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Local Government Bill

Volume 492: debated on Thursday 28 January 1988

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3.45 p.m.

My Lords I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—( The Earl of Caithness.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD ABERDARE in the Chair.]

Clause 17 [ Local and other public authority contracts: exclusion of non-commercial considerations]:

moved Amendment No. 83A:

Page 15, line 13, at beginning insert ("except as otherwise provided under subsections (5A) to (5E) below").

The noble Lord said: In its present form this clause prohibits local authorities from requiring contractors to pay nationally agreed wage rates, holiday pay, sickness benefit and other benefits. Companies paying low wages have difficulty in recruiting suitably qualified staff. That very often leads to poor quality work. Staff turnover is generally high which may cause delay in the delivery of goods and services to the satisfaction of the local authority concerned.

Poor conditions of work and late delivery of goods and services lead directly to increased costs for local authorities in supervision of work and very often in the rectification of faults.

National agreements on pay and conditions are regulated by employers' federations which require adherence to those agreements by their members and have stood the test of time. Removing the fair wages clause from the contract conditions will disadvantage those companies which pay nationally agreed wages compared with the others and so undermine the work of employers' federations in setting standards for industry.

Local authorities will be commercially disadvantaged in the same way as other contractors paying nationally agreed wage rates. In addition, as clients they will be affected by the deterioration of standards caused by the reduction in control over contractors by employers' federations. We believe that the Bill as it stands could support a further introduction or an increase in the industry of the cowboy contractors who do no good to anybody in terms of service or cost-effectiveness. I beg to move.

Before I respond to the first group of amendments to Clause 17 I should like briefly to remind the Committee of the thinking behind the provisions of Part II of this Bill. We do not believe that the contractual process between public authorities and the contractors they employ should be the place for political posturing. Nor do we believe that local authorities should take upon themselves the role of extra-statutory enforcement agencies on matters which are already the subject of existing statute and which, where appropriate, have their own enforcement agencies to make sure the law is carried out.

I apologise to the Committee for stating now what I suspect I shall repeat several times during our deliberations on Part II. However, I think it is necessary to put on record at the outset that these provisions are not simply what some would call another attack on the freedoms of local government. The great majority of local authorities will be almost entirely unaffected by Part II, for the simple reason that most authorities have never regarded it as proper to use the contractual process in the way which the Bill will prevent. However, a small minority of authorities abuse the process and that minority is growing. That is why the Government have felt it necessary to act.

Turning to the amendments, while I appreciate that Amendment No. 83A refers to subsection (5D) as proposed in Amendment No. 92D, perhaps it will be for the convenience of the Committee that we should leave discussion of Amendment No. 92D until we reach Amendment No. 84, which deals specifically with the point about wages raised by the noble Lord, Lord Dean.

The arguments of the noble Lord, Lord Dean, in support of the group of amendments have certainly not convinced me that authorities should be inquiring into that sort of detail about a potential contractor and his employees. As regards the record of relationships between management and workforce in the course of the previous five years, certain local authorities have failed to demonstrate a responsible attitude in that area in the past. The Committee may well imagine the sort of mischief which an unscrupulous authority might get up to if the amendment were made. We believe that any firm which is unable to deliver the goods because of poor industrial relations will find that reflected in their performance record. That will be one of the things which local authorities should be looking at.

It would be equally unacceptable for a local authority to take into account the proportion of supervisors to others in the workforce. That would clearly be open to abuse. However, it would not be wrong for questions to be asked about the qualifications of the workforce, providing that the questions were not masquerading as questions about composition or training. Again, any contractor whose workforce did not possess the necessary skills would find that reflected in his performance record. I cannot accept that authorities need to go into detail about the taxation status of a contractor's individual employees. That is surely something which is best left to the Inland Revenue.

The kind of detailed and lengthy inquiries of contractors which would be allowed under the amendment would place a considerable burden on companies—particularly small companies—and would stop them from getting anywhere near the tendering process in the first place, let alone being able to take it a stage further. I hope that the Committee will resist the amendments.

The Minister has properly taken the opportunity which the amendment gives him to refer to a number of issues which are wrapped up in it. He has fairly touched upon four or five separate debates which we on this side of the Committee perceive as being worthy of examination in detail.

The Minister has demonstrated that he does not see a problem. He does not see the need or necessity, as do we on this side of the Committee, to ensure that the recipients of ratepayers' money—the contractors—are following fair, acceptable, equal and non-discriminatory policies. The Minister is entitled to take that view. He is entitled to say that the amendment might lead to political posturing, whatever that means. He is entitled to say that it is not the job of local authorities to undertake extra-statutory obligations. He also said that the Committee could well imagine that the powers which we are seeking could lead to unscrupulous activity.

Of course all of those things can happen. They have not happened, but they can happen. We are speaking of sensible, responsible employers—the private sector does not have a monopoly on sensible employers—who are anxious to get value for money, to ensure that local people are employed and to make sure that the people who get a contract are paying fair wages, have proper safety records and are able to demonstrate that they are so in touch with their employees that they have a good strike policy.

The Minister might feel that all of those things have nothing to do with an employer—the council—before it lets a contract. We on this side of the Committee—and certainly the Trades Union Congress and many local authorities—feel differently. As the day goes on, I shall be pleading the case and giving illustrations in hopes that the Minister will see that what we are seeking to do in the raft of amendments which will be coming forward is not only right and proper but also necessary.

The Minister is entitled to say that good employers who are party to national wage agreements will honour those agreements. The history of industrial relations in this country has a very fair record as regards the way in which sense, more often than not, prevails. The Minister says that the burden involved would be onerous if it were placed upon small employers. The record of local councils, recognising the problems of small businesses and small communities, is not one to be put aside. If there were genuine cases in which paperwork and the need to comply were issues, I am sure that local councils would wish to be reasonable.

However, the Minister must understand that, having discussed each of the issues in detail, there is much evidence that I and other Members of the Committee will be able to adduce to show that the rosy picture may be false. There will be other amendments moved from other parts of the Committee which will accept the generality that employers in the private sector in the main seek to be fair, to do good work, to make profits and to run good businesses. We are not concerned with the generality. We are concerned with a proportion—I should not wish to quantify it—who will get away with what they can.

I know that the unemployment figures are lower than they were. However, there are large areas of unemployment and deprivation. There are large areas of discrimination against the disabled, women and ethnic minorities. The instances of those matters will come to the Minister not from any party political sources but from government papers. It is clear that unless a local authority takes upon itself the responsibility of making sure that ratepayers' money—a phrase which has been used more than once from the other side of the Committee—is spent wisely, it may well get what appears to be a good deal—that is to say, the lowest cost—but unless it has power to make some inquiries of an employer before giving out contracts and before it puts all its eggs in one basket, there may be some very serious consequences.

Perhaps I may give one instance concerning wages. Lincolnshire County Council has handed over most of its school and other cleaning to ISS Service Systems, whose savings over the in-house bid were based entirely on paying £1·70 per hour to cleaners instead of the current £2·24. The Government are apparently quite happy to allow those wage levels. We are talking about miserable levels like that. We arc talking principally about women who will be working a normal working week and going home with less than £70 per week, which will be less by the time it is taxed. We are talking about councils, which spend ratepayers' money, satisfying themselves that they are not a party to allowing such companies to get away with murder.

The Minister may think that irksome and the employer may think it an intrusion upon his right to drive the hardest bargain and to get his labour at the lowest possible level. I honestly believe that, in resisting this amendment, the Minister is simply aiding and abetting a deterioration, albeit on the fringes, in industrial relations.

Let me give another illustration. ICC's cleansing policy is to sack all part-time workers who take tea breaks. The Minister may ask, "What has that to do with the employer—the council—giving out the contract?" I think that the council is entitled to know about practices and policies, especiallly as regards wages, the ethnic mix and ensuring that enough disabled people are employed. The employer—that is, the council—is entitled to have such information. Whether it takes it into account and acts upon it is another matter.

The average weekly earnings of ICC workers in print are £15 a week. Looking at wages—and that is only one issue—or at the question of redundancies and job shedding, it is clear that those are issues which affect the most vulnerable sections of our society, whom I categorise as working women, ethnic minorities and the disabled. Statistics will be put forward to demonstrate that these are not just empty phrases. Government figures will show that it is those sections of our community who are most at risk, if no attempt is made by the responsible authority—that is, the council—to ensure that the ratepayers' money (which is being spent by the private contractor for a service to be provided to the community) is spent in the best possible manner.

The point is very often made that privatisation or the result of competitive tendering saves public money. That is a myth. There may very well be a piece of paper which shows that at a particular time the cost to the ratepayer or the consumer is less, but one must consider the totality of that cost, which includes proper health provision, safety at work and holiday and other entitlements—in other words, all that Members of this Committee have no doubt enjoyed for a great length of time in private or public service.

Before we put too many eggs in one basket we ought to be satisfied that the recipients of ratepayers' money are people who are fit and proper persons to receive it.

4 p.m.

The noble Lord, Lord Graham of Edmonton, is asking for local authorities to have a right to investigate all sorts of matters which have nothing to do with the commercial contract, which should be for the benefit of the ratepayers. He is asking that the local authorities should be allowed to investigate whatever they want to investigate, and to set a long list of questions about anything that springs to mind. One only has to look at the pre-tender form of Leicester City Council and the questions that they seek to have answered before a possible contractor is even allowed on to the list. That has led to a situation which has produced very poor results for the ratepayer. What we are seeking with this Bill is to improve services for the taxpayer and the ratepayer. I think that at this stage I ought to call in aid some words of Councillor Margaret Hodge, the leader of the Islington borough council and an unlikely supporter of my argument, I should have thought, as reported in the Local Government Chronicle of 3rd July:

"A clear message has got to go out from us, which is—the reason we are there is not to service the interests of sectional trade unionists, hut to serve the interests of the people for whom we provide services". [Official Report, Commons, 6/7/87; col. 145.]
That is the purpose of the Bill.

Not for one moment would I disagree with the Minister in that last comment and his quotation from Margaret Hodge. That was always my view when I was engaged in local government. Governments are not elected to serve sectional elements; they are elected to serve the community as a whole. They look after the interests of the community, too, not the interests of any particular group, as I have said.

What do we mean by competition? I mean equal competition. There are grave reservations about cowboys in the building industry, which come not from direct works departments but from the bona fide private building sector. In an earlier observation from the Dispatch Box, the Minister referred to the fact that this was not a question for the Department of the Environment but for the Inland Revenue. I have asked questions in this Chamber and quoted figures given to me by the Building Employers' Confederation, the Federation of Building Trade Employers and the Federation of Master Builders, and other bodies in that industry which are heavily involved in the local sector both at the top and lower levels. They complain bitterly. I understand that the Treasury was being defrauded of billions of pounds by the employment of lump labour. The local authorities were not benefiting; rather, it was the people in lump labour.

We ask that people who are competing shall compete in a proper manner and that competition shall be fair. From what the Minister has said, I am not sure by any means that it would prove fair. Local authorities must attempt to obtain high quality work and value for money when awarding a public supply or works contract. They have to assess the technical ability of potential contractors and derive the maximum value from the contract for which they are invited to tender.

At present it is standard practice for local authority departments to ask tenderers for a breakdown of their workforce by grade in order to appraise the size and structure of the firm—for example, by examining their management and supervisory structure, professional and technical support and the number of skilled employees and their particular trades. This information is important for technical appraisal of firms, to predict whether they are likely to be able to deliver high quality goods and services and the size of contract that they will be able to undertake. Nothing would be worse than somebody putting in a bid for a contract, getting it, and not having the resources to carry it out with the speed and efficiency which the local authority requires.

Noble Lords from all sides of the Chamber who have had experience of ordering for local authorities will remember that the selective tender list worked very well. Under that system, when a local authority wanted work done under various contracts, it was able, under both Labour and Conservative governments, to draw up selective lists of three or four reputable contractors in the area and keep them as its tender list. On that basis, whoever submitted the best tender won the contract, and the authority knew immediately that that contractor was capable of carrying out the work for which it was tendering.

In what the Minister has said, there is no guarantee that the local authority could obtain any such undertaking even if it asked for it. It can ask the contractor to give an undertaking, but what they dare not ask is, "Do you have the resources to do the job?" There is no indication that that information would be forthcoming. If there is a proliferation of this type of activity, I can foresee situations in which local authorities will be left in the lurch by somebody who cannot carry out the work.

I do not want to stay too long on this matter but I can cite very quickly two multimillion pound contracts in Manchester in which the contractor went "bump". Both were specialist projects and the local officers had to bring in consultants at great public expense. One was the completion of the new Manchester assize courts. It was a very large project where the electrical work failed because the person who had the contract finally did not have the resources, knowhow and technical expertise to complete the work for which he had tendered. It was no use the Manchester local authority—as the agent in part for the Government and in part for the judiciary—taking the contractor to court because he went "bump". I know that that example is repeated in dozens of cases.

The Minister has not satisfied me at this point in time. I do not know whether he has anything further to add. I should like to hear him say that he is convinced that open tendering—without the customer having the right to consider whether there are the resources to carry out the commitment that it has undertaken—is so way out that he cannot consider it.

Before the Minister responds, he quite fairly dismissed the idea that councils would be asking prospective contractors to complete questions about their employment practices. He quoted what the Leicester authority is doing—and I do not think he thought much of it. Would the Minister care to comment on the views of the Secretary of State for the Environment in another place when the issuing of questionnaires with regard to compliance under Section 71 of the Race Relations Act was discussed? If we are dismissing the necessity for a council to ask questions about the employment policy of a prospective contractor, then indeed we have a conflict.

In another place at Report stage the Secretary of State said that he would prescribe the questions that local authorities would be permitted to ask tendering companies and that there would be no more than five or six in number. There is a principle here. We have not only the principle that it is right for a council to ask questions; we have the Secretary of State saying that he will prescribe the five or six questions which in his view—nobody else's—are appropriate.

I have received a document from the Commission for Racial Equality. It has listed what it considers to be fair questions. The Minister may decide that this point anticipates later amendments, but he has raised the issue. If the Minister tells us—as may be the mood of the Committee—that discussion on the questions that the Secretary of State thinks are proper would be more properly raised by me at a later stage, I shall do that. But the Minister dismissed the idea of a council asking a prospective contractor questions about how he operated his business. Perhaps the Minister can be helpful to us.

I hope that I can he helpful to the Committee. The questions to which the noble Lord, Lord Graham of Edmonton, has referred under the Race Relations Act will be the subject of detailed debate at a later stage. They are the subject of consultation at the moment. He failed to draw the Committee's attention to the fact that in the 1976 Act there is a special section which says that it is the responsibility of the local authority to perform certain functions. We are not talking about that in the amendments before the Committee, but about a request by local authorities to look into matters over which they have no jurisdiction, and which are covered by other matters of primary law.

The noble Lord, Lord Dean of Beswick, was absolutely right to say that it is the duty of the local authority to look into the financial competence of the company to complete a contract. I am sure the Committee would agree that that does not necessarily mean it needs to look into the record of the relationships between management and the workforce in the previous five years. Would that have prevented the contractor to whom he referred in the case of the Manchester assize courts encountering the difficulties that he did?

The local authority needs to make sure, first, that it writes the correct specification; secondly, that it puts out the right tender documents to ensure that the work it wants done is done to the level required; and, thirdly, that the companies who are tendering for that have the financial ability, either through giving a bond or through insurance—that is a matter that we raised at an earlier stage—or have a track record sufficient to satisfy the local authority.

Perhaps I may very briefly give a hypothetical example that I believe could happen if the Bill is passed as it stands. A local authority puts out a contract for a building containing highly sophisticated equipment. It is a contract requiring large capital. Then the city architect or engineer in charge of the contract says, "One of these contractors here carried out a contract similar to this two or three years ago for city B. We in City A, in the interests of the local authority and the ratepayers, ought to make inquiries as to what happened there".

He takes his other officers, and perhaps his chairman of committees, to look at the first contract, and they do not like what they see. They do not think that value has been given for money. Perhaps they do not like some of the practices that have taken place while that contract was being carried out. Is the Minister saying that the second authority has no right to make such inquiries before deciding on letting that contract? That is what he appears to me to be saying. I believe a local authority has a right to do so in the interests of its ratepayers.

The local authority has the right to make sure that those who will submit a tender have the financial ability and the competence to carry out the necessary skilled work in order to make sure that the contract is completed.

I must press that last point. The nub of the argument is whether people ought to be investigated when they have carried out similar work for someone else shortly before. The Minister indicates to me that that is not on. He may not be familiar with present ordering patterns in this country. We are always told, if we wish to sell nuclear or coal-fired stations, that before anyone will buy one they have to come over here to see one of ours working to make sure that we can carry out the specification.

The same goes for a wide range of other public contracts that we have carried out abroad. I recall the Tyne and Wear railway, which people from the Far East were brought to see to assure them that the people here had the knowhow and the resources to deliver a railway—I think it was to Hong Kong—to specification. The Minister is denying that facility to local authorities. On that basis, I have a duty to test the will of the Committee.

4.18 p.m.

On Question, Whether the said Amendment (No. 83A) shall be agreed to?

Their Lordships divided: Contents, 91; Not-Contents, 145.



Airedale, L.Kirkwood, L.
Amherst, E.Leatherland, L.
Ardwick, L.Listowel, E.
Attlee, E.Llewelyn-Davies of Hastoe, B.
Aylestone, L.Lloyd of Kilgerran, L.
Banks, L.Lockwood, B.
Barnett, L.Mackie of Benshie, L.
Basnett, L.McNair, L.
Blackstone, B.Mayhew, L.
Blease, L.Molloy, L.
Bottomley, L.Mountevans, L.
Briginshaw, L.Mulley, L.
Brockway, L.Nicol, B. [Teller.]
Callaghan of Cardiff, L.Northfield, L.
Carmichael of Kelvingrove, L.Ogmore, L.
Carter, L.Oram, L.
Cledwyn of Penrhos, L.Parry, L.
Cocks of Hartcliffe, L.Perry of Walton, L.
Dean of Beswick, L.Peston, L.
Diamond. L.Phillips, B.
Donaldson of Kingsbridge, L.Pitt of Hampstead, L.
Dormand of Easington, L.Ponsonby of Shulbrede, L. [Teller.]
Elwyn-Jones, L.
Ennals, L.Prys-Davies, L.
Ewart-Biggs, B.Rathcreedan, L.
Falkland, V.Rea, L.
Fisher of Rednal, B.Ritchie of Dundee, L.
Gallacher, L.Ross of Marnock, L.
Gladwyn, L.Seear, B.
Graham of Edmonton, L.Shackleton, L.
Grey, E.Stallard, L.
Grimond, L.Stedman, B.
Hampton, L.Stewart of Fulham, L.
Hanworth, V.Stoddart of Swindon, L.
Harris of Greenwich, L.Strabolgi, L.
Hatch of Lusby, L.Taylor of Blackburn, L.
Hayter, L.Tordoff, L.
Houghton of Sowerby, L.Underhill, L.
Hughes, L.Wallace of Coslany, L.
Hylton, L.Wedderburn of Charlton, L.
Jay, L.Wells-Pestell, L.
Jeger, B.White, B.
Jenkins of Hillhead, L.Williams of Elvel, L.
Jenkins of Putney, L.Willis, L.
Kilbracken, L.Winterbottom, L.
Kilmarnock, L.Ypres, E.


Abinger, L.Cameron of Lochbroom, L.
Aldington, L.Campbell of Alloway, L.
Allenby of Megiddo, V.Campbell of Croy, L.
Alport, L.Carnarvon, E.
Ampthill, L.Carnegy of Lour, B.
Arran, E.Carnock, L.
Auckland, L.Coleraine, L.
Balfour, E.Cornwallis, L.
Beaverbrook, L.Cottesloe, L.
Belhaven and Stenton, L.Cox, B.
Beloff, L.Crickhowell, L.
Belstead, L.Cullen of Ashbourne, L.
Bessborough, E.Davidson, V. [Teller.]
Birdwood, L.De Freyne, L.
Blatch, B.Denham, L. [Teller.]
Bledisloe, V.Dilhorne, V.
Borthwick, L.Dundee, E.
Boyd-Carpenter, L.Elibank, L.
Brabazon of Tara, L.Ellenborough, L.
Brookeborough, V.Elliot of Harwood, B.
Brougham and Vaux, L.Elton, L.
Broxbourne, L.Erne, E.
Bruce-Gardyne, L.Erroll of Hale, L.
Butterworth, L.Faithfull, B.
Caccia, L.Ferrers, E.
Caithness, E.Ferrier, L.

Foley, L.Nelson, E.
Fortescue, E.Norfolk, D.
Fraser of Kilmorack, L.Norrie, L.
Gainsborough, E.Nugent of Guildford, L.
Gisborough, L.O'Brien of Lothbury, L.
Grantchester, L.Onslow, E.
Greenway, L.Orkney, E.
Gridley, L.Orr-Ewing, L.
Hailsham of Saint Marylebone, L.Pender, L.
Penrhyn, L.
Hankey, L.Peyton of Yeovil, L.
Hardinge of Penshurst, L.Plummer of St Marylebone, L.
Harlech, L.Porritt, L.
Harvington, L.Portland, D.
Havers, L.Rankeillour, L.
Hesketh, L.Reay, L.
Hives, L.Ridley, V.
Home of the Hirsel, L.Rippon of Hexham, L.
Hooper, B.Rodney, L.
Hylton-Foster, B.St. Aldwyn, E.
Ilchester, E.St. Davids, V.
Ironside, L.St. John of Fawsley, L.
Jenkin of Roding, L.Saltoun of Abernethy, Ly.
Jessel, L.Sanderson of Bowden, L.
Johnston of Rockport, L.Sandys, L.
Joseph, L.Seebohm, L.
Kearton, L.Selborne, E.
Kimball, L.Selkirk, E.
Lane-Fox. B.Shaughnessy, L.
Lauderdale, E.Simon of Glaisdale, L.
Lawrence, L.Skelmersdale, L.
Lloyd of Hampstead, L.Stockton, E.
Long, V.Strathspey, L.
Lucas of Chilworth, L.Terrington, L.
Margadale, L.Teviot, L.
Marley, L.Thomas of Gwydir, L.
Merrivale, L.Thorneycroft, L.
Mersey, V.Trafford, L.
Milverton, L.Trumpington, B.
Monckton of Brenchley, V.Vaux of Harrowden, L.
Montagu of Beaulieu, L.Ward of Witley, V.
Mottistone, L.Westbury, L.
Mountgarret, V.Whitelaw, V.
Mowbray and Stourton, L.Wise, L.
Munster, E.Wolfson, L.
Murton of Lindisfarne, L.Wynford, L.
Napier and Ettrick, L.Young of Graffham, L.

Resolved in the negative, and amendment disagreed to accordingly.

My Lords, your Lordships may feel that we have reached a suitable moment at which to take the Statement. If so, I beg to move that the House be now resumed.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.