Compulsory Competitive Tendering (Hansard, 18 May 1995)

§ Mr. Robert B. Jones

We have been discussing how best to give effect to the Government's decision to extend compulsory competitive tendering to white collar professional and corporate services with local authority representatives and other interested parties since early 1993. That consultation has proved valuable to all parties and I am grateful to all those who play a part.

Last summer we put in place statutory instruments which extended CCT to legal and construction and property services. In the autumn we issued consultation papers setting out the proposed regime for information technology, finance and personnel services. Those attracted between them over 600 responses to my Department, together with 112 to the Scottish Office and 54 to the Welsh Office.

I have considered all the points made carefully with colleagues in all the departments with an interest in the services concerned and am now able to announce the Government's final decisions on CCT for these remaining services.

IT Services

Taking first IT services, we have concluded that both the percentage competition requirement of 70 per cent. for this work and the implementation timetable set out in the consultation paper are reasonable and do not intend to alter either, save that English shire authorities remaining unchanged following review by the Local Government Commission will now be expected to follow the timetable I announced on 29 March at column 644. There is no case for any other substantive change to the proposals put forward in last year's consultation paper. On matters of detail, I am now able to: confirm that we intend to make an exemption for fire brigade mobilisation and communications systems. The precise wording of this is being discussed with fire service representatives and a specific exemption order will be brought forward in due course. The defined activity does not include fire brigades' radio systems; confirm the proposed credit for in-house IT support to contractors who have taken on other work on behalf of a defined authority, allowing the authority to count this work towards satisfying its CCT obligations, provided it had been the contractors decision to use the IT in question. confirm the proposed amendment to guidance on the avoidance of anti-competitive behaviour which will allow an authority to require that contractors use specified software or hardware, including the authority's own systems, where this can be justified on operational grounds. 322W I have decided to reject arguments for a short term exemption from CCT for project work underway at the time competition bites.

Finance Services

We have given very careful consideration to the competition percentage for finance services. The Government wish to put real pressure on authorities to market test theses services and I am confident that all authorities can achieve the competition requirement of 35 per cent. proposed in the consultation paper. We do not, therefore, intend to change this figure.

In reaching this conclusion we have had in our minds the Government's commitment that there should be no pressure for compulsory testing of housing benefit or council tax benefit administration. Similarly, the Government have made clear that we are not seeking to compel market testing of those revenues tasks which are to be the subject of an order under the Deregulation and Contracting Out Act 1994 permitting the work to be undertaken by third parties. My hon. Friend the Parliamentary Under-Secretary for Social Security and I consider that authorities can achieve this figure without necessitating the market testing of benefits work or the revenues tasks I have mentioned.

We accept that there are some statutory constraints to contracting out aspects of revenues or benefits work, and many of the services are sensitive. Nevertheless a number of authorities have already shown that, even with these limitations, market testing of this work can improve the quality of the service they are able to offer, and we would encourage them to explore this option on a voluntary basis. Should they choose to do so, this can be counted towards satisfying their obligations under the CCT regime.

Should the percentage chosen in the event be at such a level as to compel any authority to market test benefits administration or other work which we have said should only be exposed voluntarily, we will consider further the arguments for change. Where individual authorities can demonstrate they cannot meet the figure without being compelled to test benefits work the Parliamentary Under-Secretary for Social Security and I will consider sympathetically any request they may put forward for a specific exemption.

In the case of education-related benefits service and student awards administration my hon. Friend the Parliamentary Under-Secretary of State for Education and I have concluded that this work is more closely integrated with the education service that any other part of the authority. The volume of work these services make up is small, and we have concluded there would be little benefit, and possibly some disruption of services, if they were included in the CCT regime. We will, however, wish to consider carefully other methods for improving the efficiency of these services.

Also on finance services, we intend to make two further changes to the proposed regime. The first is to allow a temporary exemption from CCT for project work on the development and implementation of financial information and management systems underway when CCT bites. This will allow internal management changes, some of which may flow from CCT, to be implemented smoothly.

Secondly, I intend to allow English metropolitan districts and London boroughs an additional six months to implement CCT extension, taking their start date to 1 323W April 1997. This recognises the foreshortened timescale facing these authorities as they prepare for CCT and the need for an adequate lead-in time before new contracts can become operational. The timetable for reorganised shire authorities remains unchanged from that set out in the consultation paper, that which status quo shires will be expected to meet was explained in my announcement of 29 March.

Personnel Services

Turning lastly to personnel services, we have concluded that the defined activity should be amended to reflect practical concerns raised about the difficulties of bringing certain work into the CCT regime. We intend to specifically exclude:

(i) all training undertaken by a local authority on behalf of a Training and nterprise Council (TEC), or, in Scotland, Local Enterprise Council (LEC).
(ii) personnel work undertaken by local authorities as members of consortia (with educational institutions and others) for the pre-and post-qualification training of social workers.
(iii) operational training of fire fighters.

Colleagues in the Department for Education and I also intend to allow in-service teacher training and other education-related training funded through the grant for education support and training—GEST—to be counted towards satisfying the competition requirement in the same way as we have agreed delegated spending under the LMS initiative should count. In Wales Athrawon Bro services will similarly count.

We have also considered carefully authorities concerns that the competition percentage, which we proposed be 35 per cent., was too high and may compel them to introduce organisational changes or to tender unsuitable work. We have concluded that a reduction in the figure is necessary to accommodate these concerns and therefore intend to set the competition requirement at 30 per cent

The study of the options for setting the competition requirement undertaken by KPMG on our behalf illustrated that many authorities already actively test the market for certain aspects of personnel work. Much specialist training, for example, is already provided through contract by external organisations. Since they already have a good record in market testing, CCT should present no new difficulties to authorities, For this reason, I have concluded that no additional time is required to implement personnel CCT. All authorities will therefore be expected to meet the timetable set out in the consultation paper, with the exception of status quo English shire authorities, for which I announced a revised timetable on 29 March.

Finally for personnel services we also intend to increase the de-minimis exemption for personnel work from £300,000 to £400,000 to permit smaller authorities to protect core services.

Fire Authorities

The regime I have described will, subject to certain exemptions outlined in the consultation papers, apply to all defined authorities which are subject to CCT, with the exception of police authorities, metropolitan fire and civil defence authorities, including London, and combined fire authorities. CCT for IT, finance and personnel in police authorities is the subject of separate consultation still underway.

For single purpose fire authorities my right hon. and noble Friend the Minister of State at the Home Office and I have now decided that, having exempted operational 324W training the competition requirement for the remaining work within the defined activity of personnel services should be reduced to 15 per cent. For IT and finance work the competition requirements remain at 70 per cent. and 35 per cent. respectively, as for other authorities. The implementation timetable for English single purpose fire authorities will remain aligned with that applying to metropolitan districts and London boroughs, save that any new combined authority created following the implementation of local government reorganisation will have two years from the local date for reorganisation to take effect before CCT will bite.

Conclusion

I will be bringing forward a draft order to add these new services to the CCT regime shortly. Once the House has had the opportunity to debate and approve this order we will bring forward further regulations to put in place the remainder of the regime I have today announced.

The regime I have described today will apply to defined authorities in England, Scotland and Wales. My right hon. Friend the Secretary of State for Wales is considering comments made on the timetable for implementing CCT extension in Wales and will make an announcement in due course. My right hon. Friend the Secretary of State for Scotland announced the timetable which the new Scottish unitary authorities will be expected to follow on 27 January.

This announcement is intended to give all authorities a clear basis on which to plan for the extension of CCT. We will write with copies of the new statutory instruments and detailed guidance on each of the new services as soon as possible.

Following extensive consultation we have now established the statutory framework on which the extension of CCT to all of the white collar services will proceed. This is challenging but, I believe, fair and offers a flexible regime which meets many of the concerns raised with us. I urge all those concerned to strive for the successful implementation of CCT to ensure that local people receive the acknowledged benefits that competition may bring.