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Ms Margaret Moran (Luton, South): Does the hon. Gentleman consider that the previous Government achieved best value, given that an Equal Opportunities Commission report found that compulsory competitive tendering cost more than £250 million--twice the savings that it purported to achieve? I do not think that that is best value. Is the hon. Gentleman's concept of best value the same as the one that we are discussing?
Sir Paul Beresford: The hon. Lady should look at the most recent independent report on a large number of local authorities, which describes their opinion of CCT. Instead of going through the long report, I shall quote the summary, which concludes that most authorities
- "have achieved significant cost savings in addition to those previously obtained. At the same time, most Authorities believe that the quality of service provision has improved."
The Government have done a few correct things in the Bill. They have built on the previous Government's ideas concerning the Audit Commission and the district auditor, the three Es--economy, efficiency and effectiveness--and the citizens charter approach, to which blatant reference is made.
I am concerned that such good things will be destroyed by the apathy of which the hon. Member for Denton and Reddish (Mr. Bennett) spoke, as a result of the Labour party's idea of consultation, which I understand and, to a degree, support. Although consultation is laudable, it is set up in such a way in the Bill that it could end up providing a cover. People may be persuaded of the quality of services, which could and should be better, by the reviews, discussion and documents poured on them.
There is talk of competition yet, under the Bill, authorities will be able completely to cut out competition with the private sector--either directly or indirectly. Without doubt, that will lead to a diminution in service quality and an increase in costs. It saddens me that, as a result, inner cities will be hurt most.
The hon. Member for Denton and Reddish talked about apathy in voting. I suspect that we are doomed to find the same in the consultation exercises as they are set out in
the Bill. Let us consider the example of a London council. As a best value authority, it will be required to consult residents, service users, tenants groups, residents groups, businesses, neighbouring councils and probably the Government office for London, diocesan boards, health authorities, public utility companies, the Department of Social Security, some professional groups, and so on. The list could--and if there is a cover-up, will--go further. The beleaguered residents of that London borough will be consulted by the borough, the police, the fire and civil defence authority, the development agency, the waste authority, Transport for London, the mayor of London and the Greater London Authority. All that is just on the duties.
Next, each local authority will have to prepare a best value performance plan for each financial year. Each plan will be published before the following financial year, and, hence, will be based on the data of the previous financial year. Thus, it will be 18 months to two years out of date. For the plans to be useful, they must be voluminous and impenetrable--utterly beyond the ordinary resident. That will be a turn-off. The Denton and Reddish apathy will strike. There will be genuine interest in some aspectsof services among businesses and directly linked organisations--perhaps among others, too. However, the process will create such apathy that the ordinary resident will be most unlikely to respond. The odd resident will respond to everything, but, from my experience, with some exceptions, emphasis should be on the word "odd".
Ministers assure us that the district auditor will be closely involved. I hope that they will ensure that we are not contemplating a new bureaucratic superstructure, which will be set up by the auditor and chargeable to the council tax payer. It must not be allowed to become a gravy train. If the Minister wants any advice, he should suck in his pride and speak to Westminster council.
As has been said, compulsory competitive tendering is to go. The White Paper tells us that it will still be available as an option, but because the element of compulsion will be lost and the rules will be changed, local authorities will be able to fiddle the tendering while making a show of putting out for private competition.
The loss of quality and value for money will be covered by reviews and excuses. That is the reason for clause 17. It is a sop to the left. The removal of non-commercial considerations from competition for best value for money will mean that some local authorities will try to beat the system. They will turn competitive tendering into a farce and will stack the odds against the private sector so that there will be no real competition.
I seek a categorical assurance from the Minister that it will not be possible to use clauses 14 and 15 to allow a local authority partly or wholly to own a company that is set up for municipal trading. As the Bill is currently drafted--and because we have been provided with so little detail--that seems possible. It would be deplorable if public companies--by which I mean publicly owned companies, in the form of local authority companies--could compete against the same private companies that pay the council's business rates and whose workers pay the authority's council tax.
I suspect that the Government hope that many Back Benchers will focus on the sweet first half of the Bill and not notice the second half. It has been fairly evident this
evening that at least some of them have noticed the difference. The Secretary of State told us that crude across-the-board capping had gone. He had the wit to say that he had replaced it with another form of capping--a subjective form. The present proposals go further, introducing a subjective form in the Bill itself and crude universal capping in the schedules to it.
To add to the woes of local government, as we have heard, the Secretary of State will for the first time be able to set a cap at a level below authorities' standard spending assessment. I hope that some Government Back Benchers have thought about that. I shall watch with interest the reaction to the Bill of hon. Members representing constituencies in Labour-controlled Brent, because as matters stand, that local authority will make itself heard loudly.
Dr. Alan Whitehead (Southampton, Test):
It must be wonderful to be a born-again shadow Local Government Minister. One can repudiate everything that the previous Government did as a result of the application of a particular ideology, while at the same time defending that ideology and skipping easily over the evident contradiction between the two positions.
I shall deal with the solution to that contradiction--the release from the ideological impasse in which the previous Government placed local government--by looking at best value as a way forward. Best value is defined in clause 3 as securing continuous improvement in the exercise of all functions undertaken by an authority, whether statutory or not,
The Bill makes it clear that improvement must be judged by a variety of factors. To what extent does the community accept that there will be improvement? Is there improvement in allocative efficiency--that is, the best overall outcome of service delivery--or is it simply a cheaper service for a cheaper specification, as we previously experienced?
It is interesting that the Opposition make a great point of the fact that best value is not obsessively defined in the Bill, as CCT was under the previous regime. That is the point. The idea of a partnership with local government, and of the community being able to judge the outcome
and suggest how a particular service trajectory may go means that everything should not be obsessively laid down, because flexibility is needed at local level.
The Bill presents a challenge for local authorities. In some ways the process of conforming to the requirements of CCT was straightforward, if painful, for local government. All that local authorities had to do was to carry out the letter of the legislation. They might want their in-house team to win and they might do their best to make that happen, but the opening of the brown envelope was a neat cut-off point to all those concerns. Failure to win was the fault of the brown envelope. The authorities' job thereafter was to adapt to reality after the envelope. Their creative urges could be channelled into methods of subverting the process, but little else.
Best value, however, challenges local authorities to forge a relationship with their service providers over a long period. The service providers may be the in-house team, an external provider or a voluntary sector organisation that does not operate for profit. The duty that best value places on a local authority is to work on service provision together.
The work of preparing and allocating contracts has a direct bearing on what happens afterwards and over a long period, because there is no brown envelope cut-off point. The local authority must be responsible for the consequences of its own decision making prior to allocating the contracts. That gives local authorities the opportunity to think carefully about the best combination of provision for the local community. The Bill states--in clause 6, I think--that communities should be involved in deciding and evaluating, making that process an important part of the overall success of best value.
That is a great step forward from the narrow focus of CCT, which was almost exclusively targeted on the idea that the market rules, that there was no such thing as a public service ethos, and that the only benefit that communities wanted was to pay less for fewer services. The claim for CCT was that the market would inevitably deliver a better service at a cheaper cost, if only it were allowed to.
At the beginning of my contribution I referred to the deep ideological nature of CCT. It was an ideological instrument derived directly from that snake-oil doctor of the far right, F. A. von Hayek, who took the extreme view that the pricing mechanism would solve every problem in the market, if only it could be left to its own devices. The claim for CCT was along the lines that von Hayek suggested: provided every impediment to the operation of the market could be removed, service improvements would automatically follow. In reality, that has not happened. Overall, there is little evidence that CCT has worked in the way in which its framers originally claimed that it would. It is interesting that the hon. Member for North Essex (Mr. Jenkin) should claim overall headline savings of 6 per cent. on CCT costs. I imagine that he took that figure from the executive summary of the Walsh and Davis study of 1993. But if one reads the report as a whole, the reality, even in that report, is rather different.
There is evidence that savings, where they have occurred--Walsh and Davis make this clear--have largely been through savings in specifications, driving down conditions of service, or in labour casualisation, all of which have an effect on the quality of service offered. It is no accident that the previous Government
systematically resisted the application of the Transfer of Undertakings (Protection of Employment) Regulations 1981 to CCT contracts. An acceptance of their terms would have largely removed that hidden saving mechanism for external contractors. The evidence from many contractors is that they specifically bid for contracts because they knew that they could cut corners and costs over and above the contract terms in order to make a profit from a competitive bid.
There is some evidence of the discipline of CCT developing more service-oriented approaches by direct labour organisations, but, with hindsight, it is not clear that other developments in local government could not have achieved that outcome.
Set against that is the real evidence of the cost of preparing and policing tenders--the so-called transactional costs. Again, Walsh and Davis estimated those to be some 7 per cent. of each contract each year, but there is also evidence that savings vanish once a service is re-tendered after four years. Studies more recent than that by Walsh and Davis suggest that at the second round of tenders, especially if the local authority in-house team has been knocked out in the first round, savings start to disappear as costs rise and as cartels start to organise the service among themselves.
Evidence of the cost of monitoring the service suggests that the client side, where a strict comparison can be made, has a 30 per cent. or similar increase in its cost compared with the cost of servicing contracts prior to CCT.
Also present, but less easy to evaluate, is evidence of the breach in the perception of the local council--perhaps the most important although the least tangible point--as providing a responsive service to the community; the loss of the ability to amend and adjust to suit local needs. If a contract did not specify a service at the time of allocation, that was it. Local authorities simply told one to come back when the service was re-tendered.
There is the story of the ducks--sometimes described as the Barnet ducks, although I may be doing that authority a disservice--which allegedly died during the winter because whereas the park keeper had once fed them informally, the new contractor had not received a specification requiring him to do so. That may be a little apocryphal, but it illustrates the widespread problems that contracted services posed to the good relationship that should exist between a council and the community that it serves.
That will change with best value. Local authorities must be efficient, but they must also be able to talk about efficiency in the common-sense way in which most people refer to it--what is the best overall outcome taking into account the combination of factors that affect it. Of course, best value needs to be monitored and measured. The public have a right to expect the best from their local authorities, and they need tools to find out whether that is the case. I do not accept that the public will not be able to take part in decisions on local plans or to judge a local authority's service provision on the basis of what it said it would do. In principle, that is a fairly easy concept for local people to grasp, and I am sure that they will.
"having regard to a combination of economy, efficiency and effectiveness."
It should be noted that the definition calls for continuous improvement in all functions. Account must be taken of the three Es--economy, efficiency and effectiveness--but it is essentially improvement in the round. My personal view is that we might add a fourth E--equity--to make it crystal clear that our intention is to secure improvement in the round.
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