HL Deb 10 July 1996 vol 574 cc298-305

3.5 p.m.

The Minister of State, Department of the Environment (Earl Ferrers)

My Lords, I beg to move that the Bill be now further considered on Report.

Moved, That the Bill be further considered on Report.—(Earl Ferrers.)

On Question, Motion agreed to.

Lord Williams of Elvel moved Amendment No. 123: Before Clause 95, insert the following new clause—


(".—(1) Section 27 of the Housing Act 1985 (management agreements) shall be amended as follows—

(2) In subsection (5), before "the Secretary of State" insert—"Subjection to subsection (5A)".

(3) After subsection (5) insert—

"(5A) The Secretary of State's approval shall not be given in any case where he is informed by a local authority that—

  1. (a) following such consultation as is required under section 27A (consultation with respect to management agreements), the authority is satisfied that the majority of the tenants of the houses affected by a proposal to enter into a management agreement do not wish the proposal to proceed, or
  2. (b) following such consultation as is required under section 27AA (management agreements and compulsory competitive tendering) in relation to bids submitted by any person to exercise any of the management functions of the authority, the authority is satisfied that the majority of tenants affected would prefer that the authority exercise those management functions themselves.".").

The noble Lord said: My Lords, this amendment also stands in the name of my noble friend Lord Dubs.

This matter was not raised in Committee. I accept that the drafting of my amendment is somewhat complex. Nevertheless, I hope the purpose is entirely clear. It is to reinstate what is known as the "tenants' veto" on the contracting out of housing management services. Section 27 of the Housing Act 1985 enables a local housing authority to delegate its housing management functions to a managing agent under a management agreement, subject to approval by the Secretary of State. Such delegation may take place after voluntary competitive tendering, following compulsory competitive tendering or under an arrangement whereby management is delegated to a tenant-management organisation.

In the 1993 Act, the Government introduced a rather different system. Until that Act if local authorities proposed to enter into a management agreement to consult the tenants affected, if the majority of such tenants were opposed to the proposal the Secretary of State had a right to say, "You cannot go ahead". That was known as the "tenants' veto". The tenants' veto was removed by the Act. The Government's argument for doing so was that the tenants' veto was unnecessary given the new and more extensive rights to consultation that were introduced. That said, the justification for removing the veto as it applied to voluntary competitive tendering was never spelt out.

I shall not go into the progress of CCT, as it is called, which is being introduced in three phases. A number of authorities have not been required to expose their housing management service to CCT because the value of work falling within the defined activity falls below the de minimis level agreed by the Government. The number of authorities claiming exemption on the grounds of de minimis exceeded the Government's expectations; and the Government are now consulting on a proposal to revise the de minimis exemption to bring these authorities back within the requirement of compulsory competitive tendering.

The effect since the 1993 Act has been very interesting. The overall effect is that about 40 per cent. of the housing management work which will eventually be subject to CCT was exposed to competition in the period leading up to April this year. Local authorities have been very successful in winning contracts in the first round. The private sector, on compulsory competitive tendering, won a little over 2 per cent. of the work exposed to tender.

The result can be attributed to the small number of private contractors who are interested in the business. Experience of previous rounds of competitive tendering have shown that the private sector takes time to learn the skills—how to bid and in what form. It is far too early for either the Government or contractors to conclude that local authorities have been trying to freeze out private contractors. Nevertheless, following complaints from unsuccessful private housing management contractors, the Government have now issued a consultation paper proposing, as your Lordships would expect, a number of changes to the framework for CCT, admitting openly that the results of the first round were not as they expected; that is, that private contractors would do the business. In other words, too many contracts were won in competitive tendering by local authorities and that did not satisfy the Government.

A particular feature of housing management compulsory competitive tendering, compared with CCT for other local authority services, is the requirement to consult tenants under Section 27AA of the Housing Act 1985. That is because contracts for housing management services are classified as management agreements to which Section 27 applies and that is the reason for the drafting of the amendment I am putting before the House today.

In many authorities tenants have been involved in interviewing contractors and selecting tenders. But under the present arrangements tenants are not allowed to reject a contractor outright if they are satisfied with the price and quality of the housing management services they receive.

The consultation paper recently issued by the Department of the Environment starts off by saying that Ministers have reviewed the initial implementation of CCT and find that it is not entirely satisfactory. They accept that private sector bidders have won very few contracts. They accept that the Audit Commission expressed concern about the way in which bids were handled. They also accept that, on housing management, around 100 authorities are or will shortly conclude that they are de minimis and do not expose any work to competition. The paper says that that is many more than anticipated.

The review conducted by the Department of the Environment confirmed that all CCT contracts are being awarded in-house except in certain authorities. For example, 62 of the first 69 contracts were awarded to in-house teams, won by local authorities, which means eight contracts were awarded to external suppliers. It is our view—it is time that your Lordships had the opportunity of considering this problem again—that compulsory competitive tendering has not led to any improvement at all in management services to housing in local authorities. Furthermore, it is our contention that the tenants' veto—the right of the tenants to be able to say, "We do not want this"—should be reinstated. That is the object of my amendment. I beg to move.

3.15 p.m.

Baroness Hamwee

My Lords, if I am allowed to say "I"—following the advice earlier this afternoon—perhaps I can say that I support the amendment. This is not an argument against compulsory competitive tendering. There are times and places for that, and I would be happy to debate the good and bad qualities of CCT—but not this afternoon. It is an argument to reinstate a right which was taken away in 1983 and not replaced. It was taken away on the grounds that it was not necessary because of the amount of tenant consultation that would be carried out as part of the competition process but without the question "What harm would its retention do?" ever being answered.

Referring back to your Lordships' debates during the passage of the 1993 Bill, we were told by the Government that they proposed that tenants should be involved in every aspect of the delegation process: from drawing up the tender specifications to involvement in the shortlisting; from interviewing of tenderers to monitoring performance and service delivery; and, if need be, advising the local authority on enforcement and penalty procedures. That is involvement in every aspect except the decision itself.

We were also told that the Government have always believed that full and effective consultation with tenants should be an integral part of the preparation for management agreements. But those consultation arrangements should fit with the times. The Government argued that the tenants' veto was introduced when competitive tendering in the housing management area was voluntary and in making it compulsory the need for a tenants' veto was met by the process.

It seems to me, looking back with the benefit of three years hindsight—always better than one's consideration at the time—that when the process was voluntary and there was no compulsion on the parties to go down a road that they resisted, there was far more likelihood that involvement of tenants would be very good involvement. When the parties are compelled to do something, their resentment may show itself in a number of forms, one of which may be in failing to involve tenants with quite as much enthusiasm, despite the formal requirements, as one would like to see. I think it is timely therefore to bring this matter back and I support the proposition.

Lord Monkswell

My Lords, I support my noble friend's amendment. It may be useful to the House if I try to explain some of the historical background to the situation with which we are faced in slightly different terms from those explained by my noble friend.

I shall not give an historical reprise of the whole of the past 15 years, but perhaps the House will bear with me. In the early 1980s, the subsidy that the Government provided to local housing authorities was massively cut. There were two consequences. One was that the resources available for housing management and maintenance were reduced which resulted over the years in a decline in the standards of management in many areas. But it also effectively required a massive increase in council house rents. That prompted local resistance—local housing authorities are after all elected by the local communities—with the result that finances were squeezed even more.

It has been realised that housing benefit pays for a lot of council house rents and therefore an increase in rents is effectively covered by housing benefit. That is part of the reason for the massive increase in housing benefit payments over the past few years. Local housing authorities have attempted to catch up.

The net result is that in most local authority areas the resources that have become available for housing management have increased. It is recognised that there needs to be an increase in resources to improve the standards of local authority housing management. That has effectively taken place in the vast majority of local housing authorities throughout the country.

We also have to recognise what I would describe as the almost personal relationship between housing management and tenants. Tenants get to know the local senior housing officers. A relationship develops which, as things improve, is positive, mutually beneficial and useful for the development of local authority housing. One of the difficulties is that compulsory competitive tendering creates a risk that a new housing management team will take over. That personal relationship, which can be very beneficial, is at risk of being lost. Part of the justification, and the reason for my support, for my noble friend's amendment is that it will enable tenants to hang on to something that is very beneficial to them, if they feel that way. I recognise that there may be alternative circumstances where there may be examples of bad housing management and tenants recognise that there is a need to get a new team to do a better job. In that case they would vote accordingly. This amendment effectively protects tenants and in a very real sense ensures effective local housing management. I hope that the Government will accept it.

Lord Lucas

My Lords, both the noble Lord, Lord Williams of Elvel, and the noble Baroness, Lady Hamwee, have said that they will not discuss CCT in general and that they wish to keep the debate to the subject of this particular amendment. I am sorry about that. If we were to discuss CCT in general we might have a chance to agree about something because I am sure that both noble Lords will agree that this is yet another successful Conservative policy which has, at last and at length, been adopted by the opposition parties, having seen the benefits that it can bring to local authorities and the amount of cash that can be freed for other activities.

From now on I shall confine myself to the amendment, as the noble Lord, Lord Monkswell, did, eventually.

Amendment No. 123 would, in effect, allow tenants to veto any proposal by a local authority to delegate its housing management functions either voluntarily or under compulsory competitive tendering. It is important that there should be some form of balancing check to secure the best interests of tenants where local authorities choose to delegate housing management. However, we believe that the current arrangements for tenant consultation achieve this more effectively than a power of veto.

The veto is a blunt instrument which allows tenants a stark choice between saying yes or no. Tenants already have considerable scope under current arrangements directly to influence constructively and positively the ways in which their homes are managed. Tenants are actively involved in drawing up specifications, setting standards of service, evaluating tenders and selecting contractors. Local authorities also have to involve them in monitoring the performance of the manager, whether this is an external contractor or the local authority's in-house team under compulsory competitive tendering.

Many authorities already have extensive consultation arrangements in place and are able to follow guidance that was issued two years ago. This guidance was issued following consultation with, among others, the local authority associations, local authorities, private sector contractors, the Chartered Institute of Housing and tenant advice agencies. It aims to set out the principles we would expect authorities to follow in setting up their own local consultation arrangements and we are keeping this guidance under review. We have existing powers to make regulations imposing consultation requirements on local authorities but do not consider it necessary to make any regulations at present because local authorities have been following this guidance, and in many cases going beyond what we expected.

We have included a provision in paragraph 3 of Schedule 16 to the Bill to correct a defect in the existing powers to make regulations under Sections 27A and 27AA of the Housing Act 1985 governing the consultation arrangements of local authorities with their tenants. This provision covers the same ground as the existing Sections 27A and 27AA but also allows regulations to be made for the case where the local authority continues to carry out the management itself following a compulsory competitive tendering exercise.

Tenant consultation is central to compulsory competitive tendering of housing management and has been a key factor in improving management standards. The CCT process is carried out in accordance with a strict statutory framework. It is open and transparent. If the local authority in-house team do not come up with the most competitive bid the authority has to delegate its housing management to another contractor. The authority cannot ignore the process.

Where local authorities decide to delegate their management voluntarily, the Secretary of State's consent will not be forthcoming unless the authority has consulted their tenants in accordance with the Department of the Environment's guidance and complied with certain competitive tendering arrangements. We firmly believe that the benefits of competition and tenant consultation on specifications, and the subsequent monitoring of the manager's performance under the specification, fully safeguards the interests of tenants.

Delegation of housing management does not take away any of the existing rights of tenants. The properties remain in council ownership. As I have explained, tenants are now directly influencing the delivery of housing services through current consultation requirements. To impose an additional burden on authorities—in effect requiring them to ballot their tenants before any future contract is let—would be onerous and inappropriate. It would certainly cut across the arrangements put in place by those authorities which have already delegated housing management functions.

We are delighted by the way local authorities are responding in this area and are venturing into compulsory competitive tendering for their housing activities. We see no reason to interfere with the arrangements that have been put into place, which seem to us to be working very well, and to revert to a system which we left behind, as the noble Lord, Lord Williams of Elvel, suggested, some while ago and which to us seems no longer appropriate.

Lord Williams of Elvel

My Lords, the noble Lord, Lord Lucas, said that he would be glad to have a general debate on CCT. I, too, would be glad to have such a debate because, despite the party political broadcast which the noble Lord started with, we have some ammunition on our side.

But I shall confine myself to the amendment. It would not remove any of the existing rights of tenants to involvement or consultation in CCT. All it would do is to act as a final backstop where tenants feel that they really have to resist the operation of Conservative dogma, as the noble Lord would probably have put it. The noble Baroness, Lady Hamwee, was right in saying that the more involvement and agreement that there is with tenants, the more they will feel happy and satisfied with their housing management. By introducing this measure as a final backstop—in other words, to go back to where we were before the 1993 Act—is a sensible move. My noble friend Lord Monkswell said quite rightly that this amendment would help to protect tenants further than they are protected at the moment.

Again, we come back to the same point. There is a serious political difference between ourselves and the Government. We do not believe that this amendment would spoil any of those lovely Conservative ideas that the Government have imposed on local authorities; it would simply give tenants a backstop right to prevent their houses being managed by someone they did not want. There is a serious disagreement and the only way to resolve it is to ask for the opinion of the House.

3.29 p.m.

On Question, Whether the said amendment (No. 123) shall be agreed to?

Their Lordships divided: Contents, 73; Not-Contents, 152.

Division No. 1
Acton, L. Kennet, L.
Addington, L. Kilbracken, L.
Allen of Abbeydale, L. Kintore, E.
Archer of Sandwell, L. Lockwood, B.
Barnett, L. McIntosh of Haringey, L.
Beaumont of Whitley, L. McNair, L.
Blackstone, B. McNally, L.
Blease, L. Mar and Kellie, E.
Borrie, L. Mason of Barnsley, L.
Bruce of Donington, L. Mayhew, L.
Callaghan of Cardiff, L. Meston, L.
Carlisle, E. Milner of Leeds, L.
Carmichael of Kelvingrove, L. Monkswell, L.
Carter, L. [Teller.] Morris of Castle Morris, L
Cocks of Hartcliffe, L. Nicol, B.
David, B. Rea, L.
Dean of Beswick, L. Robson of Kiddington, B.
Donaldson of Kingsbridge, L. Rochester, L.
Donoughue, L. Sainsbury, L.
Seear, B.
Dormand of Easington, L.
Dubs, L. Simon, V.
Elis-Thomas L Smith of Gilmorehill, B.
Ezra, L. Stallard, L.
Farrington of Ribbleton, B. Stoddart of Swindon, L.
Fitt, L. Strabolgi, L.
Gallacher, L. Taverne, L.
Taylor of Gryfe, L.
Geraint, L. Thomson of Monifieth, L.
Gladwin of Clee, L. [Teller.] Thurso, V.
Hampton, L. Tope, L.
Hamwee, B. Tordoff, L.
Haskel, L. Wallace of Saltaire, L.
Hollis of Heigham, B. Whaddon, L.
Holme of Cheltenham, L. White, B.
Howie of Troon, L. Wigoder, L.
Jay of Paddington, B. Williams of Elvel, L.
Jenkins of Putney, L. Williams of Mostyn, L.
Aberdare, L. Blatch, B.
Addison, V. Blyth, L.
Ailsa, M. Boardman, L.
Aldington, L. Boyd-Carpenter, L.
Alexander of Tunis, E. Brabazon of Tara, L.
Alport, L. Bradford, E.
Arran, E. Brentford, V.
Ashbourne, L. Bruntisfield, L.
Astor of Hever, L. Bumham, L.
Balfour, E. Butterworth, L.
Belhaven and Stenton, L. Caldecote, V.
Beloff, L. Campbell of Alloway, L.
Berners, B. Campbell of Croy, L.
Blake, L. Carew, L.
Blaker, L. Carnegy of Lour, B.
Carnock, L. Lucas, L.
Carr of Hadley, L. Lucas of Chilworth, L.
Carrington, L. Lyell, L.
Chalker of Wallasey, B. McConnell, L.
Charteris of Amisfield, L. Mackay of Ardbrecknish, L
Chelmsford, V. Mackay of Drumadoon, L.
Chesham, L. [Teller.] Macleod of Borve, B.
Clark of Kempston, L. Marlesford, L.
Cochrane of Cults, L. Masham of Ilton, B.
Coleridge, L. Mersey, V.
Constantine of Stanmore, L. Middleton, L.
Cornwallis, L. Miller of Hendon, B.
Courtown, E. Mottistone, L.
Cox, B. Mountevans, L.
Cranborne, V. [Lord Privy Seal.] Mowbray and Stourton, L.
Crathorne, L. Munster, E.
Cross, V. Murton of Lindisfarne, L.
Cuckney, L. Noel-Buxton, L.
Cullen of Ashbourne, L. O'Cathain, B.
Cumberlege, B. Orkney, E.
Dacre of Glanton, L. Orr-Ewing, L.
Davidson, V. Oxfuird, V.
De Freyne, L. Palmer, L.
Dean of Harptree, L. Park of Monmouth, B.
Denham, L. Pearson of Rannoch, L.
Denton of Wakefield, B. Pender, L.
Derwent, L. Pilkington of Oxenford, L.
Dundonald, E. Platt of Writtle, B.
Elles, B. Pym, L.
Elliott of Morpeth, L. Quinton, L.
Elton, L. Rankeillour, L.
Erne, E. Rawlings, B.
Erroll, E. Renfrew of Kaimsthorn, L.
Ferrers, E. Renton, L.
Flather, B. Robertson of Oakridge, L.
Gainford, L. St. Davids, V.
Gainsborough, E. Saltoun of Abernethy, Ly.
Gardner of Parkes, B. Sanderson of Bowden, L.
Geddes, L. Sharples, B.
Gisborough, L. Shaw of Northstead, L.
Goschen, V. Skelmersdale, L.
Gray of Contin, L. Somerset, D.
Harding of Petherton, L. Stodart of Leaston, L.
Harmar-Nicholls, L. Strafford, E.
Headfort, M. Strange, B.
Henley, L. Strathclyde, L [Teller.]
HolmPatrick, L. Suffield, L.
Howe, E. Suffolk and Berkshire, E.
Hylton-Foster, B. Swinfen, L.
Ilchester, E. Swinton, E.
Inchcape, E. Terrington, L.
Inglewood, L. Thomas of Gwydir, L.
Ironside, L. Trumpington, B.
Johnston of Rockport, L. Vivian, L.
Kimball, L. Wade of Chorlton, L.
Kinnoull, E. Waterford, M.
Lauderdale, E. Whitelaw, V.
Lawson of Blaby, L. Wolfson, L.
Leigh, L. Wyatt of Weeford, L.
Lindsay, E. Wynford, L.
Long, V. Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

3.38 p.m.

Lord Williams of Elvel moved Amendment No. 124: Before Clause 95, insert the following new clause—