Deregulation and Contracting Out Bill

HL Deb 20 July 1994 vol 557 cc257-98

4.19 p.m.

The Minister of State, Department of Trade and Industry (Lord Strathclyde)

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Lord Strathclyde.)

On Question, Motion agreed to.

House in Committee accordingly.

[The DEPUTY CHAIRMAN OF COMMITTEES (Lord Strabolgi) in the Chair.]

Lord Williams of Elvel moved Amendment No. 197F: Before Clause 58, insert the following new clause:

("Preliminary consultation on contracting out

.—(1) Before a Minister makes an order under sections 58 or 59 below, he shall

1. (a) consult such organisations as appear to him to be representative of interests substantially affected by his proposals (including, in the case of an order under section 59, persons representative of local government); and
2. (b) consult such other persons as he considers appropriate.

(2) If it appears to the Minister, as a result of the consultation required by subsection (1) above, that it is appropriate to vary the whole or any part of his proposals, he shall undertake such further consultation with respect to the variations as appears to him to be appropriate.

(3) If, after the conclusion of—

1. (a) the consultation required by subsection (a) above; and
2. (b) any further consultation undertaken as mentioned in subsection (2) above, the Minister considers it appropriate to proceed with the making of an order under sections 58 or 59 below, he shall lay before Parliament a document containing his proposals in the form of a draft of the order, together with details of the matters specified in subsection (4) below.

(4) The matters referred to in subsection (3) above are—

1. (a) the burden, authorisation or requirement which it is proposed to remove or reduce;
2. (b) whether the existing provision affords any necessary protection and, if so, how that protection is to be continued if the burden, authorisation or requirement is removed or reduced;
3. (c) whether any savings in cost are estimated to result from the proposals and, if so, either the estimated amount or the reasons why savings should be expected;
4. (d) any other benefits which are expected to flow from the removal or reduction of the burden, authorisation or requirement,
5. (e) any consultation undertaken as required by subsection (1) or subsection (2) above;
6. (f) any representations received as a result of that consultation; and
7. (g) the changes (if any) which the Minister has made to his original proposals in the light of those representations.

(5) In giving details of the representations referred to in subsection (4) (f) above, the Minister shall not disclose any information relating to a particular person or business except—

1. (a) with the consent of that person or of the person carrying on that business; or
2. (b) in such a manner as not to identify that person or business.

(6) If, before the day on which this section comes into force, any consultation was undertaken which, had it been undertaken after that day, would to any extent have satisfied the requirements of subsection (1) above, those requirements shall to that extent be taken to have been satisfied.")

The noble Lord said: In moving this amendment it may be for the convenience of the Committee if I speak also to Amendments Nos. 197G and 205 and to the Motion That Clause 66 shall stand part of the Bill.

Perhaps I may have the attention of the Minister who I believe is still the Minister of State for the Department of Trade and Industry. We are now embarking on the contracting out provisions of the Deregulation and Contracting Out Bill. My purpose in moving the amendment and speaking to the amendments in the name of the noble Lord, Lord Rodgers of Quarry Bank, is to draw attention to the report of the Delegated Powers Scrutiny Committee. Perhaps I may quote first from paragraph 6 of the 9th report of that committee which reads: The Committee accordingly urges the House to consider whether the procedure for deregulation orders, with the improved safeguards for parliamentary scrutiny, should apply not only to orders under Chapter I of Part I of the bill, but also to delegated legislation made under Clauses 27, 58 and 59 of the bill".

As Members of the Committee will be aware, we are dealing with Clauses 58 and 59. There is; no doubt that the Bill as drafted gives power to Ministers in pursuance of the contracting out provisions to amend, by order— or, indeed, possibly by contract, although I am open to advice on that aspect of the matter—primary legislation. The question is whether the Committee is prepared to see those provisions made without the safeguards which are contained in the deregulation part of the Bill; namely, Part I.

Perhaps I may draw the attention of Members of the Committee to the provisions of Clause 66. Subsection (1) (b) says: An Order under Section 58 or 59 above— (b) may contain provisions"—

and I emphasise the following words— (including provisions modifying enactments)".

An enactment is defined in Clause 68 as, an enactment contained in an Act … [or] an enactment contained in subordinate legislation",

and that applies whenever an Act is passed or whenever an order is made.

We have had many arguments and much discussion on the deregulation part of the Bill; but to date this Committee has not addressed the matter raised by the Delegated Powers Scrutiny Committee. The amendments to which I speak would satisfy the concerns of the scrutiny committee. Amendment No. 197F provides for, preliminary consultation on contracting out". Amendment No. 197G tracks the arrangements made in Part I of the Bill for parliamentary consideration of contracting out.

We are advised by the Delegated Powers Scrutiny Committee to look most seriously at the matter. The amendments are designed to enable this Committee to look very seriously at the matter. Members of the Committee will know the arguments involved. Therefore, I shall not repeat the arguments that were put forward during earlier stages of the Committee. I shall simply say that I believe that what we propose is right. We should like to ensure that noble Lords in Committee, or, if not in Committee, then at a later stage of the Bill's proceedings, accept the recommendation—and I believe that it is a recommendation—of the Delegated Powers Scrutiny Committee that all orders made under Part II of the Bill should be subject to the same procedure as orders made under Part I. I beg to move.

Lord Strathclyde

The noble Lord, Lord Williams, is absolutely right on two counts. First of all, this is the first of the amendments dealing with the contracting out proposals in this part of the Bill. Secondly, the decision as to whether such orders should require the use of the special powers which were debated in connection with Clauses 1 to 4, is immensely important. Further, the amendments would implement one of the recommendations of the Delegated Powers Scrutiny Committee.

The Government fully accept that the powers provided for in Clauses 1 to 4 are exceptional. They could be used to make deregulatory changes to primary legislation across a wide range of policy areas. It is for that reason that requirements for the consultation and a unique parliamentary procedure have been proposed for orders made under that power. The Government have carefully considered the committee's view that Clauses 58 and 59 confer a widely drawn order-making power for which the same parliamentary procedure could be appropriate.

The powers in Clauses 58 and 59 can be used only for a narrowly defined purpose; namely, to allow the authorisation of contractors to exercise statutory functions on behalf of Ministers, office holders or local authorities which may be exercised at present only by their staff. The nature of the function itself remains unchanged, although the people who carry out the day-to-day business may alter as a result of the powers in Clauses 58 and 59.

During the passage of the Bill, Parliament will have had the opportunity to consider in detail the principle of extending contracting and market testing to such statutory functions, and the application of that principle in practice. For example, in Clause 61 the Bill makes explicit provision to preserve existing lines of accountability for statutory functions contracted out following the use of the power. Explicit safeguards are also provided on the face of the Bill to preserve and extend existing protection for confidential information disclosed to a contractor. Further, subject to a few express exceptions, Clause 60 excludes any function which would necessarily interfere with or affect the liberty of an individual: it is a power or right of entry, search or seizure into or of any property; or it is a power to make secondary legislation.

Parliament will thus be able, during the Bill's passage, to consider in detail the key issue to which the principle of contracting statutory functions covered by the Bill might give rise in any individual case and the safeguards which are needed. The order-making power in Clauses 58 and 59 would be used only to apply the principle to particular cases.

As the noble Lord, Lord Williams, pointed out, Clause 66 provides that an order may contain provisions which are consequential upon, or supplemental or incidental to the provisions made by the order. I believe that such provisions do not constitute a wide power to amend primary legislation. They are well precedented in order-making powers subject to the normal affirmative resolution procedure and are always strictly and narrowly construed. Where more than minimal sweeping-up changes to current legislation would be required to permit contracting out of a particular statutory function, primary legislation would then be needed to achieve them; indeed, some such provisions are included on the face of the Bill in Schedule 14. The power in Clause 66(1) (b) could not be used to make any of the amendments to legislation contained in Schedule 14.

Against that background, and having taken careful account of the Committee's views, the Government remain of the view that the affirmative resolution procedure will offer an appropriate level of scrutiny for orders made under Clauses 58 and 59.

As regards consultation, again it is important to recognise the differences between the order-making power in Clauses 1 to 4 and the contracting out order-making power in Clauses 58 and 59. The contracting out order-making power could not be used to change the purpose of a statutory function; it merely makes it possible for contractors to be employed to carry out a function. That is only possible if at present the staff of a Minister, an office holder or local authority are able to carry out such a function. The function itself remains unaltered. In that way the interests of third parties are unaffected by the change in who carries out a particular function.

Therefore, the Government do not believe that it is necessary to define the requirements for consulting third parties in legislation. However, there will be circumstances, perhaps because the clients of a service may feel that they are affected by a change in provider, in which the Minister may consider it necessary to consult more widely. I can assure Members of the Committee that consultation will be undertaken as appropriate. As an example, the Central Statistical Office has already conducted a survey of business attitudes to possible contracting out in the collection of business statistics. But we do not believe that it would be appropriate to impose an additional statutory consultation requirement. Such a requirement would prevent Ministers from responding flexibly as appropriate to particular cases.

At the beginning I joined with the noble Lord, Lord Williams of Elvel, in saying that this was an important issue. It is one that the Government have considered in great detail, not least because of the recommendation of the Scrutiny Committee. I hope that this Committee will agree to go ahead in the way that the Bill is currently drafted.

4.30 p.m.

Lord Rodgers of Quarry Bank

My wits may have been dulled by the earlier business, but, as I understood it, the Minister sought to reply to an amendment that I had not yet moved to which the noble Lord, Lord Williams, referred in his opening remarks: Amendment No. 205 standing in my name, which was taken with this group, and Clause 66 stand part. The Minister's remarks make it more difficult for me to make a powerful case, to which I hope he will reply sympathetically.

Having listened to him carefully, either my wits have been partly dulled by the business so far or he has not sufficiently explained why Clauses 1 to 4 are exceptional, whereas there is nothing exceptional in Clauses 58 and 59. Further, he has not explained, at least to my satisfaction, except in the most peremptory and passing way, why the recommendations of the scrutiny committee, which on previous occasions he has acknowledged have validity, have no validity on this occasion. In the case of Amendment No. 196, which sought to implement the recommendation in paragraph 8 of the ninth report of the Scrutiny Committee in respect of Clause 39, the Minister found it impossible to accept the amendment but found a better way to achieve the same purpose with his amendment. Perhaps it is still not too late to hope, given that we are only at the Committee stage of the Bill, that he may likewise say that, whereas Amendment No. 205 in its drafting falls short in its purpose, he is prepared to bring forward an amendment of his own at a later stage.

Grave concern has been expressed on all sides of the House about the scrutiny provisions of the Bill. That is not to say that the Minister did not anticipate some of them and that steps have not already been taken to provide safeguards. But it remains the case that the House is disturbed. I should have thought that it would require only a very small gesture on the part of the Minister now to accept the recommendations as they apply to Clauses 58 and 59, which are in paragraph 6 of the report of the scrutiny committee. The Minister will recall that because of the late hour we did not seek to move the amendment that related to Clause 27. Therefore, on that occasion the Minister was not called upon to respond and indicate his wishes.

I am sorry that he has anticipated what I may say about Amendment No. 205 this afternoon. I simply ask him to reconsider whether the views of the scrutiny committee should be set aside and perhaps a clearer way found to explain to your Lordships why Clauses 1 to 4 are exceptional but the clauses at present being considered have no exceptional quality.

Lord Simon of Glaisdale

I should like to raise an incidental matter that relates to the power to make transitional orders which the Minister mentioned particularly. I raise it because of the very curious use made of the power to make transitional orders that arose out of the Child Support Act. It applied a series of formulae for the assessment of child support by absent parents in place of the flexible and much more satisfactory assessment of maintenance by the courts.

Your Lordships thoroughly examined that Act as a Bill and disapproved of it thoroughly. Your Lordships disapproved not only of that provision, which was at the heart of the Bill, but of a great many other provisions. Unfortunately, as happens so often, the debates were carried on very late at night so that your Lordships had no effective parliamentary opportunity to amend the Bill. When one looks back at it, undoubtedly it ought to have been voted against at Third Reading in view of the lack of response by the Government. As soon as that Act came into force it was apprehended that the formulae operated capriciously and harshly. There were loud outcries, so much so that Members of another place had a bigger volume of correspondence than they have ever had on any other issue. It even caused the department to take notice. Even though some of the assessments had had statutory force and had been applicable in law, nevertheless the department changed the formulae in some respects under the rubric that they were operating the power to make transitional provisions. They said that what had happened was not what they expected when the Bill was passed into law, which was undoubtedly true, and they were therefore entitled to operate the transitional power to alleviate the hardship that the Act had caused.

The Joint Committee on Statutory Instruments, under the very able chairmanship of the late Mr. Bob Cryer— whose demise is so much regretted—immediately pointed out that the use of the word "transitional" was, in a phrase that rang alarm bells, unusual and unexpected, as of course it was. It was used not to ease the provisions so far as they had not come into law but to alter them so far as they had come into law. I believe that all that is required at this moment is an assurance from the Minister that he does not intend to use the word "transitional" and operate the power to make transitional orders in any unusual or unexpected way, as the Department of Social Security did in relation to the Child Support Act.

Lord Strathclyde

I am grateful to the noble and learned Lord, Lord Simon, and the noble Lord, Lord Rodgers. I am sorry if I pre-empted what the noble Lord intended to say. The point that he made and the point made by the noble Lord, Lord Williams of Elvel, are very similar. Their amendments are grouped together on the Marshalled List. Therefore perhaps I should have been rather slower to get to my feet and allowed the noble Lord, Lord Rodgers, to make his comments.

The fundamental principle with which we are dealing here, and the difference between Clauses 1 to 4 and Clauses 58 to 59, is that Clauses 1 to 4 provide for the power to amend a great deal of primary legislation whereas in these later clauses we are discussing the principle of contracting out. It is well precedented in legislation that once the principle has been decided the detail is dealt with under orders which are subject to the affirmative resolution procedure.

Lord Williams of Elvel

Before the noble Lord continues, will he explain to the Committee exactly what is meant by "the exercise of functions"? Does it imply that the legal responsibility for, say, a public service is contracted out? Or does the legal responsibility for the performance of that service remain with the person to whom the statute confers that obligation?

Lord Strathclyde

The noble Lord is right. As he said in the latter part of his intervention, the legal responsibility remains with the office holder, the Minister or the local authority. That responsibility cannot be contracted out. All we are talking about is the contracting out of the function itself.

Lord Williams of Elvel

We are talking about the contracting out of the exercise of the function, not the function itself.

Lord Strathclyde

Yes, that is exactly what I meant. It is the exercise of the function.

The noble and learned Lord, Lord Simon of Glaisdale, dealt with a point which had not been drawn to my attention previously. I do not pretend to be an expert on the Child Support Act and all the ramifications of the orders. However, I am in a position to confirm to the noble and learned Lord and to give him the reassurance that he seeks that we have absolutely no intention of using the power to make transitional provisions in any unusual way. I hope that that is helpful to the noble and learned Lord.

Lord Simon of Glaisdale

I said unusual or unexpected.

Lord Strathclyde

I am happy to give the noble and learned Lord the reassurance that the power will not be used in an unusual or unexpected way.

Lord Rodgers of Quarry Bank

Before the noble Lord sits down perhaps I may raise this point. In response to an intervention by the noble Lord, Lord Williams, the Minister said that the clauses refer to the exercise of functions. Can he help the Committee by indicating a practical example of how matters will be dealt with differently in future as a result of these clauses?

Your Lordships' House considered the final stages of the Local Government Bill in the early part of 1992. Clause 8(2) (b) dealt with new powers for contracting out and extending that to services. It may not be that these clauses apply to that part of the 1992 Act, but can the noble Lord explain which particular services will now be dealt with by contractors as a result of this provision, subject to orders being made?

Lord Strathclyde

That is an entirely fair question. It is one which is not easy to answer. This part of the Bill allows for the contracting out of the exercise of statutory functions. Therefore, those functions which are currently governed by statute and which have to be carried out either by a Minister, an office holder or a local authority will be able to be carried out by third party contractors.

The noble Lord seeks an example. For instance, the contracting out of the administration of a government pension fund, which at the moment is a statutory function of a Minister—and which can obviously be undertaken by his civil servants—could not be undertaken by a private company. That is the kind of operation which we are seeking to contract out.

We have been able, or sought, to contract out non-statutory functions either through primary legislation or, where there is no necessity for primary legislation, we have gone ahead and market tested in the normal way. The Government's competing for quality programme, through the introduction of competition, has already brought about significant improvements in efficiency and achieved considerable savings in public expenditure. Indeed, since April 1992 more than £1.1 billion worth of activities have been market tested. That has been extremely helpful. I hope that that explains the position.

4.45 p.m.

Lord Williams of Elvel

Perhaps I may pursue the argument which the Minister has brought forward about the contracting out of the exercise of functions. He quite rightly responded to the noble Lord, Lord Rodgers, with an example. At the moment a government pension fund is a statutory responsibility of Ministers. According to the Government's view it may well be contracted out. As I understand from what the Minister said previously, the legal responsibility remains with the Minister. In that case—and the question whether Clause 66 shall stand part of the Bill is part of this grouping—why do we have in Clause 66(1) (b) the words: may contain provisions (including provisions modifying enactments)"? As I understand the logic of the Minister's argument, there is no delegation of responsibility for the functions. The functions and responsibilities set by statute will remain with those whom the statute has indicated. The functions will be contracted out without legal responsibility.

Lord Strathclyde

I think that I can assist the noble Lord, Lord Williams. Clause 61 deals with the question of liability. It is made plain in subsection (2) that the authorised person passes his liability back to the Minister, the office holder or local authority and so on. That is important.

What I have not understood is the point that the noble Lord, Lord Williams, is making in relation to Clause 66, which deals with the orders. I understand that this is a form of words which is commonly used in legislation and that there is nothing mysterious about the phrase "including provisions modifying enactments" because that is qualified by the words: which are consequential upon, or supplemental or incidental to and so on. Those words are fixed and well understood as to their meaning. Therefore the Government cannot rampage through the statute book.

Lord Williams of Elvel

With respect to the Minister, that is the whole point of my argument. If there is provision to amend primary legislation under the contracting out part of the Bill, then that provision should be subject to the same criteria as are contained in the deregulation part of the Bill. If there is, as the Minister seems to be arguing, no provision to amend primary legislation by order, therefore he will no doubt wish to oppose the Motion that Clause 66 stand part of the Bill.

I accept that it is perfectly in order for contracting out to take place by contract and that the Minister, local authorities, or whoever has the statutory function, will remain responsible in law. That is not a small point, as I am sure the Minister understands. The transfer of the legal responsibility for a public service, in whatever form that may take, as opposed to contracting out its implementation, is in my view likely to be seen as a turning point in the history of public service provision at national and local level. For that reason I believe that the Minister should concede the point that the noble Lord, Lord Rodgers, and I are making that he should accept our view on the amendments that I am moving.

Lord Strathclyde

I believe that we are talking at cross purposes. I am not sure on which exact point we disagree. There is the issue of whether the order-making powers of Clauses 1 to 4 should be appropriate for contracting out. I contend that they are not, for the reasons I explained. Nothing that the noble Lord said has led me to believe that I am wrong in that view. I do not think that he has argued the point.

The noble Lord made a point about legal liability. As I explained, that is firmly dealt with under Clause 61. We shall deal with Clause 61 in a moment.

The noble Lord said one thing which confused me. He gave the impression that the order-making power was not amending primary legislation. Of course it amends primary legislation; there is no question about that. However, it amends primary legislation in a small way. The principle of contracting out is being dealt with now using the full force of the parliamentary process. Once the principle is agreed, then I believe that it is entirely appropriate that the detail of how it will work in practice should be done using the affirmative resolution procedure.

Lord Williams of Elvel

I do not wish to take up the Committee's time for longer than I have to. I believe that we do not have a meeting of minds. I am sorry that the Minister has not understood the point that I sought to make. The point is simply this, if I may repeat myself for the hundredth time. Where an order amends primary legislation, affirmative procedure is not enough. We have had the argument under the deregulation part of the Bill. I believe that the same argument applies under the contracting out part of the Bill. I believe that the Delegated Powers Scrutiny Committee of your Lordships' House made the same point. I invite the Committee to consider that.

Having established that we do not seem to have a meeting of minds on the basic point of the argument, I hope that the Minister will read what I have said. I shall read what the Minister said. No doubt we shall have another opportunity to consider the issue. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 197G not moved.]

Clause 58 [Functions of Ministers and office-holders]:

Lord Williams of Elvel moved Amendment No. 197H: Page 53, line 11, after ("(2)") insert ("or (2A)").

The noble Lord said: In moving the amendment it may be for the convenience of the Committee if I speak also to Amendment No. 199A. The two amendments go together. The first is a paving amendment for the second. The substantive amendment is Amendment No. 199A.

I find this such an obvious amendment that I am sure the Government will have no difficulty in accepting it. It is perfectly clear that in all defence matters where there is no threat to the defence of the United Kingdom, it is in order for certain procedures of contracting out to take place. I hope that no Member of the Committee will challenge the contracting out of the washing of chief of staffs' cars, or whatever it may be.

Amendment No. 199A is therefore rather precisely drafted. It states: A function is excluded … if the contracting-out of that function would adversely affect the defence of the United Kingdom". I should have thought that that was an absolutely obvious amendment. We cannot contract out the Army, the Navy or the Air Force. We cannot contract out the fundamental core of the defence of the United Kingdom. If the Minister disagrees with that, I shall be interested to hear his arguments. I emphasise that I do not refer to the peripheral services where there would possibly be no adverse effect on the defence of the United Kingdom. I am simply making sure that the functions which represent the core defence of the United Kingdom should not be subject to contracting out procedure. I had thought that that was perfectly obvious. I hope that the Committee will accept the amendment. I beg to move.

Lord Boyd-Carpenter

I hope that my noble friend has an answer to the question because, on the face of it, what the noble Lord says is rather disturbing.

Lord Strathclyde

I always like to be in a position to give my noble friend some comfort. I think that I shall be able to do so on this matter. The noble Lord, Lord Williams, says that since it is so perfectly obvious to make the provision, why have we not done so? We have not done so for some very good reasons.

The plain fact is that there are very few functions in the defence field which would fall within the scope of the contracting out power. Many functions in the defence area involve the exercise of prerogative powers which fall outside the terms of Part II, whereas others, the functions of the defence council, for instance, to make regulations, are excluded by the Bill itself by virtue of Clause 60.

However, there is more to this argument than meets the eye. For many years the private sector has been right at the heart of the defence of the United Elingdom. As but one example, the ballistic missile early warning system at Fylingdales, hardly a peripheral activity, has been ran by a private contractor for three decades with notable and repeatedly verified benefits. The dockyards have benefited greatly from private management, and the Government intend to remove them completely from the constraints of the public sector. During the Gulf War, the private sector played a major part in the rapid and effective supply of behind-the-lines services, as did many other parts of the private sector already operating from within and completely separate from the Ministry of Defence. Long may that continue.

I suspect that the noble Lord, Lord Williams, is probing our views on the matter. I hope that I have explained the issue in some detail. As the Committee will know, the Secretary of State for Defence recently published his report, Front Line First. That includes further possible extensions to the principle of contracting out. All those factors will simply make our defence forces even more effective than they currently are. I hope that after that explanation, the noble Lord will withdraw the amendment.

Lord Williams of Elvel

From what the Minister says, I take it that he accepts my amendment and that there will be no contracting out of any function which adversely affects the defence of the United Kingdom. I take it that that is what he says.

He is right in saying that the private sector plays a part in this, that, and the other area of the defence of the United Kingdom. I do not wish to challenge that. I assume that the assurances that he has given to the Committee are tantamount to accepting the point that I make. He is right to say that it is a probing amendment. I believe that I am right to ask the Government for a proper response on the matter. Whether that response is satisfactory, we shall have to see.

If the Committee decided to insert the proposed provision into the Bill, it would be incumbent upon the government of the day, whichever party forms that government, to demonstrate that any contracting out which took place did not adversely affect the defence of the United Kingdom. The onus of proof would be on the government of the day to demonstrate that. Otherwise they could be challenged under the Act, as it would then be.

I take it from what the noble Lord said that he accepts the basic thrust of what I say and that the Government will not contract out any function which would adversely affect the defence of the United Kingdom.

Lord Strathclyde

The noble Lord encourages me to rise to my feet once more. I was trying to say that, apart from anything else, I do not think that there is any particular reason that the defence services should in themselves be excluded from competition.

Furthermore, it is worth remembering that the provisions in this Bill are enabling only. They also ensure that the Minister remains accountable and legally liable for the carrying out of a function when contractors are employed. The safeguards in the Bill set out parameters within which each potential candidate for contracting out can be considered on its own merits. These amendments are ultimately unnecessary. We should not be in the business in this Chamber of putting into legislation unnecessary amendments.

As I said earlier, the vast amount of defence regulation and defence work falls under the prerogative powers which fall outside the terms of Part II. It is an unnecessary burden for the Government to have to prove, in the words of the amendment, that each piece of contracting out does not adversely affect the defence of the United Kingdom".

5 p.m.

Lord Williams of Elvel

The Minister has slightly changed his tune. I thought when he started off, in his first reply, that he was saying that he accepted the basic premise of what I was trying to establish, but that it was unnecessary because of this, that and thus. Now he seems to be sliding away from that position, saying that it is not right to have this sort of thing in the Bill because there is no reason why the Armed Forces like anybody else should not be subject to the contracting out procedure. If that is the case, I would simply insist that if the defence of the United Kingdom is adversely ' affected by any contracting out procedure, it is up to the Government to prove that.

Having said that, I do not think that we shall get very far with this argument. I shall look at the matter to see whether we shall return to it at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Harris of Greenwich moved Amendment No. 197J. Page 53, line 11, after ("(2)") insert ("or (2B)").

The noble Lord said: I beg leave to move this amendment on behalf of the noble Lord, Lord Allen of Abbeydale, who cannot be with us today. To be blunt, I am disappointed that there is no Home Office Minister in the Chamber to deal with this issue.

The question that I raise is that of the interface between this legislation and the present Home Office inquiry into core police functions. However well the noble Lord, Lord Strathclyde, has been briefed, he does not have any direct personal knowledge of these matters. It is most unfortunate that a Home Office Minister is not here to deal with this situation, which is causing serious disquiet in the police service. When we come back to this subject at Report—as we probably shall— let me make it quite clear that I, and 1 am sure others, will expect the matter to be dealt with by a Home Office Minister and not by somebody from the DTI.

The purpose of this brief debate and the questions that I intend to ask raise an issue of considerable importance to the police service and the public. The question that we want answered by the noble Lord—uninstructed other than by, presumably, a Home Office official—is this: precisely what are the Government planning to do in respect of the present inquiry which is now taking place into core police responsibilities? Is there a likelihood that the present Bill could be used to transfer major responsibilities from the police to private security firms?

The purpose of this amendment is to allow the Government to explain what precisely are their intentions. As I have indicated, there is serious concern in the police service, and indeed outside it, about what is now going on. If anything, that concern has intensified as a result of Mr. Howard's speech to the British Security Industry Association a few days ago, when he indicated that it could rest assured that more work would be coming the way of its members.

The Government's review of police functions has, as the noble Lord, Lord Strathclyde, will have been told in the briefing material supplied to him, the following terms of reference: to examine the services provided by the police; to make recommendations about the most cost-effective way of delivering core police services; and to assess the scope for relinquishing ancillary tasks".

Those are the terms of reference. They were announced by the Home Secretary; but of course in reality they are the terms of reference that have been determined by the Treasury. The central objective is clearly to cut police budgets.

The dangers of that approach are, I would have thought, obvious. What ancillary tasks, as they are now described, are likely to be dropped? Will this Bill be used to effect such changes? What about the crime prevention activities of the police? Are they not a core police function? What about visits to schools? What about help to confused elderly people who may inadvertently have lost their keys and go to the police station in order to get assistance from the police? What about helping to trace missing people? The reason that the British police service has such a high international reputation is that it performs just those social service functions with considerable skill and sensitivity. There is a growing fear that in a crude cost-cutting exercise there will be pressure for those responsibilities to be abandoned.

The Committee should have no doubt—as I am sure those who follow these matters have no doubt—about the risks involved in an approach along those lines. We have seen the police outside our shores reduced to the status of exclusively law enforcement agencies. That is true in particular in many inner-city areas of the United Slates and in many parts of continental Europe. The effect of such an approach has been deeply damaging. Public confidence in the police in those countries has declined sharply and, as a result, their capacity to deal effectively with law enforcement problems has been diminished.

Fortunately, so far we have declined to follow this particular approach. The reason that British police officers—by and large; there are obviously notable exceptions—get on better with the public than is the case with their colleagues in the United States and many other parts of Europe is precisely because of the social service responsibilities that they cheerfully carry. They are probably this country's only 24-hour social service.

I have indicated already the alarm in the police service about the Government's intentions. Let me summarise the view of a number of chief police officers who have expressed concerns on this matter. The chief constable of South Yorkshire—an experienced officer, formerly with the Metropolitan Police—said this: What I see is all the antecedent action which in other public services—health and education—has led to privatisation … We ask the Home Office: 'Please tell us what is different this time. Why should we be different to health?' And we get back: 'Privatisation is not on the agenda'. So we are mistrustful".

The chief constable of Derbyshire said: We need a Royal Commission. There has to be a proper debate … There is a feeling among chief officers that there is a hidden agenda, a great deal of suspicion".

The acting chief constable of North Wales said: I am cynical about the Home Office's aims. If you privatise it means you do it cheaper, and the public will lose out. If we are left with the functions which the Home Office sees as important, we will be left dealing with the public only in situations of conflict".

The chief constable of the Thames Valley force said: The review could change the whole face of policing without the public being aware. It's ironic that at the very time, more and more countries are taking a look at our policing because it's perceived to be the best, there are policies in train which could change the very things that make us unique".

The chief constable of Avon and Somerset said: The stark reality is that we have already been,given the verdict and now they are trying to fill in the facts".

Those are the views of just a handful of chief officers. So far as I am aware, they are the views of every senior chief officer in this country; and in the debate when we are discussing this matter we do not even have a Home Office Minister sitting on the Government Front Bench. In my view this is no way to conduct business which is as serious as this.

The reality of the matter is that there is now a climate of deep suspicion in the police services. They simply do not believe the assurances that they have been given that there is not a hidden agenda in the Treasury to compel the police to divest themselves of some of their most important responsibilities. Some believe that legislation of this character can be used to effect dramatic changes.

It is hardly surprising that there is such suspicion. Many noble Lords will remember only too clearly the follies of the Sheehy Committee whose members were hand-picked by Mr. Clarke to produce the report that he wanted. Those recommendations were largely dropped after 20,000 policemen had gathered together at Wembley to express their views on the matter. They remember also the present Chancellor's attempt to put political placemen into the chairmanship of every police authority in this country—a proposal which was destroyed as a result of opposition in this House. Now, once again the Government appear to be preparing to take action which could have deeply damaging consequences. Once again there is no form of genuine independent inquiry offered in order to analyse the issues before us.

In a few moments the noble Lord, Lord Strathclyde, no doubt will tell us that the Government have no such intentions; that they are looking only at ancillary tasks, such as, perhaps, escorting wide loads on motorways; and that in any event the public will be consulted, probably some time next January, according; to the leaks which have appeared in the newspapers.

I believe that this debate, brief though it will be, is of considerable importance. It gives the Government the opportunity to set out their intentions with some clarity. But I hope that we will remember that the police service in this country is not the property of one group of politicians who happen to form the current Government of this country. To quote a former commissioner of the Metropolitan Police, they are the people's police. No sensible person wants yet another major conflict between the police service and the Government. But Ministers should be under no illusion: if there is any attempt to impose on the police privatisation of functions which the service and the public see as essential to carrying out the wide social service responsibilities to which I referred, I suspect that many of us in all parts of the House will resist them with all the power at our command. I beg to move.

Lord Williams of Elvel

I should like to support the amendment of the noble Lord, Lord Harris. I regret the absence today of both the noble Lord, Lord Allen of Abbeydale, who would have been extremely persuasive on this issue, and my noble friend Lady Hilton of Eggardon. The Minister must not say that it is not his fault. I do not say that it is his fault. I merely regret their absence. If the Minister will allow me to proceed without interruption and without mutterings from the Privy Council Bench opposite, I should like to ask the noble Lord, Lord Strathclyde, one simple question. Do the Government propose to contract out the police national computer? If so, let them say so.

Lord Strathclyde

I now have an opportunity of taking part in this debate, much to the regret of the noble Lord, Lord Harris of Greenwich. I have to say that I have not come across the noble Lord, Lord Harris of Greenwich, before in my ministerial capacity. I have come across many of his colleagues and have much enjoyed doing business with them. I do not feel that the relationship that I must have with the noble Lord, Lord Harris, will be a particularly fruitful one because he is very unhappy that I am here. I have to say that I am very unhappy that he is over there. In fact, if he felt quite so strongly about the lack of a Minister from the Home Office, perhaps he should not have moved his amendment in the first place.

Lord Harris of Greenwich

If the noble Lord will allow me to intervene, that is an absurd suggestion. The noble Lord knows perfectly well that there is a major review going on at the moment of core police functions. It did not occur to me before entering the Chamber today that the noble Earl, Lord Ferrers, would not be here. I automatically assumed that he would be anxious to deal with these particular issues. I know that he has been working very hard recently. But the idea that I would not move the amendment simply because he was not here is a quite extraordinary statement to make.

5.15 p.m.

Lord Strathclyde

I have no idea whether or not my noble friend Lord Ferrers wanted to deal with the noble Lord, Lord Harris of Greenwich. It is not a subject that we discuss on many occasions. However, I am the Minister responsible for the Bill and I shall deal with the Bill for as long as I am responsible. If the noble Lord, Lord Harris of Greenwich, does not like it, that is his problem and not mine. I found his words at the beginning gratuitous and insulting. I would not wish to hear him speak in that vein again; otherwise, I can assure him that I shall be less than helpful in my responses to him.

The statutory functions of the police are multifarious. The most important involve the exercise of powers of stop and search, entry, search and seizure, arrest and detention. More minor powers involve regulatory powers of inspection and licensing across a wide range of activities, for instance, inspecting chemists' registers.

Clause 60 of the Bill, which we shall detail in a moment, excludes from the contracting out order-making power in Clause 58 any functions which affect the liberty of any individual or are powers or rights of entry, search into or seizure of property. Clause 60 therefore excludes the core functions of the police from the contracting out order-making power. The police authorities already successfully employ contractors to carry out services and activities. There is no reason that that should not continue.

Your Lordships may also be aware that the Home Office is currently reviewing police tasks to see whether any can be carried out more effectively and efficiently through transfer to other more appropriate agencies. It is not in the interests of the police or the taxpayer to have widely trained police officers performing routine or administrative functions which do not require their skills or powers. However, I should point out that there are no plans to use the contracting out order-making power in respect of any functions of the police. But it would not make sense at this stage to rule out completely the consideration of exposing the services to competition should they fall within the scope of the Clause 58 order-making power.

That includes the question put by the noble Lord, Lord Williams of Elvel. I am not certain whether or not the national police computer is a statutory function. If it is a statutory function, it could fall under the provisions of the Bill. If it is not, it falls outwith the statutory powers and contracting out could be dealt with in the normal way.

The Committee will also be aware that the Security Service Act 1989 put the security service on a statutory footing for the first time. That Act sets out the functions of the security service. They are functions of the service and not of a Minister or an officer. Such functions therefore lie outside the scope of Clause 58.

The 1989 Act also confers functions on the director general of the service. Those functions are personal to the director general and may not be carried out by her officers. Again, therefore, they lie outside the scope of the contracting out order-making power.

The 1989 Act does not permit the functions of the Secretary of State to be performed by one of his officials except in cases of urgency and even then they are of temporary validity. In any event, Clause 60(1) (c) excludes such functions from the order-making power. In respect of the security services therefore the amendment would be negatory.

The exclusions to the Bill which currently exist offer a significant safeguard. Also, the great extent to which functions in the areas of defence and of the police are able at present to be contracted out successfully, without the need for additional order-making powers, suggests that the amendments are both anomalous and unnecessary. I urge the Committee therefore to resist the amendments if they are pressed, but I hope that the noble Lord, Lord Harris, can withdraw them.

Lord Williams of Elvel

I understand that the Minister cannot reply immediately to my question regarding the police national computer. He does not know its status. But will he be good enough to write to me stating the Government's intentions in regard to the police national computer? It is an important point.

Lord Strathclyde

I shall be delighted to do so.

Lord Peston

Perhaps I can intervene on one matter. Both in his answer to an earlier amendment on defence and now in this one, the Minister referred to Clause 60. I find it impossible to see any reference to defence in Clause 60. I did not raise it then and the Minister refers again to Clause 60 with regard to the police. I assume he received high-powered legal advice. If he looks at Clause 60(1) (a), which refers to the liberty of the individual, he may agree that I could persuasively argue that everything the Government do refers one way or another to the liberty of the individual. Therefore I could interpret that provision as saying that no contracting out could possibly take place in any way whatever. That is my first point and perhaps the Minister can explain it.

Secondly, can the noble Lord interpret Clause 60 in terms of the safeguards that he says exist? I cannot see them with regard to the police in the terms referred to earlier by the noble Lord, Lord Harris of Greenwich, and I cannot see them in connection with defence. The noble Lord emphasised Clause 60 as being important; but I have difficulty in understanding what it is meant to do for these purposes.

Lord Strathclyde

; I cannot remember referring to Clause 60 vis à vis defence. I may have done so but I cannot remember in what regard. I shall no doubt be able to read it in Hansard tomorrow.

Lord Peston

I took the noble Lord to say that Clause 60 prevented what he referred to as the "core" function—in that case of defence—being in danger. It may be that it was a slip of the tongue; I am willing to accept that. But I was intrigued by his reference to it because I cannot see any connection.

Lord Strathclyde

Flicking briefly back to my notes on the last amendment, I cannot see that I mentioned Clause 60 at all. However, I may well have done. In my reply to the noble Lord, Lord Williams, I said that Clause 60 excludes the core functions of the police because of Clause 60(1) (b) which refers to the, power or right of entry, search or seizure into or of any property", and of course Clause 60(1) (a) dealing with liberty. I shall not be drawn into a great debate on Clause 60 at this stage because we shall be dealing with it in some detail—including an amendment which seeks to define the word "liberty", and that is something to which we can look forward—later this afternoon.

The fundamental point is that we do not believe that the core functions of the police can be contracted out under this Bill because of Clause 60. Other aspects of services are provided by the police which it may be appropriate to contract out. We are not even suggesting that in the Bill. All we are suggesting in the Bill is that where there exists a statutory function, the Government should be able to look at it in terms of whether or not there should be contracting out. An order will then be made and brought before Parliament at that time.

Lord Harris of Greenwich

The beginning of the speech of the noble.Lord, Lord Strathclyde, was even by recent standards unusual. I understand that if one is not nice to him he will not feel obliged to answer questions. I have not heard a more preposterous statement made by a Minister of the Crown since being involved in politics.

The reason for my original statement was obvious. When we are discussing what are essentially Home Office issues, it is not sensible to have a DTI Minister answering. An inquiry on core police functions was announced by the Home Secretary. The various questions I raised have not been answered in any way by the noble Lord, Lord Strathclyde. He merely read out his briefing material—supplied, no doubt, by the Home Office. I do not blame him for that. He relies on that because he has no day-to-day ministerial responsibility. But if we are to discuss these matters in a sensible fashion it means that the noble Earl, Lord Ferrers—who always goes to considerable trouble to assist the House and who has direct personal responsibility for the police—should be here to answer questions. For instance, he would have been able to answer the question put to him by the noble Lord, Lord Williams of Elvel; namely, what is the position about the police national computer? It is a reasonable question to ask. For the most understandable reasons—because he does not come from the Home Office—the noble Lord, Lord Strathclyde, is unable to answer the question. I put other questions to him which have not been answered.

This is not a sensible way of proceeding. We shall certainly come back to the matter—if I can have the attention of the noble Lord, Lord Strathclyde, for a moment —on Report. I urge the noble Lord to suggest to his noble friend Lord Ferrers that he assists the House. Would the noble Lord like to intervene?

Lord Strathclyde

In this Chamber I reply for Her Majesty's Government. If the noble Lord does not know that by now then he should make it his business to find out.

Lord Harris of Greenwich

Having been in this House and having been a Minister rather longer than the noble Lord, Lord Strathclyde, I know that as well as he does. All I can say to him, in the nicest possible way because I want an answer to some of these questions— now that we have this appalling threat hanging over us that he may not wish to give us an answer in the future—is that I hope he will discuss the matter with the noble Earl, Lord Ferrers, between now and Report stage. Unlike the demeanour of the noble Lord, the noble Earl, Lord Ferrers, always goes to the greatest personal trouble to answer serious questions. He would have known the answer to the police national computer issue; he would have known the answer to all the other questions raised which the noble Lord, Lord Strathclyde—again, for understandable reasons—had not the faintest idea about other than the briefing supplied by the Home Office. It is not a sensible way of proceeding when we face a situation of widespread concern in the police service in relation to what is happening at the moment. All they will see in Hansard tomorrow is a reply from a DTI Minister who had not the faintest idea what the facts of the matter were other than what appeared in his briefing note.

As I indicated, the amendment was tabled for probing purposes. We shall probe further on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 198 had been withdrawn from the Marshalled List.]

Lord Williams of Elvel moved Amendment No. 199:

Page 53, line 18, at end insert: ("(f) any other function which is of a judicial nature.").

The noble Lord said: Amendment No. 199 stands in my name and that of my noble friend Lord Williams of Mostyn. For the convenience of the Committee, I shall speak also to Amendments Nos. 201K, 201L, 206A and 215B. Amendment No. 199 is a probing amendment.

Exclusions from judicial functions which are contained in the Bill, particularly in Section 58(2), do not seem to clear up the matter. What I mean by the "matter" is that there are many functions exercised by judicial or quasi judicial bodies and we need to know whether or not they are to be contracted out. As I understand the Bill as drafted, a number of sensitive areas could easily be contracted out. For instance, certain aspects of the High Court—the Queen's Bench, the Bankruptcy Court, the Restrictive Practices Court, the tipstaffs and the taxation of bills—and certain tribunals and part of the Lord Chancellor's Department could be contracted out. Possibly some aspects of the Crown Court could be contracted out. On all these matters we have tried—when I say "we" I mean that my noble friend Lord Williams of Mostyn and I have tried and indeed other noble Lords have tried—to ascertain from the noble and learned Lord the Lord Chancellor exactly what is and what is not within the ambit of the Bill. It has been very difficult to get a final reply.

In moving the amendment and speaking to the amendments to Schedule 14 I am asking exactly what the Government believe should be contracted out in the way of organisations which have a judicial function. Others much more expert than I will be able to enlarge on the argument but that is the basic premise. It is a probing amendment at the moment, although we may well wish to come back to it at a later stage. We wish to know from the Government precisely what this means. I beg to move.

5.30 p.m.

Lord Ackner

In the Notes on Clauses to Clause 58(2) it is stated in regard to the judiciary: The functions are identified so as to mark the constitutional separation of the judges from the executive". The clause does not do that because, as your Lordships see, all it does is to specify that there is to be excluded from the section, if its exercise would constitute the exercise of jurisdiction of any of the following". There is then set out from (a) to (e) the senior appellate courts down to the county court. That seems to be the Government's limit of their understanding of where the judiciary are to be found.

My noble and learned friend Lord Brightman, who regrets that he is not able to be present today, asked of the Minister in a Written Question on 28th June: To what judicial functions of what office-holders Clause 58 of the Deregulation and Contracting Out Bill (as at present drafted) will apply". The rather limited answer he received from the noble Lord, Lord Strathclyde, was in these terms: The functions of the judges are excluded from the ambit of the clause by the conditions in Clause 58(1) coupled with the exclusions in Clause 58(2). There is no comprehensive list of functions of office-holders. Nor is there a clearly defined distinction between judicial and other public functions. It is not, therefore, practicable to compile a list of judicial functions as requested".—[Official Report, 28/6/94; col. WA39–40.] It is therefore a little difficult to see how Clause 58(2) has identified functions so as to mark the constitutional separation of the judges from the Executive.

There is an interesting schedule—Schedule 11 to the Courts and Legal Services Act 1990—which identifies judges who are barred from legal practice. Those who are included, and clearly are not included in Clause 58(2), are as follows: stipendiary magistrate; social security commissioner; president of Social Security Appeal Tribunals; president of the Industrial Tribunals; president or member of the Immigration Appeal Tribunal; member of the Lands Tribunal; president of Value Added Tax Tribunals; special commissioners appointed under Section 4 of the Taxes Management Act 1970; charity commissioner appointed under the first schedule to the Charities Act 1960; coroner appointed under Section 2 of the Coroners Act 1988. They have been specifically identified as judges and they are not, as I see it at first sight, within the protection which is referred to here.

I have consulted the Lord Chief Justice in order to see whether he wished any observations to be made. He has authorised me to say that the ambit of the clause is a source of considerable concern both to him and to other senior judges. Speaking at the Mansion House on 6th July, the Lord Chief Justice referred to recent press reports that some tribunals were being considered for possible privatisation which made it necessary, in his view, to reassert the importance of maintaining inviolate judicial independence. These are the words which I quote very shortly from his speech: Neither the Queen's Courts nor statutory Tribunals must be, nor be thought, susceptible to pressure or influence from any outside body which would be inevitable should any aspect of the judicial process be put in the hands of private contractors". As I have indicated, the Lord Chief Justice very much regrets that he is unable to be here, but he has told me that he will read the report of today's debate, and in particular what the Minister says in response to it, with great interest. Should it be necessary to do so, he will certainly speak at a later stage of the Bill's progress.

I invite the Minister to agree with the observation that it is axiomatic that the authority of determination of the rights and obligations of individuals as between each other or in relation to the Executive is the exclusive and fundamental responsibility of the judicial arm of the state. Judicial independence requires that the Queen's courts and statutory tribunals—I emphasise them—are not, and are seen not to be, susceptible to pressure or influence from any outside body or faction, as would inevitably be the case should any aspect of the judicial process be placed in the hands of private contractors.

There is grouped with the amendment moved by the noble Lord, Lord Williams of Elvel, Amendment No. 215B, which seeks to leave out paragraph 2 of Schedule 14. The paragraph and the schedule enables contractors to take over from the Lord Chancellor's Department activities of that department. Section 27 of the Courts Act 1971 vests in the Lord Chancellor the power to appoint the officers and staff of district probate registries, the Supreme Court and the county courts. The section as it stands thus prevents most of the work of court staff being undertaken by independent contractors rather than by civil servants. The amendment proposed in paragraph 2 would allow any of the functions of court staff to be undertaken by private contractors.

Some of the tasks undertaken by civil servants of the Lord Chancellor's Department have a substantial judicial element; for example, court listing. That is done on behalf of the judiciary. The drawing up of court orders is again done on behalf of the judiciary. Others are exercised under the direct supervision of the judiciary; for instance, court clerking and the personal support to judges. Those functions should be taken only by servants of the Crown.

It may also be relevant to your Lordships to know in this context that Section 110 of the Courts and Legal Services Act, which for the first time gave the parliamentary ombudsman jurisdiction to investigate the actions of court staff, of which I know my noble and learned friend Lord Hailsham has distinct recollection, expressly excluded the possibility of inquiry into acts which have this judicial element. According to Section 110(2), the ombudsman is denied jurisdiction over, Action taken by any person appointed by the Lord Chancellor as a member of the administrative staff of any court or tribunal, so far as that action is taken at the direction, or on the authority (whether expressed or implied), on any person acting in a judicial capacity or in his capacity as a member of the tribunal". Perhaps I may finally emphasise this matter. The impartiality of the courts and support for the judiciary is based on trust between the staff, the judiciary, the professions and the public. Continuity of staff employment and relationships built up over time are a crucial part of that trust. Quite understandably, contractors are motivated by profit. The varied operations run by contractors can, if applied in particular areas, create conflicts of interest and possibly undermine that trust. That makes it all the more important that this form of contracting out does not take place.

Lord Hailsham of Saint Marylebune

Perhaps I may add a word or two by way of inquiry. I do not believe that this amendment of itself is very well drafted, but there are points to be discussed. Why are the judicial officers limited in the way in which the clause would appear to suggest? For instance, there are the stipendiary magistrates who, until recently, were the only minor judiciary in London; then there are the lay magistrates all over the country. There are also quite a number of stipendiary magistrates in provincial cities. What is the situation or intention as regards the statutory tribunals which exist throughout the country and which are certainly quasi-judicial in character, although I doubt whether my noble and learned friend Lord Ackner would describe the officers who man them as judges.

There is a functionary called the president of the Employment Appeals Tribunal. It is quite certainly a court, but it is not mentioned in Clause 58 of the Bill. One can go on almost indefinitely. My noble and learned friend Lord Ackner referred to the fact that listing has been claimed—and I believe rightly claimed—by a succession of Lord Chief Justices as being a judicial and not a purely administrative function. What about the position of the ushers in courts and the persons who take charge of juries? I may be talking out of turn.

The drafting of Clause 58 may require a certain amount of attention. I know that there has been a good deal of trouble about the difference between purely administrative functions and judicial functions. There are people such as district judges who are probably part of the county court for this purpose. There are a great number of quasi-judicial officers who do not seem to be mentioned at all. I cannot speak for the judiciary of Scotland. The only specifically Scottish reference appears to be the sheriff court. But is that so? I do not want to bully my noble friend on the Front Bench, but the drafting needs looking at. I am sure that the intentions of the Government are perfectly honourable.

5.45 p.m.

Lord Lester of Herne Hill

Much of the debate on this Bill has rightly concentrated on the need to avoid any excessive delegation by Parliament, under Part I of the Bill, of its law-making powers. The constitutional issues raised by the contracting out provisions in Part II are, if anything, more important. But as I read Hansard they were scarcely touched on at all during Second Reading.

It has been said by all Members of the Committee who have spoken so far—and I gratefully and respectfully adopt what they have said—that the powers in Clause 58 in one way or another threaten the basis of the rule of law in this country, unless I misinterpret them. On the face of it, they would authorise serious breaches of Article 6 of the European Convention on Human Rights.

Perhaps I may deal with just one point to show why I share the views expressed so far. Clause 58 in its present form empowers a Minister by order made by statutory instrument, subject to the affirmative resolution procedure, to contract out any function of an office holder which is conferred by or under any enactment. "Office holder" is defined by Clause 68(1). It is apparently intended by the Government that it should include those who exercise judicial functions. I say that because, as has been said, Clause 58(2) excludes functions from the contracting out provisions if their exercise would constitute the exercise of jurisdiction by the ordinary civil courts, from the county court or, in Scotland, the sheriff court, to the Appeal Committee of this House.

Clause 60(2) also excludes any function of the official receiver attached to any court. In other words, but for Clauses 58(2) and 60(2), even the judicial functions there referred to could be contracted out and, conversely, according to the old maxim, expressio unius est exclusio alterius, any judicial functions exercised by any other independent courts or tribunals established by law to exercise judicial power in this country remain within the scope of the contracting out powers conferred by Clause 58.

Clause 60(1) (a) provides somewhat ambiguously that a function is excluded from Clause 58 if, its exercise, or a failure to exercise it, would necessarily interfere with or otherwise affect the liberty of any individual". At first blush, one might have thought that the exercise of judicial powers in civil cases—for example, about the determination by industrial tribunals of the fundamental civil right to equal pay or equal treatment without sex discrimination in employment under British and European legislation—would be classic examples of functions whose exercise would necessarily affect individual liberty.

Unfortunately, that is not how I read the relevant statutory provisions. Clause 58(2) must have been included because the Government do not consider that the exercise of jurisdiction by the ordinary civil courts comes within the Clause 60(1) (a) exception. It follows that the Government are apparently seeking powers which will enable them to contract out the exercise of the power to determine civil rights and obligations by any court or tribunal other than those specifically mentioned in Clause 58(2). I find that so extraordinary that I have read, re-read and read yet again the Bill in the hope that I am mistaken. But I believe that I am correct. Clearly, my elders and betters in the noble and learned Lords, Lord Ackner and Lord Hailsham of Saint Marylebone, are also concerned for similar reasons.

What then is so objectionable and repugnant about a power to contract out the exercise of judicial functions carried out by the many independent courts and tribunals not exempted by Clause 58(2)? A philosophical answer is given by the noble and learned Lord, Lord Hailsham of Saint Marylebone, in his fascinating, profound and perfectly timed new book, Values: Collapse and Cure, which I am delighted to advertise this afternoon. The noble and learned Lord wrote—this seems entirely apt to this issue: If the state is to operate a near monopoly of the use of force, it has to take upon itself the responsibility for the peaceful settlement of all private disputes which might lead individuals to use violence themselves as a means of self help". That is the reason why judicial power is vested exclusively in independent and impartial courts and tribunals. It is because the state has taken upon itself— and not delegated to some private contractor—the responsibility for what Article 6 of the European Convention describes as the determination of civil rights and obligations by an independent and impartial court established by law.

Very regrettably, the Government have not incorporated Article 6 into our legal system. That means that the only effective safeguards of the rule of law are safeguards which Parliament writes into the Bill to ensure that the judicial functions of all courts and tribunals in this country cannot be contracted out. Otherwise it will have to be left to the courts to construe these very ambiguous provisions and ensure compliance with Article 6 of the convention. It would surely be preferable for the matter to be put beyond doubt by accepting Amendment No. 199, or a similarly drafted amendment, which provides a crucial safeguard which is at present missing from the Bill.

Baroness Hamwee

Grouped with Amendment No. 199 are two amendments that I have tabled relating to the part of the Bill dealing with the functions of local authorities. The fact that I shall not mention the amendments which have already been debated should not be taken as an indication that I do not believe that the points raised are extremely serious. With hindsight, it may have been more convenient if the amendments had been degrouped but, in order to allow us to move on—I suspect that there is a mood to move on at something between a trot and a canter—I shall speak to the amendments briefly now.

Amendments Nos. 201K and 201L seek to exclude from the ambit of Clause 59 those functions exercised by local authorities which constitute quasi-judicial functions. I have in mind two particular areas: licensing and development control in town and country planning. Local authorities exercise many functions in relation to licensing ranging over, to take something of a random list: acupuncture; tattooing; ear-piercing and electrolysis; food and food premises; house-to-house collections; music, dancing and entertainment licences; sex shops and sex cinemas; street trading—the latter are not connected—and wild animals and zoos. The Committee will be aware that local authorities decide on the granting or refusal of planning applications.

It is not always easy to mix democratic accountability and the exercise of quasi-judicial responsibilities, as I know having juggled the various criteria myself and having observed them being juggled for some years. That is particularly the case where those elected to serve at local government level are applying rules which they have not drawn up. However, it is an area of work that needs to be sensitive to the aspirations of local communities and in which democratic accountability is an important element.

In the area of development control, I dare say that the Minister would argue that it is up to the elected members to work out their planning policies and that, using the guide of the local plan, matters are currently delegated to planning officers although they might equally be performed by contractors. However, I believe that most local authorities will not be slow to use their powers now to call back to the elected members the exercise of those functions from officer level if they feel that the decisions should be made by elected members with, as I have said, a sensitivity to the needs of the local community and an understanding of local pressures. Frankly, I am appalled at any prospect of contracting out the exercise of what, as I have said before, I believe to be local government, not merely local administration.

I refer finally to the fact that members of local authorities are required to make declarations of interest and to make it clear if they have an interest in the matters that are being determined. It is important that that is seen to be done. Many of your Lordships could speak far more forcefully than I on the need for justice to be seen to be done, but it needs to be seen to be done in this area as well as others.

Lord Strathclyde

I am grateful to all noble Lords who have spoken in this debate, and particularly the noble and learned Lord, Lord Ackner, my noble and learned friend Lord Hailsham, the noble Lord, Lord Lester of Herne Hill, and of course, the noble Lord, Lord Williams of Elvel, who moved the amendment. I join the noble Baroness, Lady Hamwee, in speaking to all the amendments in the group. It was the noble Baroness who said that these are important amendments. They are. I recognise that the amendments were tabled because of a concern, shared by the Government, about the continued independence and probity of the judicial process. I welcome the comment of the noble Lord, Lord Williams, that these are probing amendments. I shall treat them as such.

I should like first to deal with Amendments Nos. 206A and 215B and then turn to the wider questions raised by the other amendments. Clause 60(1) may already address the heart of the concern that lies behind Amendment No. 206A. That is because where the issue of proceedings will directly require an individual to attend a court or some other place on pain of some sanction, paragraph (a) will take that function outside the scope of the order-making power.

We shall be discussing the provisions of Clause 63 shortly, but this example illustrates the point well. Noble Lords will be aware that Clause 63 would, following an order and due authorisation, allow a contractor not only to take the decision to seek a liability order for non-payment of local taxes, but also to decide on what method of collection is to be used. However, that ability does not extend to an exemption from the exclusion made in Clause 60(1) (a) and an order would not extend to enabling a contractor to seek committal of a debtor to prison. At that level, the Government share the concern that a general order-making power might be used to facilitate the use of contractors to exercise such functions. In the light of the pre-existing exclusions of subsection (1) I suggest that the amendment is unnecessary and will prevent the efficient use of contractors in areas where it is entirely appropriate to consider their use.

Turning to Amendment No. 215B, approximately 10,000 staff work in the Court of Appeal, the High Court and the county courts, carrying out a wide variety of jobs ranging from mechanical and clerical tasks through to managerial functions and areas of technical expertise, such as information technology. Amendment No. 215B would give a right of monopoly supply to the public sector across a wide range of jobs, irrespective of the merits, and it cannot be right to preclude the use of non-civil servants where their use would be a more effective way of meeting the needs of the judiciary and court users and represent improved value for taxpayers' money.

My noble and learned friend the Lord Chancellor is currently exploring with the senior judiciary what functions it might be inappropriate to contract out. Subject to the outcome of those discussions, any particular proposal would be considered on its own merits, always bearing in mind the paramount need to preserve the integrity of the judicial process.

Perhaps I may turn to the wider issues raised in the debate. I can assure the Committee that we would not compromise the probity and independence of the judicial process. We attach the highest importance to the constitutional principle of the separation of the powers of the judiciary and the Executive. To mark that principle, we brought forward an amendment in another place to exclude the functions of the judges, even though it is not clear that any of them would have fallen within the scope of the Bill.

Amendment No. 199, and, in the context of local governments Amendments Nos. 20lK and 201L, would further exclude from the Bill functions of a judicial nature and quasi-judicial functions. Those go very wide, and would introduce a great degree of uncertainty into consideration of which functions were in practice covered by the Bill. They could, on some interpretations, cover activities involving little or no discretion, currently carried out by very junior public servants, which we might wish to contract out. We recognise that there are important points about judicial functions, such as those of the magistrates, the tribunals and others, raised by my noble and learned friend Lord Hailsham. We attach the greatest importance to ensuring that the judicial process is not, and cannot be thought to be, susceptible to pressure or influence from any outside body. In order to allay the anxiety expressed, the Government will look again carefully at the list of functions excluded from Clause 58 in order to mark those points of principle. In particular, we believe that it would be appropriate to make a further exclusion for magistrates.

We recognise also the serious worries about tribunals which have been expressed. Only those tribunals which are statutory office-holders and can delegate their functions to their staff currently fall within the scope of Clause 58. We are prepared to look carefully at which functions should be excluded. In principle, we believe that the functions of tribunals which amount to the exercise of the judicial power of the state should not generally be susceptible to contracting out. However, that is a complex matter. There is a wide variety of tribunals performing a wide variety of functions. Indeed, in relation to some functions mentioned in the Bill, we have made it clear that we are considering a range of options, and that the option of using those powers should not be precluded.

We intend to look carefully at those issues and bring forward appropriate amendments on Report. We are fortunate at this stage of the parliamentary year to have a considerable amount of time before we reach the Report stage, and so, having given that commitment to the Committee, I hope that the noble Lord, Lord Williams of Elvel, will feel that his probing has been successful and that he can withdraw the amendment.

6 p.m.

Lord Williams of Elvel

I am most grateful to the Minister for his reply. As he quite rightly said, some very important issues have been raised in this debate. I am grateful to all those noble Lords who have taken part. I take it from what the Minister said that he agrees—I think that it is with the remarks of the noble and learned Lord, Lord Ackner—that the impartiality of the courts and support for the judiciary is based on trust between staff, judiciary, professions and public. That seems to be the fundamental principle which the noble and learned Lord set out, and I hope very much that when the Government bring forward their amendments on Report they will reflect that principle. I expect also that in studying the matter the Government will pay attention to the comments of the noble and learned Lord, the Lord Chief Justice, as related by the noble and learned Lord, Lord Ackner. Having said that, I beg leave to withdraw the amendment.

Baroness Hamwee

Before the noble Lord does that, perhaps I may ask the Minister whether he proposes to deal at a later stage with the questions of local authority functions which I raised or whether I should continue to wish!

Lord Strathclyde

With respect to the noble Baroness, I am not entirely certain to which function she is now referring. If I have not done the noble Baroness justice—as she knows I always try to do so—perhaps I could look at the matter further. I am reminded that the noble Baroness asked a question about licensing and development control. Those are issues raised in the amendments grouped with Amendment No. 205H. Perhaps she will bear with me, and I shall give her a fuller answer at that stage.

Baroness Hamwee

Again, before the Minister sits down, perhaps I may ask him whether, if he does not respond this afternoon, he will at least consider not merely the specific functions—I used those as the example and they are probably the primary example— but that there are quasi-judicial functions exercised by local authorities and so there is an issue of principle as well as particularity.

Lord Williams of Elvel

I beg leave to withdraw the amendment.

Amendment, by leave, with drawn.

[Amendments Nos. 199A and 199B not move.]

Baroness Hamwee moved Amendment No. 199C: Page 53, line 20, leave out ("or by employees of").

The noble Baroness said: Amendment No. 199C is grouped with Amendments Nos. 199B and 199E. With those three amendments I am seeking some clarification on the drafting of Clause 58(3). Amendment No. 199C refers to employees. The subsection provides that a function may be exercised by a person or by that person's employees. In moving an amendment to delete that reference, I am asking whether the function is exercised by the person who is authorised or by the employees of that person. Is it the employees who exercise the function or are they merely doing work on behalf of the authorised person? In other words, who takes responsibility?

I am further confused by the fact that the definition of "employee" in Clause 64 seems to include an employee of an employee. That is because "employee" is defined as including a person who performs ancillary services for the authorised person, and any employee of such a person. That is difficult to understand without having the words before one, but there are two persons referred to in that definition, and so in referring to an employee of such a person it is not clear whether that means an employee of an employee.

The second amendment deals with the words in parenthesis. The subsection provides that the function may be exercised by: such person (if any) as may be authorised". Having read that provision several times, I do not understand what is meant by a "person (if any)". That subsection seems to be the meat of the clause; but who is authorised if no person is authorised by it? I am sure that due to the heat of the last few days I have been unable to conclude what that is driving at.

Amendment No. 199E leaves out the phrase "the office-holder". Subsection (3) provides that: a function … may be exercised by … such person … authorised by the office-holder or the Minister whose function it is". Should it be for the office-holder to authorise or should it always be a ministerial matter? I beg to move.

The Parliamentary Under-Secretary of State, Department of Employment (Lord Henley)

I am grateful to the noble Baroness for agreeing to take the three amendments together and for explaining that they are merely probing amendments. Amendment No. 199C appeared to me to wreck the purpose of the order-making power, which is to allow the Government the ability to involve the private sector where a contractor can offer the best value for money in the delivery of that service. It would be impossible to do that if each function or part of one had to be carried out by a named individual, with each of whom the Minister or office-holder had a discrete contract.

The contracting-out provision in the Bill will allow the benefits of competition to reach areas of the public sector where at present because of restrictions contractors may not be employed. I recognise that the Minister or office-holder would need to be assured that the employees of a contractor would be capable of carrying out the function properly so that the rights of third parties are protected. I assure the noble Baroness mat Clause 61 and the other safeguards in the Bill and in law will ensure that the rights of third parties are unaffected by the Bill. The noble Baroness was keen to have stressed exactly who takes responsibility.

The noble Baroness asked about the definition of "employee". I assure her that the definition in Clause 64(9) is exclusive to that clause. The noble Baroness will see that it states "In this section". The interpretation given by the noble Baroness was correct for Clause 64 but not otherwise.

Amendment No. 199D would delete words which were added to the subsection in another place in order to clarify the respective roles of Ministers and office-holders under Clause 58. Concern was expressed in another place that, as originally introduced to Parliament, what is now Section 58(2) could have been interpreted to mean that a Minister could make both an order and an authorisation for the contracting out of an office-holder's functions. That was certainly not our intention. Our policy is to provide for an enabling measure in this Bill. The words "if any" make it quite clear that the letting of a contract would not follow automatically from the making of an order. They thus underline that the provisions are permissive and that nothing in the Bill provides for any powers to force an office-holder to use contractors.

Amendment No. 199E removes from office-holders the power to authorise contractors to carry out a function following the making of an order. It means that, although a Minister may still specify an office-holder's functions, under Clause 58 the logical corollary— namely, an authorisation given to a contractor to carry out that function where appropriate—can never occur. That is because the Minister does not have the power under Clause 58(3) as drafted to give such an authorisation, and this amendment would delete the office-holder's power to do so. It would, therefore, render Clause 58 useless as far as the office-holder's powers are concerned.

I assure the noble Baroness that there is no difference in principle between the functions conferred on office-holders and those conferred on Ministers. The need for improvements in value for money in the delivery of office-holders' functions is just as great as it is for the functions of a Minister. Office-holders cannot be replaced by contractors by virtue of Clause 58. The office-holder will remain in place; and safeguards in the Bill, which ensure that accountability remains unchanged, apply equally to the functions of office-holders as they do to those of a Minister. Any function which must be exercised personally by an office-holder is outside the order-making power.

Finally, perhaps I may stress that the order-making power is enabling only. It would be for a Minister to make an order specifying a function, subject to consultation with the office-holder concerned. The order would be subject to the affirmative resolution procedure of both Houses.

I believe that that explanation deals with the various probings of the noble Baroness, but if it does not I shall try to do better.

Baroness Hamwee

I am grateful to the Minister for those explanations. I am not sure whether he dealt with the phrase "such person (if any)" but I shall read his response to check. I pause to see whether be is aware of doing so. Perhaps I had better leave the matter and read his reply in Hansard. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 199D and 199E not moved.]

6.15 p.m.

Lord Williams of Elvel moved Amendment No. 200: Page 53, line 22, at end insert ("provided that, in the case of employees, they are fit and proper persons.").

The noble Lord said: In moving Amendment No. 200 I shall speak also to Amendments Nos. 201, 201A, 201C, 203A and 217AA. I welcome the noble Lord, Lord Henley, to the Committee—

Lord Henley

I can assure the noble Lord that I was earlier involved in the Committee. The noble Lord may remember that we had an exchange about the admissibility of certain amendments. I believe that it was some weeks ago.

Lord Williams of Elvel

I remember that very well. I was wondering whether this was a permanent or temporary change on the Government Front Bench. No doubt we shall see.

Lord Henley

We can only speculate.

Lord Williams of Elvel

We can only speculate, as the noble Lord rightly says.

These are probing amendments. There is an important point that I wish to raise and it is right to do so by way of amendment. The whole principle of contracting out involves risks. Members of the Committee would be wrong to ignore the risks that are inherent in this procedure. Many Members will be able to cite cases where the contracting out of functions has been achieved—in particular, in local authorities and I do not blame them or any firm—where some undue influence was brought to bear on the contract that was finally let. In other words, and not to put too fine a point on it, I am talking about the possibility of corruption.

I wish to hear from the Government a strong assertion that they are committed to rooting out corruption wherever it may appear and, in particular, preventing corruption in the contracting-out procedure. I see nothing in the Bill which in any way restricts those people to whom contracts may be let in the event of the exercise of a function being contracted out. Perhaps the Minister will be able to help me on that matter.

Although the amendments to which I speak are probing, they seek to suggest how that might be done. As regards Amendment No. 200, it could be done, for instance, by ensuring that they are "fit and proper persons". That expression is used, among others, in the Financial Services Act and the Banking Act. There could be a limitation on former servants of the Crown and of local authorities or there could be a period of delay. All those suggestions are possible.

I am not particularly concerned about the precise formula but I am very concerned about the principle. I hope very much that when the noble Lord, Lord Henley, replies, he will give an indication of the Government's thinking on the matter so that we can be satisfied that even if the Committee accepts the principle of contracting out, which I think it has now accepted, we can be quite certain that there will be no corruption in its performance. I beg to move.

Baroness Hamwee

This is another slightly odd grouping. Perhaps I may speak to Amendments Nos. 201A and 203A which deal with consultation in regard to Ministers and office holders and local authorities. Both amendments seek to extend the consultation to representatives of persons who have previously carried out the function.

I hope that it is not necessary to spend any time on the importance of consultation and what good consultation should be. That is a matter which your Lordships have discussed on many occasions that I can recall. I am sure that as good employers, apart from anything else, there will be an awareness of the need to consult those who are at the sharp end. I say that not simply because their personal interest is important, although it is. Staff who have been carrying out the function need to have their interests considered very fully—and I make the point briefly in order to keep us moving forward—but they should be consulted also because by giving their views, staff can contribute to the whole process. They have been carrying out the functions and have seen the day-to-day problems and opportunities. They have experience and expertise which should not be ignored.

Lord Henley

The noble Lord, Lord Williams, is right to draw attention to the importance of impartiality and probity and to the dangers of corruption. It is right that I should take the opportunity on behalf of the Government to spell out how strongly we feel about those matters.

Obviously, impartiality and probity in the exercise of statutory functions have to be at the heart of our policy. We should be the first to recognise that they are issues of absolutely vital importance. I hope that I can assure the noble Lord that the safeguards in existing law and in the Bill as drafted address that issue. I appreciate that the amendments are probing amendments but I believe that those safeguards are more direct and effective than those proposed in the amendments.

Amendment No. 201C would preclude any of those organisations which had contributed to a government review, however slight their contribution, from making bids should that function be put out to competition. That could make an effective process of review before the introduction of competition unworkable in practice.

Ensuring regularity and propriety in the conduct of competitions for the supply of services is a responsibility which rests firmly with individual Ministers, office holders and their accounting officers. That responsibility, for which these individuals are accountable to Parliament, is underpinned by the role of the Comptroller and Auditor General.

Thus Ministers, office holders and their accounting officers must ensure that there is no conflict of interest on the part of any of those involved in the competitive process, including civil servants. If in any case there is the potential for conflict, then they must resolve this or exclude that organisation or individual from the bidding process. Guidance issued to departments makes that perfectly clear.

Given the variety of different circumstances in which advice may be sought, and competitions organised, it would be undesirable, and probably impossible, to codify that guidance in statutory form. The attempt to do so in this amendment shows that only too well.

In addition the rule in law against bias and the appearance of bias will offer further safeguards to the interests of third parties who may be affected by a contract where a decision-making function is involved. That rule means that if a contractor was biased in making a decision affecting a third party, or even where there was a real possibility that he might be biased, then the decision would be invalid and would be overturned by the courts.

Strong safeguards are also provided for the protection of confidential information. Contractors would be subject to all the same restrictions and penalties as are those public servants and others who may currently handle such information. An additional duty to safeguard the information is also imposed on contractors and their employees.

I turn now to consultation with staff, which was raised by the noble Baroness in Amendment No. 201A. Authority for personnel matters is the responsibility of individual departments and, where appropriate, office holders. Consultation arrangements with staff about market testing and contracting out are therefore matters for discussion between departments and their trade union sides. It is right that local staff are able to meet local management and consider particular circumstances, and to negotiate their own arrangements for doing so. Consultation will also be affected by the nature of existing collective agreements with trade unions in individual cases. It would be inappropriate to specify a statutory requirement for consultation in the general case. There must be freedom to negotiate appropriate consultation arrangements.

I turn now to Amendment No. 203A in the local government context. The process of consultation with the representatives of local employees is a delegated process which individual local authorities undertake with local representatives. It would be quite exceptional—even unprecedented—for a Minister to adopt a direct consultation role such as that suggested by the amendment.

Perhaps I may return to the heart of the noble Lord's amendment. I hope that he will accept that there are appropriate safeguards in the Bill and in existing law. I hope that he will accept also that we take those matters extremely seriously and that we are as concerned as he is to ensure that corruption should in no circumstances rear its ugly head.

Lord Williams of Elvel

I am most grateful to the noble Lord for that assurance. Of course, I accept it. That is a view which we share with him. I just wonder whether it might be sensible—and I offer it as a suggestion to the noble Lord—to incorporate into Clause 58(3) a "fit and proper person" provision both with regard to the "contractee", if I may put it like that, and the employee of a contractee. That would certainly ensure that any person who takes on the exercise of a function which is a statutory function laid on a Minister or an officer by Parliament is a fit and proper person.

The Banking Act makes a similar "fit and proper person" provision. I do not believe that: the Government would be giving away any vital point of principle. It would go a long way towards reassuring us that there would be absolute and total implementation of the principles which the noble Lord, Lord Henley, announced and with which we agree.

Lord Henley

I am always prepared to consider those matters between now and the next stage, or I and others may like to consider them between now and the next stage.

Baroness Hollis of Heigham

You are the Government.

Lord Henley

As my noble friend Lord Strathclyde reminded us earlier, we all speak on behalf of Her Majesty's Government. However, I am sure that we will be prepared to consider such matters between now and the next stage of the Bill's proceedings. But obviously I cannot give the noble Lord any assurance that we may consider them as appropriate. I do not believe that it would necessarily add that much to the Bill to include the words suggested.

Lord Williams of Elvel

I understand that the noble Lord, in whatever capacity he speaks, cannot give us any assurance. However I am grateful that the Government will at least look at my suggestion. Although I do not believe that it would contribute substantially, it would reassure those of us who are especially worried about the point if such an expression, suitably drafted, could find its way into Clause 58(3). Having said that, and having expressed my gratitude to the noble Lord, Lord Henley, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.30 p.m.

The Deputy Chairman of Committees (Baroness Lockwood)

I must just point out to Members of the Committee that if Amendment No. 200A is agreed I shall be unable to call Amendments Nos. 201 or 201A under the pre-emption rule.

Baroness Hollis of Heigham: moved Amendment No. 200A:

Page 53, line 24, leave out ("first consulting him") and insert; ("(a) consulting him; and (b) showing that substantial value for money savings will be achieved during the period of the contract").

The noble Baroness said: When Mr. Heseltine was Secretary of State for the Environment in 1992 he said that with CCT, we will obtain better value for money and higher quality services". The above amendment would ensure that VCT (voluntary competitive tendering) would only be pursued where the Secretary of State's objectives were likely to be met. After all, DLOs (direct labour organisations) and DSOs (direct service organisations) within local authorities are required to show a 5 per cent. return on notional capital. If not, they will be closed down. Indeed, directions have only recently been given to half a dozen local authorities which have failed to meet that 5 per cent. return and they may indeed experience a closure of their DLOs and DSOs.

Therefore, it is not unreasonable to expect similar savings at the very least when a contract goes out house, otherwise the local authority would be worse off. That is an obvious point; but is it? There are two problems involved. First —and this is the main reason for moving the amendment—is the experience we have had of CCTs since 1988. Secondly, there is the impact of TUPE—the transferred rights directive.

As regards the experience of CCT since 1988, by the beginning of 1993 about one-third of all local authority contracts had been won out house to a value of about £2 billion. In their White Paper of 1991 the Government asserted that they expected CCT to generate savings for local authorities of 25 per cent. to 30 per cent. at the very least. But what have we found? Well, I have with me a copy of the report of the Audit Commission which states that the first round of tenders resulted in gross cost savings on average not of 25 per cent. to 30 per cent but of 6.6 per cent. Moreover, those savings were heavily concentrated in a handful of areas—for example, ground maintenance, catering and the cleaning of buildings—where the average savings came mainly from the cutting of wage rates.

Such savings in those areas were on average 15 per cent. That meant that other contracts barely produced savings for the local authority. Further, much of the first year's savings were in turn offset by the in-house cost to the local authority of the contracting process itself— that is, separating the client and contractor function, the preparation of specifications, the possible cost of management consultants, advertising, processing, evaluating tenders and, finally, instituting financial and administrative arrangements for their monitoring. As the Audit Commission and the DoE's research conducted by INLOGOV have shown, such considerations have cost between 7 per cent. to 10 per cent. of the first year's worth of contract. Therefore, for the most part, that has fully offset the first year's savings.

One might argue that, although in the first year of CCT very little savings would generate to the local authority, subsequent savings might trickle in. Yes, that may be so for a couple of years, but only until the renewal of the contract falls due, which is usually in the third or fourth year. Then, with no in-house contract as competition, and often with a relatively weak market outside, prices in our experience have leapt. In other words, predatory pricing in the first round of CCT has done what it set out to do; namely, to wipe out competition. Subsequently, the losses associated with that predatory pricing have been recovered on the second round of bidding where there is no in-house contract to bring the price down.

Again—this is also the experience of the Audit Commission —we have had evidence of cartels. For example, the Office of Fair Trading found that cartels were probably operating in contracts of the Property Services Agency, and in some cases price fixing contractors are clearly operating in various regions. That has all been done against a worsening background for local authorities in which they have had to lower their service specifications by, for example, extending house painting cycles from five years to six years, grass cutting from 10 days to 12 days, and so on. That means that it is quite hard to disentangle the savings coming from CCT and those coming from the need to reduce budgets.

It is clear from the first few years' experience of CCT since 1988 that most of those contract savings have been paid for by cuts in staff, by cuts in their wages, their hours, their holidays and in their sick pay and pension entitlement. In Leicestershire, for example, because of the contracts that went out, the cleaners of school buildings took pay cuts which brought their hourly wage down from £3.77 to £2.83. As regards holidays, 25 days in local government has been reduced to 10 days in the private sector. We have also seen the replacement of full time staff with part time staff to avoid obligations regarding sick and maternity pay.

That brings me to the second reason for the amendment. In future, if our understanding of TUPE is correct, contractors will not be able to make such savings from CCT or VCT. As John Hall of the Cleaning Support Services Association said: Contractors would be required to employ all the existing staff on exactly the same rates of pay, terms and conditions as they previously enjoyed. Under these circumstances, competition would not be viable".

TUPE will not protect staff indefinitely, but it will mean that the contractor will not be able to win contracts by predatory pricing which is at the direct expense of employees' rights. Therefore, that, too, means that the likelihood of significant savings will recede. Moreover, as the value for money arguments recede we shall merely be left with a washed-up, beached-up corpse of Thatcherite ideology about privatisation which is no way to discharge one's fiduciary duty to the council tax payers. Hence the amendment.

There are real costs to competition, especially compulsory competitive tendering. It tends to casualise the workforce and undermine their employment and trade union rights; it worsens employment conditions as regards pay and hours; it means the end of contract compliance which has often brought the most marginal people—namely, the disabled and disadvantaged—into the labour market; it means less control over services provided by elected members and, therefore, by customers; and, significantly, the service provided by contractors has often sharply deteriorated. We have experienced a vicious cycle in which low wages have demoralised staff. In turn, that has led to a high turnover, has meant little or no training, poor work and an increase in complaints, which has led to more dismissals and a still higher turnover rate.

Members of the Committee may think that the latter is an exaggerated statement. However, I must point out that my information comes from the research project of the Department of. the Environment conducted by INLOGOV last year. What does the DoE's research project on CCT show? It shows that three out of four contracts have suffered from a notable failure to perform, especially in the areas of ground maintenance and building cleaning, and that most savings have been screwed out of the system by wage cuts. There was also a noticeable failure to perform in terms of poor standards of work and work not completed in time. One-in-four of all contracts going out under CCT have given rise to substantial public complaint. In one contract in 10 going out to CCT the complaints have been so severe and the work so shoddy that the contract had to be terminated. The record of CCT in savings has often been dubious and the service extraordinarily poor. Of 150 schools surveyed by the Audit Commission one-third were extremely unhappy about the quality of school cleaning performed by CCT.

A poorer quality of service may be a price worth paying if the savings are substantial: if they are not, it is not. In 1992 the Audit Commission warned the Government as well as local authorities that CCT proposals ran the risk of producing a system which was bureaucratic and unwieldy, difficult to administer and maintain, and gave rise to substantial costs that far exceeded benefits. It is precisely to ensure that we do not carry forward into VCT the problem that costs exceed benefits that I move this amendment.

Baroness Hamwee

In supporting this amendment, I should like to mention one aspect of cost savings. I ask that the Government take seriously the cost of tendering and going out to competition. To ensure that services are provided appropriately, by which I mean cost as well as quality, is something that must be considered and revisited frequently. Sometimes the costs incurred in person hours in preparing tenders for specification and going through the whole process are quite out of scale with the savings that can be made. Indeed, it may cause a hidden cost to be incurred which will become not quite so hidden and a source of regret when, at the end of the day, it appears that relatively little can be saved and achieved.

6.45 p.m.

Lord Haskel

I should like to support the amendment. Contracting out appears to have reduced the price of some local authority services but at the cost of driving down wages and reducing employee benefits, such as holiday entitlement, sickness benefits and pensions contributions. Whether or not that is desirable or brings any benefits to the wider economy is questionable. It is a trend that the recent White Paper from the DTI on competitiveness does not encourage. The reduction has been possible because most of the jobs in these services are unskilled. In the past 10 years the number of unskilled people without work has remained high. That has enabled contractors to drive down wages and force people to work longer hours. However, the whole legal basis of this matter is being challenged. TUPE is being tested in the courts and the jury is still out. If the courts decide that the Government are wrong, some contractors will find themselves in severe financial difficulties. That does not bode well for the future of these services.

The President of the Board of Trade (if he is still the President of the Board of Trade) exhorts us to become more competitive, not by predatory pricing but by investing in new equipment, improving the skills of our workforce and being more innovative. That requires both local authorities and contractors to take a longer-term view of their relationships. Perhaps the Minister will bear that in mind when he considers this amendment. Short-term relationships discourage investment. In addition, the Government discourage innovation by local authorities by institutionalising compulsory competitive tendering and setting it in stone. They, too, must find new ways to achieve their objectives. For instance, people can themselves cut costs by taking their rubbish to a small local depot or skip. Local authorities can provide new services, such as digging up the streets only once and laying large pipes in which they lease space to telephone, gas, cable and electricity companies. Some of us who live in London will certainly appreciate that.

The CCT has been successful in delivering quality. In a small number of cases it has been achieved by the use of better systems and methods. It has been achieved largely by making contractors and their staff aware of the need for quality. To make people aware of the need for quality and more responsive to customers' needs is a function of management and responsiveness to the market, not a function of CCT. Improvements in quality have been achieved in cases where services have both been contracted out and kept within the local authority.

Does not the Minister agree that it is poor management practice on the part of the Government to institutionalise CCT when the price reductions achieved appear to have a dubious legal and economic basis? Does not the Minister prefer to encourage both contractors and local authorities to improve services and cut costs by innovation, training and investment? That is what the Government exhort the rest of industry to do. Why should these public services be different?

Lord Henley

I have to say that I find hypocrisy in the party opposite in regard to TUPE quite staggering. The noble Baroness will be aware—if she is not, I shall remind her and the Committee—that when the party opposite were in government they tried to bring in the acquired rights directive with their draft TUPE proposals and proposed to exclude the entire public sector. I can assure the noble Baroness that that is the case. If she cares to look at Hansard covering 1981 or thereabouts, she will find that her noble friend Lord McCarthy confirmed that that was exactly the case. The draft proposals of the Labour Party when in government to bring in the acquired rights directive excluded the entire public sector.

Lord Peston

Is the Minister referring to 1981?

Lord Henley

I refer to the time when the House debated the Government's TUPE regulations. The noble Lord, Lord McCarthy, confessed or admitted to the House that the draft proposals of the Labour Government in the late 1970s would not have included the public sector. It is not fair that we should now witness the crocodile tears of the party opposite about our failings with regard to TUPE.

I reject the suggestion that savings can be made only by cutting staff numbers or pay. Savings can come from a whole variety of novel methods and approaches to undertaking tasks. I shall give examples in due course. There are a number of problems in regard to this amendment. The amendment focuses purely on the savings and as a result can prevent contracting out of an office-holder's function where it is done in order to secure not so much savings as improvements in quality without cash savings. I am sure that even the noble Baroness does not wish to rule out the capacity of the private sector to improve the standard of service, even if the same or greater cost is incurred by the current in-house team.

Lord Peston

Perhaps I may be permitted to interrupt the noble Lord. It may be a matter of clarification, but the expression used in the amendment is "value for money savings". That includes both the quality and benefits from the service and any substantial pecuniary savings on the other side. It does not refer to money savings; in other words, I believe that it means what the noble Lord, Lord Henley, thinks it ought to mean.

Lord Henley

My guess is that it does not mean that. However, there is no point in arguing over such things. I presume that the amendment of the noble Baroness is only a matter of probing, anyway. I stress that we are keen that competing for quality is about quality and standards as well as about price.

The noble Baroness, quite rightly, drew on her vast experience of CCT in the local government sector. She quoted the figure of 6 or 7 per cent. as being the average saving from CCT. She suggested to the Committee that there would be only similar savings by contracting out in central government. That is simply not the case. So far I believe that the average savings have been more of the order of 25 per cent. I can give other examples from my experience of other departments in which I have worked. I believe that to look at central government and local government savings is to compare apples with pears. Central government market testing is selective. In the case of local authorities, the 6 or 7 per cent. average applies to services that are subjected to compulsory competitive tendering across the board. In some areas subject to CCT, such as building, cleaning and refuse disposal, the figure is closer to the central government average. In any event, there cannot be the slightest doubt that savings at the average achieved by local government or above would yield millions of pounds to the Exchequer. Resources would obviously then be deployed far more efficiently.

The noble Baroness spoke from her experience of local government. Perhaps I may give one example from central government based on my own experience in the Department of Social Security. I can assure the noble Baroness that there the Contributions Agency microfilming service has, as a result of the process, reduced its costs by £1,360,000—over 40 per cent.— after a market test. That market test was won by the in-house team. The noble Baroness will accept that in other departments there are equally large savings to be made. The average is of the order of 20 per cent. to 25 per cent.

The noble Baroness, Lady Hamwee, was quite rightly worried about the actual costs of the tendering process. I hope that she will be reassured when I point out that in the Competing for Quality programme in central government annual savings of at least £150 million have been achieved compared with the overall annual cost of supporting the programme that produced the saving which is estimated at some £20 million. That represents a fairly good investment.

The next point I wish to make is that the scheme of the Bill is to enable Ministers to lay orders under Clause 58 which would specify functions which they consider may be appropriate for contracting out. As an order requires an affirmative resolution in each House, Parliament will then have the opportunity to debate whether the function so specified is appropriate in principle. The Minister will be able to say whether he thinks savings are likely. However, at mat stage no decision as to whether to contract out would necessarily have been taken; nor would it be possible for either the Minister or office-holder to undertake the detailed evaluation necessary to satisfy the condition which the amendment seeks to impose. An order would typically be followed by a competitive tender to choose a provider.

I hope that the noble Baroness will accept that there are sufficient safeguards in place to ensure that office-holders would satisfy themselves that contracting out would provide good value for money, as the noble Lord, Lord Peston, put it, before authorising a contractor to carry out one of their functions. That is because Clause 61 makes sure that all the present accountability arrangements, including scrutiny of the position by the Public Accounts Committee, would remain in place. I hope, therefore, that the noble Baroness will feel able to withdraw her amendment.

Baroness Hollis of Heigham

I thank the Minister for that reply. There was one aspect with which I agreed; namely, that this is a probing amendment. I did not agree with much else in his reply. In my view he made precisely the same judgments of error that infused the Local Government Act 1992, which required local authorities to take the cheapest tender and did not allow them to introduce service level specifications that could be deemed uncompetitive.

As my noble friend said, the amendment is concerned with inputs and outputs. It is about value for money. If a competitive tender is not better—in other words, if it is not either cheaper while providing the same level of service or, for the same price, offers a better level of service—it should not be pursued. The reason for bringing forward the amendment is that experience of local government CCT shows that too often contracts have not delivered either a cheaper price for the same level of service or, for the same price, a better level of service. Where cheapness has occurred it has been at the expense of wage levels and quality of service. A great deal of additional local authority time has been taken up in implementing penalty clauses and the like in order to get grass cut, street lights repaired and roads mended. We want an appropriate level of service for VCT.

We shall obviously study the Minister's reply. At this stage obviously I wish to withdraw the amendment. However, I have to say that nothing in what he said tonight persuades me that there are any safeguards that VCT will produce value for money. If it does not, then it is merely ideologically driven. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 201 and 201A not moved. ]

Baroness Hamweemoved Amendment No. 201B:

Page 53, line 24, at end insert: ("( ) A Minister shall not make an order under this section unless—

1. (a) the function is to be exercised by acceptance of the offer of the person authorised to carry out the work;
2. (b) the person authorised makes the offer in response to an invitation by the Minister to submit such offers, and
3. (c) the invitation is made to at least three other persons who are willing to carry out the function."

The noble Baroness said: This too is a probing amendment on the issue of market testing. The purpose is to give the Government the opportunity to explain why, having made so much of market testing to underpin the objectives of the Bill, they have not referred to it on the face of the Bill.

The words that I have used in the amendment are a rough adaptation of part of the Local Government Act 1988. I have used them merely in order to highlight the issue.

Local government is required to go through considerable hoops in order to market test the exercise of its functions. It seems to me that if the Government believe that it is necessary to include so many hundreds of words in legislation about precisely how local authorities should go about the job, then they should at least justify why they include no words at all as to how central government should go about contracting out. In other words, if that is right for one part of government, it should apply to the other. The purpose of the amendment, therefore, is to give the Government the opportunity to explain why there is no reference to market testing on the face of the Bill. I beg to move.

Lord Strathdyde

I thank the noble Baroness for explaining her amendment. It is clearly designed to ensure that contracts are awarded after a proper process of competition and not at the whim of a Minister or office-holder. It sets out a number of detailed preconditions before an authorisation could be given to a contractor to carry out a function specified in an order made under Clause 58, which would not always be appropriate.

I have a great deal of sympathy with the purpose of the amendment. Competition is central to the process of government procurement. It is required for most large procurements by our obligations under the European procurement directives. Where it is not required it is recommended, except in the most exceptional circumstances. The Government have stated, in the Competing for Quality White Paper, that competition is the best guarantee of quality and value for money.

However, the Government also recognise that competition can take many forms, and that government departments and office-holders should have flexibility to choose the most appropriate method of procurement, subject to the directives and provided that value for money is always the key consideration in the process.

Although departments are likely to wish to choose a service provider through competition, and it is part of the Competing for Quality policy that they should do so, there could be circumstances where it was evident that only one provider was capable of delivering a service. In those cases it might be wholly inappropriate to impose a competition condition.

The circumstances that I have in mind are in a sparsely populated rural area where there is limited scope for competition. There may be only one business capable of providing a service. If it fulfils the terms of the contract, there is no reason that it should not be awarded the contract. Indeed, in some such circumstances it might be a waste of both private sector and departmental resources to require a competitive process. I emphasise that I regard that as being a relatively rare occurrence, but that is why I have difficulties with the detail of the noble Baroness's amendment rather than with the fundamental purpose behind it.

The noble Baroness also asked why the Government are less prescriptive for themselves than for local government. The point is that it is central government policy to involve the private sector to extend competition. Sadly, I doubt whether that proposition is true of the policy of many local authorities. The Government, regrettably, feel that they must be more prescriptive for the local government sector than for themselves. That is a perfectly appropriate division of powers.

I conclude by saying that the amendment is unnecessary. Because of its inflexibility it may on occasion possibly be harmful. I invite the noble Baroness to withdraw the amendment.

Lord Peston

I did not intervene earlier because I was keen to hear the Minister's reply in order to learn from it. He has left me extremely puzzled. It is a subject on which I have taught for many years. I do not understand what the expression, "competition can take many forms" means. Competition is competition. It means having an alternative set of potential providers. If competition is desirable, it is desirable. What puzzles me is that, having said that competition takes many forms, the Minister then switched away from competition to discuss a monopoly. He referred to the case of the single possible provider. He admitted that that situation is rare. My judgment is that it is rare, and should be made even rarer. In my judgment, any rational person on being offered something should always ask the question, "Can I not obtain it better or more cheaply elsewhere?".

Lastly, I must admit that I was not happy on this point. I should like the Minister to reflect on it. The noble Baroness, Lady Hamwee, will speak again in a moment. The Minister referred to being less prescriptive for himself than for local government. I should have thought that the minimum position, not logically but philosophically, is that what is appropriately prescriptive for local government is precisely appropriately prescriptive for the Minister on the usual ground that one should always do oneself what one tells others to do. That is a golden rule in life generally. I would apply it to Government at central level.

I do not know whether the noble Baroness wishes to pursue the matter in greater detail. However, will the Minister at least reflect on the matter? I believe that some such principle or statement incorporated into the Bill would make the Bill a good deal more acceptable, not necessarily to me —the noble Lord knows my general view of the Bill—but to a number of people whom I think the noble Lord wishes to convince.

Baroness Hamwee

The noble Lord, Lord Peston, dealt with two areas of the Minister's reply. However, I wish to speak further on them. I, too, wrote down the words, "competition can take many forms". That being so, and if there are circumstances where market testing might not be appropriate, then, perhaps at another stage, as part of our deregulation we should deregulate some of the regulations which apply to the other level of government which prescribes that local government market test to the umpteenth degree.

Secondly, the issue relates to what constitutes government. The Minister makes it perfectly clear that he regards local government as merely some tedious arm of central government which rather too often fails to do the bidding of central government.

It is a matter which deserves further reflection on all our parts. I shall certainly reflect further on the issue and consider whether the amendment which I drafted swiftly as a means of introducing the issue could be altered or defined. I shall return to the matter at a later stage. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 201C not moved. ]

Viscount Goschen

I beg to move that the House do now resume. In moving the Motion, perhaps I may suggest that the Committee stage begin again at not before five minutes past eight.

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

House resumed.