramble and recentralise them. The very developments which were welcomed on both sides of the House which have made local government more accountable and more responsive and which will help to deliver the Citizen's Charter will be impeded because CCT requires vertical organisation of local government and labour rather than community oriented, geographically spread and localised services. Even if in-house as opposed to out-house teams win contracts, that will foster those rigid, centralised departments and restrictive practices which those of us in local government have tried so hard to overcome.

If so, what will happen? Are councils really to be managed by a small core of managers relying for support and information from professionals whose role and duties are tightly defined by a contract, whose presence is likely to change at the expiry of each contract term and whose skills, knowledge, experience and information—their share of the corporate memory—will go with them when they go?

I suggest that the opportunities for confusion, disruption, discontinuity and loss of expertise are boundless. No quality company could manage itself in that way so why should local government? The Minister has been a county councillor and I hope that she will recognise the analogy which I draw. The Minister has ably responded to an array of amendments. Her bright and shining advisers are sitting in the box—her team of civil servants.

Let us suppose that sitting in the Ministerial Box is not a team but a cluster or—dare I say?—a clutter of private contract-holding professionals, the cheapest she can get once they have passed a quality threshold such as a degree. How comfortable would she feel? What about the departmental view of previous precedents. People in and out of temporary secondment may find it difficult to inform the Minister about that. They may say, "I cannot help about that, Minister, because our company has accepted a contract from the Association of County Councils and there may be a conflict of interest". The Minister would not be able to count, as I am sure she does, on their undivided loyalty if somebody else paid them more; nor on their confidentiality in spite of their best efforts as they moved between clients; nor on their accumulated expertise because they do not hold the job for long enough.

Nor does the Minister want only the advice for which she has paid. She may need to hear advice which she does not want to hear and which a private firm may not proffer if that endangered the subsequent contract. She wants the advice to be expert because it is more than the sum of its parts and more than a laundry list of tendered-for skills. She wants to know that she and her corporate advisers share a common code of ethics, a commitment to the public good as well as government interest and the rapport which that presumes. I assume that the Minister wants all that. Certainly leaders and councillors of local authorities want all that. That will all be jeopardised if corporate advice and strategy goes out to CCT. I beg to move.

Baroness Match

My Lords, I cannot agree that there should be exemption of these services from the 1988 Act. However, the paper suggests the establishment of an internal market for a number of corporate professional services.

The noble Baroness clearly pointed up the difference between us: I do not enjoy the same jaundiced view of the private sector as the noble Baroness. It has come in for much maligning during the course of today, which is unjustified. I repeat what I said earlier: there are good, bad and indifferent professionals in both the public and private sector.

The paper makes it clear that we recognise the closeness of those areas to the democratic process and to the corporate core of local government. That may raise problems if the services are substantially contracted out. We propose that if competition is required for a proportion only of corporate and administrative services—including such less sensitive areas as purchasing, printing, secretarial and clerical support—an appropriate proportion may be 15 per cent. Again I invite the noble Baroness and her colleagues to ensure that their views are separately represented to the department as a result of consultation. I hope that the amendment will not be pressed.

Baroness Hollis of Heigham

My Lords, I certainly accept that there are good professional staff in the private sector. However, the Minister did not meet the point. Corporate advice by definition is not simply a random array of good professionals. It is something greater than its parts; it is about that collective memory. However, given the lateness of the hour, I do not propose to press the amendment. I beg leave to withdraw it.

Amendment, by leave, withdrawn.

Lord Dean of Beswick moved Amendment No. 26:

Before Clause 8, insert the following new clause:

("Effect of competition on electoral registration

.—(1) No order shall be made under section 2(3) of the 1988 Act by virtue of which work falling within a defined activity for the purposes of Part I of that Act includes the provision of electoral registration services.

(2) Before making any order under section 2(3) of the 1988 Act the Secretary of State shall consult such associations of local authorities, and such other persons as appear to him to be concerned with respect to any effect on the quality of provision of electoral registration services by local authorities of any such order.").

The noble Lord said: My Lords, on this occasion I rise in the absence of my noble friend and colleague Lord McIntosh of Haringey to move Amendment No. 26. The amendment seeks to exclude electoral registrations as detailed in the consultation paper.

In its White Paper, Competing for Quality, the Government stated that, The closeness … of electoral registration to the democratic process and to the corporate core of an authority could raise problems if … substantially contracted out". That is not reflected in Clause 8, which enables the Secretary of State to require any service he wishes to be subject to the provisions of the Local Government Act 1988.

There has already been considerable popular resistance to the sale of electoral registers, which is now a requirement imposed on local authorities through the Representation of the People (Amendment) Regulations 1990. Indeed, the Data Protection Registrar, with the support of the local authority associations, issued a Code of Guidance for Electoral Registration Officers which recommends that they make available for public inspection a list of bodies which have purchased the register.

In a Gallup survey carried out for the BBC in 1986, some 79 per cent, of those surveyed strongly disapproved of the sale of registers. Since then there has been increasing anxiety at the ease with which personal privacy can be invaded. Privatisation of electoral registration could well deter individuals from exercising their democratic right to register to vote.

The form of words used in the consultation paper is scarcely reassuring. Who decides what is, and what is not, "substantially" contracting out? On the evidence of the Bill it will be the Secretary of State who, after all, is consulting on the White Paper at the same time as enacting legislation and thereby devaluing both the legislative and consultative processes. Many authorities are developing computer software packages, sometimes in association with other authorities. Is that "insubstantial", and therefore to be subject to compulsory competitive tendering? What about the employees who administer the register and the temporary canvassers employed by some authorities when the register is being revised? Is the dispatch of the "A" forms and the follow-up "insubstantial"? Where do the Government propose to draw the line?

It is generally recognised that in a democratic society one of the rights of the citizen is the right to vote. Local authorities found that the introduction of the late, unlamented poll tax appeared to coincide with thousands of voters going missing from the register. Individuals who were able to register anonymously for the poll tax, but who were unable to do so for the electoral register, may have decided not to register at all. It is essential that registering to vote be linked clearly—to use the Government's own words—to the democratic process. Requiring the sale of the register to private firms on the grounds that credit reference agencies said that it would be, in the interests of the consumer", is bad enough. That is to be found in the debate on the Representation of the People (Amendment) Regulations 1990, at col. 1124 of Hansard on 6th March 1990. Privatising the process of compiling and administering the register would be even worse. If it is not in the Government's mind to allow the Secretary of State to do so, the amendment should be accepted.

Perhaps I may briefly give an example from my own experience. On one occasion someone came to see me to query how certain people received information with regard to people's credit ratings. That person's daughter had returned to live in Manchester, living first with her parents and then taking a flat. She happened to have the same initial as her father. She could not have a phone installed in her flat without paying well over the normal rate and had to pay a substantial amount of money. When it was queried BT said it was because there was a bad debt in that name at that house. My friend could not understand it. He got in touch with British Telecom who said, "Oh, we haven't got the records but we will give you an address and phone number of a company in Scotland which has all this information on computer. If you write to it and send a £1 coin it will give you your credit rating". My friend did that. Strangely, all he received was complete vindication of the fact that he had just bought a house in the Manchester area and that he had sold a house in the Sheffield area—all that was clear. But he was still mystified as to why he was considered to be a bad debt when neither he nor his wife had purchased anything on credit for years. Finally, it turned out that the daughter, during a stay at the house, had not registered on the poll tax register. So she was immediately a non-person and lost all her rights to vote and so on.

What puzzles me is who is responsible for acquiring that information and notifying whoever controls that computer in Scotland? I have not invented that story which happened to someone who is pretty close to me. I am sure the Minister must find that example a little bit more than frightening, as I do. It is something that in the near future I may take to the Home Secretary, or whoever is the appropriate person, because it happened only recently. It sounds strange that one can send £1 to an address in Glasgow and receive the credit rating of anybody in your house. I should like the Minister to consider that. I beg to move.

9.15 p.m.

Lord Ponsonby of Shulbrede

My Lords, I wish to speak briefly to this amendment. It was only last week that I was out canvassing in a by-election in the borough of Wandsworth where I am a councillor. On several occasions while canvassing I was asked by a member of the public from where I had acquired his or her name. That might be because I look like a shifty character, but it was also because people are naturally suspicious when someone has their name. When I told them that I had obtained their name from the electoral register I managed to placate them because they then realised that that is linked to the democratic process.

This placation, this confidence, in the register has been partially disrupted by the sale of registers and we know from the Gallup survey referred to earlier that people very strongly disapprove of the sale of these registers.

It is my contention that the privatisation of the administration of the electoral register will further damage the confidence that people have in the electoral register. Therefore, we should support this amendment.

Baroness Blatch

My Lords, the consultation paper recognises that some aspects of personnel work, such as employee relations, staff welfare and human resource planning, are less well suited to competition and suggests that if a proportion of the personnel services were to be exposed to CCT then 33 per cent. would be appropriate. However, it will come as no surprise that I do not accept that this service should be exempt from the provisions of the 1988 Act and I ask that the amendment be withdrawn.

Lord Dean of Beswick

My Lords, that is possibly the worst non-reply that I have heard today. It is not a reply to anything. 1 shall not press the amendment but if the Minister thinks she will get away with that she has another think coming because I shall be bringing it back at Third Reading, bearing in mind what I have introduced into this debate. It is a serious situation when people's private affairs are being bandied about and can be bought for £1. It seems a strange way to operate a democracy. Unless the safeguards are taken it could lead to serious trouble. However, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 27 not moved.]

Baroness Hilton of Eggardon moved Amendment No. 28:

Before Clause 8, insert the following new clause:

("Effect of competition on human resource planning

.—(1) No order shall be made under section 2(3) of the 1988 Act by virtue of which work falling within a defined activity for the purposes of Part I of that Act includes the provision of human resource planning, employee relations, training and development, and recruitment and retention.

(2) Before making any order under section 2(3) of the 1988 Act the Secretary of State shall consult such associations of local authorities, and such other persons as appear to him to be concerned with respect to any effect on the quality of provision of human resource planning, employee relations, training and development, and recruitment and retention services by local authorities of any such order.").

The noble Baroness said: My Lords, with the leave of the House I shall move this amendment which is in the name of my noble friend Lord McIntosh. In view of the Minister's answer to the previous question I am encouraged to think that perhaps these services will be excluded from the provisions of competitive tendering. This is a different area from those services we have been discussing so far under this clause in that personnel matters are very much at the heart of local authority work and they reflect directly on the corporate entity, which is the local authority.

The management, training and development of personnel is at the heart of any organisation and the morale and effectiveness of a workforce is dependent on teamwork and human relations as well as on efficiency and formal systems and contracts. The development of the human resources of an organisation is a long-term investment in staff to ensure commitment to the organisation and its objectives. There is a place for external consultants as advisers and as providers of courses, for instance, to supplement internal training, but the timescale of personnel matters means that obligatory competitive tendering which relies on short-term contracts would be disruptive to morale and disruptive to staff development. Those require long-term strategies rather than short-term contracts.

Confidentiality has already been addressed in relation to Amendment No. 24. Personnel departments also need to maintain confidential and sensitive personnel information which is most appropriately maintained in-house. Details of the welfare and medical records of individuals as well as of discipline and complaints should not be threatened by location within an external and commercial organisation. Staff would have little confidence in their employers if their personnel records might be handed from one contractor to another.

Training can be done by external consultants and trainers in relation to some short-term courses on specific—sometimes general—management areas but local authorities have developed successful in-house training programmes tailored to their specific management needs and their policy priorities. Some of this training—I addressed the House on this matter a week or so ago—has been in response to the never ending procession of new legislation affecting local government. Recruitment and training need to reflect the organisational culture. If that is ignored the result may be unsuitable appointments or inappropriate and wasteful training. Many authorities already use the private sector in a co-operative way in relation to recruitment, advertising and training, so there is no need for compulsion as envisaged in the Bill. I beg to move.

Baroness Blatch

My Lords, this is a similar issue to the one we have just discussed in that they both deal with people and with records of people. I shall therefore be just a little repetitive. The paper recognises that some aspects of the personnel work such as employee relationships, staff welfare, human resource planning and so on are less well suited for competition. There is a suggestion that a proportion of this work should be put out, but those aspects of the work need to be safeguarded. That is what the consultation paper states and it would be helpful if those views were fed in. The same is true of electoral registration services. But there is still an issue of internal management efficiency. That will apply to the keeping of registers and covers the point raised by the noble Lord, Lord Dean of Beswick, on the previous amendment. However, I cannot agree that these should be exempt entirely from the provisions of the 1988 Act. I ask the noble Baroness to withdraw the amendment.

Baroness Hilton of Eggardon

My Lords, I thank the Minister for what was in general an encouraging response, although not entirely so. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hollis of Heigham moved Amendment No. 29:

Before Clause 8, insert the following new clause:

("Effect of competition on computing services

.—(1) No order shall be made under section 2(3) of the 1988 Act by virtue of which work failing within a defined activity for the purposes of Part I of that Act includes the provision of computing services.

(2) Before making any order under section 2(3) of the 1988 Act the Secretary of State shall consult such associations of local authorities, and such other persons as appear to him to be concerned with respect to any effect on the quality of provision of computing services by local authorities of any such order").

The noble Baroness said: My Lords, this amendment seeks to exclude computing from CCT. The consultative document proposes that 80 per cent. of computing facilities should go out to CCT. I find that figure extraordinary and rather worrying. Computing is the knowledge resource of the local authority, the information tool needed for strategic and longer term as well as day-to-day decision-making. It is a key management tool for both senior staff and members alike. If it is put out to CCT, by definition, the contract has to specify the future demands to be made on the system, whether software or the facility's management process itself.

As I argued at Second Reading, no organisation can fully know in advance its future need for knowledge. That is precisely why one has a computer facility. If one knew what one needed to know one would already largely know it. It is because one cannot that one does not. How can one tell what one will need to know? The Secretary of State made eight or 10 adjustments to the poll tax. All required modifications of software and the IT work of in-house staff.

Local authorities need to be able to respond within days. Indeed the computing sub-committee of my authority quite spontaneously said that if the poll tax computing facility had been out to CCT it would have been impossible to deliver even the not entirely adequate service that most local authorities have provided. Where they have bought software they have had interminable bugs which have been teased out only by in-house staff working around the clock, tweaking the systems, in order to do so. Any CCT requirement involves a minimum of two months or so to tender, brief the company, draw up the specification and award the contract. Local authorities do not have two months in order to get a computing facility in place when they need the information to be at hand within a few days.

No private organisation would cripple itself in that way; that is, to put its knowledge resource at arm's length by entering a competitive tendering situation which means that it has to specify in advance what it may need to know. I suggest to your Lordships that to ask local government to follow that path is a very foolish move. I beg to move.

Baroness Blatch

My Lords, again the noble Baroness does not make the case for all computer services to be exempt from the provisions of the legislation. We are dealing now with an amendment which is asking for complete exemption from the provisions of the 1988 Act. Given the requirement to consult and the requirement for a recommendation to come before both Houses for consideration, I believe that the powers to extend should remain intact and that exemption should not be agreed at this stage.

Baroness Hollis of Heigham

My Lords, in view of the fact that the consultative document proposes that 80 per cent, of this service is to go to CCT—that is, not the 15 per cent., 20 per cent, or 25 per cent, about which we have been talking in respect of other amendments—I should have thought that the Minister might have cared to respond to the arguments involved and not simply have said that we should await the result of consultation.

The consultative document clearly puts forward the proposition that 80 per cent, of the knowledge resource of local government will be put out to CCT. I suggest that that puts this service in a somewhat different category from the other services which we have been discussing. Nonetheless, the Minister's answer has been noted. In the circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Dean of Beswick moved Amendment No. 30:

Before Clause 8, insert the following new clause:

("Effect of competition on accountancy services

.—(1) No order shall be made under section 2(3) of the 1988 Act by virtue of which work falling within a defined activity for the purposes of Part I of that Act includes the provision of accountancy services.

(2) Before making any order under section 2(3) of the 1988 Act the Secretary of State shall consult such associations of local authorities, and such other persons as appear to him to be concerned with respect to any effect on the quality of provision of accountancy services by local authorities of any such order.").

The noble Lord said: My Lords, in moving this amendment I shall speak also to Amendments Nos. 31, 32, 33, 34 and 44. All the amendments relate to the same principle, the only difference being the services involved.

This range of amendments serves to exclude various aspects of financial services, as detailed in the consultation paper; for example, accountancy services, investment management, pension management and administration, exchequer services, cash collection, payroll administration, internal audit, financial planning and budgetary advice.

Competing for Quality outlines the Government's plans for eventual CCT of financial services, which would be preceded by the requirement to operate internal trading accounts. The Government appear to have decided that that will be enacted by primary legislation after the election.

On Second Reading the Minister said: In the longer term we propose to require local authorities to open up to competition core services such as finance, legal, personnel and computing. As a necessary first step, we propose that local authorities should be required to establish internal trading accounts so that the true cost of providing each discrete service within the core services may be identified. We intend to introduce separate legislation for those proposals once we have considered the response to our current consultation exercise".—[Official Report, 18/11/91; col. 713.] However, there is nothing to stop CCT of financial services being added by the Secretary of State by order under Clause 8, if enacted.

Major changes—for example, LMS, council tax and care in the community—should be installed before CCT is introduced to central services as central services will have a major input into the changes. I could make a detailed speech about why that course should not be proceeded with by the Government; but the case has been made out by my noble friends Lady Hollis and Lady Hilton on the amendments that they have moved.

I am worried that the changes to which I have referred may again be triggered off before the consultation process has been completed. Will we once again see the Secretary of State making the decision and putting the necessary legislation or orders through another place and your Lordships' House, with the people affected being consulted only on the best way to carry out the exercise instead of being involved in the consultative process from the start so that they may advise the Minister more widely than others may do?

As I said, I shall not go into this batch of amendments in detail. They relate to a variety of services, and the argument is the same in principle. I shall be surprised if the Minister's reply is not very much the same in principle.

9.30 p.m.

Lord Desai

My Lords, at this late hour I know that your Lordships do not want to hear the same thing again; so I shall try to say something different. The spirit lying behind many of the amendments is that to a certain extent a local authority is a corporate body which cannot function without a continuing central mechanism upon which it can rely. I ask the following simple question: would any private firm behave in the way that the Government expect local authorities to behave?

I do not want to be partisan about this issue. The person who won the Nobel Prize for economics this year (Ronald Coase) is a tower of market liberalism. He is not tainted by anything with which I agree. He argued in a good paper written 60 years ago that firms do not put out to competitive tender all their activities; they do them in house because it is economically more meaningful to do things in house. It happens to be the better way of delivering every service. There is a well-established principle in economics. Many of the private firms that we know may tender out tea and sandwiches, but many other services are not tendered out because some activities need continuity. If one does not have continuity one does not deliver an economically efficient service.

For some strange reason, the Government have decided that local authorities should not behave like private firms. If the Government are asked to define the central principle of economic efficiency, I know what the answer will be. It will be the answer that we have already received: that the Secretary of State will consult, and so forth. It remains the fact that that is in total defiance of the elementary principles of economics, and if anyone thinks that what they propose will be cheaper they have another think coming.

Lord Stoddart of Swindon

I must congratulate my noble friend Lady Hollis on tabling all the amendments that we are discussing, the ones we have discussed and those appearing subsequently on the Marshalled List because they have brought out the absurdity of compulsory competitive tendering. As my noble friend pointed out, how on earth will any organisation be able to control all the activities which could possibly be involved in local authority services? How will members of the council be able to have contact with the people running the services in such a way that they can properly use influence upon them?

I have been sitting here quietly, I hope the noble Baroness will agree, listening and listening. As I have listened, my mind has become more and more boggled at the thought of how local authorities will manage to control and deliver the services to their electorates. They will have to put all these services, which need to be under a centralised form of control, out to compulsory competitive tendering. In my experience and in that of my noble friend Lord Desai, I can think of no private firm which would contemplate operating on that basis. What is good for any private firm should be good enough for a local authority.

The noble Baroness said earlier that we were against private enterprise. I can assure her that I am not against it. I ran a private firm before she was born—a very small one—so I know the difficulties of private firms. I am certainly not against them, they have their place, there is no question about that. However, what the Government are trying to inflict upon local authorities is a system which no private firms would contemplate under any circumstances because they know it would be ruinous to their business.

Baroness Denton of Wakefield

My Lords, there seems to be a lack of knowledge of private firms on the opposite Benches. The noble Lord, Lord Desai, said that he would try something different; he certainly did. He tried an academic view of the private sector which practice does not bear out. Some of the most successful companies are led by small centre head offices where people know what they are doing and know what is the strategy. They use other people; they devolve.

The noble Baroness, Lady Hollis, said that one cannot devolve and use competitive tendering but it is done in the private sector. She said that one cannot stop and take time to write a specification for computer technology. I suggest that in-house or out-of-house, if one does not stop to write a specification, one is merely piling up problems. It seems to me that we have a complete philosophical difference over the fact that a small core where the continuity is essential can operate with great success.

Baroness Blatch

My Lords, I am grateful to my noble friend for that interjection. Despite what noble Lords said, it is right that there seems to be a misunderstanding of the private sector and an antipathy towards it. I repeat that almost everything I have heard is no argument, it does not support exempting the services from the possibility of extension to CCT. This is an area where we regard the introduction of internal trading accounts as a necessary first step towards any extension of CCT. If a proportion of financial services were to be exposed to CCT, 25 per cent. is suggested by the consultation paper. I invite noble Lords to make sure that their views are known as part of the consultation exercise. In the meantime, I ask that they withdraw the amendment.

Lord Dean of Beswick

My Lords, once again we have heard the same response from the Minister and from her noble friend Lady Denton of Wakefield. I have deliberately tried to shorten the debate on this amendment because, as I have said, the argument here is mainly one of principle. However, I take issue with some statements that have been made. The noble Baroness, Lady Denton, for example, has referred to her experience as the deputy chairman of the Black Country Development Corporation. I am sure she is a capable deputy chairman. My noble friend Lord Dormand of Easington is, I believe, the deputy chairman of the Tyne and Wear Development Corporation. He is not in the Chamber at the moment. However, I hope the noble Baroness is not suggesting that development corporations are like private companies. That is not the case.

Development corporations are answerable to no one other than the Secretary of State. They have no shareholders to discipline them. The leaders of the development corporations are there by the grace and favour of the government of the day, irrespective of whether they do a good job or a bad one. The chairmen of the residuary bodies are in a similar position. They did not all do a good job. Some of the reports those chairmen produced would not have borne close examination. Therefore I do not think one can make a valid comparison between development corporations that operate under the protection of the Secretary of State—that is due to their political philosophies—and other organisations. Development corporations are another form of public body. They are not answerable to the electorate; however, local authorities are answerable. There is a fundamental difference there.

One could have debated each of the amendments that we are discussing at length if one wished to explore the details of the privations each service will suffer through the imposition of compulsory competitive tendering. The Minister has referred to fire service vehicles as though they were just another form of private transport. They are no such thing. They constitute sophisticated, complicated pieces of equipment that happen to run on four wheels. The frontiers of mechanical engineering move forward quickly and the only bodies in a position to purchase those kind of vehicles are local authorities. Those local authorities have the responsibility for saving people's lives in the event of fire. The Government should seriously consider whether they should insist that local authority services are put out to tender. If anyone is going to take a short cut as regards the maintenance of a vital piece of equipment, that will be done by an organisation in the private sector.

Baroness Blatch

My Lords, will the noble Lord give way?

Lord Dean of Beswick

No, my Lords.

Noble Lords


Baroness Blatch

My Lords, I intervene on a point of order. We are on Report stage and the noble Lord is way off the subject we are discussing. He is referring to a matter we discussed a long time ago. At the moment we are discussing a very different matter which does not concern fire service vehicles. As this is Report stage we should discuss the current amendment.

Lord Dean of Beswick

My Lords, the Minister is entitled to her opinion. I was about to draw to a conclusion. In some of her replies the Minister has ranged far and wide over a number of issues, as has her noble friend seated behind her.

I still wish to make the point that there has been insufficient time to discuss these amendments in appropriate detail. Each amendment could have been discussed in far greater detail regarding the effect of the Government's proposals on each service involved. The provision concerning architects was skated over quite outrageously. However, a deal has been done and the Government's will has been imposed. The Minister is rolling these matters through as if she is working a Roneo duplicator.

Lord Stoddart of Swindon

My Lords, before my noble friend sits down, I should remind him that he has not referred to Amendment No. 44 which concerns the effect of competition on the management of pension funds. I hope he will say a few words on that matter bearing in mind some of the scandals that have occurred in recent days and weeks.

Lord Dean of Beswick

My Lords, I am not an expert on either the management or the mismanagement of pension funds. I do not wish to be drawn on that matter as a serious case is being investigated at the present time.

It is a tragedy that people have lost their pension rights after spending all their working lives in certain companies.

My noble friend Lord Stoddart asked me about local authority employees' pensions. I recall that when the metropolitan district councils were formed in 1971 or 1972 there was very little for the metropolitan counties to do. The metropolitan districts wanted to continue to manage their own pension schemes. However, that responsibility was removed from them by the then Secretary of State—now the noble Lord, Lord Rippon—and transferred to the metropolitan counties. Since then there has been a change of heart. However, management of the pension schemes has not been handed back because machinery had been set in motion. They are now managed by joint committees representing the metropolitan districts which formed the old metropolitan counties.

I believe that the record shows that in the main the investment in pensions by local authorities on behalf of their employees has stood the test of time. They may not have obtained the highest returns for the investment but they have always been sound. I see no reason why any change is necessary in that area, irrespective of what is taking place elsewhere, the extent of which we do not yet know. I should have thought that that would have sounded a warning to the Government.

Naturally I shall withdraw the amendment. Those points needed to be made because I am sure that those matters will return to this House and another place in the not too distant future when the truth about what has taken place emerges. However, I do not want to comment on an isolated case. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 31 to 35 not moved.]

Baroness Hollis of Heigham moved Amendment No. 36:

Before Clause 8, insert the following new clause:

("Effect of competition on research, secretarial, clerical and

other support services

—(1) No order shall be made under section 2(3) of the 1988 Act by virtue of which work falling within a defined activity for the purposes of Part I of that Act includes the provision of research, secretarial, clerical and other support services.

(2) Before making any order under section 2(3) of the 1988 Act the Secretary of State shall consult such associations of local authorities, and such other persons as appear to him to be concerned with respect to any effect on the quality of provision of research, secretarial, clerical and other support services by local authorities of any such order.").

The noble Baroness said: My Lords, I shall be brief. The amendment seeks to exclude from CCT committee administration, secretarial, research and associated services. There are three basic reasons. The first is that those services are intimately involved with the operation of democracy. They are central to the democratic decision-making process. The staff play a central co-ordinating role in local government. They need to know how local government works and the relationship of committee structures and of the political parties, all within the Widdicombe framework.

Secondly, committee administrators and associated research staff need to exemplify a high standard of integrity and impartiality and to act throughout the authority as enablers for committee decisions. Thirdly, committee administrators, and in particular committee clerks, need to be very aware of the high demands of confidentiality. Time and again in committee when my colleagues and I have been dealing with a very sensitive subject members have asked all the officers except the chief officer and the committee clerk to leave the room. Never once has their discretion been questioned.

For all those reasons—their involvement in the democratic process, the key demands of impartiality, the expertise required of them and the confidentiality which is rightly expected—I suggest that those services cannot be provided by an array of temporary staff coming in and out of city hall. I beg to move.

Baroness Blatch

My Lords, I wish to place on record my reason for not wishing to discuss the detail of the amendments. I believe that the appropriate place for those views is as part of the consultation process. When and if my right honourable friend decides to recommend that CCT should be extended the matter will be put out for consultation and will require parliamentary approval.

The services referred to in the amendment are among the corporate services for which we believe the introduction of internal trading accounts would be a necessary prerequisite for CCT. However, if a proportion of those services were to be exposed to CCT, 15 per cent. is the amount suggested in the consultation paper for contracting out. Nevertheless, no argument has been made for exempting these from the provisions of the 1988 Act and I therefore ask that the amendment be withdrawn.

Baroness Hollis of Heigham

My Lords, I note the Minister's reply and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 37 to 41 not moved.]

9.45 p.m.

Baroness Hollis of Heigham moved Amendment No. 42:

Before Clause 8, insert the following new clause:

("Effect of competition on property management

.—(1) No order shall he made under section 2(3) of the 1988 Act by virtue of which work falling within a defined activity for the purposes of Part I of that Act includes the provision of property management services.

(2) Before making any order under section 2(3) of the 1988 Act the Secretary of State shall consult such associations of local authorities, and such other persons as appear to him to be concerned with respect to any effect on the quality of provision of property management services by local authorities of any such order.").

The noble Baroness said: My Lords, in moving this amendment I should like to speak also to Amendment No. 46 which seeks to take both property management and development planning out of CCT. Leaving aside the core services of finance and law, these two services are probably the most sensitive in local government.

Perhaps I may first deal briefly with property management. Some of the issues involved spill over into issues of planning. Property management can generate a conflict of interest between negotiations and valuation. Essentially, property management involves a corporate view of the estate of the local authority as a major resource. One must therefore consider the longer term environmental and developmental objectives of the local authority. As with other services, it involves a high degree of confidentiality, from deeds to purchase inquiries, and continuous contact with the public. All those reasons—the issue of conflict of interest, the corporate view and the issues of confidentiality and public access—suggest that this is an inappropriate service to put out to CCT.

If that is true of property management, how much more is it true of planning. That is because, in planning, in development plans and in development control, one not only seeks to predict future pressures, but planning is the point at which existing pressures focus. Planning umpires between motorists and residents; between developers and open space; between one man's wish to enlarge his property and his neighbour's wish to stop him in order to conserve the street scene.

I do not see how that kind of activity—that umpiring, regulatory function of local government—can be properly sent out to the private sector and, so to speak, loaned to local government sovereignty. That activity requires regulatory power and embodies council policies, yet, on the other hand, those decisions must stand up to judicial review.

The second reason why planning is so sensitive is that there is a strong possibility of conflict of interests. Almost uniquely, planners can make millionaires of other men; for example, when a field becomes a housing estate. Private consultants are unlikely to be regarded as acting genuinely in the public interest. They will be suspected of bias towards private sector development and, as both district plans and development control attach values to land, it is a field ripe for corruption. As a leader of a local authority in the past, planning was the one area that I watched like a hawk. I required that no officer or member ever had a private, solo interview with any private developer simply because of the potential for conflict of interest and corruption and the high stakes that are involved.

Associated with this is the issue of confidentiality. It is often concerned with detailed negotiations about planning, and the anticipated profits are commercially sensitive.

Finally, like law and finance, planning is a core, corporate activity at the heart of a council's strategic work. It must draw on scattered information right across the local authority and it must interlock with other services. Because planning is a corporate activity like property management, because it deals with confidential and highly sensitive information, like property management, because such high stakes are being played for, as in property management, and because, above all, planning has a regulatory, quasi-judicial role, planning, like property management, is an inappropriate service to go out to CCT at any stage. I beg to move.

Baroness Hamwee

My Lords, I should like to make one point on development plans. Without disagreeing for a moment with what the noble Baroness, Lady Hollis, has just said—I too have had to be sure that greater circumspection is shown in the circumstances which she outlined—I believe that we are in danger of forgetting the role of the member in this matter. Decisions about development plans after all are not simply matters for officers. This service is unlike other services that we have been discussing in that it is for the members to make decisions rather than being a management function carried out on a day to day basis. We are in danger of becoming rather swept away with all the exclusions that there might be.

While I support the thrust of what has been said, we are beginning to move away somewhat from what might be at the heart of the issue.

Baroness Blatch

My Lords, the consultation paper, as is known, suggests that the operational management of buildings and indeed the management of commercial estates are very much activities for which a commercial market exists and which could be readily specified. However, the paper also goes on to state that the preparation of asset management strategies is less ready for exposure to CCT.

Again, given the links with the central corporate processes, we have no plans at present for the introduction of CCT to planning services. However, we still have not had good arguments for wholesale exemption from the provisions of the 1988 Act. Again, I ask the House not to accept these amendments.

Baroness Hollis of Heigham

My Lords, when the Minister considers that she has not heard good reasons, she means that she disagrees with them, which she is entitled to do. That is not the same as saying that she has not had good reasons. I should have thought that the case was put on all the amendments, in fact powerfully put in terms of the resource information coming through from the local authority associations, quoting from the Audit Commission, CIPFA, the local authority associations and the like.

The Minister may consider that their views are not good reasons but that would not be the view accepted in the local authority world or the professional world. It ill-becomes the government side to suggest that those views are not good reasons. The Minister may disagree with them, but it is beyond doubt that they are legitimate, need to be put and that they are shared by a wide body of responsible professional opinion. However, given what the Minister said particularly about planning, with the leave of the House, I am more than willing to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hollis of Heigham moved Amendment No. 43:

Before Clause 8, insert the following new clause:

("Effect of competition on vehicle fleet management

.—(1) No order shall be made under section 2(3) of the 1988 Act by virtue of which work falling within a defined activity for the purposes of Part I of that Act includes the provision of vehicle fleet management services.

(2) Before making any order under section 2(3) of the 1988 Act the Secretary of State shall consult such associations of local authorities, and such other persons as appear to him to be concerned with respect to any effect on the quality of provision of vehicle fleet management services by local authorities of any such order.").

The noble Baroness said: My Lords, perhaps I may say very briefly that this amendment raises a different issue—in my view the confusion that exists in this proposal between the role of the local authority's client and the local authority's contractor. The maintenance of local authority vehicles, whether for education, housing rent collection, or community or social services is already out to CCT. The client for that CCT contract is the vehicle manager who, on behalf of the local authority's service department specifies operational needs.

It is suggested, though admittedly rather half-heartedly in the consultation paper, from which one takes some hope, that the client role of managing the vehicles and placing CCT contracts should itself be subject to CCT. So instead of, as in the past, local authority education departments running their own vehicles, local authorities are now to put out to contract the specifications to manage the specifications of maintenance. In other words, from a direct responsibility, as of a couple of years ago, there would now be inserted not just one layer of CCT maintenance but a second layer of CCT specifying the contracts which go out to maintenance, with all the cumbersome, bureaucratic and time wasting procedures involved.

In practice, few companies are interested in management if they do not have maintenance contracts for vehicles. The liaison between the two is interlocked. But if, for example, there should be different contracts because the vehicle maintenance is already out and someone else is tendering for the placement of those contracts, who then becomes accountable for what? Who is responsible for what and at what cost? It produces chaos.

Indeed, the whole push of the Audit Commission paper on home to school transport asks that vehicle and transport organisers be regarded as a corporate activity with perhaps shared resources and perhaps the capacity to piggyback on each other's services. That would be impossible if it were combined with separate departmental vehicle maintenance contracts. It is not even suggested in the paper that it is feasible to have this double layer of contracting. I hope that the Minister will confirm that that is her view. I beg to move.

Baroness Denton of Wakefield

My Lords, with respect, I am nervous about the brief of the noble Baroness, Lady Hollis. She wondered about the double layer of management. A whole industry is based on that double layer. It is known as the fleet management industry. Throughout the country companies with 3,000 cars in their fleets do not bring vehicles back from, say, Aberdeen. They have someone to undertake maintenance wherever those vehicles are. There is a double layer system which works without chaos. It is a system that is used by most large companies.

Baroness Blatch

My Lords, perhaps I may add to the point that my noble friend made by saying that system often works to the advantage of the company.

No good reason has been given throughout the debate for wholesale exemption of any service in advance of consultation—a consultation process that is not yet complete—and in advance of my right honourable friend the Secretary of State extending CCT to a particular service. For those reasons, I ask the House to reject the amendment.

Baroness Hollis of Heigham

My Lords, I note the thinness of the ministerial reply. Nonetheless, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 44 to 46 not moved.]

Baroness Hollis of Heigham moved Amendment No. 47:

Before Clause 8, insert the following new clause:

("Effect of competition on maintenance of police vehicles

.—(1) No order shall be made under section 2(3) of the 1988 Act by virtue of which work falling within a defined activity for the purposes of Part I of that Act includes the provision of the maintenance of police vehicles.

(2) Before making any order under section 2(3) of the 1988 Act the Secretary of State shall consult such associations of local authorities, and such other persons as appear to him to be concerned with respect to any effect on the quality of provision of the maintenance of police vehicles by local authorities of any such order.").

The noble Baroness said: My Lords, I shall speak also to Amendment No. 48. These amendments relate to the role of police vehicles and the cleaning of police buildings. They suggest that both should be exempt from CCT.

I refer first to police vehicles. Like fire vehicles, police vehicles are pushed to the limits of their performance. I shall not rehearse yet again the arguments that we adduced in favour of not putting fire vehicles out to cheap private contracts. However, police vehicles too require the best quality maintenance not only to avoid breakdowns during emergencies but also when involved in high speed action in order to prevent the sadly all too frequent risk to pedestrians and other road users such as we have seen in the past.

Secondly—it is a different point from that relating to fire vehicles—there is the problem of security. Vehicles for surveillance or for armed response must remain anonymous while being serviced. When standard police cars are serviced they contain sophisticated radio equipment which must not be left unguarded with private contractors. That equipment has to be stripped out and replaced each time the car is serviced, maintained or repaired, with uncalculated resource implications—unless the Minister has those figures available at her fingertips.

When the issue was raised in 1988, as with fire vehicles, the Government were persuaded at that time that because of the high specification requirements and security risks police vehicles should be exempted from CCT. Since then the cost-effectiveness and value for money performance of maintaining police vehicles have continued to rise. The Audit Commission reviewed the position with regard to police vehicles in May 1989. It made a number of suggestions. However, it did not suggest that it was either functional or financially sensible to put the service out to CCT.

Perhaps I may cite the Norfolk example. With the exception of vehicle recovery, its vehicle maintenance is undertaken in house. A business consultancy group in 1989 reviewed workshops. Far from encouraging Norfolk—a traditional Conservative authority—to go out to competitive tendering, it advised the authority that certain vehicle maintenance carried out by external private garages in rural areas should be brought back in house on grounds of high specification and security. Happily, that was also the most cost-effective solution. It was not what the county council expected to hear; it was not what the county council particularly wanted to hear. But it was the professional advice.

I understand that the Home Office is consulting ACPO. The worries about standards of security are shared by the chief constables. I hope that the Minister can assure the House that the issues of specification and security will be taken on board.

The issue also relates to Amendment No. 48 dealing with the cleaning of police buildings. Given that other cleaning activities above the de minimis rule are out to CCT, if sending the cleaning of police buildings out to private contractors offered value for money no chief constable would walk away from it. He would rather recycle the savings into other forms of police activity. Indeed, many police authorities put a considerable portion of their cleaning out to voluntary competitive tender; for example, training and headquarters buildings. However, there is the need to exempt buildings where a security issue is involved; for example, a special service, or drugs, or fraud, or buildings which in rural areas may for a long period be unstaffed. In those cases the police would not wish the service to go out to CCT. Most police buildings are not designed to separate sensitive and less sensitive areas when it comes to cleaning. Given that contract cleaning notoriously offers low wages, poor conditions and a heavy turnover of casual labour and that the responsibility of vetting and checking such staff will be highly intensive, I believe that it is unnecessary to include this service. Perhaps the Minister can reassure us.

When the Minister of State in the Home Office, the noble Earl, Lord Ferrers, often reminds the House that police time is not available easily to check the criminal and security records of drivers of public service vehicles, those working with children or school caretakers, why should it be presumed that they have the time, capacity and inclination to check the high turnover of casual labour which is staffing cost-cutting cleaning contracts in unmanned or highly sensitive buildings? If any area of service should he excluded from CCT on grounds of sensitivity and security I suggest that this is it. I beg to move.

10 p.m.

Baroness Blatch

My Lords, I am sure that I am not alone on this side of the House in standing back in astonishment at some of the comments that have been made about competitive tendering. Already some 30 forces contract out vehicle maintenance to some extent, including vehicle recovery, accident repairs, the replacement of tyres and a great deal of routine maintenance work. Limited exemptions might of course be necessary in respect of vehicle maintenance on the grounds of security. However, that is no argument against competitive tendering on building cleaning. Already many forces contract out cleaning. We believe that it is an area well suited to CCT.

However, there may also he exemptions on security grounds. That is not an argument for doing what the amendment asks; that is, to go for wholesale exemption from the provisions of the 1988 Act in advance of all the discussions about it. Furthermore, my right honourable friend the Secretary of State would have to come before Parliament for approval. It is also worth noting that in almost every case, whether it is police cars, fire service vehicles, ambulances, hospital equipment or whatever, the equipment is made by the private sector. People working in the sector are not demons with horns but are working on high security equipment. Much of the specialist equipment is serviced by the companies which made it.

Baroness Hollis of Heigham

My Lords, I thank the Minister for her reply. I do not believe that there is much between us. No one is denying that it may well suit police forces to have their vehicles and buildings cleaned by private firms. Where it is cost-effective, chief constables who are concerned about their level of resource do so. The dispute between us is whether that competition should be compulsory even when, according to the advice that we are receiving, the chief constables would resist doing so.

The difference between us is not that the private sector may not, entirely properly, carry out vehicle maintenance or cleaning. However, there are areas which should not go out to competitive tendering. In the past, chief constables through police committees have resisted that. If local authorities are asked to accept the operational judgment of chief constables, then government should also accept that judgment. It is for the chief constables to decide whether they wish to trade what may be cheaper costs, by use of private companies, for the greater security offered by in-house employment. The difference between us is whether this should be compulsory or voluntary. I am sorry that the Minister continues to address the issue as to whether or not this should be subject to CCT and not whether or not it should be compulsory. We argue for the second and not the first.

Baroness Blatch

My Lords, if that was the only principle involved, one amendment could have dealt with that. For hours now we have dealt with individual amendments. On every single amendment the noble Baroness has chosen to address the detail of, for example, cleaning by private or cleaning by public. One amendment could have dealt with the principle of compulsory competitive tendering.

Baroness Hollis of Heigham

My Lords, no doubt that would be more convenient for the Minister but our job is to scrutinise legislation. The Minister has chosen to bring forward legislation in advance of the responses to the consultation papers. That would have informed us of the views which were being taken. In the absence of failing to observe a proper timetable, my view is that it is our duty—and I am sorry to use such a high-falutin word—to attempt to scrutinise legislation as best we may. That is what we are doing. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments No. 48 not moved.]

Clause 8 [Application of competitive tendering to professional services etc.]:

[Amendment No. 49 not moved.]

Baroness Hollis of Heigham moved Amendment No. 50:

Page 8, line 19, at end insert:

("( ) The Secretary of State shall by order make provision whereby a local authority may include in any contract for work falling within a defined activity for the purposes of Part I of the 1988 Act such terms as it considers appropriate relating to the promotion of equal opportunities and equal employment practices.").

The noble Baroness said: My Lords, I speak also to Amendment No. 59. I shall not move Amendment No. 62. These amendments deal with contract compliance. In general we welcome the first part of the Bill, dealt with earlier this afternoon, which is concerned with improving the quality of public services by measuring not only input and costs but also output and performance. On behalf of these Benches the noble Lord, Lord McIntosh, and the noble Baroness, Lady Hamwee, dealt with the first part.

The second part of the Bill has dealt with compulsory competitive tendering. I repeat that in the Government's eyes, the private sector has not been winning enough contracts. Therefore, the Government seem doggedly determined to weight contracts still further in favour of private contractors by disallowing ongoing costs from plant to staff which would fall on the local authority as a client if the local authority as contractor lost the contract.

In Committee the Minister accepted that as a result the additional costs falling on local taxpayers could well outweigh the financial gains from private cheaper contracts. Instead of ensuring that local authorities got more for less, which is meant to be the point, it was not only likely but apparently acceptable that local authorities would have to pay more to get less, provided that that less came from the private sector.

In other words, the whole thrust of the debate both in Committee and today is that private contracts should he artificially cheapened and therefore secured by the private sector by switching costs which should properly be borne by the contractor and offloading them on to the client—the local taxpayer. That has been the line of the Minister throughout Committee stage. If she is happy to accept that as a summary of her views, I am sure that that will be noted.

Amendments Nos. 50 and 59 address the issue of contract compliance. They are the points at which the quality concerns of the first part of our discussions and the compulsory competitive tendering of the second intersect.

Amendment No. 50 calls for promotion of equal opportunity policies in employment practices for two reasons. First, it works. In the United States between 1974 and 1980—if we look at a comparison between government and non-governmental contractors—where contract compliance was standard government contractors were made up of 20 per cent. of ethnic minorities compared with 12 per cent. where it was not. Fifteen per cent. of women were under government contract with only 2.2 per cent. of women under private contracts without contract compliance.

Similarly, in the UK where contract compliance was used by local authorities in the early 1980s they found it a highly effective device to ensure that it expanded equal opportunity practices. For example, Sheffield City Council worked successfully with companies tendering for the World Youth Games by requiring contractors to employ certain percentages of local and black labour and trainees.

The second reason for Amendment No. 50 is that it is necessary. Unemployment among ethnic minorities is 60 per cent. higher than among whites. For example, women earn only 78 per cent. of the average hourly manual rate for men. The Government themselves practice those policies in Northern Ireland under the Fair Employment (Northern Ireland) Act 1976. The amendment asks that the Government extend to the rest of Great Britain what they have already conceded and administer in Northern Ireland.

Amendment No. 52 refers to Sections 17 to 23 of the Local Government Act 1988. That part of the Act requires local authorities to exclude what government deem to be non-commercial considerations when approving private tenders. The Minister listed them much earlier this afternoon. They include such considerations as the terms and conditions of employment; sub-contracting, and therefore often the loss of health and safety protection; industrial dispute records; the financial strength of the company and the like—in other words, the "non-commercial considerations" which I suggest determine quality and mark the difference between cheapness and value for money.

The Minister for Defence, in relation to physical security for military installations, said that those guards who are paid the lowest wages are unlikely to provide the highest standards of service and cheap can ultimately turn out to be costly. "Cheap can ultimately turn out to be costly"—quite so! That is exactly the experience of local government since 1980. Local authorities therefore developed contract compliance not only to ensure good employment practices—opportunities for women, the disabled and for training—but also to ensure quality of service delivery.

Forgive the anecdotal story but again I found in local government that under competitive tendering private firms frequently used to sub-contract work to labour-only contractors. Where that happened, painting was skimped; men were not available for remedial work and they were unhelpful to tenants. Only contract compliance remedied that. Contract compliance in the hands of local government before 1988 sought to check shoddy work, corner-cutting, dangerous working conditions and the rapid turnover of staff. In other words, it helped to ensure the delivery of quality for which the Citizen's Charter belatedly calls.

In two years in the mid-1980s the existence of Lewisham's contract compliance unit meant that 53 firms improved pay and conditions; 31 firms set up training schemes; 124 firms contributed to the Construction Industry Training Board, and 320 firms improved health and safety practices. The quality of public satisfaction as surveyed shot up in consequence. Without contract compliance and with compulsory competitive tendering, as we have seen in the NHS and elsewhere, one finds 25 per cent. cuts in hourly pay on what were already low wages, the loss of paid holidays and terminal instead of yearly contracts.

Without the safeguard of contract compliance CCT has found out how little people are prepared to work for and how low a standard of service the local taxpayer is prepared to put up with. We have seen that reflected in the refusal of the Social Charter at Maastricht. I fear that without contract compliance and the support of this amendment, cheap will indeed turn out not only to be costly, but also nasty. I beg to move.

10.15 p.m.

Earl Howe

My Lords, there is a great deal in these two amendments and I should like to cover them fairly fully. Amendments Nos. 50 and 59 have related purposes. Amendment No. 50 is designed to give local authorities the power, if they wish, to include in contracts they make under the competitive tendering procedures provisions designed to lay down conditions as to equal opportunities or other employment practices to be followed by contractors. We believe that to allow this would be to allow authorities to import into the tendering process entirely irrelevant considerations which would undermine the effectiveness of that process as a means of ensuring that local taxpayers get the best possible value for money from their services. We believe, on this side of the House, that competition is about efficiency in the provision of services, not social engineering.

The kind of provision envisaged in the amendment would, of course, be quite contrary to the provisions of Part II of the 1988 Act, which is expressly designed to prohibit the inclusion of such "non-commercial" matters in contracts let by local authorities. Noble Lords opposite have made it clear in tabling Amendment No. 59 that they fully appreciate this and they indeed argue that the whole of Part II should be repealed. It will come as no surprise to the House that we reject such arguments entirely. We believe that Part II is necessary to protect contractors against unfair and irrelevant interventions in the way they run their own businesses.

The main purpose of local government tendering must of course be to ensure that authorities get the best possible value for money in the supplies and services which they purchase on behalf of their local taxpayers. I must emphasise that Part II of the Local Government Act 1988, which Amendment No. 59 is designed to repeal, is intended to ensure that authorities are in a position to do just that. It applies not only to those services which are subject to CCT but to all the goods and services which an authority buys.

The main provision of Part II is contained in Section 17, which prescribes a number of "non-commercial" matters which it is improper for an authority to take into account in the contractual process. These include the terms and conditions of employment of the contractor's own workforce; the involvement of contractors with irrelevant fields of government policy, such as defence contracts; the conduct of contractors in relation to industrial disputes; the county or territory of origin of supplies; the political or other affiliations of contractors; and any financial support they might provide to institutions which happen to be out of favour with the authority concerned.

There is specific provision in Section 18 to allow for the responsibilities which authorities have under the Race Relations Act. Under that section the Secretary of State has authorised authorities, if they wish and believe it appropriate, to ask contractors, for example, whether they have had any finding of unlawful discrimination made against them or been the subject of investigation by the CRE in the previous three years; how their policy on race relations has been promulgated; and whether they observe as far as possible the CRE's code of practice for employment.

There is also a requirement to ensure that approved lists of contractors do not break the requirements of the Act, and that no charge is made for inclusion in such lists.

We on this side of the House believe that these provisions are necessary to protect contractors against unfair and irrelevant interventions in the way they conduct their own business. I know that some noble Lords opposite believe that authorities should be allowed and indeed encouraged to intervene in this way. They see contract compliance as opening the way to all sorts of hopeful developments in the field of social progress. It also gives authorities an indirect power to intervene in industrial disputes against the interests of employers. We believe that such social engineering—for that is indeed what it is—is not and never has been the proper function of local authorities. I must therefore ask the House to reject these amendments.

Baroness Hollis of Heigham

My Lords, the noble Lord in his response twice used the words "social engineering" in his rejection of these proposals. His social engineering would, on our side, be the commitment not only to equal employment opportunities but to quality service. That is what social engineering means and we on these Benches are happy to accept that label.

The point is that social engineering is about quality and quality of service. As we tried to explore when we were discussing the role of compulsory competitive tendering in the qualifications for maintenance engineers for fire service vehicles, the Minister was very insistent that that quality could not be achieved through contract compliance. That was the point that she rehearsed and which the Minister has now repeated on some of the content of contract compliance regulations. She insisted that that quality could be ensured through detailed specification.

On this side we pushed quite hard to try to find out what local authorities were permitted to ask about training and the like. The Minister insisted that we could establish competence, if not training, through specification. The noble Baroness will be aware that her honourable friend in another place, Mr. Robert Key, said in a speech that detailed specifications inhibited competition and stopped contractors submitting innovative and entrepreneurial tenders. Equally, Paragraph 141 of the White Paper Competing for Quality states: Wherever possible, of course, specifications should be simplified so as to set out essential requirements, leaving the details of delivery to the contractor". I hope the Minister will tell us how, on the one hand, he can argue that local authorities can achieve quality through detailed specification while, on the other hand, his honourable friend and the White Paper itself say that that is precisely the activity in which the local authority should not engage. If that discrepancy is there, how can we best resolve that concern for quality except through contract compliance? With the leave of the House, I invite the Minister to comment.

Earl Howe

My Lords, I do not see how the noble Baroness can argue that quality of service has anything to do with the terms on which the contractor's workforce is employed. What is important is that there is a specification against which performance is measured. That is the standard to which the local taxpayer will ultimately look.

Baroness Hollis of Heigham

My Lords, contract compliance ensures that the staff in a private company meet appropriate standards through training, employment practices and the like. In the process the local authority can find out the company's degree of turnover, its level of pay rates and its conditions of health and safety. Without that contract compliance specification those services that are dependent for their very existence on the quality of service and therefore on the quality of staff are jeopardised. That is the point of contract compliance. It ensures that staff are recruited and retained with good management practices, which in turn ensures that the services to the local taxpayer footing the Bill are of sufficient quality. That is the reason for contract compliance. Despite the Minister's earlier comments, it looks as though his honourable friend would not recommend that local authorities follow the path that he recommended to us. It is clear that the Minister may speak the words of quality but is in no position to recommend to local authorities how best they may ensure it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 51:

Page 8, line 32, leave out paragraph (b).

The noble Lord said: My Lords, in moving this amendment I shall speak also to Amendment No. 57. With this amendment we return to one of the most erudite discussions we had at Committee stage. I pointed out that the provision in Clause 8 differed ever so slightly from the provision in Clause 9. Clause 8 could be much more simply expressed as "The Secretary of State shall do what he likes". The clause provides that the Secretary of State may make an order which makes different provision for different cases, including different provision for different localities and for different authorities. But in Clause 9 a comparable provision says that he may make different provision for different cases, including different provision for different localities and for different bodies. The Minister gave us a quite interesting explanation. He said that in Clause 9 "authorities" was not quite enough because bodies which are not authorities were included in the clause. I have no quarrel with that.

However, in response to my noble friend Lord Howie of Troon who put the point that such provision was really quite unnecessary and far too wide-ranging, the Minister said that she could give him the assurance that, if she was advised that the words were superfluous and that the Secretary of State would be able to act in a flexible way, and if she believed that the words should be removed from the Bill, they would be.

Having read Clauses 8 and 9 again, I cannot believe that such provision as contained in these paragraphs is required and that the powers of the Secretary of State are not wide enough as they stand. Having given mature reflection to the points raised by my noble friends and others in Committee, I hope that the Minister will now be able to tell us that the provisions are superfluous and that it may be possible for the Government to agree that they should be taken out of the Bill. I beg to move.

10.30 p.m.

Baroness Blatch

My Lords, as I made clear in Committee, CCT legislation applies to many different types of defined authority. It may be that the consultation process will suggest that provision for separate evaluation of quality and cost would not be appropriate for all types of authority. The procedures might also need to differ according to the value of the contract and the size of the authority.

The noble and learned Lord, Lord Simon, argued during Committee that these provisions were unnecessary. I undertook to take advice on them and remove them from the Bill if that were the case. As I explained to the noble and learned Lord—and I have met with him in the meantime—I have come to the conclusion that they are indeed necessary, not least because of the existence of similar provisions in other Acts. In that context I point to the provisions in Section 15(5) and Section 15(6) of the Local Government Act 1988.

Some concern may have arisen over the fact that the wording in these clauses differs from the wording in the relevant provisions of the 1988 Act. I am advised that, although the drafting of these provisions is different, their effect is the same as those in the earlier Act. These powers would not be used in a discriminatory or unfair way against individual local authorities, as has been suggested. Even if such arbitrary use were made by a future Secretary of State, it would in any case be subject to review by the courts. It is, however, essential that the Secretary of State is able to take account of legitimate differences when framing orders or regulations under these clauses.

I must reassure the House that I presumed always in favour of taking such provision out of the Bill, if I could not be convinced otherwise. However, I am assured by counsel that it would be very conspicuous by its absence and that we would in fact be subject to challenge in the courts. It is in that light that I have been persuaded that it ought to remain part of the Bill. With the assurance that I have actually done my homework since the Committee stage, I hope that the amendments will be withdrawn.

Lord McIntosh of Haringey

My Lords, I did not have the faintest doubt that the Minister would have done her homework. Moreover, having heard the noble Baroness in Committee, I did not doubt that she genuinely would have wished to take out these parts of the Bill if she had found it possible to do so. Having been in close contact with the noble and learned Lord, Lord Simon, I am bound to say that he did listen to what she said and he was not at all convinced. I believe that the noble Baroness would acknowledge that that is the case. He is a far greater expert on such matters than I am.

Having heard what the Minister said, it seems to me to be an extraordinary piece of gobbledegook; in other words, you might as well put such a provision in every clause of every Bill which comes before Parliament. If to leave such a provision out would seriously damage the effect of the Bill and the power of the Secretary of State to do what he wants—which is what the legislation is all about—then we have come to a pretty pass. I think that we might go through past legislation over the centuries and put this sort of provision back into previous legislation.

I have not noticed any Secretary of State—I should say that I am much more afraid of the interfering propensities of the present Secretary of State than I am of the next one—having any scruples about making orders or regulations which apply to individual local authorities rather than to others.

If we look at the history of poll tax capping over the past few years, we will see that it has been conspicuous that Secretaries of State of this Administration have gone out of their way to penalise Labour-controlled local authorities and to find formulae which discriminate in favour of Conservative-controlled local authorities. They will be unable to keep it up this year, but they have been having a good go at it.

I am not convinced objectively by the Minister's arguments. But in view of the transparent integrity of her approach to the issue it is not a matter upon which I wish to take the opinion of the House. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 9 [Power to define conduct as competitive or anti-competitive]:

The Deputy Chairman of Committees (Lord Boston of Faversham)

My Lords, I should point out that if Amendment No. 52 is agreed to I cannot call Amendment No. 53.

Baroness Hollis of Heigham moved Amendment No. 52:

Page 8, line 39, leave out from ("may") to ("guidance") in line 36, on page 9 and insert ("issue").

The noble Baroness said: My Lords, in moving this amendment, I shall speak to Amendment No. 54 at the same time; and, with your Lordships' leave, also to Amendment No. 53. I am not sure that I can, but I propose to do so if your Lordships agree. This cluster of amendments relates to the issue of anti-competitive behaviour, and with these amendments we return to an issue upon which we pressed the Minister in Committee.

The amendments seek to maintain the current legal position whereby local authorities are responsible for making decisions, subject to the Secretary of State's sanction, on the award of contracts on condition that they are not behaving anti-competitively. That is the existing position.

Clause 9 would remove the ability of the local authorities to interpret what anti-competitive means in the local context, and instead require them to comply with the Secretary of State's directive. I move the amendment so as to avoid that situation. Clause 9 therefore is based upon the assumption that there is widespread abuse in local authorities' contracting. There was talk of level playing fields ad nauseam in Committee. However, if one looks at the facts - they bear repeating - out of about 3,000 contracts awarded since 1988, the Secretary of State has used his powers to seek an explanation of anti-competitive behaviour from an authority on fewer than 33 occasions. I understand that he has used his sanction powers to require re-tendering in relation to anti-competitive behaviour on fewer than 10 occasions out of those 3,000 contracts. He has used his sanction powers once only for anti-competitive behaviour under the 1980 Act

I understand that no action has been taken by district auditors against any authority over the award of a contract. No charge payer or dissatisfied tenderer—the Minister will correct me if I am wrong—has challenged an authority on the ground that it acted unreasonably in awarding any contract. In the three cases we quoted in Committee relating to CCT which have gone before the courts—Knowsley, Leicester and York—the authorities were found to have acted reasonably by Mr. Justice Popplewell, although ultimately the cases revolved around the Secretary of State's behaviour.

In Committee, when I sought to press the Minister in the light of that information, she was unable to give us one example of anti-competitive behaviour that would have been caught had the Bill been in force. The Minister may since have found many more examples, but her response then was that if only one example existed, that would be enough to justify the whole of the parliamentary procedure coming into play.

The Minister then said that the Government needed to take that stance because they were the guardian of the public interest. However, I am sure that the Minister will recall that under the Wednesbury rules the Master of the Rolls said: It is clear that the local authority is entrusted by Parliament with the decision on a matter which the knowledge and experience of that authority can best be trusted to deal with". That sense of trust in the local authorities was reflected by the Secretary of State in a DoE Circular 19/88 which stated: it is for individual authorities to decide, according to the circumstances of particular cases". Since the Wednesbury rules and DoE Circular 19/88, the Government have changed their mind. They cannot have changed their mind, because there is evidence of abuse. As I have explained to your Lordships, there is no such evidence. It can only have been because of the evidence of the palpable failure of the private sector to win contracts.

To come back yet again to the metaphor of the level playing field, it is clear that the game is being played fairly; it is just that the Government's side, the private contractors, are not winning. So let us make the Secretary of State both the 12th player and the umpire at the same time. I beg to move.

Baroness Blatch

My Lords, the noble Baroness continues to use statistics—given that the statistics are relatively small—as an argument against the Secretary of State's powers to determine whether behaviour is competitive or anti-competitive. The very fact that there are sanctions, with the occasional threat of the application of those sanctions, is frequently sufficient to persuade a local authority to conform to proper procedures. Sometimes we are aware physically of that instance and many times we know that local authorities, simply because the sanctions are there, conform to the proper procedures.

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 too many have failed to do so. Since October 1989, we have given directions to 12 authorities because we considered that they had acted anti-competitively. Such anti-competitive behaviour has included weighting the price tendered by private contractors with extraneous costs, such as overheads, or the disruption that would result from a change in operator; offering work in contracts of such large value that few, if any, private companies were capable of tendering for it; failing to provide essential information about the quantities of work to be done; and imposing unusual and onerous liability conditions.

The noble Baroness, Lady Hollis, and the noble Lord, Lord McIntosh, have claimed in previous debates that there has been little use of sanction powers, and I have already referred to that. We do not embark on the use of these powers lightly. Their employment, through preliminary investigation of a case, to the serving of a notice and the consideration of the authority's response, and finally to the giving of a direction, is a very serious and time-consuming process. That we have completed this process in the case of 12 authorities should be seen as evidence that there has been a significant extent of non-compliance with the 1988 Act that we have wanted to address.

In our view, however, 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 the reason 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.

I presume that the intention of the noble Baroness in tabling Amendments Nos. 52 and 54 has been to limit the power conferred on the Secretary of State by Clause 9 to the issuing of guidance on the avoidance of anti-competitive behaviour under Part III of the Local Government, Planning and Land Act 1980 and Part I of the Local Government Act 1988.

These are of course wrecking amendments. Your Lordships will recognise that Parliament does not need to be asked to approve such a power. The Secretary of State is already empowered to issue guidance on this and on other matters relevant to the performance by local authorities of their functions. Indeed, in March this year the Secretary of State issued Circular 1/91 which dealt in considerable detail with aspects of anti-competitive behaviour.

The Secretary of State's power to define competitive and anti-competitive behaviour under the 1980 and 1988 Acts is considerable, as was demonstrated in the Knowsley case, which was mentioned in Committee by the noble Baroness, Lady Hollis. But that case was not heard in your Lordships' House, and so the Government see a clear need to be able to provide greater certainty in the operation of CCT procedures and to do so by means of regulations which would address those aspects of CCT procedures which need clarification or where there are differing views such as tender evaluation and the timing of stages in the tendering process. That is why we seek your Lordships' agreement to Clause 9.

The Secretary of State has set out his views on aspects of anti-competitive behaviour in Circular 1/91. I know that many local authorities have been guided by this circular in their handling of CCT exercises. Others have pointed to advice offered from other sources and claimed that conflicting advice allowed them to make up their own minds and to ignore the views of the Secretary of State. The result has been diverging practices which have caused confusion and uncertainty.

Subsection (3)(e) of Clause 9, which this amendment seeks to delete, addresses this position by enabling the Secretary of State to use regulations to underpin the issue of guidance. The guidance in question will not necessarily be guidance already issued; it will more likely be revised guidance whose issue would follow the making of regulations. However, the underpinning through regulations will make it quite clear to local authorities and private contractors alike that the guidance in question will be taken into account by the Secretary of State in considering whether local authorities have acted anti-competitively.

I believe the noble Baroness, Lady Hollis, said there had been little action on anti-competitive behaviour. She suggests that because few anti-competitive directions have been given, there is little anticompetitive behaviour. In the past three months my department has received no fewer than 43 complaints or indications of anti-competitive behaviour. Until investigations have been completed, I cannot say how many of those cases will justify taking action but they are a measure of the lack of certainty which this clause is designed to address. As I go about the country, I frequently receive complaints, or at least am on the receiving end of people's perceptions, that local authorities are behaving anti-competitively. It is important that we have measures in place to ensure that does not happen and to do whatever we can to ensure there is certainty on this matter.

It is surely not necessary for me to stress that the way in which the Secretary of State would exercise these powers would of course be ultimately reviewable by the courts, and that he would neither wish nor be able to exercise them in an unreasonable or arbitrary fashion. If he did so, he would be found wanting in court. We have seen this year the judicial review of the Secretary of State's use of his powers under Sections 13 and 14 of the Local Government Act 1988, a use which was based on his view of anti-competitive behaviour by certain authorities. The Court of Appeal found that the Secretary of State had made proper use of his powers. Nonetheless, we recognise that there are continuing uncertainties in local government about what may or may not be anti-competitive. Clause 9 would allow us to settle these doubts. This amendment would impede that process, and I hope that the noble Baroness will not press it further.

10.45 p.m.

Lord Airedale

My Lords, I had expected to move separately my Amendment No. 54A because in the groupings which we usually follow—although we are not obliged to do so—Amendment No. 54A is listed separately. As the noble Baroness has already trespassed upon it in what she has just said, perhaps it would be for the convenience of the House if I were to speak now to my Amendment No. 54A.

Here we have a furtive attempt on the part of the Executive to gain power for itself at the expense of Parliament. The Bill contains the following proposition. It states: there has been a contravention of guidance". Mr. Woody Allen once said that military intelligence is a contradiction in terms. I should imagine that if he were here he would say that a contravention of guidance was equally a contradiction in terms. That certainly was the opinion of the Committee when we discussed this matter at some length. In opening the debate in Committee on 3rd December the noble Lord, Lord McIntosh, said at col. 133 of Hansard: There is a clear distinction between guidance which must be taken into account and regulations which must be given effect to". At col. 136 the noble and learned Lord, Lord Simon of Glaisdale, said: 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". Let the noble Baroness mark the words, "government by future letters of guidance". The noble and learned Lord continued: At this stage we do not know what the guidance will be; it is insufficiently denned. 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". Further down that column the noble Baroness herself said that, it is easier to change guidance than to change primary legislation". That was the wisest thing that the noble Baroness said in the course of the debate. At the end of the debate, in his closing speech, the noble Lord, Lord McIntosh, said that, 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". If the Minister wishes to issue instructions let her do so by statutory instrument, bringing the matter before Parliament and allowing Parliament to exercise some control over what is happening. If she is content to rely upon guidance and if the guidance is wise the local authorities will follow it.

The Earl of Balfour

My Lords, I have listened very carefully to what the noble Lord, Lord Airedale, said about Amendment No. 54A. I prefer the wording of the Bill because there is a considerable difference between that and a local authority contravening the guidance issued by the Secretary of State, which is quite serious. If the proposed wording were to be substituted the subsection would read: regulations under this section may … require the extent … to which there has been a failure to have regard to guidance issued by the Secretary of State That reminds me of the awkward expression "driving without due care and attention" which invariably leaves the driver of a motor car guilty of an offence because there is almost no chance of proving otherwise. It would be in the interests of the local authority to retain the words in the Bill, which are more favourable.

Baroness Blatch

My Lords, I am grateful to my noble friend for his intervention. Perhaps I may say to the noble Lord, Lord Airedale, that this is no furtive attempt to secure a power for the Secretary of State. It is very overt. The Bill is before Parliament and it is for Parliament to take a view on the matter. Indeed, we are discussing an amendment to a Bill, which is a very democratic way of expressing anxiety about such matters.

There are elements of guidance to which local authorities or the Local Government Commission must not only have regard but on which they will have to take action. I have picked up at random the guidance for the Local Government Commission which states with regard to functions in paragraph (9) that the commission should consider arrangements for law and order services—police, magistrates' courts and probation services along with others—in formulating its recommendations about local government structure. The Secretary of State will instruct the Local Government Commission to have regard to the guidance. It will be a breach if it has regard to the guidance and does not consider arrangements for law and order. It must positively do that because to have regard and simply ignore will simply not be acceptable to Parliament.

The tabling of this amendment has given us an opportunity to consider matters which were raised in Committee. I listened then, as I have listened today, to arguments put forward that guidance issued by the Secretary of State cannot be contravened or, if so, that it cannot be regarded as guidance.

I must urge your Lordships to read carefully the provisions of subsections (3) (e) and (3) (0 of Clause 9. They make it clear that the regulations which the Secretary of State would be empowered to make under Clause 9 would provide for guidance to be issued and would require any contravention of that guidance to be taken into account in determining whether an authority had acted anti-competitively. In the case of an authority acting competitively it will have had to have regard to the guidance and, if the guidance has been disregarded, it will be considered to be in breach of the guidance. That would be part of the information that would allow the Secretary of State to make a judgment. The guidance in question would therefore be clearly underpinned in regulations and would thus be given a different and more formal character than circulars of guidance which the Secretary of State customarily sends out to local authorities on a range of matters.

As I explained in Committee, making provision in regulations in this way would mean that the guidance in question would be as objective as possible. It would be reasonable and appropriate to expect local authorities generally to act in accordance with the guidance. By the same token, it would be reasonable and appropriate for the Secretary of State to consider whether they had acted in accordance, or had contravened this guidance, if and when he had to take a view of whether they had acted anti-competitively, as he must do in considering the possible use of his sanction powers under the Local Government, Planning and Land Act 1980 and the Local Government Act 1988. It would also mean that there would be a test for the courts to apply if they were required to decide whether or not an authority had acted anti-competitively. That would help authorities to be certain of their position in the event of any legal challenge by an aggrieved contractor.

We have considered the points which have been made about subsections (3)(e)and (3)(f) of Clause 9. For the reasons that I have given, we consider that the present drafting is right. I agree with my noble friend Lord Balfour and hope that the amendments will not be pressed, but I understand that we must return to the original amendment proposed by the noble Baroness, Lady Hollis.

Lord McIntosh of Haringey

My Lords, we do indeed. I do not wish to divert from the rules of debate for Report stage, but, as my noble friend moved the original amendment, another amendment to which she did not speak has been spoken to and replied to by the Minister without any of us having an opportunity to intervene on the matter. I regret that the Minister has raised on this second debate within a debate the issue of guidance and instructions and has raised it in the way that she has because her argument is attempting to pull itself up by its own bootstraps.

The Minister says that subsections (3)(e) and (f) provide that guidance can be contravened and that contravening guidance is an offence. Whether it is a sin or a crime, I am not quite clear. However, she has not answered the point made by the noble Lord, Lord Airedale, that, not just in common sense and in the common understanding of the English language, but in the legislation before us, guidance has not been used in that way. It has not been thought to be automatically wrong to contravene the guidance. You cannot contravene guidance; you can only fail to have regard to it.

The Minister chose to use in support of her argument the guidance given to the Local Government Commission rather than the guidance given to local authorities. She said that it would be wrong of the Local Government Commission to fail to give the consideration to the guidance that is required by the guidance. We might go that far. We might well say that the Local Government Commission or a relevant authority could well be required under law to give consideration to guidance, just as it might be required to have regard to guidance. What it cannot do and what this Bill should not say is that anybody, whether it is a local government commission or a local authority, should be required to adhere to guidance and that there should be such a thing as contravention of guidance. Otherwise the English language is being distorted beyond all recognition.

As I said, this matter has come up in a somewhat unusual and unorthodox way at Report stage. We have a debate within a debate which I should have preferred to have taken separately. Clearly my noble friend Lady Hollis must do as she thinks fit with the amendment before the House. But I give notice that this is a matter to which we shall certainly return at Third Reading and certainly we shall frame it in such a way as to seek to return in legislation to common sense and democratic principles, because they are being contravened in the legislation that is before us now.

11 p.m.

Baroness Hollis of Heigham

My Lords, I suspect that I am out of my depth procedurally, but I believe that what I should do, subject to the House's guidance, is respond to Amendment No. 52 and to Amendments Nos. 53 and 54 to which I spoke but not respond to Amendment No. 54A. If I am wrong on that, I shall be guided by the House.

Despite the late hour, I should like to thank the Minister for a full reply. That is a pleasant change after the abbreviated answers that we have so far been privileged to hear. There are two points that I should like to make. The Minister said that because the sanctions were there under the Act that was the reason why the statistics were so low. In other words, the local authorities did not present themselves because of the existence of the sanctions. I feel that that would be a fair comment on the Minister's reply.

In that case, if the existing sanctions are so effective in depressing anti-competitive behaviour, why change the law? If the sanctions are working exactly as the Minister would wish and they have, so to speak, been internalised by local authorities, why do we need any further change in the law?

The Minister went on to quote that there had been 43 additional complaints in the past few months. I do not know. Again, I stand to be corrected, but that does not seem to be to be a lot. I understood that there was a large number of complaints after the first round, partly from PULSE for propaganda reasons and partly from disgruntled contractors saying that it was not a fair cop. What happened was that when the Secretary of Stage reviewed the complaints, he chose not to act because those complaints were not regarded as valid. I understand that the Minister could only properly cite in aid valid complaints. If they are complaints that one has failed to win the contract, that may say much more about the state of the economy and the desperation of contractors to win any business than it does about the state of competitive tendering.

The second point that the Minister raised, which I thought was rather more worrying, was the implication that the Government needed the power to ensure consistency of practice between local authorities. Ministers have spoken—indeed, the Minister did tonight—of standardising documentation, for example. That is a very short step from requiring standard specifications and nationalised tenders. I suggest to noble Lords that it should be for each local authority, as both the client and the buyer of services, to decide how it wants to engage in a contract to purchase services from either its own DSO or a private contractor.

I suggest that ensuring standardisation among local authorities is a clear attempt to change the law by the back door as it stands in the 1980 and 1988 Acts. Changing the law by the back door should not surprise us because, after all, that is what the Henry VIII problem was all about. I withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 53 and 54 not moved.]

Lord Airedale had given notice of his intention to move Amendment No. 54A:

Page 9, line 41, leave out ("contravention of) and insert ("failure to have regard to").

The noble Lord said: My Lords, we have already had a good discussion on this amendment. I do not therefore propose to move it.

[Amendment No. 54A not moved.]

Lord McIntosh of Haringey moved Amendment No. 55:

Page 9, line 45, at end insert:

("( ) No regulation may be made under this section which requires, or may have the effect of requiring a denned authority to:

  1. (a) disregard its fiduciary obligations to its taxpayers or chargepayers; or
  2. (b) accept a tender which does not reflect the full costs to that tenderer of carrying out the work; or
  3. (c) accept a tender which in the opinion of the authority presents an unacceptable operational or financial risk;
and where a defined authority is acting reasonably in not accepting a tender in respect of (a), (b) or (c) above (that may otherwise be considered by the Secretary of State to be conduct which has the effect of restricting, preventing or distorting competition) that action by a defined authority shall be a full defence to any action by the Secretary of State under section 14 of the 1988 Act or section 19B of the 1980 Act.").

The noble Lord said: My Lords, I shall speak also to Amendment No. 58. Both amendments relate in slightly different terms to the issue which the Government, with a remarkable lack of enterprise in their metaphors, insist on calling the level playing field.

Let us consider what the level playing field means and consider the 1988 Act as well as the proposals in the Bill. With regard to the 1988 Act, a good deal of time was spent arguing against Opposition amendments which sought to remove the strict definitions of what were commercial and uncommercial considerations. Noble Lords who were unfortunate enough to sit through those debates may recall that on many occasions we believed that it would be proper for a local authority to take account of such matters as the training provided to the staff of those submitting tenders to a local authority, the minimum wages, the compliance with health and safety regulations, the adequacy of their pension fund and the adequacy of their performance bonds. There are many examples of ways in which we sought to ensure that compulsory competitive tenders were not won almost solely on price but on a range of relevant considerations which anyone in normal business would expect to take into account.

We hear no more of goods commercial and uncommercial. There is a new phrase for that in the 1991 Bill. The phrase now is competitive or anti-competitive activity. The whole clause is devoted to defining competitive and anti-competitive activity. Those factors appear directed towards the objective of securing that local authority services are privatised rather than of securing that they are undertaken in the best possible way.

The Minister was not at all friendly to my noble friend Lady Hollis when she quoted from the chief executive of the Conservative county of Norfolk at Committee stage. He asked the Government to come clean about their objective. Do they really want the best services or do they simply want privatised services? I ask the question again because the Minister earlier today reminded us of one of the most wicked provisions of the 1988 Act. It provided various protections for quality but they applied only when it was competition between a local authority's own internal direct labour organisation and an outside contractor. Where the local authority did not wish its direct service organisation to compete for the tender none of the conditions of quality applied. A classic example of that was Bromley. The local authority decided to privatise a service. I regret that I do not have the details before me; it is not an example that has come to mind since 1988. The local authority allowed a management buy-out of the service that was being put out for competitive tender so that the tender was not between the local authority's own internal service but a number of outside contractors. Therefore, none of the quality provisions was required which would otherwise apply to a tender between a local authority's own services and outside potential contractors.

The 1988 Act is not being repealed in that sense. That unfairness continues. Different standards are being applied when a local authority's own services are being considered from those applied when the competition is between different external contractors. As a result it is not surprising that we feel it necessary to include in the Bill the protection that a local authority must maintain its fiduciary obligations to taxpayers, the protection against it being required to accept a tender which does not reflect the full costs of carrying out the work and the protection against it being required to accept a tender which presents an unacceptable operational or financial risk.

In tabling Amendment No. 58 we believe that the local authority should be reimbursed if it is required by regulations laid by the Secretary of State to: disregard matters which incur actual costs … take account of matters in a manner or to an extent which do not reflect the actual cost … or assume notional saving figures which are not achieved in practice".

These are real threats. They are ways in which regulation by the Secretary of State can upset what is called the level playing field. They can secure that outside contractors have an unfair and unreasonable advantage. I do not say that we want that advantage to be removed for the sake of the local authority internal service providers. We want it removed because the people who use the service require the tendering procedure to be genuinely fair. The procedures proposed by Government in this legislation, like the procedures of the 1988 Act, are not fair. They are designed to secure privatisation even at the expense of efficiency, effectiveness and good service. I beg to move.

Earl Howe

My Lords, these amendments seek to limit the regulation-making power sought in Clause 9. Amendment No. 55 would provide that regulations could not require an authority to follow an approach to the financial evaluation of tenders if that approach diverged from the authority's own assessment of what was financially appropriate; and it would provide that an authority's pursuit of the latter would be a defence against the use by the Secretary of State of his sanction powers under the 1980 and 1988 Acts.

I do not propose to spend too long debating what is the fiduciary duty of a local authority. Of course, it is fundamentally important that authorities have regard to their obligations to act as wise stewards of the funding that comes to them from the Exchequer, from local charge payers and from other sources. There is no conflict between that and the need to comply with specific legislation such as the Local Government Act 1988. The making of regulations such as are foreseen under Clause 9 will remove uncertainties in this area and thus make it easier for local authorities to discharge their obligations. Indeed, it could be argued that local authorities have a fiduciary duty to encourage competition.

Paragraph (b) of the amendment provides that an authority should not be required to accept a tender which does not reflect the full costs to that tenderer of carrying out the work. How are we to assume that a local authority would be able to judge that? It is of the essence of competitive tendering that external tenderers have the opportunity to submit bids to carry out work based on their special knowledge of the tasks and techniques involved. That special knowledge often will not be shared by local authorities. If local authorities were able simply to impose their own assumptions about working methods and productivity levels on tendering exercises the point of competition would be lost.

Finally, paragraph (c) is a sneaky part of the amendment. It would provide that an authority should not be required to accept a tender which it judged to present an unacceptable operational or financial risk. I cannot stress too strongly that we do not see the effect of compulsory competitive tendering as being to involve local authorities in unacceptable risk. However, we cannot allow local authorities to overstate risk factors to the effective exclusion of all but the in-house tenderer. If that were to happen, there would be a very real risk of a different kind; namely, that the charge payers of an authority would be forced to pay over the odds to support a workforce that was cushioned from any competitive challenge.

Baroness Hollis of Heigham

My Lords—

Earl Howe

The noble Baroness may groan but that is the consequence of what she proposes.

11.15 p.m.

Lord McIntosh of Haringey

My Lords, the noble Earl tempts us to intervene. Will he not recognise that, even in the limited number of competitive tenders which have gone out to private organisations, there have been a substantial number where there has been an unacceptable operational and financial risk, where contracts have had to be withdrawn and where the contractors have gone bust? I can think of a number of sports centres where that has happened. If we want to bandy figures, does not the noble Earl agree that the numbers of private contractors who have gone bust who are unable to fulfil their obligations under their tenders are substantially larger than the numbers which have had to be called in by the Secretary of State, and which a few moments ago the Minister cited as a reason for stronger controls over local authority tendering procedures?

Earl Howe

My Lords, I cannot comment on the statistics. Of course, it is important for a local authority to judge whether there is an operational or financial risk. That is part of its duty. However, this amendment proposes that it could fall back on that as an excuse at any time that it did not wish to go out to tender. We take exception to that.

Amendment No. 58 seeks to insert a new subsection in Clause 9. I take that the purpose of the amendment is to ensure that if Clause 9 is used to make regulations along the lines set out in the consultation paper Competing for Quality it should not result in local taxpayers being out of pocket.

Paragraphs 1.19 to 1.21 of the consultation document set out the treatment proposed for some of the items which are not integral to the cost of doing the work but which are, nevertheless, commonly considered in tender evaluation by local authorities. The aim of the Government in prescribing this treatment is to ensure that local taxpayers are given the opportunity to benefit from the efficiency improvements which may be available from accepting an outside bid if the outside bidder can do the work at a lower price than can the in-house team. Of course, the acceptance of an external bid may result in up-front costs such as redundancy costs for in-house staff.

It may be difficult for a local authority to reduce overheads quickly if it stops doing the work itself, but the Government believe that such matters should not be used as an excuse by authorities to decide not to make the change from in-house to external contractor when the latter can do the work more efficiently. What is needed is a balance between any short-term costs and the long-term benefits to local taxpayers. That is what our proposals seek to provide.

Against that background regulations under Clause 9 will seek to ensure that the right balance is struck. I can see no case, therefore, for the national taxpayer to subsidise the transition to more efficient provision where the external bidder is able to do the same work at lower cost. The transition will be in the local taxpayers' interests.

We cannot accept either of the amendments and I hope that the noble Lord, Lord McIntosh, will not press them.

Lord McIntosh of Haringey

My Lords, listening to the noble Earl I am reminded of when I first joined Hornsey Borough Council in Middlesex in 1963. The first meeting which I attended, of the general purposes committee, was concerned with the standing orders for contracts. We had a sensible and useful debate in that Conservative-controlled council. At the end of it we recommended to the council various amendments to our standing orders for contracts. It was never suggested to us that the standing orders for contracts which we adopted should be laid down by the Secretary of State or should be subject to his overriding control. It was thought that our job was to secure the best interests of our ratepayers when we were issuing contracts in the private sector. Everybody—Labour and Conservative alike—thought that that was the case. There was never any difficulty about it.

Since that time of course successive legislation by the Government has progressively reduced the scope of local authority discretion in standing orders on contracts and the way that they carry them out. It started, as we were reminded by Ministers earlier, with the Local Government, Planning and Land Act 1980 but continued apace with the Local Government Act 1988. That was the stage at which central government control of the contracting procedures of local authorities became virtually complete. It is almost inconceivable that further legislation should be required to extend that control over contracts, but that is what is being proposed.

It is not being proposed by legislation; it is being proposed by regulation. As the Government continue to remind us, there is a consultation document out and the replies to it are not required until 31st January. Therefore the way in which the Government respond to that consultation will never be adequately considered by the House. It is just conceivable that they may be considered by another place, although I doubt it.

Therefore we have enabling legislation which seeks to take away the last tiny spot of responsibility of local authorities to their poll tax payers, electors and the users of their services. It seeks to impose upon them conditions which will inevitably result in tenders going out to private contractors who will not provide as good or as efficient a service as could be provided in other circumstances by the internal resources of the council.

It is no good the noble Earl saying that there must be a balance between long-term and short-term interests. Of course there must be. If he had read Amendment No. 58 closely he would have realised that that amendment was not seeking to overturn contracts which made the balance in the way that he would want it to be made. All we are saying is that when it is clearly to the disadvantage of the local authority and its residents, the Secretary of State should reimburse that local authority for the losses which will be made by the procedures he has imposed.

The amendments are modest. They do not require any extension of principle. They do not provide any huge loophole for even the most malevolent local authority to leap through. They simply attempt to achieve in practice what the Government falsely claim to achieve in the legislation—a level playing field.

I am sorry that it is inappropriate at this time of the night to pursue this matter to a vote. I am totally unconvinced by the arguments used in response to the amendments, and it may be a matter to which we shall wish to return at Third Reading. In the meantime, I beg leave to withdraw Amendment No. 55.

Amendment, by leave, withdrawn.

Baroness Hollis of Heigham moved Amendment No. 56:

Page 9, line 45, at end insert:

("(3A) No regulations may be made under this section which have the effect of limiting the size of a performance bond reasonably required by a local authority.").

The noble Baroness said: My Lords, it will not take me long to move Amendment No. 56. It follows on from the issues explored in previous amendments. It is simple. It has always been recognised in building and engineering contracts that one needs performance bonds. I have seen those bonds drawn on when, for example, a private house-building company involved in timber-frame housing went bankrupt. At enormous expense the local authority had to pick up the contract half-way through and complete it.

As my noble friend Lord McIntosh said, we recently saw the collapse of two major leisure companies—Crossland's and Clifford Barnett—affecting around 19 leisure centres and 1,000 staff. We have seen dozens of contracts for cleaning and the like which have had to be called in.

Performance bonds necessarily exist because there is a risk in going out to a private firm, especially where that private firm has no track record and may have bought the work as a desperate last throw to stay in business. In other words a performance bond is both a guarantee of the financial and trading probity of the company, on the one hand, and on the other an insurance for local government—and therefore its local taxpayers who are all too often ignored in this equation. The less experienced the firm, or the more it has had to undercut in order to buy the work, the more necessary is that performance bond.

All that this amendment seeks is to ensure that the Secretary of State will not unreasonably limit the size of performance bond that the local authority may require. A local authority's judgment is still open to judicial review and appropriate safeguards, but it allows a local authority to make a local judgment and to protect the interests of local taxpayers. The fear that lies behind this amendment is that the Secretary of State may unreasonably limit the size of performance bonds to allow the marginal, the cowboy, the inexperienced or the financially insecure firm to compete unwisely for contracts.

As we have seen too often in discussions on this Bill, if the local authority does not protect the interests of local taxpayers it is clear that the Government, in their pressure for CCT, will not do so. As a result we have tabled this amendment. I beg to move.

Earl Howe

My Lords, this amendment, like a number of others put down in Committee and Report stage, seeks to restrict the Secretary of State's power to use regulations under Clause 9 to define anticompetitive behaviour. Clearly the Government find such attempts unacceptable. Nevertheless, it would no doubt help the House if I set down the Government's attitude to performance bonds generally.

We accept, first of all, that it is legitimate for authorities to require performance bonds. Circular 1/91 issued by my department in March of this year, and the more recent consultation document, accept that. But we consider that it is possible, through excessive bonds, to discourage competition. We believe that the value of the bond should be related to the costs which an authority would incur in remedying defaults by a contractor and/or finding another contractor in the event of total failure. We have suggested, in the circular, that bonds should not normally amount to more than 10 per cent. to 15 per cent. of contract value. We may wish to express in regulations a maximum bond or we may simply wish to repeat the advice on the size of bonds in Circular 1/91 in the guidance to be issued under Clause 9 and to be referred to in Clause 9 regulations. This amendment would prevent us from making such regulations or issuing such guidance.

As a separate issue, we note that the cost of any performance bond required will be reflected in the contractor's bid. There will be no similar sum in the DSO's bid even though there is a risk of default by a DSO, or even of total failure if it fails to meet its financial objective and is closed down by the Secretary of State, using his powers under Section 19B of the 1980 Act or Section 14 of the 1988 Act. This disparity between internal and external bids distorts competition. It is for this reason that we propose in regulations to require the cost of providing a bond—which is, in effect, the contractor's insurance premium—to be deducted from his bid when it is evaluated by the client.

I hope this explanation has been helpful. The amendment is an unacceptable limitation on the Clause 9 power. In particular, it would prevent us from limiting performance bonds in the regulations or even from repeating the advice in Circular 1/91 in the guidance we shall issue under Clause 9. I hope the noble Baroness will withdraw the amendment.

Baroness Hollis of Heigham

My Lords, again we note the Minister's reply. In some senses by enlarging the concept of what he deemed as acceptable performance bonds that was useful information. But the suggestion of an unfair playing field and therefore the deduction of performance bonds from the bids—an issue we discussed at Committee stage—is not actually the amendment under review at the moment.

On that amendment we agreed to disagree as to whether or not it was an appropriate cost to be charged.

We are seeking to ensure that the Secretary of State does not limit the size of a performance bond in such a way that should that company default—and increasingly in the present economic climate companies are doing so—the local charge payer, or taxpayer, is not protected from the cost of remedying that default. It may be that the indications given by the Minister will be sufficient to prevent that situation occurring. Nonetheless, in CCT there is a risk for the local authority in terms of inexperienced firms buying work as loss leaders to stay afloat, then defaulting and that cost being passed on to the local taxpayer. It has nowhere else to go except to them. The point of the performance bond is to secure that position.

I suggest to the Minister that local authorities are in a much better position than the Secretary of State can ever be to decide what level of risk is therefore acceptable and what level of performance bond is therefore appropriate. However, I note the noble Earl's reply and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

11.30 p.m.

[Amendments Nos. 57 to 60 not moved.]

Clause 10 [Publicity for tender specifications]:

Baroness Hollis of Heigham moved Amendment No. 61:

Page 10, line 36, at end insert ("and under section 2(9) of the 1988 Act, the Secretary of State shall prescribe a de minimis provision of £250,000 in any financial year to be uprated at regular intervals in line with inflation").

The noble Baroness said: My Lords, the purpose of the amendment is to raise the current de minimis rule from £100,000 a year to £250,000 a year. I suggest that £100,000 is too low. A rise to £250,000 would help small authorities which would otherwise have to put out their services to competition at considerable expense. We discussed this issue in Committee, but Report stage gives us an opportunity to query the Minister again. Since then it has become clear from the PA Consulting Group Report, as reported in the Local Government Chronicle, and from the comments made by Mr. Howard Davies on behalf of the Audit Commission at a recent conference that both bodies recommend a de minimis rule.

The de minimis level of £100,000 exempts only very small-scale operations employing few people. Perhaps a comparison with provisions under the Local Government, Planning and Land Act 1980 is relevant here. They exempt from competition small DLOs with fewer than 15 employees, a level far more valuable and generous in monetary terms than that allowed for activities defined under the 1988 Act. In Committee the Minister, on behalf of the Secretary of State, offered no explanation of why the value of the exemption set at £100,000 in 1988 should fall in real terms in succeeding years. Local authorities' fiduciary duty to charge payers is increasingly threatened as the value reduces through inflation and they are forced into uneconomic tendering exercises for small scales of work. Oxfordshire is extremely worried about this. In Committee the noble Baroness, Lady Hamwee, quoted the evidence from Scotland, where 50 per cent. of the contracts received no competitive bid and the local authorities in Orkney, Shetland and the Western Isles, Nairn District Council and the Highlands Regional Council were all put to considerable and unnecessary cost.

Does the Minister expect to inflation-proof the £100,000 rule? Is he prepared to meet our suggestion that it should he raised to £250,000 as a realistic, sensible and cost-effective sum under the present circumstances? I beg to move.

Earl Howe

My Lords, the noble Baroness stated correctly that a de minimis exemption already exists in the legislation governing CCT. The 1988 exemptions order made by the Secretary of State under Section 2(9) of the Local Government Act 1988 provides that work to a value of less than £100,000 per annum is not a "defined activity" and is therefore exempt from CCT. That provision applies, as would orders made in accordance with the amendment proposed by the noble Baroness, to activities already subject to the discipline of competitive tendering, and unless altered or limited in scope by my right honourable friend would also apply to any new activities added under the provisions of this Bill or existing legislation.

As my noble friend Lady Blatch explained in Committee, the existing £100,000 de minimis rule reflects a judgment as to the point at which it would not be right to oblige an authority to comply with the accounting and reporting requirements of CCT and not any belief that there are no benefits in putting work of a lower value out to tender. On the contrary, tendering, properly managed, gives opportunities for savings regardless of the size of the authority concerned and regardless of the size of the contract. I have to say that we have as yet received no evidence to suggest that the £100,000 limit is too tight.

It may be the case that in the light of new evidence my right honourable friend would revise his judgment, or that in the case of new activities a different judgment would be appropriate. It is quite right that that sort of judgment should be the subject of secondary legislation. The amendment would, however, prevent the exercise of judgment and would prevent any revision to the real level of a de minimis provision—which is exactly what the noble Baroness seeks to do—except through primary legislation. In the light of what I have said, I hope that the noble Baroness is at least partially reassured and that she will feel able to withdraw the amendment.

Baroness Hollis of Heigham

My Lords, it gives me enormous pleasure to be able to say at this time of night that I find that to be a helpful response. I did not think that I would be saying so today. The Minister accepted not only that the figure needs to be kept under review, but that we can also realistically expect to see the figure adjusted, should local authorities bring evidence forward to the Secretary of State that the de minimis rule is increasingly a handicap. I am sure that local authorities and local authority associations will take the hint—indeed, it was more than a hint—from the Minister seriously and that they will produce the evidence that he needs to bring the figure forward in a realistic way. Having said that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 62 not moved.]

Baroness Hollis of Heigham moved Amendment No. 62A:

After Clause 10, insert the following new clause:

("Public service contracts and EC legislation

. The exercise of the powers conferred on the Secretary of State by and under sections 8 and 9 above shall he without prejudice to the exercise by local authorities of discretion in the selection of contract award criteria within the framework of the rules laid down in European Communities legislation relating to the co-ordination of procedures for the award of public service contracts.").

The noble Baroness said: My Lords, I have pleasure in moving the last amendment tonight. The amendment is a revised version of that which we moved in Committee. We were not entirely persuaded by the Minister's response then or by subsequent comments. However, unlike the amendment moved in Committee, this one is premised on the Minister's comments at that time on the supremacy of European law over national law.

Article 32 of the EC directive states that when applied to the priority services category of professional and technical services—for example, the very ones which we have been discussing tonight such as finance, computing, R&D, architecture and engineering—there should first be a qualitative selection analogous to the quality threshold in the White Paper; and, secondly, that local or regional bodies are free to choose either the economically most advantageous tender, including consideration of such items as delivery dates, technical service, technical merit, or, rather than the economically more advantageous tender, the lowest price only. In other words, every local and regional authority in Europe as defined in Article 32 has the choice between the most advantageous tender or the lowest price.

Similarly, DoE Circular 16/90 states: There arc only two alternative criteria: 'lowest price' and [the] 'most economically advantageous tender'. The criterion chosen should normally be the latter as if the 'lowest price' is chosen, contracting authorities may not necessarily obtain value for money as defined in the Government's consolidated guidelines on public purchasing policy".

I am simply asking the Minister to confirm, first, that, following the draft of EC legislation, British local authorities should have the same choice between the economically most advantageous and the lowest price when choosing which tender to accept; and, secondly, that not only should they be able to follow EC law or directives but they should also be able to follow the DoE's own guidance on purchasing policy where this is clearly in the best interests of the local taxpayer. In moving the amendment, I invite the Minister to clarify the situation. I beg to move.

Earl Howe

My Lords, as my noble friend Lady Blatch made clear, during the debate in Committee, we fully accept that European Community law must always take precedence over UK legislation when there is a conflict between the two. But there is no such conflict in this case. The draft directive on public services contracts, like the existing directives on works and supplies, provides that, so far as EC law is concerned, local authorities may (I stress the word "may") have a choice between two alternative types of criteria: lowest price tender only or economically most advantageous tender. But there is nothing in that to prevent UK legislation from restricting that choice to only one of those two criteria if there are good reasons for doing so in the circumstances of any particular situation. We have explained why we believe that there are strong and sound reasons for so restricting it in certain cases. That is why we have suggested a double envelope tendering procedure which amounts to lowest price only following a quality sift. Nor is there anything in the EC legislation which would prevent the Secretary of State from making regulations about the treatment by authorities of costs extraneous to the bid when comparing the in-house with the external bidders, as proposed in the consultation document.

I should add that the current wording of the draft directive itself would appear to make my point quite clearly, although it must be remembered that that directive is still only in the comparatively early stages of its development, and that the wording may change over time; but as it stands at present, the wording of the relevant article opens with the words, Without prejudice to national law". I also remind your Lordships that the situation contemplated in the draft directive will normally be different from that with which we are concerned in the Bill. The draft directive was framed with the kind of circumstances in mind where the competition is between different external contractors and the authority's own workforce is not involved. In the circumstances envisaged in our legislation, however, the DSO is involved, and it is that that leads us to believe that in some cases it might be appropriate to limit the criteria on which contract decisions can be made. It is for that reason that we believe it is justifiable, indeed essential, to limit the discretion allowed in those circumstances to local authorities. In the light of that explanation, I hope that the noble Baroness may feel able to withdraw the amendment.

Baroness Hollis of Heigham

My Lords, that is a pretty sorry answer, if I may say so. If I understood him correctly, the noble Earl was saying that in Europe local authorities, having gone through a quality consideration, may have the choice between the economically most advantageous and lowest price tender, but in Britain there will be no such choice open to local authorities. The Secretary of State will decide for us. The Secretary of State will decide what, in the rest of the EC, is regarded properly and appropriately as a matter for local decision making.

I shall query the difference between the lowest price and the economically most advantageous tender. What the Minister says this has been at the core of the debates on CCT—is that he recognises that there can be a distinction between the economically most advantageous and the lowest price tender. What is the difference? The lowest price is the difference. We are aware of that. The economically most advantageous tender is what optimises the position of the local authority client; that is, taking into account not just the savings from the tender but the continuing costs that may fall upon the taxpayer. In other words, the economically most advantageous tender, by definition, benefits the local authority as client, and therefore the local authority in its role as custodian of the public interest and therefore the local taxpayer.

The Minister is saying that local authorities will be directed by the Secretary of State to accept the cheapest or the lowest price tender even when—as my noble friend has already said this evening—that is not economically most advantageous. They will be paying more to obtain less. The Secretary of State will be requiring local authorities, in their capacity as client, on behalf of their taxpayers to pay more to obtain less. They will be required to take the cheapest tender, even when that is not the most economically advantageous one. That is utterly deplorable. How can local authorities look after the money that they are raising from local taxpayers if they are told by the Secretary of State to spend it in ways that are not economically most advantageous? At that point, the local authorities' whole fiduciary duty collapses.

I hope that between now and Third Reading the Minister will reflect upon this issue and the difference between the economically most advantageous and the cheapest price tender, and still see whether he will require local authorities to spend more to obtain less, as his remarks suggested. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Earl Howe

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

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

House adjourned at fifteen minutes before midnight.