§ Mr. Matthew Banks
To ask the Secretary of State for the Environment what conclusions he has reached on the arrangements for the introduction of compulsory competitive tendering for housing management in England in the light of responses to the consultation paper which his Department issued in June 1993.
§ Sir George Young
The consultation paper set out proposals for three key components of compulsory competitive tendering—CCT—of housing management in England. These were: the "defined activity", the timetable for implementation by individual authorities and the size of contracts. We have carefully considered the responses to the consultation paper and, following discussions with representatives of local housing authorities, are now in a position to announce conclusions on the proposals subject to the consultation exercise and related matters.
The defined activity will focus on those aspects of housing management which authorities might reasonably contract out, allowing them to keep strategic, policy and enabling functions in house. The defined activity will be broadly as proposed in the consultation paper but the opportunity has been taken to refine and clarify it in the light of comments received. I am today placing in the Library a detailed description of the tasks making up the defined activity.
CCT will apply to housing management services covered by the defined activity which are provided to properties held by local authorities for the purposes of part II of the Housing Act 1985, excluding hostels as defined in the 1985 Act. A temporary exemption will be granted in respect of the Barbican estate in recognition of its special circumstances. We recognise that for operational reasons authorities need some flexibility to determine the way in which housing management services are provided. We therefore propose to relax the competition requirement by requiring that 95 per cent. of the annual value of the defined activity is subject to competition. Where contracts are won by local authorities' own direct service organisations they will be required to break even after allowing for a rate of return on capital employed. We propose that the rate should be 6 per cent.263W
We recognise that for a few smaller authorities the administrative burdens of introducing CCT for housing management may be unduly onerous. We therefore propose to set a de minimis threshold whereby authorities, the annual value of whose defined activity is £500,000 or less, will be exempt from housing management CCT. This figure will be kept under review in the light of experience of market-testing housing management.
It remains our intention that the introduction of housing management CCT will be phased on the basis of the bands set out in the consultation paper issued in June 1993, with the first contracts in operation from 1 April 1996. Some authorities represented that they should be placed in a different band from that proposed. Officials will be writing to them individually to let then know the band in which they will be placed.
The consultation paper indicated that, where authorities are restructured as a result of the local government review, they would be exempt from the requirement to subject the defined activity to competition from the date of the order making the structural change until 18 months after the new authority is in place. A further announcement will be made shortly about the timetable for implementation of CCT in shire counties and districts following my right hon. Friend's recent request to the Local Government Commission to complete the review by the end of 1994.
The Department will shortly be consulting local authorities and their representatives and other interested bodies on drafts of the subordinate legislation which will implement the decisions which I have announced today. It will also consult shortly on a draft circular on the statutory competition framework for CCT of white collar services, including housing management. The draft circular will include guidance on the size of housing management contracts in the terms proposed in the consultation paper.
The Department of the Environment is today writing to all local housing authorities in England with copies of this announcement, the defined activity and a fuller explanatory note. Copies of that note ae being placed in the Library.