Recruitment and Assessment Services (Hansard, 7 November 1996)

The Parliamentary Under-Secretary of State, Ministry of Defence (Earl Howe)
My Lords, Recruitment and Assessment Services was sold to the Capita Group plc. The consideration was £7.25 million.

§ Baroness Park of Monmouth
My Lords, may I ask my noble friend what sense he thinks it makes to sell an asset like that for that amount of money and to incur an annual cost thereafter? Can he tell us the cost, for instance, of the three extra posts, of the monitoring and research and of the fixed contract? It simply does not make sense to me and I should be very glad if my noble friend could reassure me.

Earl Howe
My Lords, I note my noble friend's concerns which she reiterates from the debates that we held in your Lordships' House earlier in the year. As to the proceeds of the sale, the sum of money realised, £7.25 million, is substantial if considered in relation to the turnover of RAS, which is £9.1 million. However, the sum of money generated from the sale of RAS was never a primary consideration. What mattered were the wider benefits of the sale and the fact that value for money for the taxpayer was achieved. In fact, the net present value of the sale to the taxpayer was in the 724 region of £6 million. Therefore, to answer my noble friend's question, the costs arising out of the sale of RAS amount to approximately £1.25 million.

§ Lord Richard
My Lords, is the Minister aware that the Government have landed us in a quite disgraceful situation? Perhaps I may ask two questions. First, what conceivable experience have the people at Capita—or whatever it is called—of running a recruitment and advisory service? Secondly, for the relatively small sum of money that the Government have achieved in selling RAS, do they not realise that they have jeopardised something which has been an independent national asset and widely admired throughout the world? They ought to be ashamed of themselves.

Earl Howe
My Lords, Capita Group plc is a well established publicly quoted company specialising in consultancy and other professional services to business. I believe that it enjoys a high reputation in its field. In the Government's view, RAS has found a good home where it can develop its activities and simultaneously maintain its high standards. As the noble Lord will recall, control of the standard of service provided by RAS lies in the terms of the contract which the customer departments have entered into. Adherence to the requirements of the contract will be subject to scrutiny by departments as well as to an independent audit. Nothing in the sale jeopardises the key point which I know that all of your Lordships are keen to see preserved, which is the independence and impartiality of the Civil Service.

§ Lord Peyton of Yeovil
My Lords, is my noble friend aware that this whole episode—first, the debate and Division in your Lordships' House in March and then the evidence given before the Select Committee—has left the very unfortunate impression that when the opinion of your Lordships' House becomes inconvenient it is to be put aside and trampled underfoot?

Earl Howe
Not at all, my Lords. Perhaps I may remind my noble friend that the Government agreed either wholly or in spirit with almost all of the recommendations in the report of your Lordships' Select Committee. In effect, the Government accepted nine out of the 10 recommendations made.

§ Lord Beloff
My Lords, is my noble friend able to assure the House that there is a clause in the contract to prevent the company passing into foreign ownership?

Earl Howe
My Lords, my noble friend will recall that that point was covered in our debate in July. The fast-stream contract will entitle the Government to terminate the contract in the event of a takeover. The Government would be able to decide whether they were satisfied with the proposed new owner. The new owner would, of course, wish to ensure that the main Civil Service customers were fully satisfied. If they were not, any such takeover might well not proceed given the value and the prestige of the fast-stream work.

§ Lord Harris of Greenwich
My Lords, is the Minister aware that that was not the question that his 725 noble friend asked him? The question asked by the noble Lord, Lord Beloff, was what would happen if the company passed into foreign ownership. The noble Earl did not answer that question.

Earl Howe
My Lords, I did answer the question. I said that the Government were entitled to terminate the contract if they felt that the owners of RAS were not suitable.

§ Baroness Serota
My Lords, does the noble Earl agree that the main recommendation of your Lordships' Select Committee on the Public Service was that the Government should think again, and clearly they did not do so? Further, what arrangements have the Government made to monitor the effect of privatisation on the recruitment of high calibre graduates and other personnel into the public service, and will the results of that monitoring be reported annually?

Earl Howe
My Lords, to answer the second question of the noble Baroness first, there will be an annual report published by the OPS on the performance of RAS. As to the first question, I am sure that the noble Baroness will recall that the terms of reference of your Lordships' Select Committee did not include the wider question of whether privatisation should proceed. It addressed itself to narrower issues. Of course, I am aware that the opinion of the House was against the wider issue, but that does not negate the point I made earlier about the Government's acceptance of the majority of the recommendations made by your Lordships.

§ Lord Mackie of Benshie
My Lords, does the answer of the noble Earl to my noble friend Lord Harris mean that the Government would be quite satisfied with foreign ownership of this company?

Earl Howe
My Lords, I believe that the question put by the noble Lord, Lord Mackie, is of a hypothetical nature. It would depend upon who the prospective new owners were. The qualifications of the prospective new owners would have to be judged on their own merits. I cannot possibly say at this juncture what the Government's response would be. But the key point is that, if the Government were unhappy with the suitability of the new owners, they could terminate the contract and make other arrangements.

Lord Bruce of Donington
My Lords, in reply to an earlier question, the noble Earl said that the Government would carefully monitor the performance of this new organisation. Is this not a little remarkable since the Government have already admitted—indeed, it was part of the grounds for privatisation—that they were incapable of supervising the RAS while it was in the public sector? Have they had sudden access to intelligence in this matter?

Earl Howe
My Lords, it is perfectly natural for departments to benefit from the fast stream of the Civil Service to ensure that the standards to which RAS 726 operates are of the highest. They will be able to do that under the contract. It is right and proper that they should be able to do it, and the contract facilitates that.

§ Lord Tebbit
My Lords, does my noble friend agree that it is slightly disturbing to have these nasty tangs of xenophobia in this House from the Benches opposite? Does he agree also that it is overwhelmingly in our national interest not to object to foreigners taking over companies in other countries? After all, that is currently the ambition of a number of major British companies.

Earl Howe
My Lords, I am grateful to my noble friend. I believe that he makes an excellent point.

§ Baroness Park of Monmouth
My Lords, did my noble friend note that when the Select Committee had before it the Deputy Foreign Minister he said quite clearly that he had already made up his mind? He made it perfectly clear then that no notice would be taken of what was said—whatever was said.

Earl Howe
My Lords, I note my noble friend's strong view on the matter. I can only repeat to her that the recommendations of your Lordships made for a better contract and arrangement with the new owners in the end. For that the Government are grateful to the House.