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Market Testing

Volume 227: debated on Monday 28 June 1993

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To ask the Chancellor of the Exchequer what comparisons he has made between the costs arising from the implementation of market testing over each of the last two years and the savings arising therefrom.

Annual returns from Departments indicate that in previous years savings arising from market testing have typically been around 25 per cent. of the original cost, even when the activity has remained in-house.

I shall report on the costs and savings arising in the current period, which runs until September 1993, as soon as possible after that date.

I thank my right hon. Friend for his helpful answer. Does he not think it extraordinary that although certain Labour-controlled councils take on competitive tendering with great gusto, which results in enormous savings, the Opposition Front Bench has no enthusiasm whatsoever for market testing?

My hon. Friend is right. Labour authorities thoughout the country have found, after resisting a great deal at the beginning, that there is great benefit for their local taxpayers and for those who use local services in buying in services that can better be provided by the private sector.

Does the right hon. Gentleman intend to market test the jobs of grades 1, 2, 3 and 4 civil servants, or is market testing a mandarin-free zone?

I look forward to discussing those matters with the hon. Gentleman in the Select Committee. No one knows better than the hon. Gentleman that an increasing number of grade 1 and 2 jobs have been put out to open tender. We have thrown it open to competition. Two people, of permanent secretary rank, have come in by that route.

Could my right hon. Friend extend market testing to ensure that when civil service jobs are about to be moved from one constituency to another area, the civil servants who are doing those jobs are given the opportunity to bid for them under private management?

My hon. Friend makes an interesting and constructive point. It is part of the policy that we should enable civil servants to show, as they often can, that they can do the jobs very well, both by management buy-outs, which sometimes they have achieved, or by straight in-house bids, and sometimes by transferring successfully—as, for example, at Devonport dockyard—to private sector contractors and working very well with those private sector employers.

The Chancellor of the Duchy of Lancaster has announced that he believes that there is a cost saving of about 25 per cent. in the civil service as a result of market testing. Can he confirm that there is no evidence to suggest that that 25 per cent. cost saving is the result of internal efficiency—as would be the case with many Labour local authorities, if they were allowed to make the decision at local level, as opposed to being dictated to by central Government at Westminster—but that it is solely as a result of cutting wages and changing the terms and conditions of civil servants? That is the result of the right hon. Gentleman's market testing. There has been no increase in the quality of service.

I think that the hon. Lady has got her brief back to front. The wages issue is normally raised by local authorities. Labour local authorities have got used to compulsory competitive tendering. can give the hon. Lady one example. It happens to be the latest. RAF Finningly has stated that it expects to achieve savings of£3·5 million in the first year, 1993, and£29 million over 10 years through efficiency savings, including market testing of the technical maintenance of aircraft. That represents between 20 and 25 per cent., which is exactly the point that the hon. Lady does not understand. She will find that it has nothing to do with pay. It is the result of greater efficiency in the organisation of the function.