Direct Services Organisations (Hansard, 31 October 1994)

§ Mr. Robert B. Jones

One hundred and three statutory notices have been served on 71 local authorities concerning the failure of their DSOs to meet the required financial objective in 1992–93. To date, we have announced final decisions on 81 of the notices.

My right hon. Friend has now considered the responses of the remaining authorities on whom notices were served in June, July and August. He has today given 13 directions to the following local authorities:

(a) Allerdale district council (other cleaning, refuse collection), requiring the authority to seek the Secretary of State's consent if it wishes to award work on the defined activity to their DSO following re-tendering which is currently in hand.
(b) Bedfordshire county council (highways and sewerage), preventing the authority from carrying out the defined activity if it fails to meet the financial objective for the work in 1994–95.
(c) London borough of Camden (other catering, school and welfare catering, sport and leisure management). The other catering and school and welfare catering direction prevent the authority from carrying out all or some of the defined activity through its own DSO. For sport and leisure management the direction requires the authority to re-tender the work and subsequently seek the Secretary of State's consent if it wishes to award it to their DSO.
(d) Canterbury city council (building maintenance), preventing the authority from carrying out the defined activity if it fails to meet a specific financial objective for the work in 1994–95 and the statutory financial objective for 1995–96.
(e) Corby district council (sport and leisure management), requiring the authority to re-tender some of the work if they fail to meet the financial objective in 1994–95.
(f) London borough of Ealing (sport and leisure management), requiring the authority to seek the Secretary of State's consent if it wishes to award work on the defined activity to their DSO following re-tendering which is currently in hand.
(g) Kerrier district council (sport and leisure management), requiring the authority to re-tender all of the work if it fails to meet the financial objective in 1994–95.
(h) Leicester county council (building cleaning), preventing the authority, from carrying out the activity through its own DSO from 1 January 1996.
(i) Rochester-upon-Medway city council (sport and leisure management), requiring the authority to re-tender the work and subsequently seek the Secretary of State's consent if it wishes to award it to their DSO, and,
(j) Slough borough council (sport and leisure management), requiring the authority to seek the Secretary of State's consent if it wishes to award work on the defined activity to their DSO following re-tendering which is currently in hand.

The Secretary of State has also decided to take no further statutory action on this occasion against Camden (other cleaning), Kingswood (sport and leisure management), Northampton (building maintenance), Peterborough (building maintenance), Selby (sport and leisure management), South Bedfordshire (sport and leisure management), Stafford (sport and leisure management), and Wellingborough (highways and sewerage, building maintenance).

A statutory financial objective is set for local authority DSOs to ensure that bids are realistically priced and services delivered at that price.

For the financial year 1992–93, 350 DSOs out of a total of 2,400, failed to meet the prescribed financial objectives. This underlines the need for local authorities to take firm steps to address and correct any financial problems in DSOs, and for the Secretary of State to use the powers given to him by Parliament to ensure that this happens.

In 70 per cent. of the cases notified to the Department, local authorities had already taken action to reduce costs, improve management or, in some cases, withdraw from the activity concerned, and no statutory action was called for.

Over the year, statutory notices were served in respect of 103 accounts, leading to 39 directions. In the remaining cases, the authorities' responses and proposals for action were sufficient for the Secretary of State to be satisfied that no further statutory action was necessary. In addition, 30 out of the 39 directions reflected authorities' projections that their DSOs would meet the prescribed financial objective; the directions required retendering of work or closure of the DSO only if the projected results were not in the event achieved.

The remaining nine directions required authorities to take further action beyond that already proposed—in four cases this involved the closure of the DSOs in question.

I should emphasise that the great majority of DSOs deliver services successfully and meet the prescribed financial objectives. Where problems arise, authorities have the primary responsibility for taking the necessary steps, and the majority of authorities do so without any intervention or prompting by the Department. Their responsible action is to be commended.

Local authorities are required to submit DSO accounts for 1993–94 to the Department not later than today, 31 987W October. My right hon. Friend will consider shortly what action would be appropriate in respect of any accounts that fail to meet the statutory financial objective in the year.