§ Sir Kenneth Carlisle
To ask the Chancellor of the Duchy of Lancaster what is the Government's response to the "Competing for Quality" policy review. 
§ Mr. Freeman
The "Competing for Quality" policy review endorsed the Government's policy of improving efficiency and quality through competition and the involvement of the private sector and made a large number of recommendations for enhancing "Competing for Quality" programmes.
Since the review was published, the Government have been considering their recommendations and have consulted the CBI and the Council of Civil Service Unions.
I am happy to announce now that the Government accept the large majority of the review's recommendations. I expect Departments to follow the advice of the review in their "Competing for Quality" programmes.
In particular, I want to stress:Departments should continue to develop co-operation with the private sector, in order to maximise the opportunities for improvement in value for money.the leadership of senior management in Departments continues to be important for success and they should encourage the scope of innovation and improvement through competition to be continuously widened.496Wstaff are our key asset and they should be properly trained for and supported in managing competition programmes. The concerns of those affected by competitions should be addressed.improving quality and improving value for money should go hand in hand.transparency is important for success and will be achieved through the Government's initiatives on open government and by the introduction of resource accounting and budgeting.
The Government are not able to accept fully the review's recommendations on:imposing minimum cost thresholds for competitionThe review points out that high process costs have eroded, or in some cases exceeded, savings made by submitting to competition small or low cost areas of work. It suggests a minimum threshold below which competition should be avoided. The Government consider that this is too inflexible and could inhibit Departments from making worthwhile gains even in relatively small areas. In any competition, Departments should package small activities together as well as looking for other ways to minimise process costs. Then they should satisfy themselves that the benefits would be worth the process costs involved. But the Government do not plan to impose rigid cost thresholds, as proposed by the review.restructuring activities in preference to competitionThe review recommends that internal restructuring options should be pursued before putting activities out to competition. It also recommends that, in general, strategic contracting out (that is, competition between private sector organisations to supply services to Government, without any in-house teams competing as in a market test) is to be preferred to market testing, because the net savings are likely to be higher and because it may offer a better way of handling staff interests. The Government's policy, as was set out in the "Continuity and Change" White Paper (Cm 2627), continues to be to improve efficiency and quality through competition and by involving the private sector. But within this policy, Departments are free to make informed judgements of the relative benefits of internal restructuring, market testing and contracting out.indemnities for contractors against redundancies after staff transfer under the Transfer of Undertakings (Protection of Employment) Regulations, 1981, as amended ("TUPE")The review recommends contractors should be indemnified by the Government against the cost of future redundancies in case work is abolished at the end of a contract. Indemnities would create contingent liabilities and, in general, the Government believe the interests of the taxpayer are best served by a clean break. But indemnities can be negotiated exceptionally, with the agreement of the Treasury, on the basis of criteria issued in 1994.497WThe review also recommended that indemnities should be given against the effects of any future amendments to the European acquired rights directive, on which TUPE is based. The Government do not give indemnities against changes in legislation, but would be prepared to consider whether any transitional arrangements were needed in the event of significant changes to the directive which resulted in the need to amend TUPE.
In due course, the forthcoming Government's "Guide to Competing for Quality" will give fuller guidance to Departments.