Compulsory Competitive Tendering Personnel Services (Hansard, 13 December 1994)

§ Mr. Robert B. Jones

The Government announced on 10 November 1992 their intention to extend compulsory competitive tendering to local authority and other defined authorities' corporate and professional services, including personnel services. My officials have subsequently had valuable discussions with a joint services working group which included representatives of the local authority associations and the Audit Commission and Chartered Institute of Public Finance and Accountancy on how the CCT regime might be applied to personnel services.

Following these discussions, we are today issuing a consultation paper inviting comments on the Government's detailed proposals for extending CCT to personnel services. This follows similar consultations for local authorities' housing management, legal, construction and property, IT and finance services. It represents the last of the services which are being considered for inclusion in the CCT regime.

Copies of today's consultation paper will be placed in the Library. It proposes a definition which captures a range of authorities' personnel services, including training and human resource management, but does not encompass the day-to-day line management functions undertaken by many staff.

Authorities will wish, for a variety of reasons, to retain certain elements of personnel work in-house, both to enable an authority to fulfil its democratic responsibilities and to act as an expert client for bought-in services. We propose that local authorities be permitted to carry out up to 65 per cent. by value of personnel work using their own staff without going through competition. Authorities will be able to retain at least £300,000 worth of defined activity work in-house free of competition. This is intended to recognise and encourage the mixed economy of in-house and contracted-out service provision which is a feature of personnel services.

As with previous consultations on professional services, the consultation paper also gives details of modifications which we intend to make to the statutory framework for competitive tendering. This will ensure that authorities will continue to be able to deliver services in a way which meets their own operational objectives.

Following careful consideration of comments received on the proposals included in this consultation document, I will submit to the House the statutory instrument required under the Local Government Act 1988 to give effect to our proposals. I anticipate that, subject to the conclusions we draw from consultation and to parliamentary approval of the subsequent order defining the activity, CCT for personnel services will take effect from 1 October 1996 in metropolitan districts, London boroughs and certain other defined authorities.

For shire local authorities, personnel CCT will take effect once the Local Government Commission's review of local authority structure is complete and, where appropriate, changes have been made. The 561W implementation timetable for the new police authorities will be the subject of separate consultation.

My right hon. Friends the Secretaries of State for Scotland and for Wales are issuing separate consultation papers. The proposals contained therein follow much of what I have outlined above, although implementation dates will again take account of the programme for local government restructuring in both those countries.

Experience with the services already subject to CCT has shown that competition brings not only financial savings but also significant improvements in the management, efficiency and quality of public services. I fully expect that CCT will bring the same benefits to personnel services.

§ Mr. Robert B. Jones

On 2 August, my Department issued and invited comments from local authorities, industry and others on draft regulations and a draft guidance paper for shire county and district authorities, containing detailed proposals for the operation of compulsory competitive tendering in shire authorities during the period of local government review and reorganisation. These amplified the proposals announced by my predecessors on 29 March 1993,Official Report, column 55, and 17 December 1993, Official Report, column 1096.

The Government's main objective in determining these arrangements is to strike the right balance between maintaining and extending the benefits which CCT has brought to local authorities and the users of their services and easing administrative burdens on local authorities undergoing reorganisation.

One hundred and forty-seven organisations commented on the proposals. I have considered these, and have now made regulations under sections 19 and 26(4) of the Local Government Act 1992. The regulations will be laid next week, and my Department will then also issue the guidance paper to local authorities, a copy of which I shall place in the Library. Both the regulations and the guidance paper take account of the many comments and helpful suggestions received.

The guidance paper confirms that CCT for professional support services will start to come into effect two years after the coming into being of individual reorganised authorities, giving them good time in which to decide upon their new organisational structure, consider how they wish to organise their business and review their approach to the provision of support services.

As regards shire counties or districts which are unchanged following local government review, the proposal reflected in the August consultation drafts was that CCT for professional services would start to come into effect from April 1998. However, I have concluded that I wish to reconsider this timetable, in the interests of securing the benefits of competitive tendering as soon as possible in "status quo" authorities. I shall therefore consult local authorities further in the new year on alternative proposals. Any new arrangements, 562W if adopted following consultation, will ensure that status quo authorities will have at least as much time to prepare for and implement CCT following the decisions on their future, as the two years provided for reorganised authorities following their establishment.

The 1992 Act regulations and the guidance paper confirm the timetable arrangements previously announced for the implementation of housing management CCT. Local authorities are making good progress with their preparations, including consultation with their tenants. I have, however, decided to drop the proposal in the August consultation drafts to link the HMCCT exemption for the reorganised authorities to preparation of a detailed specification which their direct service organisations would have to meet.

For other services already subject to CCT, the requirement to invite external tenders will be lifted in authorities undergoing reorganisation, for the period between the making of statutory reorganisation orders and 18 months after successor authorities take over, in recognition of the pressure of work on outgoing and successor authorities in this period. This exemption does not apply to short-term and low-value contracts which do not normally involve significant administrative effort. These are defined as work which will last for less than 12 months or be less than £200,000 in annual value. I have considered local authorities' arguments for widening this exemption, but have not been persuaded that this would be appropriate. As indicated in the August consultation drafts, all local authorities must at all times maintain DSO accounts, meet the specified financial objectives and maintain services fully to specification.

The other arrangements provided for in the 1992 Act regulations and guidance paper are as set out in the August consultation proposals. I shall place in the Library a list of the consultation responses received. Copies of individual responses can be obtained through the Library.

On 2 November, the House approved orders under section 2(3) of the Local Government Act 1988, to extend CCT to legal services, construction and property services, and three further manual services—security work, supervision of on-street parking and management of vehicles. I have now made regulations under section 6(3) of the 1988 Act, which set out the timetable for these services to become subject to CCT, and the proportions of legal services and construction and property services to be subject to completion.

These regulations give effect to the Government's decisions which my predecessor announced on 14 June 1994, Official Report, column 346, and 19 July 1994, Official Report, column 109, and which I set out to the House on 2 November 1994, Official Report, column 1606, other than as regards the implementation timetable for "status quo" shire authorities, on which, as I have indicated, the Government wish to consult further with local authorities. Further 1988 Act regulations will be made to give effect to the decisions taken on this aspect of the arrangements, following the further consultation.