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Baroness Seccombe: My Lords, I thank the Minister for explaining the purposes of the order. When the order was dealt with in another place, my honourable friend Nigel Waterson endorsed the CBI's view, saying:

We on these Benches retain strong criticism of the whole best value regime and are pledged to reform it or, if necessary, to abolish it.

The Government have replaced compulsory competitive tendering with best value. CCT obliged councils to put the provision of many services out to tender to ensure that council services were delivered to local residents in a cost-efficient and high-quality manner. Such competition reduced instances of corruption, over-staffing and restrictive practices in local government. A 1993 Inlogov study showed that CCT had led to average savings of 7 per cent, often accompanied by improvements in service standards. CCT fundamentally changed the culture of local government provision of services for the better.

I well remember that, before CCT was introduced, every Wednesday the four officers involved in our local refuse collection used to sit in their vehicle outside our house from just after one o'clock until just before three o'clock. When I asked them why, they said, "Well, we can't go back to the depot till three". The fact that they had finished at one o'clock did not seem to count for anything. Therefore, thank goodness, now we appear to have a much cleaner, quicker and more efficient collection.

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We are not against the basic concepts behind best value, but the scheme introduced by the Government under the name of "best value" is flawed. It has led to an excessively bureaucratic, centralising inspectorate regime. 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. Best value is also costly. The LGA has called for an extra £175 million a year in funding for local government because of best value's bureaucratic burdens alone.

Best value seeks to encourage local authorities to make cost savings, yet it has a target of only 2 per cent efficiencies per year compared to the average 7 per cent that CCT delivered. The publication, Local Government Tenders, commissioned a survey of local authority contracts and tenders. It showed that there had been an astonishing 66 per cent drop in tenders advertised since Labour came to power.

The next Conservative government will seek to devolve more responsibility and autonomy to local councils away from regional quanqos and Whitehall bureaucrats. Via the ballot box, local electors should reward or punish councils that are succeeding or failing. Councils which are competent and responsible should be subject to a reduced inspectorate and audit regime. Well performing councils should not face extra regulations simply because some councils are inefficient. Systems should be put in place to promote improvements within unresponsive, inept councils, rather than relying on a box-ticking culture to achieve change.

Some form of inspectorate regime is necessary in order to ensure that councils' performance is transparent to the public. Any inspectorate regime should ensure the delivery of efficient, responsive and cost-effective local services. It should not excessively hinder competent, responsible councils and should not be expensive to administer.

I want to ask the Minister two questions. Have the Government made any attempt to estimate the potential costs and savings that will result from this order? Specifically, are the extra administrative costs that will result for local authorities believed to be more or less than the value-for-money savings that could accrue? Secondly, will the Minister confirm that, as a result of this order, a local authority will be able to consider a contractor's employment practices only in relation to a specific contract and will not be able to blacklist a contractor from all future council contracts?

Baroness Hamwee: My Lords, from these Benches we welcome the order. The noble Baroness reminded us of the days of compulsory competitive tendering. Although I wish to speak to this order rather than generally to the issue of best value and CCT, I cannot help reminding your Lordships and myself that it was the compulsory element in the CCT regime which so many of us found both difficult and offensive.

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Of course, I agree with the noble Baroness that the best-value provision should not be allowed to founder in a mire of bureaucracy and complexity. However, I fail to follow her reasoning that best value is leading us straight back to the days of "in-house provision", as I believe she expressed it. Even if it does so in some cases, I venture to say that sometimes direct labour could be the better method of delivering a service.

However, I return to this order. Another place spent one-and-a-half hours not being, in the words of the Conservative spokesman, "too protracted" in considering it. They referred at some length to the draft circular, albeit incomplete, as I understood from reading Hansard. I have now seen that circular; at least, I believe that it is the same document. I hope that it is, but the numbering and the page references do not quite seem to tie up. The Minister nods; it is the same document.

The inclusion of the subject of this order for the purposes of best value is to be, to quote from paragraph 3(a),

    "to the extent that a ... authority considers it necessary or expedient".

I assume that that is subject to the usual Wednesbury reasonableness rules. I hope that it can be interpreted with an appropriate degree of flexibility.

Best value appears to me to be focused rather narrowly on the particular service to be provided. However, we should also consider the context of the new, broad well-being powers, recently introduced by local government legislation. I believe that issues such as equal opportunities and the use of the local workforce are fundamental to the well-being, including the economic well-being, of areas. "Areas" is the word used, but I believe that "local communities" better expresses the matter.

Equal opportunities and insistence on equal opportunities should have both an immediate and longer-term effect. The use of a local workforce is perhaps a matter for the medium or longer term, but it is important to local economic activity and to regeneration. I should like to think that local authorities can be encouraged to support the development of their local skills bases.

I am aware also that the bureaucracy, as one might interpret it, and certainly the propriety of the tendering regime now required, just as under the previous rules, can so often rule out small, local companies. It would be entirely reasonable for a local authority to consider it expedient--I use the terms of the order--and, indeed, necessary to look at whom they contract on the wider basis to which I have referred.

The issue of equal opportunities is dealt with in the circular. Perhaps I may refer to a number of the paragraphs therein. In paragraph 42, we are told that it will be for best value authorities to decide in the light of their own legal advice how far to bring equal opportunities into the contracting process. Of course, I understand that each situation needs to be considered on its own merits. But I am not sure that that is the most helpful introduction to the issue.

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We are told that at the pre-qualification stage for tendering, contractors should be excluded if they have been convicted of a criminal offence or have committed an act of grave misconduct. That is in the context of the legislation on sex, race and disability. That seems to me to be a sadly low threshold.

We are reminded of the general duty on specified public authorities to promote race equality. We are told also that services which involve regular contact between providers and users of the service or the wider community may require of the providers specific attributes with regard to fair treatment and equal opportunities. As I have indicated, the issue is wider than that. Paragraph 47 goes on to say that authorities should address such considerations in a way that does not prejudice fair competition or best value considerations. As I have indicated, I look at that from the other direction. I do not disagree with what is said there but I argue that best value considerations require consideration of equality issues.

In paragraph 50, the last paragraph in this section, we are reminded that best value authorities should consider also how they can promote good practice and equal opportunities. There is the word "promote" at last but that is promotion outside the contractual issue.

In summary, I would say that the circular is far less robust than we had hoped to see.

The noble Baroness referred to the CBI's comments. I agree entirely with the point that good quality services depend heavily on appropriately skilled and motivated staff. But there is something of the chicken and the egg in that. In order to get appropriately skilled and motivated staff, the authorities which engage them need to use criteria which will be directing the employers of those staff to the issues which I have indicated are so important.

However, following those somewhat critical comments, I reiterate our welcome for the order.

7.45 p.m.

Lord Whitty: My Lords, I welcome the welcome for the order from the Liberal Democrat Benches, even though they have a few doubts about the guidance.

I was slightly surprised by the contribution from the Conservative Front Bench. While we know that there are historic battles in this respect, in general the concept of best value has been largely welcomed in principle throughout local government of all political persuasions. Inevitably, there have been some teething troubles in introducing the new regime and some of those have caused what the noble Baroness referred to as bureaucratic difficulties. But the concept and the whole approach has been widely supported. It has been supported also in the private sector.

It is completely erroneous to cite the CBI as opposing this measure because the CBI's general approach is to have clarity but also to have the provisions included within the order. Indeed, the CBI's brief on this matter starts off by saying that it strongly supports the proposed statutory instrument and we are pressed for Part II of the Local

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Government Act 1988 to be updated in precisely that way. So that is the view of the CBI, which represents, by and large, the people who will be awarded those contracts through that process.

Nostalgia for retaining CCT is erroneous. In certain respects, CCT had a number of cost achievements resulting from it but it also had a huge rigidity, a devastating presumption in favour of outside contracting and a narrow definition of what the return on the contract should be. This is a much broader approach to value for money, within a broader context of best value and, indeed, of wellbeing. It allows all sorts of quality issues to enter into considerations when assessments are made of the tenders and contractors.

The best value pilots which we have run already have demonstrated quite substantial savings. Any compliance costs will be more than offset by the improvement in the nature and outcome of the contract. Many local authorities of all complexions have already set their sights on achieving very substantial improvements, over and above the 2 per cent automatic benefit from the best value regime to which the noble Baroness referred. For example, the London Borough of Newham expects to reduce its costs by £8 million and increase quality by 6 per cent by 2002. Leeds is anticipating a saving of £35 million in procurement over the next few years. So before the full operation of this regime has come into effect, significant savings are already expected.

The noble Baroness, Lady Hamwee, referred to the issue of how to deal with the workforce and specific issues of equality. That is extremely important. Those matters are part of the value of the contract and the activity of the local authority. It is part of the duties of local authorities to promote equality objectives within their area. That is why the order and guidance are intended to set out the way in which the procurement and contracting process can assist equal opportunities.

The noble Baroness's other point as regards encouraging the local workforce is slightly more difficult. Clearly, it is part of the local authority's value for a contract to develop the skills and performance of the local workforce. However, there are EU procurement issues which make it rather more difficult to follow absolutely that concept for contracts over a certain value. Nevertheless, it is the broader objectives of how the local workforce should develop and the local authorities' own responsibilities for that which need to be reflected in the contracting process. Therefore, workforce matters are important in consideration of best value in all service delivery areas and for the purpose of achieving best value in terms of assessing the contractors' bids or the contractors themselves in individual contracts. However, it will not enable local authorities to blacklist firms generally from contracting processes. However, if contractors break the law then, in those areas as in others, they may be excluded from tendering more generally.

I believe that I have demonstrated that there is already value from the best value regime. This removes further inhibitions on that regime. It has been widely

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welcomed in local government, in the private sector and by the unions. I believe that it will enable local authorities more flexibly and more sensibly to address the wider problems of their neighbourhoods and districts in their procurement process. Therefore, it is a valid function of local government.

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