HL Deb 16 June 1994 vol 555 cc1879-89

7.41 p.m.

Viscount St Davids rose to move, That the draft order laid before the House on 4th May be approved [18th Report from the Joint Committee].

The noble Viscount said: My Lords, I beg to move the Local Government Act 1988 (Competition) (Defined Activities) (Housing Management) Order 1994. It will extend compulsory competitive tendering, or CCT for short, to the management of local authority housing. Part I of the Local Government Act 1988 contains provisions about the compulsory competitive tendering of local authority work. Section 2(2) (a) to (g) lists the activities to which the Act currently applies. This order will extend that list to include the new activity of housing management.

It may be helpful if I remind the House what CCT is and set our proposal to extend CCT to council housing management in the broader context of developments with CCT. CCT is about subjecting local authority services to the test of competition. CCT was first applied to construction, maintenance and highways work by the Local Government, Planning and Land Act 1980. CCT was extended to other blue-collar services, such as refuse collection and grounds maintenance, through the Local Government Act 1988. The value of local authority work already subject to CCT in England and Wales is about £6 billion a year. Therefore, there is nothing new about CCT. Local authorities already have a wealth of experience in testing services in competition with the private sector.

The decision to seek to extend CCT to council housing management has its origins in the Citizen's Charter, as a central element of a raft of measures designed to improve the quality of services for local authority tenants, to raise standards and to make services more responsive to the needs of the user. It also reflects our desire to extend the benefits of competition to the housing management sector. In other sectors the experience of CCT is that competition leads to improvements in the quality of services and value for money.

Local authorities currently spend around £1.25 billion per annum managing the homes for which they are responsible. The standard of housing management has undoubtedly improved over recent years. Some authorities do provide their tenants with high quality services, but even they continue to look for further improvements. We want all tenants to enjoy the highest quality services and for all authorities to reach the standard of the very best.

That requires a change of approach, a new way of doing things. Competition will stimulate that change —a change to better and more responsive services to tenants, better standards of housing management and better value for money. Councils need to stand back and look not only at the services they provide but also at the way in which they provide them. They need to look critically at existing practices and ask whether they deliver services in the most efficient and effective way. Old practices may need to be shaken up and standards of service improved, with a greater focus on what the customer wants.

Competition will also bring fresh insights and expertise into the business of housing management. It will bring benefits even for the most efficient local authorities—for all local authorities will be encouraged to think further about the standard of service they provide, whether they have the best form of organisation to deliver services and whether estates are being run in the most effective way. Therefore, we have three basic objectives in extending CCT to housing management: to improve services to tenants; to improve standards of management; and to improve value for money.

I now turn to the involvement of tenants. Tenants have a crucial role to play in the process. Last year the Leasehold Reform, Housing and Urban Development Act gave tenants enhanced consultation rights. It ensured that tenants will have a real say in setting the standards of housing management to be required and in seeing that those standards are maintained through monitoring contractors' performance. In the past many tenants have been excluded from the management of their homes, powerless to influence the way things which affected their daily lives were done.

Over and above the framework for consultation set out in the statute, we also want to see local authorities involving their tenants in the selection of contractors and in the evaluation of tenders. In March the Department of the Environment issued guidance to local authorities setting out the basic principles for tenant involvement in the process of housing management. We have also prepared a leaflet for tenants outlining the rights they have to be consulted and how the process of CCT will affect them. It is important that tenants do not misunderstand the purpose of extending CCT to housing management and are fully involved in it. As consumers of the service, they have a vital contribution to make to the success of CCT in their local area.

We recognise that housing management is a very important local service, serving nearly 4 million tenants and their families. We also recognise the sensitive nature of the service and the need to safeguard local accountability and the interests of tenants. We do not, therefore, propose that local authorities' strategic, policy-making and enabling roles should be subject to CCT. The local authority will remain the landlord. It will set the housing management policy framework and define, together with its tenants, the services to be provided and the standards to be achieved. The authority will also continue to be responsible for deciding who shall be allocated one of its homes, setting rents and so on. In order to guarantee that we have adopted a different approach to the defined activity for housing management from that applied to other services. We have deliberately sought to exclude from the defined activity those functions which we do not consider should be subject to CCT. That makes the Government's view very clear and safeguards the roles of members and the interests of tenants.

I assure your Lordships that CCT is not about privatisation of the housing stock; nor is it the compulsory contracting out of local authority housing management. CCT simply requires that, where local authorities want to provide housing management services using their own staff, they have first to demonstrate that those staff provide the best value for money.

In developing the arrangements for housing management CCT the Government have worked closely with the local authority associations. We have carried out four substantial rounds of consultation on various aspects of our proposals. We have had hundreds of responses from local authorities, tenants and the private sector. We have considered them all carefully. In addition, eight English local authorities have been piloting the implementation of housing management. The emerging results of their work have also informed our deliberations. All have therefore played a constructive part in the development of our proposals, even those who may not agree with the principle of CCT. The result of that co-operation is that the formal consultation on the draft of the order which we have before the House this evening showed general agreement with the approach which we have adopted.

I turn now to the order. In addition to identifying the functions which an authority must subject to competitive tendering, the order also specifies the properties to which housing management will apply and gives authorities some extra flexibility by enabling them to ignore, for the purposes of CCT, the work of employees who spend only a small amount of time engaged in defined activities.

CCT for housing management will be implemented from 1st April 1996 in England, 1st October 1997 in Wales and 1st April 1998 in Scotland. The timetable will be modified for some authorities in England and Wales to provide for either a phased introduction of CCT, a later start date, or both, to reflect the size and varying states of readiness of individual authorities.

The timetabling arrangements will be implemented through separate regulations under Section 6(3) of the 1988 Act and are subject to the negative resolution procedure. They will be made once the order we are considering this evening is approved and comes into force. The same applies to a second order which will set a de minimis threshold for housing management. That will have the effect of exempting small housing authorities from CCT.

In conclusion, extending CCT to housing management will bring benefits to local authorities and their tenants alike. The extension of CCT to housing management will lead to better, more responsive services for tenants, higher standards of housing management and better value for money for all. I hope that your Lordships will support the order.

Moved, That the draft order laid before the House on 4th May be approved [18th Report from the Joint Committee].—(Viscount St. Davids.)

Lord Williams of Elvel

My Lords, the House will be grateful to the noble Viscount for moving the Motion and introducing the order. For our part, we do not propose to oppose the order. Nevertheless, as the noble Viscount will know, we are opposed in principle to CCT —that is, not to voluntary competitive tendering, but to compulsory competitive tendering. We are in favour of tendering if triggered by tenants but not of compulsory competitive tendering and especially not in housing management.

Housing managers play an overall role in looking after the well-being of an estate. It is very important to ensure that when management of an estate spills over into other aspects, such as the removal of litter or the prevention of crime, there should be one person who is responsible. As I understand the order, CCT will not refer to any of the other aspects of housing management. If housing areas are to be put out to competitive tendering, I do not quite understand how the tender specifications will be drawn up to cover the wider involvement about which I have been talking.

Moreover, I find it odd that the order does not specify how tendering will operate, apart from the job note saying, "Replace the front door". If the job note says, "Replace the frame of the front door", the frame can be replaced five times. However, if the man carrying out the repair finds that the door is warped, he cannot replace it until someone else has looked at the problem. As I understand the order, that would then involve another tendering process. Perhaps the noble Viscount can help me on that aspect of the matter.

I have four questions for the noble Viscount apart from the points that I have already raised. First, are the Government really satisfied that this programme is in the best interests of the management of housing in local authorities? To that end have they employed consultants to aid the implementation of housing management CCT? If so, how much did it cost and what was the amount of public money involved?

Secondly, are the Government confident that local authorities have enough time to prepare for this rather radical shift to CCT in housing management? Thirdly, can the noble Viscount assure us that the introduction of housing management CCT will not undermine the important improvements in the quality of the housing service which many authorities have already made; for example, a comprehensive housing service? Fourthly, what are the costs of implementing housing manage-ment CCT? Will they outweigh the benefits for many authorities? Have the Government made such a calculation and, if so, can the noble Viscount kindly give us the results?

In conclusion, I can say that we will not oppose the order; indeed, it is not the custom in this House to do so. However, it does seem a somewhat odd arrangement. I am sorry that the noble Viscount introduced the Citizen's Charter in justification of the programme. I thought that that was the year before last's joke. Last year's was "Back to Basics". The real problem is that, yet again, the Government are trying to ensure that local authorities are downgraded in terms of their responsibilities. That is a policy which we on these Benches will oppose.

Baroness Hamwee

My Lords, the noble Viscount recognises the sensitivity of housing services; at least that is what he said. However, I wonder whether the Government really understand. Indeed, not only policy and strategy are sensitive; so also is the implementation of the service. The noble Lord, Lord Williams, mentioned certain matters such as the relationship with other parts of local authority services. One example that struck me was how housing management can relate to good social services if the two are separated as, indeed, they will be. Many local authorities are moving towards combining approaches to housing and social services and not trying to send them in different directions. I wonder whether the noble Viscount can give me the Government's view as to whether they are satisfied that it will be a good thing if such links are broken.

As regards the timing, I was concerned to see that in the Third Standing Committee on Statutory Instruments discussion on the order, the Minister, Sir George Young, when commenting on the pilot studies, explained, as we have heard tonight, that such studies had been carried out and that they would provide useful information for local authorities —and, undoubtedly they will. However, he did not appear to take on board the notion that there might be the opportunity to learn from the pilot studies before the programme goes forward. Surely, the point of pilot studies is that when they are carried out everyone concerned has an opportunity to consider them.

The Government may be satisfied with the results of the pilot studies, but they have not yet had the opportunity to share that satisfaction—or, indeed, dissatisfaction—with others who are concerned. I hope that the noble Viscount can tell me tonight what is in the Government's mind as regards pushing the programme forward without local authorities and tenants, and also those in the commercial sector, who may be putting in tenders bidding to carry out such services, having had the opportunity to consider the results of the pilot studies.

Thirdly, I turn to the detail that is to be included. I appreciate that consultation has led to a number of items being excluded and that the list has changed. Of course, we welcome—it would be churlish not to do so—the fact that the Government have listened to the comments of local authorities and local authority associations. However, from reading the list in the order, it seems to me that it highlights the problems that will arise in the specifications to be written by local authorities.

It would be consoling if the noble Viscount could at least recognise the problems that local authorities encounter in writing their specifications, and the hoops they have to go through, particularly those good local authorities which see the writing of the specifications not as an internal matter but as something in which tenants must be involved. My own local authority—I am sure it is the case with many others —has put, and continues to put, huge effort and time into ensuring that the specifications have the imprint of the ownership of the tenants who will be affected by them.

I should mention a further matter which, I suppose, comes back to my first point of the inter-relationship with other services. There is a reference in the list of services to collecting rent and service charges—that is obvious—but then there is a reference, at paragraph (c) on page 2 of the order, to negotiating an agreement for the payment of arrears. That seems to me a sensitive issue. Although one wants to see collection organised in a sensible and effective way, negotiating payment may involve all sorts of other issues such as knowledge of a tenant's circumstances. An ability to negotiate will not obviously be held by those who provide services such as mending window frames or dealing with the condition of common parts.

At paragraph (n) on page 2 of the order there is reference to the resolution of disputes between occupants. Again, that seems to me a sensitive matter which probably requires skills on the part of those seeking to resolve disputes which will be irregularly required but very necessary. The requirement of such skills will make it difficult for the specification by itself to ensure the quality of the overall provision of the service.

I understand the difficulty of listing the items but this whole matter seems to come back to the issue that local authorities should be allowed to decide for themselves what services are put out to tender. Different authorities may have different views as to whether all or merely some of the items on the list should be included. They know their own areas and their own problems. I say that the local authority should decide but that that decision must follow the wishes of its own tenants. The noble Viscount says that one must be responsive to the needs of the user. I fear that this order may not turn out to be responsive to the needs of the user.

Viscount St. Davids

My Lords, as regards the first point raised by the noble Lord, Lord Williams of Elvel, relating to the door, the package for which a contractor will tender, or of course for which the local authority's own housing department may tender, will be an overall package. I do not envisage that there will be a little tender for the door and another little tender for the door frame. The contractor will know the state of the housing stock and will put in an overall bid for the management of the housing stock in much the same way as occurs on any of the large private housing estates managed by large estate management companies. I do not see that that is a particular problem.

The Government have used consultants to aid the implementation of compulsory competitive tendering. As at 1 st June 1994 the Department of the Environment has paid £266,000 to consultants and we expect the full bill to be around £300,000. The noble Lord, Lord Williams of Elvel, and the noble Baroness, Lady Hamwee, questioned the timetable. Local authorities have had plenty of notice of the Government's intention to extend CCT to housing management. In June 1992 the Department of the Environment published its first consultation paper entitled Competing for Quality in Housing, which set out the Government's proposals. In December of that year the Government announced their intention to implement housing management CCT from 1st April 1996.

The Government have considered the timetable arrangements carefully and in answer to a further question of the noble Baroness, Lady Hamwee, I should say that of course we already have considerable information from the pilot schemes. We have weighed carefully the relevant factors which include authorities' size, preparedness for CCT, and the need to ensure that tenants enjoy the benefits of housing management CCT as soon as possible. Not all authorities have to implement CCT from 1st April 1996 however. Over a third of the authorities in England will have until 1st April 1997 to introduce housing management CCT. Larger authorities—those with more than 15,000 houses —will have two or three years to complete the process. Authorities in Wales and Scotland will have longer to prepare.

Where an authority is subject to restructuring as a result of the local government review, it will have extra time to prepare for housing management CCT. Most authorities will have 18 months from the date that the new authority takes over responsibilities. We announced, however, on 18th May that certain authorities which would not be able to complete their arrangements within 18 months would receive an extra six months, giving them two years from the date of re-organisation. The noble Lord, Lord Williams of Elvel, asked whether the CCT programme would undermine the important improvements in the quality of housing service which many authorities have already met. I can give the noble Lord the assurance he seeks. The regulatory framework for CCT will permit local authorities to maintain a comprehensive housing service by packaging a range of services into one contract if they wish to do so. In the end, it is up to individual authorities to adopt an approach which best meets their service delivery objectives in the light of consultation with their tenants.

The noble Lord, Lord Williams of Elvel, also asked whether the costs of implementing CCT would outweigh any of the benefits for many authorities. I agree that there is a point where the implementation costs outweigh the benefits. That is why we propose, as I mentioned, a de minimis exemption for small authorities to exempt them from the CCT process. Where the estimated annual gross cost of carrying out a housing management defined activity is below £500,000 the authority will be exempt from housing management CCT. On the basis of the current local authority structure, we estimate that about 10 per cent. of the local authorities in England will benefit from this concession; that is, about 35 to 40 small authorities will be exempt.

The noble Baroness, Lady Hamwee, asked about the integration of social services into the CCT programme for housing management. Many, many local authorities, in their wish to gain efficiency, are already able to dedicate the cost and the type of services which are already covered by a housing department, as it were, and are a discrete occupation for a local authority. The provision of the social services element of it is separate. As we see it, there is no reason why these matters should not remain separate. I commend the order to the House.

Lord Williams of Elvel

My Lords, before the noble Viscount sits down, could he respond to the point made by the noble Baroness, Lady Hamwee, about paragraph (c) of the order which states: collecting local authority housing rent and service charges, and service charge loan payments arising from such service charges, keeping a suitable record of the sums collected, collecting any arrears, negotiating an agreement for the payment of any arrears, and monitoring compliance with such an agreement". To follow the question put by the noble Baroness, are the Government seriously suggesting that that function should be put out to competitive tendering to the private sector? I have to say to the noble Viscount that if that is really what the Government intend it would be very odd for any council tenant to be faced by a private individual working for Group 4 or any other organisation to be told, "You are in arrears by this much and if you don't pay up straightaway the lads will come round tomorrow morning and will do the necessary". If that is what the Government are suggesting let them say so. However, the noble Viscount has not responded to the question put by the noble Baroness, Lady Hamwee.

Viscount St. Davids

My Lords, I am sorry that I overlooked the question raised by the noble Baroness. I shall now do my best to answer her. Of course we recognise that rent arrears and tenant disputes are very sensitive areas indeed. We feel that it is for local authorities to satisfy themselves that potential contractors will have the capability to take a proper and sensitive approach to such matters as rent arrears and their collection.

Baroness Hamwee

My Lords, before the noble Viscount sits down perhaps I may pursue that issue and then raise another one.

If in putting out its contract to tender and considering tenders a local authority is dissatisfied with the approach that will be taken to such matters by potential contractors, is the local authority in a position to disregard the fact that the costs may be somewhat lower in the tender of a contractor about which it has doubts regarding those matters? Can the local authority give more weight to its concern as to whether the contractors will deal appropriately with matters such as tenant disputes and the collection of arrears? I hope that I have made my question clear to the noble Viscount.

Secondly, will the noble Viscount return to the question of the timetable? He explained that the timetable will be different for individual local authorities. That is no consolation to those which are in the first tranche and which will have to be prepared earlier than others. Can he answer the direct question as to why the Government appear unwilling to allow all local authorities the opportunity to consider the results of the pilot study before going ahead with the programme to the predetermined timetable?

Viscount St Davids

My Lords, perhaps I may return to the sensitive matter of rent arrears. It is for the council itself to examine the methods by which contractors will carry out their obligations and to ensure that any contractor is responsible and capable of carrying out its obligations in the manner which the council deems to be the proper manner for them to be carried out.

Lord Williams of Elvel

My Lords, I am sorry to intervene yet again. Can the noble Viscount specify exactly how the council will put in the tender document, in words of one or two syllables, what is the capability or the right way of carrying out these very difficult functions?

Viscount St. Davids

My Lords, councils already carry out these activities. They know what they are doing. As I said, we have excluded from the CCT process the social aspect—the allocation of the properties and the priorities which are set for a particular type of tenant. That is done by the local authority and will continue to be the case. The management function is the maintenance of the buildings and the collection of rents. The council already knows, within its housing department, the functions which it carries out. When it issues its tender it will be putting out to tender all those non-social aspects. The council knows what it does, and can also put in its own tender on that basis. I do not see that there is a problem.

Lord Williams of Elvel

My Lords, I have not explained myself to the noble Viscount. There are no non-social aspects to the collection of rent arrears. This is a social problem, for all sorts of different reasons, which the noble Baroness, with all her experience, and I could detail to the noble Viscount if he wants. There is no non-social aspect.

I am asking the noble Viscount how on earth, knowing what it knows about rent arrears, a local authority can construct a document—which the noble Viscount assures us will be put out to tender in the most sensitive manner—which will be satisfactory and will allow a competitive bid against the local authority itself. I simply cannot understand it.

Viscount St. Davids

My Lords, I am afraid that I do not see the noble Lord's problem. The council already carries out those functions. It knows what it does. It is putting those functions into a tender. I am sorry if I have not understood the noble Lord. I do not wish to be insensitive in this matter, but I understand that the council knows the package which it is obliged to put into the CCT tender. Those are broadly the functions which it already carries out within its housing department.

Baroness Hamwee

My Lords, while we are on this subject, I am not sure whether I missed this, but I hope that the noble Viscount can assist me and say how the local authority is to assess quality in these very different areas. Can it give greater weight to the non-mechanical matters as against tasks such as mending windows?

Perhaps I may give one additional example which may help to set the matter in context. There is a reference in paragraph (n) to the contractor resolving disputes between occupants. Can the noble Viscount explain how that can be dealt with separately from the allocation of properties, given that the resolution of disputes often involves people moving house?

Viscount St. Davids

My Lords, perhaps I may deal first with the question which the noble Baroness, Lady Hamwee, raised in relation to the timetable. I understand that the lessons of the pilot programme are now available to local authorities. They have this information before them in order to help them meet the timetable.

To return to the sensitive issue of rent arrears and disputes, councils themselves will set the standards and policies. Presumably the majority of local authorities are efficient in these matters. They will set the standards and policies which they are already following. Those may be enhanced, because the CCT operation involves consultation with tenants. Tenants will have an input. They may improve the standards. They may say, "No, we want you to do a little more". But these are the standards which will be specified in the contract which is put out to a possible tenderer. It is for the contractor to respond, indicating that he is able to follow those instructions.

I do not see that I can take the matter any further. What we envisage meets the current practice of local authorities, but if a contractor takes on those duties the contractor will continue the process. If the local authority is the best tenderer it will continue to carry on the process.

Disputes are obviously a sensitive area. The allocation of houses remains in the domain of the local authority. Once the flat or property is allocated, it is then in the housing stock, which comes under the process of the CCT contract.

Many managers of large private estates are involved in disputes in which the management acts as agent between the tenant and the owning landlord. There is much experience in that area. It is not only local authority housing estates which are subject to the problems. The problems already exist in many areas of housing management in the private sector. I do not believe that housing disputes are a unique experience in the public sector.

I wish that I could be more helpful. I seek to be as helpful as I can.

Baroness Hamwee

My Lords, I am sorry to be tedious. If the noble Viscount wishes to write to me in response to this direct question, I shall understand that that may be a better way to deal with the matter. If a tender is made for, say, £500,000 but the local authority believes that the tender for £600,000 has a better, more sympathetic approach to what I have described as the non-mechanical aspects of housing management, is the local authority able to accept the higher tender?

Viscount St. Davids

My Lords, I would prefer to write to the noble Baroness on that point. I remind her that the tenants play a major part in the selection of contractors. If a management contract which exists at present with a housing authority were moved to a contractor in the private sector, obviously the tenants would set some of the frontiers of the contract—the provision of services and those sensitive issues in which they would wish to be involved. I commend the order.

On Question, Motion agreed to.

Viscount Goschen

My Lords, I beg to move that the House do now adjourn during pleasure until 8.35 p.m.

[The Sitting was suspended from 8.22 to 8.35 p.m.]