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Column 236independent advice. But we will encourage it to widen its customer base, so as to make the best possible use of its intellectual and physical resources. At the same time, it will be very important to maintain the confidence of industry and of our international partners in the impartiality and commercial confidentiality of the agency. Our intention remains to establish the Defence Research Agency within the public sector, as the hon. Member for Clackmannan noted. I hope to be able to clarify its precise status and composition by the end of the year. Target vesting day is in the spring of 1991. Let me deal now with a particular management initiative which has saved the Ministry of Defence many millions of pounds over the last ten years, and that is contracting out or "contractorisation". It is by now a well established principle that the Ministry of Defence should transfer to the private sector any work that does not need to be retained in-house for operational reasons, provided, of course, that it is in the taxpayers' interests to do so.
In recent years, we have extended what we call the "market testing" of defence support services, from the traditional areas--such as cleaning, catering and ground maintenance--to the less obvious, such as range operation, bird control at RAF stations, and the management of aircraft storage. We are also now looking at a new
development--facilities management--which would involve larger, all- embracing, support contracts, whereby one contractor would be responsible for providing a whole range of support services at an establishment.
I should point out here that market testing does not, as is often claimed, automatically lead to a task being contracted out. In some cases the mere discipline of subjecting activities to competition has achieved considerable economies in the in-house operation, so making it cheaper and more cost-effective than the private sector. Nor is cost the only consideration.
Nevertheless, we reckon that, since 1979, contracting out defence services has made net savings that now run at some £50 million a year. The MOD is recognised as a leader in that field within Government. It handled about 70 per cent. of all market testing done by Government Departments in the last financial year.
Whilst it is obviously important that we obtain the best value for money in managing the defence budget, we do not, and must not, allow that to override the operational needs of the services. In looking at what tasks might be contracted out, we give full weight to operational needs, and we accept that many tasks must, for operational or security reasons, be performed in-house.
The terrible events at Deal last month have caused some people to suggest that we have gone too far in putting security tasks out to the private sector, but it would be wise not to rush into hasty judgments and to wait until our examination of the circumstances surrounding this incident is complete. Even if we decided that, for the future, the use of contract security personnel should be restricted that is only one small part of our support activities. There will still be many other areas in which contracting out--provided that it meets the operational and security criteria--will offer a highly effective means of making the defence budget go further.
To answer the hon. Member for Clackmannan, this matter was raised by the husband of the hon. Member for Peckham (Ms. Harman) at the joint Whitley council. I was
Column 237sorry to disappoint him, but I had to say that as far as contractorisation was concerned, each proposal was considered on its merits, and the concerns that he voiced at that meeting and which have been voiced here today are properly part of that consideration. A review was under way but even while it was under way I could give no guarantee that proposals for contractorising services over a wide range of options would not be implemented. It would be wise, as I said before, not to rush to judgment on matters whose circumstances we cannot know. We would do better to await the outcome of the inquiry.
Mr. McWilliam : I do not wish to rush the Minister over any fences, but I wonder how he can tell the House that, in the face of the fact that the private security company at Deal had been sacked by another Government Department. It seems that the Minister has been singularly badly advised when constructing this part of his speech ; perhaps a little less complacency would be in order.
Mr. Neubert : There is no complacency : there is simply the need to establish the facts. I recommend, as I recommended to the husband of the hon. Member for Peckham, that the hon. Gentleman wait for the facts. However, I realise that my answers were not to be allowed to get in the way of a good press release by her husband. It is instructive that the story appeared only in The Guardian and the Morning Star, and if the hon. Gentleman wants to be better informed in future he might stick to the serious papers.
My right hon. Friend challenged the Opposition spokesman to tell us whether the motion carried so overwhelmingly at Brighton by the Labour party conference represented Labour party policy. He was told in answer that it would not appear in the party manifesto. I invite the hon. Gentleman to reconsider his response. Are we to believe that a decision taken on behalf of 4 million people at a Labour party conference--
Mr. O'Neill : I am grateful to the Minister for giving me the opportunity once again to explain this to him. It seems that I must do so to each Minister individually. The motions passed at the Labour party conference are of differing significance-- [Interruption.] --and the resolution which was passed without the need for counting, supporting the Labour party's document on foreign affairs and defence, will form the basis of the Labour party's election manifesto. What appears on the Order Paper is of no relevance to what will appear in our manifesto.
Mr. Neubert : We are being asked to believe that the Labour party-- that great democratic institution, as Labour Members present it to us, despite their block vote--when faced with a decision of conference by an overwhelming majority of two to one, gives as its answer the classical two fingers. But is that the truth?
We have here the longest amendment I have ever seen from an official Opposition. It is what I would describe as densely worded. It is an impenetrable thicket, no doubt to dissuade anybody from reading through it, but I am charged with some responsibility for the nation's defence so I have struggled through it.
In line 4, the amendment calls for the Government to, "undertake a Review". We know what that means in Labour party terms. It means a substantial reduction in expenditure. The Opposition would go on to examine the allocation of resources which could be released for social and economic purposes. That is what the official amendment says, but if we want to understand what it means, we should turn to the unofficial amendment in the name of the right hon. Member for Chesterfield (Mr. Benn) and his hon. Friends.
It being Ten o'clock, the debate stood adjourned.
Debate to be resumed tomorrow.
Motion made, and Question proposed, That this House do now adjourn.-- [Mr. Lightbown.]
Mr. Barry Field (Isle of Wight) : I thank you, Mr. Speaker, for granting me the opportunity of placing before the House tonight the arguments set out in a document entitled "An Island Apart", which seeks to identify the cost of severance by sea for the Isle of Wight. But before I do so, I thank my hon. Friend the Under-Secretary of State for coming along to reply to tonight's debate and congratulate him on the news that his wife is expecting their first baby. I am sure that everyone hopes that he or she will be a Chope off the old block.
My hon. Friend is, of course, a near neighbour, representing a Southampton constituency. I should like to place on record the considerable assistance that he has given me, particularly in the correspondence we have had about the planning considerations for the Isle of Wight's terminal at Portsmouth, Southampton and Lymington, especially as some of them appear to be under pressure for redevelopment.
I am also glad that my hon. Friend will have the opportunity of replying to tonight's debate, because, like me, he has enjoyed the privilege and pleasure of serving as a local councillor before his election to the House. I know that that knowledge will bring a special understanding and comprehension of the island's problems. The document "An Island Apart" was prepared in January 1989 and was submitted to my hon. Friend the Under- Secretary of State together with a personal letter from me.
I should like to pay a particular tribute to the retired county treasurer, Don Tuck, who worked so hard on the document and who has led successive delegations to Whitehall. It is worth recalling that in 1978 he obtained the agreement of the Department of the Environment statisticians that special costs did exist, and the then Secretary of State was prepared to do something to compensate for those costs, provided that the Association of County Councils agreed. However, it has always been the policy--in my opinion it is never likely to alter--that the Association of County Councils will not support one individual member in its submission to the Department of the Environment for a special case.
My hon. Friend will see that on page 6 of the document we seek to set out the additional costs that are borne by the island. They include £821,000 for the fire service ; £547,000 for waste disposal ; £155,000 for further education ; £27,000 for vehicles and plant ; and the impact of the three prisons on the magistrates courts, which is £95,000. That makes a total of £1,266,000 and, as my hon. Friend will be aware, the Isle of Wight is the smallest county council in England.
As an illustration of the difficulty of obtaining economies of scale, I always use the comparison of staff. Hampshire county council has 52,000 employees, and the Isle of Wight county council has 4,121. From that, I hope that it can be seen immediately that a difference of just £10,000 has a substantial impact on the Isle of Wight county council budget, whereas it takes several millions of pounds for it to be felt on other county councils.
The most easily understood problem facing the island is the need for our fire service to be self-sufficient. All fire
Column 240services in the United Kingdom rely on adjoining authorities to give them back-up facilities in the event of a major disaster or fire, but it is fairly obvious that one cannot make a 999 call on the Isle of Wight and expect the fire engine to catch the next ferry from Hampshire.
I understand that the Home Office had confirmed to the Department of the Environment that it is impossible for us to run a smaller or more efficient fire service than that which we currently operate. My hon. Friend the Minister will therefore be able to see that the overspending that is shown up by the methodology under the existing system conspires heavily against the Isle of Wight.
Because of the sensitive nature of the aquifer and the fact that the island is not self-sufficient in drinking water at peak times, more than 25 per cent. of our water supply must be piped in from the mainland. That means that the water catchment areas on the island are exceptionally sensitive, which leaves us little space in which to dispose of our household refuse. The problems that are being created by an endeavour to solve this difficulty with a waste-derived fuel plant currently appear to be compounding our financial difficulties rather than assisting them.
It will not have escaped my hon. Friend's eagle eye that the controlling group on the Isle of Wight county council is the Social and Liberal Democratic party. I am sure that my hon. Friend and his advisers would wish to know that I have made it crystal clear to the county council that I do not believe that it can simply be left to me to plead in Parliament the case for the Isle of Wight as a unique authority that deserves similar treatment to the only other island that is administered by the English Civil Service--the Scilly Isles--where a special factor called D2 is currently applied to its finances.
That same uniqueness, if I may use such a non-word, must bring a positive response from the county council to ensure that it considers every service, every function and every facility provided by county hall, and to ensure that, as England's Lilliputian county council, every facet of its work is justified and necessary.
My challenge to the county council will, I sincerely hope, reassure my hon. Friend that, in pleading on behalf of everyone on the Isle of Wight for some assistance under the proposed needs assessment area cost adjustments, there should be a special adjustment for our island in the community charge financial regulations.
On Monday of this week, a public meeting was held on the island organised by the Cowes governors support group, at which I and representatives of the county council answered question from a large audience about the island's finances. I made it quite clear that we must see a positive response from the county council to fine-tooth-comb all its functions. I believe that we received a positive response to that challenge at that meeting. I hope that in reply my hon. Friend will say that my submission--that the message that the island's largest local authority must provide a policy of value for money--has been received and understood, and I hope that it will be acted on.
However, that will still not provide us in any shape or form with the level of finances that we need to run our island services. Will my hon. Friend the Minister comment on the constitutional point, in endeavouring to reach a decision with his ministerial advisers, on the difficulty in which he and they find themselves in favouring one authority, particularly as it is generally accepted that, in the distribution of local authority finance, Ministers take
Column 241the advice of the Civil Service and the distribution of finance must be seen to have been applied fairly to all authorities. I sincerely hope that my hon. Friend can reassure me that, because the precedent has already been established for the Scilly Isles, there will be no constitutional difficulty perceived by his permanent under -secretary or by his other ministerial advisers in ensuring that the island is once and for all legislated into the regulations--so to speak.
I appreciate that the effect of safety netting and the announcement made by my hon. Friend the Minister for Local Government and Inner Cities during the Conservative party conference last week will have some effect on the island and that it is possibly too early to give the House any precise information about how safety netting will assist us.
I want to draw the attention of my hon. Friend the Minister to the fact that, under the grant-related expenditure system, we are already the most heavily safety-netted authority in England. When the Association of County Councils put forward a recommendation to the Department of the Environment that safety netting should be abolished, my council and one other county council would have been very seriously hit if my right hon. Friend the Secretary of State had accepted its suggestion.
My hon. Friend the Minister is aware that the Isle of Wight is the largest water-metering test area in the United Kingdom, and that 53, 000 meters are being fitted. There is absolutely no doubt that that will have an impact on households with young families. There is concern that the experimental tariff may have been set at a rather high level. My hon. Friend the Minister will be aware that the island has already received a ministerial assurance in this House that the tariff will be reviewed once the data are available.
The additional papers submitted to "An Island Apart" as a result of the visit of my hon. Friend the Minister for Local Government and Inner Cities to the island on 19 April, contain additional information requested by the Minister in support of "An Island Apart". They set out the impact on the island of the dislocation from the mainland and the additional costs of providing local authority services to the average island family. I particularly draw the attention of my hon. Friend the Minister to page 38 of "Regional Trends 23", the 1988 edition, which gives the average full- time male weekly wage on the island as £192.60, compared with £230.16 for the outer south-east.
The average income per head on the island is significantly lower than on the mainland due to the large proportion of pensioners in the island population. The Audit Commission report on urban deprivation gives us a Z score of plus 0.4 per cent. compared with the family average of minus 1.3 per cent. The 1989-90 Green Book shows that the figures for GRE for housing benefit for the two island boroughs averaged 21 per cent. more per head of the total population compared with all English shire districts. The major cause of the variation is attributable to rent allowances paid to private sector tenants. It can therefore be said that the average island family has a higher cost of living and a lower wage level than their mainland counterparts.
My hon. Friend will be aware that the figures were prepared before the last public sector wage awards of more than 8 per cent. for the National and Local Government Officers Association and more than 7 per cent. for the teaching professions, both of which are well above any increase in earnings in the private sector on the island.
Column 242I have just completed a tour of several factories and large employers, and in no case did I find any island employer increasing wage rates to anything like those levels. In practically all cases, they were involved in further cost-cutting exercises. Therefore, the island's community charge payers are placed in the nutcracker between nationally negotiated pay awards for public sector employees, the lack of economy of scale, and the particular difficulties, highlighted in "An Island Apart", of running England's smallest county council on the one hand and having a low wage economy with the additional costs of basis necessities as a result of our dislocation from the mainland on the other hand.
I hope that, having briefly set out to my hon. Friend the problems facing the island in the provision of basic and essential services, he will accept that the Isle of Wight has a case and that he will assure me that he and his advisers will give the island's case the most careful and detailed scrutiny before reaching a decision. 10.16 pm
The Parliamentary Under-Secretary of State for the Environment (Mr. Christopher Chope) : I thank my hon. Friend the Member for Isle of Wight (Mr. Field) for the kind words that he included in his speech. I have known my hon. Friend for some time--since before he became a Member of Parliament. I am obviously familiar with many of the problems of the Isle of Wight because of the proximity of my constituency.
I congratulate my hon. Friend on securing this debate and on the clear way in which he put forward the case for his constituents on the island. Having served as a county councillor on the island, he has a deep knowledge and understanding of the issues and is a persistent and energetic advocate on behalf of his constituents. He persuaded the Minister of Agriculture, Fisheries and Food, my right hon. Friend the member for Suffolk, Coastal (Mr. Gummer), to visit the island earlier this year. My hon. Friend has frequently visited my Department in Marsham street, and he is also a persistent letter writer. Whatever else can be said, it cannot be said that his constituents' case goes by default. My hon. Friend is very assiduous in his work.
The points that my hon. Friend has made this evening show a concern about the new grant arrangements which will come into place next April as part of the reform of local government finance. As my hon. Friend knows, the community charge will be a much fairer system than the system of domestic rates which it replaces. The community charge will have to meet only about one quarter of the total costs of local authorities. The Government will continue to provide substantial support for local government services through Exchequer grants, as now.
The Secretary of State for Trade and Industry, my right hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), when he made his announcement in July, said that central Government support for local authorities in England for 1990-91 should be £23.1 billion, including the yield from business rates, which is 8.5 per cent. more than this year on a comparable basis. In addition, about £2 billion will be paid in rebates and income-related benefits to help poorer charge payers. We have also announced a scheme to help certain individuals who might otherwise lose significantly from the move to the community charge.
Column 243The new grant system is intended to be simpler and more straightforward than the existing arrangements. The key principle will be to ensure that if each local authority spends to provide a standard level of service the community charge can be set at the same level--the national norm--which will be about £275 for 1990-91. That is before taking account of the transitional arrangements. There will then be a clear accountability between each authority's spending levels and the level of the community charge. That accountability is at the heart of the reforms.
To achieve that general principle, the Government are working out for each authority what it should cost to provide a standard level of service, taking account of the particular characteristics of that area. Obviously the more pupils there are in an area, for example, the more it will cost to provide an education service to any given standard. Similarly, an area with a high population of elderly residents is likely to require a higher level of expenditure on social services than an otherwise similar authority. This assessment is known as the standard spending assessment. An SSA will be calculated for each local authority. It will reflect a range of factors, such as the population, the mileage of roads which have to be maintained, number of school pupils who have to be educated, and other factors which affect the amount which needs to be spent on local services.
To make such an assessment of the cost of providing a standard level of service for authorities up and down the country facing a tremendous variety of circumstances is, I readily accept, not an easy task. We are committed, however, to ensuring that these new standard spending asessments should be simpler and easier to understand than the existing arrangements.
We are also committed to producing assessments which treat every authority fairly and properly. To do this we need to devise a means of assessment which is based on applying the same calculation for each authority using information which has been assembled and verified on the same basis for all authorities in the country. There are, of course, many ways in which these assessments can be approached. A great deal of work has been done over the past few years considering the various possible methods. This work has intensified since last December, during which time officials from my Department have been discussing with officials of the local authority associations detailed options for individual services. A large number of papers have been prepared, and a large number of meetings have been held. My right hon. Friend the Secretary of State and I discussed the results of this work with the leaders of the local authority associations at the end of last month in the consultative council. We have had many letters from hon. Members and local authorities, including letters from my hon. Friend. All these letters have put forward points of great concern to the individual authorities and they are all carefully considered, as will be the remarks of my hon. Friend.
We shall be reaching final decisions shortly, and making our proposals known when we consult the associations about the amount of grant for next year early in November. My hon. Friend has therefore got his timing
Column 244exactly right in initiating this debate tonight. The final proposals will be set out in a report to be debated in the House in January.
My hon. Friend has referred to the paper "An Island Apart" which he sent to the Department in February on behalf of the three local authorities on the island. It sets out the case for special treatment, reflecting the particular circumstances of the island.
As my hon. Friend has made clear, the Isle of Wight is the smallest of the shire counties--indeed, it is only about a third of the size of the next smallest in terms of population, which is Northumberland. It is also smaller than any of the London boroughs. In addition, the county is separated from mainland Britain by the Solent, which increases transport costs and makes it more difficult for the fire service, for example, to rely on mutual support from neighbouring authorities.
"An Island Apart" suggested that these two factors--the small size and the separation from mainland Britain--meant that the cost of providing local authority services to any given standard would be higher on the island than elsewhere. My hon. Friend developed that argument in detail, and gave particular examples. The report suggested that "insularity" forced the councils to spend a total of £4.6 million a year extra. He has therefore suggested that, in the methodology for calculating standard spending assessments, there should be a specific recognition of this factor.
My hon. Friend has suggested that proper account should be taken of the age profile of residents of the island. He is quite right. Standard spending assessments should and will take account of the proportion of the population which is elderly and the proportion of children in the area in assessing an authority's requirement for spending on social services. This will be so not just for the Isle of Wight, but for all authorities in the country.
My hon. Friend has also spelled out in some detail the range of incomes of people on the island. However, this is not a relevant factor to consider in relation to appropriate spending levels. The new community charge system is specifically moving away from any consideration of local resources whether they be measured by rateable values or by incomes. This is one of the ways in which our new proposals are seen to be fairer than the existing rating system. In terms of the provision of local authority services, many of which have a high labour content, low incomes would serve to reduce costs. My hon. Friend has said that there is a problem with nationally negotiated wage deals, but it is possible for local authorities to take an independent line. It is also possible for local authorities to contract out more of their services and to invite more competitive tenders. If they invite competitive tenders, they should find that the tenders reflect more accurately local labour costs rather than national salary levels negotiated on a national basis by the national associations.
Mr. Barry Field : My hon. Friend will be aware that more than 60 per cent. of the county council's budget is spent on education. I understood that it was Government policy that education was to be centrally resourced and that it was of a national standard.
Column 245identical. We know that many of the ancillary staff employed in the schools service have wage rates that differ substantially from one part of the country to another. That is an example of how, even within the education service, one should be able to get a better deal if one is operating in an area where wages are lower.
As my hon. Friend explained, there has always been special treatment for the Isles of Scilly, but that is a very extreme case. The population of the Isles of Scilly is less than 2,000, less than one fiftieth of the population of the Isle of Wight. It does not necessarily follow that the Isle of Wight and the Isles of Scilly should be treated in the same way.
"An Island Apart" was discussed at meetings between the Department and the associations as part of the general consideration of the area cost adjustment which is included in the standard spending assessment calculation. I have to say that representatives of the Association of County Councils and of the Association of District Councils were not convinced of the case for giving special treatment to the island. Their view was that the problems faced by the island were not significantly different from those faced by some other authorities. Communications with the island, for example, are not necessarily more difficult than communications between, say, Cornwall or Cumbria and the rest of England. Some people in Cornwall say that Cornwall is an island because it is separated from the mainland by the river Tamar. Equally, the extent to which authorities can look to their neighbours for support varies across the country. Counties
Column 246with long coastlines or estuaries that split the county may face problems similar to those of the island, but, as I have said, we shall be considering all those arguments carefully before we reach our final decisions.
We shall certainly be reflecting in the standard spending assessments the fact that in some areas it costs more to provide services. We have in mind the fact that wage rates in London are higher than those elsewhere and that it necessarily costs London authorities more to recruit and retain staff. If we go for an area cost adjustment that includes all of the south-east, the Isle of Wight, notwithstanding its relative low-wage economy, will benefit from such a cost adjustment. The issue is whether we go further than that and decide that the position of the island is so different from that of other authorities--each of which believes that it circumstances deserve exceptional treatment--that a special factor is required.
To answer my hon. Friend's specific question, there is no constitutional bar to giving the Isle of Wight an area cost adjustment if it is justified on the merits. However, at present all these issues are being considered by the Department, and I hope that my hon. Friend will understand that I cannot say any more tonight about the specific points he has raised. As usual, he has put them forward persuasively, and I have listened to them carefully. Question put and agreed to.
Adjourned accordingly at twenty-eight minutes past Ten o'clock.
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