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Session 2005 - 06
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Standing Committee Debates

Draft Transport for London (Best Value) (Contracting Out of Investment and Highways Functions) Order 2005

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Fifth Standing Committee
on Delegated Legislation

The Committee consisted of the following Members:


Mr. David Wilshire

†Blizzard, Mr. Bob (Waveney) (Lab)
†Creagh, Mary (Wakefield) (Lab)
†Farrelly, Paul (Newcastle-under-Lyme) (Lab)
†Fitzpatrick, Jim (Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister)
†Gwynne, Andrew (Denton and Reddish) (Lab)
†Hunter, Mark (Cheadle) (LD)
†Lait, Mrs. Jacqui (Beckenham) (Con)
Maude, Mr. Francis (Horsham) (Con)
†Morden, Jessica (Newport, East) (Lab)
Ottaway, Richard (Croydon, South) (Con)
Prisk, Mr. Mark (Hertford and Stortford) (Con)
†Smith, Geraldine (Morecambe and Lunesdale) (Lab)
†Tami, Mark (Alyn and Deeside) (Lab)
Teather, Sarah (Brent, East) (LD)
Walter, Mr. Robert (North Dorset) (Con)
†Watts, Mr. Dave (Lord Commissioner of Her Majesty’s Treasury)
†Wright, David (Telford) (Lab)
Geoffrey Farrar, Committee Clerk
† attended the Committee

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Thursday 8 December 2005

[Mr. David Wilshire in the Chair]

Draft Transport for London (Best Value) (Contracting Out of Investment and Highways Functions) Order 2005

8.55 am

The Chairman: Before I call the Minister, I draw the Committee’s attention to the fact that the order is about as narrow as they come. I therefore hope that we can confine ourselves to the matters in front of us, rather than be tempted to make speeches about other issues.

The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Jim Fitzpatrick): I beg to move,

    That the Committee has considered the draft Transport for London (Best Value) (Contracting Out of Investment and Highways Functions) Order 2005.

It is a pleasure to see you presiding this morning, Mr. Wilshire. This may be the Fifth Standing Committee on Delegated Legislation, but it is my first such Committee, so your advice is welcome.

The draft order is to be made under section 70 of the Deregulation and Contracting Out Act 1994, as applied by section 18 of the Local Government Act 1999. It will confer on Transport for London powers to contract out its investment functions and highway functions in the same way as other local authorities can. Under section 1 of the Local Government Act 1999, Transport for London is a best value authority, defined as a local authority for finance purposes and as a local highway authority for road management purposes.

Best value authorities have a duty to make arrangements to secure continuous improvement in the way in which their functions are exercised, having regard to a combination of economy, efficiency and effectiveness. Guidance from the Office of the Deputy Prime Minister states that in meeting that duty, best value authorities should challenge why, how and by whom a service is provided.

Other best value authorities outside the Greater London authority group have already been granted powers to contract out investment functions and highway functions through three separate orders made under the Deregulation and Contracting Out Act 1994. The orders are: the Local Authorities (Contracting Out of Investment Functions) Order 1996, the Local Authorities (Contracting Out of Highway Functions) Order 1999, and the Local Authorities (Contracting Out of Highway Functions) (England) Order 2001.

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The draft order will allow TFL to contract out the functions that other local authorities may already contract out under those orders. The Greater London Authority Act 1999 made provision for the Deregulation and Contracting Out Act 1994 to apply to the GLA itself, but it did not make such provision for TFL or other GLA functional bodies. That means that TFL is the only local highway authority that is unable to contract out its highway functions, and unlike all other local authorities outside the GLA group, it is also unable to contract out its investment functions.

As TFL does not have the full range of legal powers that are available to other best value authorities, it can discharge its investment and highway functions only through in-house staff, and consequently it is restricted in its ability to pursue alternative means to discharge those functions. Local authorities have been granted powers to contract out investment functions so that they can call on the expertise of specialists with the necessary experience, systems and understanding of the market, which enables optimum return on investment. TFL’s inquiries among brokers indicate that, through outsourcing parts of its investment functions, it could achieve higher returns than at present, while keeping risks at a similar level to those for investment that is managed internally.

Similarly, TFL cannot contract out its highway functions in the same way as local and highway authorities. TFL is responsible for maintaining the 580 km Transport for London road network and traffic control equipment within the GLA boundary. Currently, it cannot contract out highway functions that it considers that contractors are able to manage better and at greater value for money. It is also unable to compare in-house operations with external arrangements in the way that is encouraged by best value guidance.

We have carried out extensive consultation on the proposals among a range of stakeholders. The exercise revealed no strong opposition to granting such powers to TFL, provided that TFL demands standards from contractors who carry out its highway functions that are similar to those it would expect from its own staff. Under the arrangements, TFL would retain responsibility for the discharge of its highway functions, and would thus remain accountable for the work carried out by contractors acting on its behalf. Other local highway authorities have used powers to contract out highway functions effectively for many years, including by making provisions in contracts to manage both quality and response time standards to ensure that they meet satisfactory levels.

I do not believe that there are legitimate reasons to treat TFL differently from other local authorities in those respects. The draft order will enable TFL better to pursue its obligations as a best value authority, and should also enable it to achieve greater value for money in arranging for the execution of its highway and investment functions. I commend the draft order to the Committee.

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9 am

Mrs. Jacqui Lait (Beckenham) (Con): May I, too, welcome you to the Chair, Mr. Wilshire? I do not expect to detain you for too long, because as the Committee may well imagine, given that the original concept of contracting out was created by the Conservative Government in 1994, we support the idea that TFL should be able to contract out on the same basis as all other public and local authorities. This debate does, however, give me the opportunity to raise under the narrow terms of the order some of the concerns that TFL has created across the community.

The Minister referred to some of the reservations that people have about the way in which TFL already contracts out. I shall refer almost exclusively to a classic example in my constituency, where TFL contracted out the repair of a section of highway on the A232. It performed its statutory duty of sticking notices on lamp posts, but when it closed the road entirely for an eight-week replacement project, cutting residents off from their homes or from getting to local shops without about 48 hours’ notice, there was, needless to say, a huge outcry. Some businesses lost money—one shop lost £10,000 to £15,000 in takings. A dry cleaners, newly opened, saw its weekly takings drop from £936 to £418. Restaurants lost about 40 to 60 per cent.; indeed, one suffered a 93.5 per cent. decline in income.

At the instigation of Councillor Anne Manning, who has done a superb job on behalf of the community in Coney Hall, Bromley council passed a resolution condemning TFL’s behaviour. In fact, at a meeting that I held in Coney Hall, TFL agreed that it had handled the contract appallingly. The concern—it falls directly within the order—is that TFL told me that it would look closely at contracting out, perhaps with a view to taking over some functions itself. Because of the appalling way in which it managed the contractors in that case, it is going to revert to the bad old habits of bringing everything in house rather than managing contractors better. The explanatory memorandum refers to the need for TFL to manage its contracts to ensure best value. That, as the Minister will acknowledge, goes much wider than just considerations of money. The experience of my constituents in Coney Hall reflects stories that one hears throughout London on TFL’s inability to manage its contractors properly.

I readily concede that TFL acknowledges that it made a complete mess of the contract in question, and that it is looking at its systems of public consultation. I wrote to TFL on behalf of various people who raised the issue with me, including Mrs. Gladys Edmonds, the secretary of the local residents’ association. The letter that I received said, in essence, “If you don’t like it, write to the local government ombudsman.” TFL has acknowledged that that may not be the best way to deal not only with MPs, but with residents, who got precisely the same letter written in the same tone. It is not the best way to deal with people whose co-operation TFL needs when it disrupts their way of life as seriously as it did in Coney Hall. TFL has learned from the messages.

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Bob Neill, Conservative leader on the London assembly, who also happens to be the directly elected assembly member for Bexley and Bromley, has written to TFL asking to see the legal advice that says it is not statutorily obliged to provide compensation to the traders, some of whom have had to take out bank loans in order to succeed. We are waiting for that legal advice in order to see whether it can be challenged on behalf of residents and traders.

TFL should not only be grateful that the Government are allowing it wider powers to contract out under the order, but manage those contracts acceptably. I hope that it has learned the lessons from what it visited upon my local community. Before I sit down—I have been dying to get all that off my chest on behalf of the residents for a considerable time—I hope that the Minister will reassure me that TFL and its governing body, which does not consist of elected representatives, become more responsive to the community.

I shall talk briefly about the investment functions of TFL and the consequences of the comprehensive performance assessment. I am hearing things within local government that suggest that it is an expensive and lengthy exercise whose outcome is perhaps not worth the investment of time. Time is money, and perhaps the outcomes of the assessment are not worth the investment of people’s time. Seriously busy council leaders are taking as long as 15 days to assess other councils. One must ask whether it is an effective use of time to spend so long on an assessment. Talking of investment, it is a rare council leader who has sufficient technical knowledge to assess the performance of an investment regime. Is that the most effective way to deliver a clear view of the performance of any public body?

With those warning points and the acknowledgement that we shall be watching TFL’s performance closely, I am happy not to oppose the order. The Minister will be pleased to know that we shall not detain him for long, but we are concerned about TFL’s performance. It must pull up its socks. We hope to see a different approach with a new commissioner.

9.8 am

Jim Fitzpatrick: I assure the hon. Lady that the Government are sensitive to the burden of inspections on public bodies and local authorities. In 2003–04, the overall volume of inspections of councils fell by one third from the previous year, saving money and lessening the burden on local government. Her point about the comprehensive performance assessment and TFL investment functions is noted. I also thank her for her thoughts on TFL’s performance. From her description, it is clear she knows that TFL is ultimately accountable to the Mayor. I am sure that she and her constituent Mrs. Edmonds, with the able assistance of assembly member Bob Neill—with whom I am familiar from our days in London fire brigades—will make a powerful team to put pressure on the Mayor and TFL to ensure that it performs to the highest possible standards.

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We are trying to ensure that TFL has greater freedom and flexibility. The Audit Commission has found that TFL is bound by outdated and limited contracting arrangements. The order will increase TFL’s options and help it to develop more flexible standards. I am confident that the hon. Lady’s requested improvement in TFL’s performance will be assisted by the greater freedoms and flexibilities that it will have as a result of the order, which will increase its ability to perform its duties as a best value authority—an authority that, as the hon. Lady ably described it, secures not only optimum value for money, but the best possible service for taxpayers, thus delivering a more efficient service for Londoners.

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Having considered those issues, and having taken on board the points in respect of the consultative exercise that we have undertaken, I commend the draft order to the Committee.

The Chairman: There you are, Mr. Fitzpatrick, your first outing was not as painful as you feared.

Question put and agreed to.


    That the Committee has considered the draft Transport for London (Best Value) (Contracting Out of Investment and Highways Functions) Order 2005.

Committee rose at eleven minutes past Nine o’clock.


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Prepared 9 December 2005