HL Deb 21 May 1998 vol 589 cc1840-6
Lord McIntosh of Haringey

rose to move, That the draft order laid before the House on 6th April be approved [30th Report from the Joint Committee].

The noble Lord said: My Lords, this draft order concerns the way in which National Savings, which is an Executive Agency of the Chancellor of the Exchequer, is managed by its chief executive, who is referred to in legislation as the Director of Savings.

The Director of Savings has a range of statutory duties concerning the administration of the agency, and in particular the administration of obligations to customers of National Savings, which are placed upon him by various pieces of legislation. The purpose of this draft order is to confer upon the Director of Savings the power to delegate certain of his duties to an external contractor, as might be necessary in the event of the agency forming a public/private partnership at some time in the future.

The purpose of this order is to delineate exactly those functions which will remain with the Director of Savings if a public/private partnership is entered into. This is a contracting-out, not a privatisation. That means that all the responsibilities in question remain with the Director of Savings, who is answerable to the Chancellor of the Exchequer and to the House. Any contractor who is appointed will be merely his agent. Any legal remedies will continue to be against the Director of Savings. The savings schemes will continue to be backed by the Government.

Approving this draft order does not in itself make any form of public/private partnership involving National Savings necessary or inevitable, now or at any time in the future. Neither this order nor any use of it by the Director of Savings would diminish in any respect or to any degree the protection which exists for customers of National Savings.

The primary purpose of the National Savings Agency, which has been in existence in one form or another for almost 150 years, is to contribute to cost-effective funding of the National Debt by raising money from private investors through the retail savings market. This complements the funding which is carried out by selling gilts in the wholesale markets. This is an important function which brings benefits both to taxpayers, through making funding more efficient and thereby lowering the burden of debt interest; and also to customers of National Savings who have access to an absolutely secure home for their savings, guaranteed directly by the Treasury, and offering attractive rates of interest. Currently over £60 billion of savings are deposited with National Savings, and over half the population of the United Kingdom has some part of its savings invested in National Savings products.

By seeking to involve the private sector in its operations, National Savings is examining a route to harness the skills and experience it requires to implement an ambitious business re-engineering programme, gain expertise in exploiting the latest information technologies and develop a capability for accepting and managing the risks in that process.

National Savings carried out a detailed evaluation of how a public/private partnership could help it to provide its operational services. On 2nd April, the Economic Secretary announced that, following detailed consideration and discussion with those involved, she had given authority to the Board of National Savings to proceed to the invitation to negotiate stage with two shortlisted companies—Siemens and EDS. She made it clear, however, that any decision to conclude a public/private partnership would not be made until later in the year, it would be based on value for money and would bear in mind the interests of taxpayers, customers and National Savings staff.

Bringing this order before the House does not signify that the Government have reached a decision on the matter. It simply sets in place the legislation that will allow the Director of Savings to authorise a private contractor to exercise the operational functions of the agency undertaken in Glasgow, Durham and Blackpool. This is a necessary step if any successful bidder is to carry out these services.

The functions that would be delegated by the order are essentially the routine operational decisions. If a customer wanted to transfer funds from one account to another, to repay funds or to replace a lost bank book the contractor could arrange it. These functions and others being delegated are typical of the types of decisions made every day in savings organisations to allow the smooth running of business and provide customer care.

The director is retaining functions which go beyond simple administrative matters and have a major bearing on the make-up of the savings products and how they can be developed. For example, a number of the functions deal with the way applicants can invest in National Savings, the methods of investing and the forms to be used, or procedures which are clearly crucial in determining how the products develop. Others deal with the methods of making repayments to customers. This enables the director to take advantage of developments in the banking sector generally to steer the business and make sure that it keeps in step with best commercial practice.

That is the purpose of the draft order. It is a technical piece of secondary legislation which makes it possible for such a contract for private sector involvement to be concluded. I commend it to the House.

Moved, That the draft order laid before the House on 6th April be approved [30th Report from the Joint Committee].—(Lord McIntosh of Haringey.)

Lord Mackay of Ardbrecknish

My Lords, I am grateful to the noble Lord for his explanation of this contracting out order. If I had read the order rather earlier in the week, or perhaps even last week, I do not think I would have allowed it to come on at the tail end of today, which seems to be entirely for the convenience of the Government so that their Bank Benchers do not hear what is happening.

When I started looking at the order earlier in the day I realised that it was being brought forward under the Deregulation and Contracting Out Act 1994, a measure taken through the House by my noble friend Lord Strathclyde in one of his last ministerial acts before he was elevated to the position of Chief Whip. It is nice to see that the Labour Party is now so keen on the Act. I remember taking part myself in debating the legislation. Indeed, I summed up at Second Reading. I was defeated one evening by the late and much lamented Lord Howell. It gave him and the Labour Party a great deal of pleasure to see me defeated. I then had to speak for rather a long time in order to prevent a further defeat which I did with some success. I am glad to see the noble Lord, Lord McIntosh, remembers.

However, I decided to re-read some of my words and their words on the Deregulation and Contracting Out Act, or Bill as it then was. I came across a quotation from the noble Lord, Lord Peston, at Third Reading. At col. 621 of the Official Report on 26th October 1994, the noble Lord, Lord Peston, said: Noble Lords may ask whether my view of the Bill is what it was at the outset and I have to say that it is. I regard it as a constitutional outrage". When I went to the report of the Second Reading in which I played a part, I discovered that the noble Lord, Lord Clinton-Davis, had summed up for the Opposition that day—they are now the Government of course—on 6th June 1994 at col. 1039. The noble Lord, Lord Clinton-Davis, was preceded by the noble Lord, Lord Tordoff, who said that the Bill was a "sinister Bill". He was then speaking for the Liberal Democrats whose interest in the Bill and the order I note. The noble Lord, Lord Tordoff, said, It is a sinister Bill. It is travesty of parliamentary accountability. I hope that when the noble Lord, Lord Clinton-Davis, replies, he will give some assurance that if there is a Labour Government in the future, they will repeal this Bill in the instant". The noble Lord, Lord Clinton-Davis, was quick to respond to that request. He said, My Lords, I start by responding forthwith to the request made by the noble Lord, Lord Tordoff. From this Dispatch Box"— and it was from this very one here— I can say that the incoming Labour Government—because that it will be in the not too distant future"— it was not a very good prophesy because it was a quite far-distant future in June 1994— will repeal this Bill a Bill which he said was "sinister and offensive". So rather than repeal this sinister and offensive Bill we have today the noble Lord, Lord McIntosh of Haringey, using the power in the Bill to proceed with contract-out measures which, when they were on these Benches here, the Labour Party seemed to find fault with.

I am glad to have such a conversion as we are seeing today, the Government changing their position in Opposition from repealing the Bill to actually making use of it. They are not making use of it in any small way, but in a very big way. That is because what we have before us is an order under the Act which will mean the largest ever transfer of central government IT and non-IT staff to the private sector in a 10-year deal which is expected to be worth over its lifetime something like £1.6 billion. It is twice as many staff as transferred to EDS in 1994 under the then record-breaking £1 billion deal when the Inland Revenue out-sourced. I am envious of the noble Lord, Lord McIntosh of Haringey, because although I managed a few contracting outs I never managed one on quite this scale.

Perhaps the prime project which I was delighted to see the Government take over was not a contracting out, it went much further than that. It was privatisation by the state of the Benefits Agency and others. I was delighted that the Labour Party decided to go ahead with that.

So here we have the Government proceeding with a move, using a piece of legislation which, when they were in Opposition, they entirely and utterly deplored. But it is a very major piece of contracting out and nobody should underestimate it. There are something like 4,200 staff employed by the National Savings.

I gather that such is the contracting out that some 4,000 of the staff will go, so that only 200 at the most will remain. That suggests to me that the director of National Savings is not going to be doing very much after this contracting out has been achieved. This is a big contracting out with something like 4,000 people being involved. Roughly 1,000 of them work in Durham; 2,000 work in Cowglen near Glasgow and 1,200 in Blackpool.

The order does not meet with the approval of the unions. The Public and Commercial Services Union is very much opposed to it. Indeed, it has reminded the Labour Party of what it said in opposition. I am grateful to campaign update for reminding me that Mr. Derek Foster said in a Labour Party press release of 23rd January 1997 that the PSI (private sector involvement) proposals were an "ill founded project" which would be, a mortal body-blow to National Savings' loyal and hardworking staff'. That was said when the proposals belonged to the Conservative Government. At the Labour Party Conference in 1996, Mr. Chris Smith said: Public/Private partnership for capital projects—YES. Private, commercial take-over … NO!". As the PCS points out, these proposals for National Savings' operations represent a private, commercial takeover. That cannot be disputed. Indeed, PCS says, we have told Helen Liddell that staff feel they have been betrayed by the Labour Government". Mr. Neil Holland, the PCS union secretary at Durham, said: Our members feel angry and betrayed. We now find that after successfully resisting 18 years of Tory attempts to sell off our jobs, the Labour Party is prepared to put at risk the future of NATIONAL SAVINGS and the pay, conditions and pension arrangements of 95 per cent. of the agency's staff, by handing our jobs over to the PRIVATE sector". The Scottish Trades Union Congress carried a unanimous motion recently when the PCS asked for support for its campaign to keep all of National Savings in the public sector. The motion called on the Scottish Trades Union Congress to add its voice to those already lobbying the Economic Secretary. It said: STUC support is a welcome boost to our campaign". I suppose that New Labour is not in the least bothered by the fact that Old Labour, represented by the Scottish Trades Union Congress and the PCS, is so upset by what it is doing in carrying out Conservative policy. That is why I so much welcome this order.

However, the unions have some justification for their concern. Your Lordships will remember that I said that 4,000 people are employed by National Savings. As the Minister told us, the two contractors in the lead are Siemens and EDS. My recollection from my time as a Minister was that EDS was not an organisation entirely loved by the Labour Party in opposition, but I suppose that everything changes. In an internal document, EDS has suggested that it can do the whole job with 1,500 staff. My arithmetic tells me that 2,500 people are not likely to have a job if EDS does what it says that it can do. That is an indication of the productivity improvements that are achievable—and that is exactly why the Conservative Government were so keen on contracting out and privatisation. They always resulted in major efficiency savings.

However, it is clear that if EDS is right—it is one of the two finalists—something like 2,500 jobs could go. When I look at the three main places where National Savings has its operations, I can see that that means that jobs may be lost at two of those places. National Savings' operations may cease at Durham, at Blackpool or at Cowglen. I cannot see it being efficient to reduce the staff to the extent that EDS thinks is possible and to keep operations at all three locations. The Minister may be able to help me on this, but I believe that the premium bonds computer (ERNIE) is located in the Blackpool area. I imagine, therefore, that some of those jobs may well stay in the Blackpool area. However, that seems to pose considerable dangers to operations at Durham and Cowglen. I know Cowglen in Glasgow and it is not an area where alternative employment is thick on the ground. I suspect that the same is true of Durham.

I hope that the Government will be open and honest with the unions and employees and make clear that many of the jobs are at risk and one or more of the offices may close. As we discovered when in government, sometimes this is the unfortunate and difficult price to be paid for the improved efficiency that contracting-out brings. But it must be done with care and a good deal of help to the staff who as a result become unemployed. I hope that the noble Lord, Lord McIntosh will give me an assurance that that will be done.

I also hope that he will not try to pretend that there will be no job losses. There will be. Even if the EDS internal memorandum is a little wide of the mark I cannot believe that it will still employ 4,000 people at the end of the period of contracting out. I hope that the Minister will be able to assure me that major efforts will be made in whichever place it is to help those who lose their employment to find other jobs. At the risk of being parochial, I hope that that is particularly true of Glasgow which has considerable unemployment problems.

With that, I congratulate the Government on using this splendid Act and their sensible policy move in contracting out this organisation.

5.11 p.m.

Lord McIntosh of Haringey

My Lords, perhaps it is our fault because of timing that the noble Lord, Lord Mackay of Ardbrecknish, has not had a better audience for his splendid tirade. At least the noble Earl, Lord Peel, was here to listen to him.

Earl Peel

My Lords, it was a pleasure to hear my noble friend.

Lord McIntosh of Haringey

My Lords, it was also a pleasure for me. However, I hope that the noble Earl, Lord Peel, will convey to his colleagues the power of his noble friend's attack. It is quite legitimate to poke fun at anybody in any party who, while in opposition, promises to repeal legislation and then finds a number of years later—the noble Lord is also right about this—that it is not as easy as was thought.

I remind the noble Lord that this draft order is laid before Parliament under Section 77(2) of the Deregulation and Contracting Out Act 1994 which was not part of the original Bill that attracted particular criticism from the then Opposition, just as it is not as important as the first five sections of the 1994 Act which have caused the Delegated Powers and Deregulation Committee to institute special procedures for parliamentary scrutiny of these orders. I believe that this is less controversial than the noble Lord has said.

However, the noble Lord has a valid point in suggesting that the unions will be concerned about this contracting out if and when it takes place. I made it clear in introducing the order that there was no certainty that there would be a form of public/private partnership now or at any time in the future, but the unions have an understandable concern. The agency has consulted the trade unions regularly, and the Economic Secretary to the Treasury has had two meetings with them in recent months. There will be further contact with the unions and staff.

The noble Lord is also right that there is no guarantee that there will be no compulsory redundancies, although he will be aware that the Transfer of Undertakings (Protection of Employment) Regulations will apply in this case and will ensure that there are broadly comparable conditions of service and pensions for the staff concerned. But it is no secret that the review which National Savings was undertaking might itself have resulted in job losses even without any public/private partnership, the subject of this order.

One possibility which should not be ignored, which would work in the opposite direction, is that a contractor taking on the operational aspects of National Savings, under a public/private partnership, might well find additional uses for the skills of the staff in Durham, Blackpool and Glasgow. Those are transferable skills within the FSA. There may be additional protection for jobs rather than job losses.

I suppose that I have to be grateful—whether for satirical reasons or not—that the noble Lord commends the order. I take his words at face value and thank him for them. I commend the order to the House.

On Question, Motion agreed to.