Draft Local Government Best Value (Exclusion of Non-Commerical Considerations) Order 2001

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4.45 pm

Mr. Nigel Waterson (Eastbourne): I join the Minister in welcoming you to the Committee, Mr. Maxton, which I hope will not be too protracted. The subject is complex and we would not want to let the Minister off too lightly. She has kindly answered some of my questions already, which is helpful because it will save time.

As a Committee, we must be careful that we are not trying to make best value fuzzy around the edges. There are enough problems with best value ``rolling out''—that is the vogue expression. We must be careful that the changes that we make have a hard edge and are limited in scope. That is partly the thrust of my questions to the Minister. We are talking about only two of the subsections of section 17 of the Local Government Act 1988—a fact that the Opposition welcome. I have had only a brief look at the guidance but it seems to make it clear that even within that context we are looking only at matters that are directly related to that contract or activity. It would be wholly unacceptable if local councils used the issue as a sort of launch pad or Trojan horse—I am in the mood for analogies—to start interfering in the commercial activities of people with whom they may be doing business. That is an important point.

I will not make an issue of the fact that I did not get my copy of the guidance, although it is alarming that my hon. Friend the Member for Cotswold did not get his either—and even more alarming that the hon. Member for Bath (Mr. Foster) received his. I hope that that is not another example of the ``Lib-Labery'' that we have been debating in another Committee and which it would no doubt be out of order to discuss further here. I am sure that the hon. Gentleman has read it carefully. He clearly has read it, or at least the last paragraph because he is puzzled, as I am, about why it just tails off. Perhaps the writer just got thoroughly fed up and decided to watch television instead. It would be nice to know what the rest of that sentence or paragraph—or even page or pages—was going to say. I thoroughly endorse paragraph 5 on page 6 which states that the instrument

    does not relax the restriction on those matters that can be said to be truly ``non-commercial.''

It must be common ground in the Committee that, whatever the rights and wrongs of best value as a concept, strictly non-commercial matters must not come into it, any more than they did under compulsory competitive tendering. Local authorities must be out there trying to get the best possible deal for local residents, in a hard-headed commercial way.

That leads me to the section starting at page 18 which deals with invitations to tender. I am interested that there is a detailed section on that subject. I will no doubt read it when the Committee has adjourned. I wonder if the Minister is concerned about the evidence—anecdotal or possibly stronger—for a serious fall in the number of local authority contracts being put out to public tender since best value was rolled out. Does she think that that is pure coincidence, or is it a matter of genuine concern in the sense that local councils are putting out fewer tenders for public offer of their own services?

I have had meetings with contracting companies and others who have spotted a growing trend for local authorities to take services back in house. There are two possible explanations, and the Minister may wish to comment. In the intervening period, the in-house departments of local councils throughout the country may have become more efficient and cost-effective. That is theoretically possible, but it is more likely that best value is being used as a means whereby that process is gathering pace. That is important, because we are considering fiddling with the relevance of non-commercial considerations.

We have carried out a consultation exercise with local authorities in recent months and there is little doubt that best value is proving costly and bureaucratic. It soaks up local government resources that could be better spent on services for local residents, as our recent survey shows. Since best value was introduced, there has been a sharp fall in the number of public tenders for local government contracts. I tabled a question for the Minister on that subject and I think that the answer was that the information was not collected centrally. I am sure that that is the case if the Minister said so, but that fall is a worry and I would be interested to hear her thoughts. The reason is that a number of councils are using best value as a smokescreen behind which to bring services back in house.

As the Minister well knows, Conservative Members are not against the basic concept of best value. Indeed, we argue that it would not have been able to get off the runway without CCT and all the major changes in philosophy and culture that it brought to local government. However, Labour's scheme is fundamentally flawed. Under it, councils are not required to put their services out to tender and performance indicators are the main yardstick for determining best value. However, the system is so complex that many Labour and Liberal Democrat councils are returning to the bad old days of unchallenged, uncompetitive, in-house awards, which means that residents will not receive the best services. We need to consider the provisions before us in that context.

I did receive, as I think that we all did, a brief from the Confederation of British Industry, which has been closely involved in the drafting of the provisions. It says quite baldly that local authorities

    should take into account the workforce issues that affect the cost and quality of service delivery.

I endorse what the CBI says next:

    It is equally important to be clear that local authorities should not be taking into account those factors that are irrelevant to the cost and quality of service delivery, because that would result in poor value for money—

I think that the word ``in'' is missing—

    procurement decisions. We welcome the recognition of this point within the Government's approach.

I echo that welcome. The CBI also says:

    The regulations and guidance have been prepared with strong input from the CBI working together with local government and the trade unions.

It talks about a ``win-win'' situation. The CBI has pretty well signed up to the order, in part because of the factors that I mentioned, such as the clear basis on which the slackening of the rules is proposed.

Where are we on best value? In the context of the regulations, it is proper to pause for a moment and consider that. Kent county council, for example, has described best value as,

    a substantial additional bureaucratic burden.

It reckons that it will cost £100,000 a year in additional direct costs. Cheshire says that the best value operation has cost £670,000 in the past financial year and

    resulted in a further quarter of a million pounds worth of staff time spent away from their core tasks...Implementation locally of national government policy is costing us dear.

At a recent meeting of Ribble Valley district council, the full council, with cross-party support, passed a motion deploring

    the disproportionate and excessive costs that the Best Value exercise is placing on small, efficiently-run district councils.

A council that already gives good service—that is efficient, cost-effective and in tune with its residents—may be the sort of council that suffers most by having to deal with the 179 or however many performance indicators with which it is saddled. Of course, all that is to no real purpose, as such councils already give the quality of service at the level of cost that one would expect.

The leader of Wycombe district council says that

    because of the bureaucracy, it will be impossible to achieve year on year 2 per cent efficiency savings.

He estimated that the cost, for what I imagine is a small district council, would be more than £90,000 in a full year. The head of performance management at Sandwell metropolitan borough council reckons that he pays about £350,000 a year for the audit and inspection of best value. It is no wonder that the Local Government Association has recently called for extra national funding of about £175 million to cover the additional costs. When we consider such changes in the regulations, it is important to consider the fact that they are, in a sense, irrelevant to the large burdens that councils suddenly find that they have to bear.

It might be unfair not to touch—I promise to do so briefly—on an interesting document produced jointly by the CBI and the New Local Government Network in evidence to the review of local government commissioning and procurement that was sponsored by the Department of Trade and Industry and the Local Government Association. It is a weighty document but, when one turns with relief to the executive summary, one can read that

    the experience of the first year of Best Value reviews has demonstrated that many local authorities have not developed a clear approach as to how the service reviewed will be improved.

That is a worry. Later, the summary states:

    Moreover to date the implementation of Best Value and e-government have been under-resourced and the latter looks unlikely to happen by 2005 if present processes continue. There is a need for a major change in the scale and nature of central support, learning processes and collective actions.

Much of that is borne out even more by reports of the Audit Commission's conclusions on the early stages of best value. A headline on the front page of the Local Government Chronicle of 12 January 2001 reads, ``Best value hit by stagnant performance'', with the sub-heading, ``Latest figures hint at a mountain to climb''. We must ask ourselves whether it would be easier or more difficult to climb that mountain with the changes in the regulations. I shall quote briefly from the article, which states:

    The Audit Commission has warned that performance indicators suggest some councils will ``face a considerable challenge'' to reach the required best value standard within four years.

The commission is reported as stating that some councils are making only

    ``small improvements'' in around half the areas covered by the...pre-best value performance indicators. But in other areas covered by the indicators they stood still or even deteriorated...The commission singled out housing as a service where performance slipped. For example, less rent due was collected than in the previous year. The time taken to relet empty houses had ``deteriorated on average''.

    The commission said the gap between better and poorer-performing councils had narrowed but ``significant variations remain''.

According to the article, the serious and worrying conclusion from Sir Andrew Foster, the head of the Audit Commission, was that

    The standard of service received by the public still varies according to where people live, and some councils have to make significant improvements.

The Minister is quoted in the article, but I shall not read out what she said, as she can give us her own views. I am sure that she finds the conclusions as worrying as we do. As always seems to be the case with Audit Commission figures, Tory-controlled councils have consistently outperformed their Labour and Liberal Democrat counterparts in just about every department of local services.

The results of the survey on the effects of best value, obtained in November by the Association for Public Service Excellence, popped through my letter box a few days ago. I am sure that the association would not mind my putting the survey in context. It is clear that, not unreasonably, it sent questionnaires only to its member authorities. There are 240 of those, and 148 responses were received. There are nearly 400 local authorities in the country.

Many conclusions are drawn, which I shall not begin to try to summarise. I hope that the association will not mind if I pick out some of the comments. Negative views included the criticism that best value was

    bureaucratic, costly and time-consuming,

which is exactly the criticism that we have always made about the form in which best value has emerged. No one could be against best value as a concept—it is like motherhood and apple pie. It is a wonderful concept and a successful piece of new Labour branding. What matters, however, is the practical effect: whether the initiative costs a lot and uses officer time that could be better spent, and whether it really improves services to people. To give the most charitable interpretation, on both those questions the jury is still firmly out in many parts of the country.

To give a balanced view, the summary of survey results gives the two main benefits of best value as

    better focus on customer needs and expectations; and improved service delivery.

Who could disagree with that? Worryingly, 11 per cent. of the authorities that responded considered that they were unprepared for the new system. The Minister might want to focus on that point, if not today then in future.

It is interesting to see that old Labour is still alive and well in parts of local government. The survey report states:

    Best Value is seen by some as a move towards privatisation and the outsourcing of services.

If it is true that, as I mentioned a moment ago, the current trend is for fewer and fewer local authority contracts to be put out to public tender, those authorities need have little fear. Any move towards privatising services seems to have been thrown firmly into reverse.

We endorse the view of the CBI about carefully placed limits on the relaxations in the regulations with respect to non-commercial matters. However, that is just tinkering with the best value system, which is turning into a juggernaut, out of control and soaking up resources that are often in short supply in local government. It does not necessarily result in better services for residents, but it provides Ministers with great opportunities to speak at seminars and creates an industry of auditors, box tickers and people clutching lists. It does not necessarily do anything for the people who pay the council tax.

I shall put the Minister out of her misery. Subject, of course, to her answers to my questions, I do not intend to invite the Committee to divide on the order.

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