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Question accordingly agreed to.


That the matter be referred to the Committee of Privileges.

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Local Government

6.13 pm

The Parliamentary Under-Secretary of State for the Environment (Mr. Robert B. Jones): I beg to move,

That the draft Local Government Act 1988 (Competition) (Defined Activities) Order 1994, which was laid before this House on 14th June, be approved.

Madam Speaker: With this we shall also discuss the draft Local Government Act 1988 (Competition) (Defined Activities) (Construction and Property Services) Order 1994.

Mr. Jones: The orders seek to extend the scope of compulsory competitive tendering to legal and construction and property services of local authorities and other bodies. They will also extend CCT to further manual services--supervision of on-street parking, vehicle fleet management and security work. They are the first of the new services to be exposed to competition, as promised in the November 1991 White Paper "Competing for Quality".

Compulsory competitive tendering has proved an excellent vehicle for testing the calibre of in-house staff. It has been with us now for 14 years. I am sure that many will acknowledge that it has led directly to better value public services. Independent research carried out for the Government has found that, so far, competition in the provision of local services has produced average cost savings of about 7 per cent. a year, with the biggest savings in those services that attracted the biggest competitive response. Those savings far outweigh initial tendering costs. However, that is only half the story because the same research shows that CCT has also led to better quality services flowing from organisational and managerial improvements within local government--not increased bureaucracy, but better management. It is all those benefits that we wish to bring to local authority professional services.

Local authorities of all political colours nowadays are adopting a refreshingly undogmatic approach to securing efficient services. Competition is no longer a dirty word. Few still believe that efficiency automatically equates with direct provision. Indeed, no less a person than Jack Dromey of the Transport and General Workers Union has accepted that there is no ideological reason why certain services should be done by the council. At some risk, I fear that I must agree with Mr. Dromey. There is nothing intrinsically wrong with in-house service provision; indeed, some of the best work is done by local authority direct service organisations. But retaining work in house should not be an ideological goal of local authorities. Our original proposals to extend the scope of CCT were published in November 1991, and our decisions on the way forward announced in November 1992. The services in question are at the core of the local authority and we have considered the implications carefully. The regime will be tough, but realistic and, where necessary, flexible. Local authorities will be free to organise the delivery of white-collar services in the manner most suited to their needs. We are not seeking to dictate an approach to service provision or to stifle innovation.

The regime for legal services, and construction and property services, has been developed in consultation with the local authority associations and a number of local authority staff with a wealth of practical experience in the

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disciplines involved. I would like to thank them all for their time and effort. While we have not seen eye to eye on every matter, discussions in the various working groups have been constructive and I have no doubt that our approach has benefited from the associations and their members' input.

We have also spoken to the professional bodies--the Law Society and the General Council of the Bar, the Institution of Civil Engineers, the Royal Institute of British Architects and the Royal Institution of Chartered Surveyors. Our proposals have also been subject to public consultation. Again, while we may not have agreed with everything said, that broader discussion and input has certainly been helpful and, I am sure, contributed to the regime being both realistic and workable.

The orders have been before the House for some time and hon. Members have had time to consider them. The regime that we are putting in place has been developed paying close heed to the concerns of professionals, both inside and outside local government. I believe that it will successfully balance the need for competition with authorities' legitimate service delivery aims and objectives. It will lead to fair and even-handed competition that will benefit local authorities and the taxpayer alike.

I commend the orders to the House.

6.17 pm

Mr. Tony Lloyd (Stretford): The Minister said that he would answer the questions asked during the debate. I trust that he will listen carefully to the technical issues that have been raised.

The Minister's bullish view of compulsory competitive tendering is not borne out by the facts. I am aware that the Government commissioned a survey from the Institute of Local Government Studies, which reported as he said. But he is aware that that was a study of a fairly small sample of local authorities. There is a general presumption that, had the Government simply left things alone, without introducing any aspect of compulsion, local authorities would have achieved the same results in house simply because of the pressures on them over those years.

The Minister spoke of the refreshingly undogmatic approach of those in local government. That approach is not mirrored by the Government. We know that when the Government introduce orders such as these to the House they do so as one of their periodic fixes. The Government are hyped up and addicted, and when they cannot get the privatisation of the Post Office on the agenda, they consider instead a little privatisation in the local authority sector.

We know that the measures have little to do with efficiency. The Government were warned by two different consultancies that the costs of legal services outside local government were liable to rise compared with the costs inside local government.

The case for our debating the orders has not been made. They are part of the Government's ideological fixation, but it is a pity that the Minister and his colleagues cannot take the "refreshingly undogmatic" approach that local authorities have taken and see local government for what

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it is--an important partner in the delivery of local services to our communities. I wish that the Minister would begin to see matters in that light.

It appears that the Minister wants us to quote expert for expert. He claims that the evidence supports the Government's view of CCT, but many people have said that, although the argument might apply to those services which have already been subject to CCT--very often those involving manual work, which can be repetitive and where the impact of CCT is easy to monitor--it will be considerably more difficult to impose CCT on professional services.

I cite Professor Gerry Stoker of the university of Strathclyde's department of government. He said that

"with CCT moving from blue collar to white collar services, it doesn't follow that the same level of savings will be achieved." It is incumbent on the Government to make it clear why they expect savings to be made in the professional services and not simply take us once more down an ideological blind alley.

Other voices have also been raised in concern about the impact of CCT. I quote briefly from a speech made recently to the Society of Information Technology Managers' annual conference in Edinburgh. One of the speakers said that CCT

"had reduced scope for local initiative".

That is an important criticism because it came from the Department of the Environment's deputy secretary, Mr. Christopher Brearley. When someone on the inside is voicing such concerns, one assumes that Ministers share them. I do not want to involve officials in an argument in this place, but I assume that Ministers are aware of those worries. Perhaps the Minister will do the House justice and put it on record why the Department of the Environment itself is beginning to have doubts about CCT and the reduction in scope for local initiative.

That speech was reported in an article in Municipal Journal under the headline "Inflexible CCT threat to local democracy, warns mandarin". Again, I should be interested to know whether the Minister goes that far. Does he see CCT as a threat to local democracy? Is that what he wants? I hope that he will make it clear that that is not his aim.

The article details an exchange at the conference. It was suggested to Mr. Brearley that, in view of the uncertainty suffered by the work force and because of the lack of flexibility caused by CCT, it would be more sensible to reduce regulation of CCT. Mr. Brearley replied: "You'll have to ask ministers . . . ministers are suspicious when we talk of the need for flexibility."

Tonight we have a benchful of Ministers of one kind or another; perhaps they--individually or collectively--would like to show flexibility and even respond one after another. [Interruption.] The Minister for Local Government says that the flexibility is to be able to leave; of course, he is quite at liberty to do so. It is interesting to hear that Ministers are suspicious of the need for flexibility. I hope that the Minister will prove that those suspicions are unfounded, even if only among those whom I might call his nearest and dearest, or those who were his nearest and dearest before they made speeches to professional conferences. I hope that the Minister will recognise that some aspects of the orders require greater flexibility than has been demonstrated so far.

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I now refer specifically to the services involved. It is a little surprising that there has been no attempt to justify this particular selection or ragbag of services coming before the House now. It would have been helpful had the Minister told us of the experience of the one or two remaining flagship Conservative local authorities of voluntarily market testing services. Westminster is such a council and Croydon was one in its previous incarnation, before it changed control in May and became Labour controlled. They had put some aspects of legal services into the private sector. I am told that such is the parlous state of legal services in at least part of the capital--because of the collapse of the housing market and the need for lawyers to earn what I might describe, at least in this place, as an honest crust--that private sector lawyers are interested in taking up the contracts. The Minister should have said at least a little about the trade-off between cost and quality.

I believe that the Department of the Environment is prepared to consider the need to ensure quality in respect of professional services. During the passage of the Local Government Act 1992, we debated quality and the dual envelope concept which was later dropped because it was recognised that it was not the most sensible way to deal with quality. We need a reassurance that quality in legal services will be on the agenda from the start.

It is partly because there are doubts about quality that a significant number of people have questioned whether the move towards CCT with regard to legal services and professional, construction and property services is consistent with efficiency. The Government commissioned Kieran Walsh, the professor of local government at the Institute of Local Government Studies, to carry out a survey. He has recently written about the need to maintain core services within local government and the importance of ensuring that local government has sufficient professional in-house competence to operate as a local authority, not simply as the managing structure for disparate businesses. I hope that the Minister will at least comment on that point because it is intimately connected with the arguments and technical debate about how many services should be subject to CCT. The Minister said that there had been meetings between the Department of the Environment and other bodies about legal services and CCT. He almost said that there had been some agreement, although I am sure that some bodies such as the Law Society and local authority associations might be surprised to hear that there had been a great meeting of minds. However, it is fair to put it on the record that local authority associations accept that a number of the matters that they raised were recognised and acted on. Having put that on the record, I must say that there are still some basic problems in this respect.

The Government employed two consultancies--PA Consultants in 1991 and Coopers and Lybrand more recently--which both reported that CCT would in all likelihood mean that the cost of legal services would rise for local authorities. The Law Society felt that there were two flaws in the proposals. The first was that there would be a "crowding out" in respect of legal services, whereby ordinary people could not gain access to lawyers because local authorities were employing them. Secondly, and perhaps more significant, it felt that CCT in this instance might compromise lawyers if the local community felt

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that they were heavily in alliance with the local authority and therefore unable to offer them unbiased advice in any action that they wanted to take against the authority.

The real doubts that local authorities still have relate first to the time scale and secondly to the 45 per cent. cut-off point for the work to be tendered out. No doubt the Minister will say to the House that the Government have already relaxed a little on the time scale. I accept that, but there are still concerns about the short time scale being imposed on local authorities.

The Government have moved the deadline for legal services to April 1996, but the local authorities are saying that it would be helpful and in everyone's interests if a further relaxation of that time scale could be considered. As the issues have not yet been decided, I hope that the Minister will at least agree to take them away and consider the possibility of a further six months' remission. Equally, the size of the competitive requirements worries local authorities and the local authority associations. The Minister will be aware that PA Consultants originally recommended that 33 per cent. of services be made available for the tendering process. The Government increased that to 45 per cent. One of PA Consultants' arguments in favour of a 33 per cent. level concerns the difficulty that local authorities will have in hitting a precise figure, which means that they will need to over-tender to be certain to fall within the guidelines.

It is being argued that a 45 per cent. requirement is harsh anyway. I shall say more about that in a moment. However, as well as being harsh it is even more unwieldy simply because of the fluctuations in the need for legal services over time.

The main argument against the 45 per cent. requirement is that it is onerous anyway and forces local authorities to put out to tender more services than is helpful. That will threaten local authorities' ability to run a core legal service, which is not simply a professional and technical service, there to be hired at will, but is part of the way in which a council relates to its corporate duties as a local authority. I hope that the Minister will consider that argument carefully. It has been put to him before, and I hope that he will comment on it tonight, if only to say that he will take the issue away and reconsider it.

The Minister will know that similar arguments about the time scale have been raised in connection with the next area--construction and property services. He has been asked whether such haste is necessary in implementing the tendering process. And again, perhaps the more important issue concerns the specification that 65 per cent. of work must be tendered out. There is concern about the "de minimis" threshold for the minimum percentage of work that local authorities must tender.

The local authorities have argued consistently that some areas of work should be excluded from the tendering block, because they are integral to authorities' democratic functioning or strategic policy making, or because they are essential for maintaining an expert client function able to liaise with consultants, or because they have to be retained in house on the grounds of public interest and probity.

I hope that the Minister will accept, as I believe the Government already have, that there is an argument that at least some of those areas of work should be excluded. The reason why I want to push the Minister to reconsider

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the 65 per cent. limit is explained partly by a survey conducted by the local authority associations, which found that in a significant minority of local authorities--38 per cent.--the client core functions represented significantly more than 35 per cent. of construction and property services.

I hope that the Minister accepts the case that there is a need for a core service. If he does, I hope, too, that he will recognise that if local authorities say that core services account for more than 35 per cent., he needs to reconsider the specification.

When the Minister said that considerable consultation on professional construction and property services had taken place with the Institution of Civil Engineers, the Royal Institution of Chartered Surveyors and the Royal Institute of British Architects, he seemed to suggest that there was a degree of agreement among those bodies with the way in which the Government were going. It is worth placing on record the fact that at no point did the professional bodies express any support for the tendering process. In fact, they all oppose it, and I hope that the Minister will acknowledge that. The next area consists of security services, vehicle fleet management and the supervision of parking. The Minister said that there had been considerable dialogue about that with various bodies. That may have been true for legal services and professional construction and property services, but there is a feeling that there was little dialogue about the other activities, and little opportunity for local authorities and others to make their views known.

For example, although the consultation document appeared before Christmas last year, the draft order laid in June this year contains considerable changes, and even now there are many areas in which local authorities are not sure of the position regarding the precise implementation of tendering.

A letter of reply was sent to the secretary of the Association of Metropolitan Authorities from the director of local government within the Department of the Environment, Mrs. McDonald. It said:

"As you will by now be aware, we have debates in both Houses on the draft Order timetabled this week"--

the letter was dated 31 October--

"Once the House has approved the Orders we will lay the timetable Regulations. Although this is slightly later in the day than we might have hoped, local authorities have been well aware of our intentions for some time, and details were confirmed in the Minister's announcement of 14 June when the Order was tabled. There is no reason why they could not have begun planning for CCT, and indeed I know a number are well advanced in their preparations".

That might seem fine at first sight, but the Minister must realise that there is still considerable uncertainty about how tendering in those three different areas will operate in practice. For example, the AMA wrote to the Department of the Environment on 16 August asking whether about 15 aspects of security services--I shall not read them all into the record--would be exempted from the tendering process on the ground that each consisted of works carried out under byelaws that gave local authorities specific powers, such as powers of arrest, which could not be passed on to private contractors.

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That letter was written on 16 August, but the AMA has not yet received a reply. The official Department line is that enough notice was given, and that would be reasonable had the Department given proper notice, such as a response to questions involving the technical detail that local authorities really need before beginning the tendering process. With no attempt to frustrate the impact of the orders, local authorities are entitled to say that they need time to implement them.

Specifically, the timetable for the three areas of security services, vehicle fleet management and supervision of parking means that the metropolitan authorities and the London boroughs will have to begin the CCT process by October 1995. The local authority associations and the local authorities feel that that is much too tight a timetable. They reckon that it takes at least a year for authorities to advertise the contracts, prepare the specifications and interview the contractors.

I believe that in the past the Department itself has accepted that a year is the minimum period--the Minister can contradict me if I am wrong. As a matter of simple record, it is now November 1994, and if the process is to start by October 1995 local authorities have less than a year.

As we saw with legal services and property services, the Government are being asked to allow some movement on the timetable. I hope that the Minister will seriously consider that request. Some adjustment is necessary if things are to be done properly and if the local authorities and local authority associations involved are to have the answers that they need from the Department in order to make real sense of the tendering process.

There are specific questions on security services, some of which, perhaps, the Minister cannot answer tonight. But, certainly, he has at least to allow for the fact that local authorities are asking legitimate questions. Greenwich council, for example, raised an issue about its parks police because they have been given powers of arrest under a byelaw. That power of arrest is not transferable to a private contractor. Greenwich sought to have answered, for itself and on behalf of other local authorities, how that would impact on exemption from the tendering process. I believe that it received a reply today. However, the Minister will understand that, since the order is going through Parliament tonight and went through another place two days ago, that reply is quite late in the day, even for Greenwich, and it will be quite some time before other local authorities know the situation or the answer given to Greenwich.

Birmingham council also wrote to the Department of the Environment seeking clarification of the role of its market inspectors, who have similar powers to the parks police, and asking whether they would be exempted. As I understand it, even as of today, it is still awaiting a reply. So I hope that the Minister accepts that, while some may have criticisms--and those criticisms have been made--of the CCT process in general, such technical questions about the timetable for consultation on legal and property services are important. The amount of those two services which will be put out to tender is also important and I hope that the Minister will consider them in particular.

Precisely because the local authority associations do not feel that they have had time for consultation in other areas, such as security services, vehicle fleet management and supervision of parking, and because the timetable is so tight, I hope that the Minister will agree to be

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flexible--that flexibility which he so commended for others--and will promise tonight to consider seriously the complaints made by the local authorities and see whether there can be some easement in the process. If nothing else, that will allow the tendering process to be done in a way that the Minister himself would want--one that makes sense for local communities and for local efficiency, not one which is simply there because it is necessary to push the orders through at speed.

6.41 pm

Mr. David Rendel (Newbury): As we all know, it is getting towards the end of the Session. I am not sure how many hon. Members were still in the House at 4 am, as I was.

Mr. Robert B. Jones indicated assent .

Mr. Rendel: Those who were--the Minister indicates that he was one of them--will no doubt be beginning to feel that we are getting towards the end of another long day, so I do not intend to detain the House for long.

One or two arguments concerning the orders need to be rehearsed. Most of the main arguments have been rehearsed before--in the House and elsewhere-- but, sadly, until now, whenever compulsory competitive tendering has been discussed they have not won the day. The Government have used their majority to push through CCT in the face of arguments that, I believe, should have triumphed.

There are, in fact, some good arguments in favour of competitive tendering by local authorities. It allows local authorities to compare the quality, standard and price of their services with those of outside contractors, and that is very welcome because comparison can throw up new ideas about how services can best be delivered. Indeed, such comparison could even throw up ideas for entirely new services.

Such comparison can also reveal--I imagine that to some extent this is what the Minister was referring to in opening--wasteful spending, which can then be eliminated. There is no question but that, when competitive tendering has been properly used, some wasteful spending has been eliminated.

In addition, outside contractors may have particular expertise over and above that normally available to an authority. The opportunity to choose between its own expertise and that of an outside contractor can only increase the likelihood of an authority improving the value for money that it obtains for the services it provides. The best local authorities, with my party's full support, have always been prepared to consider increasing the use not only of contractors but of their own employees for many of their services.

That is not the whole argument. The problem, which my colleagues and I have highlighted time and again and which we have always seen in the CCT policies of the Government, lies in the compulsory nature of those policies --it is the first "C" that needs to be removed--and especially in the regulations on how the tendering process is to be judged.

Those of us who have worked in local authorities know how difficult and unfair the method of accounting for transitional costs is. It works in a way that is often extremely unfair to local authority employees who are trying to put in a tender. Indeed, an outside contractor's

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bid can often appear to be cheaper, even when its real costs to an authority may prove to be more than the cost of providing and running those same services in house.

The only criterion that can, in practice, be used in deciding between tenders is the tender price. Again, those of us who have been involved, as I have, in many such negotiations know that it is well-nigh impossible to give the work to a contractor or, indeed, to an in-house group, on the grounds of quality or extent of services, even when the authority believes that that would provide better value for money.

Value for money surely should be the ultimate criterion, not simply the tender price. Those of us who have been involved in local authorities have, sadly, seen all too many examples of services costing more as a result of competitive tendering, or have seen either the level or quality of services suffer. In my authority of Newbury, almost without exception, when services have been awarded to a contractor the price has not been lowered as a result. If it has lowered, it has been only because the level of services has fallen. There are further problems with compulsory competitive tendering, such as the accountability of services to a local authority. Accountability is inevitably reduced when a service is contracted out. We should highlight that matter--especially tonight--when we are considering legal services. One of the most fundamental needs of any member of a local authority is the certainty of obtaining objective, fair and honest legal advice from the authority's legal officers. The loyalty that an employee feels if he is directly employed by the authority must surely be far greater than his loyalty if he is indirectly employed through a contractor. That loyalty in an area such as legal advice is extremely important. As a member of a local authority, I would never like to feel that all my legal advice would be provided through contracted-out services.

We must also consider local independence. One of the Government's hallmarks is the centralisation of services. The destruction of so much local independence has been one of the worst features of the past 15 years. If things were going wrong in a local authority--the Minister has said that some authorities have been able to make services more cost-effective and more efficient by tendering--the Government should have solved that problem not by centralising power in Whitehall and Westminster but by making local government more accountable. That is where the Government have fallen down so badly. The Government are very much a top-down Government; we would like to see government from the bottom up. This is a centralising Government who believe that only central Government know best. That is their approach, but local elections up and down the country have shown that, in practice, people think the opposite--that, on the whole, central Government know less than local government.

An example of that is the way in which the Conservative party now controls just one county council, whereas the Liberal Democrats currently control four--and that figure may well rise fairly shortly. We believe

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that local people should be allowed to choose their own way forward because they are the best judges of their own needs.

Mr. Matthew Banks (Southport): Will the hon. Gentleman give way?

Mr. Rendel: I am just about to finish.

That is an important principle for the Liberal Democrats and it should be an important principle for the Government.

Mr. Banks: Will the hon. Gentleman give way now?

Madam Deputy Speaker (Dame Janet Fookes): Order. It is clear that the hon. Member for Newbury (Mr. Rendel) is not giving way. I call Mr. Rendel.

Mr. Rendel: I have finished, Madam Deputy Speaker.

6.49 pm

Mr. Robert B. Jones: With the leave of the House, I wish to reply.

The hon. Members for Stretford (Mr. Lloyd) and for Newbury (Mr. Rendel) said that one of the "Cs" in CCT should be dropped. I do not agree that the same results would have been achieved without the compulsory element. Local councillors and local officers to whom I have spoken since I have been a Minister, and in my many years as a councillor and a Member of this House, have confirmed that the discipline of having to prepare specifications and judging and monitoring tender results produces huge benefits, quite apart from cost savings.

I do not believe that CCT is exclusively about savings, although of course we are delighted by the savings that have occurred and the benefits that they have brought to council tax payers. Compulsory competitive tendering involves managers and elected representatives in thinking from basics about the level of service that they want to deliver, how that can be achieved and how they are going to judge the results. That is not a threat to local democracy because local democracy must be about elected representatives taking decisions about standards for their areas.

The hon. Member for Newbury referred to the London borough of Richmond, which is controlled by the Liberal Democrats. When I talked to councillors and housing officers in Richmond about CCT for housing management, they said that they were involving tenants on a large scale in an attempt to decide the level of service that should be prescribed in the tender. That enhances local democracy, and such practices are being used not only in Richmond but in many authorities of various political persuasions.

Mr. Rendel: Why should CCT be compulsory? Should not such matters be left to authorities such as Richmond, which in any event probably would have opted for that route?

Mr. Jones: The London borough of Richmond has been controlled by the Liberal Democrats for several years and it was controlled by the Conservatives prior to that, but what I have described did not take place until CCT arrived on the scene. I believe that CCT has concentrated minds wonderfully, to the benefit of the

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ultimate client whom we should all be serving--in the case of housing management, the tenant and, with other services, different customers.

The hon. Member for Stretford referred to flexibility. We have tried to approach these matters flexibly. That is the underlying rationale for the percentage approach and for not trying to draw too rigidly the line between the client side and the contractor side. Different authorities will want to approach that in different ways. That is as true of the construction professions as it is for legal services.

I cannot accept the view of the hon. Member for Newbury that we cannot obtain independent advice from a lawyer unless he is directly employed by an authority. That is clearly not true of counsel's opinion, which local authorities seek all the time on specialist issues. It is also not true in respect of run-of-the-mill legal advice, although it is clearly handy to have advice on hand within a local authority and the orders make provision for that.

The hon. Member for Stretford referred to quality. Quality can be very subjective. What some people may refer to as quality others would not. With the professional bodies, we have tried to develop an approach to defining and judging quality. We have been working with the Royal Institute of British Architects on guidance for obtaining architectural services through CCT. We have also been working with the Construction Industry Council on guidelines for value assessment for CCT and with the Association of Consulting Engineers on value assessment and the selection of consulting engineers. That is a very good way of going about it.

It may be possible to extend those principles further because quality is important. I was very closely associated with total quality management and BS5750 and BS7750 until I became a Minister. I welcome the focus on quality.

Mr. Tony Lloyd: If quality matters in professional services, it also matters in blue-collar or manual services. Can quality criteria be built into those services?

Mr. Jones: I should like to think that there is already such a criterion because, for example, specifications lay down how often refuse collections should be carried out and the standards to which streets should be cleaned. It is more straightforward to lay down such conditions in the original specifications for blue-collar services than it is for professional services.

The hon. Member for Stretford raised a specific point about security and referred to a point about the London borough of Greenwich that affects other authorities as well. I recognise that competition may not always be appropriate for local authority security work. That is why we are considering a specific exclusion from CCT for certain byelaw enforcement work. We have already sought the local authority associations' views on that and expect to introduce detailed proposals shortly. I give an undertaking to look at those matters against the background of the timetable and I will contact the hon. Member for Stretford when I have formed a definitive view.

I find it difficult to understand how people can accuse the Government of being dogmatic in their approach to CCT. I served on a local authority virtually constantly from the age of 21 until I became a Member of this House. I cannot say that I came across a local authority that did everything by direct labour or everything by private

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