§ 7.51 p.m.
§ Earl Russell rose to move to resolve, That the proposed sale of Department of Social Security benefit offices shall not proceed until the House is satisfied that adequate arrangements are in place to preserve ministerial accountability for the delivery of benefits.
§ The noble Earl said: I am tempted to begin with A E Housman's Fragment of a Greek Tragedy: my purpose in asking is to know. It is no part of my intention at the moment to make a party political speech. Whether I can say the same for my reply depends on the reply that I receive from the Minister.
§ I should like to understand a great deal more than I do at present about the proposal for the privatisation or lease-back of the Benefits Agency which was announced briefly just before the Summer Recess. I should like to know what exactly the Government are doing and if they cannot give us that information now, I should like to know whether they can give it to us well before any irrevocable decisions are taken.
§ I begin with a few basic questions about the "prime project", as I understand it is known in departmental circles. First, shall we be able to ask parliamentary Questions about delivery? I appreciate that the Minister will not be able to answer in person but shall we be able to use the same system as we use for matters relating to the Benefits Agency? That is a fairly basic question and, for me, a good deal hangs on the answer.
§ I want to know whether the department is contemplating a sale or an example of the private finance initiative. My latest intelligence suggests that it is the PEI with which we are dealing, but one way or another I should like to know. If it is the PFI, I should like to know, as I always do, whether we can be told before any contract is concluded what the long-term costs to public funds of the PFI agreement will be. Without knowing that, I cannot see that we can ever judge adequately a PFI project. And because even in this House we have a legitimate interest in the proper use of public money, I think that we are entitled to that information.
§ I should like to know what is envisaged as the contractor's source of profit because in the private sector, there must always be a legitimate profit. If that does not exist, from the contractor's point of view, it is useless. Is the profit envisaged to be made through 848 savings on service delivery and if so, can we be told how and in what way those savings will be made? I ask for an assurance that that will not be at the expense of the interests of claimants. Alternatively, is the saving to be made by reducing the Benefits Agency's estate, as has been suggested? If so, I should like to know what criteria are being used to judge what estate is and is not necessary and perhaps even more important, who is using those criteria. Are the criteria to be used only by the contracting firms deciding whether the estate is necessary to its commercial interest or, in a matter which involves both the administration of public money and the rights of citizens to entitlements, will there be any public interest input into deciding whether it is necessary for a particular outlet to be preserved? I imagine that a number of Members of another place representing rural constituencies will be fairly interested in the Minister's answers to those questions.
§ Is it to be done by cutting down on outlets? Again, if so, I should like to know who will make those decisions. Is there to be any scope, before decisions are finally taken, for parliamentary approbation in relation to any decisions about which outlets are to be cut down because in an issue which concerns the citizens, there is legitimate scope for parliamentary input. If there are no answers, I hope that we shall have an assurance that nothing will be done until we do have some answers.
§ Also, I recall that the Minister said last July that we are dealing with a 20-year arrangement after which the leases of DSS properties came to an end. I hope that that is a correct recollection. If the Minister said that, what will happen at the end of the 20 years because we cannot hope that we shall be so far into the withering away of the state that the need for a benefits agency will have disappeared?
§ I turn from that to consider some of the criteria which we should use. I hope that the Minister will not turn this debate into one between public service and privatisation because I hope that none of us here would believe that the boundaries between the public and private sectors should be set in stone where they are now. If we agree on that position, then we need to consider any future question empirically in deciding what should be public and what should be private.
§ I want to suggest a few of those criteria and ask whether the Minister agrees with them; and if he does, whether his proposed plan of action can meet them. In the course of doing that, I should like to look, at least cursorily, at the proposed contracting-out of the child benefit service and at some of the proposals which are being made for privatisation inside the CSA.
§ First, clearly there must be a way in which to avoid conflict of interest. We must have a situation where the making of profit does not conflict with the need to deliver the service because if that conflict of interest exists, we cannot be sure that we shall be adequately served.
§ That is a long-term problem. When we were dealing with the Spanish Armada, the fleet was kept together at night by flying a poop lantern on the leading ship. One night that task was given to Sir Francis Drake. Those were in the days when warfare was still a privatised 849 business. It was conducted for profit, for booty, plunder and ransoms. When dawn broke, Sir Francis Drake was nowhere to be seen and the English fleet was sailing right under the poop lantern of the Spanish flagship, to their considerable alarm. Drake was discovered several miles away boarding a dismasted Spanish galleon which contained all the money for paying the Spanish soldiers. Drake Enterprises was still in business.
§ I understand that but I hope that the Minister understands equally that that created a conflict of interest. It is that type of problem with which I am concerned.
§ In that context, I am interested in how monitoring is to take place and by whom. What sort of penalty clauses will there be in the contracts for failure to deliver an adequate service? If the penalties are sufficiently large to deter, may that not constitute an incentive to conceal failures in service delivery? As always happened in towns which used to have the plague, they went to great lengths to conceal it because if people discovered it, that was bad for their trade; naturally, no one much felt like trading there.
§ In the case of in-house bids, is there any problem about them having superior information? In cases of IT, let us suppose that the firm which bids successfully is an IT firm. It will have a financial incentive to use its own equipment but, of course, there will be a problem of computer compatibility because it will need to have access to other parts of the DSS service. It will need to have access to the central DSS records, to the national insurance computer, and in the case of child benefit, to the national insurance contributions records. If the profit incentive to use its own equipment conflicts with the incentive to have compatibility of computers, I see that there could be a problem. There could also be a problem with the CSA in terms of gaining access to highly confidential and extremely sensitive records.
§ I am concerned that there should be an incentive to effectiveness as well as to efficiency. The conventional answer has always been that regulation will meet this point. That conventional answer is centuries old but has usually failed. Take, for example, the 17th century provision of saltpetre. That used to be privately carried out for profit. As saltpetre results from urine there was always a great temptation to dig right round and even under or in occupied dwellings. There was no end of regulation to control that but despite all the regulation a saltpetre firm was once discovered, which, by its own confession, was digging underneath a church because it said that the "longsomeness" of the service and the women pissing in their seats made the most excellent saltpetre. The House of Commons was not impressed. It took the House of Commons to put the matter right, not a commercial incentive. That makes again the basic point about accountability.
§ Incidentally, we should not let go without question the claim that private firms are always more efficient. The efficiency unit has recently cast doubt on this. It suggests that there may be more conflict at the interface between service users and the provider, and that that may create costs which are not included in the calculation. Therefore I do not concede ex hypothesi that 850 private firms are always more efficient. But even if I did, they need to be effective as well. Regulation, which is meant to work, tends to conflict with freedom to manage and tends to interfere with business autonomy. It is not always very effective. I was distressed to learn of the suggestion that the Government might privatise the adjudication of the Benefits Agency medical service. Justice and profit are like oil and water; they really do not mix. The Minister cannot be certain that any attempt to mix them would not fall foul of judicial review as being in breach of the principles of natural justice by creating a possibility of being judge and party in their own cause. I hope that matter has been given thought.
§ Decisions on entitlement should not be made for financial reasons. We are here dealing with a right, like the right to vote. One would not wish to have decisions such as whether to provide remote rural polling stations made on grounds of commercial interest. Accountability, which is the subject of this Motion, because it is the most particular parliamentary concern, raises the question: shall we have a sight of the contract before it is signed, all considerations of commercial confidentiality notwithstanding? If not, I do not see how we can judge whether it is in the public interest. Where both public money and citizens' rights are concerned, I think we must make a judgment. Will the private firm be accountable to Parliament for failure to deliver the basic service through the Secretary of State? Will it be accountable for decisions on its staffing levels, and will those be judged on grounds of efficiency, or of effectiveness, or both? That is an area where there may be an acute conflict.
§ A contract, of course, can hold people accountable only in those criteria which have been foreseen. How are they to be held accountable for a failure of service we have not foreseen? How can the Secretary of State be accountable where he does not have control? How can the business be private if he has control? I hope the Minister has answers to those questions. I shall listen to them with interest.
§ Another criterion is that I do not think we can privatise anything which is a natural monopoly, or which cannot be allowed to go bankrupt. Those two relate closely, as the case of Eurostar topically illustrates. I do not see how there can be competition in the delivery of benefit. There is in the most literal sense a captive market. I do not know what would happen if the firm undertaking the service went bankrupt. I should be glad to know whether there are some answers to that point.
§ I should like to know whether we can have transparency in the financial provisions. Again, we have here a long-term problem. In the days of the first Earl of Salisbury, a man of affairs once wrote to him explaining that he had discovered some Crown land valued at £600 which was worth £6,000, and if Salisbury would allow him to buy it from the Crown, he could then re-sell it at enormous profit and he would go halves with Salisbury in the profit. Salisbury being a prudent man did not answer that letter—or, at least if he did, no answer survives. However, that possibility of conflict of interest still remains. In the case of the PSA, 851 it was sold for £11.4 million and resold for £70 million. In a case of profits so immense, one wonders whether it had been a sale at an under value. Where there is a sale at an under value, one always wants to know whether there had been any financial interest in making the sale to that particular person. The question may turn out to be a complete mare's nest, but it is only if we are allowed to ask it that we can stop being suspicious. I beg to move.
§ Moved, to resolve, That the proposed sale of Department of Social Security benefit offices shall not proceed until the House is satisfied that adequate arrangements are in place to preserve ministerial accountability for the delivery of benefits.—(Earl Russell.)
§ 8.7 p.m.
§ Lord Addington
My Lords, I shall speak briefly as my noble friend has, as always, outlined the points with considerable clarity and in detail. We are dealing with the Government's privatisation of their social security benefit offices where some of their most basic services are delivered. If that estate is not run properly, the delivery of basic benefits to the most vulnerable in our society may well be endangered. That is essentially what we are concerned with today. The Motion asks for parliamentary accountability as regards the delivery of benefits. If the service breaks down due to a lack of maintenance of the estate—I believe noble Lords in all parts of the House agree that this service is essential—something which is essential to a civilised society in this age will no longer function.
There is a belief that a service can be delivered more efficiently by the private sector. However, in believing that, we make a series of assumptions. First, we believe that the private firm knows more about the service. As has already been pointed out, the private firm will be dealing with what is to it a new area of activity where there is no natural competition. No one other than the Government will pay state benefits. Thus we shall have a private firm operating under a monopoly. There must be parliamentary scrutiny and accountability of that. Someone must supervise this service.
I believe the noble Earl referred to Drake chasing after the Spanish Armada for private gain. I believe I heard someone on the Government Front Bench whisper, "Yes, but he won". He won because the wind dispersed the fleet. If we are waiting for a fair wind to guarantee victory, I suggest that we are taking more risks than we should with a fundamental structure of our society.
§ 8.9 p.m.
§ Lord Carter
My Lords, the noble Earl, Lord Russell, has done the House a service in tabling this Motion. I can speak briefly because the noble Earl has covered the ground well. I shall ask a number of similar questions although I shall perhaps adopt a slightly different approach. A number of the questions will be fairly technical and the Minister may wish to write to me and place a copy of his reply in the Library. That might save the time of the House.
852 The Motion refers to the sale of DSS offices. I presume that that also involves the possibility of the privatisation of the administration and facilities management. In regard to the PRIME project it will be helpful if the Minister can tell the House exactly what the situation is now. I understand that the bidding has been reduced to three consortia which are to be considered. Will the Minister confirm that one, Nomura International, was involved in the successful bid for the sale of MoD married quarters?
What is the structure of the proposed sale? Is it to be the sale of freeholds, leaseholds, or both? As the noble Lord, Lord Lucas, will know, I am involved in discussions regarding the privatisation of ADAS and in that case research farms. In that case it is entirely clear that the Government are to retain the freehold and are selling only the leasehold. Will the Minister give the same sort of detail?
Is the money that is to come from the PRIME project capital money up-front or are there savings in the running costs which are built into the equation? I understand that the department spends £160 million a year in rent. Is that all to go to outside owners, or will some of the rent be transferred internally so that the money is kept in the public sector? What is the structure of the sale, and how will it affect the PRIME project? Is it a matter of straight sale and leaseback of the properties? Are facilities and management involved or, above all, is any shift proposed in the administration of the benefits? Already the administration of child benefit has been put out to tender and one asks why. The cost of the administration of child benefit is only two per cent. of the total bill, compared with 61 per cent. for the administrative cost of the Social Fund.
Given that example, we have to be concerned about questions of confidentiality. How would such matters as collecting from the Post Office be affected? All those matters knock on to the privatisation of the DSS estate and the potential privatisation of the administration of benefit.
We have the example of the privatisation of housing benefit administration in Croydon, Bromley and Wandsworth. A three-year contract was let under BET to run the back offices of the Benefits Agency in Lancashire and Cumbria. I am sure the Minister is aware of the consultant's report, prepared early this year, on the operation of that contract. The report stated:BET's brief was to handle typing, open the mail, run the messenger service, ensure stationery supplies were up to demand and operate security for the agencies and the Agency's branches across the region".The report concluded that the result was a disaster. The Benefits Agency was left without stationery and last September BET failed to meet up to 43 per cent. of the targets set for opening the post from claimants. That is why there is concern when there is an attempt to privatise the administration of benefit. If we set against that the proposals to put out to tender the most efficient part of the Benefits Agency, the administration of child benefit, the Minister will see why we are concerned.
Another important point in relation to the transfer of facilities management as well as property relates to arrangements for staff who are transferred. Is there any 853 question of a dowry, as in other privatisation, to cover the pensions, employment contracts and so on? What happens in relation to access to offices for benefit claimants? And there is the point, made extremely well by the noble Earl: who will decide on closures? That is very important for benefit claimants, who will not have the money to travel a long distance. Who will have the final decision on the closures of benefit offices, which are part of the prime project?
I believe a figure of £3 billion has been mentioned, defined as the present net value over 25 years. As I asked before, what proportion will be upfront? What does that mean in terms of initial receipts in proportionate terms as compared to the long-run receipts?
We had the experience of the Bill that dealt with the PFI in the health service. The Government needed an Act of Parliament to put right a glaring anomaly regarding the financial security of the trust hospitals involved in the PFI. Let us suppose that there was a massive shift in the way that DSS benefits are administered, not in the ownership of the administration but in the manner in which benefits are administered. Let us suppose, for instance, that there is an enormous shift in information technology. What happens then to the contracts for the offices? Can the leases be assigned? Who has the final decision? Are they returned to the Government if they are no longer required?
We in the Labour Party are keen to see the efficient administration of the benefit offices, which will lead to an improved service to benefit claimants. There are areas of concern. They include the protection of individual personal information; the future of staff transferred to the private sector; and the potential closure of offices in outlying regions. What provision have the Government made for the protection of personal information when the transfer to the private sector of the ownership and management of offices is completed? To repeat the point made by the noble Earl, will the Minister confirm that he will remain accountable to the House for any breach of confidentiality concerning information on individuals.
The Minister has special responsibility for pensions. I wonder whether he can help the House in regard to the story that appeared in the press today. This is not the time or place to go into a great debate about it; however, I am sure it would help the House, since we are discussing the accountability of Ministers, if he could give any indication of the true figure for the future savings that have been suggested in the way in which war pensions are handled. What are the total costs of the adjustments, which are colloquially known as sweeteners? All that will have to be done in the PES round and the Red Book figures. Some sort of calculation must have been made. I heard the exchanges at Prime Minister's Question Time in the other place today. The Prime Minister did not seem disposed to say what the correct figures are. However, I am sure that the Minister, who has special responsibility for pensions, will be able to share the correct figures with the House. If the figures quoted in the Guardian are wrong, perhaps he will tell us what are the correct figures.
854 At the end of the day the debate is about the efficient administration of benefits and the best way to deal with claimants, and particularly with poverty. We know that one child in three is now born to a family receiving benefit. We can all swap statistics on that matter. The other day I heard a graphic illustration of what is happening in some of the most deprived areas of our country. The story was told by Mr Frank Field, MP, who is perhaps one of our most radical thinkers on welfare. It concerned a school in his constituency. As we know, he represents a very deprived area. He said that he was used to entering that school a few years ago and asking the children what their ambition was. He would receive the usual stories: they wanted to be a hairdresser, a bus driver, an engine driver or whatever. He said that he recently went into the same school and asked children of 11 or 12 the same question. There was a sullen silence, until one lad perked up and said, "My ambition is to get my giro". That boy was aged 12. I wonder how that situation will be helped by the privatisation of the DSS estate and the administration of benefits and facilities management.
§ 8.18 p.m.
§ The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish)
My Lords, this has been a fairly astonishing debate for a number of reasons, not least the fact that it has ranged a great deal wider than the Motion on the Order Paper and the subject of the buildings, the estate, occupied by the Benefits Agency.
The noble Lord, Lord Carter, raised the subject of war pensions and the amazing article in the Guardian this morning. The paper cobbled together in a fairly random way from some leaked information a story with very little foundation. A great deal of it was downright untrue. I had a meeting this morning, arranged many months ago, with the central advisory committee of all the organisations representing war pensioners. We had a perfectly satisfactory meeting. We discussed a letter I had sent to them on 26th November—which hardly needed the Guardian to leak it—and also discussed some changes in medical opinion regarding deafness. We had a thoroughly amicable, sensible and businesslike meeting. At the end, the members there expressed their unanimous condemnation of the Guardian for publishing the leaked information; and there was unanimous support for the procedures that I had used in bringing these matters to their attention and the way I discussed the matters with them. That was the correct and appropriate place—the central advisory committee of the war pensions bodies.
I turn to this debate, which is equally remarkable. If noble Lords had been listening, they would have been led to the conclusion that the Benefits Agency owned all its property. I have news for the noble Earl. It is uncharacteristic of him to be so fundamentally flawed in his basic argument. The Benefits Agency does not own all its property—far from it. The department owns only 22 per cent. of the buildings it occupies at the moment. So the private sector appears in the noble 855 Earl's view to be pernicious, evil and untrustworthy, but it already owns three-quarters of the properties we occupy.
§ Earl Russell
My Lords, may I ask the Minister to withdraw the charge that I said that the private sector was pernicious and untrustworthy? I merely attempted to assess in what circumstances it was suitable to have it involved. That is a very different question.
§ Lord Mackay of Ardbrecknish
My Lords, I am always puzzled at some of the interpretations the noble Earl puts on his remarks and the interpretations that I put on them. He appeared to say that the private sector was not a fit organisation to own the property we use. If that is not what his speech was all about, then I listened in vain. I failed miserably to understand what he was saying.
§ Earl Russell
My Lords, perhaps I may assist the Minister. I was trying to assess whether or not it would be out of its element.
§ Lord Mackay of Ardbrecknish
My Lords, it is not out of its element. It already owns three-quarters of the property we occupy. That is the fundamental flaw beneath the whole of the noble Earl's argument today. He seemed to me to postulate his whole argument on the basis that we own all our property. We do not. As I explained, we own 22 per cent. of the buildings. The principle remains the same. I shall come to the details about owning, renting and how we shall proceed, but operational matters are the responsibility of chief executives. They remain accountable to Ministers, who are accountable to Parliament for all aspects of performance. My accountability and that of my colleagues is not just for the 22 per cent. we own but for 100 per cent. of the estate, including the 78 per cent. which we do not own but rent from the private sector. Ministers have been involved in every stage of the projects and we are accountable for the final decision.
It might be helpful to the noble Earl if I try to explain exactly what we are attempting to do. The objectives of project PRIME (an acronym for the Private Sector Resource Initiative for Management of the Estate) are to meet the business needs of the Department of Social Security estate at a lower cost. In particular, we need to ensure sufficient flexibility to meet the changing needs of the business; to remove the burden of surplus space; to provide a capital development programme and to involve private sector expertise and investment in the ownership and management of the estate. Particular emphasis will be placed on the transfer of risk. That will allow the department simply to be an occupier of the space it needs to deliver its core business.
We are talking about the estate, not at all about the delivery of benefits. We are also talking about the services surrounding the provision of that estate. The Department of Social Security now has the largest civil estate in government, equivalent to one of the largest property companies in the UK. It covers nearly 2 million square metres in over 700 buildings of varying size, spread throughout England, Scotland and 856 Wales, with major concentrations in Leeds, Newcastle, Fylde and central London. But we only own the freehold on 38 per cent. of the total space, or 22 per cent. of the buildings. The rest is leasehold accommodation, with many leases of a modern nature, typically with a five-year rent review. So some of our tenancies come up for review all the time. It is not a new problem for the department. We are well aware of it and deal with it. No one has found that a problem. Some are historic leases with an extended review pattern.
We have over 300 different landlords. As many noble Lords know, the existing estate consists mainly of traditional office buildings—far too many, I regret to say, built in the 1960s when I would not have given too many prizes for architectural design. Our buildings vary in age and size and are not always located in the best place for the public. The cost of maintaining our portfolio is large. Market rental is £160 million per annum. In 1995-96 we spent £80 million on capital works, £50 million on building management, £85 million on total facilities management and £41 million on rates. The mixture of freehold and leasehold accommodation also means that opportunities to change the estate to meet business needs are very much tied to the state of the market, the timing of lease breaks and availability of capital.
Over the past 20 years or so, the rate of disposal of surplus accommodation has not kept pace with the improvements that have been made to the efficiency of the department through changes in business processes and rapid development in information technology. That is not unique to the public sector. It is true across the whole service industry. The result is that the taxpayer is funding over 100,000 square metres of vacant space.
Perhaps I may illustrate the point. The DSS office at Acton in north London has 31,000 square metres of surplus space. That is bigger than the Home Office building in Queen Anne's Gate. The Five Ways site in Birmingham has 19,000 square metres of surplus space, 45 per cent. of the total. Heron House in Reading, with 5,000 square metres, has been completely empty for some years. I saw at the benefits office in Shetland that the bottom floor was empty and was not necessary for our requirements. That cannot be acceptable.
The department therefore undertook a feasibility study which reported in May this year. The study showed that there was potential to move from direct responsibility for management of our estate to buying serviced accommodation from the private sector in line with our business needs. The study found that there was a clear market interest for such a deal—one which is not a traditional sale and leaseback but a major private finance initiative involving related facilities management services and appropriate risk transfer.
We have already started this process with the award of a contract for our estate in Newcastle, where a private sector consortium, the Newcastle Estate Partnership, is currently drawing up detailed plans for a new estate using the private finance initiative. The project which I announced on 20th June will provide modern serviced office accommodation for 11,000 staff in the area under a 25-year contract. The private sector partner will 857 construct and maintain the new estate for this period. Surplus land will be used for a variety of commercial ventures, including retail, housing and a hotel leisure complex.
Noble Lords who know what the accommodation is like on the Longbenton estate in Newcastle will echo the words I used when I went there in June. I said that it was not a moment too soon to move our staff out of the old wartime accommodation into modern, properly serviced office accommodation. The scheme in Newcastle will allow us to improve our accommodation while harnessing the skills and expertise of the private sector in a long-term partnership arrangement.
The noble Lord, Lord Carter, asked a number of questions about such projects. When it comes to the maintenance and facilities management services used in the projects, the facilities management services related to the accommodation are included in the reference bid which is required. Much of the facilities management has already been subject to market testing and is managed through private sector contracts in many areas. But no benefit delivery or administration is included in that. It is envisaged that certain staff delivering maintenance and facilities management services will transfer under TUPE regulations, but it will be left to the bidders to make proposals in those areas.
The noble Lord, Lord Carter, mentioned the BET project in Lancashire. He is quite right that the contract did not work well in the beginning. However, I am happy to say that it is working a great deal better now, following discussions with the company. It is meeting its requirements and we are reasonably satisfied that, after bedding down time, it is giving us the service we require.
The aim of social security is to deliver a high quality service more efficiently. That has to be right for our customers and taxpayers. It is not necessarily organised in a way that suits the department. We wish to organise it in a way that suits our customers. Increasingly, our customers wish to talk to us by letter and telephone, and we want to use all the advantages of IT and streamlining of operations which we believe modern management techniques can bring.
The introduction of the Jobseekers' Allowance has had a significant effect on our business, in that the JSA is, in the main, available from over 1,000 jobcentres across the country. As I said, many of our customers, instead of having to go to the jobcentre as they once did and then go to the benefits agency, have to go only to the jobcentre. I think that that is a major improvement in the service that we give to people rather than asking them to go from one office to the other.
As I mentioned, the increased use of the telephone, which we have already seen, will have an impact on the number of people who currently need to call at DSS offices. Our National Customer Survey has consistently found that a significant number of our customers prefer to carry out their business on the telephone or by post. While that is a general finding and cannot be applied in every locality, it will be one of the factors that we take into account when assessing the suitability of an office for closure.
858 We still envisage a large number of offices across the country, but opportunities through the change programme and other developments, such as the roll-out of the benefit payment card, will mean changes to our total estate. The new IT strategy will have at its heart a single source of uniform customer information. That will be underpinned by computer systems in front line offices that give much more flexibility to organise in a more efficient way. Our review of income support has also shown considerable scope for greater efficiency by reorganising the processing, and cutting out clerical work and duplication.
I mentioned the benefit payment card. One of the reasons why many people call at their DSS office is because of the current system of delivering benefit—the Giro cheque which goes missing or does not appear in time. These things will be behind us when we go to the payment card in the later years of this decade. So there are considerable changes that will happen in the demand for Benefit Agency services out there by the public.
I expect the number of staff to reduce over coming years and flexibility in accommodation usage will be crucial to maximising opportunities for reducing the cost to taxpayers. Of course, the Benefits Agency is not just the front-of-house that delivers the benefit. In fact, it is largely made up of the back-of-house which administers systems and does not deal directly with the public. As I said, we already have considerable empty space when it comes to many of these things.
The DSS agencies have therefore reviewed in detail their estates strategies. They have been asked to identify three things: core, flexible and surplus buildings. We believe that this system will provide the flexibility for managers to commit under PRIME only to accommodation which meets business need and to continue to plan flexibly.
I should stress that PRIME is designed to make the management of our estate as efficient as possible, at a time when, quite rightly, the expenditure of public funds is under very close examination, while at the same time the management of PRIME will be supporting our ability to deliver a high level of service to all our customers.
The business case for the project has identified significant opportunities for efficiencies. When I was asked about this matter I was asked where the profit would come from. We believe that there are such opportunities. First, there is the perfectly clear one through the private sector's ability to use the surplus space far better than we can do. We are not—I hope that the noble Earl agrees—in the business of being an estate agent and being out and looking for customers for our empty space. Our business is to deliver benefits to the people who need them. So that is the first thing: the transfer of surplus space to the private sector.
Secondly, there is simply the commercial management of flexible space, as I mentioned. Then there are development opportunities that can arise from some of the properties. There are cost reductions in the provision of services and potential for private sector capital investment. There is also a reduction in the 859 overall costs of occupation to us. Those will allow managers to concentrate on their core business, which is running a social security system.
So we expect to make significant savings in the costs of our accommodation services, partly through lower ongoing service charges and partly through securing an immediate payment of £250 million, reflecting the value of the assets being transferred. That probably answers one of the points made by the noble Lord, Lord Carter. The requirement for an initial payment simplifies the bidding process and reduces the financial risk to government over the lifetime of the contract. In effect, we shall have taken some of the value of the estate as the up-front capital payment and the balance in lower service charges over the lifetime of the contract.
We are currently in talks with a shortlist of three consortia. I do not want to reveal exactly all the things that we hope to gain from them in terms of running costs savings. That would not be a wise thing to do in a negotiation. The objective is to meet the business needs of the department from its estate at lower cost.
So the project has reached the stage where there are three shortlisted consortia which have been accepted to respond to the invitation to negotiate. I announced the three shortlisted bidders on 1st November. They are: Partnership Property Management Ltd; Mapeley Holdings Ltd; and Opus. Perhaps I can say to the noble Lord, Lord Carter, that Nomura is one of the partners in Opus.
The DSS is retaining the interest of major investors by ensuring that the procurement process is seen to be purposeful and serious. A preferred supplier will be selected in March 1997 and a contract completed by September 1997. The duration of the main contract will be 20 years, with the necessary mechanisms in place within it to ensure continuing competitiveness and value for money during that time. I can say to the noble Earl that Ministers will make the final decision. The National Audit Office, as is its practice, will review these decisions on behalf of the Public Accounts Committee.
The noble Earl and the noble Lord, Lord Carter, asked me about office closures, and perhaps I may say a few words about that matter. Department managers are constantly looking at ways in which we can rationalise our estate as the opportunity arises. As I said a little time ago, most of our space is occupied for administration and backroom processing. Indeed, the major concentrations of accommodation in Leeds, Newcastle and Fylde are only used for that purpose. In future, we want sufficient flexibility to allow managers the option of separating processing from public caller facilities, where that is more cost-effective and delivers a quality service to the public. It also provides the opportunity to examine how best to meet the needs of customers in the light of latest developments.
Managers are compiling estates strategies which identify buildings that will be required long term (more than 15 years) and flexible buildings that may not be required for more than five years. The private sector supplier will not be able to dispose of buildings unless business needs continue to be met and the department shares in any benefit—for example, from development opportunities.
860 In every case where an office is identified as a candidate for closure on business grounds, a comprehensive examination of the potential impact on customer service is undertaken, which includes wide consultation with local MPs, staff and customer representative groups. Indeed, in cases where a closure is identified as being potentially controversial, ministerial approval is required before the office can be closed, so that individual representations and any particular problems can be examined individually. That will continue to be the case once PRIME is implemented.
In conclusion, the PRIME project is a major initiative to remove the burden to taxpayers of surplus space and to avoid a repetition in the future by ensuring sufficient flexibility to meet changing needs. It will bring private sector expertise to bear in driving out efficiency savings and in maximising development opportunities, which will benefit both the department and the supplier.
These activities will be undertaken within a long-term contractual framework which will continue to ensure that the department is in control of decisions taken, that options must achieve our core business objectives, including meeting customer needs, and that value for money is proven on a continuing basis. At all times, ministerial accountability for the delivery of benefits will be maintained.
I hope particularly by that last sentence that I have allayed some of the fears of the noble Earl.
§ 8.39 p.m.
§ Earl Russell
My Lords, I thank the Minister for that reply. I must make my apologies to him as I was not able to give him earlier notice of the main lines of the speech that I intended to make. That, I must confess, was because I had not fully worked them out until it was too late to give the Minister notice.
Perhaps I may begin at the point at which the Minister ended: the accountability for the delivery of benefit. I am extremely grateful for what he said but will we be able to ask questions about such matters as staffing levels? Are we going to be able to ask about individual closures? I am pleased to see the Minister nod. He stresses the existence of a contractual framework. Are we in Parliament going to be able to see that contractual framework and decide whether or not we approve its content? If the Minister were able to answer that it would assist me greatly.
§ Lord Mackay of Ardbrecknish
My Lords, I realise that I was speaking fairly quickly. If the noble Earl reads Hansard tomorrow, he will see that I answered his question by saying that Ministers will make the decisions, but the National Audit Office will review those decisions on behalf of the Public Accounts Committee. By that route there is parliamentary accountability.
§ Earl Russell
My Lords, I heard the Minister say that. I thought I heard a silence and now he assures me that I did hear a silence. A matter of parliamentary concern arises in that regard and it may be a matter for further thought.
861 At one point in the Minister's speech I became extremely confused about what exactly he was saying. It concerned the control of delivery of benefit. I take his point about the department not owning all its estate. I was perfectly aware of that. I was not, in the first instance, interested in estate management, but in the delivery of benefits. I believe I repeat the Minister's words correctly when he said that they were dealing with "services surrounding the estate". I am not clear what he meant by those words. He referred also to "buying serviced accommodation". Again, I am not sure what those words mean. Is the Minister attempting to give me a categorical assurance that the delivery of benefit will remain under the direct control of the DSS and not under the control of any private sector contractor? If so, it would assist me materially.
§ Lord Mackay of Ardbrecknish
My Lords, I do not want to keep jumping up and down. The prime project relates to the estate ownership and the estate management facility. That goes into facility management; for example, the maintenance of the buildings. It can go into things like opening post and so forth, as it already does, in many cases perfectly 862 satisfactorily. The question of delivering the benefits themselves has nothing to do with the prime project; it has to do entirely with estate management.
§ Earl Russell
My Lords, I am extremely pleased to hear that. But I am not the only person by a long way to whom that point has not been clear. I am glad that it is clear now. I hope that it will enable a service delivery to continue on an acceptable basis.
The issue of accountability versus commercial confidentiality, on the other hand, is one which stretches a great deal wider than this debate. On that I am not convinced that I have had any satisfactory answers. I would have been surprised if I had. That is a matter about which we will all need to think further.
I will read what the Minister said extremely carefully, but I heard a few silences. I heard a silence on the question of incentives to effectiveness. Again, I hope to hear more on that on a future occasion. But that is all that it is worth saying at this moment. I beg leave to withdraw the Motion.
§ Motion, by leave, withdrawn.
§ House adjourned at sixteen minutes before nine o'clock.